Filed with the Securities and Exchange Commission on March 11, 1999
Registration No. 333_________________
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
MIH LIMITED
(Exact name of Registrant as specified in its charter)
---------------
<TABLE>
<S> <C> <C>
British Virgin Islands 4841 Inapplicable
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
---------------
Abbot Building
Mount Street
Tortola
Road Town
British Virgin Islands
(284) 494-5471
(Address, including zip code, and telephone number, including
area code, of registrant's registered offices)
---------------
CT Corporation System
1633 Broadway
New York, NY 10019
(212) 664-1666
(Name, address, including zip code, and telephone number, including
area code, of agent for service of process)
---------------
Copies to:
<TABLE>
<S> <C> <C>
Allan Rosenzweig
Kris F. Heinzelman, Esq.
Cravath, Swaine & Moore Myriad International Holdings B.V. Michael E. Michetti, Esq.
Worldwide Plaza Jupiterstraat 13-15 Cahill Gordon & Reindel
825 Eighth Avenue 2132 HC Hoofddorp 80 Pine Street, 17th Floor
New York, New York 10019 The Netherlands New York, New York 10005
(212) 474-1000 (31) 23 515 62870 (212) 701-3000
</TABLE>
Approximate date of commencement of proposed sale to the public. As soon
as practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are being offered
in connection on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_] _________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] _________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[_] _________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Title of Each Class Proposed Maximum
of Securities to be Aggregate Amount of
Registered Offering Price(1) Registration Fee
- --------------------------------------------------------------------------------
<S> <C> <C>
Class A Ordinary Shares, no par value .... $ 100,000,000.00 $ 27,800.00
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933.
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until the Registration Statement shall become
effective on such date as the United States Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.
================================================================================
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one to be
used in connection with an underwritten public offering in the United States
and Canada of Class A Ordinary Shares (the "U.S. Prospectus"), and one to be
used in a concurrent underwritten public offering outside the United States and
Canada of Class A Ordinary Shares (the "International Prospectus"). The two
prospectuses are identical except for the front and back cover pages and the
sections entitled "Underwriting", "Additional Information" and "Certain
Netherlands Tax Consequences". Those sections or pages that will appear only in
the U.S. Prospectus are labeled "[US]", and those that will appear only in the
International Prospectus are labeled "[I]". Final forms of each Prospectus will
be filed with the Securities and Exchange Commission under Rule 424(b) under
the Securities Act of 1933.
<PAGE>
[US] SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED , 1999
PROSPECTUS
Shares
MIH Limited
Class A Ordinary Shares
All of the Class A Ordinary Shares offered hereby are being sold by MIH
Limited (the "Issuer" and, together with its subsidiaries and joint ventures,
the "Company"). Of the Class A Ordinary Shares offered hereby, shares
are being offered in the United States and Canada (the "U.S. Offering") and
shares are being offered outside the United States and Canada (the
"International Offering" and, together with the U.S. Offering, the
"Offerings"). The initial public offering price per share and the underwriting
discount per share are identical for both Offerings. See "Underwriting".
Prior to the Offerings, there has been no public market for the Class A
Ordinary Shares. For a discussion relating to factors to be considered in
determining the initial public offering price, see "Underwriting".
Application has been made to list the Class A Ordinary Shares on the
Nasdaq National Market (the "Nasdaq") and on the Amsterdam Stock Exchange under
the symbol "MIHL".
The Issuer's Ordinary Shares have been designated into two classes,
consisting of Class A Ordinary Shares and Class B Ordinary Shares. Under the
Issuer's Memorandum and Articles of Association (the "Memorandum" and
"Articles"), the holders of Class B Ordinary Shares generally have rights,
including as to dividends, identical to those of Class A Ordinary Shares,
except that holders of Class B Ordinary Shares are entitled to three votes per
share and holders of Class A Ordinary Shares are entitled to one vote per
share. Holders of Class B Ordinary Shares and Class A Ordinary Shares generally
vote together as a class, except as otherwise required under British Virgin
Islands law or the Memorandum and Articles. After giving effect to the
Offerings (without giving effect to any exercise by the Underwriters of an
option to purchase additional shares), holders of class A Ordinary Shares will
own % of the Issuer and holders of Class B Ordinary Shares will own % of
the Issuer. This means that holders of Class B Ordinary Shares will control
% of the aggregate voting power of the Ordinary Shares while holders of
Class A Ordinary Shares will control the remaining %.
See "Risk Factors" beginning on page for a discussion of certain
factors that should be considered by prospective purchasers of the Class A
Ordinary Shares offered hereby.
----------------
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.
================================================================================
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public Discount (1) Company (2)
---------- -------------- ------------
<S> <C> <C> <C>
Per Class A Ordinary Share ......... $ $ $
Total(3) ........................... $ $ $
</TABLE>
================================================================================
(1) The Issuer has agreed to indemnify the several Underwriters (as defined
herein) against certain liabilities, including certain liabilities under
the Securities Act (as defined herein). See "Underwriting".
(2) Before deducting expenses payable by the Issuer estimated at $ .
(3) The Issuer has granted to the U.S. Underwriters (as defined herein) and the
International Managers (as defined herein) options, exercisable within 30
days after the date of this Prospectus, to purchase up to an additional
and Class A Ordinary Shares, respectively, solely to cover
over-allotments, if any. If such options are exercised in full, the total
Price to Public, Underwriting Discount and Proceeds to the Issuer will be
$ , $ and $ , respectively. Pursuant to the Intersyndicate
Agreement (as defined herein), the U.S. Underwriters and the International
Managers are also permitted to sell Class A Ordinary Shares to each other
for purposes of resale at the public offering price, less an amount not
greater than the selling concession. See "Underwriting".
----------------
The Class A Ordinary Shares are offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the Underwriters and
certain other conditions. The Underwriters reserve the right to withdraw,
cancel or modify such offer and to reject orders in whole or in part. It is
expected that delivery of the Class A Ordinary Shares will be made in New York,
New York on or about , 1999.
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.
----------------
Merrill Lynch & Co. Donaldson, Lufkin & Jenrette
----------------
The date of this Prospectus is , 1999
<PAGE>
Certain persons participating in the Offerings may engage in transactions
that stabilize, maintain or otherwise affect the price of the Class A Ordinary
Shares. Such transactions may include stabilizing the purchase of Class A
Ordinary Shares to cover syndicate short positions and the imposition of
penalty bids. For a description of these activities, see "Underwriting".
EXCHANGE RATE DATA
The Company's businesses utilize many functional currencies, principally
South African rand, Greek drachmae, Thai baht and U.S. dollars. For the
convenience of the reader, certain amounts contained in this Prospectus and not
derived from the Financial Statements (as defined herein) have been translated
from various functional currencies into U.S. dollars. These translated amounts
should not be construed as a representation that the functional currency
amounts actually represent such U.S. dollar amounts or could be, or could have
been, converted into U.S. dollars at the rates indicated below or at any other
rate. Translations appearing in this document of: (i) rand to dollars have been
conducted at a rate of ZAR1.00 = $ ; (ii) drachmae to dollars have been
conducted at a rate of GRD1.00 = $ ; and (iii) baht to dollars have been
conducted at a rate of B1.00 = $ . These rates of exchange reflect the noon
buying rate in New York City for cable transfers in foreign currencies as
certified for customs purposes by the Federal Reserve Bank of New York as of
, 1999, except as otherwise provided.
TRADEMARKS
"M-Net", "SuperSport", "DStv", "MultiChoice", "Irdeto", "Orbicom",
"Mindport", "OpenTV", "M-Web", "M-Cell", "Computicket", "FilmNet", "K-T.V.",
"IBS", "Irdeto Access", "Nova" and "MultiChoice Hellas" are registered
trademarks of the Company or its affiliates.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the audited and unaudited consolidated financial statements of
the Company (the "Consolidated Statements"), and the audited combined financial
statements of the Acquired MIH Businesses (as defined herein) (the "Combined
Statements" and, together with the Consolidated Statements, the "Financial
Statements") included elsewhere in this Prospectus. Unless the context
otherwise requires, as used in this Prospectus, all references to the "Company"
refer to MIH Limited together with its subsidiaries and joint ventures. All
references to "U.S. dollars", "dollars" and "$" are to United States dollars,
"ZAR" and "rand" are to South African rand, "GRD" and "drachma(e)" are to Greek
drachma(e), and "baht" are to Thai baht. Market and industry related data,
although inherently uncertain, are derived from sources that the Company
believes are reliable.
The Company
The Company is a multinational provider of pay-television services and
pay-television technology. By leveraging its management and industry expertise,
the Company plans to expand beyond its current services to become a recognized
worldwide provider of a full array of pay-media content and services over a
variety of electronic platforms, including pay-television, Internet and
interactive television. From their significant experience in providing
pay-television services, the Company's management has developed a comprehensive
understanding of pay-media and other subscriber-based businesses, particularly
in the areas of subscriber, content and platform management. Through its
strategic application of these core competencies and its proven business model,
the Company has grown to become the leading provider of pay-television services
in each of its markets. By continuing to leverage these abilities, the Company
plans to expand its pay-television services into new regions and provide new
services and products, such as those relating to the Internet and interactive
television services.
From its origins as the leading provider of pay-television services in
South Africa, the Company has grown, through its subsidiaries and joint
ventures, to provide terrestrial analog, digital satellite and other
pay-television services to over 1.8 million households in Africa, the
Mediterranean and Asia. The Company's Mindport technology division provides
pay-media companies worldwide with proprietary software and hardware solutions
for subscriber management, conditional access and other pay-television related
solutions. The Mindport division is also a leading provider of interactive
television operating systems through OpenTV, Inc. ("OpenTV").
Pay-television
The Company operates its pay-television businesses in three major regions:
Africa, the Mediterranean and Asia. The Company currently provides analog
service in each of these regions and provides digital service in Africa and
Asia. The Company is prepared to provide digital service in the Mediterranean
upon receipt of a license pursuant to recently enacted legislation. In each
region, the Company has implemented a strategy that emphasizes being the
leading supplier of pay-television services, obtaining exclusive programming,
continually improving its customer care and offering new services and
technology.
The Company believes that two of the reasons it is the leading
pay-television operator in each of the markets it serves--South Africa, the
rest of sub-Saharan Africa, Greece, Cyprus and Thailand--are its exclusive,
high quality content and its early introduction of emerging technologies. In
most markets in which it operates, the Company has exclusive pay-television
rights to transmit premium movies, major sporting events and popular children's
programming. The Company believes that access to such programming gives it the
content necessary to attract and retain subscribers and grow successful
pay-media services.
Since beginning operations in 1986, the Company has experienced
significant growth in the number of its subscribers, revenue per subscriber and
total revenue. From March 31, 1996 to September 30, 1998, the Company's
consolidated operations (excluding Asia and the Middle East, which are not
consolidated) had subscriber growth of 35.1%, from 1.14 million subscribers to
1.54 million. Over the same time period, the monthly revenue per subscriber of
these operations grew 18.9%, from $18.63 to $22.16. In addition, subscription
revenue for these operations grew 73.4%, from $233.3 million for the year ended
March 31, 1996 to $404.5 million for the year ended March 31, 1998.
1
<PAGE>
Technology
The Company's technology division, Mindport, provides a comprehensive
package of technology products and support services to pay-media operators
worldwide. Mindport seeks to capitalize upon the pay-media industry's evolution
from analog to digital and then to interactive and Internet services.
Mindport's customers include some of the leading international pay-media
companies, such as EchoStar, BSkyB, Canal Plus S.A. ("Canal+"), Galaxy Latin
America, Television Par Satellite ("TPS") and DirecTV Japan, as well as the
Company's African and Mediterranean businesses. The Company also recently
signed an agreement to provide Mindport's pay-television technology on a trial
basis to the China Broadcasting Film and Television Satellite Co. Ltd
("CBSat"), a subsidiary of China Central Television, which is preparing to
distribute its digital television signals to rural areas in the People's
Republic of China. The Mindport product line includes subscriber management
systems (IBS), conditional access systems (Irdeto Access), operating software
for interactive television (OpenTV), content management systems, set-top box
design and specification and consulting services.
Internet
The Company believes that the Internet business is complementary to its
existing businesses and a natural extension of its core competencies of
subscriber, content and platform management. By leveraging its subscriber-based
pay-media expertise, the Company plans to offer a range of Internet services,
including as an Internet service provider, content aggregator and subscriber
manager, both within certain of its current pay-television markets and in new
markets. The Company's first investment in the Internet business occurred with
its successful acquisition, growth and spin-off of M-Web Holdings Limited
("M-Web"), a leading Internet service provider in South Africa and now a
publicly-listed affiliate of the Company.
2
<PAGE>
The Offerings
Of the Class A Ordinary Shares being offered hereby by the Issuer,
shares are being offered initially in the United States and Canada by the U.S.
Underwriters and shares are being offered initially outside the United
States and Canada by the International Managers. See "Underwriting".
<TABLE>
<S> <C> <C>
Class A Ordinary Shares offered (1):
U.S. Offering ..................... shares
International Offering ............ shares
--------
Total ........................... shares
========
Ordinary Shares to be outstanding after
the Offerings:
Class A Ordinary Shares ........... shares(1)
Class B Ordinary Shares ........... shares
--------
Total ........................... shares(1)
========
</TABLE>
Use of Proceeds.............. The Company intends to make investments in and
acquisitions of pay-television, Internet
services, interactive television services and
pay-media technology businesses. The Company
intends to use the net proceeds of the Offerings
principally to finance such investments and
acquisitions, to fund the growth of new and
acquired businesses and to repay indebtedness.
The Company will also retain some cash balances
for general working capital purposes. See "Use
of Proceeds".
Trading...................... Application has been made to list all of the
Class A Ordinary Shares sold in the Offerings on
each of the Nasdaq National Market (the
"Nasdaq") and the Amsterdam Stock Exchange under
the symbol "MIHL".
Payment and Delivery......... The Class A Ordinary Shares offered hereby
will be in registered form booked in a register
kept in New York City. Initial sales of all
Class A Ordinary Shares offered hereby will be
settled in U.S. dollars. Subsequent trading of
shares effected on the Nasdaq or the Amsterdam
Stock Exchange generally will be settled in U.S.
dollars in accordance with the normal settlement
practices of those markets.
Voting and Certain
Other Rights................. The holders of Class B Ordinary Shares generally
have rights, including as to dividends,
identical to those of holders of Class A
Ordinary Shares, except that holders of Class B
Ordinary Shares are entitled to three votes per
share and holders of Class A Ordinary Shares are
entitled to one vote per share. Holders of Class
B Ordinary Shares and Class A Ordinary Shares
generally vote together as a single class,
except as otherwise required by British Virgin
Islands law or the Memorandum and Articles.
Purchasers of Class A Ordinary Shares in the
Offerings will be able to exercise rights
attaching to those shares on the date their name
is entered as owner of record for such shares on
the books of the transfer agent. See
"Description of Capital Stock--Class A Ordinary
Shares and Class B Ordinary Shares".
3
<PAGE>
Purchase Agreements.......... All of the shares sold in the U.S. Offering
will be sold subject to a purchase agreement
between the Issuer and the U.S. Underwriters (as
defined), and all of the shares sold in the
International Offering will be sold subject to a
purchase agreement between the Issuer and the
International Managers (as defined).
- ----------------
(1) Does not include up to and shares subject to over-allotment options
granted by the Issuer to the U.S. Underwriters and International
Managers, respectively.
Risk Factors
Prospective purchasers of the Class A Ordinary Shares should carefully
consider all of the information contained in this Prospectus before making an
investment in the Class A Ordinary Shares. In particular, prospective
purchasers should carefully consider the factors set forth herein under "Risk
Factors".
4
<PAGE>
RISK FACTORS
In addition to other information contained in this Prospectus, prospective
investors should consider carefully the following factors in evaluating the
Company and its business before making an investment in the securities offered
hereby.
Holding Company Structure; Significant Limitations on Access to Cash Flow of
Subsidiaries and Joint Ventures
MIH Limited is a holding company that has no significant business
operations or assets other than its interest in its subsidiaries, joint
ventures and other investments. Accordingly, the Issuer must rely entirely upon
distributions and repayment of advances from its subsidiaries, joint ventures
and other investments to generate the funds necessary to meet its obligations
and its other cash flow needs, including for working capital, capital
expenditures and acquisitions. The Issuer's subsidiaries and joint ventures are
separate and distinct legal entities that have no obligation, contingent or
otherwise, to make any funds available to it, whether by dividends, loans or
other payments. In addition, the ability of the Issuer's subsidiaries and joint
ventures to make distributions to the Issuer is subject, in certain
jurisdictions, to applicable foreign investment and exchange laws and the
availability of foreign exchange in sufficient quantities in those countries.
The amount of such distributions from these entities will be affected by the
current regulatory systems in these jurisdictions, primarily the provisions
relating to exchange controls. See "--South African Exchange Control".
Furthermore, because consent is required of the joint venture partners in some
of the Issuer's joint ventures for distributions from such joint ventures, the
Issuer's ability to receive distributions from such joint ventures is dependent
on the cooperation of its joint venture partners. See "--Dependence on Local
Parties; Absence of Control of Joint Ventures". Thus, there can be no assurance
that the Issuer will be able to realize benefits from its subsidiaries, joint
ventures and other investments through the receipt of distributions at such
times and in such amounts as it desires. Any failure by the Issuer to receive
distributions from its subsidiaries, joint ventures or other investments would
restrict its ability to pay dividends on the Class A Ordinary Shares and could
otherwise have a material adverse effect on the Company. In the event that the
Company were unable to meet its working capital needs and capital expenditure
requirements with cash generated from its subsidiaries, joint ventures or other
investments, the Company would have to consider various options, such as
incurring indebtedness, obtaining additional equity capital or selling its
assets. There can be no assurance that the Company will be able to raise new
equity capital, refinance its outstanding indebtedness or obtain new financing
in the future or that, if the Company is able to do so, the terms available
will be favorable to the Company. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources".
History of Operating Losses
The Company or its predecessors had operating losses of $5.3 million,
$42.7 million and $24.1 million for the six months ended September 30, 1998 and
for the years ended March 31, 1998 and 1997, respectively, and an accumulated
loss of $301.2 million as of September 30, 1998. See "Selected Financial and
Operating Data". The Company expects to continue to generate operating losses
as it expands its businesses and attempts to increase its subscriber base.
There can be no assurance that the Company will ever be able to achieve or
maintain profitable operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
Risks Associated with Growth Strategies
Acquisitions
Part of the Company's growth strategy includes, inter alia, the selective
acquisitions of and investments in pay-television, Internet services,
interactive television services and pay-media technology businesses in
different countries. A substantial portion of the proceeds of the Offerings
will be used to finance such acquisitions and investments. There can be no
assurance that the Company will be able to identify and acquire such businesses
on satisfactory terms, if at all, or that the funds necessary to finance such
acquisitions or investments will be available. The magnitude, timing and nature
of future acquisitions will depend upon various factors (some of which are
beyond the Company's control), including the availability of suitable
acquisition candidates, the negotiation of acceptable terms, the Company's
financial capabilities, the availability of skilled employees to manage the
acquired companies, receipt of any required regulatory approvals and general
economic and business conditions. In addition, future acquisitions by the
Company will involve certain risks, including the risk that they will require
increased capital and operating expenditures associated with upgrading acquired
systems to the Company's standards and the risk
5
<PAGE>
that the costs of integrating such businesses may have a material adverse
effect on the Company's operating results. The integration of acquired
businesses may also lead to diversion of management attention from other
ongoing business concerns. The consummation of certain acquisitions may lead to
the Company recognizing goodwill, which would be subject to amortization that
reduces the Company's net profits in subsequent financial reporting periods.
See "Use of Proceeds" and "Business--Objectives and Strategy".
Rapid Growth
The Company has experienced rapid growth in a relatively short period of
time. If the Company is able to implement successfully its business strategy,
the Company will experience additional growth and expansion. The management of
such growth will require, among other things, the continued development of the
Company's financial and management controls, the stringent control of costs and
the increased employment and retention of qualified personnel. Failure to
manage its growth successfully could have a material adverse effect on the
Company.
Cost of Receivers
The Company's growth depends, in part, upon its ability to attract new
pay-television customers, many of whom are required to make an up-front
investment in purchasing the equipment necessary to receive the Company's
transmissions. The cost of such equipment may discourage potential subscribers.
The Company believes that the current price of such equipment is low enough to
attract a significant number of subscribers and expects that the price will
decrease over time; however, the Company's market penetration and growth may be
impeded if the cost of the equipment necessary to receive its broadcasts does
not decrease. There can be no assurance that the Company will be able to
establish a substantial customer base in new markets or grow or maintain a
substantial customer base in existing markets.
Greek Operations
The Company's growth strategy in Greece includes the planned launch of a
digital platform upon the receipt by the Company's Greek operations of a
license under a recently enacted broadcasting law. There can be no assurance,
however, that the Greek government will grant such a license. The Company is
currently incurring expenses with regard to its Greek digital operations, and
accordingly, any delay or inability to launch the digital platform could
materially adversely affect the Company's business in that market.
Dependence on Local Parties; Absence of Control of Joint Ventures
Many of the Company's operations have been developed in cooperation or
partnership with key local parties. With regard to such operations, the Company
is dependent on its local partners to provide knowledge of the local market
conditions and to facilitate the acquisition of necessary licenses and permits.
Any failure by the Company to form or maintain alliances with local partners,
or the preemption or disruption of such alliances by the Company's competitors
or otherwise, could adversely affect the Company's ability to penetrate and
compete successfully in many of the markets it operates or enters. Certain of
the Company's businesses may be vulnerable to local governmental or
quasi-governmental entities or other third parties who wish to renegotiate the
terms and conditions of, or terminate, their agreements or other understandings
with the Company.
Significant actions by most of the Company's ventures, such as approving
budgets and business plans, declaring and paying dividends and entering into
significant transactions, effectively require the approval of the Company's
local partners. Accordingly, the Company does not have unilateral control over
the operations of many of its joint ventures, which limits the Company's
flexibility and, under certain circumstances, could adversely affect the
Company's business strategy and operating results in the applicable region.
Availability of Programming
The success of the Company's pay-television business will be dependent on
its ability to continue to obtain attractive programming at commercially
reasonable costs. The Company is dependent on third party suppliers for
substantially all of its programming. A large portion of the Company's
programming is purchased from content providers in the United States and
Europe. The competition for the most attractive programming contracts,
including major sports and premium Hollywood movies, is intense, and in the
event that any of the Company's contracts are canceled or not renewed, the
Company would be required to seek alternative programming from other sources.
There can be no assurance that alternative programming would be available to
the Company on acceptable terms or at all or, if so available, that such
programming would appeal to the Company's subscribers. The Company's strategy
also depends on its ability to offer attractive programming on an exclusive
basis. There can be no assurance that the Company will continue to obtain
exclusive rights to such programming. See "Business--Pay-television".
6
<PAGE>
Competition
Pay-television
Although the Company is currently the only major provider of
pay-television services in each of its markets, the Company competes directly
with both state-owned and private national free-to-air broadcast networks and
regional and local broadcast stations for audience share, programming and
advertising revenue and indirectly with motion picture theaters, video rental
stores and other entertainment and leisure activities for general leisure
spending. The markets in which the Company operates are in a constant state of
change due to technological, economic and regulatory developments. The Company
is unable to predict what forms of competition will develop in the future, the
extent of such competition or its possible effects on the Company's businesses.
See "Business--Pay-television".
Technology
The market for the products and services offered by the Company's Mindport
division is highly competitive. The Company competes with numerous other
entities, including other pay-television providers, many of which have
substantially greater financial resources than the Company. Current and
potential competitors in one or more aspects of the Mindport product line
include television and other system software companies, interactive television
system providers and multimedia authoring tool providers. There are also
numerous businesses with the expertise and financial resources necessary to
enter the markets in which Mindport operates. Competition in these markets is
also greatly affected by technological developments, which may make the
Company's products and services obsolete or less competitive. See
"Business--Technology".
Internet
The market for Internet access and related services is extremely
competitive. The Company anticipates that competition will continue to
intensify as the use of the Internet grows. The tremendous growth and potential
market size of the Internet access market has attracted many start-up companies
as well as existing businesses from different industries. Competitors include,
in addition to national, regional and local Internet service providers, long
distance and local exchange telecommunications companies, cable television
companies, direct broadcast satellite and other wireless communications
providers and on-line service providers. Many such competitors have longer
operating histories and substantially greater financial, technical, marketing
and personnel resources as well as greater name recognition than does the
Company.
Dependence Upon Satellites
The Company's digital programming is or will be transmitted to customers
through different satellites around the world, and in certain regions its
terrestrial analog signal is also transmitted to regional broadcast points
through satellites. In addition, the Company receives a significant amount of
its programming through satellites. Satellites are subject to significant
risks, including defects, launch failure, incorrect orbital placement and
destruction and damage, that may prevent or impair proper commercial
operations. All satellites have limited useful lives, which vary as a result of
their construction, the durability of their components, the capability of their
solar arrays and batteries, the amount of station keeping fuel remaining once
in orbit, the launch vehicle used and the accuracy of the launch. In addition,
there can be no assurance that satellites will achieve their minimum design
life. Furthermore, the Company's transponder lease agreements do not guarantee
the minimum useful life of any satellites. Although the Company has not
experienced any significant disruption of its transmissions, the operation of
satellites is beyond the control of the Company. Future launch failures or
disruption of the transmissions of satellites that are already operational
could have a material adverse effect on the Company. In addition, the ability
of the Company to transmit its programming following the expected useful lives
of its current satellites and to broadcast additional channels will depend upon
the ability of the Company to obtain rights to utilize transponders on other
satellites. The Company does not currently have alternative satellite contracts
in place, and in the event of a satellite failure, transponder capacity on
other satellites must be procured. There can be no assurance that the Company
will be able to obtain any such rights or that the cost of such rights will be
commercially acceptable to the Company.
Dependence on Transmission and Production Facilities
The Company is dependent on its own transmission and production facilities
as well as those of its programming suppliers and affiliates to provide its
pay-television services. If a natural disaster or other event, such as a
lightning strike, results in the operations at any of these facilities being
disrupted for any significant period
7
<PAGE>
of time or inventory located there being damaged, a prolonged suspension of the
Company's pay-television services could occur and the results of operations and
financial condition of the Company could be materially adversely affected.
Although the Company maintains insurance coverage on its own transmission and
production facilities, there can be no assurance that such insurance proceeds
would be available on a timely basis or be sufficient to fully offset such
losses.
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, 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. In addition, changes
in technology, including enhancements of the Company's existing technology, may
require the Company to expend substantial financial resources to remain
competitive.
New technologies or industry standards have the potential to replace or
provide lower cost alternatives to the products and services of Mindport. The
adoption of such new technologies or industry standards could render the
Company's planned products and services obsolete or less competitive.
Risk of Unauthorized Access
As with all providers of subscription television programming, the Company
faces the risk that its various programming signals will be obtained by
unauthorized users. For this reason, the delivery of subscription programming
requires the use of encryption technology to prevent unauthorized access to
programming or "piracy". The Company currently utilizes encryption technology
supplied to it by Mindport. The Company believes that this encryption
technology adequately prevents unauthorized access. There can be no assurance,
however, that such encryption technology is, or will remain, effective in
preventing such unauthorized access. In addition, encryption technology cannot
prevent the illegal retransmission or sharing of a television signal once it
has been decrypted. If the Company fails to control unauthorized access to its
transmission, its revenues and its ability to contract for programming services
could be adversely affected.
Internet Business Risks
A significant part of the Company's strategy is to develop Internet
businesses. As is typical in the case of a new and rapidly evolving industry
characterized by rapidly changing technology, evolving industry standards and
frequent new product and service introductions, demand and market acceptance
for recently introduced products and services on the Internet are subject to a
high level of uncertainty. In addition, critical issues concerning the
commercial use of the Internet remain unresolved and may impact the growth of
Internet use. These issues include a perceived lack of security of commercial
data (such as credit card numbers) and capacity constraints resulting in
delays, transmission errors and other difficulties. These and other issues
affecting the Internet industry may be particularly aggravated in the countries
in which the Company may enter the Internet business, which may have a less
developed Internet culture. If, in the areas in which the Company launches its
Internet business, the market for Internet access services fails to develop,
develops more slowly than expected or becomes saturated with competitors, or if
the Internet access and services to be offered by the Company are not broadly
accepted, the Company's growth strategy could be materially adversely affected.
Other Internet business risks include: (i) the inability to obtain attractive
content, (ii) unauthorized access, viruses and other disruptive problems, (iii)
dependence on telecommunications providers and (iv) changes in technology that
would require the Company to modify its Internet business.
South African Exchange Control
MIH Limited's South African subsidiaries are subject to significant
restrictions on their ability to remit funds outside of South Africa. South
African exchange control regulations provide for a common monetary area
consisting of South Africa, Lesotho, Namibia and Swaziland (the "CMA").
Transactions between South African residents and non-CMA residents are subject
to South African exchange control regulations. South African residents,
including companies, are generally not permitted to export capital from South
Africa or to hold foreign currency without the approval of The South African
Reserve Bank (the "Reserve Bank"), and restrictions are imposed on their
foreign investments. In addition, South African companies are generally
required to repatriate to South Africa those profits of foreign operations
which are not required to fund their ongoing business operations. These
exchange control regulations effectively prevent the Company from receiving
distributions from its South African subsidiaries. While
8
<PAGE>
such restrictions have been liberalized in recent years, a South African
company's ability to raise and deploy capital outside South Africa remains
subject to significant restrictions. Although approximately two-thirds of the
Company's revenue is generated by its businesses in the CMA and their
subsidiaries and joint ventures, the Company believes that the South African
exchange control restrictions will not affect its ability to fulfill its
various payment obligations.
Foreign Currency Risks
Although a substantial portion of the Company's revenue is denominated in
the currencies of the countries in which it operates, a significant portion of
its cash obligations, including the payment obligations under its satellite
transponder leases and its contracts for programming and channels for its
pay-television platforms, are denominated in U.S. dollars. In those areas where
the Company's revenue is denominated in local currency, a depreciation of that
currency against the U.S. dollar could adversely affect the Company's earnings
and its ability to meet its cash obligations. Similarly, where the Company
prices its products and services in U.S. dollars or U.S. dollar equivalents, a
depreciation of the local currency would make the Company's products more
expensive for its customers and could have an adverse impact on the Company's
sales. Many of the Company's operations are in countries or regions where there
has been substantial depreciation of the local currency against the U.S. dollar
in recent years. Although most of the Company's operating entities hedge a
substantial portion of their currency risks, there can be no assurance that any
such hedging will fully protect the Company or that the Company will continue
to hedge such risks in the future.
The Company's reporting currency is the U.S. dollar. The Company conducts
and will continue to conduct business transactions in currencies other than its
reporting currency; accordingly, appreciation or depreciation in the value of
other currencies as compared to the reporting currency will result in
translation gains or losses which, if the appreciation or depreciation is
significant, could be material.
Social and Political Factors
Many of the countries in which the Company operates are subject to social,
political or economic factors that may materially adversely affect the
Company's business. South Africa is a nascent democracy that is in the early
stages of addressing a large wealth differential among its citizens. In recent
years, South Africa has also experienced high levels of crime and unemployment,
which have, among other things, impeded foreign investment in South Africa and
prompted an emigration of skilled workers. In addition, Thailand has recently
experienced adverse economic developments, as have a number of other countries
in Southeast Asia. These developments include currency depreciations, increased
interest rates, economic slowdown or contraction, increases in corporate
bankruptcies, stock market declines and government imposed austerity measures.
These or other adverse developments or government reactions to them could
adversely affect the Company's business. In addition, the Company does and may
begin to do business in other countries that have political, social or economic
factors that could adversely affect the Company's business. Although
governments in each of the above countries have taken steps toward addressing
these factors, it is not possible to predict whether or to what extent these
steps will succeed in achieving their objectives or what effect these steps or
these problems will have on companies doing business in these countries.
Regulation
Pay-television, Internet and other pay-media operations and the provision
of programming services are generally subject to governmental regulation, which
may change from time to time. Such changes in applicable laws and regulations
could cause the Company to incur additional costs of compliance or otherwise
adversely affect the Company's business. There can be no assurance that
material and adverse changes in the regulation of the Company's existing
operations will not occur in the future. Regulation can take the form of price
controls, service requirements, programming content restrictions, foreign
ownership restrictions and licensing requirements, among others. Delays in
obtaining or renewing any required regulatory approvals could adversely affect
the Company's ability to offer some or all of its services; for instance, the
Company's license to broadcast analog television in Greece is scheduled to
expire in October 1999, and there can be no assurance that it will be renewed.
In most countries in which it does or may do business, the Company operates or
may operate pursuant to licenses obtained from governmental or
quasi-governmental agencies, which licenses are generally subject to periodic
renewal. The inability of the Company to obtain or retain any required licenses
could have a material adverse effect on its business. See "Regulation".
9
<PAGE>
Risks Associated with Intellectual Property
The Company's success depends in part on its ability to protect and
maintain the proprietary nature of its technology through a combination of
patents, trade secrets, trademarks, copyrights, licenses and other intellectual
property arrangements. The Company has issued and pending patents, trademark
registrations and computer program copyrights in the United States and other
countries. See "Business--Intellectual Property". The Company intends to
vigorously protect its intellectual property rights. It may be possible,
however, for a third party to copy or otherwise obtain and use the Company's
technology without authorization, or to develop similar technology
independently. Furthermore, the laws of certain countries in which the Company
sells its products do not protect the Company's intellectual property rights to
the same extent as do the laws of the United States. If unauthorized copying or
misuse of the Company's products were to occur to any substantial degree, the
Company's business could be materially adversely affected. There can be no
assurance that the Company's means of protecting its proprietary rights will be
adequate or that the Company's competitors will not independently develop
similar technology.
Although the Company has not received any notices from third parties
alleging infringement claims, there can be no assurance that third parties will
not claim that the Company's current or future products infringe the
proprietary rights of others. The Company expects that software developers will
increasingly be subject to such claims as the number of products and
competitors providing software and services to the pay-media industries
increases and overlaps occur. Any such claim, with or without merit, could
result in costly litigation or might require the Company to enter into royalty
or licensing agreements, any of which could have a material adverse effect on
the Company. Such royalty or licensing agreements, if required, may not be
available on terms acceptable to the Company or at all.
Dependence on Personnel
The operating performance of the Company depends on the efforts and
abilities of its senior management. The loss of the services of any of those
individuals could have a material adverse effect on the Company's business. See
"Management". The Company believes that the success of its technology and
Internet businesses will depend in large part on its ability to attract and
retain highly skilled information technology professionals and software
programmers for whom there is intense competition. There can be no assurance
that the Company will be able to attract and retain the personnel necessary for
the development and integration of these businesses. Delays in hiring such
personnel could delay the achievement of development and marketing objectives.
The loss of the services of key personnel or the failure to attract additional
personnel as required could have a material adverse effect on the Company.
Control by Principal Shareholder
Immediately following the Offerings (assuming no exercise of the
Underwriters' over-allotment options), MIH Holdings Limited ("MIH Holdings")
will own, through its wholly-owned subsidiary MIH (BVI) Limited, 100.0% of the
Class B Ordinary Shares outstanding, representing % of the voting
interest of the Issuer. MIH Investments (Proprietary) Limited ("MIH
Investments") owns 53.0% of the voting stock of MIH Holdings, and Naspers
Limited ("Naspers") owns 100.0% of the voting stock of MIH Investments along
with direct ownership of 13.2% of MIH Holdings. As a result of its ownership of
Class B Ordinary Shares, MIH Holdings and its parent companies have sufficient
voting power, without the vote of any other shareholders, to determine the
outcome of any action requiring shareholder approval, to amend the Memorandum
and Articles for any purpose, which could include increasing or reducing the
Issuer's authorized capital or authorizing the issuance of additional shares
and to elect all of the issuer's directors who determine the declaration and
payment of dividends and any other action to be taken by the Issuer. The
Company engages in transactions with subsidiaries of Naspers in the ordinary
course of business. The interests of holders of the Class B Ordinary Shares may
diverge from the interests of the holders of the Class A Ordinary Shares, and
holders of Class B Ordinary Shares may be in a position to require the Company
to act in a way that is not consistent with the general interests of the
holders of the Class A Ordinary Shares, including through transactions with
related companies. See "Management", "Security Ownership" and "Certain
Transactions".
Broad Discretion on Application of Proceeds
The Company's business plan is general in nature and is subject to change
based upon changing conditions and opportunities. The management of the Company
will have broad discretion in applying the net proceeds of the Offerings. The
Company may use the net proceeds for future acquisitions and investments;
however, the
10
<PAGE>
Company at present is not party to any definitive, material agreements relating
to such future acquisitions. There can be no assurance that suitable
opportunities for any such acquisitions will be available to the Company and no
assurance of the timing of such acquisitions or of the portion of the net
proceeds from the Offerings necessary for their consummation. See "Use of
Proceeds".
Year 2000 Risks
Many computer programs and electronic devices in use today mistakenly
treat dates falling after December 31, 1999 as dates during the twentieth
century. The Company is conducting a comprehensive review of its internal
computer systems and the products and services it offers to customers in order
to identify which of them will have to be modified in order to properly
recognize and process dates after December 31, 1999. The testing which the
Company has conducted to date (and will conduct in respect of all of its
products and business critical systems) is designed to identify which of its
products and business critical systems are not Year 2000 compliant and
determine the remedies necessary to ensure such compliance. The Company has
also requested its suppliers to provide it with details of what action they are
taking to ensure that the products and services supplied to the Company will be
Year 2000 compliant. Although the Company believes that with certain planned
modifications and upgrades, the Year 2000 issue will not pose significant
operational problems for its products and business critical systems, there can
be no assurance that its Year 2000 compliance efforts will be completed on time
or that it will be successful. Any delays or omissions by the Company or its
suppliers to resolve the Year 2000 issue could materially adversely affect the
Company. Further, in certain countries in which the Company operates, the
governments, governmental agencies, utility companies and the Company's
suppliers may not be applying sufficient resources to the resolution of the
Year 2000 issue. Such failure could materially adversely affect the Company.
Finally, the Company has incurred and will continue to incur internal staff
costs, consultancy fees and other expenses in preparation for the Year 2000.
There can be no assurance that such amounts will not be material. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000 Issue".
Shareholder Rights under British Virgin Islands Law
The Issuer's corporate affairs are governed by its Memorandum and Articles
and by the International Business Companies Act of the British Virgin Islands.
Principles of law relating to such matters as the validity of corporate
procedures, the fiduciary duties of management and the rights of the Issuer's
shareholders may differ from those that would apply if the Issuer were
incorporated in the United States or another jurisdiction. The rights of
shareholders under British Virgin Islands law are not as clearly established as
are the rights of shareholders in many other jurisdictions. Thus, the public
shareholders of the Issuer may have more difficulty in protecting their
interests in the face of actions by the Board of Directors or the principal
shareholders (see "--Control by Principal Shareholder") than they would have as
shareholders of a corporation incorporated in another jurisdiction. In
addition, it is unlikely that the courts of the British Virgin Islands would
enforce, either in an original action or in an action for enforcement of
judgments of other courts, liabilities which are predicated upon the securities
laws of the United States or other jurisdictions. See "--Enforceability of
Civil Liabilities".
Enforceability of Civil Liabilities
The Issuer is a holding corporation organized as an International Business
Company under the laws of the British Virgin Islands with its business
operations located in several countries, principally South Africa, the
Netherlands, Greece and Thailand. The Issuer has appointed CT Corporation
System as its agent upon whom process may be served in any action brought
against the Issuer under the securities laws of the United States. However,
outside the United States, it may be difficult for investors to enforce
judgments against the Issuer obtained in the United States in any such actions,
including actions predicated upon civil liability provisions of securities
laws. In addition, all of the Issuer's officers and directors reside outside
the United States and nearly all of the assets of these persons and of the
Issuer are located outside of 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 the Issuer or such persons judgments
predicated upon the liability provisions of the securities laws of the United
States. The Issuer has been advised by Mallinicks, its South African counsel,
Nauta Dutilh, its Dutch counsel, Zepos & Zepos, its Greek counsel, White & Case
(Thailand) Limited, its Thai counsel and Harney Westwood and Riegels, its
British Virgin Islands counsel that there is substantial doubt as to the
enforceability against the Issuer or any of its directors and officers located
outside the United States in original actions or in actions for enforcement of
judgments of U.S. courts of liabilities predicated on the civil liability
provisions of the United States securities laws.
11
<PAGE>
No Prior Public Market; Possible Volatility of Stock Price
Prior to the Offerings, there has been no public market for the Class A
Ordinary Shares. Although the Company expects that the Class A Ordinary Shares
will be approved for listing on the Nasdaq and the Amsterdam Stock Exchange,
there can be no assurance that an active public market for the Class A Ordinary
Shares will develop or continue after the Offerings. The initial public
offering price per Class A Ordinary Share will be determined by negotiations
among the Issuer and the representatives of the Underwriters and may not be
indicative of the price at which the Class A Ordinary Shares will trade after
the Offerings. See "Underwriting". Prices for the Class A Ordinary Shares will
be determined in the marketplace and may be influenced by many factors,
including the financial results of the Company, changes in earnings estimated
by industry research analysts, investors' perceptions of the Company and
general economic, industry and market conditions. In addition, the stock
markets have from time to time experienced extreme price and volume volatility,
and such volatility may adversely affect the market price of the Class A
Ordinary Shares. Accordingly, there can be no assurance that the market price
of the Class A Ordinary Shares will not decline below the initial public
offering price.
Absence of Dividends
The Issuer anticipates that all of its earnings in the foreseeable future
will be retained to finance the continued growth and expansion of its business,
and, therefore, the Issuer has no intention to pay cash dividends on its
Ordinary Shares in the foreseeable future. In the event that the Issuer or its
subsidiaries enter into future financings, the terms of such financings may
include restrictions on the payment of dividends. See "Dividend Policy" and
"--Holding Company Structure; Significant Limitations on Access to Cash Flow of
Subsidiaries and Joint Ventures".
Shares Eligible for Future Sale
SuperSport International Holdings Limited ("SSIH") and Johnnic (IOM)
Limited ("Johnnic") own Class A Ordinary Shares, and MIH Holdings,
through MIH (BVI) Limited, owns all of the Class B Ordinary Shares. SSIH,
Johnnic and MIH (BVI) Limited, together with the Issuer and its officers and
directors, have entered into agreements not to sell, contract to sell, or
otherwise dispose of, any Ordinary Shares without the consent of the
Underwriters for a period of 180 days after the date of this Prospectus (the
"Lock-Up Agreements") and that subject them to other restrictions on the sale
of Ordinary Shares. In addition, SSIH, Johnnic and MIH (BVI) Limited have
agreed (in accordance with the rules for admission to listing on the Amsterdam
Stock Exchange of issuers with less than three financial years' net profit)
that they will not, for a period of three years after the date of such
admission, dispose of Ordinary Shares that total, in the aggregate, more than
50% (as long as not more than one of the financial years of the Issuer has
closed with a net profit) or 75% (if and when two financial years of the Issuer
have closed with a net profit) of the number of Ordinary Shares currently
outstanding, subject to certain exceptions (the "ASE Lock-Up Agreement"). Upon
expiration of the Lock-Up Agreements, such shares will be eligible for resale
in the public markets in accordance with Regulation S ("Regulation S") and Rule
144 ("Rule 144") promulgated under the Securities Act of 1933 (the "Securities
Act").
Upon consummation of the Offerings, but subject to the continued
applicability of the ASE Lock-Up Agreement to SSIH, Johnnic and MIH (BVI)
Limited, the Issuer will have outstanding stock options to purchase a total of
Class A Ordinary Shares, of which options for Class A Ordinary
Shares will be exercisable immediately following consummation of the Offerings.
The shares issued upon exercise of these options will be potentially eligible
for public sale 90 days after the date of this Prospectus pursuant to Rule 701
under the Securities Act. All holders of such options, however, have signed
Lock-Up Agreements. Except as limited by the Lock-Up Agreements and by volume
limitations applicable to affiliates under Rule 144, shares issued upon the
exercise of stock options generally are available for sale in the open market.
Future sales of significant amounts of Class A Ordinary Shares in the public
market after the Offerings could adversely affect the prevailing market price
of the Class A Ordinary Shares. See "Shares Eligible for Future Sale".
Certain Anti-Takeover Matters
The low voting rights of the Class A Ordinary Shares, as well as certain
other provisions of the Issuer's Memorandum and Articles, may discourage other
persons from attempting to acquire control of the Issuer. These provisions
include, but are not limited to, a classified Board of Directors, the
authorization of the Board of Directors to issue shares of undesignated
preferred stock in one or more series without the specific approval of the
holders of Ordinary Shares, the establishment of advance notice requirements
for director nominations and actions to be taken at shareholder meetings and
the requirement that two-thirds of the shareholders entitled to vote at a
meeting
12
<PAGE>
are required to approve any change to certain provisions of the Memorandum and
Articles. The low voting rights of the Class A Ordinary Shares and such
provisions, as well as certain provisions of British Virgin Islands law to
which the Issuer is subject, could impede a merger, takeover or other business
combination involving the Issuer or discourage a potential acquiror from making
a tender offer or otherwise attempting to obtain control of the Issuer. In
certain circumstances, such provisions may inhibit or discourage takeover
attempts and could reduce the market value of the Class A Ordinary Shares. See
"Description of Capital Stock--Certain Anti-Takeover Matters".
Immediate and Substantial Dilution
Investors purchasing Class A Ordinary Shares in the Offerings will
experience immediate and substantial dilution in the net tangible book value of
their shares. See "Dilution".
Forward-Looking Statements
This Prospectus contains "forward-looking statements". These
forward-looking statements are subject to a number of risks and uncertainties,
many of which are beyond the Company's control. Forward-looking statements are
typically identified by the words "believe", "expect", "anticipate", "intent",
"estimate" and similar expressions. All statements other than statements of
historical facts contained in this Prospectus, including, without limitation,
the statements under "Prospectus Summary", "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business" and
located elsewhere herein regarding industry prospects and the Company's results
of operations or financial position are forward-looking statements. Actual
results could differ materially from those contemplated by these
forward-looking statements as a result of factors ("Cautionary Statements")
such as product and service development, market acceptance risks, the impact of
competitive products, services and pricing, the results of current and future
programming agreements and regulatory relationships, the results of financing
efforts, the pursuit and consummation of certain acquisitions, developments
regarding intellectual property rights and litigation, and risks described
under "Risk Factors". In light of these risks and uncertainties, there can be
no assurance that the results and events contemplated by the forward-looking
information contained in this Prospectus will in fact transpire. Potential
investors are cautioned not to place undue reliance on these forward-looking
statements. Neither the Company nor any of the Underwriters undertake any
obligation to update or revise any forward-looking statements. All subsequent
written or oral forward-looking statements attributable to the Company or
persons acting on behalf of the Company are expressly qualified in their
entirety by the Cautionary Statements.
13
<PAGE>
USE OF PROCEEDS
The net proceeds to the Issuer from the Offerings are estimated to be
approximately $ after deducting underwriting discounts and offering
expenses. The Company intends to use these proceeds to make acquisitions and
investments in new and existing businesses, repay debt and fund working capital
and general corporate purposes.
As described under "Business--Objectives and Strategy", the Company
intends to make investments in and acquisitions of pay-television services,
Internet services, interactive television services and related technology
businesses. The Company intends to use the net proceeds of the Offerings
principally to finance such acquisitions and investments. The Company is
currently considering a number of acquisitions but has not yet entered into
definitive agreements with regard to any of them. The Company expects that
additional acquisition opportunities will arise. The Company's acquisitions and
investments may be made directly by the Issuer or indirectly by its
subsidiaries. The Company's management will have substantial discretion in
investing the net proceeds of the Offerings.
The acquisitions and investments described above reflect the Company's
current expectations and plans, which are subject to change. Any acquisition or
investment will be subject to various contingencies, including the results of
negotiations with third parties, obtaining required government approvals, and
obtaining required shareholder or board approvals. See "Risk Factors--Risks
Associated with Growth Strategies".
The Company also intends to use the proceeds of the Offerings for the
repayment of certain indebtedness. This indebtedness consists of (i) a $40
million revolving demand facility from ABSA Bank Limited that bears interest at
a rate of LIBOR + 2% and (ii) a loan from MeesPierson N.V. with an outstanding
balance of $ million that bears interest at a rate of LIBOR + 0.9% and is
repayable upon the earlier of February , 2000 and the completion of the
Offerings or another public offering or credit facility. These loans were used
to (i) repay $30 million of debt assumed in connection with the Canal+
Transaction (as defined herein) and (ii) make payments to third parties to
purchase 1.7% of the voting shares of UBC. In addition, prior to completion of
the Offerings, these loans may be used to fund a payment to Thomson Consumer
Electronics, Inc. ("Thomson") in connection with the purchase by the Company of
35.6% of OpenTV.
DIVIDEND POLICY
The Issuer anticipates that all of its earnings in the foreseeable future
will be retained to finance its continued growth and expansion and has no
current intention to pay cash dividends on its Ordinary Shares. The payment of
dividends is within the discretion of the Issuer's Board of Directors and will
be dependent upon, among other factors, the Company's results of operations,
financial condition, capital requirements, restrictions imposed by the
Company's financing arrangements and legal requirements. See "Risk
Factors--Holding Company Structure; Significant Limitations on Access to Cash
Flow of Subsidiaries and Joint Ventures".
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<PAGE>
DILUTION
At September 30, 1998, the Issuer had a net tangible book value of
approximately $ million, or $ per Ordinary Share. Net tangible book
value per share represents the amount of total tangible assets less total
liabilities divided by the number of Ordinary Shares outstanding. After giving
effect to the sale of Class A Ordinary Shares in the Offerings at an assumed
initial public offering price of $ per share (the mid-point of the
estimated price range) and after deducting the estimated underwriting discount
and offering expenses payable by the Issuer, the pro forma net tangible book
value of the Issuer as of September 30, 1998 would have been approximately
$ million, or $ per share. This represents an immediate increase in
net tangible book value of $ per share to the existing shareholders and an
immediate dilution of $ per share to new investors. The following table
illustrates this per share dilution:
<TABLE>
<S> <C>
Assumed initial public offering price .........................
Net tangible book value as of September 30, 1998 ..........
Increase attributable to net proceeds to the
Issuer of the Offerings ...................................
Pro forma net tangible book value after the Offerings .........
Dilution to new investors .....................................
</TABLE>
The following table summarizes on a pro forma basis, as of September 30,
1998, the difference between existing shareholders and new investors in the
Offerings (at an assumed initial public offering price of $ per share) with
respect to the number of Ordinary Shares purchased from the Issuer, the total
consideration paid and the average price paid per share:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
-------------------- -------------------- Average Price
Number Percent Amount Percent per Share
-------- --------- -------- --------- --------------
<S> <C> <C> <C> <C> <C>
Existing shareholders ......... % $ % $
New investors ................. ------ ------ ------ ------
Total ....................... % $ %
====== ====== ====== ======
</TABLE>
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<PAGE>
SUMMARY ORGANIZATIONAL CHART
(Ownership figures reflect economic interests rather than voting rights)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
--------------- --------
MIH Holdings(1) ------------------------------------ M-Web(1)
--------------- (shares lined on JSE) --------
| A leading
-------------------- | %(2) -------------------- ISP in
SSIH(1) | Johnnic South Africa
-------------------- | --------------------
Provides pay- | %(2) | %(2) | Wholly-owned
television +--------| | |--------------+ subsidiary of
programming, -------------------- JSE listed
mostly sports MIH Limited investment
(the "Issuer") company
--------------------
|
|
-----------------------------------------------------------------------------------------------
| | | | |
| | | | |
--------------------------------- --------------- ------ --------------------------
AFRICA AND THE MIDDLE EAST MEDITERRANEAN ASIA TECHNOLOGY
--------------------------------- --------------- ------ (Mindport)
| | | | --------------------------
| 100% | various% |100%(3) | 28%(4) | |
------------------- ---------------- ------------- --------------- | |
MultiChoice Egypt and the NetMed UBC(5) | |
Africa Middle East | |
------------------- ---------------- ------------- --------------- | |
| | | various Manages the | | Leading | |
| 100% | | % subscriber Leading provider | |
-------------- | -------------- base of pay- provider of pay- | |
South | Sub-Saharan television of pay- television | |
Africa | Africa providers in television services | 100% | 80%(6)
-------------- | -------------- Egypt and services in Thailand ------------ --------------
| certain in Greece Irdeto OpenTV
Leading | Leading Middle-Eastern and Cyprus ------------ --------------
provider of | provider of countries | | Technology
pay-television | pay-television | | company Develops and
services in | services in various | | serving pay- sells software
South Africa | Sub-Saharan % | | 51% media platforms for
| Africa --------- --------- business interactive
| 10% Greece Cyprus television
----------------------------- --------- ---------
| |
- ------------- -------------
(shares
SSIH(1) linked on JSE) M-Net(1)
----------------
- ------------- -------------
Provides pay- Provides pay-
television television
programming, programming, mostly
mostly sports premium movies
</TABLE>
(1) Publicly listed in South Africa.
(2) Adjusted to give pro forma effect to the Offerings, assuming no exercise of
the Underwriters' over-allotment options.
(3) Effectively 100% because the Company holds an option to purchase the
remaining 48% of NetMed at a fixed price on demand and NetMed does not pay
dividends.
(4) The Company holds an option to purchase an additional 3.3% of UBC.
(5) Publicly listed in Thailand.
(6) Includes 36% of OpenTV that the Company has agreed to purchase from
Thomson.
16
<PAGE>
THE COMPANY
Overview
The Company is a multinational supplier of pay-television services and
related technology. The Company plans to leverage its management and industry
expertise to provide a full array of pay-media content and services over a
variety of electronic platforms, including pay-television, Internet and
interactive television. MIH Limited is incorporated in the British Virgin
Islands and conducts its businesses through subsidiaries and joint ventures.
After giving effect to the Offerings, MIH Holdings, which is quoted on the
Johannesburg Stock Exchange (the "JSE") under the symbol "MIB", will indirectly
own shares representing % of the economic interest and % of the
voting interest of MIH Limited. The shares of MIH Holdings are linked with
those of M-Web, an Internet service provider that was spun off by MIH Holdings
last year. Together, they had a market capitalization of ZAR ($ ) as
of , 1999. The diagram on the preceding page summarizes the Company's
group structure and ownership.
Subsidiaries and Joint Ventures
Pay-television
In many of its markets, the Company's pay-television businesses utilize
similar corporate structures. These structures generally include a content
management company which provides the content for the pay-television operation,
a subscription management business and a service transmission and distribution
business. In each region, these companies may have local partners.
Africa. The Company operates its South African businesses through
MultiChoice Africa (Proprietary) Limited ("MultiChoice Africa"), an indirect
wholly owned subsidiary of MIH Limited. MultiChoice Africa obtains channels
from and conducts transmission and distribution through certain of the
Company's affiliates. MultiChoice Africa in turn has ownership interests in
joint ventures operating in Kenya, Ghana, Uganda, Nigeria, Tanzania, Zambia,
Namibia, Botswana and Lesotho. In Africa, the Company considers several factors
when determining the countries within which to establish joint ventures,
including comparative political stability, a free market economy, adequate
infrastructure, a favorable foreign exchange system, a suitable local partner
and sufficient management control. In many other African nations, the Company
operates through agents or franchisees. These parties conduct marketing and
advertising to build the subscriber base and collect subscription revenues on
behalf of the Company. They retain a minor portion of these subscription
revenues as compensation for their services and remit the balance to the
Company.
MultiChoice Middle East Inc. ("MultiChoice Middle East") is a 90.0% owned
subsidiary of MultiChoice Middle East Holdings Inc. ("MultiChoice Middle East
Holdings"), which in turn is 50.0% indirectly owned by MIH Limited. The other
shareholders in MultiChoice Middle East Holdings and MultiChoice Middle East
are strategic regional investors. In Egypt, MIH Limited indirectly owns 10.0%
of Cable Network Egypt ("CNE"), which provides terrestrial analog service, and
75.0% of MultiChoice Egypt Limited ("MultiChoice Egypt"), which provides
subscriber management services to CNE.
Mediterranean. The Company operates its Mediterranean businesses through
its interest in a holding company, NetMed B.V. MIH Limited owns 52.0% of NetMed
B.V. (together with its subsidiaries, "NetMed"), and MP Communications B.V.
("MP") owns the remaining 48.0%. The Company holds an option to purchase MP's
48.0% interest on demand at a fixed, pre-arranged price that is slightly
greater than the price at which MP purchased that interest from the Company.
Pursuant to a shareholders agreement between the Company and MP, NetMed does
not pay dividends. Recent changes in the Greek regulatory environment may lead
to a change in the ownership structure of the Company's Greek subsidiaries and
joint ventures, and the Company is currently reviewing several alternatives.
NetMed manages its pay-television business through the following operating
subsidiaries:
o MultiChoice Hellas S.A. ("MultiChoice Hellas") and MultiChoice Cyprus
Limited ("MultiChoice Cyprus") manage the subscriber base and market and
sell pay-television services in Greece and Cyprus, respectively. NetMed
B.V., through Myriad Development B.V., owns 51% of each of MultiChoice
Hellas and MultiChoice Cyprus. The remainder of MultiChoice Hellas is
42.0% owned by Teletypos S.A., a Greek media company that owns Mega
Channel, the second largest Greek free-to-air television channel. The
other 7.0% is owned by Lumiere Television Limited ("Lumiere"), a Cypriot
investor. Lumiere also owns the remaining 49.0% of MultiChoice Cyprus.
MultiChoice Hellas and MultiChoice Cyprus collect subscriber revenues,
retain a portion as payment for their services and pass the balance to
NetMed Hellas S.A. ("NetMed Hellas"), Lumiere and Alfa TV.
17
<PAGE>
o NetMed Hellas is 96.0% owned by NetMed B.V. NetMed Hellas operates the
FilmNet, SuperSport and K-T.V. pay-television channels in Greece and
provides programming to Lumiere and AlfaTV in Cyprus. The remaining 4.0%
ownership is held by Lumiere.
o Synergistic Network Development S.A. ("Syned") is 100.0% owned by NetMed
B.V. and is responsible for signal transmission and distribution.
Asia. The Company conducts its development operations in Asia through its
office in Hong Kong. The Company's first Asian investment is its joint venture
interest in the United Broadcasting Corporation Public Company Limited,
formerly the International Broadcasting Corporation Public Company Limited
("UBC"), and its subsidiaries (together, the "UBC Group") in Thailand. UBC was
founded in 1985 by Shinawatra Computer and Communications Public Company
Limited ("Shinawatra"). The Company became an investor in UBC in January 1997
and has gradually increased its total share of ownership of UBC to
approximately 27.8% with an option to purchase an additional 3.3% from London
National Corporation. As of February 8, 1999, the remaining shares were
beneficially owned 41.0% by Telecom Holding Company Limited ("Telecom Asia"),
0.4% by the Mass Communications Organization of Thailand ("MCOT") and 30.8% by
other private investors and the public. The Company has pledged its shares in
UBC to ABSA Bank Limited as security for a revolving demand facility and
MeesPierson N.V. as security for a loan. The Company expects these pledges to
be released once the debt has been repaid from the proceeds of the Offerings.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources--Debt".
The UBC Group's pay-television business is managed through four operating
entities. UBC operates the digital satellite and MMDS services and acts as a
holding company for the remaining parts of the business. UBC Cable Network
Public Company Limited ("UBC Cable"), formerly UTV Cable Network Public Company
Limited, which is 97.9% owned by UBC, operates the cable television services
business for the UBC Group. Cineplex Company Limited ("Cineplex"), which is
99.9% owned by UBC, produces channels featuring movies, drama, educational
programming, news and sports for the UBC Group's pay-television systems. Both
UBC Cable and Cineplex were founded by Telecom Asia and later purchased by UBC.
Satellite Services Company Limited ("SSV"), which is 96.0% owned by UBC,
provides certain services used by the UBC Group in its pay-television systems,
including signal transmission and distribution.
Technology
The Company's Mindport division is a leading provider of pay-television
software and hardware solutions and services both to the Company's pay-media
businesses and to third-party pay-media operators. The Company operates its
Mindport technology division mainly through its wholly owned subsidiary Irdeto
B.V. ("Irdeto"). In addition, the Company owns 44.5% of OpenTV, a joint venture
that produces operating systems for interactive television. In the future, the
Company plans to form a new subsidiary named Mindport as a holding company for
all of its technology assets. The Company has signed an agreement to purchase
an additional 35.6% of OpenTV from Thomson in exchange for either cash, shares
in Mindport or a note secured by the OpenTV shares purchased. The Company
expects this transaction to close prior to or just after completion of the
Offerings.
Affiliates
The Company has several non-subsidiary affiliates, including Electronic
Media Network Limited ("M-Net Ltd."), SSIH, M-Web and Orbicom (Proprietary)
Limited ("Orbicom"). M-Net Ltd. is a publicly traded South African company that
provides the premium film channels carried by the Company on its pay-television
platforms in Africa. SSIH is a publicly traded South African company that
provides the sports channels carried by the Company on its pay-television
systems in Africa and the Middle East. Shares of SSIH are linked with those of
M-Net Ltd., and as of , 1999, their market capitalization was
approximately ZAR ($ million). The linking provides that each share of
either company's stock trades with one share of the other company's stock, with
a single price for both shares combined. The shares can be delinked by
declaration by each company's board. The Company currently owns 9.9% of each
M-Net Ltd. and SSIH and is 8.5% owned by SSIH.
M-Web was formed in 1997 through a series of transactions whereby the
Issuer contributed its Internet related business to a new entity, M-Web, and
subsequently capitalized it with a special dividend to MIH Holdings. M-Web is a
leading Internet service provider in South Africa. It provides Internet access
and aggregates content oriented toward South Africans. As of December 31, 1998,
it had 126,882 subscribers. The Company has no economic or voting interest in
M-Web.
18
<PAGE>
Orbicom is owned 80.0% by MIH Holdings and 20.0% by the Company. It
provides the uplink and signal backhaul facility for the Company's operations
in Africa. Orbicom is not operated as a profit center as it provides its
services at cost to various subsidiaries of MIH Holdings, including the
Company.
History
In 1985, several large South African media companies formed a pay-media
business, M-Net Ltd., the predecessor to the Company. M-Net Ltd. was separately
listed on the JSE in 1990.
Effective October 1993, M-Net Ltd. was divided into two companies. The
subscriber management, signal distribution and cellular telephony businesses,
together with the holding in FilmNet, a leading pay-television operator in
Europe, were placed in a new company, MIH Holdings (then called MultiChoice
Ltd.). M-Net Ltd. continued to hold other corporate operations and provide
pay-television programming.
In late 1992, MIH Holdings joined a consortium that procured the second
GSM cellular license awarded in South Africa. MIH Holdings owned 25.0% of
Mobile Telephone Networks Holdings (Proprietary) Limited ("MTN"), the cellular
network operator, and subsequently increased its stake in MTN to 34.7%. In
1995, MIH Holdings spun off its interest in MTN as a new corporation, M-Cell
Limited ("M-Cell"). M-Cell is listed on the JSE and has a market capitalization
of approximately ZAR ($ million) as of , 1999.
In 1995, Richemont S.A. ("Richemont") and MIH Holdings merged their global
pay-television operations, including their interest in FilmNet, the Company's
operations in Africa and Richemont's interest in Telepi-, into a single venture
called NetHold B.V. ("NetHold"), which MIH Holdings held through MIH Limited.
In March 1997, the Company and Richemont merged most of NetHold with Canal+,
the French-based pay-television operator. The Company retained NetHold's
African, Mediterranean and Middle East pay-television businesses, acquired 49%
of Irdeto, now part of the Mindport division, and received an interest in
Canal+. The Company has since sold its interest in Canal+ to fund its expansion
in Asia. The Company purchased the remainder of Irdeto from Canal+ in January
1998. The Company purchased its interests in its Thai pay-television joint
venture, UBC, from 1997 until the present. In 1998, the Company purchased its
44.5% interest in OpenTV, now a part of the Company's Mindport technology
division, and has signed an agreement to increase its ownership to 80.1% in
1999.
In 1997, the Company purchased an Internet service provider and renamed it
M-Web. In March 1998, M-Web was spun off and listed on the JSE.
19
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated cash and capitalization of
the Company at September 30, 1998 and as adjusted to give effect to the
conversion of Ordinary Shares into Class A Ordinary Shares and Class B Ordinary
Shares that occurred on , 1999, the issuance and sale of Class A Ordinary
Shares in the Offerings and the application of the net proceeds therefrom. This
table is based upon MIH Limited's Consolidated Statements, which have been
prepared in accordance with International Accounting Standards ("IAS"). This
information should be read in conjunction with the Financial Statements
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
September 30, 1998
--------------------------
Actual As adjusted(1)
-------- ---------------
(in thousands)
<S> <C> <C>
Cash and cash equivalents ........................................ $ $
====== =========
Long-term debt:
Long-term debt, including current portion but
excluding film and sports rights ..............................
Lease obligations(2) ............................................
Total debt(3) ...................................................
Shareholders' equity:
Ordinary Shares, $1.00 par value; 10 non-voting shares and 49,990
voting shares authorized, actual; 10 non-voting shares and 22,789
voting shares issued and outstanding, actual ....................
Class A Ordinary Shares, no par value; shares
authorized, as adjusted; shares issued and outstanding, as
adjusted ......................................................
Class B Ordinary Shares, no par value; shares
authorized, as adjusted; shares issued and outstanding, as
adjusted ......................................................
Share premium ...................................................
Foreign currency translation adjustment .........................
Accumulated loss ................................................
------ ---------
Total shareholders' equity ....................................
------ ---------
Total capitalization ......................................... $ $
------ ---------
</TABLE>
- ----------------
(1) Gives effect to the conversion of Ordinary Shares into Class A Ordinary
Shares and Class B Ordinary Shares that occurred on , 1999, the
Offerings and the application of $ million of proceeds to repay
indebtedness.
(2) Lease obligations include obligations under transponder leases.
(3) For details of the Company's debt, see Note 14 to the Consolidated
Statements and Note 13 to the Combined Statements included elsewhere in
this Prospectus.
20
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
The selected financial data set forth below for the years ended March 31,
1998, 1997, 1996, 1995 and 1994 have been derived from the Consolidated
Statements for the year ended March 31, 1998 and from the Combined Statements
for the years ended March 31, 1997, 1996, 1995 and 1994. The selected financial
data set forth below for the six months ended September 30, 1998 and 1997 have
been derived from the Condensed Consolidated Statements for such periods. The
data should be read in conjunction with, and are qualified in their entirety
by, the Financial Statements included elsewhere in this Prospectus. The
Financial Statements are prepared in accordance with international accounting
standards ("IAS") and for the years ended March 31, 1998, 1997 and 1996 have
been audited by Coopers & Lybrand. The accounting policies adopted by the
Company under IAS differ in certain significant respects from generally
accepted accounting principles in the United States ("US GAAP"). Such
differences are described in Note 29 to the Consolidated Statements and in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--US GAAP Reconciliation". The Combined Statements include the
combined accounts of the Acquired MIH Businesses (as defined herein) and
eliminate all accounts among the Acquired MIH Businesses. The Combined
Statements do not eliminate amounts due from the Acquired MIH Businesses to MIH
Limited, which the Consolidated Statements do eliminate, nor do they include
purchase accounting adjustments that occurred as a result of the Canal+
Transaction (as defined).
<TABLE>
<CAPTION>
Company Consolidated(1)
----------------------------
Six Months Ended
September 30,
----------------------------
1998 1997
------------- --------------
(dollars in millions, except
per share and per subscriber
data)
<S> <C> <C>
Statements of Operations Data:
Amounts in accordance with IAS:
Revenues:
Subscriptions ............................... $ 205.4 $ 202.9
Decoder sales and repair .................... 44.1 25.3
Technology and other ........................ 36.8 7.3
-------- -----------
Total revenues, net(2) .................... $ 286.3 $ 235.5
Operating expenses:
Cost of providing services .................. (188.7) (147.3)
Selling, general and administrative ......... (77.9) (79.1)
Depreciation and amortization(3) ............ (25.0) (28.1)
-------- -----------
Operating loss ............................ (5.3) (18.9)
Financial results, net(4) ................... (8.8) (0.6)
Equity results in joint ventures and
associates ................................. (14.2) (4.2)
Profit on sale of joint venture ............. 31.1 --
-------- -----------
Profit/(loss) before taxation ............... 2.8 (23.7)
Loss from continuing operations ............. ( 0.7) (26.4)
Net loss .................................... $ (0.7) $ (30.4)
Per share amounts(5):
Loss from continuing operations ............. (32.19) (1,159.52)
Pro forma(6) .............................. [ ]
Net loss .................................... (32.19) (1,332.16)
Pro forma(6) .............................. [ ]
Dividends(7) ................................ -- --
Weighted average shares outstanding ......... 22,799 22,799
Amounts in accordance with US GAAP:
Loss from continuing operations ............. $ (5.9) $ (31.2)
Cumulative effect of a change in
accounting principle ....................... -- --
Net loss .................................... $ (5.9) $ (35.1)
Per share amounts(5):
Loss from continuing operations ............. $ (259.97) $ (1,364.80)
Pro forma(6) .............................. [ ]
<CAPTION>
Acquired MIH
Company Businesses Combined
Consolidated(1) (Predecessor)(1)
-------------- -----------------------------------------------
Year Ended March 31,
--------------------------------------------------------------
1998 1997 1996 1995 1994
-------------- ----------- ----------- ----------- -----------
(dollars in millions, except per share and per subscriber data)
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Amounts in accordance with IAS:
Revenues:
Subscriptions ............................... $ 404.5 $ 315.5 $ 233.3
Decoder sales and repair .................... 63.1 60.2 43.6
Technology and other ........................ 33.9 16.2 6.0
---------- -------- --------
Total revenues, net(2) .................... $ 501.5 $ 391.9 $ 282.9 $ 266.9 $ 271.9
Operating expenses:
Cost of providing services .................. (309.0) (259.4) (212.9)
Selling, general and administrative ......... (177.2) (140.4) (77.6)
Depreciation and amortization(3) ............ (58.0) (16.2) (9.8)
---------- -------- --------
Operating loss ............................ (42.7) (24.1) (17.4)
Financial results, net(4) ................... (5.5) (5.3) (0.9)
Equity results in joint ventures and
associates ................................. (7.9) 3.8 0.6
Profit on sale of joint venture ............. -- -- --
---------- -------- --------
Profit/(loss) before taxation ............... (56.1) (25.6) (17.8)
Loss from continuing operations ............. (59.9) (26.0) (21.5)
Net loss .................................... $ (63.8) $ (26.0) $ (21.5)
Per share amounts(5):
Loss from continuing operations ............. (2,625.82)
Pro forma(6) .............................. [ ]
Net loss .................................... (2,798.46)
Pro forma(6) .............................. [ ]
Dividends(7) ................................ 2,272.73
Weighted average shares outstanding ......... 22,799
Amounts in accordance with US GAAP:
Loss from continuing operations ............. $ (75.4) $ (26.0) $ (21.6)
Cumulative effect of a change in
accounting principle ....................... -- -- ( 3.9)
Net loss .................................... $ (79.3) $ (26.0) $ (25.4)
Per share amounts(5):
Loss from continuing operations ............. $ (3,304.88)
Pro forma(6) .............................. [ ]
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Acquired MIH
Businesses Combined
Company Consolidated(1) (Predecessor)(1)
--------------------------------------------- ----------------------------------
Six Months Ended
September 30, Year Ended March 31,
--------------------------- ----------------------------------------------------
1998 1997 1998 1997 1996 1995 1994
------------- --------------- --------------- ---------- ---------- ------ -----
(dollars in millions, except per share and per subscriber data)
<S> <C> <C> <C> <C> <C> <C> <C>
Net loss .................................... $(259.97) $(1,537.44) $(3,477.52)
Pro forma(6) .............................. [ ] [ ]
Balance Sheet Data (at period end):
Amounts in accordance with IAS:
Cash and cash equivalents ................... $ 87.5 -- $ 153.4 $ 53.9 $ 15.1
Total assets ................................ 700.8 -- 646.1 287.2 156.1
Total debt(8) ............................... 146.7 -- 107.6 76.8 16.1
Total liabilities ........................... 445.5 -- 392.5 337.7 188.6
Amounts in accordance with US GAAP:
Total assets ................................ $ 670.9 -- $ 621.2 $ 287.2 $ 156.1
Total debt(8) ............................... 146.7 -- 107.6 76.8 16.1
Total liabilities ........................... 445.5 -- 392.5 337.7 188.6
Other Data:
Operating Income Before Depreciation
and Amortization(9) ........................ $ 19.7 $ 9.1 $ 15.3 $ (7.9) $ (7.6)
Cash flow from operating activities ......... (40.1) (39.5) 5.2 68.5 6.6
Cash flow from investing activities ......... (38.3) (12.2) 170.5 (14.6) (10.7)
Cash flow from financing activities ......... ( 3.7) 52.7 (77.0) (13.3) ( 1.3)
Capital expenditures ........................ ( 1.8) (10.2) (31.7) (17.6) (13.0)
Subscribers in thousands (at period end):
Africa
South Africa .............................. 1,086 1,025 1,054 1,008 943
Sub-Saharan Africa ........................ 127 103 109 104 73
Egypt ..................................... 22 14 18 13 9
Middle East ............................... 47 23 27 15 --
Total Africa ............................ 1,282 1,166 1,208 1,140 1,025
Mediterranean
Greece .................................... 277 217 254 203 101
Cyprus .................................... 33 30 31 26 11
Total Mediterranean ..................... 310 247 285 230 112
Asia
Thailand .................................. 289 308 313 253 130
Total subscribers ....................... 1,881 1,720 1,806 1,623 1,268
Average monthly revenue per .................
subscriber(10) ............................. $ 22.16 $ 23.23 $ 23.90 $ 21.10 $ 18.63
</TABLE>
<TABLE>
<CAPTION>
Company Consolidated(1)
--------------------------------------------------------------------
Year ended March 31,
--------------------------------------------------------------------
1997 1996 1995 1994
-------------- --------------- --------------- ---------------
(dollars in millions, except per share data)
<S> <C> <C> <C> <C>
Statements of Operations Data:
Amounts in accordance with IAS:
Net profit/(loss) ........................... $ 409.2 $ (85.7) $ (52.0) $ (33.6)
Weighted average shares outstanding ......... 22,799 22,799 22,799 22,799
Profit/(loss) per share ..................... $ 17,946.58 $ (3,758.98) $ (2,280.80) $ (1,473.75)
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Company Consolidated(1)
--------------------------------------------------
Year ended March 31,
--------------------------------------------------
1997 1996 1995 1994
------------- --------- --------- ----------
(dollars in millions, except per share data)
<S> <C> <C> <C> <C>
Amounts in accordance with US GAAP:
Net Income ........................ 409.64
Income per share .................. 17,946.58
Balance Sheet Data (at period end):
Amounts in accordance with IAS:
Total assets ...................... 803.1 63.7 65.4 370.1
Total debt(8) ..................... 124.0 94.5 -- --
Amounts in accordance with US GAAP:
Total assets ...................... 803.1
Total debt(8) ..................... 124.0
</TABLE>
- ----------------
(1) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Presentation of Financial Information".
(2) Prior to March 31, 1995, the revenues of the Company's predecessors were
primarily generated by its operations in Africa. The other operations did
not generate significant revenue. The business of the Company's
Africa-based predecessor was included with the operations of affiliates
prior to March 31, 1995. Therefore, only total net revenues have been
presented.
(3) The operating results of the Company for the year ended March 31, 1998 and
the six-month period ended September 30, 1998 include amortization of $39.0
million and $__ million, respectively attributable to intangible assets of
$207.9 million, which were recorded as a result of the acquisition of the
Acquired MIH Businesses (as defined herein). Amortization of film and
sports rights is included in the cost of providing services.
(4) Includes interest expense, interest income, dividend income, foreign
exchange gains and losses, and gains on disposal of investments.
(5) Per share amounts are not applicable to the results of the Acquired MIH
Businesses.
(6) Pro forma per share amounts are historical amounts adjusted to give effect
to the number of shares whose proceeds will be used to repay $[ ] million
of debt and the impact on interest expense. See "Use of Proceeds".
(7) Dividend paid to facilitate the capitalization of M-Web. The Company does
not expect to pay dividends in the near future. See "Dividend Policy".
(8) Includes bank overdrafts, current portion of long-term debt, long-term
debt (including approximately $21.3 million including accreted interest,
which was recorded in connection with the transfer of shares of
M-Net/SSIH during the six-month period ended September 30, 1998. See Note
3 to the Condensed Consolidated Statements). In fiscal 1997 and 1996,
excludes debt owed to MIH Limited included in the liabilities of the
Acquired MIH Businesses, as such amounts would be eliminated upon
consolidation.
(9) Operating Income Before Depreciation and Amortization is defined as
operating income (loss) before depreciation and amortization (other than
amortization of film and sports rights). Operating Income Before
Depreciation and Amortization is presented supplementally as the Company
believes it is the most appropriate measure for evaluating operating
performance. The Company believes Operating Income Before Depreciation
and Amortization is a standard measure commonly reported and widely used
by analysts, investors and others associated with the pay-media industry.
Operating Income Before Depreciation and Amortization eliminates the
uneven effect across reporting periods and companies of (1) depreciation
of tangible fixed assets and (2) amortization of intangible assets
acquired in business combinations accounted for by the purchase method of
accounting. While many in the financial community consider Operating
Income Before Depreciation and Amortization to be an important measure of
comparative operating performance, it should be considered in addition
to, and not as a substitute for, operating income, net income, cash flow
and other measures of financial performance prepared in accordance with
generally accepted accounting principles which are presented in the
audited financial statements included elsewhere in this Prospectus.
Additionally, the Company's calculation of Operating Income Before
Depreciation and Amortization may be different than the calculation used
by other companies and, therefore, comparability may be affected.
(10) Excludes the Company's Asia and Middle East pay-television operations
because such revenues are not consolidated with the Company's income
statements. Total subscribers from consolidated operations were 1.545
million, 1.390 million, 1.466 million, 1.355 million and 1.137 million as
of September 30, 1998 and 1997 and March 31, 1998, 1997 and 1996,
respectively.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Financial Statements included elsewhere in this Prospectus.
Presentation of Financial Information
MIH Limited is a holding company that operates in the pay-media and
related technology industries through its interests in subsidiaries and joint
ventures.
Prior to March 31, 1997, MIH Limited's activities consisted almost
entirely of its 50% interest in NetHold, a pay-television joint venture. Prior
to March 1997, NetHold had investments in pay-television operations in Africa,
Cyprus, Greece, Italy, Belgium, the Netherlands, Scandinavia and the Middle
East. NetHold also owned Irdeto, a pay-television technology company. In March
1997, the Company sold its interest in NetHold to Canal+ in exchange for a 5%
equity interest in Canal+, all of NetHold's pay-television businesses in
Africa, Cyprus, Greece and the Middle East (the "Canal+ Transaction") and 49%
of Irdeto. In subsequent transactions, the Company acquired all of the
ownership interest of Irdeto. The pay-television businesses in Africa, Cyprus,
Greece and the Middle East, along with 49% of Irdeto, are collectively referred
to as the "Acquired MIH Businesses." As a result of these factors, for the
years ended March 31, 1997 and 1996, MIH Limited's financial information
consists almost entirely of its investment in NetHold, which owned, in addition
to the Acquired MIH Businesses, a substantial number of other businesses.
Accordingly, the Company's historical financial information after March 31,
1997 is not comparable to its financial information prior to that date.
Accordingly, two sets of financial statements are included herein. The
Consolidated Statements present on a consolidated basis the financial position
and results of operations of MIH Limited and its subsidiaries, including the
results of joint ventures and associates accounted for under the equity method.
In addition, the Combined Statements present the financial position and results
of operations of the Acquired MIH Businesses on a combined basis. The Company
believes that the Acquired MIH Businesses are effectively the predecessor of
the Company prior to March 31, 1997. This is because the Acquired MIH
Businesses include nearly all of the businesses currently operated by the
Company, and do not include businesses that have been discontinued or sold.
Because of this, the Company believes that a period to period comparison of the
Acquired MIH Businesses will be more meaningful to potential investors and will
more accurately reflect the Company's business trends. Therefore, the
discussion in this section compares the Consolidated Statements for the year
ended March 31, 1998 and the Combined Statements for the year ended March 31,
1997 and 1996.
The comparability of the Consolidated Statements for the year ended March
31, 1998 with the Acquired MIH Businesses is affected by the intangible assets
recognized upon the acquisition of the Acquired MIH Businesses and the
amortization thereof. Further, during fiscal 1998, the Company acquired 100% of
Irdeto and began consolidating results which were equity accounted in the
Combined Statements.
Both the Consolidated Statements and Combined Statements have been
prepared in accordance with IAS, which differs in certain significant respects
from US GAAP. See "--US GAAP Reconciliation" and Note 29 and Note 24 to the
Consolidated Statements and Combined Statements, respectively, for a
description of the principal differences between IAS and US GAAP as they relate
to the Company and the Acquired MIH Businesses.
Overview of Operations
The Company is a multinational provider of pay-television services and the
technology employed in the provision of such services. As of September 30,
1998, the Company provided pay-television and related services to over 1.8
million households, and operated its businesses in over 45 countries around the
world. The current holdings of MIH Limited consist of:
o Pay-television operations in Africa, the Mediterranean and Asia.
o Pay-media technology businesses, based in the Netherlands and the United
States, that collectively compose the Company's Mindport division.
o Ownership of 9.9% (19.8% at March 31, 1998) of M-Net Ltd. and SSIH.
In Africa, MultiChoice Africa provides a range of subscriber management
services to pay-television households in over 35 countries on the African
continent and adjacent islands, principally in South Africa.
24
<PAGE>
MultiChoice Africa also has direct investments with fully-staffed offices for
pay-television services in Lesotho, Namibia, Botswana, Zambia, Nigeria, Ghana,
Uganda, Kenya and Tanzania. In the Mediterranean, NetMed operates analog
platforms in Greece and Cyprus. In Asia, the Company owns 27.8% (17.3% at March
31, 1998) of UBC, the only major pay-television provider in Thailand. In the
Middle East, the Company performs subscriber management operations for the two
digital platforms in Saudi Arabia and, through MultiChoice Egypt, services the
Egyptian subscriber base for both digital and analog platforms.
The Company's Mindport technology division consists of Irdeto and its
subsidiaries, which develop and market conditional access, subscriber
management systems and other pay-television technologies. Mindport also
consists of a 44.5% interest in OpenTV (soon to be increased to 80.1%), which
develops and provides operating systems for interactive television.
The Company's operating results are affected by a number of items,
including the number of households subscribing to its pay-television service,
the average revenue per subscriber, churn rates, seasonality and foreign
exchange rates. Foreign exchange rates can have a significant effect on the
Company's reported earnings as the Company generates revenues predominantly in
the local currencies of the countries in which it operates, whereas a
substantial portion of the Company's expenses are incurred in U.S. dollars.
Revenues. The Company's primary source of revenue is subscriber fees. The
Company also generates revenue from the sale, rental and maintenance of
decoders, and other income. As a result of the subsequent acquisition of the
remaining interest in Irdeto and its interest in OpenTV, the Company began in
January 1998 to consolidate the revenue it generated from technology licenses.
Cost of Providing Services. These include programming, subscriber
management, decoder purchase, transmission and development costs. Programming
costs include the cost for third-party programs and the production cost of
programs produced by the Company, as well as the amortization of programming
rights for sporting events and movies. Subscriber management costs include the
direct costs of service and maintenance of equipment installed at subscribers'
homes and the cost of customer service. Decoder costs include the purchase of
decoders by the Company for use, lease or resale. Transmission costs consist of
transmission and uplinking and backhauling charges paid by the Company to
various satellite vendors under operating lease agreements. Development costs
include the costs of research necessary to enhance the Company's existing
technology products and develop new technologies.
Selling, General and Administrative Expenses. These costs include overhead
costs from the various departments such as marketing, public relations,
subscriber sales, warehousing, information systems, finance and accounting,
accounts receivable and the human resources department.
Depreciation and Amortization. These costs include charges relating to the
amortization of intangible assets arising from acquisitions and the
depreciation of the Company's tangible fixed assets, including transponders,
decoders and assets under capital lease.
Results of Operations
The Company's results of operations are summarized in the following
tables:
<TABLE>
<CAPTION>
Consolidated Combined
--------------------------------------- -------------------------
Six months ended
September 30, Year Ended March 31,
------------------------- ---------------------------------------
1998 1997 1998 1997 1996
----------- ----------- ----------- ----------- -----------
(in millions) (in millions)
<S> <C> <C> <C> <C> <C>
Subscription revenues ....................... $ 205.4 $ 202.9 $ 404.5 $ 315.5 $ 233.3
Decoder sales and repairs ................... 44.1 25.3 63.1 60.2 43.6
Technology and other ........................ 36.8 7.3 33.9 16.3 6.0
-------- -------- -------- -------- --------
Net revenues ............................... 286.3 235.5 501.5 391.9 282.9
-------- -------- -------- -------- --------
Cost of providing services .................. (188.7) (147.3) (309.0) (259.4) (212.9)
Selling, general and administrative expenses. (77.9) (79.1) (177.2) (140.4) (77.6)
Depreciation and amortization ............... (25.0) (28.1) (58.0) (16.2) (9.8)
-------- -------- -------- -------- --------
Total operating expenses ................... (291.6) (257.2) (544.2) (416.0) (300.3)
Operating loss ............................. (5.3) (18.9) (42.7) (24.1) (17.4)
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Consolidated Combined
--------------------------------------- -------------------------
Six months ended
September 30, Year Ended March 31,
------------------------- ---------------------------------------
1998 1997 1998 1997 1996
----------- ----------- ----------- ----------- -----------
(in millions) (in millions)
<S> <C> <C> <C> <C> <C>
Financial results, net ..................... (8.8) (0.6) (5.5) (5.3) (0.9)
Equity results in joint ventures ........... (13.7) (2.9) (5.1) 1.1 (1.8)
Equity results in associates ............... (0.5) (1.3) (2.8) 2.6 2.4
Profit on sale of joint venture ............ 31.1 -- -- -- --
------- ------- ------- ------- -------
Profit/(loss) before taxation ............. 2.8 (23.7) (56.1) (25.6) (17.8)
Income taxation ............................ (3.6) (3.6) (7.6) (1.2) (3.9)
------- ------- ------- ------- -------
Loss after taxation ....................... (0.7) (27.3) (63.7) (26.8) (21.6)
Minority interest .......................... -- 0.8 3.8 0.7 0.1
------- ------- ------- ------- -------
Loss from continuing operations ........... (0.7) (26.4) (59.9) (26.0) (21.5)
Loss from discontinued operations ......... -- (3.9) (3.9) -- --
------- ------- ------- ------- -------
Loss for the period ...................... $ (0.7) $ (30.4) $ (63.8) $ (26.0) $ (21.5)
======= ======= ======= ======= =======
</TABLE>
Six-months ended September 30, 1998 (Consolidated Statements) compared to the
six-months ended September 30, 1997 (Consolidated Statements)
Revenues
Subscription revenues increased by $2.5 million, or 1.2%, to $205.4
million during the period ended September 30, 1998 from $202.9 million in the
same period in 1997, mainly as a result of an increase in the number of
subscribers as reflected in the table below:
<TABLE>
<CAPTION>
Number of
Subscribers(1)
September 30,
-------------------
1998 1997
-------- --------
(thousands)
<S> <C> <C>
Digital ................. 299 156
Analog .................. 1,246 1,233
----- -----
Total .................. 1,545 1,390
===== =====
</TABLE>
- ----------------
(1) Excludes non-consolidated joint ventures and associates.
Total subscribers increased by 155,000, or by 11.2%, from 1,390,000 at
September 30, 1997 to 1,545,000 at September 30, 1998. In Africa, the number of
digital subscribers increased by 143,000 and analog subscribers decreased by
51,000. The reduction in African analog subscribers resulted primarily from the
Company's campaign to convert analog customers to digital service. The
Company's subscribers in Greece and Cyprus, where the Company currently
provides only analog service, increased by 25.8%, from 247,000 at September 30,
1997 to 310,000 at September 30, 1998. The net increase in overall analog
subscribers is 12,000.
Average subscription revenue per subscriber per month decreased by $ 0.97,
or 4.6%, to $22.16 for the period ended September 30, 1998 from $23.23 for the
same period in 1997. The decrease was primarily attributable to the effects of
the devaluation of local currencies against the U.S. dollar partially offset by
increases in monthly subscriber fees in local currencies (primarily rand and
drachma) by 10%-20% and a shift from analog service to higher-priced digital
service.
Decoder sales and repairs increased $18.8 million, or 74.3%, to $44.1
million during the period ended September 30, 1998 from $25.3 million during
the same period in 1997. This increase is attributable to the increase in
digital subscribers and the Company's increased activity in selling digital
decoders directly to subscribers. During the same period in 1997, digital
decoders were sold through independent retail outlets. This trend is partly
offset by the decrease of the sales price per decoder, as the Company passed on
the savings in the price it pays for decoders to its customers.
26
<PAGE>
Technology and other revenue increased $29.5 million, or 404.1%, to $36.8
million during the period ended September 30, 1998 from $7.3 million in the
same period in 1997, primarily as a result of the consolidation of Irdeto for
the full six month period ended September 30, 1998. During the period ended
September 30, 1997, Irdeto was accounted for under the equity method.
Operating expenses
Costs of providing services increased by $41.4 million, or 28.1%, to
$188.7 million during the period ended September 30, 1998 from $147.3 million
in the same period in 1997. This increase is primarily attributable to the
inclusion of costs associated with the consolidation of Irdeto, effective
January 1998, and the increase in the amortization of sports and programming
rights in NetMed as compared to the same period in 1997.
Depreciation and amortization decreased $3.1 million, or 11.0%, to $25.0
million during the period ended September 30, 1998, from $28.1 million in the
same period in 1997. The decrease is primarily attributable to the transfer of
assets from the Company to Orbicom.
Operating profit/(loss)
Operating loss decreased by $13.6 million, or 72.0% to $5.3 million during
the period ended September 30, 1998 from a loss of $18.9 million for the same
period in 1997 as a result of the combined effect of the foregoing factors.
Finance results, net
The net financial results decreased by $8.2 million from a net financial
loss of $0.6 million during the period ended September 30, 1997 to a net
financial loss of $8.8 million during the same period in 1998. The change in
the net financial result was affected by a profit of $2.4 million on the
disposal of the Company's interest in Canal+ during the period ended September
30, 1997 and: (i) an increase in interest paid of $3.3 million, or 76.7%, to
$7.6 million during the period ended September 30, 1998, from $4.3 million
during the same period in 1997, as a result of the increase in long term debt,
(ii) a decrease in dividends received of $2.8 million, or 87.5%, to $0.4
million during the period ended September 30, 1998 from $3.2 million during the
same period in 1997, which mainly related to the dividend received from Canal+,
(iii) a decrease of exchange losses of $1.0 million, or 22.2%, to $3.5 million
during the period ended September 30, 1998 from $4.5 million during the same
period in 1997, (iv) interest accretion of $0.9 million attributable to the
liability recorded in connection with the transfer of M-Net/SSIH shares in
April 1998, net of amortization of the related option premium and (v) an
increase of interest received of $0.8 million, or 29.6%, to $3.3 million during
the period ended September 30, 1998 from $2.5 million during the same period in
1997.
Equity results in joint ventures
The Company's share in the loss of its investment in joint ventures
increased by $10.7 million, or 365.4%, to $13.7 million during the period ended
September 30, 1998, from $2.9 million in the same period in 1997. The reason
for the increase is primarily attributable to the Company's share of $11.4
million, including goodwill amortization allocation of $3.3 million, in the
losses of UBC, which was previously accounted for using the cost method; and a
$3.0 million share, including goodwill amortization allocation of $1.2 million,
in the losses of OpenTV, which was acquired during January 1998. Since January
1998, Irdeto and its subsidiaries have been consolidated in MIH's results of
operations and not included in equity result in joint ventures. The equity loss
relating to Irdeto for the period ended September 30, 1997 was $2.9 million,
including goodwill amortization allocation of $1.4 million.
Equity results in associates
The Company's equity results in associates (mainly a 19.9% interest in
M-Net/SSIH) was a loss of $0.5 million after goodwill amortization allocation
of $0.7 million for the period ended September 30, 1998. As described in Note 3
to the Condensed Consolidated Statements, the Company transferred a 9.9%
interest in M-Net/SIHH to a trust, but continues to equity account for 19.9% of
M-Net/SIHH. For the same period in 1997, the Company's equity result in
associates was a loss of $1.3 million after goodwill amortization allocation of
$1.0 million. The Company accounts for its investment in M-Net using the equity
method of accounting because of the significant influence the Company exercises
over M-Net as a result of common ownership, the Company's management and
directors' representation on the Board of Directors of M-Net and the fact that
substantially all of M-Net's revenues are derived from the Company.
Profit on sale of joint venture
The profit on sale of joint venture resulted from the release of
provisions relating to the sale of the NetHold joint venture to Canal+. At
March 31, 1997 the Company deferred recognition of approximately $73.3 million
of this gain, relating to liability for warranties of decoder technology,
guarantees of the number of subscribers and
27
<PAGE>
the potential reimbursement of programming costs. During the six month period
ended September 30, 1998, $31.1 million of these provisions were released, as
they were no longer required following the expiry of the these warranties and
guarantees on June 30, 1998.
Taxation expense
The taxation expense did not fluctuate significantly for the period ended
September 30, 1998 compared with the same period in 1997. The taxation charge
mostly reflects the charge for foreign taxes payable. No significant amount of
tax is payable by the Company due to losses incurred and accumulated tax losses
available in various companies.
Net loss for the period
As a result of the foregoing factors, the Company realized a net loss of
$(0.7) million during the period ended September 30, 1998 compared to a net
loss of $(30.4) million for the same period in 1997.
Year ended March 31, 1998 (Consolidated Statements) compared to
the year ended March 31, 1997 (Combined Statements)
Revenues
Subscription revenues increased $89.0 million, or 28.2%, to $404.5 million
during the year ended March 31, 1998 from $315.5 million in the same period in
1997, mainly as a result of an increase in the number of subscribers in MIH
Limited's consolidated subsidiaries, as reflected in the table below:
<TABLE>
<CAPTION>
Number of
Subscribers(1)
Mar. 31,
-------------------
1998 1997
-------- --------
(thousands)
<S> <C> <C>
Digital ................. 212 105
Analog .................. 1,254 1,250
----- -----
Total .................. 1,466 1,355
===== =====
</TABLE>
- ----------------
(1) Excludes non-consolidated joint ventures and associates.
Total subscribers increased by 111,000, or 8.2%, from 1,355,000 at March
31, 1997 to 1,466,000 at March 31, 1998. In Africa, the number of digital
subscribers increased by 107,000 and the number of analog subscribers decreased
by 52,000. The reduction in African analog subscribers resulted primarily from
the Company's campaign to convert analog customers to digital service, a trend
that the Company expects to continue. The Company estimates that in South
Africa 60% of analog subscribers that discontinue service do so as a result of
conversion to digital service. The Company's subscribers in Greece and Cyprus,
where the Company currently provides only analog service, increased by 24.2%,
from 230,000 to 285,000. This resulted in a net increase of 4,000 in overall
analog subscribers.
Average revenue per subscriber per month increased by $2.80, or 13.3%, to
$23.90 for the year ended March 31, 1998 from $21.10 for the year ended March
31, 1997. The increase was attributable to the shift in subscribers in Africa
from analog service to the higher-priced digital service, increases in monthly
subscriber fees in local currencies (primarily rand and drachma) by
approximately 18% and 11% for the analog and digital service, respectively,
offset by the effects of devaluation of local currencies against the U.S.
dollar.
Decoder sales and repairs increased $2.9 million, or 4.8%, to $63.1
million during the year ended March 31, 1998 from $60.2 million in the same
period in 1997. During the fiscal year ended March 31, 1998 the retail price of
decoders decreased consistent with the reduction in manufacturing cost of
decoders. The Company passed on the savings in the price it pays for decoders
to its customers. The revenue per decoder has therefore decreased, resulting in
a slower rate of growth in decoder revenues relative to the growth in the
number of subscribers. This trend is partly offset by a shift of subscribers
from analog to digital decoders, which are more expensive.
Technology and other revenue increased $17.7 million, or 108.8%, to $33.9
million during the year ended March 31, 1998 from $16.2 million in the same
period in 1997. Of this increase, $11.5 million related to the consolidation of
Irdeto for the three months beginning in January 1998. Prior to that time,
Irdeto was accounted for under the equity method.
28
<PAGE>
Operating expenses
Costs of providing services increased by $49.6 million, or 19.1%, to
$309.0 million during the year ended March 31, 1998 from $259.4 million in the
same period in 1997. The increase in the cost of providing services is
primarily attributable to: (i) the inclusion of costs associated with Irdeto
effective January 1998, (ii) the amortization of sports rights which were
acquired by NetMed for the first time in fiscal 1998, (iii) increased charges
for additional satellite capacity and (iv) net increased programming costs
associated with the increased number of digital subscribers.
Selling, general and administrative ("SG&A") costs increased by $36.8
million, or 26.2%, to $177.2 million during the year ended March 31, 1998 from
$140.4 million in the same period in 1997, primarily as a result of (i)
consolidation of the SG&A of Irdeto beginning in January 1998, which was $5.8
million, (ii) an increase in staff and communication costs primarily due to the
expansion of call centers required to match the increased number and length of
calls arising from the growth in the digital subscriber base, (iii) an expanded
advertising campaign and (iv) costs associated with the establishment of group
corporate functions.
Depreciation and amortization increased $41.8 million, or 258.3%, to $58.0
million during the year ended March 31, 1998 from $16.2 million in the same
period in 1997. Depreciation and amortization for the fiscal year ended March
31, 1998 included amortization of $37.0 million relating to intangible assets
recorded on March 31, 1997 in connection with the Canal+ Transaction. The
remaining increase in depreciation and amortization was attributable to the
increase in depreciation of various tangible assets and capital leases for
transponders.
Operating loss
Operating loss increased by $18.6 million, or 77.1%, to $42.7 million
during the year ended March 31, 1998 from $24.1 million for the same period in
1997 as a result of the combined effect of the foregoing factors.
Financial results, net
Financial results decreased by $0.2 million, or 4.2%, to a net financial
loss of $5.5 million during the year ended March 31, 1998 from a net financial
loss of $5.3 million in the corresponding period of 1997. Dividend income of
$3.2 million and gain on disposal of investments of $2.6 million (representing
the sale of the Company's interest in Canal+) were recorded in 1998, with no
corresponding amounts recorded in 1997. Interest income increased $3.9 million,
or 97.2%, to $7.9 million from $4.0 million in the corresponding period of
1997, primarily as a result of increased cash balances produced from the
disposal of Canal+ shares. Interest expense increased $5.4 million, or 69.2%,
to $13.2 million from $7.8 million in the corresponding period of 1997. The
main reason for the change is the capitalization of the satellite leases and
the corresponding interest charge. Exchange losses increased by $4.6 million,
or 305.4%, to $6.0 million from $1.5 million in the corresponding period of
1997.
Equity result in joint ventures
The Company's equity result in joint ventures was a loss of $5.1 million
(consisting of OpenTV ($2.9 million)) and, for the nine months ended December
31, 1997, Irdeto ($2.2 million)) net of a goodwill allocation of $0.8 million
during the year ended March 31, 1998. In fiscal 1997, the Acquired MIH
Businesses had net income from joint ventures of $1.1 million. Since January
1998, Irdeto and its subsidiaries have been consolidated in MIH Limited's
results of operations and not included in equity result in joint ventures.
Equity result in associated companies
Equity result in associates decreased by $5.4 million, or 205.3%, to $2.8
million loss during the year ended March 31, 1998 from $2.6 million gain in the
corresponding period of 1997. Equity result in associates for the year ended
March 31, 1998 is net of a goodwill allocation of $3.8 million in fiscal 1998,
attributable to the Company's 19.9% interest in M-Net Ltd. and SSIH. The
Company accounts for its investment in M-Net using the equity method of
accounting because of the significant influence the Company exercises over
M-Net as a result of common ownership, the Company's management and directors'
representation on the Board of Directors of M-Net and the fact that
substantially all of M-Net's revenues are derived from the Company.
Taxation expense
Taxation expense increased to $7.6 million during the year ended March 31,
1998 from $1.2 million in the corresponding period of 1997. The taxation charge
reflects mainly the charge for foreign taxes payable. No significant amount of
taxes is payable by the Company, due to losses incurred in the various
companies to date.
29
<PAGE>
Taxes provided mainly relate to minimum statutory requirements and changes
resulting from new tax legislation introduced during fiscal 1998. The deferred
taxes are as a result of timing differences between the values for financial
reporting and fiscal purposes under the liability method.
Minority interest
Minority interest increased by $3.1 million, or 414.0%, to $3.8 million
during the year ended March 31, 1998 from $0.7 million in the corresponding
period of 1997. The minority interest primarily relates to NetMed Hellas and
MultiChoice Hellas for the losses incurred in these operations. The provision
for minority interest was limited to the capital infusion from the minority
parties. The Company has recorded cumulative losses attributable to minority
interest shareholders of $8.4 million through March 31, 1998.
Net loss
As a result of the foregoing factors the Company realized a net loss of
$63.8 million during the year ended March 31, 1998 compared to a net loss of
$26.0 million for the comparable period in 1997.
Year ended March 31, 1997 (Combined Statements) compared to the year ended
March 31, 1996 (Combined Statements)
Revenues
Subscription revenues increased $82.2, or 35.2%, to $315.5 million during
the year ended March 31, 1997 from $233.3 million in the same period in 1996,
mainly as a result of an increase in the number of subscribers as reflected in
the table below:
<TABLE>
<CAPTION>
Number of
Subscribers(1)
Mar. 31,
-------------------
1997 1996
-------- --------
(thousands)
<S> <C> <C>
Digital ................. 105 22
Analog .................. 1,250 1,115
----- -----
Total .................. 1,355 1,137
===== =====
</TABLE>
- ----------------
(1) Excludes non-consolidated joint ventures and associates.
Total subscribers increased by 218,000, or 19.1%, from 1,137,000 at March
31, 1996 to 1,355,000 at March 31, 1997. The number of digital subscribers
increased by 82,000 in Africa, while the aggregate number of analog subscribers
increased by 18,000 for a total increase of 100,000 subscribers in Africa. The
relatively low net increase in analog subscribers resulted partially from the
Company's campaign to convert analog customers to digital service, a trend that
the Company expects to continue. The Company estimates that 60% of analog
subscribers that discontinue service do so as a result of conversion to digital
service. The Company's subscribers in Greece and Cyprus, where the Company
provided only analog service, increased by 118,000, or 105.1%, from 112,000 to
230,000.
Average revenue per subscriber per month increased by $2.47, or 13.3%, to
$21.10 for the year ended March 31, 1997 as compared to $18.63 for the year
ended March 31, 1996. The increase was attributable to the shift in subscribers
in Africa from analog service to higher priced digital service and increases in
monthly subscriber fees in local currencies (primarily rand and drachma) by
approximately 11%-18%, offset by the effects of devaluation of local currencies
against the U.S. dollar.
Sales from decoders increased $16.5 million, or 37.9%, to $60.2 million
during the year ended March 31, 1997 from $43.7 million in the same period in
1996. The increase in sales correlated to the increase in the number of
subscribers, as well as the change in subscriber composition between analog and
digital services.
Other revenue increased $10.3 million, or 174.7%, to $16.2 million during
the year ended March 31, 1997 from $5.9 million in the same period in 1996. The
increase related mainly to advertising revenues, which increased from $3.0
million to $8.0 million.
30
<PAGE>
Operating expenses
Costs of providing services increased by $46.5 million, or 21.8%, to
$259.4 million during the year ended March 31, 1997 from $212.9 million in the
same period in 1996. The costs consisted primarily of programming and
transmission costs which are computed based on number of subscribers. Satellite
costs incurred in Africa related to a full year as compared to six-months in
the previous year. Additional costs in respect of the roll out of the digital
service during February 1996 in Africa were incurred during fiscal 1997.
Selling, general and administrative costs increased $62.9 million, or
81.1%, to $140.4 million during the year ended March 31, 1997 from $77.6
million in the same period in 1996. The staff complement increased dramatically
during the 1997 fiscal year in order to facilitate the increased numbers of
subscribers and channels and enhanced customer service facilities.
Depreciation and amortization increased $6.4 million, or 64.9%, to $16.2
million during the year ended March 31, 1997 from $9.8 million in the same
period in 1996. Certain satellite transponder leases were capitalized during
the 1997 fiscal year, resulting in a significant increase in depreciation in
the 1997 fiscal year.
Operating loss
Operating loss increased $6.7 million, or 38.7%, to $24.1 million during
the year ended March 31, 1997 from $17.4 million in the same period in 1996 as
a result of the combined effect of the foregoing factors.
Financial results, net
Financial expense increased $4.4 million, or 468.8%, to $5.3 million
during the year ended March 31, 1997 from $0.9 million in the corresponding
period of 1996. Interest income increased $1.7 million, or 74.1%, to $4.0
million from $2.3 million in the corresponding period of 1996. Interest expense
increased $4.6 million, or 143.1%, to $7.8 million from $3.2 million in the
corresponding period of 1996. The main reason for the change is the
capitalization of the satellite leases and the corresponding interest charge.
During the 1997 fiscal period, the NetHold Finance VOF loan, originated in
connection with the acquisition of the Acquired MIH Businesses, accounted for
additional interest. Exchange losses were $1.5 million in 1997.
Equity results in joint ventures
Equity results in joint ventures increased to a profit of $1.1 million
during the year ended March 31, 1997 from a loss of $1.8 million in the
corresponding period of 1996. The increase was primarily the result of the
increased earnings from MultiChoice Supplies (Proprietary) Limited, offset in
part by losses incurred by the Middle East joint ventures.
Equity results in associates
Equity results in associates (mainly a 20.0% interest in M-Net Ltd. and
SSIH) increased to $2.6 million during the year ended March 31, 1997 from $2.4
million in the corresponding period of 1996.
Taxation expense
Taxation expense decreased by $2.7 million, or 70.2%, to $1.2 million
during the year ended March 31, 1997 from $3.9 million in the corresponding
period of 1996. The taxation charge relates to the certain required minimum
statutory charges from the business units.
Minority interest
Minority interest increased by $0.6 million, or 547.4%, to $0.7 million
during the year ended March 31, 1997 from $0.1 million in the corresponding
period of 1996. The increase in minority interest is limited to actual capital
infusions.
Net loss
As a result of the foregoing factors the Company realized a net loss of
$26.0 million during the year ended March 31, 1997 compared to a net loss of
$21.5 million for the comparable period in 1996.
Liquidity and Capital Resources
The Company's business and growth strategy has required and will continue
to require substantial capital for acquisitions, expansion of services, the
financing of operating losses and working capital. For example, the Company is
incurring operating expenses in connection with the launch of digital service
in Greece and Cyprus, and the revenue from such service is not expected to
fully offset those expenses in the near future.
31
<PAGE>
During the years ended March 31, 1997 and 1996, the Company had no
significant cash flows as its activities consisted almost entirely of its
investment in NetHold. During the period from April 1997 through October 1997,
the Company sold its shares in Canal+, which it had obtained in connection with
the Canal+ Transaction, for net proceeds of $261.5 million and invested a
portion of the proceeds in pay-television and technology businesses.
The Acquired MIH Businesses have historically obtained cash flow from
operations, capital infusions by equity holders, proceeds from the sale of
investments and seller financings.
The Company expects to meet its capital needs for the foreseeable future
with the proceeds of the Offerings, cash on hand and existing loan facilities.
During the fiscal year ended March 31, 1998, the Company acquired an
additional 51% in Irdeto for $11 million, such price having been predetermined
as part of a call option granted at the time of the Canal+ Transaction, and
invested $17.7 million in UBC. The Company also made an initial investment in
OpenTV of $9.1 million. Subsequent to March 31, 1998 the Company made
additional contributions to OpenTV of $6.4 million and increased its ownership
interest in UBC to 27.8% by acquiring additional shares for $66.6 million,
including an additional 1.7% interest acquired on February 1, 1999 for $4.5
million. In September 1999, the Company intends to exercise its option to
purchase an additional 3.3% of UBC for $8.9 million in cash.
The Company intends to make investments in and acquisitions of businesses
operating in the pay-television, Internet services, interactive television
services and pay-media technology industries. The Company's general approach
has been to make investments that are expected to be sufficient to meet cash
needs until the operation can, within a predictable period of time, become
self-funding. MIH Limited's South African subsidiaries are subject to
significant restrictions on the ability to remit funds outside of South Africa.
While such restrictions have been liberalized in recent years, a South African
company's ability to raise and deploy capital outside of South Africa remains
subject to significant restrictions. See "Risk Factors--South African Exchange
Control". The Company anticipates funding future acquisitions and investments
through issuances of debt or equity and available cash resources.
During the fiscal year ended March 31, 1998, MIH Limited paid a special
dividend of $51.8 million. MIH Holdings used its pro rata portion of the
dividend to capitalize M-Web. Following this capitalization, M-Web purchased
the Company's South African Internet businesses for $20.5 million. No dividends
were declared in 1996 and 1997.
On April 4, 1998 the Company transferred 28 million of its shares in
M-Net/SSIH to a trust for a total consideration of $22.2 million in cash as
described in Note 3 to the Condensed Consolidated Statements. Consideration of
$20.0 million was financed with bank borrowings by the purchaser and under
certain circumstances on April 14, 2001, the Company could be required to
assume the obligations and reacquire the ownership of the shares. Accordingly
the transaction has been accounted for as a financing transaction. The
borrowings bear interest at 12.55% and mature on April 14, 2001. The Company
retains rights to the dividends on the M-Net/SSIH shares.
At September 30, 1998 and March 31, 1998, the Company had cash balances of
$87.5 million and $153.4 million, respectively, overdraft borrowing facilities
of $___ million and $43.7 million, respectively and decoder rental funding
facilities of $___ million and $10.3 million, respectively.
Commitments and capital expenditures
The Company has lease commitments of $47.9 million, $46.6 million, and
$44.3 million in each of the years ended March 31, 1999, 2000 and 2001,
respectively, for land and buildings, machinery, furniture and equipment and
transponders and transmitters. The Company does not expect to make significant
additional capital expenditures.
Debt
Debt at March 31, 1998 of $122.2 million consists primarily of capital
lease obligations ($67.2 million), loans ($24.0 million) and program and film
rights ($31.0 million). The capital leases bear interest at rates ranging from
6.0 % to 21.0%. Capital lease obligations increased by $18.3 million during the
year ended March 31, 1998, primarily as a result of additional transponder
leases obtained for coverage in the Mediterranean region. Program and film
rights are non-interest bearing and amounts due in future fiscal years are
$10.0 million in 1999, $15.9 million in 2000 and $5.1 million thereafter.
Included in loans is a loan for $24.0 million bearing interest at 2.0% above
the Amsterdam Interbank Offering Rate and maturing on October 5, 1998.
32
<PAGE>
In connection with the Canal+ Transaction, the Company deferred
recognition of approximately $73.3 million of the associated gain representing
an estimated probable liability for warranties relating to decoder technology,
guarantees of numbers of subscribers and reimbursement of programming costs
which were expected to be incurred by Canal+. The gain deferral relating to the
guaranteed number of subscribers was calculated based on an estimate of the
shortfall in the number of subscribers at the date of the transaction. The
Company was aware that a defect in the technology included in certain set top
boxes would prevent the boxes from providing certain services and were likely
to cause the Company to have to replace them. The provision was calculated as
the amount of the replacement cost of decoder boxes to be replaced under the
warranty. The Company also believed that the costs to Canal+ of renegotiated
programming contracts were likely to exceed costs of contracts in force at the
sale date. The amount provided was the Company's best estimate of this
exposure, based on its experience with renegotiating similar contracts. During
the year ended March 31, 1998, the Company paid approximately $38.0 million for
guarantees of number of subscribers. At March 31, 1998 approximately $31.8
million of such provisions remained and were included in current liabilities.
The Company continued to believe that payment of the amount provided was
probable as the circumstances concerning the warranties had not changed and
discussions with Canal+ indicated a substantial likelihood that it would pursue
all claims available. No further claims were made prior to their expiry on June
30, 1998 and the remaining provision was reversed.
In October 1998, the Company established a $40 million revolving demand
facility with ABSA Bank Limited that bears interest at a rate of LIBOR + 2%. As
of January 31, 1999, the Company had drawn nearly the entire available balance
of the facility. In February 1999, the Company established a $50 million loan
from MeesPierson N.V. The loan bears interest at a rate of LIBOR + 0.9% and is
repayable upon the earlier of February , 2000 and the completion of the
Offerings. Both loans are secured by a pledge of the shares of UBC that are
owned by the Company.The Company intends to use a portion of the proceeds of
the Offerings to repay the outstanding balance on the loans, at which time the
pledged shares will be released.
Foreign Currency Management
The Company's functional currencies are generally the local currencies of
the countries in which the Company operates. All transactions in currencies
other than the given functional currency are recorded at the rate of exchange
of the transaction or, if hedged forward, at the rate of exchange under the
related forward exchange contract. Any resulting exchange differences are
included in current results. The cumulative translation effects of translating
the financial statements of operations using functional currencies other than
U.S. dollar to the reporting currency are included in foreign currency
translation adjustment in shareholders' equity (net deficit) and are only
included in net earnings upon sale or liquidation of the underlying
investments.
A number of the Issuer's subsidiaries use foreign currency forward
exchange contracts, which typically expire within one year, to hedge a
substantial portion of their currency risks arising from payments of foreign
currencies related to the purchase of goods and services in currencies other
than their functional currency. Realized gains and losses on these contracts
are recognized in the same period as the hedged transactions are included in
earnings. The Issuer and its subsidiaries had foreign exchange forward
contracts on hand at March 31, 1998, hedging South African rand, Greek drachma
and Thai baht against the U.S. dollar and the British pound sterling. The
Company does not currently hold or issue derivative financial or interest rate
instruments for trading purposes, but intends to continue to use forward
exchange contracts to limit its exposure to expected depreciation of some of
its functional currencies relative to foreign currencies in which it incurs a
significant portion of its cost.
The Company's forward exchange contracts are primarily to hedge the South
African rand and Greek drachma against the U.S. dollar. During the six-month
period ended September 30, 1998, the value of the U.S. dollar increased against
the South African rand by approximately 16.8% while the Greek drachma increased
against the dollar by approximately 9.9%. The cost of the Company's foreign
currency commitments were approximately $1.5 million less during this period as
a result of forward currency contracts entered into, measured as the difference
between the spot rate and the contract rate at the contract due date. During
the six month period ended September 30, 1997 the U.S. dollar strengthened
against the South African rand and Greek drachma by approximately 5.6% and
5.3%, respectively. During the year ended March 31, 1998 the U.S. dollar
strengthened against the South African rand and Greek drachma by approximately
14.1% and 20.5%, respectively. During the year ended March 31, 1998, the cost
of the Company's foreign currency commitments were approximately $1.8 million
greater as a result of hedging activities.
33
<PAGE>
The contractual amounts, exchange rates and settlement dates of the
outstanding forward exchange contracts at March 31, 1998 are set out below:
<TABLE>
<CAPTION>
Average
Contractual Amount Exchange
(in thousands) Rates Settlement dates
-------------------- ----------- ------------------------------------
<S> <C> <C> <C>
Greek drachma/U.S. dollar .............. $14,000 307.49 April 27, 1998 to May 25, 1999
South African rand/U.S. dollar ......... $23,849 5.22 August 31, 1998 to January 28, 1999
Thai baht/U.S. dollar .................. $ 8,000 50.35 June 30, 1998
South African rand/
British pound sterling ................ $ 1,727 7.97 July 31, 1998 to August 31, 1998
</TABLE>
US GAAP Reconciliation
As more fully explained in Note 29 to the Consolidated Statements, under
IAS the Company's investment in UBC is carried at cost. In June 1998, the
Company increased its investment in UBC from 17.3% to 26.1%. Under IAS and US
GAAP the investment is accounted for by using the equity method subsequent to
the increase of the Company's shareholding. US GAAP requires retroactive
adjustment of financial statements for an investee that was previously
accounted for on the cost method when that investee becomes qualified for use
of the equity method.
As explained in Note 23 to the Combined Statements, the Company adopted
IAS 19 "Retirement Benefit Costs" on April 1, 1995, which requires recognition
of the costs of post-retirement benefits on an accrual basis. MultiChoice
Africa recognized its cumulative actuarially determined liability for
post-retirement medical benefits as of April 1, 1995 of $3.9 million. In
accordance with IAS 19 and IAS 8, "Net Profit or Loss for the Period,
Fundamental Errors and Changes in Accounting Policies" the change has been
reported retrospectively through an adjustment of $3.9 to the opening balance
of MultiChoice Africa accumulated results. Under US GAAP, SFAS 106 "Employers
Accounting for Postretirement Benefits Other Than Pensions", the effect of
adoption is recognized immediately in net income of the period of change as the
effect of a change in accounting principle.
The effect of the difference between IAS and US GAAP resulted in an
increase in the Company's net loss under US GAAP as compared with IAS for the
years ended March 31, 1998 and 1997 and the six-month periods ended September
30, 1998 and 1997 and a reduction of shareholders' equity as compared with IAS
as at September 30, 1998, March 31, 1998 and 1997.
Year 2000 Issue
The Company is reviewing its computer systems and operations in order to
identify and determine the extent to which any systems may be vulnerable to
potential errors and failures as a result of the "Year 2000" problem. The Year
2000 problem is the result of computer programs being written using two digits,
rather than four digits, to define the applicable year. Any computer
application having time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000, which could result in a major system
failure or miscalculations.
The effects of the Year 2000 problem are exacerbated because of the
interdependence of computer and telecommunications systems throughout the
world. This interdependence is true for the Company, its suppliers and certain
of its customers.
MIH Year 2000 Project
The management of the Company has been briefed about the Year 2000 problem
and its possible effects on the Company's business activities. The Company is
implementing a Year 2000 project (the "Project"), which will be modified as
events warrant, to ensure Year 2000 compliance.
The Project is managed by the Company's Year 2000 project office which
provides leadership and direction to the Year 2000 efforts of the Company's
operations in Africa, the Middle East, the Mediterranean and Thailand as well
as Irdeto, but not OpenTV. Each of the operations is ultimately responsible for
its own Year 2000 activities, but the Project office has set out a uniform
approach which includes the following activities: inventory; impact assessment;
supplier compliance; testing, corrections and upgrades; and contingency
planning.
Inventory. The first phase is the compilation of an inventory of all of
the Company's computer hardware and software systems and embedded chips and
software (including the compilation of an inventory of all of Irdeto's
products). The Company has completed this phase.
34
<PAGE>
Impact Assessment. The second phase is an assessment of the effects of
Year 2000 problems on the Company's systems and products. This phase includes
the identification of business critical systems and products. The Company has
completed this phase.
Supplier Compliance. Simultaneously with the second phase, all suppliers
and vendors of products and services have been or will be approached to
ascertain whether such suppliers and vendors have determined whether or not
their products and services are Year 2000 compliant and, if not, what efforts
they are making in this regard. The Company will continue working on this phase
through the rest of 1999.
Testing, Corrections and Upgrades. The fourth phase involves the testing
of all products and business critical systems to determine the correct remedial
action which is required to address any Year 2000 problems which are diagnosed.
This phase further includes the verification and testing of those systems to
which remediation efforts have been applied (whether by way of corrections or
upgrade). Irdeto and the African operations have completed diagnostic testing
and expect to complete the implementation of corrections and upgrades by the
second quarter of 1999. The Mediterranean operations expect to have completed
diagnostic testing by February 1999 and the implementation of corrections and
upgrades by March 1999. The Thai and Middle Eastern operations expect to have
completed diagnostic testing by March 1999 and the implementation of
corrections and upgrades by June 1999.
A variety of testing procedures are being used to test business
applications for Year 2000 compliance by the Company's operations. These
include methods that first capture current processing steps and relevant data,
which are run prior to remediation (baseline test) and again after remediation
(regression test). Such methods are intended to identify any business rules
that may have changed during the remediation effort and to confirm that only
date processors have been changed. Where the regression tests are successfully
completed, test software tools that perform date simulation of the system clock
being rolled forward may be used to age the same data and to verify and compare
results.
Contingency Planning. The final phase involves the preparation of
contingency plans to attempt to ameliorate those aspects of the Year 2000
problem that cannot practically be remediated. It is intended for these plans
to encompass business continuity, both internally and in the external business
environment. It is intended that the planning effort will include critical
areas such as computing networks, suppliers and vendors, operations, personnel
and business systems.
Outside Systems and Entities
The Company recognizes that the computer, telecommunications and other
systems ("Outside Systems") of outside entities ("Outside Entities") play a
major role in the Company's operations. The Company does not have control of
these Outside Entities or Outside Systems. The Company has, however,
implemented an ongoing process of contacting Outside Entities whose systems
have, or may have, a substantial effect on the Company's ability to continue to
conduct business without disruption from Year 2000 problems. The Company is
attempting to assess the extent to which these Outside Systems may not be Year
2000 compliant. The Company will attempt to coordinate with these Outside
Entities in an ongoing effort to obtain assurance that these Outside Systems
will be Year 2000 compliant before January 1, 2000.
OpenTV
OpenTV has implemented its own Year 2000 activities. OpenTV has undertaken
to notify customers of any and all date-related bugs, errors or deficiencies in
its software. OpenTV believes that because development of its software began
only recently, it has adequately anticipated Year 2000 issues.
Year 2000 Costs
The total remaining cost of the Project is estimated at $5.330 million.
Approximately $2.372 million is for new software and hardware purchases and
will be capitalized. The remaining $2.958 million will be expensed as incurred
over the next nine month period. To date, the Company has incurred and expensed
approximately $1.466 million, related to the phases of the Project which have
been implemented. The costs of the Project and the dates on which the Company
plans to complete the Project are based on management's best estimates, which
were derived utilizing numerous assumptions of future events, including the
continued availability of certain resources, the readiness of Outside Systems
and other factors. Until the Company has completed further analysis of the
impact of Year 2000 on its operations and contingency planning, it will be
unable to estimate the additional costs, if any, that it may incur as a result
of its efforts. For these reasons, and for the reasons stated in the next
paragraph, there can be no assurance that the actual costs of implementing the
Project will not differ materially from the estimated costs.
35
<PAGE>
Potential Risks
With respect to its internal operations (those over which the Company has
direct control), the Company believes that the most significant potential risks
concern the Company's ability to use electronic devices to distribute its
services, the Company's ability to render timely bills to its subscribers, the
ability of the Company's subscribers to receive its services, the uninterrupted
use of Irdeto's products by its customers and the Company's ability to maintain
continuous operation of its computer systems. The Project addresses each of
these risks. The Company relies, however, on Outside Systems, and there can be
no assurance, for example, that all Outside Systems will be adequately
remediated so that they are Year 2000 compliant by December 31, 1999, or by
some earlier date, so as not to create a material disruption to the Company's
business. In addition, there can be no assurance that the Company's products
and systems will be Year 2000 compliant. If, despite the Company's efforts in
terms of the Project, there are Year 2000 related failures that create
substantial material disruptions to the Company's operations, the adverse
impact on the Company's business could be material. Moreover, the estimated
costs of implementing the Project do not take into account the costs, if any,
that may be incurred as a result of Year 2000 related failures that occur
despite the Company's implementation of the Project including, for example,
claims from subscribers or customers related to business interruption. See
"Risk Factors--Year 2000 Risks".
Accounting Standards
The Financial Accounting Standards Board (the "FASB") has issued Statement
of Financial Accounting Standards ("SFAS") No. 132, "Employers' Disclosures
about Pension and other Postretirement Benefits". This Statement is effective
for fiscal years beginning after December 15, 1997 and, therefore, will be
effective for the Company's financial statements beginning with the year ended
March 31, 1999. The Company does not expect the adoption of this Statement to
have a material impact on its financial statements.
SFAS No. 130, "Reporting Comprehensive Income", was issued by the FASB in
June 1997 and is effective for fiscal years beginning after December 15, 1997.
It will be effective for the Company's financial statements for the year ended
March 31, 1999. SFAS No. 130 requires additional disclosure but does not change
the measurement of financial position or net income. Management is currently
assessing the impact that this Statement may have on its financial statements.
SFAS No.133, "Accounting for Derivative Instruments and Hedging
Activities," is effective for fiscal years beginning after June 15, 1999. It
will be effective for the Company's annual financial statements for the year
ended March 31, 2001. Management is currently assessing the impact that this
Statement may have on its financial statements.
In July 1997, the International Accounting Standards Committee ("IASC")
issued International Accounting Standard ("IAS") 1 (revised), "Disclosure of
Accounting Policies". IAS 1 (revised) will be effective for the Company's
financial statements for the year ending March 31, 2000. The Company believes
that it has complied with the main provisions of this standard and does not
believe that this standard will have a significant influence on the Company's
financial statements.
In 1997, the IASC issued IAS 17 (revised 1997), Leases, which supersedes
IAS 17, "Accounting for Leases" and is effective for the Company's financial
statements for the year ending March 31, 2000. The Company does not expect a
material impact on its financial statements as a result of adopting IAS 17
(revised 1997).
In January 1998, the IASC issued IAS 19 (revised 1998), "Employee
Benefits". It will be effective for the Company's financial statements for the
year ending March 31, 2000. The Company is currently assessing the impact that
this standard may have on the Company's financial statements.
In February of 1998, the IASC issued IAS 34, "Interim Financial
Reporting". IAS 34 will be effective for the Company's interim financial
statements issued after March 31, 1999. The Company believes that it has
complied with the main provisions of this standard and does not believe that
this standard will have a significant influence on the Company's financial
statements.
In June of 1998, the IASC issued IAS 35, "Discontinuing Operations". IAS
35 will be effective for the Company's financial statements for the year ending
March 31, 2000. The Company believes that it has complied with the provisions
of this standard and does not believe that this standard will have a
significant influence on the Company's financial statements.
36
<PAGE>
In June of 1998, the IASC issued IAS 36, "Impairment of Assets". IAS 36
will be effective for the Company's financial statements for the year ending
March 31, 2001. The Company is currently assessing the impact that this
standard may have on its financial statements.
In September of 1998, the IASC issued IAS 37, "Provisions, Contingent
Liabilities and Contingent Assets". IAS 37 will be effective for the Company's
financial statements for the year ending March 31, 2001. The Company is
currently assessing the impact that this standard may have on its financial
statements.
In October of 1998, the IASC published IAS 22 (revised 1998), "Business
Combinations", that includes limited revisions to the version of IAS 22
approved in 1993. IAS 22 (revised 1998) is effective for the Company's
financial statements for the year ending March 31, 2001. The provisions of IAS
22 (revised) would apply prospectively.
In October of 1998, the IASC published IAS 38 "Intangible Assets". The
standard becomes effective for the Company's financial statements for the year
ending March 31, 2001, with earlier application encouraged. If an enterprise
chooses to adopt IAS 38 early, it must also apply IAS 22 (revised 1998),
"Business Combinations" and IAS 36, "Impairment of Assets" early. The Company
is currently assessing the impact this standard may have on its financial
statements.
37
<PAGE>
BUSINESS
General
The Company is a multinational provider of pay-television services and
pay-television technology. By leveraging its management and industry expertise,
the Company plans to expand beyond its current services to become a recognized
worldwide provider of a full array of pay-media content and services over a
variety of electronic platforms, including pay-television, Internet and
interactive television. From their significant experience in providing
pay-television services, the Company's management has developed a comprehensive
understanding of pay-media and other subscriber-based businesses, particularly
in the areas of subscriber, content and platform management. Through its
strategic application of these core competencies and its proven business model,
the Company has grown to become the leading provider of pay-television services
in each of its markets. By continuing to leverage these abilities, the Company
plans to expand its pay-television services into new regions and provide new
services and products, such as those relating to the Internet and interactive
television services.
From its origins as the leading provider of pay-television services in
South Africa, the Company has grown, through its subsidiaries and joint
ventures, to provide terrestrial analog, digital satellite and other
pay-television services to over 1.8 million households in Africa, the
Mediterranean and Asia. The Company's Mindport technology division provides
pay-media companies worldwide with proprietary software and hardware solutions
for subscriber management, conditional access and other pay-television related
services. Mindport is also a leading provider of interactive television
operating systems through OpenTV.
Pay-television
The Company operates its pay-television businesses in three major regions:
Africa, the Mediterranean and Asia. In each region, the Company has implemented
a strategy that emphasizes being the leading supplier of pay-television
services, obtaining exclusive programming, continually improving its customer
care and offering new services and technology, such as interactive television.
Through the application of its core competencies, the Company has developed the
leading pay-television service in each of its operating regions. These
businesses were generally started as single-channel analog services, which
provide the market presence and subscriber base for the Company to launch
multi-channel digital and interactive services. The Company currently provides
analog service in each of these regions and provides digital service in Africa
and Asia. The Company is prepared to provide digital service in the
Mediterranean upon enactment of certain legislation and receipt of a license
thereunder.
The Company believes that two of the reasons it is the leading
pay-television operator in each of the markets it serves are its exclusive,
high quality content and its early introduction of emerging technologies. In
most of its markets, the Company has exclusive pay-television rights to
transmit premium movies, major sporting events and popular children's
programming. The Company believes that access to this programming gives it the
content necessary to attract and retain subscribers and grow its pay-media
services. The Company believes that its core competency in technology, drawn in
large part from Mindport, is an important component of its business and a key
strategic advantage.
The following table sets forth the services offered and subscriber numbers
for the Company's pay-television subsidiaries and joint ventures by region and
service:
<TABLE>
<CAPTION>
Subscribers
Launch as of Sep. 30,
Date Service 1998
------------------- ------------------------------------ ---------------
<S> <C> <C> <C>
Africa
South Africa .................. 1986 M-Net (analog) 861,237
1995 DStv (digital) 224,796
Sub-Saharan Africa ............ 1991 M-Net (analog) 60,692
1996 DStv (digital) 66,371
Egypt and Middle East ......... various Subscriber management(1) 69,174
Mediterranean
Greece and Cyprus ............. 1993/1997 LTV/Alfa (analog) 32,584
1994/1996/1997 FilmNet/SuperSport/K-T.V. (analog) 277,446
1999(2) Nova (digital) N/A
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
Subscribers
Launch as of Sep. 30,
Date Service 1998
-------- ------------------------- ---------------
<S> <C> <C> <C>
Asia
Thailand ......... 1989 UBC MMDS(3) (analog) 24,449
1995 UBC Cable (analog) 139,331
1995 UBC Satellite (digital)
124,799
</TABLE>
- ----------------
(1) Pay-television platforms operated by third parties.
(2) Expected. See "--Pay-television--Mediterranean."
(3) Phase-out expected by the end of first quarter 1999.
Since beginning operations in 1986, the Company has experienced
significant growth in the number of its subscribers, revenue per subscriber and
total pay-television revenue. As of September 30, 1998, the Company's
consolidated pay-television operations (excluding Asia and the Middle East,
which are not consolidated) had approximately 1.54 million subscribers, as
compared to 1.47 million, 1.36 million and 1.14 million subscribers as of March
31, 1998, 1997 and 1996, respectively. Also, the average revenue generated by
these pay-television subscribers per month was approximately $22.16 during the
six-months ended September 30, 1998 compared to approximately $23.19, $21.10
and $18.63 during the years ended March 31, 1998, 1997 and 1996, respectively.
For the six-months ended September 30, 1998, the Company's consolidated
pay-television operations generated subscriber revenues of $205.1 million
compared to $404.5 million, $315.5 million and $233.3 million for the years
ended March 31, 1998, 1997 and 1996, respectively.
Technology
The Company's technology division, Mindport, provides a comprehensive
package of technology products and support services to pay-media operators
worldwide. Mindport seeks to capitalize upon the pay-media industry's evolution
from analog to digital and then to interactive and Internet services. This
adoption of new technologies has generated the need for increasingly complex,
integrated and scalable software and hardware that Mindport provides. In
addition, by taking advantage of the Company's experience in operating
pay-media businesses, Mindport has been able to improve its products and offer
highly advanced and complete solutions to third-party platform operators.
Mindport's customers include some of the leading international pay-media
companies, such as EchoStar, BSkyB, Canal+, Galaxy Latin America, TPS and
DirecTV Japan, as well as the Company's African and Mediterranean
pay-television businesses. The Company also recently signed an agreement to
provide pay-television technology to CBSat, a subsidiary of China Central
Television, which is preparing to distribute their digital television signals
to rural areas in the People's Republic of China.
The Mindport product line includes subscriber management systems,
conditional access systems, interactive television operating software, content
management systems, set-top box design and specification and consulting
services. The Company believes its subscriber management system, marketed under
the IBS brandname, provides the critical scalability and system adaptability
necessary to meet the growing needs of pay-television operators, Internet
service providers and data broadcasters worldwide. Irdeto Access, Mindport's
conditional access unit, provides encryption and decoding systems to
pay-television operators. OpenTV, in which the Company owns a 44.5% equity
interest, develops and sells operating systems for interactive television, the
first generation of which is running on several pay-television platforms. The
Company recently executed an agreement to purchase an additional 35.6% of
OpenTV from Thomson.
Internet
The Company believes that the Internet business is complementary to its
existing businesses and a natural extension of its core competencies of
subscriber, content and platform management. By leveraging its subscriber-based
pay-media expertise, the Company plans to offer a range of Internet services,
including Internet access, content aggregation and subscriber management, both
within certain of its current pay-television markets and in new markets. The
Company's first investment in the Internet business occurred with its
acquisition, development and ultimate spin-off of M-Web, a leading Internet
services provider in South Africa that is now a publicly-listed affiliate of
the Company.
Objectives and Strategy
The Company seeks to strengthen its current position as a worldwide
provider of pay-television services and related technologies and to become a
recognized multinational provider of a full array of content and pay-media
39
<PAGE>
services over a variety of platforms, including Internet and interactive
television. In addition, the Company seeks to become a leader in the supply of
pay-media technology and customer care products and services. Specifically, the
Company is pursuing the following three objectives:
o Build Out Current Markets. In each of its existing markets, the Company
plans to fully develop its pay-television business by enhancing its
platforms to offer a full compliment of services including analog,
digital, interactive and Internet services. The Company also plans to
further grow its subscriber base by achieving higher levels of penetration
within its current addressable markets as well as taking advantage of
favorable demographic trends.
o Expand Into New Markets. The Company seeks to take advantage of its
management expertise and experience by expanding into new markets,
particularly emerging pay-media markets. Being an early entrant into these
markets helps the Company secure transmission frequencies and exclusive
programming and build strong relationships with subscribers and local
affiliates. This expansion is likely to be accomplished through
investments in and acquisitions of existing businesses, including
pay-television systems and Internet service providers.
o Develop Leading Technology Company. The Company intends to build Mindport
into a leading technology company that develops and sells software and
designs hardware that support pay-media businesses worldwide. Mindport
will continue to benefit from the Company's experience as a pay-media
operator and build its technology base through internal research and
development and strategic acquisitions.
In pursuing these objectives and drawing on its core competencies, the
Company intends to implement the following strategies:
o Provide Exclusive, High Quality Content. In most markets in which the
Company operates its pay-television business, it has the exclusive rights
to provide popular sporting events and first-run motion pictures from the
major studios. In certain regions, the Company includes local free-to-air
networks on its digital platform, thereby creating a well-rounded channel
selection. The Company believes that providing exclusive, high quality
content is the key to establishing and growing its pay-media businesses
and intends to obtain such rights in its new markets and maintain such
rights in its existing markets.
o Provide Leading Edge Platforms. The Company consistently strives to
improve the quality of its pay-television services by taking advantage of
technological developments. In each of its operating regions, the Company
provides, or is planning to provide, digital service, which generally
features many more channels than its existing analog services, with
greater picture clarity and sound quality. The next major enhancement of
the Company's business will be the introduction of interactive services.
The Company is already offering an electronic programming guide which is
currently accessible by all digital subscribers in South Africa,
Sub-Saharan Africa and Thailand and expects to begin implementing in most
of its regions other interactive services such as pull-down menus in mid
1999, and some time thereafter, web browsing, e-mail, gaming, home
shopping and home banking. The Company believes that these enhanced
services will provide it with significant new sources of revenue and
generally higher margins from its current customer base and will attract
new subscribers.
o Provide High Quality Service. The Company views its business as primarily
a service business and, accordingly, places great emphasis on providing
high quality customer service. The Company believes this helps build
customer loyalty and reduce churn. The Company seeks to achieve high
quality customer service by operating walk-in service centers and
utilizing computer systems equipped with Mindport's advanced IBS
subscriber management software, which allows customer service
representatives to quickly address subscriber concerns.
Pay-television
Overview
The Company, through its subsidiaries and joint ventures, provides
pay-television and related services to over 1.8 million households in Africa,
the Mediterranean and Asia. The Company's services are primarily provided
through wireless technology, mainly terrestrial analog and digital satellite
transmission, with certain subscribers in Thailand receiving programming
through coaxial cable employing a fiber optic backbone.
40
<PAGE>
The Company believes that providing unique, high quality programming,
utilizing the most advanced technology, including interactive services and
providing superior customer service are the keys to establishing and growing a
successful pay-television business. The Company seeks in each of its regions to
provide an array of programming, including movies, sports and children's
programming, with elements that appeal to different family members. In
addition, on both its movie and children's channels, the Company frequently
provides local programming such as local series and shows dubbed into the local
language. In most of its markets, the Company or an affiliate operates channels
with exclusive rights to premier movies (including programming from such
studios as Disney, Columbia Tristar/Sony, Warner Brothers, Fox, MCA/Universal,
MGM, Paramount and DreamWorks). In several regions, the Company or an affiliate
provides a sports channel, SuperSport, that has exclusive rights to show
popular sports in that region. The Company has also developed a proprietary
channel, K-T.V., that televises exclusive children's programming. On the
Company's digital platforms, these primary channels are supplemented by major
international channels and/or the local market television networks. The Company
believes that such a comprehensive package attracts new subscribers, enhances
subscriber loyalty and helps to reduce churn. The Company also believes that,
as long as it maintains a leading position in each of its markets, it will be
in a strong position to continue to acquire programming rights on favorable
terms.
The Company uses the latest available technologies and was one of the
first pay-television companies in the world to provide digital satellite
service, which it now provides or plans to provide in each of its operating
regions. Following the successful introduction of digital services, the Company
is currently introducing interactive services on its digital platforms. Today,
such interactive services include electronic program guides. In the future, the
Company anticipates introducing enhanced services in its major markets, such as
web-browsing, pull-down menus, e-mail, gaming, home shopping and home banking,
which have the potential for generating significant additional revenue and
generally higher margins. The Company believes that its Mindport division gives
it great support and insight into the latest developments and enhancements of
pay-media technologies.
The Company believes its business is primarily a service business and
accordingly places great emphasis on customer care. The Company is installing
Mindport's proprietary customer care and billing system, IBS, throughout its
pay-television regions. IBS provides advanced billing capabilities for
pay-television operators and allows customer specific information to be
accessed and manipulated quickly by customer service representatives. The
Company believes IBS will result in greater customer satisfaction and reduced
churn. In many of its regions, the Company operates advanced call centers that
also serve to increase customer satisfaction. For example, the Company's call
center in South Africa has an average response time of 61 seconds and 67
seconds for its analog and digital service, respectively, and a low call
abandonment rate. These operations ensure that the Company is perceived as a
customer friendly organization.
The following table shows the growth of subscribers in each of the
Company's markets:
<TABLE>
<CAPTION>
Mar. 31,
---------------------------------------
Sept. 30,
1998 1998 1997 1996 CAGR(1)
---------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
Subscribers (thousands):
Africa
South Africa ...................................... 1,086 1,054 1,008 943 5.8%
Sub-Saharan Africa ................................ 127 109 104 73 24.8
Egypt ............................................. 22 18 13 9 42.9
Middle East ....................................... 47 27 15 -- --
----- ----- ----- ---
Total Africa ..................................... 1,282 1,208 1,140 1,025 9.4
----- ----- ----- ----- ----
Mediterranean
Greece ............................................ 277 254 203 101 49.7
Cyprus ............................................ 33 31 26 11 55.2
----- ----- ----- -----
Total Mediterranean .............................. 310 285 230 112 50.3
----- ----- ----- ----- ----
Asia
Thailand .......................................... 289 313 253 130 37.7
----- ----- ----- -----
Total subscribers ................................. 1,881 1,806 1,623 1,268 17.1
===== ===== ===== =====
Average monthly revenue per subscriber (2) ......... $ 22.16 $ 23.19 $ 21.10 $ 18.63 7.2%
</TABLE>
- ----------------
41
<PAGE>
(1) Compounded annual growth rate from March 31, 1996 until September 30,
1998.
(2) Excluding the Company's Asian and Middle East operations because such
revenues are not consolidated on the Company's income statements. Total
subscribers from consolidated operations were 1.545 million, 1.466
million, 1.355 million and 1.137 million as of September 30, 1998 and
March 31, 1998, 1997 and 1996, respectively.
Marketing
Throughout its operations, the Company conducts market research on an
ongoing basis to ensure that it continues to offer its subscribers a lineup of
attractive programming. The Company provides a bouquet of programming that is
designed to be attractive to different members of a household. The Company
markets its analog services as premium offerings with broad market appeal and
positions its digital platforms as upscale services with greater choice. The
Company believes that segmenting its product line in this way helps it to
maximize the size of its addressable market, while also encouraging analog
subscribers to upgrade to the higher-end digital service.
Africa
The Company offers terrestrial analog and digital satellite pay-television
services in Africa through its wholly owned subsidiary, MultiChoice Africa,
which has operations in both South Africa and other sub-Saharan African nations
besides South Africa ("Sub-Saharan Africa").
South Africa
In South Africa, the Company's analog service transmits the M-Net
channels, which feature exclusive premium movies, exclusive sports and other
programming. The analog service began in 1986 and is transmitted over two
frequencies. The Company's digital satellite service, which commenced in 1995
under the brand name DStv, features 42 video channels and 48 audio channels. As
of September 30, 1998, MultiChoice Africa had 861,237 subscribers to its analog
service and 224,796 subscribers to its digital service in South Africa.
Opportunity. South Africa is Africa's largest economy, with a population
of over 40 million people, and is Africa's third largest television market with
over 4.1 million color TV households in 1998. Using subscriber figures from
September 30, 1998, MultiChoice Africa's pay-television services had a market
penetration of approximately 26% of potential households. The Company believes
that South Africa has been and will remain a favorable market for the provision
of its services. A substantial portion of television households have incomes
that give them the disposable income to purchase the Company's services. The
Company believes that the number of television households will continue to grow
as the efforts to provide economic empowerment to previously disadvantaged
groups begin to take effect and as interactive services become available on the
Company's digital platform.
The Company also believes that there is potential for growth in
MultiChoice Africa's business due to a number of additional factors: (i)
nationwide coverage provided by a digital platform that reaches new customers
who are not able to receive the Company's analog transmissions; (ii) a
significantly enhanced bouquet that provides broader appeal to households who
do not currently subscribe to the dual-channel analog service; and (iii)
renewed promotions that have proven successful in the past to drive subscriber
growth. For example, the Company is planning to repeat its successful
promotions in which the price of the equipment for digital service is reduced.
Products. MultiChoice Africa's analog service transmits the M-Net
channels, which provide a combination of first run movies, sporting events and
children's programming along with some original and imported series. These
channels are provided to MultiChoice Africa by M-Net Ltd., an affiliate of the
Company, and are transmitted over two terrestrial frequencies. MultiChoice
Africa transmits its analog signal 24 hours each day, including two hours of
unencrypted transmission. The Company's digital service is also transmitted 24
hours each day and offers a significant increase in the number of specialized
channels that provide movies, sports, general entertainment, children's
programming, local stations and international news, etc. The following chart
details the channels available on the DStv platform.
42
<PAGE>
<TABLE>
<CAPTION>
Type of Type of
Programming Channel Programming Channel
- --------------- -------------------------------- -------------- ---------------------------
<S> <C> <C> <C>
Movies The Movie Magic Channel News BBC World
Hallmark Entertainment Network CNN International
TNT Classic Movies CNBC
Sky News
Bloomberg Television
SABC Africa
- --------------- -------------------------------- -------------- ---------------------------
Sports SuperSport Infotainment Discovery Channel
SuperSport 2 Travel Channel
SuperSport International -------------- ---------------------------
ESPN Kids K-T.V. Channel
SuperTrack Cartoon Network
- --------------- -------------------------------- -------------- ---------------------------
General M-Net Channel Music VH1
Entertainment The Series Channel MTV Europe
The Soap Channel BET on Jazz International
Carlton Select Channel O Sound Television
Carlton Food
Canal Horizon
Channel Africa -------------- ---------------------------
Sci-Fi Channel Audio DMX (40 channels)
Parliamentary Service* BBC World Service 1
RTPi* BBC World Service 2
ART Africa* BBC World Service 3
CCTV-4* VOA--Voice of America
RAI International* WRN--World Radio Network
ERT SAT* Trans World Radio
Rhema Network* 702 Talk Radio
TV5* Radio Africa Austral
NBC (Namibia)*
SABC 1,2,3*
</TABLE>
* = subscription not required to receive channel.
The Company believes that the programming it receives from affiliates
provides it with a significant advantage over other forms of broadcast
entertainment and helps build and retain its subscriber base. M-Net Ltd., which
provides the M-Net and Movie Magic digital channels, has the exclusive rights to
the South African pay-television broadcast of movies from all of the eight major
Hollywood movie studios, including Disney, Columbia Tristar/Sony, Warner
Brothers, Fox, MCA/Universal, Paramount, MGM and DreamWorks. The contracts allow
M-Net Ltd. to select from all films produced by a given studio each year up to a
maximum number and to broadcast these movies at least a year in advance of their
free-to-air television premiere. Typically M-Net Ltd. is entitled to show a
movie 10 to 15 times during its twelve-month pay-television window.
Similarly, SSIH, which provides sports programming for the M-Net channel
and the SuperSport channels for MultiChoice Africa's digital platform, has
obtained the exclusive rights to broadcast the South African cricket and rugby
leagues along with major international cricket and rugby events, two of the most
popular sports in South Africa. In addition, SSIH has the exclusive rights to
broadcast, among others, the English, Italian, German and French soccer leagues,
all four major professional golf tournaments as well as the United States and
European PGA Tours and three of the four major professional tennis tournaments.
MultiChoice Africa has signed ten-year channel agreements with both M-Net
Ltd. and SSIH. Payments under these contracts are calculated on a per subscriber
basis and are subject to annual price escalations. See "Certain
Transactions--Channel Distribution Agreements".
43
<PAGE>
The Company is now beginning to offer interactive television services on
DStv. These services currently consist of electronic programming guides that
allow all digital subscribers to access detailed information about available
programming. The Company intends to begin implementing other interactive
services such as pull-down menus in mid 1999, and some time thereafter, gaming,
home shopping and home banking. In providing these services, the Company will
use software platforms developed and provided by OpenTV, part of the Company's
Mindport division. The Company believes interactive television will become a
substantial new phase in its business development and has the potential to
provide the Company with significant new sources of revenue at higher margins
and to fuel subscriber growth.
Marketing and Subscriber Management. The Company will continue to market
its analog service as a premium offer with broad market appeal and position
DStv as an upscale service with greater choice. By targeting the digital and
analog services at different market segments, the Company hopes to spur total
subscriber growth. The Company also believes that DStv will be attractive to
rural residents, who often have poor reception of terrestrial signals. The
Company expects that the majority of growth in its digital subscriber base will
come from customers who upgrade from analog with additional growth from new,
rural subscribers currently unable to receive the analog service. The Company
expects its analog subscriber numbers to generally remain stable as new
subscribers from the growing middle class replace subscribers who migrate to
DStv. The Company believes that approximately 60% of the analog subscribers who
have terminated service have migrated to digital.
The Company transmits its analog service unencrypted for two hours every
day. It uses these transmissions as a promotional vehicle to increase
subscriber numbers, as a mechanism to fulfill public service obligations and as
cross-promotion for its DStv services. The Company believes that these
unencrypted transmissions have been instrumental in achieving its subscriber
growth and establishing a strong brand identity.
The Company services its subscriber base through its customer care and
billing centers in Johannesburg, Durban and Cape Town. Each customer center
uses Mindport's IBS subscriber management system. These centers provide
customers with local walk-in and telephone service and also act as a mutual
back up in times of heavy call volume. The Company also conducts telemarketing
from these centers in order to solicit new subscriptions.
Pricing and Billing. The following table sets forth certain pricing
information for the Company's South African businesses:
<TABLE>
<CAPTION>
Subscribers
(thousands) Equipment Price(1)
Monthly
Subscription Monthly
Sep. 30, Mar. 31, Price Purchase Lease(2)
---------- --------------- ------------- ---------------- ------------
1998 1998 1997 ZAR $ ZAR $ ZAR $
---------- ------ ------ ----- ----- -------- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Analog 861 896 934 136 799 28
Digital 225 158 74 233 2,999 59
</TABLE>
- ----------------
(1) Excludes price of satellite receiver in the case of digital service.
(2) The amount of monthly payment under optional installment purchasing plans
for equipment, which are typically five years in length and require a
deposit of ZAR250 ($ ).
MultiChoice Africa bills its subscribers monthly, in advance, in South
African rand. Subscribers who fail to pay their bill by the beginning of any
given month are automatically disconnected and may be charged a fee for
reconnection. During the 12 months ended September 30, 1998, MultiChoice Africa
experienced an average monthly net churn (as described below) of approximately
1.6% on its analog subscriber base and less than 0.1% on its digital subscriber
base. To date, the Company has not experienced significant customer
disconnections as a result of increases in the price of its services. Net churn
is the percentage of customers who terminate their subscription in a given
period net of former customers who reconnect in that period.
From time to time, MultiChoice Africa runs promotions during which it
subsidizes the purchase price of set-top boxes, and these promotions have been
successful in increasing the numbers of subscribers.
Competition. MultiChoice Africa currently competes directly with free
television broadcasters in South Africa and indirectly with sporting events,
motion picture theaters, the Internet and other forms of entertainment. There
are currently three free-to-air broadcast channels in South Africa, SABC1,
SABC2 and SABC3, which are each government owned. A fourth free-to-air
television channel, e.tv, in which Time Warner holds a minority
44
<PAGE>
interest, recently began broadcasting. The Company's digital and analog
platforms are the only pay-television services provided in South Africa.
The Company believes that its pay-television services are differentiated
from the competition by their high quality, exclusive programming, including
first run movies and sporting events. This programming promotes subscriber
growth and retention and increases the Company's appeal to more sophisticated,
higher-income viewers. In addition, DStv offers a greater choice of programming
than its competitors; its offering of 42 distinct video channels is several
times more than all of the free-to-air television channels in South Africa
combined.
Transmission. The transmission of MultiChoice Africa's analog and digital
services is conducted by Orbicom, a company that is owned 80.0% by MIH Holdings
and 20.0% by the Company. These services are provided to MultiChoice Africa at
cost. The analog service is sent to transmission towers either terrestrially
over fiber optic cables or microwave links or via satellite. The towers
transmit the signal to homes which receive it over an antenna and decrypt it
using a set-top box. Those who receive the digital satellite signal do so by
means of a 90cm dish, which receives the signal from the Panamsat 4 Satellite
situated over the east coast of Africa. The Company leases 9 Ku-band
transponders on Panamsat 4. Uplink facilities are provided by Orbicom.
MultiChoice Africa utilizes the Irdeto Access encryption and decoder technology
provided by its Mindport division for both its analog and digital platforms.
Sub-Saharan Africa
The Company offers terrestrial analog and digital satellite pay-television
services to Sub-Saharan Africa through MultiChoice Africa and various joint
ventures and agents. The Company's analog service transmits a customized M-Net
channel, which features exclusive movies and sports and other programming to
eight African nations through joint ventures. Its digital service features 30
video channels, including the customized M-Net channel and many major
international networks, transmitted via C-band satellite to approximately 40
countries in Sub-Saharan Africa. As of September 30, 1998, MultiChoice Africa
and its joint ventures had 60,692 Sub-Saharan African subscribers to its
terrestrial analog service and 66,371 Sub-Saharan African subscribers to its
DStv digital satellite service. The following table provides information about
the primary Sub-Saharan African nations in which the Company conducts business:
<TABLE>
<CAPTION>
Total TV Analog Business Analog
Population Households Analog Digital Total Total Ownership Start
Market (millions) (thousands) Subs(1) Subs(1) Subs Penetration Interest(2) Date
- ---------- ------------ ------------- --------- --------- -------- ------------- ----------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nigeria 111.3 10,000 9,884 8,514 18,398 0.2% 91% 1994
Tanzania 29.1 466 1,218 2,688 3,906 0.8 100 1997
Kenya 30.0 645 4,810 5,614 10,424 1.6 51 1995
Uganda 19.2 200 2,584 1,752 4,336 2.2 75 1995
Ghana 17.1 274 5,044 1,364 6,408 2.3 50 1993
Zimbabwe 12.7 342 246 15,791 16,037 4.7 N/A N/A
Angola 11.2 571 2 4,226 4,228 0.7 N/A N/A
Malawi 9.5 * 1,136 3,559 4,695 N/A N/A N/A
Zambia 9.2 589 6,746 3,517 10,263 1.7 51 1995
Namibia 2.0 109 24,481 5,199 29,680 27.2 49 1992
Botswana 1.5 35 1,447 6,199 7,646 21.8 50 1993
</TABLE>
- ----------------
(1) As of September 30, 1998.
(2) Ownership of digital is 100%.
* Insufficient data.
Opportunity. Although the current number of subscribers in Sub-Saharan
Africa is a small portion of the Company's overall base and recent political
and economic instability in the region could delay the realization of the
market's full potential, the Company expects significant percentage subscriber
growth in this market to the extent economic demographics improve. In addition,
the Company expects the continuing rollout of its digital service and
promotions, including set-top box subsidies, to further drive subscriber
growth.
Products. The Company's Sub-Saharan African businesses transmit an analog
service that includes the M-Net channel to eight major African nations and a
digital platform that provides 30 video and 6 audio channels to all of
Sub-Saharan Africa. The Company offers many of the same premium channels in
Sub-Saharan Africa as in
45
<PAGE>
South Africa, including those broadcasting exclusive premium films and popular
sports. The Company varies the timing of certain programs on its digital
platform between east and west Africa to account for time zone differences.
Interactive services in the form of an electronic programming guide are
currently available to all subscribers on the digital platform. The Company
intends to further offer gaming, home shopping and home banking sometime in the
next several years.
Marketing and Subscriber Management. Similar to the position in South
Africa, the Company believes that by targeting its digital and analog services
to different economic demographics the subscriber base will increase and
subscribers who are initially attracted to the analog service will, in time,
migrate to the digital service.
The Company actively markets its services in the region through local
affiliates and agents. Its efforts are focused on the major cities in each of
the countries it serves because the Company believes that these major
metropolitan areas contain the households with the greatest ability to afford
its services. In addition, the Company believes that given the size of the
urban population and color television penetration, there is significant
opportunity to increase the subscriber base in these areas.
Pricing and Billing. The following table sets forth certain pricing
information for the Company's Sub-Saharan African businesses:
<TABLE>
<CAPTION>
Subscribers
(thousands)
Sep. 30, Mar. 31,
---------- --------------- Monthly Equipment
1998 1998 1997 Subscription Purchase(1)
---------- ------ ------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Analog .......... 61 60 75 $30 $150
Digital ......... 66 49 29 50 700
</TABLE>
- ----------------
(1) Includes price of satellite receiver in the case of digital service.
In each Sub-Saharan African nation, the Company generally bills its
customers in U.S. dollars or dollar equivalents. Generally, subscribers who
fail to pay their bills by the beginning of any given month are automatically
disconnected and may be charged a fee for reconnection. During the 12 months
ended September 30, 1998, the Company's Sub-Saharan African operations
experienced an average monthly net churn of approximately 3.2% on its analog
subscriber base and approximately 1.1% on its digital subscriber base. To date,
the Company has not experienced significant customer disconnections as a result
of increases in the price of its services. From time to time, the Company runs
promotions during which it subsidizes the purchase price of set-top boxes, and
these promotions have been successful in increasing the number of subscribers.
Competition. The Company is the leading provider of pay-television
services in Sub-Saharan Africa. In the countries in which it broadcasts,
however, there are numerous public and private free-to-air television stations,
as well as small, localized pay-television operations. The Company believes
that its high quality, exclusive programming distributed terrestrially and on
DStv appeals to the broader African market. In addition, the wider choice of
programming available on DStv serves to differentiate it from other
broadcasters.
Transmission. The Company delivers analog services terrestrially to
Sub-Saharan Africa by transmitting its programming signal by satellite to local
receiving stations in nine countries. These stations are generally owned in
partnership with a local partner or franchisee in each country. These stations
relay the signal to a broadcast tower that transmits it as a standard encrypted
television signal. As that signal is received by a customer, a decoder in a
standard set-top box decrypts the signal and provides it to the customer's
television.
The Company's digital service is transmitted DTH on a C-band satellite
transponder. Customers receive these signals on a dish mounted on or near their
homes. The signal is then descrambled and decompressed for viewing, using a
conditional access system, set-top box and smart cards designed by Mindport.
Egypt and the Middle East
The Company provides customer service, subscriber management and customer
billing services to third-party pay-television broadcasters in Egypt and other
Middle-Eastern nations. The Company provides these services for the Showtime
and Firstnet digital satellite platforms. In Egypt, the Company also provides
these services to CNE for its terrestrial analog service. As of September 30,
1998, there were 69,174 subscribers in these countries.
46
<PAGE>
Under its arrangements with Arab Radio & TV and Gulf DTH, the Company
collects revenues from their subscribers. The Company then takes these
subscriber revenues and remits a percentage to the broadcasters and keeps the
remainder as compensation for its services, which include operating customer
service centers, managing the subscriber base and conducting billing and
collection.
Mediterranean
Greece and Cyprus
The Company offers terrestrial analog pay-television services in Greece
and Cyprus through its subsidiary, NetMed. In Greece, the Company's analog
service provides three channels operating on two frequencies that offer a broad
array of entertainment, including exclusive first-run movies, sports and
children's programming. In Cyprus, the Company's analog service offers two
third-party channels that feature a similar programming lineup. NetMed began
broadcasting its analog service in 1994 and expects to begin offering digital
satellite service in 1999, subject to the receipt of a license from the Greek
government. As of September 30, 1998, NetMed had 277,446 subscribers in Greece
and 32,584 subscribers in Cyprus.
Opportunity. Greece has a population of approximately 10.5 million people
and approximately 3.2 million television households, giving NetMed's
pay-television services a market penetration of approximately 9% of television
households. The market penetration for pay-television in Greece is much lower
than the average of 38% for cable and satellite penetration in the European
Union ("EU") countries. Furthermore, in 1998, average daily viewing time in
Greece was 225 minutes, compared to an average of 191 minutes in the EU as a
whole. The Company believes that the potential market growth in Greece arises
from the large Greek appetite for television and its comparatively low rates of
market penetration. The Company also believes that the launch of NetMed's
digital satellite service, Nova, will be a significant source of new
subscribers. Nova is ready to be launched upon NetMed's receipt of a license
under a recently enacted broadcasting law.
Products. NetMed's Greek analog service consists of three channels,
FilmNet, SuperSport and K-T.V., transmitted over two analog frequencies.
FilmNet provides a combination of exclusive, first-run movies, along with some
original and imported series. SuperSport features exclusive sporting events,
including Greek league soccer and basketball, the two most popular sports in
Greece. K-T.V. offers a wide range of exclusive children's programming.
Customers have the option of subscribing to FilmNet, SuperSport or to both
services. Customers who subscribe to both also receive K-T.V. as a bonus
channel, which is currently the only way to receive K-T.V. Each of these
channels is produced by NetMed Hellas, a 96% owned subsidiary of NetMed B.V.
In Cyprus, the Company's analog platform broadcasts the LTV and Alfa
channels. LTV is produced by Lumiere, a Cypriot media company that is NetMed
B.V.'s joint venture partner in MultiChoice Cyprus. Alfa is produced by Alfa
TV, a Cypriot company. Each channel shows a variety of programming, including
exclusive films and sports. Most of the programming on each channel is
purchased from NetMed Hellas.
The digital service, Nova, is anticipated to include 19 video and five
audio channels, including film, sports and children's channels provided by
NetMed Hellas, supplemented by popular international channels and several of
the national Greek free-to-air networks. The Company's digital service has been
fully built and tested, and the Company has already established all agreements
necessary for its operation. The Company anticipates receiving a license for
digital broadcasting in 1999, although there can be no assurance that will be
the case. See "Risk Factors--Risks Associated with Growth Strategies--Greek
Operations" and "Regulation--Greece". At that time, the Company also intends to
begin offering some interactive television services on its digital platform.
The Company believes that its ability to attract and retain subscribers in
Greece and Cyprus depends on the ability of NetMed Hellas to retain its rights
to exclusive programming. NetMed Hellas has the exclusive pay-television
broadcast rights to movies from six of the eight major Hollywood movie studios,
including Columbia Tristar/Sony, Warner Brothers, Fox, MCA/Universal, Paramount
and DreamWorks and is currently negotiating with the two other studios for
similar rights. The contracts allow NetMed Hellas to select a specified number
of films from all films produced by a given studio each year and to broadcast
these movies at least a year in advance of their free-to-air television
premiere. Typically NetMed Hellas is entitled to show a movie 10 to 15 times
during its twelve-month pay-television window. Under the contracts, NetMed
Hellas makes payments on a per subscriber basis.
NetMed Hellas also holds the exclusive rights to broadcast Greek league
soccer and Greek league basketball, the two most popular sports in the country.
Under NetMed Hellas' contract with the Greek soccer federation, NetMed
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<PAGE>
currently broadcasts three live matches each week and then sells the matches
for delayed rebroadcast on free-to-air television. NetMed Hellas has a contract
with the Greek basketball league pursuant to which NetMed will televise two
live matches and two delayed matches each week.
Marketing and Subscriber Management. The Company believes its analog
service is attractive due to its comparatively clean frequencies and
uncluttered channels. When the Company is able to provide digital service,
NetMed will continue to market its analog service as a premium offer with broad
market appeal and position Nova as an upscale service with greater choice.
Initially, the Company expects the majority of its digital growth to come from
subscribers that upgrade from the analog service. The Company also expects to
achieve subscriber growth due to the expanded territorial coverage of the
digital platform. With its digital service, the Company will be able to reach
100% of Greek households, as compared to 70% with its analog system.
The broadcast television business in Greece tends to be seasonal, with a
significant decrease in viewership occurring in the summer, when Greeks
traditionally enjoy outdoor activities and travel and when the soccer and
basketball seasons have ended. In line with this trend, the Company has
experienced subscriber churn in the summer, but the Company is aggressively
implementing new programs designed to promote year-long subscriptions. For
example, the Company is pursuing programs that apply a discount to the price of
a set-top box in conjunction with a subscription over a consecutive number of
months that runs through the summer.
NetMed provides customer service through customer care and billing centers
in Athens and Salonica. These centers utilize Mindport's IBS subscriber
management system.
Pricing and Billing. The following table sets forth certain pricing
information for the Company's Mediterranean businesses:
<TABLE>
<CAPTION>
Equipment(1)
Subscribers (thousands) --------------------------------------------
------------------------------- Monthly Monthly
Sept. 30, Mar. 31, Subscription Total Lease(2)
----------- ------------------- ------------------- ------------------------ -------------------
1998 1998 1997 GRD $ GRD $ GRD $
----------- --------- --------- --------------- --- ---------------- ------- -------------- ----
<S> <C> <C> <C> <C> <C> <C>
Greece
Analog .......... 277 254 203 10,900(3) 55,000 N/A
Digital ......... N/A N/A N/A 14,900(4) 200,000(4) 6,000(4)
Cyprus
Analog .......... 33 31 26 10,172(5) 66,169 N/A
</TABLE>
- ----------------
(1) Includes price of satellite receiver in the case of digital service.
(2) The estimated amount of monthly payment under optional, three-year
installment purchasing plans for equipment.
(3) Price for both FilmNet and SuperSport as of January 1, 1999. Separately,
FilmNet costs GRD7,300 ($ ) and SuperSport costs GRD8,900 ($ ).
(4) Current estimates upon launch of digital service.
(5) Price for both LTV and Alfa together. Separately, each costs GRD8,439
($ ).
NetMed bills its subscribers monthly in Greek drachmae. Subscribers are
billed in advance and those who fail to pay their bill by the end of the month
of service are disconnected. During the 12 months ended September 30, 1998,
NetMed experienced a monthly net churn of approximately 1.3% on its total
subscriber base. Net churn is heaviest in the summer months of May, June, and
July, which averaged approximately 6.9% in 1998. In September 1998, monthly net
churn was approximately negative 6.6% versus negative 3.2% in September 1997.
Negative net churn occurs when the number of former subscribers who reconnect
exceeds the number of subscribers who drop off in a given period. To date, the
Company has not experienced significant customer disconnections as a result of
increases in the price of its services.
Competition. NetMed competes directly with free-to-air broadcast channels
in Greece and Cyprus and indirectly with sporting events, motion picture
theaters, the Internet and other forms of entertainment. There are currently
numerous free-to-air channels in Greece and Cyprus, including national Greek
networks (such as Mega, Antenna, Skai and Star) and four national Cypriot
networks (Cyprus Broadcasting Corp., Sigma, O Logos TV and Antenna). The
Company believes its analog service is attractive due to its comparatively
clean frequencies and uncluttered channels. When launched, NetMed's digital
satellite service will have clear signal coverage throughout Greece and Cyprus,
which is difficult to replicate using terrestrial broadcasts due to the
mountainous terrain and remote islands found there. Although the new Greek
media law allows multiple licenses to be granted for pay-television platforms,
the Company is not aware of any other entity that independently intends to
apply for such a license.
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<PAGE>
Transmission. NetMed transmits its analog service through a network of 56
terrestrial transmission sites across Greece. Its network currently covers
approximately 70% of the Greek population. NetMed owns and operates 13 of the
56 sites, including the two major transmission sites in Athens and Salonica,
which together cover approximately 60% of the population. NetMed distributes
its signal to the regional transmission sites over the Eutelsat's Hot Bird 2
satellite.
The remaining regional transmission sites are owned and operated on the
Company's behalf by local business partners, who often also own distribution
outlets where NetMed's set-top boxes are sold. In return, the local business
partners receive 6% of analog subscription revenues in their reception area,
and upon the launch of digital it is expected that they will receive some
incremental compensation.
The terrestrial analog network in Cyprus is owned by Lumiere, the
Company's minority partner in MultiChoice Cyprus, and Alfa TV. The network
consists of transmission sites, which together provide coverage of 77% of
Cypriot television households. Additional sites are being established to
increase coverage.
The digital satellite service will be transmitted off Eutelsat's Hot Bird
2 and Hot Bird 3 satellites to 60cm dishes mounted on homes. Both the
terrestrial analog and digital satellite transmission systems utilize backup
systems, including redundant routing to the point of uplink and, in the case of
analog, backup broadcast towers.
In encrypting and decoding its signal, NetMed uses conditional access
technology licensed from Mindport.
Asia
The Company conducts its Asian development operations out of its office in
Hong Kong. Its first investment in this region is its joint venture interest in
UBC, the leading pay-television provider in Thailand. Through a series of
transactions beginning in 1997, the Company now owns 27.8% of UBC and holds an
option to purchase an additional 3.3%. The agreements governing this joint
venture grant the Company certain management rights, including the right to
appoint the Chief Operating Officer. The Company views the UBC venture as a
model for possible future ventures in Asian countries and plans to draw upon
its experiences in Thailand in structuring its other investments in the region.
Thailand
The Company offers digital satellite and analog pay-television services in
Thailand through the UBC Group. The UBC Group was formed from UBC's acquisition
in February 16, 1998 of Telecom Asia's interest in UBC Cable, a leading
provider of cable television services in Thailand. This acquisition combined
the two largest pay-television companies in Thailand. The Company believes that
the UBC Group has been able to derive significant benefits from this
acquisition, including a more coordinated and focused marketing strategy and
the ability to streamline its workforce.
In 1997, the Company was invited to acquire an equity interest in UBC in
order to provide UBC with its pay-television management expertise. After making
its initial investment, the Company placed certain of its employees in key
management positions. As a result of these appointments, the Company was able
to refocus UBC in order to bring it in line with the Company's operating
philosophy. The Company took the lead role in repositioning UBC for long-term
growth through the acquisition of UBC Cable by UBC. The Company also led the
coordination of the cable and digital bouquets, the implementation of a new
pricing plan and the introduction of a new billing plan. The Company believes
the long-term effect of these changes will be to increase subscriber growth and
UBC's revenues and profitability.
As of September 30, 1998, the UBC Group had 288,579 total subscribers,
including 139,331 cable subscribers, 124,799 digital satellite subscribers, and
24,449 MMDS subscribers. The UBC Group began its MMDS service in 1989, its
cable service in 1995 and its digital satellite service in 1995.
Opportunity. Thailand has a population of approximately 61.1 million
people, with approximately 14.6 million television households. The Company
believes that Thailand represents an excellent opportunity for subscriber
growth, given the low pay-television penetration in Thailand, which is
approximately 2% of television households. That figure is less than most other
countries in the region, including those with similar or lower levels of
economic development than Thailand.
Given the comparatively low level of market penetration in Thailand, the
Company believes that the recently adopted coordinated marketing plan between
its cable and digital satellite services should result in increased subscriber
growth. UBC's digital satellite service is potentially receivable by all 14.6
million television households in the country. UBC Cable's service, which has
approximately 139,000 subscribers, passes more than 800,000 homes in Bangkok.
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<PAGE>
Products. The UBC Group's digital satellite and cable services each
provide the same 35 channels, including proprietary channels showing movies and
sports, major international channels and six major free-to-air networks, in
addition to seven educational channels. The bouquets were coordinated in order
to reduce churn between services as subscribers abandoned one system for
another. The Company believes this unified approach and leading market position
has been responsible for a significant decline in its international channel
costs. The satellite service is offered on two tiers, and the cable service is
offered on three tiers.
The UBC Group plans to persuade existing digital subscribers whose homes
are cable accessible to switch to cable. The Company believes it can accomplish
this as the programming on each service is now congruent. This will allow the
Company to use that household's digital equipment for new subscribers
elsewhere.
Six of the channels shown on the UBC Group's pay-television systems are
produced by its 99.9% owned subsidiary, Cineplex. The channels include UBC
Movies and UBC Asian Movies, which show first run and repeat films, UBC Kids,
UBC Series, UBC News and SuperSport 1 and 2. Cineplex does not currently have
the same exclusive rights to first run movies as are enjoyed by other MIH
operating companies, but shows programming to which HBO, Cinemax and other
movie channels do not have exclusive access. Its SuperSport channels show
programming tailored for Thai audiences, including favorite local sports such
as takraw and badminton, along with exclusive major international events, such
as English Premier League Soccer. The UBC Group also broadcasts major
international and local free-to-air channels. Most programming on the UBC
Group's pay-television systems carry the original soundtrack along with a
dubbed Thai soundtrack or Thai subtitling, with such dubbing and subtitling
generally being carried out by the UBC Group. The chart below details the
channels provided and the tiering structure for both the cable and satellite
bouquets:
<TABLE>
<CAPTION>
Type of Type of
Programming Channel Programming Channel
- --------------- ------------------------ -------------- ------------------------------
<S> <C> <C> <C>
Movies HBO -- G News UBC News -- S
Cinemax -- G CNN -- G
Star Movies -- G BBC -- G
Hallmark -- G CNBC -- G
UBC Asian Movies -- S -------------- ------------------------------
TNT Classic Movies -- G Kids Cartoon Network -- G
UBC Movies -- G* UBC Kids -- S*
- --------------- ------------------------ -------------- ------------------------------
Sports ESPN -- G Education DLT/ETV (seven channels) -- B
Star Sports -- G -------------- ------------------------------
SuperSport 1 -- G Music MTV -- G
SuperSport 2 -- G CH[V] Thai -- S
- --------------- ------------------------ -------------- ------------------------------
General UBC Series -- S Foreign TV5 (French) -- G
Entertainment Jet TV (Thai) -- G NHK (Japanese) -- A
Jet TV (Japanese) -- A -------------- ------------------------------
CCTV -- G Terrestrial Channel 3 -- B
Mosaic -- B Broadcasters Channel 5 -- B
AXN -- G Channel 7 -- B
Discovery -- G Channel 9 -- B
Animal Planet -- G Channel 11 -- B
Fashion TV -- G ITV -- B
</TABLE>
- ----------------
B = Basic tier (also included in silver and gold tiers)
S = Silver tier, cable (also included in gold tier, cable and digital)
G = Gold tier, cable and digital
A = A la carte
* = Occupies same physical channel
50
<PAGE>
UBC currently offers interactive services in the form of an electronic
programming guide on its digital platform. In the future, the Company intends
to offer web browsing, pull-down menus, e-mail, gaming, home shopping and home
banking, but has not set a definite date for the launch of those services. In
providing these services, the Company will use software platforms developed and
provided by OpenTV, a part of the Company's Mindport division. The Company
believes interactive television will be a substantial new phase in its business
development and has the potential to provide the Company with significant new
sources of revenue at higher margins and fuel subscriber growth.
Marketing and Subscriber Management. The Company markets its service as a
premium offer with broad market appeal. The Company is in the process of
phasing out its analog MMDS system due to widespread piracy of its signal. The
Company believes that this action may encourage subscriber growth among
individuals who can no longer receive the pirated signal for free. The Company
will retain its rights to the MMDS frequencies and is examining the feasibility
of establishing a digital MMDS service.
UBC provides customer service through customer care and billing centers in
four cities, including Bangkok. These centers will be utilizing Mindport's IBS
subscriber management system by the end of February 1999.
Pricing and Billing. The following table sets forth certain pricing
information for the Company's Thai business:
<TABLE>
<CAPTION>
Monthly Subscription
Number of Subscribers(1) Price Equipment
------------------------ --------------------- ----------------------
Silver Gold Monthly
Sep. 30, Mar. 31, Package Package Purchase(2) Rental
---------- ------------- ---------- ---------- ------------ ---------
1998 1998 1997 Baht $ Baht $ Baht $ Baht $
---------- ------ ------ ------ --- ------ --- -------- --- ------ --
<S> <C> <C> <C> <C> <C> <C> <C>
Cable ........ 139 154 119 400 890 4,000 100
Digital ...... 125 116 59 N/A 890 10,500 160
MMDS(3) ...... 24 43 76 N/A N/A N/A N/A
</TABLE>
- ----------------
(1) Subscribers in thousands.
(2) Includes installation fee, connection fee and refundable set-top box
deposit.
(3) Phase-out expected in early 1999.
The Company believes the recent decline in subscribers is the result of
the duplication of subscribers between UBC and UBC Cable and the phasing out of
MMDS.
The Company believes it will be able to rebuild the subscriber base once
it resumes marketing and promotional activity. During the last period in which
it was actively marketing, the last three months of 1997, there were
approximately 10,000 new subscribers per month to UBC's digital services.
Recently, consistent with the policies of other MIH companies, the UBC
Group instituted a strict policy of terminating the service of subscribers once
they fall 30 days in arrears. This policy has helped reduce the average
arrearage to nine days from 180. In early 1999, the UBC Group plans to switch
to advance billing, which is used in the other MIH operating companies.
For the 12 months ended September 30, 1998, the UBC Group's average
monthly net churn was approximately 2.0% on its digital system and
approximately 3.8% on its MMDS system. The higher net churn for MMDS is
consistent with the Company's effort to phase out its analog MMDS system. The
average monthly net churn for the UBC Group's cable system was approximately
3.3% for the 6 months ending October 31, 1998 (net churn for the months prior
to this period are unavailable). The Company believes that the coordination of
the programming packages for cable and digital will reduce the amount of churn
caused by subscribers switching between those platforms. To date, the UBC Group
has not experienced significant customer disconnections as a result of
increases in the price of its services.
The UBC Group does not require its subscribers to purchase their set-top
boxes but rather retains ownership of the equipment. The cost of the equipment
is built into the connection fee and monthly charge. The Company believes that
this strategy has a positive effect upon subscriber growth by minimizing the
entry cost of subscription to the Company's services.
Competition. The Thai television industry consists primarily of several
national free-to-air television stations and the Company's pay-television
operations. Previously, another pay-television service had been operated by
Thai Sky, but it discontinued operations in 1997. The Thai regulatory authority
granted pay-television licenses to two other companies in 1996, but those
companies have not launched, or announced an intention to launch, pay-
51
<PAGE>
television services. There are also several small, provincial cable systems,
generally averaging fewer than 1,500 subscribers. The UBC Group competes
directly with the national free-to-air television stations and, in the case of
the digital service, local cable groups in Thailand and indirectly with
sporting events, motion picture theaters, the Internet and other forms of
entertainment. The Company believes that its unique programming, including
exclusive first run movies and sporting events, gives it a distinct advantage
over its free-to-air television competitors. The national free television
stations are uplinked to the same satellite used by the Company's service and
consequently form part of the bouquet available to the Company's subscribers.
The Company believes that this arrangement enhances its appeal to current
subscribers and assists in growing its subscriber base.
Transmission. UBC's digital satellite service is transmitted on a Ku-band
signal through the Thaicom 3 satellite, owned by Shinawatra Satellite Public
Company Limited, which is 60% owned by Shinawatra. The satellite uplink
facilities at Lad Lum Koa are owned and operated by CS Communications Limited,
an affiliate of Shinawatra. UBC utilizes digital compression technology that
facilitates multiple channel transmission through a single channel's bandwidth.
Subscribers receive their signal on a 60-90 cm dish and unscramble and
decompress the signal with a set-top box utilizing Irdeto Access' conditional
access system and smart card technology from Mindport. The set-top box, smart
cards and conditional access equipment are owned by SSV (a 96% owned subsidiary
of UBC) and leased to the UBC Group.
UBC Cable's transmission is delivered on hybrid coaxial fiber optic cable
lines and over a dropwire into homes that utilize a set-top box to access the
signal. The cable network is owned by Asia Multimedia Company Limited ("AMM"),
a subsidiary of Telecom Asia, and leased to UBC Cable pursuant to an agreement
that expires in 2014. As part of its services to UBC Cable, AMM supplies and
installs a dropwire to link its network to subscriber homes and installs and
maintains the set-top boxes.
The Company's cable system features redundancy at the head-end. The
satellite system features route and fiber redundancy in the feed to the uplink
stations. The uplink stations themselves will be fully redundant by 1999.
Technology
Overview
The Company's technology division, Mindport, provides a comprehensive
package of technology products and support services to pay-media operators
worldwide. These products and services include IBS subscriber management
systems, Irdeto conditional access systems and the OpenTV operating system for
interactive television along with others. Mindport's products are designed to
be flexible, configurable and scalable, allowing them to be used by a variety
of different customers and to be integrated in systems using the products of
Mindport's competitors. Mindport's diverse and well integrated product line
also allows it to act as a single source for fulfilling a customer's pay-media
technology needs, particularly in the growing market for interactive
television. The Company believes that Mindport will be able to capitalize on
the anticipated growth in interactive platforms and the anticipated convergence
of television, telephony and the Internet in order for it to expand its
customer base.
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The following table lists certain of Mindport's major customers and the
products they use:
<TABLE>
<CAPTION>
Irdeto
Customer Market IBS Access OpenTV
- -------------------------------------- -------------------- -------- -------- -------
<S> <C> <C> <C> <C>
MultiChoice(1) ....................... South Africa X X X
Sub-Saharan Africa X X X
Greece X X Future
Middle East X X
UBC(1) ............................... Thailand Future X Future
Canal+ ............................... Europe(2) X X
Echostar ............................. United States Future
CBSat ................................ China Trial Trial Trial
Stream ............................... Italy X X
Galaxy Latin America ................. Latin America(2) X
DirecTV .............................. Japan X
Optus ................................ Australia X X
BSkyB ................................ UK X
TPS .................................. France X
TDK .................................. Denmark X
----- ----- -----
Total Subscribers (000's)(3) ......... 3,142 3,746 2,000
</TABLE>
- ----------------
(1) All transactions between Mindport and MIH Limited's other subsidiaries
and affiliates are conducted on an arms-length basis.
(2) Certain countries only.
(3) As of , 1999.
Mindport's ability to provide a "one-stop-shop" for pay media technology
needs is valuable to new interactive platform providers who can speed their
time to market by utilizing Mindport technology. A good example of this is the
Company's recent agreement to provide conditional access systems, subscriber
management systems and the OpenTV operating system to CBSat, the first provider
of trial digital satellite services in the People's Republic of China. CBSat's
system is being deployed in small numbers on a test basis in 1999, with a
possible broader rollout thereafter.
IBS
Mindport's IBS software provides pay-media operators with a broad range of
subscriber management services and products that combine customer care, billing
and logistics functionality in one integrated system. IBS supports all types of
subscriber-based businesses, including pay-television operators, Internet
service providers and data broadcasters over a wide range of delivery
platforms. Mindport's IBS system is a flexible, configurable and highly
scalable product, that can service pay-media operations of vastly different
sizes.
Mindport IBS has historically generated revenues by charging up-front
license fees and monthly customer service and support fees. Recently, Mindport
has begun to collect from certain customers license revenues and support fees
scaled to the customers' subscriber numbers, paid on a monthly basis. Mindport
currently provides IBS to 25 customers, including certain platforms of Canal+,
DirecTV Japan and many of the Company's operating entities. IBS's competition
in its current and planned future markets includes approximately 40 companies
worldwide, including Wiztec and CableData, who focus on pay-television, and
Saville, LHS Group, CSG and Amdocs, who focus primarily on telephony operators.
The Company believes that the demand for subscriber management services
will increase as operators seek to provide more advanced technology to their
customers. IBS is able to support changes and accommodate new platforms,
including analog, digital and interactive systems. In addition, IBS is a highly
scalable software package, as demonstrated in testing by major U.S. hardware
and software producers who verified its scalability to several million
subscribers.
Today, IBS is a leading subscriber management software package for
pay-television. The Company plans to continually redefine the IBS architecture
to improve on its configurability, flexibility and scalability. The Company
also plans to take advantage of the system's flexibility to penetrate new
markets for IBS, such as Internet service, cable, data broadcasting and
telephony providers. In addition, the Company also plans to introduce a
scaled-down
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<PAGE>
IBS for the Internet market that can run on a laptop and a product capable of
tracking interactive television applications, especially interactive commerce
transactions.
Irdeto Access
Irdeto Access provides digital and analog conditional access systems to 13
customers operating in over 20 countries. These systems enable pay-television
operators to encrypt and decrypt their broadcast signals and thus control
subscriber access to programs, services and events.
The Company believes that its digital conditional access system's
flexibility, compatibility with multiple equipment vendors, ease-of-use and
sophisticated security features make it attractive to pay-television operators
worldwide. The system's open architecture allows pay-television operators to
incorporate as few or as many features as they require and adjust these
features as their needs change. Irdeto Access offers M-Crypt, a system
specifically for pay-media providers with fewer than 100,000 subscribers.
M-Crypt allows these operators to reduce their investment in computing
equipment and third-party software licenses and is easily upgradable if the
operator's subscriber base were to grow past a certain size. Mindport also
produces an analog conditional access system that is also based upon a modular
and flexible design. This allows the Company to tap into price sensitive
markets that will not be considering digital services for some years to come.
Irdeto Access licenses its technology to various manufacturers to produce
its conditional access systems and generates revenues by charging an up-front
license fee along with a fee for each conditional access unit sold. The major
users of Mindport's conditional access systems include Stream, Telepiu, Canal+
and certain of the Company's operating entities. As of September 30, 1998,
Mindport had supplied over 1.1 million digital and over 2.5 million analog
conditional access units.
The principal products competing with Irdeto Access include MediaGuard,
ViaAccess, NDS and NagraVision. The Company believes that a customer's primary
consideration in choosing among conditional access systems are system security
and dependability and that Irdeto Access enjoys a solid reputation for both of
these qualities.
Mindport's strategy for Irdeto Access encompasses four main goals: (i)
reduce the cost of ownership for both digital and analog conditional access
systems; (ii) develop the next generation conditional access products; (iii)
implement an analog sales operation in new markets; and (iv) develop an MPEG-2
encryption product for the Internet. The Company has a team of engineers
dedicated to conditional access design and development who are responsible for
developing new products, increasing the functionality of existing products and
reducing costs through increased chip functionality. Mindport's management
believes that further price reductions may be achieved by cutting production
costs, shifting production to locales with lower manufacturing costs and
reducing royalty costs by re-examining certain partnerships and business
relationships dealing with developing conditional access technology. The
Company recently acquired TV/COM International Inc., a San Diego based company
that holds intellectual property licensed to Irdeto for use in its conditional
access systems.
OpenTV
OpenTV is a leading provider of operating system software for digital
set-top boxes used in both satellite and cable television systems. Several
digital satellite operators, including TPS in France, EchoStar in the United
States, BSkyB in the United Kingdom and CBSat in China, are using or have
entered into agreements to use the OpenTV software system. TPS is presently
OpenTV's largest customer with over 700,000 set-top boxes deployed as of
December 31, 1998. TPS has used OpenTV software to gain market share in France
by deploying interactive television applications and services that attract and
retain subscribers. Using OpenTV's development tools, TPS designs its own
virtual channels, including an electronic programming guide and interactive
weather service. It also recently ran a successful interactive advertising spot
for Renault.
OpenTV's operating system software manages all of the basic functionality
of the digital set-top box and enables it to run interactive applications. The
OpenTV operating system is extremely flexible and is currently being used with
a variety of decoders. In addition, OpenTV provides pay-media operators with
easy-to-use software tools such as its Software Development Kit and Open
Author, which permit the operators themselves to design their own interactive
services. The open architecture of OpenTV's operating system software means
that it can be used with any conditional access system and can support a number
of different head-end systems. Another feature of the OpenTV operating system
is its ability to manage and handle several interactive applications
simultaneously.
OpenTV derives its revenue from a licensing fee per set-top box,
maintenance and support fees, licenses of proprietary software tools supporting
the OpenTV system and consulting fees. As of December 31, 1998, the OpenTV
operating system had been installed in approximately 2.0 million set-top boxes.
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<PAGE>
At present, OpenTV's competitors include MediaHighway, Enhanced TV, Power
TV, NCI and WebTV. In the future, other software companies may decide to
compete directly with OpenTV in the digital interactive television software
market. OpenTV believes that its future competitors must overcome OpenTV's
first to-market advantage and the significant head start that it enjoys in
developing interactive television software. In addition, applications developed
with OpenTV software function at the head-end level and are independent of the
set-top box, thereby providing two principal advantages. First, any
improvements or enhancements can be downloaded over the digital signal received
by the set-top box, making the dissemination of upgrades simple and
inexpensive. Second, applications based upon the OpenTV operating system enjoy
protection against decoder obsolescence since the software is used with
different set-top box technologies. To date, OpenTV's customers have developed
interactive applications using OpenTV's software development tools, or they
have contracted with OpenTV to develop applications on a consulting basis.
OpenTV is now developing a suite of interactive applications that it will
market to customers on a licensing or revenue sharing basis.
The present strategy for OpenTV is to become the leading operating system
for interactive applications on digital media platforms worldwide, complete the
development and introduction of applications such as home banking and home
shopping and to enhance its products and services for greater exploitation of
the Internet.
Other Products
Media Commerce Technologies. Mindport is currently developing software in
three application areas as part of its plan to develop the tools, technologies
and supporting structures that will enable pay-television operators to provide
comprehensive interactive broadcast services. The first consists of
applications for interactive television, such as extended electronic program
guides, virtual channels and program enhancement. The second is fulfilment
services, which use Internet commerce technologies that have been adapted for
the broadcast platform. The third application area, infrastructure
technologies, provides the common communications infrastructure for media
commerce.
CLASS. Mindport's Contracts, Library and Scheduling System (CLASS) enables
digital pay-television operators to manage contracts, control their program
libraries, manage license tracking and utilize multiple-language electronic
program guides.
Consulting. Mindport Solutions is a new division intended to capitalize on
the expertise within the Mindport group to offer consultancy services and
turnkey solutions to new pay-television operators. This division was launched
with the award of a system integration contract for the DTH platform of Stream,
the Italian pay-television service owned by Telecom Italia.
Properties
The Company has major corporate offices in Hoofddorp, The Netherlands,
Johannesburg, South Africa and Athens, Greece. The following table summarizes
certain information regarding the Company's principal facilities as of November
1998:
<TABLE>
<CAPTION>
Description/Use Location Size Owned or Leased
- ---------------------------- ---------------------------- ------------ ----------------
<S> <C> <C> <C>
Corporate offices .......... Hoofddorp, the Netherlands 6,772 m2 leased
Corporate offices .......... Johannesburg, South Africa 20,400 m2* leased
Corporate offices .......... Durban, South Africa 2,672 m2 leased
Corporate offices .......... Cape Town, South Africa 3,219 m2 leased
Corporate offices .......... Athens, Greece 8,126 m2* leased
</TABLE>
- ----------------
* = multiple locations
Employees
As of September 30, 1998, the Company had full-time employees. None of
the Company's full-time employees are unionized. The Company believes its labor
relations are satisfactory.
As of March 31, 1998, 1997 and 1996, the Company had , and
employees, respectively.
Intellectual Property
The Company relies on a combination of patents, licensing arrangements,
trade names, trademarks and proprietary technology to protect its intellectual
property rights. The Company owns, or has been assigned or
55
<PAGE>
licensed the rights to, several patents and has several patent applications in
various jurisdictions relating to its proprietary technology. In addition, the
Company currently has numerous trademarks (pending and registered) in countries
where it conducts business. Some of the Company's major trademarks include the
names and logos of Irdeto, Mindport, OpenTV, DStv and MultiChoice.
The Company may file additional patent and trademark applications in the
future, although there can be no assurance that the Company will be successful
in obtaining patents or trademark registrations based upon such applications.
The Company intends to vigorously protect its intellectual property rights. It
may be possible, however, for a third party to copy or otherwise obtain and use
the Company's technology without authorization or to develop similar technology
independently. Furthermore, the laws of certain countries in which the Company
sells its products do not protect the Company's intellectual property rights to
the same extent as do the laws of the United States. See "Risk Factors--Risks
Associated with Intellectual Property".
Legal Proceedings
From time to time, the Company and its local partners in Greece have
experienced objections by local communities to the establishment or continued
presence of transmission sites in such communities. Such matters have generally
been resolved in the ordinary course. In addition, the Company is party to
routine litigation and proceedings in the ordinary course of business. The
Company is not aware of any current or pending litigation which it believes
would have a material adverse effect on the Company's results of operations or
financial condition.
Environmental Matters
Environmental laws vary significantly among the countries in which the
Company operates. Under certain environmental laws, a current or previous owner
of real property, and parties that generate or transport hazardous substances
that are disposed of on real property, may be liable for the costs of
investigating and remediating such substances on or under the property.
Environmental laws also may impose restrictions on the manner in which property
may be used or businesses may be operated, and these restrictions may require
expenditures for compliance. In connection with the ownership or operation of
its facilities, the Company could be liable for such costs in the future.
The Company is not aware of any material environmental claims pending or
threatened against it, and the Company does not believe it is subject to any
material environmental remediation obligations. However, no assurance can be
given that a material environmental claim or compliance obligation will not
arise in the future.
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<PAGE>
REGULATION
South Africa
Overview. M-Net broadcasts its channels pursuant to a license acquired on
October 17, 1985 from the Minister of Posts and Telecommunications (the
"Minister"). In accordance with the prevailing law at the time, the Minister's
approval was given after the requisite consultation with the SABC, the
state-owned public service broadcaster.
The Independent Broadcasting Authority Act No. 153 of 1993 (the "IBA
Act"), which came into operation on March 31, 1994, established the Independent
Broadcasting Authority (the "IBA") as an independent regulator mandated to
regulate broadcasting in the public market subject to principles of
accountability and transparency. The regulation of broadcasting is now vested
in the hands of the council of the IBA.
The IBA Act vests in the council of the IBA all powers, functions and
duties in relation to the administration, management, planning and use of
broadcasting services' frequency bands (those frequencies assigned to
broadcasting by the International Telecommunications Union and adopted in South
Africa), including the power to issue licenses for broadcasting services. The
IBA Act prohibits the provision of broadcasting signal distribution or a
broadcasting service (utilizing the broadcasting frequencies) unless such
distribution or service is provided in accordance with a signal distribution or
broadcasting license issued by the IBA. The latter licenses may be granted for
public broadcasting services, private broadcasting services and community
broadcasting services.
The IBA Act contains provisions which recognize existing licenses under
previously applicable laws, such as the license previously issued to M-Net
Ltd., which license has been amended by the IBA after a public consultation
process. The license imposes certain local content requirements, advertising
limitations and a license fee equal to 2% of gross subscription revenues. In
addition, Orbicom has received a downlink license and a broadcasting signal
distribution license from the IBA. The latter permits Orbicom to provide M-Net
Ltd. with terrestrial analog distribution services in South Africa.
The Telecommunications Act No. 103 of 1996 provides that all
telecommunications and radio frequencies other than broadcasting and
broadcasting frequencies should be regulated by the South African
Telecommunications Regulatory Authority ("SATRA"). In addition, SATRA
recognizes the uplink license and MMDS license which were issued to Orbicom
prior to the establishment of SATRA. The MMDS license authorizes the use of
frequencies and terrestrial stations for analog distribution. The uplink
license authorizes the distribution of television, sound and/or associated data
via satellite for direct reception or terrestrial re-transmission, provided
that such distribution is directly related to a broadcasting service. In
addition, Orbicom has received a value added network services licence and, on
February 19, 1999, received a further uplink license from SATRA.
Future Developments. On June 4, 1998, the Department of Communications
issued a White Paper on broadcasting policy. It confirmed that a new
broadcasting policy would seek to establish a 3-tier governance system for the
broadcasting industry, namely policy formulation and development by the
government, licensing and regulation by the IBA and service provision by the
broadcasters and signal distributors. The White Paper made, inter alia, the
following recommendations:
o the imposition of specific broadcasting license conditions on private
broadcasters which would acknowledge the different services offered by
satellite services, pay services and free-to-air services and which would
impose obligations commensurate to the nature of the particular
broadcasting business;
o the adoption of a more comprehensive definition of broadcasting and
broadcasting services than that contained in the IBA Act in line with
international practices and technological developments; and
o the merger into a single body of the broadcasting and telecommunications
regulatory functions.
In view of the increasing difficulty in differentiating between radio
frequency spectrums used for telecommunications and those used for broadcasting
and in order to prevent duplication specifically in the technical skills and
facilities areas, the government has decided to merge the IBA and SATRA into a
single regulatory authority. It was envisaged in the White Paper that the new
regulatory body would enjoy an independent statutory framework.
On August 14, 1998, a new Broadcasting Bill was published. This Bill,
which has not yet been enacted, essentially seeks to put into law the most
important findings and recommendations of the White Paper. In particular, it:
o repeals the Broadcasting Act and provides a charter for the SABC;
o clarifies the Minister's powers with regard to policy formulation and the
IBA's powers in respect of the regulation and licensing of the
broadcasting system;
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o establishes the Frequency Spectrum Directorate in the Department of
Communications; and
o creates new classes of broadcasting licenses in line with the proposals
in the White Paper.
MultiChoice Africa does not itself presently require a license from the
regulatory authorities for its DStv service. The Company's affiliates (M-Net
Ltd. and Orbicom) hold the necessary broadcasting signal distribution and
uplink licenses. It is, however, likely that the enactment of the Broadcasting
Bill will affect MultiChoice Africa's position, and that a form of license will
be required for the DStv service within the new regulatory framework.
Greece
General. The regulatory framework governing the establishment and
operation of free-to-air television stations in Greece is provided by Law
2328/95 on the "Legal Status of Private Television and Local Radio, Regulation
of Several Issues related to the Radio Television Market and Other Provisions"
(the "Free-to-Air Law"). The Greek government recently enacted a new law (Law
2644/98 on "The provision of pay television and radio services and other
provisions") that regulates pay television (via satellite, terrestrial relays
or cable) by the use of analog or digital methods of transmission (the
"Pay-Television Law"). Prior to the enactment of the Pay-Television Law,
pay-television was regulated by the Free-to-Air Law, some provisions of which
survive, as described below.
The Free-to-Air Law. Before the enactment of the Pay-Television Law, the
Free-to-Air Law granted Greek Radio Television SA ("ERT"), the state-owned
broadcasting entity, the exclusive right to broadcast encrypted television
signals in Greece. ERT was permitted to further assign such rights to third
parties. Based on this legislation, which is in effect until October 1999,
NetMed Hellas entered into an agreement with ERT on October 15, 1994, pursuant
to which NetMed Hellas' encrypted service is transmitted on a frequency
allocated by ERT. This agreement has been approved by a common decision of the
Minister of Press and Mass Media and the Minister of Finance and ratified by
Law 2328/95.
The October 1994 agreement was extended and supplemented by a further
agreement dated December 29, 1995 which relates to the transmission of a second
encrypted service on a frequency allocated by ERT. This further agreement was
also approved by common ministerial decision.
These agreements require NetMed Hellas to pay certain fees to ERT equal to
6.5% of subscription fees payable by subscribers who subscribe to only one
service and 5.0% of subscription fees payable by subscribers who subscribe to
both services. NetMed Hellas is required to provide a bank guarantee in an
amount of GRD 1 billion each year to secure these payments.
The regulations concerning the share capital composition of free to air
television are not applicable to NetMed Hellas, which is subject to the terms
of the cooperation agreements with ERT. The regulations with ERT ensure that
NetMed BV and NetMed Hellas (or any other company which has the control of the
group of companies to which NetMed Hellas belongs) shall be liable towards ERT
for the fulfillment of the obligations of NetMed Hellas in accordance with the
cooperation agreement. Additionally, ERT's approval is required for the
transfer of the majority of the shares to NetMed Hellas and the transfer of
less shares than the majority requires ERT to be notified. ERT has also the
right to be provided with detailed information if the new shareholders or the
new share capital are directly entered into NetMed Hellas. These regulations
are in effect for the entire term of the agreement with ERT.
Pay-Television Law. Under the new Pay-Television Law, the rights to
provide pay-television through terrestrial, satellite or cable broadcast can be
secured either by obtaining a license directly from the Greek government or by
signing of an agreement with any holder of a license. Accordingly, the existing
agreement between NetMed Hellas and ERT is sufficient to secure terrestrial
broadcast rights for the Company. Upon the expiration of that agreement in
October 1999, NetMed Hellas could either extend the agreement or seek a license
directly.
With regard to digital, an application for the issue of a license for the
provision of pay services via satellite has been submitted by MultiChoice
Hellas, and the application is being studied by the National Radio and
Television Council.
EU Regulation. The EU Broadcasting Without Frontiers Directive (the
"Directive") of October 3, 1989 established the basic principles for the
regulation of broadcasting activity in the EU. In essence, it provides that
each EU broadcasting service should be regulated by the authorities of one
member state (the "home member state") and that certain minimum standards
should be required by each member state of all broadcasting services that
state's authorities regulate.
58
<PAGE>
The Directive currently requires member states to ensure "where
practicable and by appropriate means" that the broadcasters reserve "a majority
proportion of their transmission time" for programs produced in Europe. In
applying this rule, broadcast time for news, games, advertisements, sports
events, infomercials, and teletext services is excluded. The Directive
recognizes that member states are to move progressively towards requiring their
broadcasters to devote a majority of relevant transmission time to programs
produced in Europe, having regard to the broadcaster's informational,
educational, cultural and entertainment responsibilities to the viewing public.
Thailand
Since September 1992, television broadcasting in Thailand has fallen under
the control of the National Broadcasting Commission of the Prime Minister's
office. Private investors are not allowed to own television stations. The Thai
Television Co. Ltd. was established by the Public Relations Department of
Thailand (the "PRD") and other government agencies as a state enterprise to
operate Thailand's first television station. Following enactment of the Thai
Radio and Television Broadcasting Act of BE 2498 (AD 1955) (the "RTBA"),
television broadcasting commenced on June 24, 1955. In 1977, MCOT was
established to operate mass media businesses on behalf of the government. The
Thai Television Co. Ltd. was then dissolved, and its assets and operations were
transferred to MCOT. As a consequence of developments in technology, the RTBA
was amended in 1987 to allow television broadcasts to be made to the public
through cable and electronic means.
Since January 13, 1994, pursuant to certain ministerial regulations dated
October 13, 1993, companies in the private sector have had the right to apply,
in the case of Bangkok transmissions, to the PRD and, in the case of
transmissions outside Bangkok, to the PRD or the Regional Public Relations
Centre, for a license to supply cable television. Those applications for
licenses are considered by a committee appointed by the Prime Minister. Such
licenses, on the basis of the regulations, permit the supply of television
through fibre optic or electric cable, but not through other means, including
wireless transmission, such as microwave signal as currently utilized by UBC.
At present, there are two major government bodies which regulate and
monitor media companies and their activities, MCOT and the PRD. The PRD is a
regulatory body controlled by the Prime Minister's office. It has a similar
scope of responsibilities to MCOT and is responsible for monitoring terrestrial
stations and issuing licenses for new commercial free-to-air and satellite
stations. The PRD also runs Channel 11, which is the only state education
television station in Thailand.
Both MCOT and the PRD have wide regulatory powers. Since their scope of
responsibilities overlap significantly, many companies apply for licenses to
broadcast from both entities. At present, UBC and UBC Cable require and have
obtained a license from the PRD to utilize certain frequencies and concessions
from MCOT to operate pay-television businesses.
On April 17, 1989, MCOT and UBC entered a joint venture agreement for the
provision of subscription television service which was subsequently amended on
May 19, 1994 and April 17, 1998 (together, the "UBC Concession"). UBC is
permitted to operate subscription television on behalf of MCOT until September
30, 2014. UBC is entitled to provide subscription television pursuant to the
UBC Concession to the whole of Thailand, using satellite to provide a
direct-to-home service to the whole of Thailand, cable in the provincial areas,
MMDS as permitted by the Post and Telegraph Department and by satellite to hubs
in provincial areas and then through local cable networks to subscribers. In
exchange, UBC pays MCOT 6.5% of the gross revenue derived from the operation of
the subscription television business in each year during the period of the UBC
Concession as consideration for the agreement, subject to a minimum amount per
annum.
Subscription fees or other subscriber charges and the form of contracts
with subscribers must be submitted to MCOT for prior clearance.
On November 12, 1993, MCOT and Telecom Asia entered into a memorandum of
agreement for a joint venture for the provision of cable television services.
Pursuant to its terms, Telecom Asia agreed to set up a public company to
operate a cable television business. On June 6, 1994, MCOT and UBC Cable
entered into a contract for the joint operation of subscription television
services (the "UBC Cable Concession"). The Company is permitted to operate
subscription television on behalf of MCOT until December 31, 2019. UBC Cable is
entitled to provide subscription television pursuant to the UBC Cable
Concession in Bangkok and elsewhere. UBC Cable pays MCOT 6.5% of the gross
revenue derived from the operation of the subscription television business in
each year during the period of the concession as consideration for the
agreement, subject to a minimum amount per annum.
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<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table sets forth certain information as of September 30,
1998 with respect to persons who are expected to serve as directors or
executive officers and other key personnel of the Issuer upon consummation of
the Offerings:
<TABLE>
<CAPTION>
Name Age Positions with the Issuer
- ----------------------------------- ----- -----------------------------------------------
<S> <C> <C>
Theunissen Vosloo ................. 61 Chairman of the Board of Directors
Jacobus D.T. Stofberg . ........... 47 Chief Executive Officer and Director
Jacobus P. Bekker ................. 45 Director
Vaughan G. Bray ................... 63 Director
Johannes H. W. Hawinkels .......... 47 Chief Executive Officer--MIH Asia and Director
Stephen G. Oldfield ............... 44 Chief Executive Officer--Mindport and Director
Stephan J.Z. Pacak ................ 43 Director
Lesley R. Penfold ................. 35 Chief Financial Officer and Director
Allan M. Rosenzweig ............... 43 Group Director--Corporate Finance and Director
Sheryl A. Raine ................... 40 Chief Executive Officer--NetMed
J. James Volkwyn .................. 40 Chief Executive Officer--MultiChoice Africa
</TABLE>
- ----------------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
Messrs. Vosloo, Stofberg, Bekker, Bray, Hawinkels, Oldfield, Pacak,
Penfold and Rosenzweig are referred to herein as the "named directors and
officers".
Pursuant to the Memorandum and Articles of the Issuer, the Board of
Directors will be classified into three classes of directors at its next annual
meeting of stockholders. The terms of the classes of directors will expire at
the annual meetings of stockholders to be held in 2000, 2001 and 2002,
respectively. Thereafter, the classes will be elected to staggered three-year
terms. See "Description of Capital Stock--Certain Anti-Takeover Matters--
Classified Board of Directors".
Theunissen Vosloo has been the Chairman of the Board of Directors of the
Issuer since August 1993. Mr. Vosloo is also currently the non-executive
Chairman of the Board of Directors of Naspers and holds a variety of other
chairmanships among the Naspers group of companies. In 1984, he assumed the
position of managing director at Naspers and then served as the executive
chairman from September 1992 until September 1997. Mr. Vosloo is also Chairman
of the Board of Directors of MIH Holdings and M-Net Ltd.
Jacobus D.T. Stofberg has been the Chief Executive Officer and a director
of the Issuer since September 1998. Mr. Stofberg has been the managing director
of MIH Holdings since September 1997 and, as one of the original members of the
MIH Holdings management team, has also held a variety of positions within the
MIH Holdings group of companies, including that of Chief Operating Officer
since 1985. Mr. Stofberg currently serves as a director of M-Net Ltd., M-Cell,
M-Web and SSIH. Before joining the Issuer in September 1998, Mr. Stofberg was a
director of NetHold, the Issuer's previous joint venture, and held a variety of
directorships within the NetHold group of companies. In addition, Mr. Stofberg
has previously served as a director of MultiChoice Africa and NetMed.
Jacobus P. Bekker has been a director of the Issuer since September 1998.
Mr. Bekker and Mr. Stofberg founded MIH Holdings in 1985 and has held a variety
of positions within the MIH Holdings group of companies since that time. Mr.
Bekker was CEO of MIH Holdings until 1997, when he became the managing director
of Naspers. He is also currently the Chairman of the Board of Directors of
M-Web, and a director of MIH Holdings, SSIH, M-Net Ltd., MTN and M-Cell. Mr.
Bekker is also a director of a number of South African print media companies
and served as a director of NetHold from September 1995 to April 1997.
Vaughan G. Bray has been a director of the Issuer since August 1993. Mr.
Bray joined Johnnic in 1960, specializing in investment and finance, and was
appointed to the position of Finance Director in 1984. Since 1995, he has also
been the Chief Executive Officer of Johnnic. In addition, Mr. Bray is a
director of MIH Holdings, M-Net Ltd. and M-Cell and the Chairman of the Board
of Directors of Omni.
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<PAGE>
Johannes H. W. Hawinkels has been the Chief Executive Officer of MIH Asia
Limited and a director of the Issuer since July 1997 and September 1998,
respectively. Mr. Hawinkels has held a variety of positions within the MIH
Holdings group of companies since 1993. Mr. Hawinkels also currently serves as
a director of certain of the Issuer's joint ventures in the Middle East and
Egypt. In addition, Mr. Hawinkels was the Chief Executive Officer of
MultiChoice Africa from August 1993 to August 1997. Mr. Hawinkels has also
previously served as a director of MultiChoice Africa. Mr. Hawinkels was
previously a director of a leisure company involved in film distribution and
exhibition, fast food franchising, sports goods retail and wholesale and film
production.
Stephen G. Oldfield has been the Chief Executive Officer of Mindport and
director of the Issuer since September 1997 and September 1998, respectively.
Mr. Oldfield has held a variety of positions within the MIH Holdings group of
companies since 1986. Mr. Oldfield has been a director of both NetMed and
OpenTV since April 1998. Mr. Oldfield was also Chief Executive Officer of
NetMed from 1994 to 1997.
Stephan J.Z. Pacak has been a director of the Issuer since March 1996. Mr.
Pacak was the Chief Financial Officer of MIH Holdings from November 1993 to
January 1998 and has held a variety of executive positions within the MIH
Holdings group of companies. In addition to being a director of MIH Holdings,
Mr. Pacak is also a director of Naspers, M-Net Ltd., M-Web, SSIH and a number
of South African print media companies and is the chief executive officer of
M-Cell. Mr. Pacak also previously served as a director of MultiChoice Africa.
Lesley R. Penfold has been the Chief Financial Officer and a director of
the Issuer since March 1998. Mr. Penfold has been the Chief Financial Officer
and an alternate director of MIH Holdings since January 1998 and February 1998,
respectively. Mr. Penfold also currently serves as a director of NetMed,
MultiChoice Africa, M-Web and M-Net Ltd. and SSIH as an alternate. Mr. Penfold
worked in the corporate finance departments of Investec Bank Ltd. and Standard
Merchant Bank Limited from May 1994 to January 1998 and from May 1993 to May
1994, respectively. From 1981 to 1993, Mr. Penfold held a number of positions
at Deloitte & Touche in the corporate finance and audit departments.
Allan M. Rosenzweig has been the Group Director--Corporate Finance of the
Issuer since February 1996 and a director of the Issuer since October 1997. Mr.
Rosenzweig currently serves as a director of M-Web, Mindport and OpenTV. Before
joining the Issuer in 1996, Mr. Rosenzweig was the Director of Corporate
Finance of NetHold. In addition, Mr. Rosenzweig was previously the managing
director of Intertax (Pty) Ltd., an international tax consultancy firm. He also
serves on the boards of other publicly quoted companies like United Services
Technologies Limited and Brait S.A.
Sheryl A. Raine has been the Chief Executive Officer of NetMed since
October 1997. Ms. Raine has also been a director of NetMed since March 1998. In
addition, Ms. Raine previously served as the director of channels of M-Net Ltd.
from 1991 to 1995 and as the managing director of NetHold Electronic Media from
November 1995 until April 1997.
J. James Volkwyn has been the Chief Executive Officer of MultiChoice
Africa since September 1997. Mr. Volkwyn also currently serves as a director of
MultiChoice Africa and MultiChoice Middle East. Mr. Volkwyn was the chief
operations officer (excluding South African operations) and finance manager of
MultiChoice Africa from January 1996 to September 1997, and finance manager of
MultiChoice Africa from January 1993 to December 1995.
The business address of the Company's directors and officers is the
Company's registered office: Abbot Building, Mount Street, Tortola, Road Town,
British Virgin Islands.
Board Committees
The Issuer's Board of Directors has a Compensation Committee and an Audit
Committee. The Compensation Committee, which comprises Messrs. Bekker and
Pacak, establishes salaries, incentives and other forms of compensation for
executive officers and administers incentive compensation and benefit plans
provided for employees. The Audit Committee, which comprises Messrs. Bekker,
Bray and Pacak, reviews the Issuer's audit policies and oversees the engagement
of the Issuer's independent auditors.
Compensation of Directors and Officers
The aggregate salary compensation to be paid by the Issuer and its
subsidiaries to the named directors and officers as a group during the fiscal
year ending March 31, 1999 will be approximately $ . The maximum aggregate
bonus compensation to be paid by the Issuer and its subsidiaries to the named
directors and officers as a group during the fiscal year ending March 31, 1999
will be approximately $ .
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<PAGE>
The aggregate amount to be set aside by the Issuer and its subsidiaries to
provide pension, retirement and similar benefits to the named directors and
officers as a group during the fiscal year ending March 31, 1999 will be
approximately $ .
Options to Purchase Securities
At , 1999, options over Class A Ordinary Shares held by the named
directors and officers as a group were as follows:
<TABLE>
<CAPTION>
Expiration
Held by Option Shares Purchase Price Date
- ------------------------------------------- --------------- ---------------- -----------
<S> <C> <C> <C>
Directors and officers as a group .........
</TABLE>
Share Scheme
Pursuant to the Deed Constituting the MIH Limited Share Trust (the
"Deed"), dated February , 1999, the Issuer has established the MIH Limited
Share Scheme (the "Share Scheme") and appointed trustees (the "Trustees") to
administer the Share Scheme. The Share Scheme is intended to provide an
incentive to the Company's employees, by giving them an opportunity to acquire
Class A Ordinary Shares of the Issuer, to remain in the Company's employment
and to promote the Company's continued growth. The following summary does not
purport to be complete and is subject to, and qualified in its entirety by, the
Deed, which has been filed as an exhibit to the Registration Statement of which
this Prospectus forms a part and is incorporated herein by reference.
The Issuer may allocate to the MIH Limited Share Trust (the "Trust") a
number of Class A Ordinary Shares which represent, in aggregate, no more than
10% of the total number of Ordinary Shares. Class A Ordinary Shares which are
allotted to the Trust for the purpose of the Share Scheme become "Scheme
Shares" and an amount equal to the total consideration payable in respect of
the Scheme Shares is advanced to the Trust by the Issuer as an interest free
loan.
Under the Share Scheme, the Trustees may offer or grant options in respect
of Scheme Shares to selected employees at a price which is equal to the market
value of the Shares. The employees are selected and the number of shares are
determined by the Trustees after consultation with the Compensation Committee.
The aggregate number of Scheme Shares which can be made available to any one
employee under the Share Scheme is not permitted to exceed approximately 1% of
total number of Ordinary Shares issued and outstanding.
Each offer sets forth the terms on which it may be accepted. The time
period for acceptance is usually within 14 days from the date of the offer, and
the maximum period which may be allowed for the payment of the purchase price
is 5 years and 105 days from the date of acceptance of the offer. Under the
Share Scheme, the purchase price is payable in three equal installments which
may not be paid before the third, fourth and fifth anniversaries, respectively,
of the date on which the offer was made. The Trustees may, however, in their
discretion allow earlier payment dates.
Similarly, each option sets out the terms on which it may be exercised.
The maximum period which may be allowed for the exercise of an option is 5
years and 105 days from the date the option was granted. However, options are
generally exercisable immediately on (or within a short period after) the date
on which they were granted. The implementation of the resulting contract (being
the payment of the purchase price against delivery) takes place in three phases
which may not be effected before the third, fourth and fifth anniversaries,
respectively, of the grant date. The Trustees may, however, in their discretion
allow earlier implementation.
Accordingly, unless the Trustees permit otherwise, Scheme Shares are only
transferred to employees in three equal tranches on the third, fourth and fifth
anniversaries of the date of the offer or grant of the option, as the case may
be.
The directors of the Issuer may amend the provisions of the Share Scheme;
however, any amendments which would adversely affect an employee's rights under
any offers which have been made or options which have been granted, would
require the consent of the affected employee.
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CERTAIN TRANSACTIONS
Channel Distribution Arrangements
Pursuant to channel distribution agreements (the "M-Net Channel
Distribution Agreements") between MultiChoice Africa and M-Net Ltd., the
Company has the right to distribute by analog and digital distribution systems,
and to license the reception by terrestrial analog and digital satellite
distribution systems of, the M-Net channels. M-Net Ltd. provides the M-Net and
Movie Magic channels and has the exclusive rights to the South African and
Sub-Saharan pay-television broadcast of movies from major movie studios,
including Disney, Warner Brothers, Columbia Tristar/Sony, Fox, MCA/Universal,
Paramount, MGM and DreamWorks. The M-Net Channel Distribution Agreements expire
in 2005 (digital) and 2002 (analog). Pursuant to the M-Net Channel Distribution
Agreements, MultiChoice Africa pays M-Net Ltd. fees based on subscriber
numbers. During the fiscal year ended March 31, 1998, these amounts totaled
approximately ZAR 500 million ($ ) .
The Company, through the M-Net Channel Distribution Agreements, also has
the right to distribute the sports channels which are produced by SSIH. SSIH
has obtained the exclusive rights to broadcast the South African cricket and
rugby leagues along with major international cricket and rugby events, two of
the most popular sports in South Africa. Pursuant to the M-Net Channel
Distribution Agreements, MultiChoice Africa pays SSIH fees based on subscriber
numbers. During the fiscal year ended March 31, 1998 these amounts totaled
approximately ZAR 200 million ($ ) .
Transmission Arrangements
The Company, through certain of its subsidiaries and joint ventures, has
various arrangements (the "Orbicom Arrangements") with Orbicom, pursuant to
which MIH Limited's subsidiaries receive certain rights and services, including
transponder leasing (C-band and Ku-band capacity), terrestrial and satellite
signal distribution, maintenance of transmitter networks and backhaul and
uplink services. The Orbicom Arrangements expire at various times. Pursuant to
the Orbicom Arrangements, the Company pays Orbicom fixed monthly fees for
leasing arrangements and variable fees for maintenance services. During the
fiscal year ended March 31, 1998, these amounts totaled approximately $23.7
million.
The M-Net Channel Distribution Agreements and the Orbicom Arrangements
were negotiated on an arms-length basis and, the Company believes, on terms no
less favorable than the Company could have received from independent third
parties.
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SECURITY OWNERSHIP
The table below sets forth, after giving effect to the Offerings, certain
information with respect to the beneficial ownership of each class of voting
securities of the Issuer by (i) each person who is known by the Company to be
the beneficial owner of more than 5% of any class or series of voting
securities of the Issuer and (ii) all directors and executive officers as a
group. See "Risk Factors--Control by Principal Shareholder".
<TABLE>
<CAPTION>
Identity of
Person or Group Class A Ordinary Shares Class B Ordinary Shares
- --------------------------------------------------- ----------------------------- ----------------------------
Number Percent of Class Number Percent of Class
-------- ------------------ -------- -----------------
<S> <C> <C> <C> <C>
MIH (BVI) Limited ................................. 0 0% 100%
Johnnic (IOM) Limited ............................. 0 0
SuperSport International Holdings Limited ......... 0 0
Directors and officers as a group ................. 0 0 0 0
</TABLE>
64
<PAGE>
DESCRIPTION OF CAPITAL STOCK
General
The following summary of certain provisions of the Issuer's capital stock
does not purport to be complete and is subject to, and qualified in its
entirety by, the provisions of the Memorandum and Articles, which are included
as exhibits to the Registration Statement of which this Prospectus is a part,
and by the provisions of applicable British Virgin Islands law.
The Memorandum and Articles authorize the issuance of up to (i)
Class A Ordinary Shares, (ii) Class B Ordinary Shares and (iii)
shares of Preference Shares (the "Preferred Stock" and, together with the Class
A and Class B Ordinary Shares, the "Capital Stock").
Application has been made to list the Class A Ordinary Shares offered
herewith on the Nasdaq and on the Amsterdam Stock Exchange under the symbol
"MIHL". The transfer agent and registrar for the Class A Ordinary Shares is
First Chicago Trust Company of New York, and the paying agent in the
Netherlands is MeesPierson N.V.
The Issuer intends to apply to The Depository Trust Company ("DTC"),
Euroclear and Cedel Bank S.A. ("Cedel") for acceptance of the Class A Ordinary
Shares in their respective book-entry settlement systems. Initial settlement of
the Class A Ordinary Shares will take place on the closing date through DTC,
Euroclear and Cedel in accordance with their respective customary settlement
procedures for equity securities. Each person owning a beneficial interest in
Class A Ordinary Shares held through DTC, Euroclear or Cedel, as the case may
be, must rely on the procedures thereof and on institutions that have accounts
therewith to exercise any rights of a holder of Class A Ordinary Shares.
Persons wishing to obtain certificates of their Class A Ordinary Shares must
make arrangements with DTC, Euroclear or Cedel, respectively.
MIH Limited was incorporated on July 26, 1991 in the British Virgin
Islands under IBC No. 47572. Its founding statutes do not prescribe any time
period for its existence.
Trading through ASAS
Trading in Class A Ordinary Shares on the Amsterdam Stock Exchange will
take place through the Amsterdam Security Account System ("ASAS"), developed to
enable the listing on the Amsterdam Stock Exchange of registered shares of
non-Dutch companies. Under ASAS, the owner of Class A Ordinary Shares is
Nominee Amsterdam Stock Exchange N.V. ("Nominee"), a wholly-owned subsidiary of
the Amsterdam Stock Exchange, which acts exclusively as a depositary company.
Nominee maintains accounts on behalf of ASAS participants. The number of Class
A Ordinary Shares that each participant is entitled to is booked to the
participant's account, but Nominee will only credit the accounts of ASAS
participants when the Class A Ordinary Shares are deposited in its name or on
its behalf with a custodian. ASAS participants have a claim against Nominee for
delivery of Class A Ordinary Shares credited to their account. Class A Ordinary
Shares to which an investor is entitled are credited to that investor's account
with an ASAS participant, and that investor will have a claim for delivery
against the participant. Transfers of Class A Ordinary Shares are effected
through book-entries.
Payments by the Issuer in respect of Class A Ordinary Shares in ASAS are
made through that system. Shareholder notices are not sent directly to
investors holding Class A Ordinary Shares through ASAS. Instead, notices will
be published in the Daily Official List (Officiele Prijscourant) of the
Amsterdam Stock Exchange and in at least one Netherlands newspaper, indicating,
when applicable, where shareholders can obtain copies of any documents referred
to in the notice.
The above is only a summary of ASAS. Investors should consult their
professional advisors if they require more information or if they have any
questions about ASAS.
Class A Ordinary Shares and Class B Ordinary Shares
Voting. The holders of the Class A Ordinary Shares and the Class B
Ordinary Shares (collectively the "Ordinary Shares") will generally be entitled
to vote as a single class on all matters upon which holders of Ordinary Shares
have a right to vote, subject to the requirements of any applicable laws. Each
Class A Ordinary Share entitles its holder to one vote, and each Class B
Ordinary Share entitles its holder to three votes. Unless otherwise required by
law, and so long as their rights would not be adversely affected, the holders
of the Class A Ordinary Shares and the Class B Ordinary Shares will not be
entitled to vote on any amendment to the Memorandum and Articles that relates
solely to the terms of one or more outstanding series of Preferred Stock.
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<PAGE>
Dividends and Other Distributions. The holders of the Class A Ordinary
Shares and the Class B Ordinary Shares will be entitled to equal dividends per
share when, as and if declared by the Board of Directors, except that all
dividends payable in Ordinary Shares will be paid in the form of Class A
Ordinary Shares to holders of Class A Ordinary Shares and in the form of Class
B Ordinary Shares to holders of Class B Ordinary Shares. Neither the Class A
Ordinary Shares nor the Class B Ordinary Shares may be split, divided or
combined unless the other class is proportionally split, divided or combined.
According to the Articles, all dividends that remain unclaimed for a
period of three years after their declaration may be forfeited by the Board of
Directors for the benefit of the Company.
In the event of a liquidation or winding up of the Issuer, the holders of
the Class A Ordinary Shares and the Class B Ordinary Shares will be treated
equally on a per share basis and will be entitled to receive all of the
remaining assets of the Issuer following distribution of the preferential
and/or other amounts to be distributed to the holders of Preferred Stock.
Issuance of Class B Ordinary Shares, Options, Rights or Warrants. Subject
to certain provisions regarding dividends and other distributions described
above, the Issuer will not be entitled to issue additional shares of Class B
Ordinary Shares or issue options, rights or warrants to subscribe for
additional shares of Class B Ordinary Shares, except that the Issuer may make a
pro rata offer to all holders of Ordinary Shares of rights to purchase
additional shares of the class of Ordinary Shares held by them. The Class A
Ordinary Shares and the Class B Ordinary Shares will be treated equally with
respect to any offer by the Issuer to holders of Ordinary Shares of options,
rights or warrants to subscribe for any other Capital Stock of the Issuer.
Merger. In the event of a merger, the holders of the Class A Ordinary
Shares and the Class B Ordinary Shares will be entitled to receive the same per
share consideration, if any, except that if such consideration includes voting
securities (or the right to acquire voting securities or securities
exchangeable for or convertible into voting securities), the Issuer may (but is
not required to) provide for the holders of Class B Ordinary Shares to receive
voting securities (or rights to acquire voting securities) entitling them to
three times the number of votes per share as the voting securities (or rights
to acquire voting securities) being received by holders of the Class A Ordinary
Shares.
Conversion of Class B Ordinary Shares. Each Class B Ordinary Share will be
convertible at any time, at the option of the holder thereof, into a Class A
Ordinary Share on a share-for-share basis. Each Class B Ordinary Share shall
automatically convert into a Class A Ordinary Share on a share-for-share basis
(i) upon transfer of a Class B Ordinary Share to a person or entity which is
not an Initial Holder or a Permitted Transferee (as defined below); (ii) on the
date on which the number of shares of Class B Ordinary Shares then outstanding
is less than 10% of the then outstanding Ordinary Shares (without regard to
voting rights); (iii) at any time when the Board of Directors and the holders
of a majority of the outstanding Class B Ordinary Shares approve the conversion
of all of the Class B Ordinary Shares into Class A Ordinary Shares; and (iv) if
the Board of Directors, in its sole discretion, elects to effect a conversion
after a determination that there has been a material adverse change in the
liquidity, marketability or market value of the Class A Ordinary Shares,
considered in the aggregate, due to (x) the exclusion of the Class A Ordinary
Shares from trading on a national securities exchange or the exclusion of the
Class A Ordinary Shares from quotation on the Nasdaq or any other similar
market quotation system then in use; or (y) requirements under any applicable
law, in each of cases (x) and (y), as a result of the existence of the Class B
Ordinary Shares.
In the event of a transaction where the Class A Ordinary Shares are
converted into or exchanged for one or more other securities, cash or other
property (a "Class A Conversion Event"), a holder of Class B Ordinary Shares
thereafter will be entitled to receive, upon the conversion of such Class B
Ordinary Shares, the amount of such securities, cash and other property that
such holder would have received if the conversion of such Class B Ordinary
Shares had occurred immediately prior to the record date or effective date, as
the case may be, of the Class A Conversion Event.
"Affiliate" means, in relation to any specified person or entity, any
other person or entity which directly or indirectly controls, is controlled by
or is under common control with, such specified person or entity.
"Initial Holders" means the original beneficial owners of the Class B
Ordinary Shares.
"Permitted Transferee" means any Affiliate of an Initial Holder.
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<PAGE>
Preemptive Rights. The holders of Ordinary Shares will not have any
preemptive rights with respect to any outstanding or newly issued capital stock
of the Issuer.
Preferred Stock
Pursuant to the Memorandum and Articles, the Issuer may issue shares of
Preferred Stock in one or more series.
The Board of Directors has the authority, without any vote or action by
the shareholders, to create one or more series of Preferred Stock up to the
limit of the Issuer's authorized but unissued shares of Preferred Stock and to
fix the number of shares constituting such series and the designation of such
series, the voting powers (if any) of the shares of such series and the
relative, participating, optional or other rights (if any), and any
qualifications, preferences, limitations or restrictions thereof, including,
without limitation, the dividend rate (and whether dividends are cumulative),
conversion rights, rights and terms of redemption (including sinking fund
provisions), and redemption price and liquidation preferences, and to increase
or decrease the number of shares of any series subsequent to the issue of
shares of that series, but not below the number of shares of such series then
outstanding. Upon the completion of the Offerings, there will be no shares of
Preferred Stock outstanding. See "--Certain Anti-Takeover Matters--Blank Check
Preferred Stock".
Limitation of Liability
The Articles provide that, to the fullest extent permitted by British
Virgin Islands law or any other applicable laws, directors of the Issuer will
not be personally liable to the Issuer or its shareholders for any acts or
omissions in the performance of their duties. Such limitation of liability does
not affect the availability of equitable remedies such as injunctive relief or
rescission. These provisions will not limit the liability of directors under
United States federal securities laws.
Certain Anti-Takeover Matters
Memorandum and Articles Provisions. The Memorandum and Articles include a
number of provisions that may have the effect of encouraging persons
considering unsolicited tender offers or other unilateral takeover proposals to
negotiate with the Board of Directors rather than pursue non-negotiated
takeover attempts. These provisions include a dual class voting stock, a
classified Board of Directors, the inability of shareholders to act by written
consent, the inability of the shareholders to call a special meeting of the
shareholders, an advance notice requirement for director nominations and other
actions to be taken at annual meetings of shareholders, the requirements for
approval by 662/3% of the shareholder votes to amend certain provisions of the
Memorandum and Articles, removal of a director only for cause and the
availability of authorized but unissued blank check Preferred Stock.
Dual Class Voting Stock. Because the Class B Ordinary Shares are entitled
to three votes per share and Class A Ordinary Shares are entitled to one vote
per share, the Class B Ordinary Shares represent % of the voting power of all
Ordinary Shares even though they represent % of the economic interests
thereof. Since MIH Holdings, though MIH (BVI) Limited, owns all of the Class B
Ordinary Shares, it currently has effective control over any proposals to
acquire the Issuer, rendering futile any attempts to pursue unsolicited tender
offers or takeover attempts without negotiation with MIH Holdings.
Classified Board of Directors. The Articles establish a classified Board
of Directors. The Board of Directors is divided into three classes of
approximately equal size with terms expiring in 2000 (Class I), 2001 (Class II)
and 2002 (Class III). Thereafter, subject to the right of holders of any series
of Preferred Stock to elect directors, shareholders will elect one class
constituting approximately one-third of the Board for a three-year term at each
annual meeting of shareholders. See "Management." As a result, at least two
annual meetings of shareholders will be required for the shareholders to change
a majority of the Board of Directors. The classification of directors will
effectively make it more difficult to change the composition of the Board of
Directors.
No Shareholder Action by Written Consent; Special Meetings Callable Only
by Board. The Articles prohibit shareholders from taking action by written
consent in lieu of an annual or special meeting, and, thus, shareholders may
take action only at an annual or special meeting called in accordance with the
Articles. The Articles provide that special meetings of shareholders may only
be called by the direction of the Board of Directors pursuant to a resolution
adopted by the Board of Directors or by the chief executive officer of the
Company. These provisions could have the effect of delaying consideration of a
shareholder proposal until the next annual meeting. The
67
<PAGE>
provisions would also prevent the holders of a majority of the voting power of
the Ordinary Shares of the Issuer entitled to vote from unilaterally using the
written consent procedure to take shareholder action.
Advance Notice Requirement. The Articles set forth advance notice
procedures with regard to shareholder proposals relating to the nomination of
candidates for election as directors or new business to be presented at
meetings of shareholders. These procedures provide that notice of such
shareholder proposals must be timely given in writing to the Secretary of the
Issuer prior to the meeting at which the action is to be taken. Generally, to
be timely, notice must be received at the principal executive offices of the
Issuer not less than 30 days nor more than 60 days prior to the meeting. The
advance notice requirement does not give the Board of Directors any power to
approve or disapprove shareholder director nominations or proposals but may
have the effect of precluding the consideration of certain business at a
meeting if the proper notice procedures are not followed.
Amendment of Memorandum and Articles. The Memorandum requires the
affirmative vote of at least 662/3% of the voting power of all outstanding
shares of Capital Stock entitled to vote to amend or repeal certain provisions
of the Memorandum and Articles, including those described in this section under
"Certain Anti-Takeover Matters", or to approve any merger of the Issuer which
would have the effect of making changes in the Memorandum or Articles which
would have required such affirmative vote if effected directly as an amendment.
This requirement will render more difficult the dilution of the anti-takeover
effects of the Memorandum and Articles.
Removal of Directors Only for Cause. The Articles permit shareholders to
remove directors only for cause and only by the affirmative vote of the holders
of a majority of the voting power of the Ordinary Shares. This provision may
restrict the ability of a third party to remove incumbent directors and
simultaneously gain control of the Board of Directors by filling the vacancies
created by removal with its own nominees.
Blank Check Preferred Stock. The Memorandum provides for authorized shares
of Preferred Stock, none of which has been issued. The existence of authorized
but unissued Preferred Stock may enable the Board of Directors to render more
difficult or discourage an attempt to obtain control of the Issuer by means of
a merger, tender offer, proxy contest or otherwise. For example, if in the due
exercise of its fiduciary obligations, the Board of Directors were to determine
that a takeover proposal is not in the Issuer's best interests, the Board of
Directors could cause shares of Preferred Stock to be issued without
shareholder approval in one or more private offerings or other transactions
that might dilute the voting or other rights of the proposed acquirer or
insurgent shareholder or shareholder group. In this regard, the Memorandum
grants the Board of Directors broad power to establish the rights and
preferences of authorized and unissued Preferred Stock. The issuance of shares
of Preferred Stock pursuant to the Board of Directors' authority described
above could decrease the amount of earnings and assets available for
distribution to holders of Ordinary Shares and adversely affect the enjoyment
of rights of such holders, including voting rights in the event a particular
series of Preferred Stock is given a disproportionately large number of votes
per share, and may have the effect of delaying, deferring or preventing a
change in control of the Issuer that may be favored by certain shareholders.
Authorized and Issued Share Capital
The following table sets forth historical information about the Issuer's
authorized and issued share capital. Significant changes (including the
division of Ordinary Shares into Class A and Class B Ordinary Shares) were made
to the share capital of the Company between March 31, 1998 and the date of this
Prospectus.
<TABLE>
<CAPTION>
Mar. 31, Mar. 31, Mar. 31,
1998 1997 1996
----------------------- ----------------------- ------------------------
Authorized Issued Authorized Issued Authorized Issued
------------ -------- ------------ -------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Non-Voting Ordinary Shares
$1.00 par value 10 10 10 10 10 10
Voting Ordinary Shares
$1.00 par value 49,990 22,789 49,990 22,789 49,990 22,789
</TABLE>
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offerings, the Issuer will have Class A
Ordinary Shares outstanding ( Class A Ordinary Shares if the Underwriters'
over-allotment options are exercised in full) and Class B Ordinary Shares
outstanding. Of these shares, the Class A Ordinary Shares sold by the
Issuer in the Offerings ( Class A Ordinary Shares if the Underwriters'
over-allotment options are exercised in full) will be freely tradable without
restriction or further registration under the Securities Act, unless held by an
"affiliate" of the Issuer (as that term is defined under the Securities Act and
the regulations promulgated thereunder). The remaining Class A Ordinary
Shares outstanding (the "Unregistered Shares") were issued or sold without
registration under the Securities Act in reliance on Regulation S and may not
be resold except in compliance with the registration requirements of the
Securities Act or pursuant to an exemption therefrom, including the exemptions
provided by Regulation S and Rule 144.
Unregistered Shares held by non-affiliates of the Issuer ( shares)
generally can be resold in the United States or to U.S. persons without
registration under the Securities Act at any time, subject only to the laws of
any other applicable jurisdictions. Unregistered Shares held by affiliates of
the Issuer ( shares) generally can be resold in the United States or to
U.S. persons beginning 90 days after the date of this prospectus without
registration under the Securities Act, subject only to the volume and manner of
sale requirements of Rule 144 and the laws of any other applicable
jurisdictions.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) is entitled to sell within any three-month period
a number of shares that does not exceed the greater of (i) 1% of the then
outstanding Class A Ordinary Shares or (ii) the average weekly trading volume
of the outstanding Class A Ordinary Shares during the four calendar weeks
preceding such sale.
Except for the issuance by the Issuer of options under the Stock Option
Plan, the Issuer and its directors, executive officers and existing
shareholders have agreed not to, directly or indirectly, (i) sell, grant any
option to purchase or otherwise transfer or dispose of any Ordinary Shares or
securities convertible into or exchangeable or exercisable for Ordinary Shares
or file a registration statement under the Securities Act with respect to the
same or (ii) enter into any swap or other agreement or transaction that
transfers, in whole or in part, the economic consequence of ownership of the
Ordinary Shares, without the prior written consent of Merrill Lynch for a
period of 180 days after the date of this prospectus.
In addition, MIH (BVI) Limited, SSIH and Johnnic, constituting all of the
shareholders of the Issuer that individually hold more than 5% of the Ordinary
Shares outstanding, have agreed (in accordance with the rules for admission to
listing on the Amsterdam Stock Exchange of issuers with less than three
financial years' net profit) that they will not, for a maximum period of three
years after the date of such admission, dispose of Ordinary Shares that total,
in the aggregate, more than 50% (as long as not more than one of the financial
years of the Issuer has closed with a net profit) or more than 75% (if and when
two financial years of the Issues have closed with a net profit) of the number
of Ordinary Shares currently outstanding for a maximum period of three years
after the date of admission of the Ordinary Shares to listing on the Amsterdam
Stock Exchange, except (i) to each other or to professional investors, provided
they agree to be bound by the same restrictions on the disposal of the Ordinary
Shares being transferred as the transferor, and (ii) on certain conditions, by
a registered public offering occurring at least one year after the date of
admission of the Ordinary Shares to listing on the Amsterdam Stock Exchange.
The directors of the Issuer (to whom the above rules would apply if they held
shares in the Issuer as of the date of this prospectus) have not entered into
similar undertakings as described above, since none of them, directly or
indirectly, holds or has any ownership interest in or control over the disposal
of Ordinary Shares currently outstanding.
Options to purchase Class A Ordinary Shares are outstanding under the
Share Scheme, of which are immediately exercisable. An additional
shares will remain available for future option grants under the Share Scheme.
The Company intends to file a registration statement under the Securities Act
after consummation of the Offerings to register for resale under the Securities
Act all of the Class A Ordinary Shares issued or reserved for issuance
under the Share Scheme. Such registration statement will become effective
automatically upon filing. Shares issued under the Share Scheme after the
registration statement is filed may thereafter be sold in the open market,
subject, in the case of the various holders, to the Rule 144 volume limitations
or prospectus delivery requirements applicable to affiliates and any transfer
restrictions imposed on the date of grant or otherwise.
Prior to the Offerings, there has been no public market for the Class A
Ordinary Shares. No predictions can be made of the effect, if any, that future
sales of Ordinary Shares, options to acquire Ordinary Shares or the
availability of shares for future sale will have on the market price prevailing
from time to time. Sales of substantial amounts of Ordinary Shares in the
public market, or the perception that such sales may occur, could have a
material adverse effect on the market price of the Class A Ordinary Shares. See
"Risk Factors--Shares Eligible for Future Sale", "--Immediate and Substantial
Dilution" and "--No Prior Public Market; Possible Volatility of Stock Price".
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<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary discusses the material U.S. federal income tax
consequences to a shareholder of owning and disposing of Ordinary Shares. This
discussion is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury regulations promulgated thereunder, administrative rulings
and judicial decisions currently in effect, all of which are subject to change,
possibly with retroactive effect. The discussion assumes that shareholders hold
their Ordinary Shares as capital assets within the meaning of Section 1221 of
the Code. Further, the discussion does not address all aspects of U.S. federal
income taxation that may be relevant to a particular shareholder in light of
his or her personal investment circumstances or to shareholders subject to
special treatment under U.S. federal income tax laws such as insurance
companies, tax-exempt organizations, dealers in securities or foreign currency,
banks, thrifts, persons that hold their Ordinary Shares as part of a straddle,
a hedge against currency risk, a constructive sale or conversion transaction or
other integrated investment, persons that have a functional currency other than
the U.S. dollar, investors in pass-through entities, shareholders who acquired
their Ordinary Shares through the exercise of options or otherwise as
compensation or through a tax-qualified retirement plan, holders of options and
performance share units granted under any MIH Limited benefit plan or persons
that own, directly or indirectly, at least 10% of the total combined voting
power of MIH Limited. Furthermore, this discussion does not consider the
potential effects of any state, local or foreign tax laws.
MIH Limited has not requested a ruling from the Internal Revenue Service
(the "IRS") with respect to any of the U.S. federal income tax consequences of
owning and disposing of Ordinary Shares and, as a result, there can be no
assurance that the IRS will not disagree with or challenge any of the
conclusions set forth herein.
For purposes of this discussion: (a) "U.S. Holder" means (i) a citizen or
resident of the United States, (ii) a corporation or other entity taxable as a
corporation created or organized under the laws of the United States or any
political subdivision thereof or therein, (iii) an estate the income of which
is includible in gross income for U.S. federal income tax purposes regardless
of its source, (iv) a trust if a court within the U.S. is able to exercise
primary supervision over the trust's administration and one or more U.S.
persons have the authority to control all its substantial decisions or (v) a
person whose worldwide income and gain is otherwise subject to U.S. federal
income taxation on a net income basis, and (b) "Non-U.S. Holder" means any
person that (i) is not a U.S. Holder, (ii) is not engaged in the active conduct
of a trade or business within the United States, and (iii) is not present in
the United States for 183 days or more during any taxable year.
U.S. Holders of Ordinary Shares
Distributions. Distributions by MIH Limited to a U.S. Holder of Ordinary
Shares will be taxable to such U.S. Holder as ordinary dividend income for U.S.
federal income tax purposes to the extent of MIH Limited's current and
accumulated earnings and profits, without reduction for any British Virgin
Islands income tax, if any, withheld from such distributions. Any British
Virgin Islands income tax so withheld may be credited, subject to certain
limitations, against the U.S. Holder's U.S. federal income tax liability or, if
the U.S. Holder so elects, may be deducted in computing the U.S. Holder's
taxable income for U.S. federal income tax purposes. Distributions in excess of
MIH Limited's current and accumulated earnings and profits will be treated as a
return of capital to the extent of the U.S. Holder's adjusted tax basis in his
or her Ordinary Shares, and thereafter as gain from the sale or exchange of
Ordinary Shares. Generally, dividends paid on shares of a foreign corporation
will not be eligible for the dividends received deduction provided to
corporations receiving dividends from certain U.S. corporations.
Dispositions. Generally, a U.S. Holder will recognize gain or loss upon
the sale or other taxable disposition of Ordinary Shares equal to the
difference, if any, between (i) the amount of cash plus the fair market value
of any property received, and (ii) the shareholder's adjusted tax basis in his
or her Ordinary Shares. Such gain or loss will constitute capital gain or loss
and will constitute long term capital gain or loss if the holder's holding
period is greater than 12 months as of the date of the sale or other taxable
disposition. For non-corporate holders, any such long-term capital gain
generally will be subject to tax at a maximum rate of 20%. The deductibility of
capital losses is subject to limitations.
Other Considerations. MIH Limited believes that it has not been and does
not expect to become a "passive foreign investment company" (a "PFIC"), a
"foreign personal holding company" (a "FPHC") or a "controlled foreign
corporation" (a "CFC").
If more than 50% of the voting power or value of MIH Limited stock were
owned (actually or constructively) by U.S. Holders who each owned (actually or
constructively) 10% or more of the voting power of MIH Limited
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stock ("10% Shareholders"), then MIH Limited would become a CFC and each 10%
Shareholder would be required to include in its taxable income as a
constructive dividend an amount equal to its share of certain undistributed
income of MIH Limited. If more than 50% of the voting power or value of MIH
Limited stock were owned (actually or constructively) by five or fewer
individuals who are citizens or residents of the United States and 60% or more
of MIH Limited's gross income (regardless of source) consisted of certain
interest, dividend or other enumerated types of income, MIH Limited would be a
FPHC. If MIH Limited were a FPHC, then each U.S. Holder (regardless of the
amount of MIH Limited stock owned by such U.S. Holder) would be required to
include in its taxable income as a constructive dividend its pro rata share of
MIH Limited's undistributed income of specified types.
If 75% or more of MIH Limited's annual gross income has ever consisted of,
or ever consists of, "passive" income or if 50% or more of the average value of
MIH Limited's assets in any year has ever consisted of, or ever consists of,
assets that produce, or are held for the production of, such "passive" income,
then MIH Limited would be or would become a PFIC. For these purposes, MIH
Limited will be treated as owning an allocable portion of the assets of, and
earning an allocable portion of the income of, any company of which MIH Limited
owns 25% or more of the stock (by value). MIH Limited believes that it has not
been and does not expect to become a PFIC.
If MIH Limited were to be or become a PFIC, then a U.S. Holder would be
required to pay an interest charge together with tax calculated at maximum tax
rates on certain "excess distributions" (defined to include gain on the sale of
stock) unless such U.S. Holder made an election either to (i) include in his or
her taxable income certain undistributed amounts of MIH Limited's income or
(ii) mark to market his or her Ordinary Shares at the end of each taxable year
as set forth in Section 1296 of the Code.
U.S. Holders of Ordinary Shares are urged to consult their own tax
advisers regarding the potential application of the rules described above to
their particular tax situations.
Non-U.S. Holders of Ordinary Shares
Distributions. Distributions by MIH Limited to a Non-U.S. Holder of
Ordinary Shares generally will not be subject to U.S. federal income tax,
including withholding tax, unless 25% or more of the gross income of MIH
Limited (from all sources for the three-year period ending with the taxable
year preceding the declaration of the dividend (the "Testing Period")) was
effectively connected with the conduct of a trade or business in the United
States by MIH Limited. MIH Limited does not anticipate that 25% or more of its
gross income will be effectively connected with its conduct of a trade or
business in the United States, and accordingly, MIH Limited anticipates that
dividends paid to Non-U.S. Holders will not be subject to withholding of U.S.
federal income tax.
Dispositions. Gain realized on a Non-U.S. Holder's sale or other taxable
disposition of Ordinary Shares generally will not be subject to U.S. federal
income tax, including withholding tax, unless (i) the gain is effectively
connected with such Non-U.S. Holder's conduct of a trade or business within the
United States, or (ii) in the case of a Non-U.S. Holder that is an individual,
the shareholder has been present in the United States for 183 days or more
during the taxable year of the sale or other taxable disposition and certain
other conditions are satisfied.
71
<PAGE>
[US] UNDERWRITING
Subject to the terms and conditions set forth in a U.S. purchase agreement
(the "U.S. Purchase Agreement") among the Issuer and each of the underwriters
named below (the "U.S. Underwriters") and concurrently with the sale of Class A
Ordinary Shares to the International Managers (as defined below), the Issuer
has agreed to sell to each of the U.S. Underwriters, and each of the U.S.
Underwriters for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") and Donaldson, Lufkin & Jenrette Securities Corporation are
acting as representatives (the "U.S. Representatives"), has severally agreed to
purchase from the Issuer, the number of Class A Ordinary Shares set forth
opposite its name below.
<TABLE>
<CAPTION>
Number
of Class A
U.S. Underwriters Ordinary Shares
- ------------------------------------------------------------- ----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated .........................................
Donaldson, Lufkin & Jenrette Securities Corporation .........
-----------
Total ......................................................
===========
</TABLE>
The Issuer has also entered into an international purchase agreement (the
"International Purchase Agreement" and, together with the U.S. Purchase
Agreement, the "Purchase Agreements") with certain underwriters outside the
United States and Canada (the "International Managers" and, together with the
U.S. Underwriters, the "Underwriters") for whom Merrill Lynch International,
Donaldson, Lufkin & Jenrette International and MeesPierson N.V. are acting as
representatives (the "International Representatives," and together with the
U.S. Representatives, the "Representatives"). Subject to the terms and
conditions set forth in the International Purchase Agreement, and concurrently
with the sale of Class A Ordinary Shares to the U.S. Underwriters pursuant
to the U.S. Purchase Agreement, the Issuer has agreed to sell to the
International Managers, and the International Managers severally have agreed to
purchase, an aggregate of Class A Ordinary Shares. The public offering
price per Class A Ordinary Share and the underwriting discount per Class A
Ordinary Share are identical under the U.S. Purchase Agreement and the
International Purchase Agreement.
In each Purchase Agreement, the several U.S. Underwriters and the several
International Managers, respectively have agreed, subject to the terms and
conditions set forth in such Purchase Agreement, to purchase all the Class A
Ordinary Shares offered in the U.S. Offering and the International Offering,
respectively, if any are purchased.
The Class A Ordinary Shares are offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the Underwriters and
certain other conditions. The Underwriters reserve the right to withdraw,
cancel or modify such offer and to reject orders in whole or in part. In the
event of default by an Underwriter, the Purchase Agreement provides that, in
certain circumstances, purchase commitments of the nondefaulting Underwriters
may be increased or the Purchase Agreement may be terminated. The sale of Class
A Ordinary Shares to the U.S. Underwriters is conditioned upon the sale of
shares of Class A Ordinary Shares to the International Managers, and vice
versa.
The U.S. Underwriters and the International Managers have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") that provides for the
coordination of their activities. Pursuant to the Intersyndicate Agreement, the
U.S. Underwriters and the International Managers are permitted to sell Class A
Ordinary Shares to each other for purposes of resale at the public offering
price set forth on the cover page of this Prospectus, less an amount not
greater than the selling concession. Under the terms of the Intersyndicate
Agreement, the U.S. Underwriters and any dealer to whom they sell Class A
Ordinary Shares will not offer to sell or sell Class A Ordinary Shares to
persons who are non-U.S. or non-Canadian persons or to persons they believe
intend to resell to persons who are non-U.S. or non-Canadian persons, and the
International Managers and any dealer to whom they sell Class A Ordinary Shares
will not offer to sell or sell Class A Ordinary Shares to U.S. persons or
Canadian persons or to persons they believe intend to resell to U.S. persons or
Canadian persons, except, in each case, for transactions pursuant to the
Intersyndicate Agreement. Any U.S. Underwriters and International Managers who
purchase from each other for the purpose of resale will be deemed an
"underwriter" under the Securities Act.
The U.S. Representatives have advised the Issuer that the U.S.
Underwriters propose initially to offer the Class A Ordinary Shares to the
public at the public offering price set forth on the cover page of this
Prospectus, and to certain dealers at such price less a concession not in
excess of $ per Class A Ordinary Share. The U.S.
72
<PAGE>
Underwriters may allow, and such dealers may reallow, a discount not in excess
of $ per Class A Ordinary Share on sales to certain other dealers. After the
Offerings, the public offering price, concession and discount may be changed.
The Issuer, its directors, executive officers and shareholders have
agreed, subject to certain exceptions, not to directly or indirectly (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant for
the sale of, or otherwise dispose of or transfer any Ordinary Shares or any
securities convertible into or exchangeable or exercisable for any Ordinary
Shares or request the filing of any registration statement under the Securities
Act, with respect to any of the foregoing or (ii) enter into any swap or any
other agreement or any transaction that transfers, in whole or in part,
directly or indirectly, the economic consequence of ownership of Ordinary
Shares, whether any such swap transaction is to be settled by delivery of the
Ordinary Shares or other securities, in cash or otherwise without the prior
written consent of Merrill Lynch, on behalf of the Underwriters, for a period
of 180 days after the date of this Prospectus.
The Issuer has granted an option to the U.S. Underwriters, exercisable for
30 days after the date of this Prospectus, to purchase up to an aggregate of
additional Class A Ordinary Shares at the public offering price set forth on
the cover page of this Prospectus, less the underwriting discount. The U.S.
Underwriters may exercise this option only to cover over-allotments, if any,
made on the sale of the Class A Ordinary Shares offered hereby. To the extent
that the U.S. Underwriters exercise this option, each U.S. Underwriter will be
obligated, subject to certain conditions, to purchase a number of additional
Class A Ordinary Shares proportionate to such U.S. Underwriter's initial amount
reflected in the foregoing table. The Issuer has also granted an option to the
International Managers, exercisable for 30 days after the date of this
Prospectus, to purchase up to an additional Class A Ordinary Shares to cover
over-allotments, if any, on terms similar to those granted to U.S.
Underwriters.
The Issuer has agreed to indemnify the several U.S. Underwriters and the
International Managers against certain liabilities, including liabilities under
the Securities Act or to contribute to payments the Underwriters may be
required to make in respect thereof.
Until the distribution of the Class A Ordinary Shares is completed, rules
of the Securities and Exchange Commission may limit the ability of the U.S.
Underwriters and certain selling group members to bid for and purchase the
Class A Ordinary Shares. As an exception to these rules, the Representatives
are permitted to engage in certain transactions that stabilize the price of the
Class A Ordinary Shares. Such transactions consist of bids or purchases for the
purpose of pegging, fixing or maintaining the price of the Class A Ordinary
Shares.
If the Underwriters create a short position in the Class A Ordinary Shares
in connection with the Offerings, (i.e., if they sell more Class A Ordinary
Shares than are set forth on the cover page of this Prospectus), the U.S.
Representatives may reduce that short position by purchasing Class A Ordinary
Shares in the open market. The U.S. Representatives may also elect to reduce
any short position by exercising all or part of the over-allotment option
described above.
The U.S. Representatives may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the U.S.
Representatives purchase Class A Ordinary Shares in the open market to reduce
the Underwriters' short position or to stabilize the price of the Class A
Ordinary Shares, they may reclaim the amount of the selling concession from the
Underwriters and selling group members who sold those shares as part of the
Offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security before the distribution is completed.
Neither the Issuer nor any of the Underwriters makes any representation or
prediction, however, as to the direction or magnitude of any effect that the
transactions described above may have on the price of the Class A Ordinary
Shares. In addition, neither the Issuer nor any of the Underwriters makes any
representation that the U.S. Representatives will engage in such transaction or
that such transactions, once commenced, will not be discontinued without
notice.
An application has been made to list the Class A Ordinary Shares on the
Nasdaq and the Amsterdam Stock Exchange under the symbol "MIHL".
73
<PAGE>
Certain of the Underwriters have been engaged from time to time, and may
in the future be engaged, to perform financial advisory and other investment
banking services to the Issuer and its affiliates. In connection with rendering
such services in the past, such Underwriters have received customary
compensation, including reimbursement of related expenses.
The Underwriters do not intend to confirm sales of Class A Ordinary Shares
offered hereby to any accounts over which they exercise discretionary
authority.
Prior to the Offerings, there has been no public market for the Class A
Ordinary Shares. The initial public offering price for the Class A Ordinary
Shares will be determined through negotiations between the Issuer and the
Representatives. Among the factors to be considered in determining the initial
public offering price, in addition to prevailing market conditions, are the
financial and operating history and condition of the Company, an assessment of
the Company's business and financial prospects, the Company's management, the
prospects for the industry in which the Company operates and the recent market
prices of securities of companies in industries similar to that of the Company.
The initial public offering price set forth on the cover page of this
Prospectus should not, however, be considered as an indication of the actual
value of the Class A Ordinary Shares. Such price is subject to change as a
result of market conditions and other factors. There can be no assurance that
an active trading market will develop for the Class A Ordinary Shares or that
the Class A Ordinary Shares will trade in the public market subsequent to the
Offerings made hereby at or above the initial public offering price.
74
<PAGE>
LEGAL MATTERS
The validity of the Class A Ordinary Shares offered hereby will be passed
upon by Harney Westwood & Riegels, the British Virgin Islands. Certain United
States legal matters will be passed upon for the Company by Cravath, Swaine &
Moore, New York, New York. Matters relating to Dutch tax law have been passed
upon for the Company by Loyens & Volkmaars, Amsterdam, the Netherlands. Certain
United States legal matters will be passed upon for the Underwriters by Cahill
Gordon & Reindel (a partnership including a professional corporation), New
York, New York.
INDEPENDENT ACCOUNTANTS
The Consolidated Financial Statements of the Company as of March 31, 1998
and 1997 and for each of the three years in the period ended March 31, 1998,
and the Combined Financial Statements of the Acquired MIH Businesses as of
March 31, 1997 and 1996 and for the years then ended appearing in this
Prospectus, have been audited by Coopers & Lybrand Inc., independent
accountants, as set forth in their report thereon appearing elsewhere herein.
With respect to the unaudited interim financial information as of
September 30, 1998 and for the six months ended September 30, 1998 and 1997,
contained herein, PricewaterhouseCoopers, Inc., independent accountants, have
reported that they have applied limited procedures in accordance with
professional standards for a review of such information. However, their
separate report included herein states that they did not audit and they do not
express an opinion on that interim financial information. Accordingly, the
degree of reliance on their report on such financial information should be
restricted in light of the limited nature of the review procedures applied. The
accountants are not subject to the liability provisions of Section 11 of the
Securities Act for their report on the unaudited interim financial information
because that report is not a "report" or a "part" of the registration statement
prepared or certified by the accountants within the meaning of Sections 7 and
11 of the Securities Act.
75
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
MIH Limited and Subsidiaries Unaudited Interim
Condensed Consolidated Financial Statements
Report of Independent Accountants ........................................ F-2
Condensed Consolidated Balance Sheets as of September 30, 1998
and March 31, 1998 ...................................................... F-3
Condensed Consolidated Statements of Operations for the periods ended
September 30, 1998 and 1997 ............................................. F-4
Condensed Consolidated Statements of Cash Flow for the periods ended
September 30, 1998 and 1997 ............................................. F-5
Notes to the Condensed Consolidated Financial Statements ................. F-6
MIH Limited and Subsidiaries
Consolidated Financial Statements
Report of Independent Accountants ........................................ F-11
Consolidated Balance Sheets as of March 31, 1998 and 1997 ................ F-12
Consolidated Statements of Operations for the years ended March 31, 1998,
1997 and 1996 ........................................................... F-13
Consolidated Statements of Cash Flow for the years ended March 31, 1998,
1997 and 1996 ........................................................... F-14
Consolidated Statements of Changes in Shareholders' Equity for the years
ended March 31, 1998, 1997 and 1996 ..................................... F-15
Notes to the Consolidated Financial Statements ........................... F-16
Acquired MIH Businesses (Predecessor to MIH Limited)
Combined Financial Statements
Report of Independent Accountants ........................................ F-43
Combined Balance Sheets as of March 31, 1997 and 1996 .................... F-44
Combined Statements of Operations for the years ended March 31,
1997 and 1996 ........................................................... F-45
Combined Statements of Cash Flow for the years ended March 31,
1997 and 1996 ........................................................... F-46
Combined Statements of Changes in Net Deficit for the years ended
March 31, 1997 and 1996 ................................................. F-47
Notes to the Combined Financial Statements ............................... F-48
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the directors and shareholders of
MIH Limited
We have performed a limited review of the accompanying condensed consolidated
balance sheet of MIH Limited and subsidiaries as of September 30, 1998 and the
related condensed consolidated statements of operations and cash flow for the
six-month periods ended September 30, 1998 and 1997. These financial statements
are the responsibility of MIH Limited's management.
We conducted our limited review in accordance with standards promulgated by the
South African Institute of Chartered Accountants, which are substantially the
same as those followed in the United States of America. A limited review
consists primarily of applying analytical review procedures to financial data
and making enquiries of persons responsible for accounting and financial
matters. It is substantially less in scope than an audit of financial
statements carried out in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we are not able to express
any audit opinion on these financial statements.
Based on our limited review, we are not aware of any material modifications
that should be made to the accompanying financial statements for them to be in
conformity with International Accounting Standards.
Johannesburg, Republic of South Africa PricewaterhouseCoopers, Inc.
November 30, 1998 Chartered Accountants (SA)
Registered Accountants and Auditors
F-2
<PAGE>
MIH Limited and Subsidiaries
Condensed Consolidated Balance Sheets
September 30, 1998 and March 31, 1998
(in thousands of US dollars)
<TABLE>
<CAPTION>
(Unaudited)
---------------
September 30, March 31,
1998 1998
--------------- -------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents ............................................... $ 87,473 $ 153,412
Accounts receivable, net ................................................ 44,925 36,999
Other receivables ....................................................... 36,569 29,444
Program and film rights ................................................. 52,578 22,543
Amounts owing by related parties ........................................ 12,024 14,784
Inventories, net ........................................................ 26,473 18,283
---------- ----------
Total current assets .................................................. 260,042 275,465
---------- ----------
Non-Current Assets
Tangible fixed assets, net .............................................. 97,947 114,248
Intangible assets, net .................................................. 194,298 163,611
Long-term investments ................................................... 84,760 77,020
Program and film rights ................................................. 63,756 15,711
---------- ----------
Total non-current assets .............................................. 440,761 370,590
---------- ----------
TOTAL ASSETS .......................................................... $ 700,803 $ 646,055
========== ==========
LIABILITIES
Current liabilities
Bank overdrafts ......................................................... $ 10,263 $ 16,399
Current portion of long-term debt ....................................... 51,173 42,800
Current portion of program and film rights .............................. 35,875 --
Accounts payable ........................................................ 50,516 73,291
Accrued expenses and other current liabilities .......................... 133,440 121,902
Amounts owing to related parties ........................................ -- 4,857
Provisions .............................................................. 18,439 50,563
---------- ----------
Total current liabilities ............................................. 299,706 309,812
---------- ----------
Non-Current Liabilities
Long-term debt .......................................................... 85,250 79,395
Program and film rights ................................................. 60,509 --
Deferred taxation ....................................................... -- 3,275
---------- ----------
Total non-current liabilities ......................................... 145,759 82,670
---------- ----------
TOTAL LIABILITIES ..................................................... 445,465 392,482
---------- ----------
Commitments and contingencies ............................................ -- --
---------- ----------
SHAREHOLDERS' EQUITY
Share capital
Authorized: 1998 and 1997: 10 registered redeemable non-voting
ordinary shares of $1 each and 49,990 ordinary shares of $1 each .......
Issued: 1998 and 1997: 10 registered redeemable non-voting ordinary
shares of $1 each and 22,789 ordinary shares of $1 each................. 23 23
Share premium ............................................................ 589,529 589,529
Accumulated loss ......................................................... (314,281) (313,547)
Foreign currency translation adjustment .................................. (19,933) (22,432)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY ............................................ 255,338 253,573
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............................ $ 700,803 $ 646,055
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
MIH Limited and Subsidiaries
Condensed Consolidated Statements of Operations
for the six-month periods ended September 30, 1998 and 1997
(in thousands of US dollars, except per share and share amounts)
<TABLE>
<CAPTION>
(Unaudited)
Six month period ended
September 30,
1998 1997
------------- ---------------
<S> <C> <C>
Net revenues ........................................... $ 286,269 $ 235,501
Operating expenses:
Cost of providing services ............................ (188,674) (147,254)
Selling, general and administrative ................... (77,924) (79,127)
Depreciation and amortization ......................... (24,976) (28,058)
---------- -----------
Total operating expenses ............................... (291,574) (257,214)
---------- -----------
Operating loss ......................................... (5,305) (18,938)
Financial results, net ................................ (8,771) (559)
Equity results in joint ventures ...................... (13,665) (2,936)
Equity results in associates .......................... (524) (1,268)
Profit on sale of joint venture ....................... 31,093 --
---------- -----------
Profit/(loss) before taxation ......................... 2,828 (23,701)
Income taxation ....................................... (3,562) (3,563)
---------- -----------
Profit/(loss) after taxation .......................... (734) (27,264)
Minority interest ..................................... -- 828
---------- -----------
Profit/(loss) from continuing operations .............. (734) (26,436)
Profit/(loss) from discontinued operations ............ -- (3,936)
---------- -----------
Net profit/(loss) .................................. $ (734) $ (30,372)
========== ===========
Per share amounts:
Profit/(loss) from continuing operations
Basic and diluted ..................................... $ (32.19) $ (1,159.52)
Net profit/(loss)
Basic and diluted ..................................... $ (32.19) $ (1,332.16)
Shares used to compute profit/(loss) per share ......... 22,799 22,799
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
<PAGE>
MIH Limited and Subsidiaries
Condensed Consolidated Statements of Cash Flow
for the six-month periods ended September 30, 1998 and 1997
(in thousands of US dollars)
<TABLE>
<CAPTION>
(Unaudited)
Six month period ended
September 30,
1998 1997
------------ -------------
<S> <C> <C>
Cash flows from operating activities
Operating loss ....................................................... $ (5,305) $ (18,938)
Adjustments for:
Depreciation and amortization ....................................... 24,976 28,058
Amortization of program and film rights ............................. 14,501 10,675
Taxation paid ....................................................... (4,607) (7,784)
Increase in receivables ............................................. (8,089) (2,889)
Payments for program and film rights ................................ (12,845) (18,328)
Net increase/(decrease) in amounts owing by related parties ......... 8,784 (9,387)
Decrease in amounts owing to related parties ........................ (3,192) --
Increase in inventories ............................................. (6,274) (8,436)
Decrease in payables ................................................ (34,925) (8,568)
Utilised in discontinued operations ................................. -- (3,936)
--------- ---------
Net cash used in operating activities (26,976) (39,533)
--------- ---------
Cash flows from investing activities
Purchase of tangible fixed assets .................................... (1,830) (10,153)
Proceeds on sale of tangible fixed assets ............................ 28 1,434
Proceeds on disposal of Canal+ shares ................................ -- 49,806
Acquisition of subsidiaries, net of cash acquired .................... -- (14,168)
Investment in OpenTV ................................................. (6,400) (1,758)
Investment in UBC .................................................... (62,164) (22,338)
Net increase in other investments .................................... (3,223) (15,005)
--------- ---------
Net cash used in investing activities .............................. (73,589) (12,182)
--------- ---------
Cash flows from financing activities
Finance income/(costs) ............................................... 1,120 (5,403)
Funds raised from outside shareholders ............................... -- 828
Proceeds on transfer of M-Net/SSIH shares ............................ 22,243 --
Increase in long-term debt ........................................... 20,339 72,362
Capital lease payments ............................................... (17,295) (6,707)
Bank overdrafts repaid ............................................... (7,854) (8,373)
--------- ---------
Net cash from financing activities ................................. 18,553 52,707
--------- ---------
Net (decrease)/increase in cash and cash equivalents ................. (82,012) 992
Cash and cash equivalents at beginning of the period ................. 153,412 60,773
Translation adjustment on cash and cash equivalents .................. 16,073 (3,349)
--------- ---------
Cash and cash equivalents at end of the period ....................... $ 87,473 $ 58,416
========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
<PAGE>
MIH Limited and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
1. Nature of operations
MIH Limited ("MIH") was incorporated on July 26, 1991 under the laws of
the British Virgin Islands. The principal activities of MIH and its operating
subsidiaries (collectively the "Company") are the provision of pay-television
and subscriber management services ("pay-television services") and the
development and sale of pay-television technology. These activities are
conducted through subsidiaries, joint ventures and investments primarily in
Africa, Greece, Cyprus, the Middle East, the Netherlands, Thailand and the
United States of America.
2. Basis of presentation
The condensed consolidated balance sheet of MIH as of September 30, 1998
and the condensed consolidated statements of operations and cash flow for the
six-months ended September 30, 1998 and 1997 are unaudited. For the purpose of
these interim consolidated financial statements, certain information and
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted.
The March 31, 1998 balance sheet was derived from audited financial statements,
but does not include all disclosures required by generally accepted accounting
principles. However, the Company believes that the disclosures are adequate to
make the information presented not misleading. These unaudited statements
should be read in conjunction with the audited consolidated financial
statements and notes thereto for the year ended March 31, 1998.
In the opinion of the management of MIH, all adjustments (consisting only
of normal recurring adjustments) necessary for fair presentation of the
financial statements have been included therein. The results of interim periods
are not necessarily indicative of the results for the entire year.
3. Significant acquisitions and divestitures
On April 4, 1998 the Company transferred 28 million of its shares in
Electronic Media Network Holdings Limited/ SuperSport International Holdings
Limited (M-Net/SSIH) into a trust (the "Trust"), with the objective to increase
share ownership in M-Net/SSIH amongst certain South Africans, for consideration
of $22.2 million. The Trust financed 90% of the consideration through bank
borrowings. Under certain circumstances, the Company may be required to assume
the obligation for the bank borrowings at maturity on April 14, 2001 and
reacquire ownership of the M-Net/SSIH shares. The shares of M-Net/SSIH sold
have been pledged as collateral for such obligations. Under the terms of the
sale agreement the purchasers are entitled to vote the shares and the Company
is entitled to receive any dividend until 2001.
The Company recorded a liability of approximately $20.0 million related to
the bank borrowings. The cash consideration for the share transfer which has
not been financed by bank borrowings is accounted for as an option premium. The
$20.0 million liability accretes interest until the redemption date (April 14,
2001) at an interest rate of 12.55%. The option premium is amortized to income
over three years and the Company continues to account for a 19.8% equity method
investment in M-Net/SSIH.
In June 1998, the Company increased its shareholding in International
Broadcasting Corporation Public Company Limited ("UBC") from 17.3% to 26.1% for
a purchase consideration of $62.1 million, paid in cash. The excess of the
consideration of the Company's share of the fair value of the net assets
acquired, amounting to $65.5 million, was allocated to goodwill, and is
amortized over its estimated useful life of 5 years. Since the increase of its
shareholding, the Company exercises significant influence over UBC and
therefore accounts for its investment in UBC using the equity method of
accounting.
4. Program and film rights
Program and film rights increased primarily due to the purchase of
basketball and soccer rights in Greece and Cyprus.
F-6
<PAGE>
MIH Limited and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
5. Inventories
<TABLE>
<CAPTION>
(Unaudited)
September 30, March 31,
1998 1998
(thousands) (thousands)
<S> <C> <C>
Decoders and associated components ............................... $ 35,495 $ 28,689
Less: Provision for slow moving and obsolete inventories ......... (9,022) (10,406)
-------- ---------
$ 26,473 $ 18,283
======== =========
</TABLE>
6. Profit on sale of joint venture
At March 31, 1997 the Company deferred recognition of approximately $73.3
million of the gain arising on the sale of NetHold to Canal+, representing the
estimated probable liability for warranties of decoder technology guarantees of
the number of subscribers and the potential reimbursement of programming costs.
During the year ended March 31, 1998 the Company paid approximately $38.0
million for guarantees of number of subscribers. As no further claims under the
warranties were made prior to June 30, 1998, the deadline for such claims, the
Company reversed the remaining provisions to profit on sale of joint venture
during the six months ended September 30, 1998.
7. Long-term debt
The increase in long-term debt is attributable to the financing of the
program and film rights purchases during the period.
8. Segment and geographic information
The Company has determined that its reportable segments are those that are
based on the Company's method of internal reporting, which disaggregates its
businesses by service/product and by geography. The Company's reportable
business segments are pay-television services and technology. The
pay-television business segment is conducted in Africa and the Middle East and
the Mediterranean. The technology business segment consists of Irdeto, based in
The Netherlands, and the Company's joint venture interest in OpenTV, based in
the United States. The Company's interests in OpenTV and the Middle East are
accounted for by the equity method and are, therefore, included in equity
results of joint ventures below.
Unaudited segment information for the six-month periods ended September
30, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
September 1998
(in thousands) Pay-television services Technology
Africa
& Mediter-
The Middle East ranean
<S> <C> <C> <C>
SALES
External sales .............................. $201,462 $ 61,419 $ 22,539
Inter-segment sales ......................... -- -- 8,754
-------- -------- --------
Total revenue ............................... $201,462 $ 61,419 $ 31,293
======== ======== ========
RESULTS
Operating (loss)/profit ..................... $ (2,791) $ (5,802) $ 4,810
Depreciation and amortization (b) ........... 14,327 8,647 2,002
Amortization of program and film rights ..... -- 14,501 --
Equity results in joint ventures ............ (701) -- (1,537)
OTHER INFORMATION
Segment assets .............................. $395,644 $ 93,253 $179,027
<CAPTION>
September 1998
(in thousands)
Segmental Reconciling Consolidated
Total Corporate items Total
<S> <C> <C> <C> <C>
SALES
External sales .............................. $285,420 $ 849 $ -- $ 286,269
Inter-segment sales ......................... 8,754 -- (8,754) --
-------- -------- ----------- ---------
Total revenue ............................... $294,174 $ 849 $ (8,754) $ 286,269
======== ======== =========== =========
RESULTS
Operating (loss)/profit ..................... $ (3,783) $ (1,522) $ -- $ (5,305)
Depreciation and amortization (b) ........... 24,976 -- -- 24,976
Amortization of program and film rights ..... 14,501 -- -- 14,501
Equity results in joint ventures ............ (2,238) -- (11,427)(c) (13,665)
OTHER INFORMATION
Segment assets .............................. $667,924 $758,468 $ (725,589)(a) $ 700,803
</TABLE>
F-7
<PAGE>
MIH Limited and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
8. Segment and geographic information --Continued
<TABLE>
<CAPTION>
September 1997
(in thousands) Pay-television services Technology
Africa
& Mediter-
The Middle East ranean
<S> <C> <C> <C>
SALES
External sales .............................. $185,824 $ 49,677 $ --
Inter-segment sales ......................... -- -- --
-------- -------- ---------
Total revenue ............................... $185,824 $ 49,677 $ --
======== ======== =========
RESULTS
Operating (loss) ............................ $ (9,000) $ (6,977) --
Depreciation and amortization (b) ........... 19,693 8,365 --
Amortization of program and film rights ..... -- 10,675 --
Equity results in joint ventures ............ (48) -- (2,888)
<CAPTION>
September 1997
(in thousands)
Segmental Reconciling Consolidated
Total Corporate items Total
<S> <C> <C> <C> <C>
SALES
External sales .............................. $ 235,501 $ -- $-- $ 235,501
Inter-segment sales ......................... -- -- -- --
--------- -------- --- ----------
Total revenue ............................... $ 235,501 $ -- $-- $ 235,501
========= ======== === ==========
RESULTS
Operating (loss) ............................ $ (15,977) $ (2,961) $-- $ (18,938)
Depreciation and amortization (b) ........... 28,058 -- -- 28,058
Amortization of program and film rights ..... 10,675 -- -- 10,675
Equity results in joint ventures ............ (2,936) -- -- $ (2,936)
</TABLE>
(a) Represents adjustments to the assets and liabilities for the segments
relating to intergroup loans which eliminated on consolidation
(b) Excludes amortization of program and film rights included in cost of
providing services and amortization of goodwill on equity method
investments included in equity results in joint ventures.
(c) UBC, which is accounted for under the equity method beginning June
1998.
9. Subsequent events
During November 1998 the Company acquired a 100% interest in TV Com
International Inc. for $14.5 million, paid in cash.
10. Differences between IAS and United States Generally Accepted Accounting
Principles
The Company's consolidated financial statements are prepared in accordance
with IAS, which differ in certain respects from accounting principles generally
accepted in the United States ("US GAAP").
The only significant difference which affects the Company's results and
shareholders' equity relates to the accounting for its investment in UBC. Under
IAS the investment in UBC is carried at cost through June, 1998. In June 1998,
the Company increased its shareholding in UBC to approximately 26.1% and, as a
result, exercises significant influence in UBC. Under IAS, the Company
thereafter uses the equity method of accounting for UBC. US GAAP requires a
retroactive adjustment of financial statements for an investee that was
previously accounted for on other than the equity method when that investee
becomes qualified for use of the equity method. The adjustment therefore
reflects the effect of applying the equity method to the investment in UBC
determined under US GAAP.
Reconciliation of net (loss)/profit (in thousands, except per share data):
<TABLE>
<CAPTION>
(Unaudited)
Six-month period ended
September 30,
------------------------------
1998 1997
------------ ---------------
<S> <C> <C>
Net profit/(loss) under IAS ........................ $ (734) $ (30,372)
US GAAP adjustments:
(a) Equity accounting for UBC ...................... (5,193) (4,680)
--------- -----------
Net loss under US GAAP ............................. $ (5,927) $ (35,052)
========= ===========
Weighted average common shares outstanding ......... 22,799 22,799
========= ===========
Net loss per share under US GAAP ................... $ (259.97) $ (1,537.44)
========= ===========
</TABLE>
F-8
<PAGE>
MIH Limited and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
<TABLE>
<CAPTION>
(Unaudited)
Six-month period ended
September 30,
------------------------------
1998 1997
------------ ---------------
<S> <C> <C>
Net loss under US GAAP consists of:
Loss from continuing operations ......... $ (5,927) $ (31,116)
Discontinued operations ................. -- (3,936)
--------- -----------
Net loss ................................ $ (5,927) $ (35,052)
========= ===========
Per share amounts:
Continuing operations .................. $ (259.97) $ (1,364.80)
Discontinued operations ................ -- ( 172.64)
--------- -----------
Net loss ............................... $ (259.97) $ (1,537.44)
========= ===========
</TABLE>
Reconciliation of shareholders' equity:
<TABLE>
<CAPTION>
(Unaudited)
September 30,
1998
--------------
<S> <C>
Total shareholders' equity under IAS ............. $ 255,338
US GAAP adjustments:
(a) Equity accounting for UBC .................... (29,930)
---------
Total shareholders' equity under US GAAP ......... $ 225,408
=========
</TABLE>
11. Recently issued accounting standards
In February of 1998, the IASC issued IAS 34, "Interim Financial
Reporting". IAS 34 will be effective for the Company's interim financial
statements issued after March 31, 1999. IAS 34 establishes guidelines for both
presentation and measurement for interim financial reporting, and defines the
minimum content of an interim financial report as a condensed balance sheet,
condensed income statement, condensed cash flow statement, condensed statement
showing changes in equity, and explanatory notes. An appendix to IAS 34
contains guidance for applying the basic recognition and measurement principles
to specific financial statement items at interim dates. The Company believes
that it has complied with the main provisions of this standard and does not
believe that this standard will have a significant influence on the Company's
financial statements.
In September of 1998, the IASC issued IAS 37, "Provisions, Contingent
Liabilities and Contingent Assets" IAS 37 will be effective for the Company's
financial statements for the year ending March 31, 2001. IAS 37 requires that
provisions should be recognized in the balance sheet when and only when an
enterprise has a present obligation as a result of past event; and it is
probable (i.e. more likely than not) that an outflow of resources embodying
economic benefits will be required to settle the obligation; and a reliable
estimate can be made of the amount of obligation. IAS 37 replaces part of IAS
10, "Contingencies and Events Occurring After the Balance Sheet Date". IAS 37
prohibits the recognition of contingent liabilities and contingent assets. An
enterprise should disclose a contingent liability, unless the possibility of an
outflow of resources embodying economic benefits is remote, and disclose a
contingent asset if an inflow of economic benefits is probable. The Company is
currently assessing the impact that this standard may have on its financial
statements.
In October of 1998, the IASC published IAS 22 (revised 1998), "Business
Combinations", that includes limited revisions to the version of IAS 22
approved in 1993. IAS 22 (revised 1998) is effective for the Company's
financial statements for the year ending March 31, 2001. The main changes to
IAS 22 relate to the requirements for the amortization of goodwill, the
recognition of restructuring provisions at the date of acquisition and the
treatment of negative goodwill. The provisions of IAS 22 (revised 1998) would
apply prospectively.
In October of 1998, the IASC published IAS 38 "Intangible Assets".
Intangible assets should only be recognized when it is probable that future
economic benefits attributable to the asset will flow to the enterprise and
F-9
<PAGE>
MIH Limited and Subsidiaries
Notes to the Condensed Consolidated Financial Statements
11. Recently issued accounting standards --Continued
the cost of the asset can be reliably measured. Internally generated goodwill,
brand names, mastheads, publishing titles, customer lists and research costs
should not be recognized as intangible assets. After initial recognition at
cost, intangible assets can only be revalued to fair value if it can be
determined by reference to an active market. Intangible assets are required to
be amortized on a systematic basis over the best estimate of an asset's useful
life. There is a rebuttable presumption that the useful life will not exceed 20
years. The standard becomes effective for the Company's financial statements for
the year ending March 31, 2001, with earlier application encouraged. If the
Company chooses to adopt IAS 38 early, it must also apply IAS 22 (revised)
"Business Combinations" and IAS 36 "Impairment of Assets" early. The Company is
currently assessing the impact this standard may have on its financial
statements.
F-10
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the directors and shareholders of
MIH Limited
We have audited the accompanying consolidated balance sheets of MIH Limited and
subsidiaries as of March 31, 1998 and 1997, and the related consolidated
statements of operations, cash flow and changes in shareholders' equity for
each of the three years in the period ended March 31, 1998. These consolidated
financial statements are the responsibility of MIH Limited's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the Republic of South Africa, which are substantially the same as
those followed in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
consolidated 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 consolidated financial position of MIH Limited and
subsidiaries as of March 31, 1998 and 1997, and the consolidated results of
their operations, cash flow and changes in shareholders' equity for each of the
three years in the period ended March 31, 1998, in conformity with
International Accounting Standards.
International Accounting Standards vary in certain significant respects from
accounting principles generally accepted in the United States of America. The
application of the latter would have affected the determination of consolidated
results for each of the two years in the period ended March 31, 1998 and
shareholders' equity as of March 1998 and 1997 to the extent summarized in Note
29 to the consolidated financial statements.
Johannesburg, Republic of South Africa Coopers & Lybrand
June 15, 1998 Chartered Accountants (SA)
Registered Accountants and Auditors
The accompanying notes are an integral part of these
consolidated financial statements.
F-11
<PAGE>
MIH Limited and Subsidiaries
Consolidated Balance Sheets
March 31, 1998 and 1997
(in thousands of US dollars)
<TABLE>
<CAPTION>
Notes 1998 1997
------- ------------- -------------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents ............................................... $ 153,412 $ 60,773
Accounts receivable, net ................................................ 4 36,999 22,331
Other receivables ....................................................... 5 29,444 21,292
Program and film rights ................................................. 11 22,543 32,599
Amounts owing by related parties ........................................ 20 14,784 --
Inventories, net ........................................................ 6 18,283 12,781
---------- ----------
Total current assets .................................................. 275,465 149,776
---------- ----------
Non-Current Assets
Tangible fixed assets, net .............................................. 8 114,248 90,876
Intangible assets, net .................................................. 9 163,611 207,870
Long-term investments ................................................... 10 77,020 331,740
Program and film rights ................................................. 11 15,711 22,874
---------- ----------
Total non-current assets .............................................. 370,590 653,360
---------- ----------
TOTAL ASSETS .......................................................... $ 646,055 $ 803,136
========== ==========
LIABILITIES
Current liabilities
Bank overdrafts ......................................................... $ 16,399 $ 9,912
Current portion of long-term debt ....................................... 14 36,369 15,476
Current portion of program and film rights .............................. 14 6,431 7,251
Accounts payable ........................................................ 73,291 42,540
Accrued expenses and other current liabilities .......................... 12 121,902 136,127
Amounts owing to related parties ........................................ 20 4,857 9,850
Provisions .............................................................. 13 50,563 93,327
---------- ----------
Total current liabilities ............................................. 309,812 314,483
---------- ----------
Non-Current Liabilities
Long-term debt .......................................................... 14 54,787 60,610
Program and film rights ................................................. 14 24,608 30,758
Deferred taxation ....................................................... 15 3,275 --
---------- ----------
Total non-current liabilities ......................................... 82,670 91,368
---------- ----------
TOTAL LIABILITIES ..................................................... 392,482 405,851
---------- ----------
Commitments and contingencies ............................................ 22 -- --
SHAREHOLDERS' EQUITY
Share capital
Authorized: 1998 and 1997: 10 registered redeemable non-voting
ordinary shares of $1 each and 49,990 ordinary shares of $1 each .......
Issued: 1998 and 1997: 10 registered redeemable non-voting
ordinary shares of $1 each and 22,789 ordinary shares of $1 each........ 23 23
Share premium ............................................................ 589,529 585,161
Accumulated loss ......................................................... (313,547) (197,928)
Foreign currency translation adjustment .................................. (22,432) 10,029
---------- ----------
TOTAL SHAREHOLDERS' EQUITY ............................................ 253,573 397,285
========== ==========
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY ................................................. $ 646,055 $ 803,136
========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-12
<PAGE>
MIH Limited and Subsidiaries
Consolidated Statements of Operations
for the years ended March 31, 1998, 1997 and 1996
(in thousands of US dollars, except per share and share amounts)
<TABLE>
<CAPTION>
Notes 1998 1997 1996
------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Net revenues ............................................ 16 $ 501,492 $ -- $ --
Operating expenses:
Cost of providing services ............................. (308,996) -- --
Selling, general and administrative .................... (177,213) (899) (16)
Depreciation and amortization .......................... (58,010) -- --
----------- ---------- -----------
Total operating expenses ................................ (544,219) (899) (16)
----------- ---------- -----------
Operating loss .......................................... (42,727) (899) (16)
Financial results, net ................................. 17 (5,488) (107) --
Equity results in joint ventures
--Acquired MIH businesses .............................. (5,091) (16,150) (12,794)
--Non-acquired businesses .............................. -- (113,708) (72,891)
Equity results in associates ........................... (2,783) -- --
Profit on sale of joint venture ........................ -- 540,028 --
----------- ---------- -----------
(Loss)/profit before taxation .......................... (56,089) 409,164 (85,701)
Income taxation ........................................ 18 (7,570) -- --
----------- ---------- -----------
(Loss)/profit after taxation ........................... (63,659) 409,164 (85,701)
Minority interest ...................................... 3,793 -- --
----------- ---------- -----------
(Loss)/profit from continuing operations ............... (59,866) 409,164 (85,701)
Loss from discontinued operations ...................... 19 (3,936) -- --
----------- ---------- -----------
Net (loss)/profit ................................... $ (63,802) $ 409,164 $ (85,701)
=========== ========== ===========
Per share amounts:
(Loss)/profit from continuing operations
Basic and diluted ...................................... $ (2,625.82) $ 17,946.58 $ (3,758.98)
Net (loss)/profit
Basic and diluted ...................................... $ (2,798.46) $ 17,946.58 $ (3,758.98)
Shares used to compute (loss)/profit per share .......... 22,799 22,799 22,799
</TABLE>
F-13
<PAGE>
MIH Limited and Subsidiaries
Consolidated Statements of Cash Flow
for the years ended March 31, 1998, 1997 and 1996
(in thousands of US dollars)
<TABLE>
<CAPTION>
Note 1998 1997 1996
------ ------------- ------------ ------------
<S> C> <C> <C> <C>
Cash flows from operating activities
Operating loss .............................................. $ (42,727) $ (899) $ (16)
Adjustments for:
Depreciation and amortization .............................. 58,010 -- --
Amortization of program and film rights .................... 32,599 -- --
Increase in taxation liability ............................. 2,849 -- --
Loss on sale of tangible fixed assets ...................... 1,653 -- --
(Increase)/decrease in receivables ......................... (9,553) 12,072 (12,723)
Payments for program and film rights ....................... (26,048) -- --
Net increase in amounts owing by related parties ........... (18,790) -- --
Increase in inventories .................................... (6,783) -- --
Increase/(decrease) in payables ............................ 17,941 (5,194) --
Utilised in discontinued operations ......................... (3,936) -- --
--------- --------- ---------
Net cash from/(used in) operating activities ............. 5,215 5,979 (12,739)
--------- --------- ---------
Cash flows from investing activities
Purchase of tangible fixed assets .......................... (31,664) -- --
Proceeds on sale of tangible fixed assets .................. 5,276 -- --
Dividends received from associates ......................... 1,539 -- --
Proceeds on disposal of Internet businesses ................ 21,546 -- --
Proceeds on disposal of Canal+ shares ...................... 261,536 -- --
Acquisition of subsidiaries, net of cash acquired .......... 27 (33,911) 54,045 --
Investment in OpenTV ....................................... (9,100) -- --
Investment in UBC .......................................... (45,797) (10,348) --
Net decrease in other investments .......................... 1,052 -- --
--------- --------- ---------
Net cash from investing activities ....................... 170,477 43,697 --
--------- --------- ---------
Cash flows from financing activities
Finance (costs)/income ..................................... (11,312) (107) 14,205
Funds raised from outside shareholders ..................... 3,793 -- --
Long-term debt repaid ...................................... (20,556) -- --
Capital leases repaid ...................................... (4,550) -- --
Dividends paid ............................................. (51,817) -- --
Bank overdrafts raised ..................................... 7,479 9,913 --
--------- --------- ---------
Net cash (used in)/from financing activities ............. (76,963) 9,806 14,205
--------- --------- ---------
Net increase in cash and cash equivalents ................... 98,729 59,482 1,466
Cash and cash equivalents at beginning of the year .......... 60,773 1,466 --
Translation adjustment on cash and cash equivalents ......... (6,090) (175) --
--------- --------- ---------
Cash and cash equivalents at end of the year ................ $ 153,412 $ 60,773 $ 1,466
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-14
<PAGE>
MIH Limited and Subsidiaries
Consolidated Statement of Changes in Shareholders' Equity
for the years ended March 31, 1998, 1997 and 1996
(in thousands of US dollars)
<TABLE>
<CAPTION>
Foreign
currency
Share Share Accumulated translation
capital premium loss adjustment Total
--------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
At March 31, 1995 ...................... $ 23 $585,161 $ (521,391) $ (3,315) $ 60,478
Net loss ............................... -- -- (85,701) -- (85,701)
Translation adjustment ................. -- -- -- (4,614) (4,614)
----- -------- ---------- --------- ---------
At March 31, 1996 ...................... 23 585,161 (607,092) (7,929) (29,837)
Net profit ............................. -- -- 409,164 -- 409,164
Translation adjustment ................. -- -- -- 17,958 17,958
----- -------- ---------- --------- ---------
At March 31, 1997 ...................... 23 585,161 (197,928) 10,029 397,285
Capital contribution (note 19) ......... -- 4,368 -- -- 4,368
Net loss ............................... -- -- (63,802) -- (63,802)
Dividend paid .......................... -- -- (51,817) -- (51,817)
Translation adjustment ................. -- -- -- (32,461) (32,461)
----- -------- ---------- --------- ---------
At March 31, 1998 ...................... $ 23 $589,529 $ (313,547) $ (22,432) $ 253,573
===== ======== ========== ========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
F-15
<PAGE>
MIH Limited and Subsidiaries
Notes to the Consolidated Financial Statements
1. Nature of operations
MIH Limited ("MIH") was incorporated on July 26, 1991 under the laws of
the British Virgin Islands. The principal activities of MIH and its operating
subsidiaries (collectively the "Company") are the provision of pay-television
and subscriber management services ("pay-television services") and the
development and sale of pay-television technology. These activities are
conducted through subsidiaries, joint ventures and investments primarily in
Africa, Greece, Cyprus, the Middle East, the Netherlands, Thailand and the
United States of America.
Until March 31, 1997 the Company's main activity was its 50% share in
Network Holdings S.A. ("NetHold"), a joint venture. The principal activities of
NetHold included pay-television operations in Africa, Greece, Cyprus, the
Middle East, the Benelux and Scandinavian countries and Italy (Note 3).
2. Principal accounting policies and reporting currency
The consolidated financial statements of the Company have been prepared in
accordance with International Accounting Standards ("IAS") issued by the
International Accounting Standards Committee. The financial statements have
been prepared on the historical cost basis.
The Company has adopted the US dollar as its reporting currency.
Notwithstanding the US dollar reporting currency, the Company measures
separately the transactions of each of its material operations using the
particular currency of the primary economic environment in which the operation
conducts its business (its functional currency).
The financial statements have been translated from functional currencies
to the reporting currency by translating assets and liabilities, both monetary
and non-monetary, and including goodwill and other intangible assets which
arise as a result of equity investments in entities, at the closing rate at
each balance sheet date. Income and expense items are translated at exchange
rates at the dates of the transactions or at average rates. All resulting
exchange differences are included in equity.
Preparation of the consolidated financial statements in conformity with
generally accepted accounting principles ("GAAP") requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
(a) Basis of consolidation
The consolidated financial statements include the financial statements of
MIH and all majority owned (directly and indirectly) and controlled
subsidiaries. A company in which MIH holds directly or indirectly more than 50%
of the ordinary share capital and voting rights is classified as a subsidiary.
Newly acquired companies are consolidated from the effective date of
acquisition. Similarly, the result of a subsidiary divested during an
accounting period is included in the Company accounts only to the date of
disposal.
All inter-company transactions are eliminated as part of the consolidation
process and the interests of the minority shareholders in the consolidated
equity and in the consolidated results of the Company are shown separately in
the Consolidated Balance Sheet and Consolidated Statement of Operations. Where
the losses applicable to the minority shareholder in a consolidated subsidiary
exceed the minority interest in the subsidiary, the excess, and any further
losses applicable to the minority, are charged against the majority interest
except to the extent that the minority has a binding obligation to, and is able
to, make good the losses. If the subsidiary subsequently reports profits, the
majority's interest is allocated all such profits until the minority's share of
losses previously absorbed by the majority has been recovered.
Acquisitions of companies are accounted for using the purchase method. The
excess of the purchase price over the fair value of assets acquired less the
liabilities assumed of the acquired company, is allocated to identifiable
tangible and intangible assets and goodwill and amortized over future periods.
F-16
<PAGE>
MIH Limited and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
2. Principal accounting policies and reporting currency --Continued
Companies in which the Company has joint control are accounted for using
the equity method with the Company's share of profits and losses included in
the Consolidated Statement of Operations. The Company's share of post
acquisition retained profits/losses is added to/deducted from the cost of the
joint venture investments in the Consolidated Balance Sheet.
Associated companies, over which the Company has significant influence,
are accounted for using the equity method with the Company's share of profits
and losses included in the Consolidated Statement of Operations. The Company's
share of post acquisition retained profits/losses is added to/deducted from the
cost of the associated company investments in the Consolidated Balance Sheet.
Other investments are stated at cost. When necessary a provision is made
on the basis of an evaluation of each individual investment for any diminution
in value which is considered to be of a permanent nature.
(b) Foreign currencies
Individual companies' transactions in currencies other than their
functional currency are recorded at the rate of exchange at the date of the
transaction or, if hedged forward, at the rate of exchange under the related
forward exchange contract. Assets and liabilities in currencies other than
their functional currency are translated at year-end rates. Any resulting
exchange differences are reflected in the Statement of Operations.
On consolidation, assets and liabilities of subsidiaries denominated in
foreign currencies are translated at year-end rates. Income and expense items
are translated using the annual weighted average rates of exchange or, where
known or determinable, at the rate on the date of the transaction for
significant items.
Adjustments from translation have been recorded in shareholders' equity
and are reflected in the Consolidated Statement of Operations only upon sale or
liquidation of the underlying investments.
(c) Cash and cash equivalents
Cash and cash equivalents represent cash and short-term highly liquid
investments with original maturities of three months or less.
(d) Trade accounts receivable
Trade accounts receivable are stated at estimated realizable values and an
allowance for doubtful accounts is provided for an amount considered by
management to be sufficient to meet probable future losses related to
uncollectable amounts.
(e) Inventories
Inventories, consisting primarily of decoders and associated components,
are stated at the lower of cost or net realizable value. Cost is generally
determined on the first-in first-out basis. Where necessary, provision is made
for obsolete, slow moving or defective inventories.
(f) Tangible fixed assets
Tangible fixed assets are stated at historical cost less accumulated
depreciation. Depreciation is charged on a straight-line basis over the
estimated useful lives of the respective assets, based on the following useful
lives:
<TABLE>
<CAPTION>
Years
------
<S> <C>
Buildings ................................... 50
Machinery, furniture and equipment .......... 4-10
Transponders and transmitters ............... 10
Decoders .................................... 2
</TABLE>
Land is not depreciated. Improvements to leasehold properties are
amortized over the period of the respective leases.
F-17
<PAGE>
MIH Limited and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
2. Principal accounting policies and reporting currency --Continued
Fully depreciated assets are retained in tangible fixed assets and
depreciation accounts until they are removed from service. In the case of
disposals, assets and related depreciation are removed from the accounts and
the net amount, less proceeds from disposal, is charged or credited to the
Statement of Operations.
(g) Intangible assets
Intangible assets are stated at historical cost less accumulated
amortization. Amortization of subscriber base is charged on a straight-line
basis over the period of expected benefit, which is five years. Goodwill is
amortized on a straight-line basis over five years.
(h) Leases
Assets held under capital lease agreements are treated as tangible fixed
assets and the present value of the related lease payments is recorded as a
liability. Costs for operating leases are charged to the Statement of
Operations in the year that they are incurred.
(i) Long-lived assets
The Company periodically evaluates the carrying value of long-lived assets
to be held and used, including goodwill and other intangible assets, when
events and circumstances warrant such a review. The carrying value of a
long-lived asset is considered impaired when the anticipated undiscounted cash
flow from such an asset is separately identifiable and is less than its
carrying value. In that event, a loss is recognized based on the amount by
which the carrying value exceeds the fair market value of the long-lived asset.
Fair market value is determined primarily using anticipated cash flows
discounted at a rate commensurate with the risk involved. Long-lived assets to
be disposed of are recorded at fair market value, reduced by the estimated
costs to dispose of the asset.
(j) Program and film rights
Film rights are stated at acquisition cost less accumulated amortization.
Sport rights are written off upon showing the event and general entertainment
and films are amortized on a straight-line basis over the period of the license
or based on showings where the number of showings is limited. Amortization of
program and film rights is included in the cost of providing services.
(k) Taxation
Provision is made for all taxes payable in respect of taxable profits
earned in the year. The Company also provides at current rates for taxation on
all timing differences between income for financial reporting and fiscal
purposes under the liability method. No deferred taxation is provided for in
respect of timing differences that are anticipated to reverse within the
carry-forward period of tax losses.
(l) Minority interest
The interest of third parties in subsidiaries is accounted for on the
basis of their share in the underlying equity of the subsidiaries. Through
March 31, 1998, the Company has recorded losses of $8.4 million attributable to
minority interests.
(m) Revenue recognition
The Company generates revenue from subscription fees, decoder sales and
rentals, technology licensing, advertising and the performance of other
services, net of sales taxes and discounts. Subscription fees are earned over
the period of providing services. Decoder sales, technology licensing and other
services are recorded upon delivery of products and customer acceptance, if
any, or performance of services. Advertising revenues are recognized upon
showing over the period of the advertising contract.
(n) Pensions and other postretirement benefits
The Company has various postretirement and pension plans in accordance
with local conditions and practices in the countries in which it operates. The
plans are predominately defined contribution plans. Current contributions to
the pension funds operated for employees are charged to the Statement of
Operations as incurred.
F-18
<PAGE>
MIH Limited and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
2. Principal accounting policies and reporting currency --Continued
(o) Research and development costs
Research and development costs are expensed in the financial period during
which they are incurred. Research and development costs for the years ended
March 31, 1998, 1997 and 1996 were not material.
(p) Discontinued operations
A discontinued operation results from the sale or abandonment of an
operation that represents a separate, major line of business of an enterprise
and of which the assets, net profits or losses and activities can be
distinguished physically, operationally and for functional reporting purposes.
The results of discontinued operations, net of tax, are separately disclosed.
(q) Dividends
Dividends proposed are payable when declared by the board of directors.
Dividends declared by MIH are payable in United States Dollars. Dividends
declared and received by MIH from its subsidiaries are primarily in South
African rand, Greek drachmae and Netherlands guilder.
(r) Financial instruments
The Company enters into foreign currency exchange contracts in order to
reduce the impact of certain foreign currency exchange rate fluctuations.
Firmly committed transactions and the related receivable and payable may be
hedged with forward exchange contracts. Any gains/losses are included in
accrued liabilities and are recognized in results when the transaction being
hedged is recognized.
(s) (Loss)/earnings per share
(Loss)/earnings per share is based on the (loss)/profit from continuing
operations divided by the weighted average number of shares outstanding during
each period.
(t) Segment reporting
The segmental reporting has been prepared based on the Company's method of
internal reporting, which disaggregates its business by service or product and
by geography.
3. Significant acquisitions and divestitures
Until March 31, 1997 the Company's main activity was its 50% share in
NetHold, a joint venture. The principal activities of NetHold included
pay-television operations in Africa, Greece, Cyprus, the Middle East, the
Benelux, Scandinavian countries and Italy. Additionally, NetHold held 100% of
the shares in Irdeto B.V.("Irdeto"), a pay-television technology company.
Effective March 31, 1997, the Company sold its interest in NetHold to Canal+ in
exchange for a 5% share in Canal+ and all of NetHold's pay-television
businesses in Africa, Greece, Cyprus and the Middle East. The transaction was
accounted for as a sale of the 50% interest in NetHold and a purchase of the
pay-television businesses transferred to the Company. Thereafter, the Company
acquired a 49% share in Irdeto for a consideration of $17.7 million paid for in
cash. The acquired businesses in Africa, Greece, Cyprus, the Middle East and
Irdeto are collectively referred to as the "Acquired MIH Businesses".
The Company recognized a gain of $540 million on the sale of its interest
in NetHold. The gain is equal to the excess of the fair value of consideration
received ($475 million) over the book value of the Company's interest in the
NetHold businesses sold ($159 million deficit) less deferral of a portion of
the gain related to warranties provided and direct costs of $94 million. The
fair value of the consideration received consisted of the Canal+ shares
F-19
<PAGE>
MIH Limited and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
3. Significant acquisitions and divestitures --Continued
($273 million) and 50% of the NetHold businesses in Africa, Greece, Cyprus and
the Middle East ($202 million). As a result of the transaction the Company
recorded intangible assets of $193 million, which has been allocated to
subscriber base ($55 million) and goodwill ($138 million).
During the 1998 financial year the Company sold its shares in Canal+ for a
total consideration of approximately $262 million, resulting in a gain of $3
million.
For the 1997 and 1996 fiscal years, the Company's results include equity
in the losses of the Acquired MIH Businesses, equity in the losses from the
NetHold businesses that were sold to Canal+ ("Non-acquired Businesses") and
profit on the sale of NetHold to Canal+, which are separately disclosed in the
Consolidated Statement of Operations.
During the 1998 fiscal year the Company acquired the entire issued share
capital of a number of Internet-related businesses in South Africa. For
financial statement purposes the acquisitions were accounted for as purchases
and, accordingly, the Internet related businesses' results are included in the
consolidated financial statements since the date of acquisition. The aggregate
purchase price was approximately $21.5 million, which was financed through
internal resources. The excess of the purchase price over the net liabilities
acquired (goodwill) approximated $17 million. Refer to Note 19 with respect to
the subsequent disposal of the Internet-related business.
In January 1998, the Company acquired the remaining 51% of the outstanding
share capital of Irdeto for an aggregate cash consideration of approximately
$11 million. For financial statement purposes the acquisition was accounted for
as a purchase, and accordingly, the related business's results are included in
the consolidated financial statements since the date of acquisition.
The Company also acquired a 44.5% interest in OpenTV, Inc. ("OpenTV") for
$15.5 million with effect from January 26, 1998 of which $6.4 million is due in
the ensuing financial year. The excess purchase price over the net liabilities
acquired of approximately $18.1 million has been allocated to goodwill and is
amortized over 5 years.
The Company invested an additional $17.7 million in International
Broadcasting Corporation Public Company Limited ("UBC"), a company listed on
the Stock Exchange of Thailand, during the year. As a result of the Company's
additional investment in UBC and following a merger between UBC and UTV Cable
Network Public Company, the Company's interest in the new merged entity
increased to 17.3%.
The following summarized unaudited pro forma financial information assumes
that the Acquired MIH Businesses were acquired as of April 1, 1996 and the
acquisition of Irdeto occurred on April 1, 1996 and 1997, respectively.
<TABLE>
<CAPTION>
Year ended March 31,
-------------------------------
1998 1997
Pro Forma Information (in thousands, except per share data) --------------- -------------
<S> <C> <C>
Net sales .................................................. $ 545,306 $ 494,596
Net loss ................................................... $ (73,843) $ (3,953)
Loss per share ............................................. $ (3,238.87) $ (173.38)
</TABLE>
Pro forma data do not purport to be indicative of the results that would
have been obtained had these events actually occurred at the beginning of the
periods presented and are not intended to be a projection of future results.
The following are the condensed consolidated NetHold balance sheets as of
March 31, 1997 and 1996 and statements of operations for the years ended March
31, 1997 and 1996.
F-20
<PAGE>
MIH Limited and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
3. Significant acquisitions and divestitures --Continued
These condensed consolidated balance sheets and statements of operations
are based on financial statements prepared under Netherlands GAAP. The NetHold
financial statements do not differ significantly from IAS, except for the
treatment of goodwill arising on the acquisition of a business, which is
directly written off against distributable reserves, and the recognition of a
debit balance of minority interest. Under IAS, goodwill would have been
capitalized and amortized over its estimated useful life and a minority
interest debit balance recognized only to the extent that the minority has a
binding obligation and is able to make good its share of losses. The impact of
these differences on the Company's financial statements was not material.
The condensed consolidated balance sheets were translated from Netherlands
guilders to US dollars using the prevailing year-end rates and the statements
of operations were translated using a weighted average exchange for the year.
The differences arising as a result of the difference between the weighted
average and year-end exchange rates have been recorded in shareholders'
deficit.
<TABLE>
<CAPTION>
March 31,
------------------------------
1997 1996
(thousands) (thousands)
NetHold --------------- ------------
<S> <C> <C>
Balance Sheets:
Cash and cash equivalents ............................ $ 66,313 $ 35,478
Accounts receivable, net ............................. 86,877 59,829
Prepayments and other ................................ 105,569 130,525
Inventories, net ..................................... 25,156 37,060
------------ ---------
Total current assets ................................ 283,915 262,892
------------ ---------
Property, plant and equipment ........................ 116,500 147,080
Intangible assets, net ............................... 10,377 15,364
Investments .......................................... 241,854 315,834
Other non-current assets ............................. 111,824 109,956
------------ ---------
Total non-current assets ............................ 480,555 588,234
------------ ---------
Total Assets ........................................ $ 764,470 $851,126
============ =========
Bank overdrafts ...................................... $ 4,586 $317,481
Accounts payable ..................................... 89,731 100,903
Accrued expenses ..................................... 246,642 262,341
Other current liabilities ............................ 105,783 98,726
------------ ---------
Total current liabilities ........................... 446,742 779,451
Long-term liabilities ................................ 1,509,680 717,709
------------ ---------
Total liabilities ................................... 1,956,422 1,497,160
------------ ---------
Minority interest .................................... (9,603) (5,419)
------------ ---------
Redeemable preferred shares .......................... 174,859 198,487
------------ ---------
Share capital ........................................ 133,276 151,286
General reserve ...................................... (1,492,302) (991,223)
Translation reserve .................................. 1,818 835
------------ ---------
Shareholders' deficit ............................... (1,357,208) (839,102)
------------ ---------
Total Liabilities and Shareholders' Deficit ......... $ 764,470 $851,126
============ =========
</TABLE>
F-21
<PAGE>
MIH Limited and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
3. Significant acquisitions and divestitures --Continued
<TABLE>
<CAPTION>
March 31,
------------------------------
1997 1996
(thousands) (thousands)
NetHold ------------- --------------
<S> <C> <C>
Statements of Operations:
Revenues ............................ $ 730,158 $ 634,439
Operating expenses:
Cost of providing services ......... (348,062) (302,098)
Other operating expenses ........... (587,953) (470,489)
---------- ----------
Operating results .................. (205,857) (138,148)
Financial results, net ............. (56,718) (34,462)
---------- ----------
Loss before taxation ............... (262,575) (172,610)
Income taxation .................... (2,870) (2,655)
---------- ----------
Loss after taxation ................ (265,445) (175,265)
Minority interest .................. 5,729 3,895
---------- ----------
Net Loss ........................... $ (259,716) $ (171,370)
========== ==========
</TABLE>
4. Accounts receivable
<TABLE>
<CAPTION>
March 31,
----------------------------
1998 1997
(thousands) (thousands)
------------- ------------
<S> <C> <C>
Trade accounts receivable ..................... $ 47,148 $ 29,398
Less: Provision for doubtful accounts ......... (10,149) (7,067)
--------- --------
$ 36,999 $ 22,331
========= ========
</TABLE>
Included in accounts receivable are $14.3 million and $22.2 million at
March 31, 1998 and March 31, 1997, respectively, pre-billed to customers and
credit balances which have been recorded as deferred income (Note 12).
5. Other receivables
<TABLE>
<CAPTION>
March 31,
----------------------------
1998 1997
(thousands) (thousands)
------------- ------------
<S> <C> <C>
Prepayments and accrued income ......... $14,272 $15,469
Other receivables ...................... 15,172 5,823
------- -------
$29,444 $21,292
======= =======
</TABLE>
6. Inventories
<TABLE>
<CAPTION>
March 31,
----------------------------
1998 1997
(thousands) (thousands)
------------- ------------
<S> <C> <C>
Decoders and associated components ............................... $ 28,689 $ 19,247
Less: Provision for slow moving and obsolete inventories ......... (10,406) (6,466)
--------- --------
$ 18,283 $ 12,781
========= ========
</TABLE>
F-22
<PAGE>
MIH Limited and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
7. Valuation and qualifying accounts
<TABLE>
<CAPTION>
At March Translation
31, 1997 adjustment
------------- -------------
(thousands) (thousands)
<S> <C> <C>
Provision for:
Doubtful accounts -- Note 4 ................... $ (7,067) $ 708
Slow moving and obsolete inventories --
Note 6 ....................................... (6,466) 648
Sports and film rights ........................ (476) 48
Decoder technology ............................ (29,358) 2,942
Postretirement benefits ....................... (4,678) 469
Subscriber guarantees ......................... (42,203) 4,229
Programming costs ............................. (9,125) 914
Write down of carrying values of assets in
certain African countries .................... (7,963) 798
Development costs/losses in joint ventures..... -- --
---------- -------
$ (107,336) $10,756
========== =======
<CAPTION>
Credited/
Arising on (Charged)
acquisition to cost and At March
of subsidiary Deductions expenses 31, 1998
--------------- ------------- ------------- ------------
(thousands) (thousands) (thousands) (thousands)
<S> <C> <C> <C> <C>
Provision for:
Doubtful accounts -- Note 4 ................... $ (6,251) $ -- $ 2,461 $ (10,149)
Slow moving and obsolete inventories --
Note 6 ....................................... (4,135) -- (453) (10,406)
Sports and film rights ........................ -- -- (1,444) (1,872)
Decoder technology ............................ -- 3,682 -- (22,734)
Postretirement benefits ....................... -- -- 443 (3,766)
Subscriber guarantees ......................... -- 37,974 -- --
Programming costs ............................. -- -- (882) (9,093)
Write down of carrying values of assets in
certain African countries .................... -- -- 2,824 (4,341)
Development costs/losses in joint ventures..... (3,398) -- (4,610) (8,008)
--------- ------- -------- ---------
$ (13,784) $41,656 $ (1,661) $ (70,369)
========= ======= ======== =========
</TABLE>
The decoder technology provision relates to guarantees in respect of
potential defects in the technology of decoders used by a NetHold associate.
The provision for subscriber guarantees relates to guarantees provided to
Canal+ regarding the number of subscribers of a NetHold associate that were
sold to Canal+. During fiscal 1998, the guarantee resulted in a payment which
was charged against the provision created as of March 31, 1997. The Company
believes that payment under the guarantee of the amount provided is probable.
The provisions for programming costs arises from an agreement with Canal+
according to which MIH will reimburse Canal+ for any increases in the
programming costs incurred by NetHold subsidiaries which result from the need
to renegotiate such contracts. The Company believes that payment under the
agreement of the amount provided is probable.
The provision for the write down of the carrying value of assets in
certain African countries relates to managements' estimates regarding the
recoverability of such assets, given the current economic and political
environment in certain African countries.
F-23
<PAGE>
MIH Limited and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
8. Tangible fixed assets (in thousands)
<TABLE>
<CAPTION>
Land, buildings and Machinery, furniture Transponders
leasehold improvements and equipment and transmitters Decoders
----------------------- ---------------------- ---------------------- ----------
Purchased Leased Purchased Leased Purchased Leased Leased Total
----------- ----------- ----------- ---------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cost
At March 31, 1997 ......... $3,627 $ 8,824 $ 44,165 $ 3,922 $ 10,660 $ 28,174 $ 8,033 $ 107,405
Translation adjustment .... (638) (1,272) (8,341) (655) (1,717) (2,890) (193) (15,706)
Additions ................. 1,171 2,759 37,340 3,377 3,166 21,576 -- 69,389
Disposals ................. (221) -- (4,438) -- (3,671) (1,038) -- (9,368)
------ -------- --------- -------- -------- -------- -------- ---------
At March 31, 1998 ......... 3,939 10,311 68,726 6,644 8,438 45,822 7,840 151,720
------ -------- --------- -------- -------- -------- -------- ---------
Accumulated
depreciation
At March 31, 1997 ......... (409) -- (12,389) (1,440) (2,155) (136) -- (16,529)
Translation adjustment .... 91 12 2,748 220 282 8 -- 3,361
Charge for the year ....... (318) (297) (16,090) (734) (525) (3,223) (5,573) (26,760)
Disposals ................. 73 3 1,183 -- 1,069 128 -- 2,456
------ -------- --------- -------- -------- -------- -------- ---------
At March 31, 1998 ......... (563) (282) (24,548) (1,954) (1,329) (3,223) (5,573) (37,472)
------ -------- --------- -------- -------- -------- -------- ---------
Net book value
At March 31, 1998 ......... $3,376 $ 10,029 $ 44,178 $ 4,690 $ 7,109 $ 42,599 $ 2,267 $ 114,248
====== ======== ========= ======== ======== ======== ======== =========
At March 31, 1997 ......... $3,218 $ 8,824 $ 31,776 $ 2,482 $ 8,505 $ 28,038 $ 8,033 $ 90,876
====== ======== ========= ======== ======== ======== ======== =========
</TABLE>
The Company leases certain land and buildings, machinery, furniture and
equipment, and transponders and transmitters. Commitments for minimum rentals
under non-cancellable leases as at March 31, 1998 are as follows:
<TABLE>
<CAPTION>
Capital Operating
leases leases
For the years ended March 31: ------------- ------------
(thousands) (thousands)
------------- ------------
<S> <C> <C>
1999 ....................................... $ 14,312 $ 33,611
2000 ....................................... 12,938 33,615
2001 ....................................... 10,636 33,630
2002 ....................................... 9,716 33,712
2003 and after ............................. 67,385 110,132
--------- --------
Total minimum lease payments ............... 114,987 $244,700
========
Less: amount representing interest ......... (47,815)
---------
$ 67,172
=========
</TABLE>
Operating rental expenses for the year ended March 31, 1998 amounted to
approximately $33 million. Capital leases bear interest ranging from 6%-21% as
of March 31, 1998. The weighted average interest rate was 10%.
F-24
<PAGE>
MIH Limited and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
9. Intangible assets
<TABLE>
<CAPTION>
1998
Subscriber base Goodwill Total
(thousands) (thousands) (thousands)
----------------- ------------- ------------
<S> <C> <C> <C>
Cost
At April 1, 1997 .................. $ 55,000 $ 152,870 $ 207,870
Translation difference ............ (6,750) (20,268) (27,018)
Additions ......................... 36,490 36,490
Disposals ......................... (17,561) (17,561)
--------- ---------
At March 31, 1998 ................. 48,250 151,531 199,781
--------- --------- ---------
Accumulated amortization
At April 1, 1997 .................. -- -- --
Amortization for the year ......... (10,311) (28,689) (38,999)
Translation difference ............ 661 2,169 2,829
--------- --------- ---------
At March 31, 1998 ................. (9,650) (26,520) (36,170)
--------- --------- ---------
Net book value ..................... $ 38,600 $ 125,011 $ 163,611
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
1997
Subscriber base Goodwill Total
(thousands) (thousands) (thousands)
----------------- ------------- ------------
<S> <C> <C> <C>
Cost
At April 1, 1996 .................. --
Additions ......................... $55,000 $152,870 $207,870
------- -------- --------
At March 31, 1997 ................. 55,000 152,870 207,870
Accumulated amortization
At April 1, 1996 .................. -- -- --
Amortization for the year ......... -- -- --
------- -------- --------
At March 31, 1997 ................. -- -- --
------- -------- --------
Net book value ..................... $55,000 $152,870 $207,870
======= ======== ========
</TABLE>
F-25
<PAGE>
MIH Limited and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
10. Long-term investments
<TABLE>
<CAPTION>
March 31,
----------------------------
1998 1997
(thousands) (thousands)
------------- ------------
<S> <C> <C>
Marketable securities (a) ................................. $56,924 $309,669
Associates (b) ............................................ 12,992 12,051
Joint ventures (c) ........................................ 7,104 4,790
Unsecured loans to joint ventures ......................... -- 5,230
------- --------
$77,020 $331,740
======= ========
(a) Marketable securities at cost
Listed Shares
UBC ...................................................... $52,840 $ 35,084
Canal+ ................................................... -- 273,459
Unlisted shares
Cable News Egypt S.A.E (CNE) ............................. 2,985 1,126
Croco Beteiligungs Gesellschaft GmbH ..................... 1,004 --
LTH AE ................................................... 95 --
------- --------
$56,924 $309,669
======= ========
(b) Associates
Electronic Media Network Limited / SuperSport International
Holdings Limited ("M-Net") ............................... $10,312 $ 12,051
Orbicom (Proprietary) Limited ("Orbicom") ................. -- --
Share of post acquisition retained profits ................ 2,680 --
------- --------
$12,992 $ 12,051
======= ========
</TABLE>
F-26
<PAGE>
MIH Limited and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
10. Long-term investments --Continued
<TABLE>
<CAPTION>
March 31,
----------------------------
1998 1997
(thousands) (thousands)
------------- ------------
<S> <C> <C>
(c) Joint ventures
Digco BV ("Digco") ............................................. $ 7,762 $ --
MultiChoice Supplies (Proprietary) Limited
("MultiChoice Supplies") ...................................... 3,686 4,790
Irdeto (1997) .................................................. -- --
MultiChoice Middle East ........................................ -- --
OpenTV ......................................................... -- --
Share of post acquisition retained profits less losses ......... (4,344) --
-------- --------
$ 7,104 $ 4,790
======== ========
Listed shares at market value
UBC ........................................................... $104,817 $ 12,957
Canal+ ........................................................ -- 273,459
M-Net ......................................................... 54,483 71,022
-------- --------
$159,300 $357,438
======== ========
</TABLE>
The following information relates to the Company's significant
investments:
<TABLE>
<CAPTION>
March 31,
-------------------------
1998 1997
Type of investment ------------- --------- Nature of business Country
% %
<S> <C> <C> <C> <C>
Marketable securities at cost
UBC ................................... 17.3 15.0 Pay-television Thailand
Canal+ ................................ -- 4.9 Pay-television France
CNE ................................... 10.0 10.0 Television Egypt
Associates
M-Net ................................. 19.8(1) 20.0 Pay-television South Africa
Orbicom ............................... 20.0 20.0 Signal distribution South Africa
Joint ventures
Digco ................................. 50.0 -- Decoder technology The Netherlands
MultiChoice Supplies .................. 50.0 50.0 Decoder rentals South Africa
Irdeto (1998 : Subsidiary) ............ -- 49.0 Technology development The Netherlands
OpenTV ................................ 44.5 -- Technology development USA
Multichoice Middle East ............... 45.0 45.0
Subsidiaries
Myriad Africa BV ...................... 100.0 100.0 Investment holding The Netherlands
MultiChoice Africa (Pty) Limited
("MultiChoice Africa") ............... 100.0 100.0 Pay-television South Africa
MultiChoice Africa Limited ............ 100.0 100.0 Investment holding British Virgin Islands
NetMed ................................ 52.0 52.0 Investment holding The Netherlands
NetHold Hellas S.A. ................... 52.0 52.0 Pay-television Greece
MultiChoice Hellas S.A. ............... 52.0 52.0 Pay-television Greece
Irdeto (1997 : Joint venture) ......... 100.0 -- Technology development The Netherlands
</TABLE>
- ----------------
(1) The Company accounts for its investment in M-Net using the equity method of
accounting because of the significant influence the Company exercises over
M-Net as a result of common ownership, the Company's management and
directors' representation on the Board of Directors of M-Net and the fact
that substantially all of M-Net's revenues are derived from the Company.
F-27
<PAGE>
MIH Limited and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
10. Long-term investments --Continued
<TABLE>
<CAPTION>
March 31,
Significant joint venture information --------------------------------------------
1998 1997 1996
(thousands) (thousands) (thousands)
------------- ------------- ------------
<S> <C> <C> <C>
(a) NetHold (Note 3)
(b) Other joint ventures
Combined joint venture information .........
Share of results in joint ventures ......... $ (5,091) $ -- $ --
Current assets ............................. 11,110 -- --
Long-term assets ........................... 5,320 -- --
Current liabilities ........................ (26,173) -- --
Long-term liabilities ...................... (25,388) -- --
</TABLE>
11. Program and film rights
The following table sets forth the components of program and film rights,
on a gross and net basis:
<TABLE>
<CAPTION>
March 31,
----------------------------
1998 1997
(thousands) (thousands)
------------- ------------
<S> <C> <C>
Cost
Sports rights ............................. $60,893 $70,944
Film rights ............................... 13,554 10,291
------- -------
74,447 81,235
------- -------
Accumulated amortization
Sports rights ............................. 26,266 17,337
Film rights ............................... 9,927 8,425
------- -------
36,193 25,762
------- -------
Net book value
Sports rights ............................. 34,627 53,607
Film rights ............................... 3,627 1,866
------- -------
$38,254 $55,473
======= =======
Classified on the balance sheets as follows:
Currents assets ............................ $22,543 $32,599
Non-current assets ......................... 15,711 22,874
------- -------
$38,254 $55,473
======= =======
</TABLE>
12. Accrued expenses and other current liabilities
<TABLE>
<CAPTION>
March 31,
----------------------------
1998 1997
(thousands) (thousands)
------------- ------------
<S> <C> <C>
Deferred income .......................................... $ 14,344 $ 22,213
Accrued expenses ......................................... 41,973 42,399
Taxes and social securities .............................. 12,630 5,086
Amounts owing in respect of investments acquired ......... 6,400 42,387
Other current liabilities ................................ 46,555 24,042
-------- --------
$121,902 $136,127
======== ========
</TABLE>
F-28
<PAGE>
MIH Limited and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
13. Provisions
<TABLE>
<CAPTION>
March 31,
----------------------------
1998 1997
(thousands) (thousands)
------------- ------------
<S> <C> <C>
Decoder technology .................................................. $22,734 $29,358
Postretirement benefits (Note 26) ................................... 3,766 4,678
Write down of carrying values of assets in certain African countries 4,341 7,963
Subscriber guarantees ............................................... -- 42,203
Programming costs ................................................... 9,093 9,125
Provision for development costs/losses in joint ventures ............ 10,629 --
------- -------
$50,563 $93,327
======= =======
</TABLE>
14. Long-term debt and program and film rights
<TABLE>
<CAPTION>
March 31,
----------------------------
1998 1997
(thousands) (thousands)
Long-term debt comprises: ------------- ------------
<S> <C> <C>
Capital leases -- Note 8 ......................................... $ 67,172 $ 48,912
NetHold Finance VOF .............................................. 23,984 26,655
Other long-term debt ............................................. -- 519
--------- ---------
91,156 76,086
Less: Short-term portion included in current liabilities ......... (36,369) (15,476)
--------- ---------
$ 54,787 $ 60,610
========= =========
</TABLE>
Program and film rights payable are non-interest bearing and amounts due
in future fiscal years are $6.4 million in 1999; $15.9 million in 2000 and $8.7
million thereafter.
The loan from NetHold Finance VOF bears interest at 2% above the Amsterdam
Inter-bank Benchmark Rate and matures on or before October 5, 1998.
The currency mix of the long-term debt as at March 31, 1998 is:
<TABLE>
<CAPTION>
%
---------
<S> <C>
European Currency Unit .......... 39.0
Greek drachmae .................. 29.0
Netherlands guilders ............ 19.0
South African rand .............. 11.0
US dollars ...................... 2.0
-----
100.0
=====
</TABLE>
F-29
<PAGE>
MIH Limited and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
15. Deferred taxation
The deferred taxation relates to the temporary differences between the
book values and the tax bases of assets and liabilities. Significant components
of the Company's deferred taxation liabilities and assets are summarized below:
<TABLE>
<CAPTION>
March 31,
----------------------------
1998 1997
(thousands) (thousands)
------------- ------------
<S> <C> <C>
Deferred taxation liabilities
Leased assets .......................................... $ 1,097 $ 2,648
Purchased intangible fixed assets ...................... 3,275 --
Prepayments ............................................ 1,995 2,356
Subscriber base ........................................ 13,472 19,250
--------- ---------
Gross deferred taxation liabilities .................... 19,839 24,254
--------- ---------
Deferred taxation assets
Purchased intangible fixed assets ...................... 2,062 2,053
Purchased tangible fixed assets ........................ 350 153
Accounts receivable and other assets ................... 1,387 175
Accrued expenses and other current liabilities ......... 23,791 21,870
Program and film rights ................................ 3,113 566
Leased tangible fixed assets ........................... 2,881 209
Deferred income ........................................ 4,929 6,275
Tax loss carryforwards ................................. 36,156 26,770
--------- ---------
Gross deferred taxation assets ......................... 74,669 58,071
--------- ---------
Net deferred taxation assets ........................... 54,830 33,817
Less Valuation allowance ............................... (58,105) (33,817)
--------- ---------
Net deferred tax liabilities ........................... $ (3,275) $ --
========= =========
</TABLE>
The Company has raised a valuation allowance against the net deferred
taxation asset as in management's estimate it is more likely than not that the
deferred taxation asset will not be realized, due to the historical operating
losses incurred by the Company's operations and the timing limits on the tax
loss carry-forwards that arose on these losses.
16. Net revenues
<TABLE>
<CAPTION>
Year ended March 31,
--------------------------------------------
1998 1997 1996
(thousands) (thousands) (thousands)
------------- ------------- ------------
<S> <C> <C> <C>
Subscription revenues ............. $404,479 $ -- $ --
Decoder sales and repairs ......... 63,082 -- --
Technology and other .............. 33,931 -- --
-------- ----- -----
$501,492 $ -- $ --
======== ===== =====
</TABLE>
F-30
<PAGE>
MIH Limited and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
17. Financial results
<TABLE>
<CAPTION>
Year ended March 31,
--------------------------------------------
1998 1997 1996
(thousands) (thousands) (thousands)
------------- ------------- ------------
<S> <C> <C> <C>
Dividend income ......................... $ 3,177 $ -- $ --
Gain on disposal of investments ......... 2,647 -- --
Interest income ......................... 7,898 -- --
Exchange losses ......................... (6,049) -- --
Interest expense ........................ (13,161) (107) --
--------- ------- -----
$ (5,488) $ (107) $ --
========= ======= =====
</TABLE>
18. Income taxation
<TABLE>
<CAPTION>
Year ended March 31,
--------------------------------------------
1998 1997 1996
(thousands) (thousands) (thousands)
------------- ------------- ------------
<S> <C> <C> <C>
Foreign taxation
Current ....................... $ (5,964) $ -- $ --
Deferred ...................... (1,606) -- --
-------- ----- -----
Charged against income ......... $ (7,570) $ -- $ --
======== ===== =====
</TABLE>
The difference between income taxation expense computed at statutory rates
of the respective companies (35% average) and income taxation expense provided
on results are as follows:
<TABLE>
<CAPTION>
March 31,
--------------------------------------------
1998 1997 1996
(thousands) (thousands) (thousands)
------------- ------------- ------------
<S> <C> <C> <C>
Income taxation benefit at statutory rates ............ $ 19,631 $ -- $ --
Unprovided timing differences ......................... (22,080) -- --
Permanent differences
Profit on sale of investments ........................ 1,692 -- --
Profit on dilution of interest in associates ......... 315 -- --
Non deductible charges ............................... (13,961) -- --
Expenditure of a capital nature ...................... 156 -- --
Other taxes .......................................... (3,064) -- --
Change in taxation rates ............................. 9,741 -- --
--------- ----- -----
Income taxation expense .............................. $ (7,570) $ -- $ --
========= ===== =====
</TABLE>
The Company has tax loss carry-forwards of approximately $92.1 million. A
summary of the tax loss carry-forwards by tax jurisdiction, and the expiry
dates at March 31, 1998 (in thousands) is set out below:
<TABLE>
<CAPTION>
Africa Mediterranean Netherlands Total
---------- --------------- ------------- ---------
<S> <C> <C> <C> <C>
1999 ................ $ 2,400 $ 792 $ -- $ 3,192
2000 ................ 2,400 5,762 -- 8,162
2001 ................ 2,400 26,544 -- 28,944
2002 ................ 9,200 2,554 -- 11,754
2003 ................ 1,452 14,048 -- 15,500
Indefinite .......... 19,351 -- 5,230 24,581
------- ------- ------ -------
$37,203 $49,700 $5,230 $92,133
======= ======= ====== =======
</TABLE>
Tax loss carry-forwards of $23.6 million are only available for offset
against future taxable income from the same category of income which created
the loss.
F-31
<PAGE>
MIH Limited and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
18. Income taxation --Continued
The ultimate outcome of additional taxation assessments may vary from the
amounts accrued, however management of the Company believe that any additional
taxation liability over and above the amount accrued would not have a material
adverse impact on the Company's results of operations or financial position.
Unprovided timing differences are timing differences that are expected to
reverse within the carry-forward period of tax losses (note 3(j)) and are,
therefore, effectively a valuation allowance.
19. Discontinued operations
With effect from October 1, 1997 the Company sold its Internet-related
businesses to M-Web Holdings Limited, a related party, for $20.5 million, which
was settled in cash and resulted in a surplus of $4.4 million. The Company
accounted for the operating losses of the Internet-related businesses as
discontinued operations for the period from May 1, 1997 to September 30, 1997.
The $4.4 million surplus on this transaction was accounted for as a capital
contribution.
20. Related party transactions
The Company entered into transactions and has balances with a number of
affiliated companies, including equity investees, shareholders and entities
under common control. The transactions with affiliated companies are summarized
in the following table:
<TABLE>
<CAPTION>
Year ended March 31,
--------------------------------------------
1998 1997 1996
(thousands) (thousands) (thousands)
------------- ------------- ------------
<S> <C> <C> <C>
Income
Satellite transmission costs (a) ........... $ 1,308 $ -- $ --
Interest income (b) ........................ -- 11,916 14,205
-------- ------- -------
$ 1,308 $11,916 $14,205
======== ======= =======
Costs
Channel and programming costs (c) .......... $171,355 $ -- $ --
Transmission costs (d) ..................... 17,369 -- --
Use of broadcasting facilities (e) ......... 933 -- --
Licensing fees (f) ......................... 2,671 -- --
-------- ------- -------
$192,328 $ -- $ --
======== ======= =======
</TABLE>
- ----------------
(a) Certain costs related to the lease, maintenance and insurance of signal
distribution are charged on by the Company to one of its affiliated
companies.
(b) Interest income relates to a loan from the Company to one of the
subsidiaries of NetHold. Interest income on the loan has been included in
equity results in joint ventures.
(c) The Company purchased the right to transmit certain channels and programs
from an affiliated company.
(d) The Company is charged by an affiliate for services relating to the lease,
maintenance and insurance of signal distribution equipment.
(e) The Company is charged for the use of broadcasting facilities of an
affiliated company.
(f) Licensing fees are charged by an affiliated company for the use of certain
subscriber technology and software.
F-32
<PAGE>
MIH Limited and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
20. Related party transactions --Continued
The balances of advances, deposits, receivables and payables between the
Company and affiliates are:
<TABLE>
<CAPTION>
March 31,
----------------------------
1998 1997
(thousands) (thousands)
------------- ------------
<S> <C> <C>
Receivables
MIH Holdings ............................... $ 8,657 $ --
OpenTV ..................................... 323 --
Computicket ................................ 434 --
UBC ........................................ 3,872 --
Myriad International Holdings B.V. ......... 1,498 --
------- ------
$14,784 $ --
======= ======
Payables
Irdeto ..................................... $ -- $6,337
M-Web ...................................... 2,223 --
MIH Holdings ............................... -- 3,513
M-Cell ..................................... 237 --
Supersport ................................. 1,819 --
M-Net ...................................... 362 --
Orbicom .................................... 216 --
------- ------
$ 4,857 $9,850
======= ======
</TABLE>
21. Segment and geographic information
The Company has determined that its reportable segments are those that are
based on the Company's method of internal reporting, which disaggregates its
businesses by service/product and by geography. The Company's reportable
business segments are pay-television services and technology. The
pay-television business segment is conducted in Africa and the Middle East and
the Mediterranean. The technology business segment consists of Irdeto, based in
The Netherlands, and the Company's joint venture interest in OpenTV, based in
the United States. The Company's interests in OpenTV and the Middle East are
accounted for by the equity method and are, therefore, included in equity
results in joint ventures below.
F-33
<PAGE>
MIH Limited and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
21. Segment and geographic information --Continued
The accounting policies of the segments are identical to the accounting
policies described in "Summary of Significant Accounting Policies".
<TABLE>
<CAPTION>
Pay-television services Technology
1998 --------------------------- -------------
Africa
&
The Middle Mediter-
East ranean
--------- ---------- ---------
SALES (thousands) (thousands) (thousands)
<S> <C> <C> <C>
External sales ........................ $ 382,308 $ 106,403 $ 12,781
Inter-segment sales ................... -- -- 4,719
--------- ---------- ---------
Total revenue ......................... $ 382,308 $ 106,403 $ 17,500
========= ========== =========
RESULTS
Operating loss ........................ $ (4,901) $ (26,626) $ (3,035)
Depreciation and
amortization(c) ...................... (36,994) (18,243) (2,711)
Amortization of fi
program and film rights .............. -- (32,599) --
Operating loss is stated before the
following items;
Exchange (losses)/gains ............... (1,464) (8,042) 672
Dividend income ....................... -- -- --
Interest expense ...................... (4,476) (10,814) (555)
Gain on disposal of
investments .......................... -- -- --
Interest income ....................... 3,078 474 1,647
Equity results in associates .......... (2,783) -- --
Equity results in joint ventures ...... (556) -- (4,535)
Income taxation ....................... -- (1,658) (2,777)
OTHER INFORMATION
Segment assets ........................ 290,671 164,561 101,806
Investments in equity companies ....... 13,857 -- 6,239
Other investments at cost ............. 3,080 -- 1,004
Segment liabilities ................... 170,207 228,322 52,478
Capital expenditures .................. 23,356 7,085 1,223
<CAPTION>
1998
Segmental Reconciling Consolidated
Total Corporate items Total
------------- ------------- -------------------- -------------
SALES (thousands) (thousands) (thousands) (thousands)
<S> <C> <C> <C> <C>
External sales ........................ $ 501,492 $ -- $ -- $ 501,492
Inter-segment sales ................... 4,719 -- (4,719) --
---------- --------- ------------- ----------
Total revenue ......................... $ 506,211 $ -- $ (4,719) $ 501,492
========== ========= ============= ==========
RESULTS
Operating loss ........................ $ (34,562) $ (8,165) $ -- $ (42,727)
Depreciation and
amortization(c) ...................... (57,948) (62) -- (58,010)
Amortization of fi
program and film rights .............. (32,599) -- -- (32,599)
Operating loss is stated before the
following items;
Exchange (losses)/gains ............... (8,834) 2,785 -- (6,049)
Dividend income ....................... -- 3,177 -- 3,177
Interest expense ...................... (15,845) (18,339) 21,023 (a) (13,161)
Gain on disposal of
investments .......................... -- 2,647 -- 2,647
Interest income ....................... 5,199 23,101 (20,402) (a) 7,898
Equity results in associates .......... (2,783) -- -- (2,783)
Equity results in joint ventures ...... (5,091) -- -- (5,091)
Income taxation ....................... (4,435) (3,135) -- (7,570)
OTHER INFORMATION
Segment assets ........................ 557,038 539,631 (450,614) (b) 646,055
Investments in equity companies ....... 20,096 -- -- 20,096
Other investments at cost ............. 4,084 52,840 -- 56,924
Segment liabilities ................... 451,007 392,089 (450,614) (b) 392,482
Capital expenditures .................. 31,664 -- -- 31,664
</TABLE>
- ----------------
(a) Represents interest income and expenses on loans between group companies in
different segments and corporate that eliminate on consolidation.
(b) Represents adjustments to the assets and liabilities for the segments
relating to intergroup loans which eliminate on consolidation.
(c) Excludes amortization of program and film rights included in cost of
providing services and amortization of goodwill on equity method
investments included in equity results in joint ventures.
22. Commitments and contingencies
(a) Loans
MultiChoice Africa is required to lend a joint venture an amount not
exceeding $8.1 million, which represents 20% of a banking facility available to
fund the acquisition of decoders.
(b) Program and film rights and decoders
At March 31, 1998, the Company had entered into contracts for the purchase
of program and film rights and decoders. The Company's commitments in respect
of these contracts amount to $11.6 million (1997: $6.7 million and $12.6
million (1997: $14.8 million), respectively.
F-34
<PAGE>
MIH Limited and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
22. Commitments and contingencies--Continued
(c) Capital expenditure
The Company had capital expenditure commitments as at March 31, 1998 and
1997 of $17.5 million and $2.6 million, respectively.
(d) Lines of credit
At March 31, 1998, the Company had overdraft borrowing facilities of $43.7
million and decoder rental funding facilities in an aggregate amount equal to
$10.3 million with various financial institutions.
(e) Loss insurance
The Company does not generally carry risk of loss insurance for injury to
others, damage to the property of others, or interruption of its business
operations.
23. Foreign currency management
The currencies of the countries in which the Company operates are also the
functional currencies. For these operations, all gains and losses from foreign
currency transactions are included in current results. The cumulative
translation effects for operations using functional currencies other than the
US dollar are included in the foreign currency translation adjustment in
shareholders' equity.
The Company uses foreign currency forward exchange contracts, which
typically expire within one year, to hedge payments of foreign currencies
related to the purchase of goods and services in currencies other than the
functional currency. Realized gains and losses on these contracts are
recognized in the same period as the hedged transactions. The Company had
foreign exchange forward contracts on hand at March 31, 1998 hedging South
African rand, Greek drachmae and Thai baht against the US dollar and South
African rand against the British pound sterling. The US dollar/Thai baht
exchange contracts were entered into by the Company on behalf of UBC. Under a
written agreement, all profits/losses arising from these contracts are for the
account of UBC. The Company does not currently hold or issue derivative
financial instruments for trading purposes.
The contractual amounts, exchange rates and settlement dates of the
outstanding contracts at March 31, 1998 are set out below:
<TABLE>
<CAPTION>
Contractual Average
amounts exchange
(thousands) rates Settlement dates
------------- ----------- ------------------------------------
<S> <C> <C> <C>
Greek drachmae/US dollar ............. $14,000 307.49 April 27, 1998 -- May 25, 1999
South African rand/US dollar ......... 23,849 5.22 August 31, 1998 -- January 28, 1999
Thai baht/US dollar .................. 8,000 50.35 June 30, 1998
South African rand/British
pound sterling ...................... 1,727 7.97 July 31, -- August 31, 1998
</TABLE>
F-35
<PAGE>
MIH Limited and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
24. Fair value of financial instruments
The carrying amount of cash and cash equivalents approximates fair value
due to the short maturities of these instruments. The value of long-term debt
is estimated using discounted cash flows based on the Company's incremental
borrowing rates for similar types of borrowings. The value of forward exchange
contracts is based on quoted market prices. A comparison of the carrying value
and fair value of these instruments is as follows:
<TABLE>
<CAPTION>
March 31, 1998 March 31, 1997
Carrying Carrying
Value Fair Value Value Fair Value
(thousands) (thousands) (thousands) (thousands)
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents .......... $153,412 $153,412 $ 60,773 $ 60,773
Receivables ........................ 81,227 81,227 43,623 43,623
Marketable securities .............. 56,924 104,817 309,669 286,416
Liabilities:
Payables and provisions ............ 257,630 257,630 281,844 281,844
Short-term borrowings .............. 59,199 59,199 32,640 32,640
Long-term debt ..................... 79,395 79,395 91,368 91,368
Off-balance-sheet instruments
Forward exchange contracts ......... 47,576 45,999 28,027 24,610
</TABLE>
25. Pension funds
The Company has defined contribution plans covering employees of most of
its subsidiaries. The Company's contributions under these plans are based
primarily on the performance of the business units and employee compensation.
Total expense amounted to $2.4 million for 1998.
26. Postretirement benefits
MultiChoice Africa provides postretirement benefits by way of medical aid
contributions. At March 31, 1998 and 1997 the provision for benefits is $3.8
million and $4.7 million, respectively. During the year ended March 31, 1997,
an agreement was reached with employees of MultiChoice Africa to terminate the
postretirement medical aid benefits plan in exchange for an increase of the
MultiChoice Africa's annual contributions to the retirement benefit fund. The
provision will be released to operating results to match the additional
contributions to the retirement benefit plan.
27. Acquisition of subsidiaries net of cash acquired
<TABLE>
<CAPTION>
1998
(thousands)
------------
<S> <C>
Fair value of tangible assets:
Fixed assets .............................. $ (23,451)
Investments and loans ..................... (19,638)
Current assets -- other than cash ......... (25,127)
Current liabilities ....................... 40,865
Long term liabilities ..................... 16,928
---------
(10,423)
Goodwill .................................. (31,223)
---------
Consideration ............................. (41,646)
Cash acquired ............................. 7,735
---------
Net cash paid for acquisitions ............ $ (33,911)
=========
</TABLE>
In 1997, cash from acquisition of subsidiaries of $54,045 represents cash
balances of the Acquired MIH Businesses.
F-36
<PAGE>
MIH Limited and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
28. Subsequent events
On April 4, 1998 the Company sold 28 million of its shares in M-Net for
$22.5 million. As a result of this transaction the Company recorded a gain of
$11.2 million and reduced its shareholding to 9.9%.
29. Differences between IAS and United States Generally Accepted Accounting
Principles
The Company's consolidated financial statements are prepared in accordance
with IAS, which differ in certain respects from accounting principles generally
accepted in the United States ("US GAAP").
The only significant difference which affects the Company's results and
shareholders' equity relates to the accounting for its investment in UBC. Under
IAS the investment in UBC is carried at cost through March 31, 1998. In June
1998, the Company increased its shareholding in UBC to approximately 26.1% and,
as a result, exercises significant influence in UBC. Under IAS, the Company
thereafter will use the equity method of accounting for UBC. US GAAP requires a
retroactive adjustment of financial statements for an investee that was
previously accounted for on other than the equity method when that investee
becomes qualified for use of the equity method. The adjustment therefore
reflects the effect of applying the equity method to the investment in UBC
determined under US GAAP. The initial investment in UBC occurred in March 1997
and the effect on the year ended March 31, 1997 is not material.
I Reconciliation of net (loss)/profit (in thousands, except per share data):
<TABLE>
<CAPTION>
Year ended March 31,
---------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
Net (loss)/profit under IAS ........................ $ (63,802) $ 409,164
US GAAP adjustment:
Equity accounting for UBC .......................... (15,482) --
----------- -----------
Net (loss)/profit under US GAAP .................... $ (79,284) $ 409,164
=========== ===========
Weighted average common shares outstanding ......... 22,799 22,799
=========== ===========
Net (loss)/profit per share under US GAAP .......... $ (3,477.52) $ 17,946.58
=========== ===========
Net (loss) profit under US GAAP consists of:
Loss from continuing operations .................... $ (75,348) $ 409,164
Discontinued operations ............................ (3,936) --
----------- -----------
Net (loss) profit .................................. $ (79,284) $ 409,164
=========== ===========
Per share amounts:
Continuing operations ............................. $ 3,304.88) $ 17,946.58
Discontinued Operations ........................... (172.64) --
----------- -----------
Net (loss) profit ................................. $ (3,477.52) $ 17,946.58
=========== ===========
</TABLE>
Reconciliation of shareholders' equity:
<TABLE>
<CAPTION>
March 31,
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
Total shareholders' equity under IAS ............. $ 253,573 $397,285
US GAAP adjustment:
Equity accounting for UBC ........................ (24,883) --
--------- --------
Total shareholders' equity under US GAAP ......... $ 228,690 $397,285
========= ========
</TABLE>
F-37
<PAGE>
MIH Limited and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
II Additional disclosure requirements
(a) Certain Risks and Concentrations
The Company is exposed to certain concentrations of credit risk relating
to its cash and current investments. The Company places its cash and current
investments with high quality institutions. The Company's policy is designed to
limit exposure with any one institution and to invest its excess cash in low
risk investment accounts. The Company has not experienced any losses on such
accounts. As of March 31, 1998, cash and current investments were held with
numerous financial institutions.
The Company's digital programming is or will be transmitted to customers
through different satellites around the world, and in certain regions its
terrestrial analog signal is also transmitted to regional broadcast points
through satellites. In addition, the Company receives a significant amount of
its programming through satellites. Satellites are subject to significant risks
that may prevent or impair commercial operations. Although the Company has not
experienced any significant disruption of its transmissions, the operation of
satelittes is beyond the control of the Company. Disruption of the
transmissions of satellites could have a material adverse effect on the
Company.
(b) Stock based compensation
MIH management and employees participate in the Stock Option Plan (the
"Plan") of the Company's parent MIH Holdings Limited ("MIHH"). Under the Plan,
MIHH may grant options to its employees for up to 11.8 million shares of MIHH's
common stock. Stock options may be granted with an exercise price not less than
100% of the market value of the options at the time of the grant. One third of
the options generally vest at the anniversary of each of the third, fourth and
fifth year after the grant date of the stock options and expire after ten
years. Unvested shares are subject to cancellation upon expiration or
termination of employment.
<TABLE>
<CAPTION>
1998
----------------------------------------
Weighted average
exercise price
Shares (Rand)
------------ -----------------
<S> <C> <C>
Outstanding at April 1, 1997 .......... 734,749 10.40
Granted ............................... 3,082,000 15.79
Exercised ............................. (150,856) 10.39
Forfeited ............................. (150,917) 14.47
--------- -----
Outstanding at March 31, 1998 ......... 3,514,976 14.25
========= =====
</TABLE>
The following table summarizes information about the stock options
outstanding at March 31, 1998:
<TABLE>
<CAPTION>
Range of exercise Remaining Weighted-average Weighted average
prices Outstanding as of contractual life exercise price Exercisable as of exercise price
(Rand) March 31, 1998 (years) (Rand) March 31, 1998 (Rand)
- ------------------- ------------------- ------------------ ------------------ ------------------- -----------------
<S> <C> <C> <C> <C> <C>
5.60 - 12.50 571,076 6.13 10.62 259,804 9.53
12.51 - 17.50 2,943,900 9.33 14.95 -- --
</TABLE>
For purposes of US GAAP, the Company applies Accounting Principles Board
("APB") Opinion 25, "Accounting for Stock Issued to Employees," and related
Interpretations in accounting for its plans. Accordingly, no compensation cost
has been recognized for its stock option plan. Had compensation cost for the
Company's stock option plan been determined based on the fair value at the
grant dates for awards under those plans consistent with the method of SFAS No.
123, "Accounting for Stock-Based Compensation," the Company's net loss and loss
per share would have been increased to the pro forma amounts indicated below:
F-38
<PAGE>
MIH Limited and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
II Additional disclosure requirements --Continued
<TABLE>
<CAPTION>
Year ended
March 31, 1998
(In thousands except for per share data) ---------------
<S> <C> <C>
Net loss As reported $ (63,802)
Pro forma $ (64,678)
Net loss per share As reported $ (2,798.46)
Pro forma $ (2,836.88)
</TABLE>
The weighted average grant date fair value of options granted during
fiscal 1998 was rand 9.40. The fair value of each option grant is estimated on
the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for grants during fiscal 1995,
respectively: dividend yield of 0%; expected volatility of 30%; an expected
risk-free interest rate of 14.9%; and an expected life of 6 years.
(c) Restricted Net Assets
The net assets of certain of MIH Limited's subsidiaries and associates are
subject to regulatory restrictions with regard to the transfer of such assets
to MIH Limited in the form of loans, advances or cash dividends without the
consent of regulatory authorities. The restrictions primarily relate to foreign
exchange control regulations in South Africa, which prescribe that South
African residents and companies are not permitted to export capital from South
Africa or to hold foreign currency without the approval of the South African
Reserve Bank. These exchange control regulations effectively prevent MIH
Limited from receiving distributions from its South African subsidiaries,
without regulatory approval. The total net assets of subsidiaries subject to
such restriction as of March 31, 1998, amount to approximately $120.5 million.
The following are the condensed balance sheets and statements of
operations and cash flow for MIH Limited as of March 31, 1998 and 1997 and the
years then ended. Investments in subsidiaries and associated companies are
accounted for using the equity method of accounting.
<TABLE>
<CAPTION>
Balance Sheets
March 31,
----------------------------
1998 1997
(thousands) (thousands)
------------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents .............................. $ 89,226 $ 6,728
Amounts owing by related parties ....................... 5,370 --
---------- ----------
Non-current assets 94,596 6,728
Long-term investments .................................. 225,400 522,463
---------- ----------
Total assets ........................................ $ 319,996 $ 529,191
========== ==========
LIABILITIES
Current liabilities
Bank overdrafts ........................................ $ -- $ 12,720
Current portion of long-term debt ...................... 23,984 --
Accrued expenses and other current liabilities ......... 10,568 44,933
Provisions ............................................. 31,871 74,253
---------- ----------
Total liabilities ................................... 66,423 $ 131,906
---------- ----------
SHAREHOLDERS' EQUITY
Share capital ........................................... 23 23
Share premium ........................................... 589,529 585,161
Accumulated loss ........................................ (313,547) (197,928)
Foreign currency translation adjustment ................. (22,432) 10,029
---------- ----------
Total shareholders' equity .......................... 253,573 397,285
---------- ----------
Total liabilities and shareholders' equity .......... $ 319,996 $ 529,191
========== ==========
</TABLE>
F-39
<PAGE>
MIH Limited and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
II Additional disclosure requirements --Continued
Statements of Operations
<TABLE>
<CAPTION>
Year ended March 31,
----------------------------
1998 1997
(thousands) (thousands)
------------- ------------
<S> <C> <C>
General and administrative expenses ................. $ (6,587) $ (899)
Financial results, net .............................. 8,311 (107)
Equity results in joint ventures/associates ......... (59,812) (129,858)
Profit on sale of joint venture ..................... -- 540,028
Income taxation ..................................... (5,714) --
--------- ----------
Net (loss)/profit for the year ...................... $ (63,802) $ 409,164
========= ==========
</TABLE>
Statements of Cash flow
<TABLE>
<CAPTION>
Year ended March 31,
----------------------------
1998 1997
(thousands) (thousands)
------------- ------------
<S> <C> <C>
Net cash (used in)/from operating activities ................ $ (20,528) $ 5,979
---------- ---------
Disposal of investments ..................................... 269,222
Acquisition of associates and subsidiaries .................. (103,474) (10,348)
---------- ---------
Net cash from /(used in) investing activities ............... 165,748 (10,348)
---------- ---------
Finance income/(costs) ...................................... 2,488 (107)
Dividends paid .............................................. (51,816) --
Bank overdrafts (repaid)/raised ............................. (12,720) 9,913
---------- ---------
Net cash (used in)/from financing activities ................ (62,048) 9,806
---------- ---------
Net increase in cash and cash equivalents ................... 83,172 5,437
Cash and cash equivalents at beginning of the year .......... 6,728 1,466
Translation adjustment on cash and cash equivalents ......... (674) (175)
---------- ---------
Cash and cash equivalents at end of the year ................ $ 89,226 $ 6,728
========== =========
</TABLE>
(d) Significant Associates: Summarized financial information
The following are the summarized balance sheets and statements of
operations for UBC and M-Net, as derived from their respective audited
financial statement and converted to US dollars.
<TABLE>
<CAPTION>
UBC M-Net/Supersport
-------------- ----------------------------
December 31, March 31,
-------------- ----------------------------
1997 1998 1997
(thousands) (thousands) (thousands)
-------------- ------------- ------------
<S> <C> <C> <C>
Current assets ........................................ $18,243 $157,300 $145,219
Non-current assets .................................... 70,298 74,325 73,529
------- -------- --------
Total assets ....................................... 88,541 231,625 218,748
------- -------- --------
Current liabilities ................................... 25,257 137,107 133,872
Non-current liabilities ............................... 8,268 29,586 25,730
------- -------- --------
Total liabilities .................................. 33,525 166,693 159,602
------- -------- --------
Minority interest ..................................... 4,037 -- --
Total shareholders' equity ......................... 50,979 64,932 59,146
------- -------- --------
Total liabilities and shareholders' equity ......... $88,541 $231,625 $218,748
======= ======== ========
</TABLE>
F-40
<PAGE>
MIH Limited and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
II Additional disclosure requirements --Continued
<TABLE>
<CAPTION>
Year ended
December 31, Year ended March 31,
-------------- ----------------------------
1997 1998 1997
(thousands) (thousands) (thousands)
-------------- ------------- ------------
<S> <C> <C> <C>
Net sales ....................... $ 36,794 $216,971 $192,954
Operating (loss)/profit ......... (34,961) 28,053 18,658
Net income ...................... 36,212 10,446 5,120
</TABLE>
(e) Recently issued accounting standards
SFAS No. 130, "Reporting Comprehensive Income" was issued by the Financial
Accounting Standards Board ("FASB") in June 1997 and is effective for fiscal
years beginning after December 15, 1997. It will be effective for the Company's
financial statements for the year ended March 31, 1999. Reclassification of
financial statements for earlier periods provided for comparative purposes is
required. This Statement established guidelines for the reporting and display
of comprehensive income and its components (revenues, expenses, gains and
losses) in a full set of general purpose financial statements. It requires that
all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements; it does not
address issues of recognition or measurement. Management is currently assessing
the impact of adopting this Statement on its financial statements.
SFAS No. 132, "Employers' Disclosures about Pensions and other
Postretirement Benefits" was issued by the FASB in February 1998 and is
effective for all years beginning after December 15, 1997. It will be effective
for the Company's financial statements for the year ended March 31, 1999.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required. This statement revises employers' disclosures
about pension and other postretirement benefit plans. It does not change the
measurement or recognition of those plans. It standardizes the disclosure
requirements for pensions and other postretirement benefits to the extent
practicable, requires additional information on changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis, and eliminates certain disclosures that are no longer considered as
useful as they were when SFAS No. 87, "Employers' Accounting for Pensions,"
SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined
Benefit Pension Plans and for Termination Benefits," and SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions," were
issued. The Statement suggests combined formats for presentation of pension and
other postretirement benefit disclosures. Management is currently assessing the
impact of adopting this Statement on its financial statements.
SFAS No.133, "Accounting for Derivative Instruments and Hedging
Activities" is effective for fiscal years beginning after June 15, 1999. It
will be effective for the Company's financial statements for the year ended
March 31, 2001. This Statement establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded
in other contracts (collectively referred to as derivatives), and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. If certain conditions are met, a derivative may be
specifically designated as (a) a hedge of the exposure to changes in the fair
value of a recognized asset or liability or an unrecognized firm commitment,
(b) a hedge of the exposure to variable cash flows of a forecasted transaction,
or (c) a hedge of the foreign currency exposure of a net investment in a
foreign operation, an unrecognized firm commitment, an available-for-sale
security, or a foreign-currency-denominated forecasted transaction. Management
is currently assessing the impact of adopting this Statement on its financial
statements.
In July of 1997, the International Accounting Standards Committee ("IASC")
issued International Accounting Standard ("IAS") 1 (revised) "Disclosure of
Accounting Policies". IAS 1 will be effective for the Company's financial
statements for the year ending March 31, 2000. IAS 1 defines overall
considerations for financial statements and prescribes the minimum structure
and content of four basic financial statements (Balance sheet, Income
statement, Cash flow statement, and Statement showing changes in equity),
including certain information required on the financial statements. IAS 1 also
addresses various issues in disclosures in financial statements. The Company
F-41
<PAGE>
MIH Limited and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
II Additional disclosure requirements--Continued
believes that it has complied with the main provisions of this standard and
does not believe that this standard will have a significant influence on the
Company's financial statements.
The IAS has issued IAS 17 (revised 1997), "Leases", which supersedes IAS
17, "Accounting for Leases" and is operative for financial statements covering
periods beginning on or after January 1, 1999. The changes from the original
IAS 17 do not fundamentally alter the accounting treatments. The Company does
not expect a material impact on its financial statements as a result of
adopting IAS 17 (revised 1997).
In January 1998, the IASC issued IAS 19 (revised 1998) "Employee
Benefits", which supersedes IAS 19 "Retirement Benefit Costs". It will be
effective for the Company's financial statements for the year ending March 31,
2000. The revised standard applies a uniform accounting model to pension
benefits and other short term employee benefits such as compensated absences,
as well as other post-employment benefits and termination benefits. It also
requires disclosure of equity compensation benefits. IAS 19 (revised 1998) also
changes certain key provisions with respect to defined benefit plans. For
example, all companies must use the projected unit credit method to measure
their pension expense and pension obligation. The Company is currently
assessing the impact that this standard may have on the Company's financial
statements.
In June of 1998, the IASC issued IAS 35 "Discontinuing Operations". IAS 35
will be effective for the Company's financial statements for the year ending
March 31, 2000. IAS 35 is a presentation and disclosure standard. It requires
that enterprises follow the recognition and measurement principles in other IAS
standards. The standard defines the situations in which disclosures must be
made by the enterprise for a discontinuing operation. Appendices to IAS 35 also
provide (a) illustrative disclosure and (b) guidance on how prior period
information should be restated to conform to the presentation requirement of
IAS 35. The Company believes that it has complied with the provisions of this
standard and does not believe that this standard will have a significant
influence on the Company's financial statements.
In June of 1998, the IASC issued IAS 36 "Impairment of Assets". IAS 36
will be effective for the Company's financial statements for the year ending
March 31, 2001. IAS 36 establishes the procedures that an enterprise should
apply to ensure that its assets are not overstated in the financial statements.
It also prescribes the method an enterprise should use to assess the amount to
be recovered from an asset and the timing when an enterprise should account for
an impairment loss. Under IAS 36, an impairment loss should be recognized
whenever the recoverable amount of an asset is less than its carrying amount.
The Company is currently assessing the impact that this standard may have on
its financial statements.
F-42
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the directors and shareholders of
MIH Limited
We have audited the accompanying combined balance sheets of the Acquired MIH
Businesses (predecessor to MIH Limited) as of March 31, 1997 and 1996, and the
related combined statements of operations and cash flow and changes in net
deficit for each of the two years in the period ended March 31, 1997. These
combined financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the Republic of South Africa, which are substantially the same as
those followed in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
combined 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 combined financial position of the Acquired MIH
Businesses (predecessor to MIH Limited) as of March 31, 1997 and 1996, and the
combined results of their operations and cash flow for each of the two years in
the period ended March 31, 1997, in conformity with International Accounting
Standards.
International Accounting Standards vary in certain significant respects from
accounting principles generally accepted in the United States of America. The
application of the latter would have affected the determination of combined
results for each of the two years in the period ended March 31, 1997 and the
net deficit as of March 31, 1997 and 1996 to the extent summarized in Note 24
to the combined financial statements.
Johannesburg, Republic of South Africa Coopers & Lybrand
June 15, 1998 Chartered Accountants (SA)
Registered Accountants and Auditors
F-43
<PAGE>
Acquired MIH Businesses
(Predecessor to MIH Limited)
Combined Balance Sheets
March 31, 1997 and 1996
(in thousands of US dollars)
<TABLE>
<CAPTION>
Notes 1997 1996
------- ------------ ------------
ASSETS
<S> <C> <C> <C>
Current Assets
Cash and cash equivalents .............................. $ 53,908 $ 15,063
Accounts receivable, net ............................... 4 22,331 17,748
Other receivables ...................................... 5 21,292 34,972
Program and film rights ................................ 10 32,599 2,417
Amounts owing by related parties ....................... 17 10,247 10,560
Inventories, net ....................................... 6 12,781 13,414
--------- ---------
Total current assets ................................ 153,158 94,174
Non-Current Assets
Tangible fixed assets, net ............................. 8 87,449 39,052
Long-term investments .................................. 9 23,672 21,327
Program and film rights ................................ 10 22,874 1,571
--------- ---------
Total non-current assets ............................ 133,995 61,950
--------- ---------
TOTAL ASSETS ........................................ $ 287,153 $ 156,124
========= =========
LIABILITIES
Current Liabilities
Bank overdrafts ........................................ $ 753 $ 7,914
Current portion of long-term debt ...................... 15,476 1,927
Current portion of program and film rights ............. 7,251 --
Accounts payable ....................................... 42,540 35,436
Accrued expenses and other current liabilities ......... 11 79,673 50,123
Amounts owing to related parties ....................... 17 83,817 79,892
Provisions ............................................. 12 16,865 7,052
--------- ---------
Total current liabilities ........................... 246,375 182,344
Non-Current Liabilities
Long-term debt ......................................... 13 60,610 6,219
Program and film rights ................................ 13 30,758 --
--------- ---------
Total non-current liabilities ....................... 91,368 6,219
--------- ---------
TOTAL LIABILITIES ................................... 337,743 188,563
--------- ---------
Commitments and contingencies .......................... 19 -- --
NET DEFICIT ......................................... (50,590) (32,439)
--------- ---------
TOTAL LIABILITIES AND NET DEFICIT ................... $ 287,153 $ 156,124
========= =========
</TABLE>
The accompanying notes are an integral part of these
combined financial statements.
F-44
<PAGE>
Acquired MIH Businesses
(Predecessor to MIH Limited)
Combined Statements of Operations
for the years ended March 31, 1997 and 1996
(in thousands of US dollars)
<TABLE>
<CAPTION>
Notes 1997 1996
------- ------------- -------------
<S> <C> <C> <C>
Net revenues .................................. 14 $ 391,898 $ 282,894
Operating expenses:
Cost of providing services ................... (259,391) (212,919)
Selling, general and administrative .......... (140,446) (77,553)
Depreciation and amortization ................ (16,191) (9,818)
---------- ----------
Total operating expenses ...................... (416,028) (300,290)
---------- ----------
Operating loss ................................ (24,130) (17,396)
Financial results, net ........................ 15 (5,267) (926)
Equity results in joint ventures .............. 1,144 (1,826)
Equity results in associates .................. 2,644 2,388
---------- ----------
Loss before taxation .......................... (25,609) (17,760)
---------- ----------
Income taxation ............................... 16 (1,158) (3,883)
---------- ----------
Loss after taxation ........................... (26,767) (21,643)
Minority interest ............................. 738 114
---------- ----------
Net loss .................................. $ (26,029) $ (21,529)
========== ==========
</TABLE>
The accompanying notes are an integral part of these
combined financial statements.
F-45
<PAGE>
Acquired MIH Businesses
(Predecessor to MIH Limited)
Combined Statements of Cash Flow
for the years ended March 31, 1997 and 1996
(in thousands of US dollars)
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities
Operating loss $ (24,130) $ (17,396)
Adjustments for:
Depreciation and amortization .............................................. 16,191 9,818
Amortization of program and film rights .................................... 18,796 10,123
Taxation refunded/(paid) ................................................... 3,863 (5,364)
Loss on sale of tangible fixed assets ...................................... 5,223 680
Decrease/(increase) in receivables ......................................... 3,934 (30,627)
Payments for program and film rights ....................................... (32,747) (7,278)
Net increase in amounts owing to related parties ........................... 27,139 989
Increase in inventories .................................................... (964) (3,755)
Increase in payables ....................................................... 53,509 46,793
(Decrease)/increase in current portion of long-term debt to related parties (2,268) 2,574
--------- ---------
Net cash from operating activities ...................................... 68,546 6,557
--------- ---------
Cash flows from investing activities
Purchase of tangible fixed assets ........................................... (17,649) (13,022)
Proceeds on sale of tangible fixed assets ................................... 4,227 3,253
Dividends received from associates .......................................... 1,490 2,057
Investments acquired ........................................................ (658) (3,136)
(Increase)/decrease in unsecured loan ....................................... (2,050) 188
--------- ---------
Net cash used in investing activities ................................... (14,640) (10,660)
--------- ---------
Cash flows from financing activities
Finance costs ............................................................... (5,267) (926)
Funds raised from outside shareholders ...................................... 738 114
Long-term debt raised/(repaid) .............................................. 27,174 (4,741)
Long-term debt (repaid)/raised from related party ........................... (11,272) 10,207
Capital leases repaid ....................................................... (18,422) (7,278)
Bank overdrafts (repaid)/raised ............................................. (6,219) 1,349
--------- ---------
Net cash used in financing activities ................................... (13,268) (1,275)
--------- ---------
Net increase/(decrease) in cash and cash equivalents ........................ 40,638 (5,378)
Cash and cash equivalents at the beginning of the year ...................... 15,063 22,081
Translation adjustment on cash and cash equivalents ......................... (1,793) (1,640)
--------- ---------
Cash and cash equivalents at end of the year ................................ $ 53,908 $ 15,063
========= =========
</TABLE>
The accompanying notes are an integral part of these
combined financial statements.
F-46
<PAGE>
Acquired MIH Businesses
(Predecessor to MIH Limited)
Combined Statement of Changes in Net Deficit
for the years ended March 31, 1997 and 1996
(in thousands of US dollars)
<TABLE>
<CAPTION>
Myriad Africa NetMed Total
(thousands) (thousands) (thousands)
--------------- ------------- ------------
<S> <C> <C> <C>
Share capital
April 1, 1995 ...................................................... $ 48 $ 26 $ 74
======== ========= =========
March 31, 1996 ..................................................... 48 26 74
======== ========= =========
March 31, 1997 ..................................................... 48 26 74
======== ========= =========
Share premium
April 1, 1995 ...................................................... $ 24,869 $ -- $ 24,869
======== ========= =========
March 31, 1996 ..................................................... 24,869 -- 24,869
======== ========= =========
March 31, 1997 ..................................................... 24,869 -- 24,869
======== ========= =========
Accumulated loss
April 1, 1995 ...................................................... $ -- $ (31,450) $ (31,450)
Cumulative effect of change in accounting policy (Note 23) ......... (3,868) -- (3,868)
Profit (loss) for the year ......................................... 13,350 (33,940) (20,590)
-------- --------- ---------
March 31, 1996 ..................................................... 9,482 (65,390) (55,908)
Loss for the year .................................................. (8,175) (20,914) (29,089)
-------- --------- ---------
March 31, 1997 ..................................................... $ (1,307) $ (86,304) $ (84,997)
======== ========= =========
Foreign Currency Translation Adjustment
April 1, 1995 ...................................................... $ -- $ (1,295) $ (1,295)
Translation adjustment ............................................. (1,801) 2,561 760
-------- --------- ---------
March 31, 1996 ..................................................... (1,801) 1,266 (535)
Translation adjustment ............................................. 319 7,779 8,098
-------- --------- ---------
March 31, 1997 ..................................................... $ (1,482) $ 9,045 $ 7,563
======== ========= =========
Total Combined Net Deficit
April 1, 1995 ...................................................... $ 24,917 $ (32,719) $ (7,802)
Cumulative effect of change in accounting policy (note 23) ......... (3,868) (3,868)
Net profit (loss) .................................................. 13,350 (33,940) (20,590)
Translation adjustment ............................................. (1,801) 2,561 760
-------- --------- ---------
March 31, 1996 ..................................................... 32,598 (64,098) (31,500)
Net Loss ........................................................... (8,175) (20,914) (29,089)
Translation adjustment ............................................. 319 7,779 8,098
-------- --------- ---------
March 31, 1997 ..................................................... $ 24,742 $ (77,233) $ (52,491)
======== =========
Equity investment in Irdeto .................................................................... 1,901
---------
Combined Net Deficit ........................................................................... $ (50,590)
=========
</TABLE>
Difference between the total net loss for the years ended March 31, 1996
and 1997 and the net loss recorded in the statements of operations amounting to
$(939) and $3,060, respectively, and the difference between the total net
deficit at March 31, 1996 and 1997 and the net deficit in the combined balance
sheet amounting to $(939) and $1,901, respectively, are attributable to the
gains/(losses) and net equity/(deficit) of Irdeto, an equity investment which
is included in the Acquired MIH Businesses (note 3(a)).
The accompanying notes are an integral part of these
combined financial statements.
F-47
<PAGE>
Acquired MIH Businesses
(Predecessor to MIH Limited)
Notes to the Combined Financial Statements
1. Description of business and basis of presentation
These combined financial statements include the accounts of Myriad Africa
B.V. ("Myriad Africa"), NetMed B.V. ("NetMed"), and equity investments in
MultiChoice Middle East Holdings Inc. ("MultiChoice Middle East"), Irdeto B.V.
("Irdeto") and their subsidiaries (collectively referred to as the "Acquired
MIH Businesses"). The Acquired MIH Businesses are the predecessor to MIH
Limited ("MIH") and subsidiaries. Historically, no combined financial
statements have been prepared for the Acquired MIH Businesses. The reason for
the presentation of the combined financial statements of the Acquired MIH
Businesses is to provide financial statements for the years ended March 31,
1997 and 1996 that are comparable to the MIH consolidated financial statements
for the year ended March 31, 1998 which include MIH and the Acquired MIH
Businesses after the Canal+ transaction described in Note 2.
The principal activities of the Acquired MIH Businesses are the provision
of pay-television and subscriber management services ("pay-television
services") and the development of pay-television technology. These activities
are conducted primarily in Africa, Greece, Cyprus, the Middle East and in the
Netherlands.
2. Canal+ transaction
Until March 31, 1997, the Acquired MIH Businesses were collectively part
of the Network Holdings S.A. Group ("NetHold"), a joint venture between MIH and
Compagnie Richemont A.G. ("Richemont"). The principal activities of NetHold
included pay-television services operations through its subsidiaries and equity
investments in Africa, Greece, Cyprus, the Middle East, Benelux, Italy and
Scandinavia. Additionally, NetHold held 100% of the share capital of Irdeto, a
decoder technology company. Effective March 31, 1997, MIH sold its interest in
NetHold to Canal+ in exchange for a 5% share in Canal+ and NetHold's
pay-television services businesses in Greece and Cyprus (NetMed), Africa
(Myriad Africa) and the Middle East (MultiChoice Middle East) and subsequently
acquired a 49% share in Irdeto.
3. Principal accounting policies and reporting currency
The combined financial statements are based on International Accounting
Standards ("IAS") issued by the International Accounting Standards Committee
and have been prepared on the historical cost basis.
The Acquired MIH Businesses have adopted the US dollar as their reporting
currency. Notwithstanding the US dollar reporting currency, the Acquired MIH
Businesses measure separately the transactions of each of their material
operations using the particular currency of the primary economic environment in
which the operation conducts its business (its functional currency).
The financial statements have been translated from functional currencies
to the reporting currency by translating assets and liabilities, both monetary
and non-monetary, and including goodwill and other intangible assets which
arise as a result of equity investments in entities, at the closing rate at
each balance sheet date. Income and expense items are translated at exchange
rates at the dates of the transactions or average rates. All resulting exchange
differences are included in equity.
Preparation of the combined financial statements in conformity with
generally accepted accounting principles ("GAAP") requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
(a) Basis of combination
The combined financial statements include the consolidated accounts of
Myriad Africa (including its equity investment in MultiChoice Middle East) and
NetMed and an equity investment in Irdeto. Included in Note 9 is a listing of
the significant companies included in the combined financial statements. The
structure of the Acquired MIH Businesses has not changed during the periods
presented in these combined financial statements.
F-48
<PAGE>
Acquired MIH Businesses
(Predecessor to MIH Limited)
Notes to the Combined Financial Statements (Continued)
3. Principal accounting policies --Continued
An inter-company loan owing by the Acquired MIH Businesses to another
NetHold subsidiary, which was acquired by MIH, has been included in net
deficit.
All inter-company transactions are eliminated as part of the combination
process, and the interest of the minority shareholders in the combined equity
and the combined results of the Acquired MIH Businesses are shown separately in
the Combined Balance Sheet and Statement of Operations. For financial reporting
purposes, the equity accounts of the Acquired MIH Businesses have been
accumulated into a single amount entitled net deficit. Where the losses
applicable to the minority shareholders in a consolidated subsidiary exceed the
minority interest in the subsidiary, the excess, and any further losses
applicable to the minority, are charged against the majority interest except to
the extent that the minority has a binding obligation to, and is able to, make
good the losses. If the subsidiary subsequently reports profits, the majority
interest is allocated to all such profits until the minority's share of losses
previously absorbed by the majority has been recovered.
Companies in which the Acquired MIH Businesses have joint control are
accounted for using the equity method with the Acquired MIH Businesses' share
of profit and losses included in the Combined Statement of Operations. The
Acquired MIH Businesses' share of post acquisition retained profits/losses is
added to/deducted from the cost of the joint venture investments in the
Combined Balance Sheet.
Associated companies, in which the Acquired MIH Businesses have
significant influence, are accounted for using the equity method with the
Acquired MIH Businesses' share of profits and losses included in the Combined
Statement of Operations. The Acquired MIH Businesses' share of post acquisition
retained profits/losses is added to/deducted from the cost of the associated
company investments in the Combined Balance Sheet.
Other investments are stated at cost. When necessary a provision is made
on the basis of an evaluation of each individual investment for any diminution
in value which is considered to be of a permanent nature.
(b) Foreign currencies
Individual companies' transactions in currencies other than their
functional currency are recorded at the rate of exchange at the date of the
transaction or, if hedged forward, at the rate of exchange under the related
forward exchange contract. Assets and liabilities in currencies other than
their functional currency are translated at year-end rates. Any resulting
exchange differences are reflected in the Statement of Operations.
On combination, assets and liabilities of companies denominated in foreign
currencies have been translated at year-end rates. Income and expense items are
translated using the annual weighted average rates of exchange or, where known
or determinable, at the rate on the date of the transaction for significant
items.
Adjustments from translation have been recorded in the net deficit and are
are reflected in the Combined Statement of Operations only upon sale or
liquidation of the underlying investments.
(c) Cash and cash equivalents
Cash and cash equivalents represent cash and short-term highly liquid
investments with original maturities of three months or less.
(d) Trade accounts receivable
Trade accounts receivable are stated at estimated realizable values and an
allowance for doubtful accounts is provided for an amount considered by
management to be sufficient to meet probable future losses related to
uncollectable amounts.
(e) Inventories
Inventories, consisting primarily of decoders and associated components,
are stated at the lower of cost or net realizable value. Cost is generally
determined on the first-in first-out basis. Where necessary, provision is made
for obsolete, slow moving or defective inventories.
F-49
<PAGE>
Acquired MIH Businesses
(Predecessor to MIH Limited)
Notes to the Combined Financial Statements (Continued)
3. Principal accounting policies --Continued
(f) Tangible fixed assets
Tangible fixed assets are stated at historical cost less accumulated
depreciation. Depreciation is charged on a straight-line basis over the
estimated useful lives of the respective assets, based on the following useful
lives:
<TABLE>
<CAPTION>
Years
-------
<S> <C>
Buildings ................................... 50
Machinery, furniture and equipment .......... 4 - 10
Transponders and transmitters ............... 10
Decoders .................................... 2
</TABLE>
Land is not depreciated. Major improvements to leasehold properties are
amortized over the period of the respective leases.
Fully depreciated assets are retained in property and depreciation
accounts until they are removed from service. In the case of disposals, assets
and related depreciation are removed from the accounts and the net amount, less
proceeds from disposal, is charged or credited to the Statement of Operations.
(g) Leases
Assets held under capital lease agreements are treated as tangible fixed
assets and the present value of the related lease payments is recorded as a
liability. Costs for operating leases are charged to the Statement of
Operations in the year that they are incurred.
(h) Sports and film rights
Film rights are stated at acquisition cost less accumulated amortization.
Sports rights are written off upon showing the event and general entertainment
and films are amortized on a straight-line basis over the period of the licence
or based on showings where the number of showings is limited. Amortization of
program and film rights is included in the cost of providing services.
(i) Taxation
Provision is made for all taxes payable in respect of taxable profits
earned in the year. Deferred taxation is provided at current rates for taxation
on all timing differences between values for financial reporting and fiscal
purposes under the liability method. No deferred taxation is provided for in
respect of timing differences that are anticipated to reverse within the
carry-forward period of tax losses.
(j) Minority interest
The interest of third parties in subsidiaries of the Acquired MIH
Businesses are accounted for on the basis of their share in the underlying
equity of the subsidiaries. Through March 31, 1997, the Acquired MIH Businesses
recorded losses of $9.2 million, attributable to minority interest.
(k) Revenue recognition
The Acquired MIH Businesses generate revenue from subscription fees,
decoder sales and rentals, advertising and the performance of other services,
net of sales taxes and discounts. Subscription fees are earned over the period
of providing services. Technology licensing and other services are recorded
upon delivery of products and customer acceptance, if any, or performance of
services. Advertizing revenues are recognized upon showing over the period of
the advertizing contract.
(l) Pensions and other postretirement benefits
The Acquired MIH Businesses have various postretirement and pension plans
in accordance with local conditions and practices in the countries in which it
operates. The plans are predominantly defined contribution plans. Current
contributions to the pension funds operated for employees are charged to the
Statement of Operations as incurred.
F-50
<PAGE>
Acquired MIH Businesses
(Predecessor to MIH Limited)
Notes to the Combined Financial Statements (Continued)
3. Principal accounting policies --Continued
(m) Research and development costs
Research and development costs are expensed in the financial period during
which they are incurred. Research and development costs for the years ended
March 31, 1997 and 1996 were not material.
(n) Dividends
Dividends proposed are payable when declared by the board of directors.
Dividends declared by the Acquired MIH Businesses are payable in the functional
currency of the respective entity.
(o) Financial instruments
The Acquired MIH Businesses enter into foreign currency exchange contracts
in order to reduce the impact of certain foreign currency exchange rate
fluctuations. Firmly committed transactions and the related receivable and
payable may be hedged with forward exchange contracts. Any gains/losses are
included in accrued liabilities and are recognized in results when the
transaction being hedged is recognized.
(p) Segment reporting
The Acquired MIH Businesses have prepared their segmental reporting based
on the method of internal reporting, which disaggregates its businesses by
service or product and by geography.
4. Accounts receivable
<TABLE>
<CAPTION>
March 31,
----------------------------
1997 1996
(thousands) (thousands)
------------- ------------
<S> <C> <C>
Trade accounts receivable ...................... $ 29,398 $ 21,577
Less : Provision for doubtful accounts ......... (7,067) (3,829)
-------- --------
$ 22,331 $ 17,748
======== ========
</TABLE>
Included in accounts receivable are $22.2 million and $14.0 million at
March 31, 1997 and March 31, 1996, respectively, pre-billed to customers and
credit balances which have been recorded as deferred income (Note 11).
5. Other receivables
<TABLE>
<CAPTION>
March 31,
----------------------------
1997 1996
(thousands) (thousands)
------------- ------------
<S> <C> <C>
Prepayments and accrued income ......... $15,469 $19,736
Other receivables ...................... 5,823 15,236
------- -------
$21,292 $34,972
======= =======
</TABLE>
6. Inventories
<TABLE>
<CAPTION>
March 31,
----------------------------
1997 1996
(thousands) (thousands)
------------- ------------
<S> <C> <C>
Decoders and associated components ............................... $ 19,247 $ 18,173
Less: Provision for slow moving and obsolete inventories ......... (6,466) (4,759)
-------- --------
$ 12,781 $ 13,414
======== ========
</TABLE>
F-51
<PAGE>
Acquired MIH Businesses
(Predecessor to MIH Limited)
Notes to the Combined Financial Statements (Continued)
7. Valuation and qualifying accounts
<TABLE>
<CAPTION>
Charged to
At March 31, Translation costs and At March 31,
1996 adjustment expenses 1997
(thousands) (thousands) (thousands) (thousands)
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Provision for doubtful accounts -- Note 4 ......... $ (3,829) $ 456 $ (3,694) $ (7,067)
Provision for slow moving and obsolete
inventories -- Note 6 ............................ (4,759) 567 (2,274) (6,466)
-------- ------ -------- ---------
$ (8,588) $1,023 $ (5,968) $ (13,533)
======== ====== ======== =========
</TABLE>
8. Tangible fixed assets (in thousands)
<TABLE>
<CAPTION>
Land, buildings and
leasehold Machinery, furniture Transponders and
improvements and equipment Transmitters Decoders
-------------------- ---------------------- ---------------------- ----------
Purchased Leased Purchased Leased Purchased Leased Leased Total
----------- -------- ----------- ---------- ----------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cost
At March 31, 1996 ......... $2,793 $ -- $ 32,012 $ 5,928 $ 1,094 $ 4,301 $ -- $ 46,128
Translation adjustments ... (279) -- (3,015) (567) (105) (411) -- (4,377)
Additions ................. 701 9,050 9,291 12,156 7,657 27,547 11,404 77,806
Disposals ................. (285) -- (3,963) (6,114) (3,484) -- -- (13,846)
------ ------ -------- -------- -------- -------- -------- ---------
At March 31, 1997 ......... 2,930 9,050 34,325 11,403 5,162 31,437 11,404 $ 105,711
------ ------ -------- -------- -------- -------- -------- ---------
Accumulated
depreciation
At March 31, 1996 ......... (208) -- (4,320) (1,795) (54) (699) -- (7,076)
Translation adjustments ... 10 -- 354 172 5 68 -- 609
Charge for the year ....... (178) -- (5,695) (4,927) (744) (1,276) (3,371) (16,191)
Disposals ................. 14 -- 910 3,178 294 -- -- 4,396
------ ------ -------- -------- -------- -------- -------- ---------
At March 31, 1997 ......... (362) -- (8,751) (3,372) (499) (1,907) (3,371) (18,262)
------ ------ -------- -------- -------- -------- -------- ---------
Net book value
At March 31, 1997 ......... $2,568 $9,050 $ 25,574 $ 8,031 $ 4,663 $ 29,530 $ 8,033 $ 87,449
====== ====== ======== ======== ======== ======== ======== =========
At March 31, 1996 ......... $2,585 $ -- $ 27,692 $ 4,133 $ 1,040 $ 3,602 $ -- $ 39,052
====== ====== ======== ======== ======== ======== ======== =========
</TABLE>
F-52
<PAGE>
Acquired MIH Businesses
(Predecessor to MIH Limited)
Notes to the Combined Financial Statements (Continued)
8. Tangible fixed assets --Continued
The Acquired MIH Businesses lease certain land and buildings, machinery,
furniture and equipment, and transponders and transmitters. Commitments for
minimum rentals under non-cancellable leases as at March 31, 1997 are as
follows:
<TABLE>
<CAPTION>
Capital leases Operating leases
(thousands) (thousands)
For the years ended March 31 ---------------- -----------------
<S> <C> <C>
1998 ....................................... $ 12,064 $ 33,034
1999 ....................................... 11,618 33,611
2000 ....................................... 8,851 33,615
2001 ....................................... 7,002 33,630
2002 and after ............................. 51,919 143,844
--------- --------
Total minimum lease payments ............... $ 91,454 $277,734
========
Less: amount representing interest ......... (42,542)
---------
$ 48,912
=========
</TABLE>
Operating rental expenses for fiscal 1997 amounted to approximately $37.8
million. (1996: $11 million) Capital leases bear interest ranging from 6%-20%
as of March 31, 1997. The weighted average interest rate was 12%.
9. Long-term investments
<TABLE>
<CAPTION>
March 31,
----------------------------
1997 1996
(thousands) (thousands)
------------- ------------
<S> <C> <C>
Associates (a) ................................................ $12,051 $ 11,982
Joint ventures (b) ............................................ 5,265 4,652
Unlisted investments .......................................... 1,126 1,118
Unsecured loans to joint ventures ............................. 5,230 3,575
------- --------
$23,672 $ 21,327
======= ========
(a) Associates
Electronic Media Network Limited ("M-Net") .................... $10,224 $ 11,186
Orbicom (Proprietary) Limited ("Orbicom") ..................... -- --
Share of post acquisition retained profits less losses......... 1,827 796
------- --------
$12,051 $ 11,982
======= ========
(b) Joint ventures
MultiChoice Supplies (Proprietary) Limited
("MultiChoice Supplies") ................................... $ 4,790 $ 5,268
Irdeto ........................................................ 20 22
MultiChoice Middle East ....................................... 983 1,118
Share of post acquisition retained profits less losses......... (528) (1,756)
------- --------
$ 5,265 $ 4,652
======= ========
Market value of listed shares
M-Net ......................................................... $71,022 $ 33,050
======= ========
</TABLE>
F-53
<PAGE>
Acquired MIH Businesses
(Predecessor to MIH Limited)
Notes to the Combined Financial Statements (Continued)
9. Long-term investments --Continued
The following information relates to the Acquired MIH Businesses'
significant investments:
<TABLE>
<CAPTION>
March 31,
-------------------
1997 1996
Type of investment --------- --------- Nature of business Country
% %
<S> <C> <C> <C> <C>
Unlisted marketable securities at cost
Cable News Egypt S.A.E. ............ 10.0 10.0 Television Egypt
Associates
M-Net .............................. 20.0 20.0 Pay-television South Africa
Orbicom ............................ 20.0 20.0 Signal distribution South Africa
Joint ventures
MultiChoice Supplies ............... 50.0 50.0 Decoder rentals South Africa
Irdeto ............................. 49.0 49.0 Technology development The Netherlands
MultiChoice Middle East ............ 45.0 45.0 Pay-television Mauritius
Subsidiaries
Myriad Africa BV ................... 100.0 100.0 Investment holding The Netherlands
MultiChoice Africa (Pty) Limited
("MultiChoice Africa") ............ 100.0 100.0 Pay-television South Africa
MultiChoice Africa Limited ......... 100.0 100.0 Investment Holding British Virgin Islands
NetMed ............................. 100.0 100.0 Investment Holding The Netherlands
NetMed Hellas S.A. ................. 52.0 52.0 Pay-television Greece
MultiChoice Hellas S.A. ............ 52.0 52.0 Pay-television Greece
</TABLE>
The aggregate summarized financial information of the joint ventures at
March 31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
March 31,
----------------------------
1997 1996
(thousands) (thousands)
------------- ------------
<S> <C> <C>
Current assets ..................... $ 2,220 $ 5,206
Long-term assets ................... 5,485 6,335
Current liabilities ................ (3,680) (4,627)
Long-term liabilities .............. (379) (2,498)
Shareholders' deficit .............. (3,646) (4,416)
Revenues ........................... 10,455 5,960
Expenses ........................... (12,552) (7,003)
--------- --------
Net loss before taxation ........... (2,097) (1,043)
Taxation benefit/(expense) ......... 43 (83)
--------- --------
Net loss ........................... $ (2,054) $ (1,126)
========= ========
</TABLE>
F-54
<PAGE>
Acquired MIH Businesses
(Predecessor to MIH Limited)
Notes to the Combined Financial Statements (Continued)
10. Program and film rights
The following table sets forth the components of program and film rights,
on a gross and net basis:
<TABLE>
<CAPTION>
March 31,
----------------------------
1997 1996
(thousands) (thousands)
------------- ------------
<S> <C> <C>
Cost
Sports rights ............................. $70,944 $16,909
Film rights ............................... 10,291 1,996
------- -------
81,235 18,905
------- -------
Accumulated amortization
Sports rights ............................. 17,337 14,148
Film rights ............................... 8,425 769
------- -------
25,762 14,917
------- -------
Net book value
Sports rights ............................. 53,607 2,761
Film rights ............................... 1,866 1,227
------- -------
$55,473 $ 3,988
======= =======
Classified on the balance sheets as follows:
Currents assets ............................ $32,599 $ 2,417
Non-current assets ......................... 22,874 1,571
------- -------
$55,473 $ 3,988
======= =======
</TABLE>
11. Accrued expenses and other current liabilities
<TABLE>
<CAPTION>
March 31,
----------------------------
1997 1996
(thousands) (thousands)
------------- ------------
<S> <C> <C>
Deferred income ..................... $22,213 $14,035
Accrued expenses .................... 35,968 10,604
Taxes and social securities ......... 5,086 73
Other current liabilities ........... 16,406 25,411
------- -------
$79,673 $50,123
======= =======
</TABLE>
12. Provisions
<TABLE>
<CAPTION>
March 31,
----------------------------
1997 1996
(thousands) (thousands)
------------- ------------
<S> <C> <C>
Post retirement benefits ............................................ $ 4,678 $4,306
Write down of carrying values of assets in certain African countries 5,001 2,746
Decoder technology .................................................. 4,098 --
Programming costs ................................................... 2,885 --
Other provisions .................................................... 203 --
------- ------
$16,865 $7,052
======= ======
</TABLE>
F-55
<PAGE>
Acquired MIH Businesses
(Predecessor to MIH Limited)
Notes to the Combined Financial Statements (Continued)
13. Long-term debt and program and film rights
<TABLE>
<CAPTION>
March 31,
----------------------------
1997 1996
(thousands) (thousands)
------------- ------------
<S> <C> <C>
Long-term debt comprises:
Capital leases -- Note 8 ........................................ $ 48,912 $ 8,146
NetHold Finance VOF ............................................. 26,655 --
Other long term debt ............................................ 519 --
--------- --------
76,086 8,146
Less: Short term portion included in current liabilities ......... (15,476) (1,927)
--------- --------
$ 60,610 $ 6,219
========= ========
</TABLE>
Program and film rights payable are non-interest bearing and amounts due
in future fiscal years are $7.3 million in 1998, $10.7 million in 1999 and $20
million thereafter.
The loan repayable to Nethold Finance VOF is unsecured and matures on or
before October 4, 1998. The loan is denominated in Netherlands guilders and
bears interest at 2% above the Amsterdam Inter-bank Benchmark Rate.
Other long-term debt does not have fixed repayment terms and bears
interest at 6%.
The currency mix of the long-term debt as at March 31, 1997 is:
<TABLE>
<CAPTION>
%
---------
<S> <C>
Greek drachmae .................. 42.0
Netherlands guilder ............. 24.0
South African rand .............. 10.0
European Currency Unit .......... 24.0
-----
100.0
=====
</TABLE>
14. Net revenues
<TABLE>
<CAPTION>
Year ended March 31,
----------------------------
1997 1996
(thousands) (thousands)
------------- ------------
<S> <C> <C>
Subscription revenues ............. $315,463 $233,332
Decoder sales and repairs ......... 60,183 43,645
Other ............................. 16,252 5,917
-------- --------
$391,898 $282,894
======== ========
</TABLE>
15. Financial results
<TABLE>
<CAPTION>
Year ended March 31,
----------------------------
1997 1996
(thousands) (thousands)
------------- ------------
<S> <C> <C>
Interest income .......... $ 4,005 $ 2,301
Interest expense ......... (7,780) (3,200)
Exchange losses .......... (1,492) (27)
-------- --------
$ (5,267) $ (926)
======== ========
</TABLE>
F-56
<PAGE>
Acquired MIH Businesses
(Predecessor to MIH Limited)
Notes to the Combined Financial Statements (Continued)
16. Income taxation
<TABLE>
<CAPTION>
Year ended March 31,
----------------------------
1997 1996
(thousands) (thousands)
------------- ------------
<S> <C> <C>
Foreign taxation
Current ....................... $ (1,158) $ (3,883)
Deferred ...................... -- --
-------- --------
Charged against income ......... $ (1,158) $ (3,883)
======== ========
</TABLE>
The difference between income taxation expense computed at statutory rates
of the respective businesses and income taxation expense provided on earnings
are as follows:
<TABLE>
<CAPTION>
Year ended March 31,
----------------------------
1997 1996
(thousands) (thousands)
------------- ------------
<S> <C> <C>
Income taxation benefit at statutory rates ......... $ 10,252 $ 6,062
Unprovided timing differences ...................... (6,107) (9,265)
Permanent differences:
Non-deductible charges ............................ (2,469) (98)
Expenditure of a capital nature ................... 54 64
Dividends received ................................ (504) (646)
Utilisation of losses carried forward ............. (2,384) --
-------- --------
Income taxation expense ............................ $ (1,158) $ (3,883)
======== ========
</TABLE>
The Acquired MIH Businesses have tax loss carry-forwards of approximately
$76.5 million expiring in years 1998 through 2002 and tax losses of $19.5
million which may be carried forward indefinitely.
The ultimate outcome of additional taxation assessments may vary from the
amounts accrued, however, management of the Acquired MIH Businesses believe
that any additional taxation liability over and above the amount accrued would
not have a material adverse impact on the Acquired MIH Businesses results of
operations or financial position.
Unprovided timing differences are timing differences that are expected to
reverse within the carry-forward period of tax losses (note 3(i)) and are,
therefore, effectively a valuation allowance.
F-57
<PAGE>
Acquired MIH Businesses
(Predecessor to MIH Limited)
Notes to the Combined Financial Statements (Continued)
16. Income Taxation --Continued
The deferred taxation relates to the temporary differences between the
book values and the tax bases of assets and liabilities. Significant components
of the Acquired MIH Businesses deferred taxation liabilities and assets are
summarized below:
<TABLE>
<CAPTION>
March 31,
----------------------------
1997 1996
(thousands) (thousands)
------------- ------------
<S> <C> <C>
Deferred taxation liabilities
Leased assets .......................................... $ 2,648 $ --
Prepayments ............................................ 2,386 3,125
--------- ---------
Gross deferred taxation liabilities .................... 5,034 3,125
--------- ---------
Deferred taxation assets
Purchased intangible fixed assets ...................... 2,053 2,329
Purchased tangible fixed assets ........................ 153 77
Accounts receivable and other assets ................... 175 33
Accrued expenses and other current liabilities ......... 21,870 12,586
Program and film rights ................................ 566 --
Leased tangible fixed assets ........................... 209 153
Deferred income ........................................ 6,275 1,597
Tax loss carry-forwards ................................ 26,770 23,729
--------- ---------
Gross deferred taxation assets ......................... 58,071 40,504
--------- ---------
Net deferred taxation assets ........................... 53,037 37,379
Less: Valuation allowance .............................. (53,037) (37,379)
--------- ---------
$ -- $ --
========= =========
</TABLE>
The Acquired MIH Businesses have recorded a valuation allowance against
the net deferred taxation asset as in management's estimate it is more likely
than not that the deferred taxation asset will not be realized, due to the
historical operating losses of the Acquired MIH Businesses and timing limits on
the tax loss carry-forwards that arose on those losses.
F-58
<PAGE>
Acquired MIH Businesses
(Predecessor to MIH Limited)
Notes to the Combined Financial Statements (Continued)
17. Related party transactions
The Acquired MIH Businesses entered into transactions and have balances
with a number of affiliated companies, including equity investees, shareholders
and entities under common control. Transactions with affiliated companies are
summarized in the following table:
<TABLE>
<CAPTION>
Year ended March 31,
----------------------------
1997 1996
(thousands) (thousands)
------------- ------------
<S> <C> <C>
Income
Satellite transmission costs (a) ........... $ 227 $ --
Costs
Channel and programming costs (b) .......... $137,804 $103,608
Satellite transmission costs (c) ........... 12,767 8,835
Use of broadcasting facilities (d) ......... 741 546
Licensing fees (e) ......................... 2,404 2,164
-------- --------
$153,716 $115,153
======== ========
</TABLE>
- ----------------
(a) Certain costs related to the lease, maintenance and insurance of signal
distribution are charged on by the Acquired MIH Businesses to one of its
affiliated companies.
(b) The Acquired MIH Businesses purchased the right to transmit certain
channels and programs from an affiliated company.
(c) The Acquired MIH Businesses are charged by an affiliate for services
relating to the lease, maintenance and insurance of signal distribution
equipment ranging from ground-stations to satellite transponders.
(d) The Acquired MIH Businesses are charged for the use of broadcasting
facilities of an affiliated company.
(e) Licensing fees are charged by an affiliated company for the use certain
subscriber technology and software.
The balances of advances, deposits, receivables and payables between the
Acquired MIH Businesses and affiliates are:
<TABLE>
<CAPTION>
March 31,
----------------------------
1997 1996
(thousands) (thousands)
------------- ------------
<S> <C> <C>
Receivables:
M-Net ............................ $ 1,000 $ 3,028
Orbicom .......................... 3,350 4,946
MIH Holdings ..................... 2,324 2,586
MultiChoice Nigeria .............. 3,020 --
Other ............................ 553
------- -------
$10,247 $10,560
======= =======
Payables:
MIH Limited ...................... $78,527 $48,982
NetHold .......................... -- 15,369
Irdeto ........................... 4,317 3,714
FilmNet .......................... -- 11,827
MultiChoice Belgium N.V. ......... 841 --
Other ............................ 132 --
------- -------
$83,817 $79,892
======= =======
</TABLE>
F-59
<PAGE>
Acquired MIH Businesses
(Predecessor to MIH Limited)
Notes to the Combined Financial Statements (Continued)
18. Segment and geographic information
The reportable segments of the Acquired MIH Businesses are those that are
based on the Acquired MIH Businesses' method of internal reporting, which
disaggregates its businesses by service/product and by geography. The Acquired
MIH Businesses reportable business segments are pay-television services and
technology. The pay-television business segment is conducted in Africa and the
Middle East and the Mediterranean. The technology business segment consists of
an equity investment in Irdeto, based in The Netherlands. The Acquired MIH
Businesses' operations in the Middle East are accounted for by the equity
method and are, therefore, included in equity in results of joint ventures
below.
The accounting policies of the segments are identical to the accounting
policies described in "Summary of Significant Accounting Policies".
<TABLE>
<CAPTION>
Pay television services Technology Segmental Total
---------------------------------- ------------- ----------------
Africa
&
The Middle East Mediterranean
(thousands) (thousands) (thousands) (thousands)
1997 ----------------- -------------- ------------- ----------------
<S> <C> <C> <C> <C>
SALES
External sales ............................ $306,950 $ 83,873 $ -- $ 390,823
Inter-segment sales ....................... -- 1,075 -- 1,075
-------- --------- ------ ---------
Total revenue ............................. $306,950 $ 84,948 $ -- $ 391,898
======== ========= ====== =========
RESULTS
Operating loss ............................ $ (8,953) $ (15,177) $ -- $ (24,130)
Depreciation and amortization (a) ......... (9,029) (7,162) -- (16,191)
Amortization of fi
program and film rights .................. -- (18,796) -- (18,796)
Operating loss is stated before the
following items;
Exchange loss ............................. (1,420) (72) -- (1,492)
Interest expense .......................... (2,384) (5,396) -- (7,780)
Interest income ........................... 3,413 592 -- 4,005
Equity results in associates .............. 2,644 -- -- 2,644
Equity results in joint ventures .......... (1,916) -- 3,060 1,144
Income taxation ........................... (19) (1,139) -- (1,158)
OTHER INFORMATION
Segment assets ............................ 132,995 148,226 5,932 287,153
Investments in equity companies ........... 14,242 -- 3,074 17,316
Other investments ......................... 6,356 -- -- 6,356
Segment liabilities ....................... 116,963 220,780 -- 337,743
Capital expenditure ....................... 7,841 9,808 -- 17,649
</TABLE>
F-60
<PAGE>
Acquired MIH Businesses
(Predecessor to MIH Limited)
Notes to the Combined Financial Statements (Continued)
18. Segment and geographic information--Continued
<TABLE>
<CAPTION>
Pay television services Technology Segmental Total
---------------------------------- ------------- -----------------
Africa
&
The Middle East Mediterranean
(thousands) (thousands) (thousands) (thousands)
1996 ----------------- -------------- ------------- -----------------
<S> <C> <C> <C> <C>
SALES
External sales .................................. $242,340 $ 40,100 $ -- $ 282,440
Inter-segment sales ............................. -- 454 -- 454
-------- --------- ------ ---------
Total revenue ................................... $242,340 $ 40,554 $ -- $ 282,894
======== ========= ====== =========
RESULTS
Operating income/(loss) ......................... $ 8,945 $ (26,341) $ -- $ (17,396)
Depreciation and amortization (a) ............... (7,171) (2,647) -- (9,818)
Amortization of program and film rights ......... -- (10,123) -- (10,123)
Operating income/(loss) is stated before the
following items;
Exchange gain/(loss) ............................ 206 (233) -- (27)
Interest expense ................................ (1,696) (1,504) -- (3,200)
Interest income ................................. 2,301 -- -- 2,301
Equity results in associates .................... 2,388 -- -- 2,388
Equity results in joint ventures ................ (857) -- (969) (1,826)
Income taxation ................................. (3,543) (340) -- (3,883)
OTHER INFORMATION
Segment assets .................................. 112,008 43,000 1,116 156,124
Investment in equity companies .................. 16,003 -- 631 16,634
Other investments ............................... 4,693 -- -- 4,693
Segment liabilities ............................. 78,564 101,763 188,563
Capital expenditures ............................ $ 8,758 $ 4,264 $ -- $ 13,022
</TABLE>
(a) Excludes amortization of program and film rights included in cost of
providing services.
19. Commitments and contingencies
(a) Loans
MultiChoice Africa is required to lend a joint venture, an amount not
exceeding $8.1 million, which represents 20% of a banking facility available to
fund the acquisition of decoders.
(b) Loss insurance
The Acquired MIH Businesses do not generally carry risk of loss insurance
for injury to others, damage to the property of others, or interruption of
their business operations.
20. Foreign currency management
The currencies of the countries in which the Acquired MIH Businesses'
operate are also their functional currency. For these operations, all gains and
losses from foreign currency transactions are included in current results. The
cumulative translation effects for operations using functional currencies other
than the US dollar are included in Net Deficit.
The Acquired MIH Businesses use foreign currency forward exchange
contracts, which typically expire within one year, to hedge payments of foreign
currencies related to the purchase and sale of goods and services in currencies
other than the functional currency. Realized gains and losses on these
contracts are recognized in the same period as the hedged transactions. The
Acquired MIH Businesses had foreign exchange forward contracts on hand at March
31, 1997, hedging South African rand against the US dollar and the British
pound sterling. The Acquired MIH Businesses do not currently hold or issue
derivative financial instruments for trading purposes.
F-61
<PAGE>
Acquired MIH Businesses
(Predecessor to MIH Limited)
Notes to the Combined Financial Statements (Continued)
20. Foreign currency management --Continued
The contractual amounts, exchange rates and settlement dates of the
outstanding foreign currency forward exchange contracts at March 31, 1997, are
set out below:
<TABLE>
<CAPTION>
Average
exchange Settlement
(thousands) rates Dates
------------- ---------- ------------------------------------
<S> <C> <C> <C>
South African rand/US dollars ......... $26,070 5,06 April 30, 1997 to March 27, 1998
South African rand/ British pound
sterling ............................. $ 1,954 7,12 April 30, 1997 to February 27, 1998
</TABLE>
21. Fair value of financial instruments
The carrying amount of cash and cash equivalents approximates fair value
due to the short maturities of these instruments. The value of long-term debt
is estimated using discounted cash flows based on the Acquired MIH Businesses'
incremental borrowing rates for similar types of borrowings. The value of
foreign currency forward exchange contracts is based on quoted market prices. A
comparison of the carrying value and fair value of these instruments is as
follows:
<TABLE>
<CAPTION>
March 31, 1997 March 31, 1996
-------------------------------- -------------------------------
Carrying Value Fair Value Carrying Value Fair Value
(thousands) (thousands) (thousands) (thousands)
---------------- ------------- ---------------- ------------
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents .......... $ 53,908 $ 53,908 $ 15,063 $ 15,063
Receivables ........................ 53,870 53,870 63,280 63,280
Liabilities:
Payables and provision ............. 222,895 222,895 172,503 172,503
Short-term borrowings .............. 23,480 23,480 9,841 9,841
Long-term debt ..................... 91,368 91,368 6,219 6,219
Off-balance-sheet instruments
Forward exchange contracts ......... 28,024 24,610 17,410 18,738
</TABLE>
22. Pension fund
The Acquired MIH Businesses have defined contribution plans covering
employees of most of its subsidiaries. The Acquired MIH Businesses'
contributions under these plans are based primarily on the performance of the
business units and employee compensation. Total contributions amounted to $3.5
million for 1997. (1996: $2.9 million)
23. Postretirement benefits
MultiChoice Africa provides post retirement medical benefits by way of
medical aid contributions. IAS 19 "Retirement Benefit Costs", is effective for
periods beginning after January 1, 1995 and requires recognition of the costs
of such benefits on an accrual basis. MultiChoice Africa recognized its
cumulative actuarially determined liability for postretirement medical benefits
as of April 1, 1995 of $3.9 million. In accordance with IAS 19 and IAS 8, "Net
Profit or Loss for the Period, Fundamental Errors and Changes in Accounting
Policies" the change has been reported retrospectively through an adjustment of
$3.9 million to the opening balance of MultiChoice Africa accumulated results
as of April 1, 1995. During the year ended March 31, 1997, an agreement was
reached with employees of MultiChoice Africa to terminate the postretirement
medical aid benefits plan in exchange for an increase of MultiChoice Africa's
annual contributions to the retirement benefit fund. The provision will be
released to operating results to match the additional contributions to the
retirement benefit plan.
F-62
<PAGE>
Acquired MIH Businesses
(Predecessor to MIH Limited)
Notes to the Combined Financial Statements (Continued)
24. Differences between IAS and United States Generally Accepted Accounting
Principles
The Acquired MIH Businesses' combined financial statements are prepared in
accordance with IAS, which differ in certain respects from accounting
principles generally accepted in the United States ("US GAAP").
As discussed in Note 23, MultiChoice Africa adopted IAS 19 effective April
1, 1995 by recognizing an adjustment to retained earnings. Under US GAAP, SFAS
106 "Employers Accounting for Postretirement Benefits Other Than Pensions", the
effect of adoption is recognized immediately in net income of the period of
change as the effect of a change in accounting principle. Net income under US
GAAP would be as follows:
<TABLE>
<CAPTION>
1997 1996
(thousands) (thousands)
<S> <C> <C>
Net income--IAS ............................................. $ (26,029) $ (21,529)
Cumulative effect of change in accounting principle ......... -- (3,868)
--------- ---------
Net income--US GAAP ......................................... $ (26,029) $ (25,397)
========= =========
</TABLE>
No other material differences exist between the net loss and total net
deficit as determined under IAS and US GAAP.
Additional disclosure requirements
(a) Certain Risks and Concentrations
The Acquired MIH Businesses are exposed to certain concentrations of
credit risk relating to cash and current investments. The Acquired MIH
Businesses place cash and current investments with high quality institutions.
The Acquired MIH Businesses' policy is designed to limit exposure with any one
institution and to invest its excess cash in low risk investment accounts. The
Acquired MIH Businesses have not experienced any losses on such accounts. As of
March 31, 1997, cash and current investments were held with numerous financial
institutions.
The Acquired MIH Businesses' digital programming is or will be transmitted
to customers through different satellites around the world, and in certain
regions its terrestrial analog signal is also transmitted to regional broadcast
points through satellites. In addition, the Acquired MIH Businesses receive a
significant amount of their programming through satellites. Satellites are
subject to significant risks that may prevent or impair commercial operations.
Although the Acquired MIH Businesses have not experienced any significant
disruption of its transmissions the operation of the satellites is beyond the
control of the Acquired MIH Businesses. Disruption of the transmissions of
satellites could have a material adverse effect on the Acquired MIH Businesses.
(b) Stock based compensation
MIH management and employees participate in the Stock Option Plan (the
"Plan") of MIH Holdings Limited ("MIHH"). Under the Plan MIHH may grant options
to its employees for up to 11.8 million shares of MIHH's common stock. Stock
options may be granted with an exercise price not less than 100% of the market
value of the shares at the time of the grant. One third of the options
generally vest at the anniversary of each of the third, fourth and fifth year
after the grant date of the stock options and expire after ten years. Unvested
shares are subject to cancellation upon expiration or termination of
employment.
<TABLE>
<CAPTION>
1997
---------------------------------------
Weighted average
exercise price
Shares (Rand)
------------- -----------------
<S> <C> <C>
Outstanding at April 1, 1996 .......... 898,423 10.26
Granted ............................... -- --
Exercised ............................. (111,956) 8.64
Forfeited ............................. (51,718) 11.75
-------- -----
Outstanding at March 31, 1997 ......... 734,749 10.40
======== =====
</TABLE>
F-63
<PAGE>
Acquired MIH Businesses
(Predecessor to MIH Limited)
Notes to the Combined Financial Statements (Continued)
24. Differences between IAS and United States Generally Accepted Accounting
Principles --Continued
The following table summarizes information about the stock options
outstanding at March 31, 1997:
<TABLE>
<CAPTION>
Range of Remaining Weighted-average
exercise prices Outstanding as of contractual life exercise price Exercisable as of Weighted average
(Rand) March 31, 1997 (years) (Rand) March 31, 1997 exercise price
- ----------------- ------------------- ------------------ ----------------- ------------------- -----------------
<S> <C> <C> <C> <C> <C>
5.60-8.50 271,618 5.88 6.82 160,557 6.99
8.51-12.50 463,131 7.64 12.50 -- --
</TABLE>
The Acquired MIH Businesses apply Accounting Principles Board ("APB")
Opinion 25, "Accounting for Stock Issued to Employees," and related
Interpretations for purposes of US GAAP in accounting for its plans.
Accordingly, no compensation cost has been recognized for its stock option
plan. Under SFAS No. 123, "Accounting for Stock-Based Compensation,"("SFAS
123"), the compensation cost for the Acquired MIH Businesses is determined
based on the fair value at the grant date of stock options awarded under the
plan. No stock option where granted under the Plan between April 1, 1995, the
effective date of SFAS 123 to be used by the Acquired MIH Businesses for
purposes of calculating the impact of SFAS 123, and March 31, 1997. The
application of SFAS 123 therefore does not have an impact on the reported net
loss of the Acquired MIH Businesses.
F-64
<PAGE>
EXHIBIT D
CERTAIN DEFINITIONS
"Acquired MIH Businesses" means NetHold's pay-television businesses in Africa,
Cyprus, Greece and the Middle East acquired by the Company in the Canal+
Transaction, along with Irdeto.
"AMM" means Asia Multimedia Company Limited, a subsidiary of Telecom Asia.
"baht" means the Thai baht, the functional currency of the Kingdom of Thailand.
"Canal+" means Canal Plus S.A., a leading pay-television operator in Europe.
"Canal+ Transaction" means the March 1997 transaction in which the Company sold
its interest in NetHold to Canal+ in exchange for a 5% equity interest in
Canal+ and all of NetHold's pay-television businesses in Africa, Cyprus, Greece
and the Middle East.
"CBSat" means the China Broadcasting Film and Television Satellite Co. Ltd.
"Cineplex" means Cineplex Company Limited, the programming subsidiary of UBC.
"CNE" means Cable Network Egypt, a terrestrial analog pay-television operator
in Egypt.
"Combined Statements" means the Combined Financial Statements for the Acquired
MIH Businesses.
"Company" means MIH Limited, together with its subsidiaries and joint ventures.
"Consolidated Statements" means the Consolidated Financial Statements of the
Company.
"Condensed Consolidated Statements" means the interim financial statements of
the Company.
"drachma(e)" or "GRD" means Greek drachma(e), the functional currency of
Greece.
"ERT" means Greek Radio Television S.A., the state-owned broadcasting entity in
Greece.
"EU" means the European Union.
"Financial Statements" means the Combined Statements and the Consolidated
Statements.
"IAS" means international accounting standards issued by the International
Accounting Standards Committee.
"International Offering" means the offering of Class A Ordinary Shares outside
of the United States and Canada.
"Irdeto" means Irdeto B.V., the holding company for the company's technology
division other than OpenTV.
"Issuer" means MIH Limited, the issuer of the Class A Ordinary Shares offered
hereby.
"Johnnic" means Johnnic (IOM) Limited, a current holder of % of the Class A
Ordinary Shares.
"JSE" means the Johannesburg Stock Exchange.
"Lumiere" means Lumiere Television Limited, a Cypriot investor that is the
Company's minority partner in MultiChoice Cyprus.
"M-Cell" means M-Cell Limited, a leading cellular telephone provider in South
Africa.
"M-Net Ltd." means Electronic Media Network Limited, the company that produces
the premium film channel carried by the Company's pay-television services in
Africa.
"M-Web" means M-Web Holdings Limited, a leading Internet service provider in
South Africa.
"MCOT" means the Mass Communications Organization of Thailand, one of the two
primary media regulators in Thailand.
"Memorandum" and "Articles" means the Issuer's Memorandum and Articles of
Association.
"MIH Holdings" means MIH Holdings Limited, the indirect holder of all of the
Class B Ordinary Shares.
D-1
<PAGE>
"MIH Investments" means MIH Investments (Proprietary) Limited, the holder of a
majority of MIH Holdings' shares.
"Mindport" means the Company's technology division, including Irdeto and
OpenTV.
"MTN" means Mobile Telephone Networks (Proprietary) Limited.
"MultiChoice Africa" means MultiChoice Africa (Proprietary) Limited.
"MultiChoice Cyprus" means MultiChoice Cyprus Limited.
"MultiChoice Egypt" means MultiChoice Egypt Limited.
"MultiChoice Hellas" means MultiChoice Hellas S.A.
"MultiChoice Middle East Holdings" means MultiChoice Middle East Holdings Inc.
"MultiChoice Middle East" means MultiChoice Middle East Inc.
"Nasdaq" means the Nasdaq National Market.
"Naspers" means Naspers Limited, a JSE-listed company that, together with Omni,
owns all of the voting stock of MIH Investments.
"NetHold" means NetHold B.V., the holding company through which the Company
held its interest in the Acquired MIH Businesses prior to the Canal+
Transaction.
"NetMed" means NetMed B.V. and its subsidiaries, the subsidiaries through which
the Company conducts its pay-television operations in Greece and Cyprus.
"NetMed Hellas" means NetMed Hellas S.A.
"Offerings" means the International Offering and the U.S. Offering.
"Omni" means Omni Media Corporation Limited.
"OpenTV" means OpenTV, Inc., a joint venture in the interactive television
business in which the Company has a 44.5% interest.
"Orbicom" means Orbicom (Proprietary) Limited, an affiliate that provides
transmission services.
"Ordinary Shares" means the Class A Ordinary Shares and the Class B Ordinary
Shares.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Richemont" means Richemont S.A.
"RTBA" means the Thai Radio and Television Broadcasting Act of BE 2498 (AD
1955).
"Rule 144" means Rule 144 promulgated under the Securities Act.
"SABC" means the South African Broadcasting Corporation, the state-owned
broadcaster in South Africa.
"Securities Act" means the U.S. Securities Act of 1933.
"SG&A" means selling, general and administrative costs.
"Shinawatra" means Shinawatra Public Company Limited.
"South Africa" means the Republic of South Africa.
"SSIH" means SuperSport International Holdings Limited, the company that
produces the sports channels carried by the Company's pay-television services
in Africa.
"Sub-Saharan Africa" means countries in the sub-Saharan African region
excluding South Africa.
D-2
<PAGE>
"Syned" means Synergistic Network Development S.A., the signal transmission and
distribution subsidiary of NetMed.
"Telecom Asia" means Telecom Holding Company Limited.
"Thomson" means Thomson Consumer Electronics, Inc.
"TPS" means Television par Satellite, a digital satellite pay-television
operator in France.
"UBC" means United Broadcasting Corporation Public Company Limited, the
Company's Thailand joint venture.
"UBC Cable" means UBC Cable Network Public Company Limited, a subsidiary of
UBC.
"UBC Group" means UBC and its subsidiaries.
"U.S. dollar", "dollar" or "$" means the United States dollar, the functional
currency of the United States of America.
"US GAAP" means generally accepted accounting principles in the United States.
"U.S. Offering" means the offering of Class A Ordinary Shares in the United
States and Canada.
"ZAR" or "rand" means South African rand, the functional currency of the
Republic of South Africa.
D-3
<PAGE>
EXHIBIT G
GLOSSARY OF TECHNICAL TERMS
addressable: A device is addressable if a signal can be transmitted from the
conditional access system to the device instructing it to carry out or cease to
carry out a particular function, for instance, descrambling a signal.
analog: Information is transmitted by varying the phase, amplitude or frequency
of a radio carrier wave with the information that is being transmitted.
bandwidth: The radio frequency spectrum, whether the transmission medium is
physical wire or thin air, can be divided up into any number of "channels".
Each channel takes up a certain amount of space on the frequency spectrum. The
amount of spectrum occupied by the channel is its band width and is usually
measured in Kilohertz (Khz) and Megahertz (MHz). A broader band width can carry
more information.
bouquet: The channels offered by a pay-television provider on a given platform.
broadband: High-capacity transmission capability usually associated with
fibre-optic cable. Generally used when discussing video or TV transmission
systems.
C-band: A frequency range of the electromagnetic spectrum used heavily for
satellite transmission, having an uplink frequency at 6 GHz and a downlink
frequency at 4 GHz.
CA module: Conditional access module. Forms part of the conditional access
system.
CATV: Cable television.
co-axial cable: A cable consisting of insulated center conductor and a
concentric outer conductor. Co-axial cable is used primarily for wideband,
video, or radio-frequency applications.
compression: Technology that reduces or lowers the band width or space required
for transmission or storage of a data set.
conditional access system or CAS: The technology that provides for selective
access to specific services including subscription television services.
decoder: The term given to the device in a signal receiver that receives the
scrambled signal and converts it into a quality audio or visual signal for
listening or viewing.
dedicated line: A transmission circuit which is available at all times
installed between two sites of a private network.
digital: A method of storing, processing, or transmitting information in terms
of binary digits.
digital compression: The process of reducing the number of bits required to
store or transmit information in digital form.
dish: A dish collects signals downlinked from a satellite or concentrates them
for uplinking to the satellite.
downlink: The signal that travels from the satellite down to the receivers on
earth.
DStv: Digital satellite television.
DTH: Direct-to-Home. The generic term used to describe the system of signal
transmission from an earth station to a satellite and then to home for viewing.
encryption: Transforms digital or analog data into a format that is
unintelligible without the proper decryption key.
fiber optic cable: A transmission medium that uses glass or plastic fibers
rather than copper wire to transport data or voice signals.
footprint: The geographic area covered by the beam of a satellite, the outer
edge of which is generally defined as that area where the quality of
communication degrades below an acceptable commercial level.
G-1
<PAGE>
head-end: The source end of a television broadcast system. Head-ends receive
television signals from a variety of sources including satellite or dedicated
line and transmit it through the cable, satellite or terrestrial subscription
networks.
integrated receiver/decoder or IRD: Digital set-top receiver with a built-in
de-scrambler for decoding pay-television services.
Ku-band: A frequency range used for satellite downlink transmissions which
falls within the 12 to 14 GHz range of the electromagnetic spectrum, allowing
use of 27 inch (or 90 cm) or smaller ground dishes.
LMDS: Local, Multipoint Distribution Service. LMDS uses low-power transmitters
to broadcast programming to receiving equipment in homes and businesses.
MPEG II: A set of standards developed by the Moving Pictures Experts Group that
details guidelines for access rates, compression and conditional access.
multichannel, multi-point distribution service or MMDS: Also known as "wireless
cable", MMDS uses high-power transmitters to broadcast programming to receiving
equipment in homes and businesses.
near video-on-demand (VOD): A service on a switched network that allows users
to select individual programmes electronically and watch them instantaneously.
net churn: The percentage of subscribers over a given period who terminate
their subscription, net of former subscribers who reconnect during that period.
pay-per-view: A service which may be offered by subscription TV operators where
subscribers elect to view individual scheduled premium programmes, such as
select movies and sporting events, for a fee.
piracy: Any impersonation, unauthorized browsing, falsification, breach of
copyright, theft of data or disruption of service or control information in a
network.
set-top box: Device used to receive and decode subscription services including
subscription television services for display on television.
scrambler: A device that alters a message at the transmitter to make the
message unintelligible at a receiver not equipped with an appropriate
de-scrambling device.
smart card: A credit card-sized device with embedded processors that provides
entitlement functions and stores decryption keys and digital signatures and
which may be inserted in a set-top box.
subscribers: Viewers who pay a fee for any programming package offered by the
Company.
transponder: A microwave repeater on a satellite that can retransmit a signal
or set of signals.
ultra-high frequency (UHF): Frequencies from 300 MHz to 3000 MHz.
uplink: The signal that travels from the earth transmitting station up to the
receiving station, such as a satellite.
very-high frequency (VHF): Frequencies from 30 MHz to 300 MHz.
wireless cable: Refers to the use of MMDS or LMDS systems for transmission of
subscription TV services.
G-2
<PAGE>
================================================================================
[US] No dealer, salesperson or other individual has been authorized to give any
information or to make any representations not contained in this prospectus in
connection with the offering covered by this prospectus. If given or made, such
information or representations must not be relied upon as having been
authorized by the Company or the Underwriters. This prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, the Class A
Ordinary Shares in any jurisdiction where, or to any person to whom, it is
unlawful to make such offer or solicitation. Neither the delivery of this
prospectus nor any sale made hereunder shall, under any circumstances, create
an implication that there has not been any change in the facts set forth in
this prospectus or in the affairs of the Company since the date hereof.
----------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Exchange Rate Data ............................
Trademarks ....................................
Prospectus Summary ............................
Risk Factors ..................................
Use of Proceeds ...............................
Dividend Policy ...............................
Dilution ......................................
The Company ...................................
Capitalization ................................
Selected Financial and Operating Data .........
Management's Discussion and Analysis
of Financial Condition and Results of
Operations .................................
Business ......................................
Regulation ....................................
Management ....................................
Certain Transactions ..........................
Security Ownership ............................
Description of Capital Stock ..................
Shares Eligible for Future Sale ...............
Certain United States Federal Income Tax
Consequences ...............................
Underwriting ..................................
Legal Matters .................................
Experts .......................................
Index to Financial Statements ................. F-1
Certain Definitions ........................... D-1
Glossary of Technical Terms ................... G-1
</TABLE>
Until , 1999 (25 days after the date of this Prospectus), all dealers
effecting transactions in the Class A Ordinary Shares in the United States,
whether or not participating in this distribution, may be required to deliver a
prospectus. This is in addition to the obligation of dealers to deliver a
prospectus when acting as underwriters or with respect to their unsold
allotments or subscriptions in transactions in the United States.
Shares
MIH Limited
Class A Ordinary Shares
----------------------------------
P R O S P E C T U S
----------------------------------
Merrill Lynch & Co.
Donaldson, Lufkin & Jenrette
, 1999
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than the
underwriting discount, payable by the Registrant in connection with the sale of
Ordinary Shares being registered. All amounts are estimates except the SEC
registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
Amount to be
Paid
-------------
<S> <C>
SEC registration fee ............................. $
NASD filing fee .................................. $
Nasdaq National Market listing fee ............... $
Amsterdam Stock Exchange listing fee ............. $
Printing, mailing and engraving expenses ......... $
Legal fees and expenses .......................... $
Accounting fees and expenses ..................... $
Transfer agent and registrar fees ................ $
Miscellaneous expenses ........................... $
Total ........................................... $
</TABLE>
Item 14. Indemnification of Directors and Officers
The Memorandum and Articles of the Issuer provide that, to the fullest
extent permitted by British Virgin Islands law or any other applicable laws,
directors of the Issuer will not be personally liable to the Issuer or its
shareholders for any acts or omissions in the performance of their duties. Such
limitation of liability does not affect the availability of equitable remedies
such as injunctive relief or rescission. These provisions will not limit the
liability of directors under United States federal securities laws.
Item 15. Recent Sales of Unregistered Securities
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description
- -------- ------------------------------------------------------------------------------------------
<S> <C>
1.1 + U.S. Purchase Agreement.
1.2 + International Purchase Agreement.
3.1 + Memorandum of Association of the Registrant.
3.2 + Articles of Association of the Registrant.
4.1 + Specimen Certificate for Class A Ordinary Shares of the Registrant.
5.1 Opinion of Harney Westwood & Riegels with respect to the validity of
the securities being offered.
10.1 Shareholders' Agreement dated June 20, 1997 among Myriad
International Holdings B.V., MP Communications B.V. and NetHold
Mediterranean B.V.
10.2* Investment & Shareholders' Agreement dated April 4, 1997 among Canal+
S.A., FilmNet Investments B.V., Myriad Holdings Netherlands B.V., MIH
Holdings Limited, MIH Limited and Irdeto B.V.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
- ---------- -----------------------------------------------------------------------------------------
<S> <C>
10.3* Shareholders' Agreement dated February 16, 1998 among Telecom Holding
Company Limited, Shinawatra Computer and Communications Public
Company Limited, MIH Limited and International Broadcasting
Corporation Public Company Limited, as supplemented by the
Supplementary Shareholders' Agreement dated May 20, 1998 and as
amended by the Amendment to Shareholders' Agreement dated September
25, 1998.
10.4* Greek Football Broadcasting Agreement dated December 29, 1995 between
Football Societes Anonymes Association and NetHold Hellas S.A.
10.5* Greek Basketball Broadcasting Agreement dated July 3, 1998 between
Greek Association of Basketball Societes Anonymes and NetHold Hellas
Pay-TV Societe Anonyme.
10.6* Channel Distribution Agreement dated June 18, 1998 between
MultiChoice Africa (Proprietary) Limited and Electronic Media Network
Limited.
10.7* Analogue Agreement dated March 31, 1995 between MultiChoice Africa
(Proprietary) Limited and Electronic Media Network Limited.
10.8* Facility Letter dated September 29, 1998 from ABSA Bank to MIH
Limited.
10.9+ MIH Limited Share Scheme.
15.1 Letter re: unaudited interim financial information.
21+ Subsidiaries of the Registrant.
23.1 Consents of Harney Westwood & Riegels (one is included in Exhibit 5).
23.2 Consent of Mallinicks.
23.3 Consent of Nauta Dutilh.
23.4 Consent of Zepos & Zepos.
23.5 Consent of White & Case (Thailand) Limited.
23.6 Consent of PricewaterhouseCoopers Inc.
</TABLE>
- ----------------
* Indicates that portions of the exhibit have been omitted pursuant to a
request for confidential treatment and that such portions have been filed
separately with the Commission.
+ To be filed by amendment.
# Filed previously with the Commission.
(b) Financial Statement Schedules
All financial schedules, other than that listed above, have been omitted
because the information required to be set forth therein is not applicable or
is shown in the Financial Statements or Notes thereto.
Item 17. Undertakings.
The Registrant will provide to the Underwriters at the closing specified
in the Purchase Agreements certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to each
purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable.
II-2
<PAGE>
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of Prospectus filed as part of a Registration
Statement in reliance upon Rule 430A and contained in a form of Prospectus
filed by the Registrant pursuant to Rule 424(b)(1) or (4), or 497(h) under the
Securities Act shall be deemed to be part of this Registration Statement as of
the time it was declared effective.
(2) For determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus 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.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant, MIH Limited, a corporation organized and existing under the
laws of the British Virgin Islands, certifies that it has duly caused this
Registration Statement on Form F-1 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Johannesburg, South
Africa, on this 11th day of March, 1999.
MIH LIMITED
By /s/ Jacobus D.T. Stofberg
--------------------------
Jacobus D. T. Stofberg
Chief Executive Officer and
Director
We, the undersigned officers and directors of MIH Limited, hereby severally
constitute and appoint Allan M. Rosenzweig and Lesley R. Penfold, and each of
them, with full power of substitution, our true and lawful attorney with full
power to him singly to sign for us and in our names in the capacities indicated
below the Registration Statement on Form F-1 filed herewith and any and all
pre-effective and post-effective amendments to said Registration Statement,
and, in connection with any registration of additional securities pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, to sign any
abbreviated registration statement and any and all amendments thereto, and to
file the same, with all exhibits thereto and other documents in connection
therewith, in each case, with the Securities and Exchange Commission, and
generally to do all such things in our names and on our behalf in our
capacities as officers and directors to enable MIH Limited to comply with the
provisions of the Securities Act of 1933, as amended, and all requirements of
the Securities and Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorney to said Registration
Statement and any and all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following person in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------ -------------------------------------- --------------
<S> <C> <C>
/s/ Theunissen Vosloo Chairman of the Board March 11, 1999
- -------------------------
Theunissen Vosloo
/s/ Jacobus D. T. Stofberg Chief Executive Officer and Director March 11, 1999
- -------------------------
Jacobus D. T. Stofberg
/s/ Jacobus P. Bekker Director March 11, 1999
- -------------------------
Jacobus P. Bekker
/s/ Vaughan G. Bray Director March 11, 1999
- -------------------------
Vaughan G. Bray
/s/ Johannes H. W. Hawinkels Chief Executive Officer-- March 11, 1999
- -------------------------
MIH Asia and Director
Johannes H. W. Hawinkels
/s/ Stephen Oldfield Chief Executive Officer-- March 11, 1999
- -------------------------
Mindport and Director
Stephen Oldfield
/s/ Stephan J. Z. Pacak Director March 11, 1999
- -------------------------
Stephan J. Z. Pacak
/s/ Lesley R. Penfold Chief Financial Officer March 11, 1999
- -------------------------
and Director
Lesley R. Penfold
/s/ Allan M. Rosenzweig Group Director-- March 11, 1999
- -------------------------
Corporate Finance and Director
Allan M. Rosenzweig
</TABLE>
II-4
<PAGE>
[I] SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED , 1999
PROSPECTUS
Shares
MIH Limited
Class A Ordinary Shares
----------------
All of the Class A Ordinary Shares offered hereby are being sold by MIH
Limited (the "Issuer" and, together with its subsidiaries and joint ventures,
the "Company"). Of the Class A Ordinary Shares offered hereby, shares
are being offered outside the United States and Canada (the "International
Offering") and shares are being offered in the United States and Canada
(the "U.S. Offering" and, together with the International Offering, the
"Offerings"). The initial public offering price per share and the underwriting
discount per share are identical for both Offerings. See "Underwriting".
Prior to the Offerings, there has been no public market for the Class A
Ordinary Shares. For a discussion relating to factors to be considered in
determining the initial public offering price, see "Underwriting".
Application has been made to list the Class A Ordinary Shares on the
Nasdaq National Market (the "Nasdaq") and on the Amsterdam Stock Exchange under
the symbol "MIHL".
The Issuer's Ordinary Shares have been designated into two classes,
consisting of Class A Ordinary Shares and Class B Ordinary Shares. Under the
Issuer's Memorandum and Articles of Association (the "Memorandum" and
"Articles"), the holders of Class B Ordinary Shares generally have rights,
including as to dividends, identical to those of Class A Ordinary Shares,
except that holders of Class B Ordinary Shares are entitled to three votes per
share and holders of Class A Ordinary Shares are entitled to one vote per
share. Holders of Class B Ordinary Shares and Class A Ordinary Shares generally
vote together as a class, except as otherwise required under British Virgin
Islands law or the Memorandum and Articles. After giving effect to the
Offerings (without giving effect to any exercise by the Underwriters of an
option to purchase additional shares), holders of Class A Ordinary Shares will
own % of the Issuer and holders of Class B Ordinary Shares will own % of
the Issuer. This means that holders of Class B Ordinary Shares will control
% of the aggregate voting power of the Ordinary Shares while holders of
Class A Ordinary Shares will control the remaining %.
See "Risk Factors" beginning on page for a discussion of certain
factors that should be considered by prospective purchasers of the Class A
Ordinary Shares offered hereby.
----------------
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.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public Discount (1) Issuer (2)
---------- -------------- ------------
<S> <C> <C> <C>
Per Class A ......... $ $ $
Total(3) ............ $ $ $
</TABLE>
- --------------------------------------------------------------------------------
(1) The Issuer has agreed to indemnify the several Underwriters (as defined
herein) against certain liabilities, including certain liabilities under
the Securities Act (as defined herein). See "Underwriting".
(2) Before deducting expenses payable by the Issuer estimated at $ .
(3) The Issuer has granted to the International Managers (as defined herein)
and the U.S. Underwriters (as defined herein) options, exercisable within
30 days after the date of this Prospectus, to purchase up to an additional
and Class A Ordinary Shares, respectively, solely to cover
over-allotments, if any. If such options are exercised in full, the total
Price to Public, Underwriting Discount and Proceeds to the Issuer will be
$ , $ and $ , respectively. Pursuant to the Intersyndicate
Agreement (as defined herein), the U.S. Underwriters and the International
Managers are also permitted to sell Class A Ordinary Shares to each other
for purposes of resale at the public offering price, less an amount not
greater than the selling concession. See "Underwriting".
----------------
The Class A Ordinary Shares are offered by the several Underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of certain legal matters by counsel for the Underwriters and
certain other conditions. The Underwriters reserve the right to withdraw,
cancel or modify such offer and to reject orders in whole or in part. It is
expected that delivery of the Class A Ordinary Shares will be made in New York,
New York on or about , 1999.
----------------
Merrill Lynch International Donaldson, Lufkin & Jenrette
MeesPierson N.V.
----------------
The date of this Prospectus is , 1999
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>
[I] UNDERWRITING
Subject to the terms and conditions set forth in an international purchase
agreement (the "International Purchase Agreement") among the Issuer and each of
the underwriters named below (the "International Managers") and concurrently
with the sale of Class A Ordinary Shares to the U.S. Underwriters (as defined
below), the Issuer has agreed to sell to each of the International Managers,
and each of the International Managers for whom Merrill Lynch International
("Merrill Lynch"), Donaldson, Lufkin & Jenrette International and MeesPierson
N.V. are acting as representatives (the "International Representatives"), has
severally agreed to purchase from the Issuer, the number of Class A Ordinary
Shares set forth opposite its name below.
<TABLE>
<CAPTION>
Number
of Class A
International Managers Ordinary Shares
- ---------------------------------------------------- ----------------
<S> <C>
Merrill Lynch International ........................
Donaldson, Lufkin & Jenrette International .........
MeesPierson N.V. ...................................
----------------
Total .............................................
================
</TABLE>
The Issuer has also entered into a U.S. purchase agreement (the "U.S.
Purchase Agreement" and, together with the International Purchase Agreement,
the "Purchase Agreements") with certain underwriters in the United States and
Canada (the "U.S. Underwriters" and, together with the International Managers,
the "Underwriters") for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated
and Donaldson, Lufkin & Jenrette Securities Corporation are acting as
representatives (the "U.S. Representatives," and together with the
International Representatives, the "Representatives"). Subject to the terms and
conditions set forth in the U.S. Purchase Agreement, and concurrently with the
sale of Class A Ordinary Shares to the International Managers pursuant to
the International Purchase Agreement, the Issuer has agreed to sell to the U.S.
Underwriters, and the U.S. Underwriters severally have agreed to purchase, an
aggregate of Class A Ordinary Shares. The public offering price per Class A
Ordinary Share and the underwriting discount per Class A Ordinary Share are
identical under the International Purchase Agreement and the U.S. Purchase
Agreement.
In each Purchase Agreement, the several International Managers and the
several U.S. Underwriters, respectively have agreed, subject to the terms and
conditions set forth in such Purchase Agreement, to purchase all the Class A
Ordinary Shares offered in the International Offering and the U.S. Offering,
respectively, if any are purchased. The Class A Ordinary Shares are offered by
the several Underwriters, subject to prior sale, when, as and if issued to and
accepted by them, subject to approval of certain legal matters by counsel for
the Underwriters and certain other conditions. The Underwriters reserve the
right to withdraw, cancel or modify such offer and to reject orders in whole or
in part. In the event of default by an Underwriter, the Purchase Agreement
provides that, in certain circumstances, purchase commitments of the
nondefaulting Underwriters may be increased or the Purchase Agreement may be
terminated. The sale of Class A Ordinary Shares to the U.S. Underwriters is
conditioned upon the sale of Class A Ordinary Shares to the International
Managers, and vice versa.
The International Managers and the U.S. Underwriters have entered into an
intersyndicate agreement (the "Intersyndicate Agreement") that provides for the
coordination of their activities. Pursuant to the Intersyndicate Agreement, the
International Managers and the U.S. Underwriters are permitted to sell Class A
Ordinary Shares to each other for purposes of resale at the public offering
price set forth on the cover page of this Prospectus, less an amount not
greater than the selling concession. Under the terms of the Intersyndicate
Agreement, the U.S. Underwriters and any dealer to whom they sell Class A
Ordinary Shares will not offer to sell or sell Class A Ordinary Shares to
persons who are non-U.S. or non-Canadian persons or to persons they believe
intend to resell to persons who are non-U.S. or non-Canadian persons, and the
International Managers and any dealer to whom they sell Class A Ordinary Shares
will not offer to sell or sell Class A Ordinary Shares to U.S. persons or
Canadian persons or to persons they believe intend to resell to U.S. persons or
Canadian persons, except, in each case, for transactions pursuant to the
Intersyndicate Agreement. Any U.S. Underwriters and International Managers who
purchase from each other for the purpose of resale will be deemed an
"underwriter" under the Securities Act.
The International Representatives have advised the Issuer that the
International Managers propose initially to offer the Class A Ordinary Shares
to the public at the public offering price set forth on the cover page of this
Prospectus, and to certain dealers at such price less a concession not in
excess of $ per Class A Ordinary Share. The International Managers may
allow, and such dealers may allow, a discount not in excess of $
72
<PAGE>
per Class A Ordinary Share on sales to certain other dealers. After the
Offerings, the public offering price, concession and discount may be changed.
The Issuer, its directors, executive officers and shareholders have
agreed, subject to certain exceptions, not to directly or indirectly (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant for
the sale of, or otherwise dispose of or transfer any Ordinary Shares or any
securities convertible into or exchangeable or exercisable for any Ordinary
Shares, or request the filing of any registration statement under the
Securities Act, with respect to any of the foregoing or (ii) enter into any
swap or any other agreement or any transaction that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership of Ordinary
Shares, whether any such swap transaction is to be settled by delivery of the
Ordinary Shares or other securities, in cash or otherwise without the prior
written consent of Merrill Lynch, on behalf of the Underwriters, for a period
of 180 days after the date of this Prospectus.
The Issuer has granted an option to the International Managers,
exercisable for 30 days after the date of this Prospectus, to purchase up to an
aggregate of additional Class A Ordinary Shares at the public offering
price set forth on the cover page of this Prospectus, less the underwriting
discount. The International Managers may exercise this option only to cover
over-allotments, if any, made on the sale of the Class A Ordinary Shares
offered hereby. To the extent that the International Managers exercise this
option, each International Manager will be obligated, subject to certain
conditions, to purchase a number of additional Class A Ordinary Shares
proportionate to such International Manager's initial amount reflected in the
foregoing table. The Issuer has also granted an option to the U.S.
Underwriters, exercisable for 30 days after the date of this Prospectus, to
purchase up to an additional Class A Ordinary Shares to cover
over-allotments, if any, on terms similar to those granted to International
Managers.
The Issuer has agreed to indemnify the International Managers and the U.S.
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the Underwriters may be required
to make in respect thereof.
Until the distribution of the Class A Ordinary Shares is completed, rules
of the Securities and Exchange Commission may limit the ability of the U.S.
Underwriters and certain selling group members to bid for and purchase the
Class A Ordinary Shares. As an exception to these rules, the U.S.
Representatives are permitted to engage in certain transactions that stabilize
the price of the Class A Ordinary Shares. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
Class A Ordinary Shares.
If the Underwriters create a short position in the Class A Ordinary Shares
in connection with the Offerings, (i.e., if they sell more Class A Ordinary
Shares than are set forth on the cover page of this Prospectus), the U.S.
Representatives may reduce that short position by purchasing Class A Ordinary
Shares in the open market. The U.S. Representatives may also elect to reduce
any short position by exercising all or part of the over-allotment option
described above.
The U.S. Representatives may also impose a penalty bid on certain
Underwriters and selling group members. This means that if the Representatives
purchase Class A Ordinary Shares in the open market to reduce the Underwriters'
short position or to stabilize the price of the Class A Ordinary Shares, they
may reclaim the amount of the selling concession from the Underwriters and
selling group members who sold those shares as part of the Offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security before the distribution is completed.
Neither the Issuer nor any of the U.S. Underwriters makes any
representation or prediction, however, as to the direction or magnitude of any
effect that the transactions described above may have on the price of the Class
A Ordinary Shares. In addition, neither the Issuer nor any of the Underwriters
makes any representation that the Representatives will engage in such
transaction or that such transactions, once commenced, will not be discontinued
without notice.
Each International Manager agrees that (a) it has not offered or sold and,
for a period of six months following consummation of the Offerings, will not
offer or sell any Class A Ordinary Shares to persons in the United Kingdom
73
<PAGE>
except to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purposes
of their businesses or otherwise in circumstances which do not constitute an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995, (b) it has complied with and will comply
with all applicable provisions of the Public Offers of Securities Regulations
1995 and the Financial Services Act 1986 with respect to anything done by it in
relation to the Class A Ordinary Shares in, from, or otherwise involving the
United Kingdom and (c) it has only issued or passed on and will only issue or
pass on in the United Kingdom any document received by it in connection with
the issue or sale of the Class A Ordinary Shares to a person who is of a kind
described in Article 11 (3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 (as amended) or to a person to whom the
document may otherwise lawfully be issued or passed on.
Application has been made to list the Ordinary Shares on the Nasdaq and
the Amsterdam Stock Exchange under the symbol "MIHL".
Certain of the Underwriters have been engaged from time to time, and may
in the future be engaged, to perform financial advisory and other investment
banking services to the Issuer and its affiliates. In connection with rendering
such services in the past, such Underwriters have received customary
compensation, including reimbursement of related expenses.
The Underwriters do not intend to confirm sales of Class A Ordinary Shares
offered hereby to any accounts over which they exercise discretionary
authority.
Prior to the Offerings, there has been no public market for the Class A
Ordinary Shares. The initial public offering price for the Class A Ordinary
Shares will be determined through negotiations between the Issuer and the
Representatives. Among the factors to be considered in determining the initial
public offering price, in addition to prevailing market conditions, are the
financial and operating history and condition of the Company, an assessment of
the Company's business and financial prospects, the Company's management, the
prospects for the industry in which the Company operates and the recent market
prices of securities of companies in industries similar to that of the Company.
The initial public offering price set forth on the cover page of this
Prospectus should not, however, be considered as an indication of the actual
value of the Class A Ordinary Shares. Such price is subject to change as a
result of market conditions and other factors. There can be no assurance that
an active trading market will develop for the Class A Ordinary Shares or that
the Class A Ordinary Shares will trade in the public market subsequent to the
Offerings made hereby at or above the initial public offering price.
74
<PAGE>
[I] ADDITIONAL INFORMATION
The following table sets forth the costs and expenses, other than the
underwriting discount, payable by the Registrant in connection with the sale of
Ordinary Shares being registered. All amounts are estimates except the SEC
registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
Amounts to
be Paid
-----------
<S> <C>
SEC registration fee ............................. $
NASD filing fee .................................. $
Nasdaq National Market listing fee ............... $
Amsterdam Stock Exchange listing fee ............. $
Printing, mailing and engraving expenses ......... $
Legal fees and expenses .......................... $
Accounting fees and expenses ..................... $
Transfer agent and registrar fees ................ $
Miscellaneous expenses ........................... $
Total ............................................ $
</TABLE>
A copy of this Prospectus, including the Financial Statements, and the
Memorandum and Articles are available for inspection at the offices of
MeesPierson N.V., Rokin 55, 1012 KK, Amsterdam, The Netherlands, tel: +31 (0)20
527 2467, fax: +31 (0)20 527 1928.
The issuance of the Class A Ordinary Shares being offered by the Issuer in
the Offerings was authorized, and the preemptive rights of the existing
shareholders were excluded, by resolutions of the Board of Directors of the
Issuer in February , 1999.
Other than as disclosed herein, there has been no material adverse change
in the financial condition or results of operations of the Company since March
31, 1998.
The Issuer, having made all reasonable enquiries, confirms that, to the
best of its knowledge and belief as of the date hereof, the information
contained in this prospectus relating to the Company, is accurate and this
prospectus does not omit to state any material fact the omission of which would
make any such information misleading. The Issuer is responsible for the
accuracy and the completeness of the information contained in this prospectus.
75
<PAGE>
[I] CERTAIN NETHERLANDS TAX CONSEQUENCES
The overview of certain Netherlands taxes set forth below is only intended
for individuals and corporate entities resident in the Netherlands who invest
in Ordinary Shares of the Issuer. This overview describes the tax consequences
that will generally apply to such investors under the Netherlands tax laws in
force and in effect as of the date hereof, and is subject to changes in
Netherlands law, including changes that could have retroactive effect. Not
every potential tax consequence of such investment under the laws of the
Netherlands will be addressed. It is therefore recommended that each investor
consults his own tax adviser with respect to the tax consequences of an
investment in the Ordinary Shares.
Individual and Corporate Income Tax
Individuals Not Engaged in an Enterprise
As a general rule, an individual who is resident or deemed to be resident
in the Netherlands ("Netherlands resident individual") and who holds Ordinary
Shares ("Netherlands Ordinary Shareholder") that are not attributable to an
enterprise carried on by or on behalf of such resident, is subject to income
tax at progressive rates on distributions made by the Issuer as well as on
certain distributions deemed made by the Issuer as described below.
Distributions to Netherlands Ordinary Shareholders. Distributions by the
Issuer made to Netherlands Ordinary Shareholders who are subject to Netherlands
income tax include, but are not limited to:
(i) distributions in cash or in kind, deemed and constructive
distributions and repayments of paid-in capital not recognized
for Netherlands income tax purposes; and
(ii) liquidation proceeds, proceeds of redemption of Ordinary Shares
or, as a rule, consideration for the repurchase (buy-back) of
Ordinary Shares by the Issuer in excess of the average paid-in
capital recognized for Netherlands income tax purposes.
Capital gains. Capital gains realized on the disposition of the Ordinary
Shares by a Netherlands resident individual are generally exempt from
Netherlands income tax if (i) the individual does not have a substantial
interest as defined below and if (ii) the Ordinary Shares are not attributable
to an enterprise carried on by or on behalf of such individual. See
"Individuals Engaged in an Enterprise, Companies and Other Entities" below.
Substantial interest. A Netherlands resident individual will be subject to
tax (generally at a rate of 25%) with respect to any dividend (deemed or
actual) derived from, and any gain (deemed or actual) realized on the disposal
(deemed or actual) of, the Ordinary Shares if such holder has a substantial
interest (deemed or actual) in the Issuer. Generally, a holder of Ordinary
Shares will not have a substantial interest in the Issuer if he, his spouse,
certain other relatives (including foster children) or certain persons sharing
his household, do not hold, alone or together, whether directly or indirectly,
the ownership of, or certain other rights over, Ordinary Shares representing
five percent or more of the total issued and outstanding capital (or the issued
and outstanding capital of any class of Ordinary Shares) of the Issuer, or
rights to acquire Ordinary Shares, whether or not already issued, that
represent at any time (and from time to time) five percent or more of the total
issued and outstanding capital (or the issued and outstanding capital of any
class of Ordinary Shares) of the Issuer or the ownership of certain profit
participating certificates that relate to five percent or more of the annual
profit of the Issuer and/or to five percent or more of the liquidation proceeds
of the Issuer. A deemed substantial interest is present if (part of) a
substantial interest has been disposed of, or is deemed to have been disposed
of, on a non-recognition basis.
Individuals Engaged in an Enterprise, Companies and Other Entities
Netherlands resident individuals who own Ordinary Shares that are
attributable to an enterprise carried on by or on behalf of such individuals,
and companies or other entities, subject to Netherlands corporate income tax,
that are resident in the Netherlands for Netherlands tax purposes and that own
Ordinary Shares, are generally subject to income tax or corporate income tax
with respect to distributions made by the Issuer as well as with respect to
certain distributions deemed made by the Issuer and with respect to any gain
realized on the disposal of the Ordinary Shares.
Netherlands Qualifying Pension Funds and Investment Institutions
("Beleggingsinstellingen")
A Netherlands qualifying pension fund is not subject to corporate income
tax. Furthermore, qualifying Netherlands resident investment institutions are
subject to corporate income tax at a special rate of 0 percent.
76
<PAGE>
Net Wealth Tax
Netherlands resident individuals are subject to Netherlands net wealth tax
on the basis of their world-wide net wealth, which includes the fair market
value of the Ordinary Shares.
Gift, Estate and Inheritance Taxes
Gift, estate and inheritance taxes will arise in the Netherlands with
respect to an acquisition of Ordinary Shares by way of a gift by, or on the
death of, a holder of Ordinary Shares who is resident or deemed to be resident
of the Netherlands.
For purposes of Netherlands gift, estate and inheritance taxes, an
individual who holds the Netherlands nationality will be deemed to be resident
in the Netherlands if he has been resident in the Netherlands at any time
during the ten years preceding the date of the gift or his death. Furthermore,
for purposes of Netherlands gift tax, an individual not holding the Netherlands
nationality will be deemed to be resident in the Netherlands if he has been
resident in the Netherlands at any time during the twelve months preceding the
date of the gift.
Other Taxes and Duties
No Netherlands capital tax, registration tax, transfer tax, stamp duty or
any other similar documentary tax or duty will be payable in the Netherlands in
respect of or in connection with the subscription, issue, placement, allotment
or delivery of the Ordinary Shares.
PROSPECTIVE INVESTORS SHOULD CONSULT LEGAL AND TAX ADVISORS IN THE
COUNTRIES OF THEIR CITIZENSHIP, RESIDENCE AND DOMICILE TO DETERMINE THE
POSSIBLE TAX CONSEQUENCES OF PURCHASING, HOLDING AND REDEEMING ORDINARY SHARES
UNDER THE LAWS OF THEIR RESPECTIVE JURISDICTION.
77
<PAGE>
================================================================================
[I] No dealer, salesperson or other individual has been authorized to give any
information or to make any representations not contained in this prospectus in
connection with the offering covered by this prospectus. If given or made, such
information or representations must not be relied upon as having been
authorized by the Company or the Underwriters. This prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, the Class A
Ordinary Shares in any jurisdiction where, or to any person to whom, it is
unlawful to make such offer or solicitation. Neither the delivery of this
prospectus nor any sale made hereunder shall, under any circumstances, create
an implication that there has not been any change in the facts set forth in
this prospectus or in the affairs of the Company since the date hereof.
----------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Exchange Rate Data ............................
Trademarks ....................................
Prospectus Summary ............................
Risk Factors ..................................
Use of Proceeds ...............................
Dividend Policy ...............................
Dilution ......................................
The Company ...................................
Capitalization ................................
Selected Financial and Operating Data .........
Management's Discussion and Analysis of
Financial Condition and Results of
Operations .................................
Business ......................................
Management ....................................
Certain Transactions ..........................
Security Ownership ............................
Description of Capital Stock ..................
Shares Eligible for Future Sale ...............
Certain United States Federal Income Tax
Consequences ...............................
Underwriting ..................................
Legal Matters .................................
Experts .......................................
Additional Information ........................
Certain Netherlands Tax Consequences ..........
Index to Financial Statements ................. F-1
Certain Definitions ........................... D-1
Glossary of Technical Terms ................... G-1
</TABLE>
Until , 1999 (25 days after the date of this International Prospectus),
all dealers effecting transactions in the Class A Ordinary Shares in the United
States, whether or not participating in this distribution, may be required to
deliver a prospectus.
Shares
MIH Limited
Class A Ordinary Shares
----------------------------------
P R O S P E C T U S
----------------------------------
Merrill Lynch International
Donaldson, Lufkin & Jenrette
MeesPierson N.V.
, 1999
================================================================================
[ ] 1999
MIH Limited
P.O. Box 3186
Road Town, Tortola
British Virgin Islands
Dear Sirs,
MIH Limited
We have been asked as counsel to MIH Limited, a British Virgin Islands company
(the "Company") to provide this legal opinion in connection with the
registration under the United States Securities Act of 1933, as amended (the
"Securities Act"), of the unissued Class A Ordinary Shares in the Company (the
"Shares") to be offered by the Company to members of the general public through
certain underwriters. This opinion is given in accordance with the terms of the
Legal Matters section of the Registration Statement (as defined below).
1. For the purpose of this opinion we have reviewed the following documents:-
(a) the Registration Statement on Form F-1 provided to us (the
"Registration Statement") filed by the Company with the United States
Securities and Exchange Commission for the purpose of registering the
Shares;
(b) (i) the Memorandum and Articles of Association and certificate of
incorporation of the Company; and
(ii) a Registered Agent's Certificate dated [ ] 1999 issued by Havelet
Trust Company (BVI) Limited, the Registered Agent of the Company
in the British Virgin Islands.
(c) the public records of the Company as at [ ] 1999 on file with, and
available for inspection at, the Companies Registry in the British
Virgin Islands.
<PAGE>
We have also made such other enquiries and reviewed such matters of law and
examined the originals, photocopies, certified or otherwise identified to our
satisfaction, of such other documents, records, agreements and certificates as
we have considered relevant for the purposes of giving the opinion expressed
below.
2. This legal opinion is confined to and given on the basis of the laws of the
British Virgin Islands at the date hereof and as currently applied by the
courts of the British Virgin Islands. We have not investigated and we do
not express or imply nor are we qualified to express or imply any opinion
on the laws of any other jurisdiction.
3. Based on the foregoing, we are of the opinion that:-
(a) the Company is a company limited by shares, duly incorporated, validly
existing, and in good standing as a separate legal entity under the
laws and regulations of the British Virgin Islands;
(b) the Company has full statutory authority, corporate power and legal
right to own, lease and operate its properties and to conduct its
business as described in the Registration Statement; and
(c) the Shares to be offered and sold by the Company have been legally
authorised and when sold pursuant to the terms described in the
Registration Statement, in conformity with applicable state securities
law, pursuant to duly adopted resolutions of the directors of the
Company and are paid for at least to the extent of their par value,
will be legally issued, fully paid and non-assessable.
In connection with the above opinion, we hereby consent:-
(a) to the use of our name in the Registration Statement, the prospectus
constituting a part thereof and all amendments thereto under the
caption "Legal Matters"; and
(b) to the filing of this opinion as an exhibit to the Registration
Statement.
This opinion is addressed to you and may be relied upon by you and your counsel.
This opinion is limited to the matters detailed herein and is not to be read as
an opinion with respect to any other matter.
Yours faithfully
HARNEY WESTWOOD & RIEGELS
DATED 20 June 1997
(1) MYRIAD INTERNATIONAL HOLDINGS BV
(2) MP COMMUNICATIONS BV
(3) NETHOLD MEDITERRANEAN BV
-------------------------------------
SHAREHOLDERS AGREEMENT
-------------------------------------
Mallinicks
25 Savile Row
London W1X 1AA
<PAGE>
TABLE OF CONTENTS
1. RECITALS ..................................................... 3
2. DEFINITIONS AND INTERPRETATION ............................... 3
3. CONDITION .................................................... 6
4. THE BUSINESS OF THE COMPANY .................................. 6
5. BOARD OF MANAGEMENT AND SUPERVISORY BOARD .................... 6
6. ACCOUNTS ..................................................... 7
7. FINANCING .................................................... 7
8. DIVIDENDS .................................................... 8
9. MATTERS REQUIRING A TWO-THIRDS MAJORITY ...................... 8
10. PROVISIONS RELATING TO TRANSFERS OF SHARES ................... 9
11. GOVERNING LAW AND ARBITRATION ................................ 11
12. RESTRICTIVE COVENANTS ........................................ 12
13. CONFIDENTIALITY .............................................. 13
14. DURATION AND TERMINATION ..................................... 13
15. NOTICES ...................................................... 13
16. GENERAL ...................................................... 14
2
<PAGE>
THIS AGREEMENT
is made on 20 June 1997
BETWEEN
(1) MYRIAD INTERNATIONAL HOLDINGS BV, a company incorporated in The
Netherlands, whose registered office is at Planetenweg 6, 2132 HP
Hoofddorp, The Netherlands (" Myriad"); and
(2) MP COMMUNICATIONS BV a company incorporated in The Netherlands, whose
registered office is at Keizersgracht 683, 1017 Amsterdam, The
Netherlands ("MPCom"); and
(3) NETHOLD MEDITERRANEAN BV, a company incorporated in The Netherlands
whose registered office is at Planetenweg 6, 2132 HP Hoofddorp, The
Netherlands (the "Company").
1. RECITALS
MPCom and Myriad have agreed to enter into this agreement for the
purpose of regulating their relationship as shareholders in the Company
pursuant to the acquisition by MPCom of shares in the Company.
2. DEFINITIONS AND INTERPRETATION
In this agreement -
2.1 clause headings are inserted for convenience only and shall
not be taken into account in its construction;
2.2 unless the context clearly indicates a contrary intention, an
expression which denotes any one gender includes the other
genders, a natural person includes an artificial person and
vice versa, the singular includes the plural and vice versa
and the following expressions bear the meanings assigned to
them below and cognate expressions bear corresponding meanings
-
"Agreed Proportions" - such proportions as equal, at the
time when any shareholders' funds
are contributed by Shareholders
under clause 7, the percentages
which the nominal value of the
shares owned by the Shareholders
respectively in the issued share
capital of the Company bears to the
combined nominal value of all the
issued shares in the capital of the
Company (taken as a whole);
3
<PAGE>
"Affiliate" - in relation to any Person, any other
Person which, directly or
indirectly, ie: (i) is controlled by
that Person; or (ii) controls that
Person; or (iii) is under common
control with that Person;
"the Articles" - the Articles of Association of the
Company at the date of completion
of the Sale Agreement, as such
Articles may be amended from time to
time;
"the Auditors" - the auditors from time to time of
the Company;
"Board of Management" - the board of managing directors
("raad van bestuur") of the Company;
"Business" - the business of the Company set out
in clause 4;
"Encumbrance" - includes any mortgage, charge
(whether legal or equitable),
pledge, lien, hypothecation or other
encumbrance securing any obligation
of any Person or any other type of
preferential arrangement (including,
without limitation, title transfer
and retention arrangements (other
than those entered into in the
ordinary course of trading), sale
and leaseback, sale and purchase or
deferred purchase arrangements and
the discounting or factoring of
receivables on recourse terms)
having a similar effect or any other
arrangement having substantially the
same economic effect as any of the
foregoing;
"Loan Claims" - the amount of NLG 150,496,000 (one
hundred and fifty million four
hundred and ninety six thousand
Dutch Guilders) advanced by Myriad
to the Company as shareholder loan
contributions as at 31 March 1997
and the amount of NLG 27,473,000
(twenty seven million four hundred
and seventy three thousand Dutch
Guilders) advanced by
4
<PAGE>
Myriad to the Company as loans on
current account as at 31 March 1997
together with such other amounts as
have been or may be advanced by
Myriad to the Company from time to
time;
"Pay-TV" - the exhibition or transmission,
whether from inside or outside
Greece, and whether by wire,
telephone wire, over the air, cable,
optic fibre, satellite or microwave
signals, of audio-visual programming
or services substantially in
scrambled or encrypted format, to a
subscriber in Greece, capable of
being unscrambled or decrypted by
individually addressable decoders or
equivalent devices, where a fee is
payable by such subscriber (in
addition, if applicable, to being
charged by the person transmitting
the signal incorporating such
programming) for the right to view
or participate in such television
programmes in unencrypted format;
"Person" - any person, firm, company,
corporation or other incorporated or
unincorporated body;
"the Parties" - MPCom, Myriad and the Company;
"the Sale Agreement" - the Agreement of even date between
the Parties setting out the terms
and conditions of the acquisition by
MPCom of shares in the Company;
"share" - a share in the capital of the
Company of whatever class;
"the Shareholders" - all those Persons holding shares in
the capital of the Company from time
to time;
"Subsidiary" - in relation to any Person, any other
Person directly or indirectly
controlled by such Person, provided
that for the purposes of this
definition "control" means the
holding, whether directly or
indirectly, of in excess of 50% of
the equity in respect of such
Person;
"Supervisory Board" - the board of supervisory directors
of the Company;
5
<PAGE>
"Transfer" - in relation to any share or any
legal or beneficial interest in a
share, includes (i) the sale,
transfer, lease, assignment, grant,
renunciation, alienation, or
disposal of such share or of any
right or interest which a Person may
have in the Company as a result of
such right or interest in that
share; (ii) entering into any
agreement in respect of the votes
attached to such share; (iii)
creating or granting any Encumbrance
over or in respect of such share;
and (iv) any agreement (whether or
not subject to conditions) to do or
create or grant any of the
aforegoing.
3. CONDITION
This agreement is subject to the conclusion and becoming unconditional
of the Sale Agreement save for the suspensive condition in that
agreement which requires this agreement to become unconditional and,
accordingly, if this condition is not fulfilled by 21 July 1997 or such
later date as may be agreed between MPCom and Myriad, then this
agreement shall cease to have effect and each Party shall have no claim
under it against the other, save in respect of prior breach.
4. THE BUSINESS OF THE COMPANY
4.1 The Business of the Company shall be the holding of the
interests (including without limitation equity interests) in
companies which conduct, or participate in the provision of
technology or services relating or ancillary to, the
acquisition, management, compilation and/or distribution of
television programmes or programme services via Pay-TV in
Greece and Cyprus and the conduct itself of such activities.
4.2 Each of the Shareholders shall not act to undermine the
interests of the Company, and shall not participate in any
activity which would be detrimental to the Business.
5. BOARD OF MANAGEMENT AND SUPERVISORY BOARD
5.1 The Supervisory Board shall comprise three directors
("Supervisory Directors") and the Board of Management shall
comprise at least two directors ("Managing Directors").
5.2 Myriad shall be entitled to nominate two persons for election
to the Supervisory Board and shall be entitled to nominate all
persons for election to the Board of Management (the "Myriad
Supervisory Directors" and the "Myriad Managing Directors"
respectively)
5.3 For so long as MPCom owns at least 30% (thirty percent) of the
shares it shall be entitled to nominate 1 (one) person for
election to the Supervisory Board (the "MPCom Supervisory
Director").
6
<PAGE>
5.4 Each Shareholder shall be entitled from time to time to remove
any of the persons nominated by it for election as Supervisory
Directors or as Managing Directors and nominate someone else
to take their place.
5.5 Each Shareholder undertakes to the others to cooperate to
ensure that the persons nominated from time to time by each
Shareholder as Supervisory or Managing Directors are duly
elected as such in accordance with this Agreement.
5.6 A quorum at meetings of Directors, whether of the Supervisory
Board or of the Board of Management shall be 2 (two)
Directors, consisting of at least 1 (one) Myriad Director.
5.7 If, at any meeting of either of the Boards, any Myriad
Director is not present then the Myriad Director who is
present at such meeting shall be entitled to exercise all the
voting rights of the Myriad Directors as if such absent Myriad
Director were present at such meeting.
5.8 The Company shall be managed by the Board of Management who
shall, inter alia, lay down general policies relating to the
conduct by the Company of the Business and each Managing
Director may represent and bind the Company.
5.9 Myriad shall procure that the Board of Management ensures that
the Company complies in all respects with all legislation or
regulations which may be applicable to the Company from time
to time.
6. ACCOUNTS
6.1 The Company shall at all times keep and maintain true and
accurate accounting and other financial records and other
books and records of the affairs of the Company.
6.2 The statutory accounts and related statements of the Company
shall be made up at the completion of each financial year of
the Company and the Shareholders shall procure that after the
end of each financial year and within the period required
under Dutch law -
6.2.1 there shall be prepared proper accounts in respect of
such financial year in accordance with the
legislation applicable in The Netherlands from time
to time and international standards and generally
accepted accounting principles and practices and that
the same shall be duly audited; provided that, where
such accounts reflect or consolidate information
concerning the Subsidiaries of the Company, such
information may not have been audited nor prepared in
accordance with such principles and practices but
will have been prepared in accordance with
international accounting standards; and
6.2.2 such audited accounts, together with the report of
the Directors thereon, shall be submitted by the
Directors to the annual general shareholders' meeting
of the Company for approval.
7. FINANCING
7
<PAGE>
7.1 Myriad shall procure that the Company is properly funded to
conduct the Business and to meet its obligations as and when
such obligations fall due. In this regard, Myriad shall use
reasonable endeavours to procure that the requirements of the
Company for working capital to finance its Business are met as
far as practicable by borrowing from banks and other similar
sources, on terms acceptable to the Company, as to interest,
repayment and security, but without allowing any prospective
lender the right to participate in the equity share capital of
the Company as a condition of any loan and, in addition,
without all of the Shareholders (and MPCom in particular)
being obliged to provide any guarantees, indemnities or other
security over their assets on behalf of the Company to any
prospective lenders to facilitate such loans.
7.2 If the Board of Management determines that borrowing from a
bank or other similar source is not possible or desirable,
they shall refer the matter to a meeting of Shareholders,
which meeting shall determine by majority vote the amounts of
additional funds required by the Company and the manner in
which such funds are to be made available whether by
subscribing for new shares in the Company or by way of
Shareholders loans to the Company or by the issue of new
shares to any third Party; provided that no Shareholder shall
be obliged to contribute any additional shareholder
contributions; provided further that if additional shareholder
loan contributions are made then such loans shall bear
interest at normal commercial interest rates prevailing in The
Netherlands.
7.3 If Shareholders do not contribute additional shareholder
contributions in the Agreed Proportions, whether by way of the
subscription for new shares in the Company or the making of
shareholder loan contributions which are subsequently
capitalised, then such Shareholders' percentage of interests
in the Company shall be varied accordingly.
8. DIVIDENDS
8.1 No dividends shall be declared or paid nor shall any
distribution of capital or profits be made until the repayment
in full of the Loan Claim.
8.2 In addition, if any Shareholder has contributed more loan
capital to the Company than it would have done if all the loan
capital had been contributed by the Shareholders in the Agreed
Proportions then the Company shall not pay any dividends or
make any distribution of capital or of profits unless and
until such excess loan claims of the Shareholder against the
Company have been repaid in full.
9. MATTERS REQUIRING A TWO-THIRDS MAJORITY
9.1 All decisions of the Board of Management, the Supervisory
Board and the Shareholders in general meeting shall be made by
simple majority vote; provided, however, that in relation to
the following matters a valid resolution of the Shareholders
and/or Directors shall only be adopted if Shareholders holding
not less than two-thirds of the votes exercisable by all
Shareholders vote in favour thereof:
9.1.1 a change to the nature of the Business;
8
<PAGE>
9.1.2 a change of the nationality of the Company; or
9.1.3 the incurring by the Company of any obligations
requiring guarantees or similar security to be given
by all of the Shareholders.
The question whether any resolution relating to any of the
above matters are adopted by the Shareholders shall be
determined in accordance with the provisions of the Articles
and Dutch company law.
9.2 If a deadlock arises because the Shareholders are unable to
adopt a resolution which deals with any of the matters listed
in clause 9.1 then -
9.2.1 the Shareholders shall, within 14 (fourteen) days
after the deadlock has arisen, prepare and circulate
to each other a memorandum or other written statement
setting out their position on the matter in dispute
and their reasons for adopting such position. Such
memoranda or statements shall be considered by the
respective Chief Executives of the Shareholders who
shall use their reasonable endeavours to resolve such
dispute within 30 (thirty) days of the exchange of
the memoranda. If the aforesaid Chief Executives
agree on a resolution of the matter, the Shareholders
shall jointly exercise the voting rights and other
powers of control available to them in relation to
the Company to procure that such resolution is
promptly and fully carried into effect;
9.2.2 if the procedure set out in clause 9.2.1 fails to
resolve the deadlock, any of the Shareholders may
request by written notice in writing to the Company
and the other Shareholders that an attempt be made to
resolve the deadlock by way of mediation. If the
Shareholders are unable to agree on a mediator by the
majority stipulated in clause 9.1 within 21 (twenty
one) days of receipt by the Company of the request
for mediation, the mediator shall be nominated by the
President for the time being of the Netherlands
Mediation Institute (Stichting Nederlands Mediation
Instituut) in Rotterdam and the following procedure
shall be adhered to -
9.2.2.1 each individual Shareholder and 1 (one)
executive officer of each corporate
Shareholder shall be entitled to attend the
mediation, and no Shareholder shall be
entitled to any other representation;
9.2.2.2 the mediator shall in his absolute
discretion determine the nature and form of
the mediation with the sole aim of resolving
the deadlock by way of negotiation as soon
as possible;
9.2.2.3 the cost of the mediation as determined by
the mediator shall be borne by the
Shareholders pro rata to their respective
shareholdings.
10. PROVISIONS RELATING TO TRANSFERS OF SHARES
10.1 MPCom undertakes that it will not Transfer any of its shares
during this Agreement otherwise than in accordance with the
following provisions of this clause 10.
9
<PAGE>
10.2 MP Com shall be entitled to Encumber its shares in favour of
any Affiliate of MPCom with the prior written consent of
Myriad as to the identity of the Affiliate and the terms and
conditions of such Encumbrance ;
10.3 Right of First Refusal
10.3.1 If, at any time, MPCom wishes to Transfer any of its
Shares other than as set out in clause 10.2, it
shall, prior to making or becoming contractually
bound to make, any such Transfer, by notice in
writing to Myriad, offer (the "Offer") to sell all
(but not a part only) of its Shares to Myriad at the
"Offer Price", as determined in the manner set out
below. The Offer shall:
10.3.1.1 specify the Shares to which it relates (the
"Offered Shares"); and
10.3.1.2 stipulate a price (which shall constitute
the Offer Price), at which MPCom is prepared
to Transfer the Offered Shares. If MPCom has
received a bona fide written offer (the
"Third Party Offer") from a third Party (the
"Third Party") to purchase the entire legal
and beneficial ownership of the Offered
Shares for a cash price, a copy of such
Third Party Offer, showing the name and
address of the Third Party and the terms and
conditions offered by such Third Party,
shall be supplied to Myriad. In this case,
the price offered by such third Party for
the Offered Shares shall be set out in the
Offer and shall constitute the Offer Price.
Myriad shall keep and maintain the existence
and the terms of any such Third Party Offer
strictly confidential and shall only
disclose them within its own corporate
structure and to outside professionals on a
need to know basis. If a Third Party Offer
has been made then, save as specifically set
out herein, the Offer shall be subject,
mutatis mutandis, to the terms and
conditions contained in the Third Party
Offer. MPCom may not offer to sell its
shares except on an "all cash" basis.
10.3.2 The Offer shall be irrevocable and shall be open for
acceptance (in whole and not in part only) by Myriad
for a period of 30 (thirty) days following receipt of
the Offer. Acceptance shall be made by means of a
written notice, specifying the number of Offered
Shares in respect of which the Offer is being
accepted.
10.3.3 Should Myriad not accept the whole of the Offer as
provided above, then MPCom shall be entitled to sell
all (but not a part only) of the Offered Shares to
the Third Party on the terms and conditions set out
in the Third Party Offer or, where no Third Party
Offer had been made, to any bona fide third Party,
but at a price which shall not be less than that, and
on terms and conditions which are not, taken as a
whole, more favourable to the third Party purchaser
than
10
<PAGE>
those at which Myriad was entitled to purchase the
Offered Shares in terms of clause 10.3.1, provided
that MPCom shall, before selling the Offered Shares
to such bona fide third Party, in writing advise
Myriad of the identity of such third Party and the
terms and conditions on which such third Party is
prepared to purchase the Offered Shares, in which
case Myriad shall be entitled, for a period of 30
(thirty) days after receipt of the written advice as
aforesaid, to purchase the Offered Shares on the
terms and conditions at which such third Party is
prepared to do so.
10.3.4 Should MPCom not complete the sale of all the Offered
Shares within 120 (one hundred and twenty) days (or
such longer period as may be required by law to
obtain all required approvals of Governmental bodies)
after non-acceptance of the Offer by Myriad, then
MPCom's right to effect the sale to the third Party
shall terminate and the process set out in clause
10.3.1, 10.3.2 and 10.2.3 shall commence anew with
respect to any such Shares.
10.3.5 Following acceptance of the Offer by Myriad as set
out in clause 10.4 or clause 10.3.3, MPCom shall be
obliged to sell, and Myriad shall be obliged to
purchase, the Offered Shares at 10h00 on the date
falling 10 (ten) business days after the date of
acceptance, at the registered office of the Company
(or such other time, date and place as may be agreed
by MPCom and Myriad) upon the terms and conditions as
set out in such Offer or on the terms and conditions
which the bona fide third Party was prepared to do
so, as the case may be. Pending completion of such
purchase and sale, MPCom shall remain liable for all
its obligations to the Company.
10.3.6 Unless the transferee is an existing Shareholder, any
Transfer of Shares (and any registration thereof)
shall be subject to the condition precedent that:
10.3.6.1 the transferee enters into an agreement in
writing with the Company and Myriad in a
form reasonably acceptable to Myriad,
whereby the transferee agrees to be bound by
all of the provisions of this Agreement
(mutatis mutandis and insofar as they are
applicable) as those by which the transferor
is bound under this Agreement as a
Shareholder, as if it were an original
Shareholder and, where the context so
permits, as if each reference therein to the
transferor were always a reference to the
transferee in place thereof); and
10.3.6.2 the transferee notifies the Company and the
Shareholders of its address for service of
all notices and communications to be given
or made under this Agreement.
10.4 Myriad shall notify MPCom in writing at least thirty days in
advance of the transfer by Myriad of any of its shares.
11. GOVERNING LAW AND ARBITRATION
11
<PAGE>
11.1 This agreement shall be governed by and construed in all
respects in accordance with the laws of The Netherlands.
11.2 If any dispute arises at any time between any of the Parties
in connection with this agreement including without
limitation, the formation or existence of, the implementation
of or the interpretation or application of, the Parties'
respective rights and obligations in terms of or arising out
of this agreement or its breach or termination or the
performance or non-performance of any Party's obligations
hereunder or which relates in any way to any matter affecting
the interests of the Parties in terms of this agreement, and
the Parties are unable to resolve their dispute, any Party may
refer the matter in dispute, in the first instance, to the
respective chief executive officers of the Shareholders for
resolution.
11.3 All disputes arising in connection with this Agreement or
further agreements resulting therefrom, which after having
been referred under clause 11.2 shall not have been resolved
by the said chief executive officers within 21 (twenty-one)
days of having been so referred, shall be finally settled by
arbitration in accordance with the rules of the Netherlands
Arbitration Institute (Nederlands Arbitrage Instituut). The
arbitration tribunal shall be composed of three arbitrators.
The place of arbitration shall be Amsterdam, the Netherlands.
The arbitration procedure shall be conducted in the English
language. The arbitration tribunal shall decide in accordance
with the rules of law (overeenkomstig de regelen des rechts).
11.4 This clause 11 shall not preclude any Party from obtaining
interim relief on an urgent basis from a court of competent
jurisdiction pending any decision of the arbitrator.
11.5 The provisions of this clause -
11.5.1 constitute an irrevocable consent by the Parties to
any proceedings in terms hereof and no Party shall be
entitled to withdraw therefrom or claim at any such
proceedings that it is not bound by such provisions;
11.5.2 are severable from the rest of this agreement and
shall remain in effect despite the termination of or
invalidity for any reason of this agreement.
12. RESTRICTIVE COVENANTS
12.1 MPCom undertakes that it will not, and it shall procure that
its Affiliates shall not, either alone or in conjunction with
or on behalf of any other Person, or directly or indirectly,
do any of the following things while it is a Shareholder and
for a period of 6 (six) months after it ceases for any reason
to be a Shareholder -
12.1.1 carry on or be engaged or interested in any business
in Greece or Cyprus which competes with the Business
excluding any business in which MPCom or any of its
Affiliates is interested or engaged as at the date of
signature of this Agreement ; or
12.1.2 solicit the custom in Greece as a subscriber of any
Person who at any time in the 12 (twelve) months
prior to it ceasing to be a Shareholder was a
subscriber
12
<PAGE>
to the programming services of any Pay-TV licence
holder in which Company has an interest, whether
direct or indirect; or
12.1.3 solicit or entice away any employee of the Company;
or
12.1.4 use any business name, mark or style which may
suggest a connection with the Company excluding those
business names, marks and styles which are used by
MPCom at the date of signature of this Agreement; or
12.1.5 assist any other Person to do any of the foregoing
things.
12.2 It is agreed between the Parties hereto that whilst the
restrictions set out in clause 12.1 are considered fair and
reasonable, if it should be found that any of the restrictions
are void or unenforceable and if by deleting part of the
wording or substituting a shorter period of time or different
geographical limit or a more restricted range of activities
for the period of time, geographical limits or ranges of
activities set out in clause 12.1it would not be void, then
there shall be substituted such next less extensive period
and/or limit and/or activity or such deletions shall be made
as shall render clause 12.1 valid and enforceable.
13. CONFIDENTIALITY
Save as required by law or the requirements of any stock exchange or
other regulatory body, each of the Parties hereby undertakes to the
others that it will not at any time hereafter divulge or communicate to
any person (except to such of its employees, directors, officers or
advisers whose province is to know the same) at any time hereafter
(save with the written prior consent of the other Parties) any
confidential information or secret information concerning the Business
or the financial or contractual arrangements or other dealings or
affairs of the Company or of the other Parties to this Agreement, save
to the extent to which such information shall (other than by
unauthorised disclosure by that Party or any of its or their respective
employees, directors, officers or advisers) come within the public
domain.
14. DURATION AND TERMINATION
Except as otherwise provided herein, this agreement shall continue in
full force and effect until the earlier of the following events -
14.1 the Shareholders agreeing in writing to terminate this
agreement; or
14.2 an effective resolution being passed or a binding order being
made for the winding-up of the Company;
provided, however, that this agreement shall cease to have effect as
regards any Shareholder who ceases to hold any shares save for any
provisions hereof which are expressed to continue in force thereafter.
15. NOTICES
15.1 Notices and communications under this agreement shall be given
in writing and may be
13
<PAGE>
delivered to the relevant Party or sent by registered air mail or
facsimile to the address of that Party or that Party's facsimile number
specified in 15.2.
15.2 Notices and communications shall be addressed as follows:
15.2.1 if to Myriad - Flamingo Building, Planetenweg 6,
and/or the Hoofddorp 2132 HP,
Company The Netherlands
Attention: Chief Executive Officer
Telefax: +31 2356 86880
15.2.2 if to MPCom - Keizersgracht 683, 1017 Amsterdam,
The Netherlands
Attention: Chief Executive Officer
Telefax: +31 20 527 4394
or such other address of a Party, person and/or fax number as that
Party shall have notified in writing to all other Parties.
15.3 Notices and communications shall be given and made in the
English language.
16. GENERAL
16.1 Representations
No Party shall be bound by any express or implied term, representation,
warranty, promise or the like not recorded in this agreement.
16.2 Variations
No addition to, modification, amendment or consensual
cancellation of this agreement shall have any force or effect
unless made in writing specifically referring to this
agreement and duly signed by the Parties.
16.3 Waiver
No indulgence which any Shareholder ("the Grantor") may grant
to any other ("the Grantee") shall constitute a waiver of any
of the rights of the Grantor, who shall not thereby be
precluded from exercising any rights against the Grantee which
may have arisen in the past or which may arise in the future.
16.4 Severance
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<PAGE>
If any provision of this agreement or part thereof is rendered
void, illegal or unenforceable in any respect under any law,
the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired
thereby.
16.5 Time
Time shall be of the essence as regards the provisions of this
agreement, both as regards the times and periods mentioned
herein and as regards any times or periods which may, by
agreement between the Parties, be substituted for them.
16.6 Survival of Rights, Duties and Obligations
Termination of this agreement for any cause shall not release
a Party from any liability which at the time of termination
has already accrued to another Party or which thereafter may
accrue in respect of any act or omission prior to such
termination.
16.7 Costs
Each Party shall bear its own costs and expenses incurred by
it in connection with the preparation, negotiation and
conclusion of this agreement.
16.8 Assignment
None of the Parties shall be entitled to assign this agreement
or any of its rights and obligations hereunder except to a
transferee of shares in accordance with clause 10.2 or 10.3 of
this Agreement.
16.9 Conflict with Articles
In the event of any ambiguity or discrepancy between the
provisions of this agreement and the Articles, then unless the
application of the relevant provisions in the Articles are
mandatory in terms of Dutch law, the provisions of this
agreement shall prevail and accordingly the Parties shall
exercise all voting and other rights and powers available to
them so as to give effect to the provisions of this agreement
and shall further if necessary procure any required amendment
to the Articles.
16.10 No Partnership
Nothing in this agreement shall be deemed to constitute a
partnership between the Parties nor constitute any Party the
agent of any other Party for any purpose.
16.11 Further Assurance
Each Party shall cooperate with the others and execute and
deliver to the others such other instruments and documents and
take such other actions as may be reasonably requested from
time to time in order to carry out, evidence and confirm their
rights and the intended purpose of this agreement.
15
<PAGE>
IN WITNESS WHEREOF this agreement has been executed on the day and year first
above written.
SIGNED BY ALLAN ROSENZWEIG )
)
for and on behalf of )
MYRIAD INTERNATIONAL HOLDINGS BV ) /s/ ALLAN ROSENZWEIG
in the presence of: )
SIGNED BY )
ROBERT AARTS/NIELS TEVES )
for and on behalf of )
MP COMMUNICATIONS BV ) /s/ ROBERT AARTS /s/ NIELS TEVES
in the presence of: )
DAVID TUDOR
SIGNED BY ALLAN ROSENZWEIG )
)
)
for and on behalf of )
NETHOLD MEDITERRANEAN BV ) /s/ ALLAN ROSENZWEIG
in the presence of )
DAVID TUDOR
16
* Indicates where text has been omitted pursuant to a request for confidential
treatment. The omitted text has been filed separately with the Securities and
Exchange Commission.
AGREEMENT
dated 4 April 1997
between
CANAL+ SA
and
FILMNET INVESTMENTS BV
and
MYRIAD HOLDINGS NETHERLANDS BV
and
MIH HOLDINGS LIMITED
and
MIH LIMITED
and
IRDETO BV
-----------------------------------------
INVESTMENT & SHAREHOLDERS' AGREEMENT
relating to Irdeto BV
-----------------------------------------
Mallinicks Attorneys
25 Savile Row
London W1X IAA
<PAGE>
TABLE OF CONTENTS
RECITALS......................................................................4
DEFINITIONS AND INTERPRETATION................................................5
AGREEMENT FOR SALE...........................................................10
PURCHASE CONSIDERATION.......................................................11
COMPLETION...................................................................11
WARRANTIES...................................................................12
BUSINESS OF THE COMPANY......................................................12
BOARD OF DIRECTORS AND MANAGEMENT............................................13
BUDGETS......................................................................17
FINANCING....................................................................18
FUNDAMENTAL BUSINESS DECISIONS...............................................20
TRANSFERS OF SHARES..........................................................23
GOVERNING LAW AND ARBITRATION................................................28
BUSINESS ACTIVITIES ONLY THROUGH THE COMPANY.................................29
DURATION AND TERMINATION.....................................................30
CONFIDENTIALITY..............................................................31
WAIVERS......................................................................32
ASSIGNMENT...................................................................32
GUARANTEE....................................................................32
ENTIRE AGREEMENT.............................................................33
NOTICES......................................................................33
ANNOUNCEMENTS................................................................34
RELATIONSHIP OF THE SHAREHOLDERS.............................................35
<PAGE>
CONFLICT WITH OTHER DOCUMENTS................................................35
NEW STATUTUES................................................................35
COUNTERPARTS.................................................................36
SCHEDULE 1: FUNDAMENTAL BUSINESS DECISIONS...................................38
SCHEDULE 2: DRAFT NEW STATUTES OF IRDETO.....................................40
<PAGE>
INVESTMENT & SHAREHOLDERS' AGREEMENT
This Agreement is made on 4 April 1997 between
(1) Canal+ SA, a societe anonyme incorporated under the laws of France,
whose principal place of business is at 88/89 Quai Andre Citroen,
Paris, France ("Canal+"); and
(2) FilmNet Investments BV, a company incorporated in The Netherlands,
whose principal place of business is at Neptunusstraat 41, NL 2132 JA
Hoofddorp, The Netherlands ("FilmNet"); and
(3) Myriad Holdings, Netherlands BV , a company incorporated in The
Netherlands, whose registered address is at Neptunusstraat 41, NL2132
JA Hoofddorp, The Netherlands ("Myriad"); and
(4) MIH Holdings Limited, a company incorporated in the Republic of South
Africa, whose registered office is at 75 Republic Road, Randburg, South
Africa ("Holdings"); and
(5) MIH Limited, a company incorporated in the British Virgin Islands,
whose registered office is at 3rd Floor, Abbot Building, Main Street,
Road Town, Tortola, British Virgin Islands ("MIH"); and
(6) Irdeto BV, a company incorporated in The Netherlands, whose principal
place of business is at Jupiterstraat 42, 2132 ND Hoofddorp, The
Netherlands (the "Company" or "Irdeto").
1 RECITALS
1.1 On 16 December 1996, Irdeto, Canal+, MIH, Holdings and
NetHold B.V. entered into a Term Sheet which sets out the main
principles which govern -
1.1.1 the acquisition by MIH of a portion of the shares in
and shareholders' loan claims against the Company;
and
4
<PAGE>
1.1.2 the relationship between the parties as (direct and
indirect) shareholders of the Company.
1.2 The registered owner of all the issued Shares in the Company
is FilmNet, an indirect wholly owned subsidiary of NetHold
B.V. NetHold B.V. will on the Closing Date become an indirect
wholly owned subsidiary of Canal+.
1.3 MIH wishes to hold its shareholding in the Company through
Myriad, which is an indirect wholly owned subsidiary of MIH.
1.4 The purpose of this Agreement is accordingly to record the
terms and conditions -
1.4.1 upon which Myriad will acquire the Sale Shares and
Loan Claims; and
1.4.2 regulating the relationship between FilmNet and
Myriad as direct Shareholders (and where appropriate,
between Canal+ and MIH as indirect Shareholders) of
the Company.
2. DEFINITIONS AND INTERPRETATION
In this Agreement -
2.1 clause headings are inserted for convenience only and shall
not be taken into account in its construction.
2.2 unless the context clearly indicates a contrary intention, an
expression which denotes any one gender includes the other
genders, a natural person includes an artificial person and
vice versa, the singular includes the plural and vice versa
and the following expressions bear the meanings assigned to
them below and cognate expressions bear corresponding
meanings -
"Agreed Proportions" - such proportions as equal,
at the time when
5
<PAGE>
any shareholders' funds are
to be contributed by the
Shareholders under clause
10, the percentages which
the nominal value of the
Shares beneficially owned by
the Shareholders
respectively bears to the
combined nominal value of
all the issued Shares (taken
as a whole);
"Agreement" - this agreement and the
schedules hereto;
"Auditors" - the auditors from time to
time of the Company;
"Board" - the managing board
("Bestuur") of the Company;
"Budgets" - the annual budgets and
financial and business plans
for the Company, as approved
by the Board from time to
time;
"Business" - the business of the Company
as set out in clause 7.1;
"Closing" - closing of the transactions
provided for in the
Contribution and
Subscription Agreement, in
the manner specified in
Section 2.4 of such
Agreement;
"Closing Date" - the date defined as such in
the Contribution and
Subscription Agreement;
"Contribution and
6
<PAGE>
Subscription Agreement" - the agreement of that title
concluded on 16 December
1996 between Canal+,
Richemont SA, MIH, Holdings
and Network Investments SA;
"Controlled Affiliate" - in relation to any Person,
any other Person directly or
indirectly Controlled by
such Person, provided that
for purposes of this
definition "Control" means
the holding of in excess of
80% (eighty percent) of the
equity and voting rights in
respect of such other
Person;
"Directors" - the members of the Board
from time to time
("Bestuurders").
"Encumbrance" - includes, without
limitation, any usufruct,
pledge, attachment, lien
(other than liens arising
and being discharged by the
operation of law in the
ordinary course of
business), security
interest, preferential
rights or trust arrangement
or other arrangement or
agreement, the effect of
which is the creation of
security, and any option,
pre-emption or other such
right;
"Fundamental Business
Decisions" - decisions of the general
meeting of shareholders of
the Company or of the Board,
as the case may be, relating
to any of the matters listed
in Schedule 1;
7
<PAGE>
"Indebtedness" - any loan, bond, note, loan
stock or debenture or other
obligation for borrowed
monies, any indebtedness in
the nature of borrowings,
any liability in respect of
any trade finance or credit,
financial leases, acceptance
credit or note or bill,
discounting facility, any
amount of consideration left
outstanding by way of loan
under any agreement for the
sale of assets and/or the
supply of services and any
guarantee or indemnity in
respect of any of the
foregoing, the amount
thereof in each case being
taken for this purpose to be
the maximum amount capable
of being outstanding from
the Company thereunder
whether or not then due or
owing or advanced at the
time of calculation;
"Loan Claims" - 50% (fifty percent) of all
monetary claims which
FilmNet and NetFin
respectively may have
against the Company on the
Closing Date;
"NetFin" - NetHold Finance VOF;
"Pay-TV" - (i) the exhibition or
transmission, whether by
wire, telephone wire, over
the air, cable, optic fibre,
satellite, microwave signals
or any other means of
delivery, of audio, visual
and/or audio-visual
programming or services
substantially in scrambled
or encrypted format, to a
subscriber, capable of being
unscrambled or decrypted by
individually
8
<PAGE>
addressable decoders or
equivalent devices, where a
fee is payable by such
subscriber (in addition, if
applicable, to being charged
by the person transmitting
the signal incorporating
such programming) for the
right to view and/or
participate in such
television programmes and
services in unencrypted
format; (ii) the provision,
enabling and disabling of
decoders or equivalent
devices, the marketing and
sale of subscriptions and
the provision of
customer/subscriber support
services and/or know-how
relating thereto; and (iii)
in connection with the
above, the compilation and
scheduling of such
television services,
programming, signal
distribution and other
related technical activities
and know-how;
"Permitted Transferees" - a Person to whom Shares are
transferred in accordance
with clause 12.4;
"Person" - any individual, firm,
company, corporation,
government, State or agency
of a State or any joint
venture, partnership or
other incorporated or
unincorporated body;
"Sale Shares" - 19999 (nineteen thousand
nine hundred and ninety
nine) ordinary Shares of NLG
1 (one Dutch Guilder) each,
consisting 50% (fifty
percent) (less one Share) of
the total issued Shares;
9
<PAGE>
"Shareholders" - FilmNet, Myriad and their
Permitted Transferees from
time to time;
"Statutes" - the Statutes of the Company
at the date of this
Agreement and as such
Statutes may be amended from
time to time;
"Share" - a share in the capital of
the Company of whatever
class;
"Technology Agreements" - the Short Form Technology
Agreement dated 16 December
1996 between Canal+,
Irdeto, MIH, Holdings,
Paltech Ltd, MultiChoice
Africa (Pty) Ltd and/or all
definitive agreements
referred to therein or
concluded pursuant thereto;
"Transfer" - in relation to any Share or
any legal or beneficial
interest in a Share,
includes (i) the sale,
transfer, lease, assignment,
grant, renunciation,
alienation, or disposal of
such Share or of any right
or interest which a Person
may have in the Company as a
result of such right or
interest in that Share; (ii)
entering into any agreement
in respect of the votes
attached to such Share;
(iii) creating or granting
any Encumbrance over or in
respect of such Share; and
(iv) any agreement (whether
or not subject to
conditions) to do or create
or grant any of the
aforegoing.
3 AGREEMENT FOR SALE
10
<PAGE>
Subject to the terms and conditions of this Agreement, on 8 April 1997,
FilmNet shall sell (and in the case of Loan Claims owed by the Company
to NetFin, shall procure that NetFin shall sell) and Myriad shall
purchase, the Sale Shares and the Loan Claims. The Sale Shares shall be
free of all Encumbrances (other than those recorded in the Statutes)
and shall be sold with all rights attached or accruing to them on the
Closing Date.
4 PURCHASE CONSIDERATION
The purchase consideration for the Sale Shares and the Loan Claims
shall be the sum of US$17.5 million (seventeen and a half million
United States Dollars).
5 COMPLETION
5.1 Completion of the purchase and sale of the Sale Shares and the
Loan Claims shall be effected on 8 April 1997, in the
following manner -
5.1.1 FilmNet, Myriad and the Company shall execute a
notarial deed before a Dutch notary transferring the
Sale Shares from FilmNet to Myriad and immediately
thereafter the Board shall register Myriad as the
holder of the Sale Shares;
5.1.2 Canal+ shall cause FilmNet and NetFin to assign to
Myriad (or to a Controlled Affiliate of MIH,
nominated in writing by MIH not later than 5 (five)
days before the Closing Date) all the Loan Claims,
5.1.3 a meeting of the shareholders of the Company shall be
held at which it shall be resolved -
5.1.3.1 to elect as Directors of the Company such
two persons as Myriad and FilmNet may
respectively nominate. The parties
acknowledge that the current directors of
the Company will,
11
<PAGE>
pursuant to the provisions of Section 2.4
(v) of the Contribution and Subscription
Agreement, resign as directors with effect
from the Closing Date and the parties will
not do anything to prevent such resignations
taking effect;
5.1.3.2 to adopt new Statutes which will reflect all
the fundamental principles set out in
Schedule 2 and which will be consistent with
the provisions of this Agreement.
5.2 On completion of the matters set out in clause 5.1, Myriad
shall discharge the purchase consideration for the Sale Shares
and the Loan Claims by paying the amount thereof into account
number 628158955 with the HBU Bank of Coolsingel 104, 3000 AE
Rotterdam branch, by means of a wire transfer.
6 WARRANTIES
6.1 Canal+ and FilmNet severally warrant that on the date of this
Agreement and on the Closing Date, they have and will have
full power and authority to enter into and perform this
Agreement, which constitutes binding obligations on each of
them in accordance with its terms.
6.2 MIH and Myriad warrant that they have, and on the Closing Date
will have, full power and authority to enter into and perform
this Agreement, which constitutes binding obligations on each
of them in accordance with its terms.
6.3 Save as aforesaid, no party gives any warranties or
representations to any other in relation to the purchase and
sale of the Sale Shares and Loan Claims.
7 BUSINESS OF THE COMPANY
7.1 The business of the Company is -
12
<PAGE>
7.1.1 the creation and/or acquisition of technology
relating to Pay TV including, without limitation,
conditional access systems, business systems for
subscriber management and studio operations and
operating systems/applications;
7.1.2 the commercialisation, marketing and distribution (by
installing, servicing and supporting) of such Pay-TV
technology through licensing (including both hardware
and software) and consultancy, including, without
limitation, system integration, anywhere in the
world;
7.1.3 any other business which the Shareholders may agree
on from time to time.
7.2 MIH and Myriad hereby undertake to support the development by
or on behalf of the Company and Canal+ of an interface
between the Company's digital access control technology and
the "Media Highway" software developed by Canal+, provided
that MIH (or any Controlled Affiliate of MIH, nominated by
MIH) shall be entitled to obtain a license to use such
software on fair and reasonable commercial terms. MIH and
Myriad further undertake to support any efforts towards the
integration or convergence of the Irdeto and SECA digital
access control technologies, provided that the interests and
rights in the Company of MIH and Myriad that result from this
Agreement shall not be adversely affected, subject to
dilution, as a result of such integration or convergence, it
being understood that such integration or convergence will not
cause the Fundamental Business Decisions to be extended to
matters which do not affect the Company, its affairs or the
Business.
8 BOARD OF DIRECTORS AND MANAGEMENT
8.1 The Board shall comprise 4 (four) persons. For so long as a
Shareholder owns -
8.1.1 25 percent or less of the issued Shares, it shall be
entitled to nominate 1 (one) person for election as a
Director;
8.1.2 more than 25% (twenty five percent) but less than 75%
(seventy five percent)
13
<PAGE>
of the issued Shares, it shall be entitled to
nominate 2 (two) persons for election as Directors;
and
8.1.3 75% (seventy five percent) or more of the issued
Shares, it shall be entitled to nominate 3 (three)
persons for election as Directors.
Each Shareholder shall be entitled from time to time, by
notice in writing to the other Shareholder, to remove any of
the persons nominated by it for election as Directors and
nominate someone else to take his place.
8.2 Each Shareholder undertakes to the other to exercise all
voting rights exercisable by it as a holder of Shares to
ensure -
8.2.1 that the persons nominated from time to time by each
Shareholder as Directors (respectively referred to as
the "Canal+ Directors" and the "MIH Directors") are
duly elected as such; and
8.2.2 the removal of a person from the Board if such
removal is requested in writing by the Shareholder
who previously nominated such person for election
as a Director.
8.3 A quorum at meetings of the Board shall be two Directors, who
may be present either physically, by telephone, video
conference or such other telecommunications medium as all the
Directors from time to time agree on or may be represented by
a written power of attorney given in favour of another
Director, provided that at meetings of the Board at which a
resolution relating to any of the Fundamental Business
Decisions will be proposed the quorum will be two Directors,
one of whom shall be a Canal+ Director and one of whom shall
be an MIH Director. Each Shareholder shall use all its
reasonable endeavours to procure that a quorum is present at
any Board meeting. Should a quorum not be present within 30
(thirty) minutes after the time appointed for the commencement
of any meeting of the Board, that meeting shall stand
adjourned to the day after the following day, at the same time
and place. The adjourned meeting
14
<PAGE>
may only deal with the matters which were on the agenda of the
meeting which was adjourned. Where a meeting has been
adjourned as aforesaid the Chairman shall use his best
endeavours to inform, in the most reasonably expeditious
manner, each of the Directors who are not present at the
meeting that was adjourned of the time, date and place to
which the meeting has been adjourned. If at any adjourned
meeting, a quorum is not present within 30 (thirty) minutes
after the time appointed for the commencement of such meeting,
then the Directors present in person or by written power of
attorney in favour of another Director shall constitute a
quorum.
8.4 Notwithstanding anything to the contrary herein contained, but
subject to the provisions of any applicable laws in the
Netherlands, any resolution signed by all the Directors shall
be valid and effective as if it had been passed at a meeting
of the Board. Any such resolution may consist of several
counterparts, each of which may be signed by 1 (one) or more
Directors and shall be deemed to have been passed on the date
on which it was signed by the last Director who signed it
(unless a statement to the contrary is made in that
resolution).
8.5 FilmNet shall be entitled to nominate 1 (one) of the Canal+
Directors to be the chairman of the Board ("Chairman") and the
Shareholders shall use their best endeavours to procure,
subject to any applicable laws, that all Directors nominated
by them will act and vote in such manner as may be necessary
to elect such Canal+ Director as Chairman. FilmNet shall be
entitled from time to time, by notice in writing to Myriad, to
remove any person nominated by it for election as Chairman and
nominate another Canal+ Director to take his place and Myriad
shall use its best endeavours to procure, subject to any
applicable laws, that all Directors nominated by it, vote and
act in such manner as may be necessary to give effect to
FilmNet's wishes in this regard.
8.6 All decisions of the Board shall be by majority vote of the
Directors. The Chairman shall have a casting vote in case of a
deadlock between the Directors, except in relation to any
Fundamental Business Decision, in relation to which unanimity
of the Directors or the Shareholders, as the case may be,
shall be required.
15
<PAGE>
8.7 Meetings of the Board shall be held in Hoofddorp (or such
other place as all Board members may agree on from time to
time) at such times as the Board shall determine, provided
that, unless otherwise agreed between the Shareholders, a
meeting of the Board shall be held at least once every 3
(three) calendar months and provided further that any MIH
Director shall be entitled, by written notice to all other
Directors, to call an emergency Board meeting in the event of
a dispute between Paltech Ltd (or its permitted assignees
under the Technology Agreements) and the Company regarding the
performance by the Company of its obligations under the Pay TV
technology licence(s) granted by the Company to Paltech Ltd
(or to its permitted assignees under the Technology
Agreements) (or any other related agreement between such
parties). In the event that such dispute is not resolved
within 15 (fifteen) days after the emergency Board meeting
then a Deadlock shall be deemed to have arisen and the
provisions of clause 11.2.2 shall apply, provided that the 60
(sixty) day period referred to therein shall be reduced to 30
(thirty) days after the date on which the Deadlock was first
deemed to have arisen. Not less than 14 (fourteen) days notice
(or such other period of notice as may be agreed from time to
time by a Canal+ Director and a MIH Director) of each meeting
of the Board specifying the date, time and place of the
meeting and the business to be transacted thereat shall be
given to all Directors by the Chairman (or by the applicable
MIH Director, in the case of an emergency Board meeting as
aforesaid).
8.8 All decisions of the Shareholders (other than Fundamental
Business Decisions) shall be adopted by a simple majority of
the votes exercisable by both Shareholders.
8.9 For as long as FilmNet or any Controlled Affiliate of Canal+
owns a majority of the Shares, Canal+ shall have the right-
8.9.1 to manage the day to day business of the Company as
it deems fit and Canal+ shall be entitled to
nominate such staff, including a Chief Executive
Officer ("CEO") and a Chief Financial Officer
("CFO"), as may be necessary to do so and shall
furthermore be entitled to remove and replace such
staff from time
16
<PAGE>
to time,
8.9.2 to appoint the Procuratiehouder(s) of the Company who
shall act in accordance with the instructions of the
Board. It is recorded, for the avoidance of doubt,
that the parties shall procure that such
Procuratiehouders shall not be authorised to bind the
Company in relation to any Fundamental Business
Decision unless the provisions of clause 11.1 shall
have been complied with.
8.10 Each Shareholder shall exercise all voting rights exercisable
by it as a holder of Shares and shall use its best efforts to
procure that the Directors nominated by it exercise their
voting rights in order to ensure that the persons designated
by Canal+ as CEO and CFO respectively, be so appointed.
8.11 The CEO and the CFO shall -
8.11.1 report to the Board and shall comply with all
policies and directions laid down by the Board.
8.11.2 be entitled to attend all Board meetings but shall
not be entitled to vote at such meetings.
8.12 Myriad shall be entitled to designate, in consultation with
FilmNet, one of the two representatives of the Company on the
Digco technical committee, provided that Myriad shall procure
that with regard to the activities of such committee, its
representative shall at all times act on the instructions of
the Company's management. MIH, Myriad, NetHold and FilmNet
hereby acknowledge and accept the obligations of the Company
in relation to Digco BV and each Shareholder undertakes to
assume its proportionate share of the Company's financial
obligations resulting therefrom.
9 BUDGETS
9.1 Each Budget shall consist of an annual and a 3 (three) year
rolling budget and financial
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and business plan for the Company.
9.2 Canal+ shall procure that -
9.2.1 a budget in respect of the 1997/1998 financial year
and a 3 (three) year rolling budget and financial and
business plan is prepared by the CEO and CFO and
submitted to the Directors for their approval by not
later than 31 May 1997;
9.2.2 a budget in respect of each and every subsequent
financial year is prepared by the CEO and CFO and
submitted to the Directors for their approval. If
such budget is unanimously approved (with or without
amendment) by the Directors it shall constitute the
Company's Budget for the financial year (or shorter
period) in respect of which it was prepared. If any
annual budget shall not be so approved by the
Directors before the start of each financial year of
the Company, a Deadlock (as defined in clause 11.2)
shall be deemed to have arisen on the first day of
such financial year, which Deadlock shall be dealt
with as set out in clause 11.2. Until the Deadlock is
resolved, the Company shall continue to operate on a
budget equivalent, on a monthly basis, to the
previous Budget with an increase of 5% (five percent)
for all operating cost items specified in such
Budget. It is recorded, for the avoidance of doubt,
that except for the 3 (three) year rolling financial
and business plan prepared pursuant to the provisions
of clause 9.2.1, a failure by the Directors to
approve unanimously a 3 year rolling financial and
business plan shall, unlike as is the case in
relation to an annual budget, not be deemed to
constitute a Deadlock.
10 FINANCING
10.1 Neither Shareholder shall be obliged to provide any
shareholders' funds to the Company unless such funds are
required and expressly set out in terms of a Budget. If, at
any time, shareholders' funds are required in terms of any
Budget to finance the Business, the Directors shall issue to
each Shareholder a notice in writing (the
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"Notice"), requiring each of them provide, in the Agreed
Proportions, such shareholders' funds (either by subscribing
for new shares in the Company or by way of shareholders' loans
to the Company, as shall have been set out in the Budget).
10.2 Each of the Shareholders shall contribute in cash the amount
of shareholders' funds stated in the notice within 30 (thirty)
days (or such greater number of days as all the Directors
agree on) after the date of the Notice.
10.3 If either Shareholder fails to contribute its Agreed
Proportion of the shareholders' funds within the time
specified, the Company shall be entitled to take such action
as it thinks fit for obtaining payment of the contribution
including, without limitation, commencing legal proceedings
against the defaulting Shareholder for breach of its
obligations. The defaulting Shareholder shall refrain from
using its rights and other powers in relation to the Company
and shall, subject to any applicable laws, instruct the
Directors nominated by it not to do anything to prevent or
delay action being taken by the Company.
10.4 If either Shareholder fails to contribute its Agreed
Proportion of the shareholders' funds within the time
specified, the other Shareholder shall be entitled (if it has
already contributed its Agreed Proportion of the shareholders'
funds) to pay, to the Company, in cash, the amount due to the
Company by the defaulting Shareholder. The amount shall be
wholly applied (notwithstanding any other provision of this
Agreement), in the discretion of the paying Shareholder, in
providing additional shareholders' loans or subscribing for
additional Shares at par of the same class as those Shares
already held or beneficially owned by the paying Shareholder
or a combination of additional shareholders' loans and
additional Shares.
10.5 If the shareholders' funds referred to in clause 10.1 are
contributed to the Company by the Shareholders in the form of
loan capital, the terms and conditions applicable to such
loans shall be as agreed upon between the Shareholders and
shall be set out in the Notice.
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10.6 A Shareholder who fails to contribute its Agreed Proportion of
any shareholders' funds and whose equity interest in the
Company is diluted pursuant to the provisions of clause 10.4
shall remain fully liable to the Company, in its diluted
Agreed Proportion, for shareholders' funds which the
Shareholders may become obliged to provide pursuant to the
provisions of clauses 10.1 and 10.2.
11 FUNDAMENTAL BUSINESS DECISIONS
11.1 The parties acknowledge and agree that no resolution relating
to any of the Fundamental Business Decisions shall be
validly adopted nor shall any action be taken by the Company
in relation to such Fundamental Business Decisions unless
(i) at a general meeting of the members of the Company, both
Shareholders shall have voted in favour thereof; or (ii) at
a meeting of the Board, all the Canal+ Directors and all
the MIH Directors shall have voted in favour thereof,
provided however, that the aforesaid requirements shall
lapse and have no further force or effect in respect of a
Shareholder (and in respect of the Directors nominated by
such Shareholder) whose shareholding falls below 45% (forty
five percent) of all the issued Shares of the Company. If a
Shareholder's shareholding is reduced below such
Shareholder's shareholding at the date of completion in
accordance with clause 5.1 but does not fall below 45%
(forty five percent) of all the issued Shares of the
Company, such Shareholder shall be obliged by not later than
the date on which the Budget for the immediately succeeding
financial year is approved, to subscribe for such number of
additional Shares as may be required to restore such
Shareholder's shareholding to the level it was at the date
of completion in accordance with clause 5.1 (and the other
Shareholder shall use all its voting rights as a Shareholder
to facilitate such subscription), failing which the
aforesaid requirements regarding the adoption of Fundamental
Business Decisions shall lapse and have no further force or
effect in respect of a Shareholder (and in respect of the
Directors nominated by such Shareholder) whose shareholding
is diluted. The parties record, for the avoidance of doubt,
that a dilution in a Shareholder's shareholding caused by or
pursuant to the integration or convergence of the Irdeto and
the SECA digital access control technologies (as is referred
to in clause 7.2) shall not cause the above stated
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requirements regarding the adoption of Fundamental Business
Decisions to lapse in respect of a diluted Shareholder (or in
respect of the Directors nominated by such Shareholder) even
if such Shareholder's shareholding is reduced below 45% (forty
five percent) of all the issued shares of the Company.
11.2 In the event that the Shareholders or the Directors (as may be
required in terms of Dutch law) shall have failed to adopt
(pursuant to the provision of clauses 11.1 (i) or 11.1 (ii),
as the case may be), a resolution proposed in respect of a
Fundamental Business Decision by reason of a good faith
disagreement between the Shareholders or the Directors, as the
case may be, (a "Deadlock"), then the following provisions
shall apply-
11.2.1 the chief executive officers of Canal+ and MIH shall
promptly meet to attempt in a co-operative spirit to
resolve the Deadlock.
11.2.2 if the Deadlock shall not have been resolved within
60 (sixty) days after the date on which the Deadlock
first arose, then FilmNet shall, immediatly after
expiry of such 60 (sixty) day period either -
11.2.2.1 agree, within the next 24 hours, with
Myriad's final position with respect to the
subject matter of the Deadlock and procure
the immediate implementation of such
position; or
11.2.2.2 failing compliance with clause 11.2.2.1, be
deemed to have offered to sell (the "Offer")
to Myriad, all FilmNet's Shares, in which
case Myriad shall be deemed to have accepted
such Offer 30 (thirty) days after the date
on which the Offer was deemed to have been
made (being the date on which the 24 (twenty
four) hour period referred to in clause
11.2.2.1 expires) ("Offer Date"), at a price
equal to *
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11.3 Any sale of FilmNet's Shares pursuant to the provisions set
out above shall be subject to the following additional terms
and conditions-
11.3.1 FilmNet's Shares shall be sold cum dividend and
without any Encumbrance, with effect from the date of
acceptance of the offer.
11.3.2 the purchase price for FilmNet's Shares shall be paid
in immediately available Dutch Guilders to a bank
account (designated in writing by FilmNet) as soon as
practicable, but in any event within 15 (fifteen)
days, after the acceptance by Myriad of the Offer.
11.3.3 following any sale pursuant to the provisions set out
above, MIH shall cause Irdeto to continue to license
its technology to -
11.3.3.1 Canal+ and those of its Controlled
Affiliates which use such technology at the
time of such sale,
11.3.3.2 such of Canal+'s Controlled Affiliates as
require a licence of such technology in
order to perform their obligations to third
parties in terms of written agreements
existing at the date hereof.
on such terms and conditions as are contained in
valid and enforceable written agreement(s) between
Irdeto and such user(s)/licensee(s) at the date of
the sale or, if no such written agreements exist, on
Irdeto's then standard terms and
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conditions
11.3.4 FilmNet shall warrant only that it is the owner of
FilmNet's Shares, free of any Encumbrance.
12 TRANSFERS OF SHARES
GENERAL RESTRICTION ON TRANSFERS
12.1 Each Shareholder undertakes that it will not Transfer any of
its Shares during this Agreement otherwise than in accordance
with the following provisions of this clause 12.
12.2 For so long as Myriad is a Shareholder, MIH shall procure that
Myriad shall be a Controlled Affiliate of MIH and for so long
as FilmNet is a Shareholder, Canal+ shall procure that
FilmNet shall be a Controlled Affiliate of NetHold BV. If an
event is about to occur as a result of which either Myriad or
FilmNet shall cease to be such a Controlled Affiliate, Myriad
or FilmNet, as the case may be, shall transfer all the Shares
in the Company owned by it to another Controlled Affiliate of
MIH (in the case of Myriad) or another Controlled Affiliate of
NetHold (in the case of FilmNet) in accordance with clause
12.4.
12.3 Canal+ shall ensure that for so long as NetHold BV or a
Controlled Affiliate of NetHold BV owns any Shares, it
(Canal+) shall retain direct or indirect control of NetHold
BV and Holdings shall ensure that for so long as MIH or a
Controlled Affiliate of MIH owns any Shares, it (Holdings)
shall retain control of MIH. For the purpose of this
provision only, control shall mean either the ownership,
directly or indirectly, of a majority of the issued shares
of MIH or NetHold BV, as the case may be, or the possession,
directly or indirectly,of the power to direct or cause the
direction of the management and policies of NetHold BV or
MIH, as the case may be, whether through the ownership of
voting securities, by contract or otherwise.
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PERMITTED TRANSFERS
12.4 A Shareholder may, at any time and on any terms (including as
to price), Transfer all (but not part only) of its Shares, in
the case where FilmNet is the transferor, to Canal+, to
NetHold BV or to a Controlled Affiliate of either Canal+ or
NetHold BV, and in the case where Myriad is the transferor, to
Holdings, to MIH or to a Controlled Affiliate of either
Holdings or MIH, provided that -
12.4.1 the transferor shall remain a party to this Agreement
and undertakes to the other Shareholder to procure the
performance by the transferee of its obligations
pursuant to the provisions of this Agreement and to
indemnify the other Shareholder from and against a
breach by such transferee of any of its obligations
under this Agreement;
12.4.2 it shall be a condition precedent to any such Transfer
(and any registration thereof) that the transferee
agree in writing with the other Shareholder to
observe, perform and be bound by the terms and
conditions of this Agreement as if references herein
to the transferor were references to the transferee;
12.4.3 if the transferee ceases to be a Controlled Affiliate
of Canal+, NetHold BV, Holdings or MIH, as the case
may be, then the transferor shall procure that the
transferee shall have transferred to the transferor or
another Controlled Affiliate of Canal+, NetHold BV,
Holdings, or MIH, as the case may be, all its Shares
prior to the date of such cessation in accordance with
this clause 12.4
RIGHT OF FIRST REFUSAL
12.5 If, at any time, a Shareholder (the "Offeror") wishes to
Transfer any of its Shares other than as set out in clause
12.4, it shall, prior to making or becoming contractually
bound to make, any such Transfer, by notice in writing to the
other Shareholder (the "Offeree"), offer (the "Offer") to sell
all (but not a part only) of its Shares to the
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Offeree at the "Offer Price", as determined in the manner set
out below. The Offer shall -
12.5.1 specify the Shares to which it relates (the "Offered
Shares"); and
12.5.2 stipulate a price (which shall constitute the Offer
Price), at which the Offeror is prepared to Transfer
the Offered Shares. If the Offeror has received a
bona fide written offer (the "Third Party Offer")
from a third party (the "Third Party") to purchase
the entire legal and beneficial ownership of the
Offered Shares for a cash price, a copy of such third
Party Offer, showing the name and address of the
Third Party and the terms and conditions offered by
such Third Party, shall be supplied to the Offeree.
In this case, the price offered by such third party
for the Offered Shares shall be set out in the Offer
and shall constitute the Offer Price. the Offeree
shall keep and maintain the existence and the terms
of any such third Party Offer strictly confidential
and shall only disclose them within its own corporate
structure and to outside professionals on a need to
know basis. If a Third Party Offer has been made
then, save as specifically set out herein, the Offer
shall be subject, mutatis mutandis, to the terms and
conditions contained in the Third Party Offer.
No Shareholder may offer to sell its Shares except on an "all
cash" basis, provided that a Shareholder may offer to sell its
Shares in exchange for immediately liquid marketable
securities which are listed on a national securities exchange.
12.6 The Offer shall be irrevocable and shall be open for
acceptance (in whole and not in part only) by the Offeree for
a period of 30 (thirty) days following receipt of the Offer.
Acceptance shall be made by means of a written notice,
specifying the number of Offered Shares in respect of which
the Offer is being accepted.
12.7 Should the Offeree not accept the whole of the Offer as
provided above, then the Offeror shall be entitled to sell all
(but not a part only) of the Offered Shares to the Third Party
on the terms and conditions set out in the Third Party Offer
or, where no
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Third Party Offer had been make, to any bona fide third party,
but at a price which shall not be less than that, and on terms
and conditions which are not, taken as a whole, more
favourable to the third party purchaser than those at which
the Offeree was entitled to purchase the Offered Shares in
terms of clause 12.5, provided that the Offeror shall, before
selling the Offered Shares to such bona fide third party, in
writing advise the Offeree of the identity of such third party
and the terms and conditions on which such third party is
prepared to purchase the Offered Shares, in which case the
Offeree shall be entitled, for a period of 30 (thirty) days
after receipt of the written advice as aforesaid, to purchase
the Offered Shares on the terms and conditions at which such
third party is prepared to do so.
12.8 Should the Offeror not complete the sale of the Offered Shares
within 120 (one hundred and twenty) days (or such longer
period as may be required by law to obtain all required
approvals of Governmental bodies) after non-acceptance of the
Offer by the Offeree, then the Offeror's right to effect the
sale to the third party shall terminate and the process set
out in clause 12.5 shall commence anew with respect to any
such Shares.
12.9 Following acceptance of the Offer in full by the Offeree as
set out in clause 12.6 or clause 12.7, the Offeror shall be
obliged to sell, and the Offeree shall be obliged to purchase,
the Offered Shares at 10h00 on the date falling 10 (ten)
business days after the date of acceptance, at the registered
office of the Company (or such other time, date and place as
may be agreed by the Offeror and the Offeree) upon the terms
and conditions as set out in such Offer or on the terms and
conditions which the bona fide third party was prepared to do
so, as the case may be, and as set out immediately below.
Pending completion of such purchase and sale, the Offeror
shall remain liable for all its obligations to the Company
including, without limitation, any obligation to make capital
or loan contributions to the Company.
12.10 At the completion of the sale and purchase of the Offered
Shares to the Offeree-
12.10.1 the Offeree shall use best endeavours to procure the
immediate release
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of all guarantees, indemnities and similar covenants,
if any, given by the Offeror in favour or for the
benefit of the Company (and pending such release
shall indemnify and keep the Offeror fully and
effectively indemnified from and against all claims
arising under such guarantees, indemnities and
similar covenants);
12.10.2 against delivery in accordance with clause 12.10.3,
the Offeree shall pay the purchase price to the
Offeror;
12.10.3 concurrently with payment of the purchase price in
accordance with clause 12.10.2 the Offeror, Offeree
and the Company shall execute a notorial deed of
Transfer of the Offered Shares in favour of the
Offeree.
12.11 Unless the transferee is an existing Shareholder, any Transfer
of Shares (and any registration thereof), other than pursuant
to clause 12.4, shall be subject to the condition precedent
that:
12.11.1 the transferee enters into an agreement in writing
with the Company and the other Shareholder in a form
reasonably acceptable to such other Shareholder,
whereby the transferee agrees to be bound by all of
the provisions of this Agreement (mutatis mutandis
and insofar as they are applicable) as those by which
the transferor is bound under this Agreement as a
Shareholder, as if it were an original Shareholder
and, where the context so permits, as if each
reference therein to the transferor were always a
reference to the transferee in place thereof); and
12.11.2 the transferee notifies the Company and the
Shareholders of its address for service of all
notices and communications to be given or made under
this Agreement.
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TRANSFERS
12.12 Each Shareholder undertakes to exercise all shareholder rights
to procure that any Transfer of Shares made in accordance with
this Agreement can be effected and that in such an event the
Shareholders shall adopt a resolution to enable such a
Transfer to take effect and in such resolution the
Shareholders shall waive any rights which they may have under
the Statutes in relation to such Transfer.
13 GOVERNING LAW AND ARBITRATION
13.1 This Agreement shall be governed by and construed in all
respects in accordance with the laws of the Netherlands
13.2 If any dispute (other than a Deadlock, which shall be dealt
with as set out in clause 11) arises between the parties in
connection with -
13.2.1 the formation or existence of, the implementation of
or the interpretation or application of, the
provisions of the parties' respective rights and
obligations in terms of or arising out of this
Agreement or its breach or termination; or
13.2.2 the validity, enforceability, rectification,
termination or cancellation, whether in whole or in
part, of any documents furnished by any of the
parties pursuant to the provisions of this Agreement;
or
13.2.3 which relates in any way to any matter affecting the
interests of the parties in terms of this Agreement.
and the parties are unable to resolve their dispute then any
party shall be entitled to refer the dispute in the first
instance, to the respective chief executive officers of
Canal+ and MIH for resolution.
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13.3 If the matter in dispute shall not have been resolved within
30 (thirty) days of it having been so referred under clause
13.2, either Shareholder may refer the matter in dispute for
determination by final arbitration in Geneva in accordance
with the Rules of the International Chamber of Commerce
("ICC") (which Rules are deemed to be incorporated by
reference into this clause) by three arbitrators, one of whom
shall be appointed by Canal+ and one of whom shall be
appointed by MIH. The third arbitrator, who shall be the
chairman of the tribunal, shall be appointed by agreement
between the first two appointees within 30 (thirty) days after
the date on which the second arbitrator is appointed, failing
which, such arbitrator shall be appointed by the relevant
appointing authority under the Rules of the ICC. The
arbitrators shall establish the procedural rules applicable to
the proceedings and shall conduct the arbitration proceedings
in accordance with Dutch law. The arbitration shall be
conducted in the English language. Any award of such
arbitration shall be finally binding upon the parties and this
Agreement places no restriction on the jurisdiction in which
such award shall be enforced.
13.4 This clause shall not preclude any party from obtaining
interim relief on an urgent basis from a court of competent
jurisdiction pending any decision of the arbitrators.
13.5 The provisions of this clause -
13.5.1 constitute an irrevocable consent by the parties to
any proceedings in terms hereof and no party shall be
entitled to withdraw therefrom or claim at any such
proceedings that it is not bound by such provisions.
13.5.2 are severable from the rest of this Agreement and
shall remain in effect despite the termination of or
invalidity for any reason of this Agreement.
14 BUSINESS ACTIVITIES ONLY THROUGH THE COMPANY
14.1 Subject to anything to the contrary envisaged in the
Technology Agreements, MIH undertakes that for so long as
Myriad and/or any of MIH's Controlled Affiliates is a
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Shareholder, all the interests and activities of MIH and its
direct and indirect subsidiaries in the field of access
control technology, whether analogue or digital, shall be
conducted exclusively through the Company. For the purposes
hereof "access control technology" means technology which is
utilised for the secure transmission and controlled access of
video, audio, data and/or interactive Pay-TV services which
are accessed through the mechanism of an integrated receiver
decoder and/or another device performing the same function,
incorporating analogue or digital technology or any component
thereof.
14.2 Subject to the interests and activities of Canal+ internally
and in SECA (for digital) and in NAGRA + (for analogue), the
provisions set out in clause 14.1 shall apply, mutatis
mutandis, to Canal+ and its direct and indirect subsidiaries
for as long as FilmNet and/or any of Canal+'s Controlled
Affiliates is a Shareholder.
14.3 Canal+ and MIH shall, not later than the third anniversary of
the Closing Date, assess in good faith whether the exclusivity
provisions set out in clause 14.1 may, as they apply to MIH
and its direct and indirect subsidiaries, be alleviated, in
view of the evolution and future prospects of the SECA and
Irdeto technologies respectively.
15 DURATION AND TERMINATION
15.1 This Agreement shall automatically terminate upon the
termination of the Contribution and Subscription Agreement in
accordance with Section 10.3(a) thereof.
15.2 Except as otherwise provided herein, this Agreement shall
continue in full force and effect without time limit until the
Shareholders agree in writing to terminate this Agreement
provided, however, that this Agreement shall cease to have
effect as regards any Shareholder who ceases to hold any
shares save for any provisions hereof which are expressed to
continue in force thereafter.
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16 CONFIDENTIALITY
Save as required by law or the requirements of any stock exchange or
other regulatory body, each of the parties hereby undertakes to the
others that -
16.1 it will not at any time hereafter divulge or communicate to any person
(except to its Controlled Affiliates and to such of its or their
employees, directors, officers or advisers whose province is to know
the same) at any time hereafter (save with the written prior consent of
the other parties) any confidential information or secret information
concerning the business, financial or contractual arrangements or other
dealings or affairs of the Company, the disclosure of which may either
be detrimental to Canal+ and/or its Controlled Affiliates or to MIH
and/or its Controlled Affiliates or may be advantageous to a competitor
of the Company, save to the extent to which such information is or
shall come within the public domain (other than by unauthorized
disclosure by that party or any of its Controlled Affiliates or any of
its or their respective employees, directors, officers or advisers) or
is rightfully received by the recipient from a third party legally
entitled to disclose such information, without breach by the recipient
of this Agreement; and
16.2 it shall procure that -
16.2.1 each of its Controlled Affiliates and any of its or
their employees, directors, officers or advisers to
whom any such information has been divulged or
communicated; and
16.2.2 each Director appointed to the board of the Company
on its nomination,
keep such information strictly confidential and do not divulge or
communicate the same to any other person (except as provided in clause
16.1).
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17 WAIVERS
17.1 No delay in exercising or failure to exercise any right or
remedy under this Agreement shall operate as a waiver thereof
nor shall any single or partial exercise of any right or
remedy preclude either the further exercise thereof or the
exercise of any other right or remedy. The rights and remedies
provided by this Agreement are cumulative and do not exclude
any rights, powers or remedies provided by law.
17.2 In the event that any party shall expressly waive any breach,
default or omission hereunder, no such waiver shall apply to,
or operate as, a waiver of similar breaches, defaults or
omissions or be deemed to be a waiver of any other breach,
default or omission hereunder.
18 ASSIGNMENT
No party hereto shall be entitled to transfer this Agreement or any of
the rights and obligations hereunder except to a transferee of Shares
in accordance with this Agreement.
19 GUARANTEE
19.1 Canal+ undertakes to MIH to procure the performance by FilmNet
(and any Permitted Transferee of FilmNet) of its obligations
pursuant to this Agreement and indemnifies MIH from and
against a breach by FilmNet or such Permitted Transferee of
any of its obligations under this Agreement.
19.2 Holdings undertakes to Canal+ to procure the performance by
Myriad (and any Permitted Transferee of Myriad), the
incorporators of Myriad to the extent that such incorporators
are bound by this Agreement and MIH of their respective
obligations pursuant to this Agreement and indemnifies Canal+
from and against a breach by Myriad (and any Permitted
Transferee of Myriad) of any of its obligations under this
Agreement.
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20 ENTIRE AGREEMENT
20.1 This Agreement (and the side letter dated 4 April 1997 between
Richemont SA, Holdings, MIH, Network Investments SA, PayCo
Funding SA, FilmNet, Myriad and Irdeto) constitute(s) the
entire agreement between the parties and supersede all prior
agreements between the parties concerning the subject matter
hereof. No amendment, change or additions hereto shall be
effective or binding on any party unless reduced to writing
and executed by both the Shareholders.
20.2 Each of the parties acknowledges that in entering into this
Agreement it is not relying on any representation or other
statement which is not set out in this Agreement or the other
documents referred to herein.
21 NOTICES
21.1 Notices and communications under this Agreement shall be given
in writing and may be delivered to the relevant party or sent
by registered air mail or facsimile to the address of that
party or that party's facsimile number specified in 21.2.
21.2 Notices and communications shall be addressed as follows:
if to Canal+ - 88/89 Quai Andre Citroen, Paris, France
Attention: Mr. Marc Andre Feffer
Vice President:- Delegue General
Fax No: 33 1 40 60 70 50
if to FilmNet - Neptunusstraat 41, NL 2132 JA Hoofddorp
The Netherlands
Attention: Mr. Marc Andre Feffer
Fax No: 33 1 40 60 70 50
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if to Myriad - Neptunustraat 41, 2132 JA Hoofddorp
The Netherlands
Attention: Mr. Steve Pacak
Fax No: +27 11 88 65 785
if to Holdings - 75 Republic Road, Randburg, South Africa
Attention: Mr. Steve Pacak
Fax No: +27 11 88 65 785
if to MIH - 3rd Floor, Abbot Building, Main Street
Road Town, Tortola, British Virgin Islands
Attention: Mr. Steve Pacak
Fax No: +27 11 88 65 785
if to Irdeto - Jupiterstraat 42, 2132 HD Hoofddorp
The Netherlands
Attention: Mr. Marc Andre Feffer
Vice President - Delegue General
Fax No: 33 1 40 60 70 50
or such other address of a party, person and/or fax number
as that party shall have notified in writing to all other
parties.
21.3 Notices and communications shall be given and made in the
English language.
22 ANNOUNCEMENTS
No announcement concerning this Agreement shall be made by any party
without prior written approval of the others, such approval not to be
unreasonably withheld.
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23 RELATIONSHIP OF THE SHAREHOLDERS
It is expressly agreed that the relationship of the Shareholders shall
be that of joint venturers and not that of partners. Accordingly, the
Business shall be conducted as the business of the Company and no
Shareholder shall represent to any person that such Shareholder is
authorized to act on behalf of any of the other Shareholder or that any
partnership, agency, employment or joint liability exists between the
Shareholders in respect of any person who is not a party to this
Agreement.
24 CONFLICT WITH OTHER DOCUMENTS
In the event of any conflict between the provisions of this Agreement
and the provisions of the Statutes then, subject to the provisions of
Dutch law, the provisions of this Agreement shall prevail as between
the Shareholders and the Shareholders shall exercise all voting and
other rights and powers legally available to them (whether as
Shareholders or otherwise) to give effect to the provisions of this
Agreement. If there is an irreconcilable conflict between a provision
of this Agreement and a mandatory provision of Dutch law, the parties
shall use best efforts to agree on an alternative mechanism or
provision which is as close as reasonably possible to the provisions of
this Agreement and the conflicting provision contained in this
Agreement shall be invalid (but only to the extent necessary), provided
that such invalidity shall not affect the other provisions of this
Agreement.
25 NEW STATUTES
25.1 Each of the parties shall use its best endeavors to procure -
25.1.1 that the proposed New Statutes of the Company and
referred to in clause 5.1.3.2 (the "Proposed New
Statutes") are approved in their entirety and a
Declaration of No Objection in respect thereof be
issued by the applicable authorities in the
Netherlands as soon as possible after the Closing
Date; and
25.1.2 that the Proposed New Statutes are notarially
executed as the Company's new
35
<PAGE>
Statutes not later than 10 (ten) days after the issue
of the Declaration of No Objection referred to in
clause 25.1.1.
25.2 Until such time as the steps set out in clause 25.1 have been
duly completed, each party undertakes to the other parties to
exercise all voting rights and other powers of control
available to it in relation to the Company and to the Board so
as to ensure that the business and affairs of Irdeto as well
as the relationship of the Shareholders with each other and
with the Company are conducted in the manner contemplated by
the Proposed New Statutes as if all the aforesaid steps had
been completed.
26 COUNTERPARTS
This Agreement may be executed in any number of counterparts and by the
parties on separate counterparts, each of which shall constitute an
original, but all the counterparts shall together constitute but one
and the same instrument.
27 STANDSTILL
During the period from the Closing Date until the completion in terms
of clause 5.1 of the transactions envisaged in this Agreement, neither
Canal+ nor FilmNet shall take any action or permit any action to be
taken by or in relation to the Company which would in any way conflict
or be inconsistent with the provisions of this Agreement and of the
Statutes.
SIGNED BY
/s/ MARC ANDRE FEFFER
- --------------------------------------
for and on behalf of
CANAL+ SA
SIGNED BY
/s/ MFE DEWAARD-PRELLER
- --------------------------------------
MFE DEWAARD-PRELLER (proxy holder)
for and on behalf of
FILMNET INVESTMENTS BV
36
<PAGE>
SIGNED BY
/s/ STEPHEN PACAK
- --------------------
S. PACAK
for and on behalf of
MYRIAD HOLDINGS
NETHERLANDS BV
SIGNED BY
/s/ STEPHEN PACAK
- --------------------
S. PACAK
for and on behalf of
MIH HOLDINGS LIMITED
SIGNED BY
/s/ STEPHEN PACAK
- --------------------
S. PACAK
for and on behalf of
MIH LIMITED
SIGNED BY
/s/ G.A. KILL
- --------------------
GRAHAM KILL
for and on behalf of
IRDETO BV
37
<PAGE>
SCHEDULE 1: FUNDAMENTAL BUSINESS DECISIONS
1 Adoption of annual budgets or approval of any 10% variance per annum in
the aggregate (based on operating costs).
2 Approval of the initial three-year business plan and material
amendments thereto.
3 Approval of the entering into or termination of any partnership, joint
venture or consortium with any other legal entity, the creation of any
subsidiary, or the acquisition or sale of any equity interest in any
other entity.
4 Approval of stock insurances, stock splits, creation of new classes of
securities, grants or agreements to grant options over stock or rights
to subscribe for stock, reorganization any change to or rearrangement
of the capital structure of or rights attached to the capital of
Irdeto.
5 Approval of any proposed new shareholder of Irdeto (other than a
Controlled Affiliate of a Party).
6 Appointment of exclusive marketing agents for the Irdeto technology.
7 Authorization of the lending or borrowing of funds or the making of
guarantees of amounts in excess of an aggregate of US$ five (5) million
in any year.
8 Approval of any development project not provided for in the annual
budget in excess of US$ five (5) million individually and in excess of
US$ five (5) million per annum in the aggregate.
9 Authorisation of the release of Irdeto's proprietary source code to any
person (including shareholders except for the purpose of SECA/Irdeto
integration).
10 Approval of any material change in the nature of Irdeto's business. For
the purpose of this clause, it is agreed that Irdeto's current business
is the creation and/or acquisition of technology relating to pay TV
conditional access systems, business systems for subscriber management
and
38
<PAGE>
studio operations, and operating systems/applications; the
commercialisation, marketing and distribution (by installing, servicing
and supporting) of that technology through licensing (hard and
software); and consultancy, including systems integration. Such
technology is licensed to companies worldwide, both inside and outside
Irdeto's parent company group.
11 Settlement of any litigation involving amounts in excess of US$ 10
million.
12 Appointment or dismissal of the statutory or external auditors or
change or adoption of any material accounting principle or practice to
be applied.
13 Approval of the merger or amalgamation of Irdeto with any other company
or legal entity.
14 Approval of the liquidation or dissolution of Irdeto.
15 Approval of the filing for bankruptcy of any decision not to take
action to prevent a filing for bankruptcy or to process an involuntary
filing for bankruptcy or other windings up of Irdeto, except as
otherwise required by applicable law.
16 Amendment of the Statutes, except as envisaged in this Agreement.
17 Approval and entry into, on or prior to 30 June 1997, of the definitive
agreements on the basis of the agreement dated 16 December 1996 between
Canal+, Irdeto, MIH, Paltech Limited, MultiChoice Africa (Pty) Ltd and
Holdings
39
<PAGE>
SCHEDULE 2: DRAFT NEW STATUTES OF IRDETO
40
<PAGE>
UNOFFICIAL TRANSLATION
On this day, the (____)th day of nineteen hundred and ninety-seven, appears
before me, (___) NOTARIS (civil law notary), practicing in (___).
(Mr./Ms. ___)
the person appearing declares that on the (___)th day of (___), nineteen hundred
and ninety-seven, the general meeting of shareholders of Irdeto B.V., a private
company with limited liability, having its corporate seat in Hoofddorp and its
registered office at 2132 HD Hoofddorp, Jupiterstraat 42, has resolved to amend
the articles of association of the company and to authorize the person appearing
to execute this deed. Pursuant to those resolutions, the person appearing
declares that (he/she) amends the company's articles of association such that in
full they will read as follows:
ARTICLES OF ASSOCIATION:
NAME. CORPORATE SEAT.
ARTICLE 1.
The name of the company is: Irdeto B.V.
It has its corporate seat in Hoofddorp.
OBJECTS.
ARTICLE 2.
The objects of the company are:
a. to create and acquire technology relating to pay-television; and
<PAGE>
b. to commercialize, market and distribute, in any manner, technology and
intellectual property rights, including, without limitation, patents,
trade marks and licenses relating to pay television; and
c. to participate in, to take an interest in any other manner in, and to
manage, other business enterprises of whatever nature, and
d. to borrow funds and to provide security for such funds, to finance
third parties and to provide security for or guarantee the obligations
of third parties, including without limitation, entities which are
controlled by, or under common control with, or control, the company;
and
to conduct all activities which are incidental to or which may be conducive to
any of the foregoing in the broadest sense.
SHARE CAPITAL AND SHARES.
ARTICLE 3
3.1 The authorized share capital of the company amounts to two hundred
thousand Dutch guilders (NLG 200,000). It is divided into two hundred
thousand (200,000) shares of one Dutch guilder (NLG 1) each.
3.2 The shares shall be in registered form and shall consecutively be
numbered from 1 onwards.
3.3 No share certificates shall be issued.
3.4 In respect of the subscription for or acquisition of shares in its
share capital or depository receipts for shares by other persons, the
company may neither grant security rights, give a guarantee with
respect to the price of the shares, grant guarantees in any other
manner, nor bind itself
<PAGE>
either jointly or severally in addition to or for other persons.
The company may make loans in respect of a subscription for or an
acquisition of shares in its share capital or depository receipts for
shares up to an amount not exceeding the amount of its distributable
reserves. A resolution by the managing board to make a loan as referred
to in the preceding sentence shall be subject to the approval of the
general meeting of shareholders, hereinafter also to be referred to as:
the general meeting. The company may make the loans referred to above
only if it has offered to extend such a loan to each shareholder such
that if every shareholder accepts the offer, the loan amount lent to a
shareholder stands to the total amount lent on the occasion, as the
number of shares held by that shareholder stands to the total number of
shares then outstanding. The company shall maintain a non-distributable
reserve for an amount equal to the outstanding amount of the loans
referred to in this paragraph.
3.5 If the aggregate amount of the issued share capital and the reserves
required to be maintained by law is less than the minimum share capital
as then required by law, the company must maintain a reserve up to an
amount equal to the difference.
ISSUANCE OF SHARES.
ARTICLE 4.
4.1 Shares shall be issued pursuant to a resolution of the general meeting;
the general meeting shall determine the price and further terms and
conditions of the issuance. A resolution to issue
<PAGE>
shares, as well as a resolution determining the price and further terms
and conditions of this issuance, requires the prior approval from the
meeting of shareholders.
4.2 The previous paragraph shall equally apply to a grant of rights to
subscribe for shares, but shall not apply to an issuance of shares to a
person who exercises a previously acquired right to subscribe for
shares.
4.3 Shares shall never be issued at a price below par.
4.4 Shares shall be issued by notarial deed, in accordance with the
provisions set out in section 2:196 of the Civil Code.
4.5 The company is not authorized to co-operate with the issuance of
depository receipts of its shares.
4.6 Holders of a usufruct on shares may not be granted the right to vote on
those shares.
A right of pledge may not be established on shares.
4.7 Only persons who have agreed to be bound by the terms of the April 4,
1997 Investment and Shareholders' Agreement relating to Irdeto B.V. can
be shareholders of the company.
PAYMENT FOR SHARES.
ARTICLE 5.
5.1 Shares shall only be issued against payment in full.
5.2 Payment must be made in cash, unless the general meeting of
shareholders has resolved otherwise.
PREEMPTIVE RIGHTS.
ARTICLE 6.
6.1 Upon the issuance of shares, each holder of shares shall have a
preemptive right in proportion to the
<PAGE>
aggregate amount of its shares, subject to the provisions of paragraph
2. Should a shareholder who is entitled to a preemptive right not or
not fully exercise such right, the remaining holders of shares shall be
similarly entitled to preemptive rights in respect of those shares
which have not been claimed. If the latter collectively do not or do
not fully exercise their preemptive rights either, then the general
meeting shall be free to decide to whom the shares which have not been
claimed shall be issued, and such issuance may be made at a higher
price.
6.2 Preemptive rights may be limited or excluded by resolution of the
general meeting, each time for a single issuance of shares only.
6.3 Preemptive rights may not be separately disposed of.
6.4 If preemptive rights exist in respect of an issuance of shares, the
general meeting shall determine, with due observance of the provisions
set out in this article and simultaneously with the resolution to issue
shares, the manner in which and the period within which such preemptive
rights may be exercised. Such period shall be at least four weeks from
the date that the notification referred to in paragraph 5 hereof is
sent.
6.5 The company shall notify all shareholders, including those who do not
(yet) have a preemptive right with respect to this issuance, of an
issuance of shares in respect of which preemptive rights exist and of
the period of time within which such rights may be exercised.
6.6 The provisions of this article shall equally apply to a grant of rights
to subscribe for shares, but
<PAGE>
shall not apply to an issuance of shares to a person who exercises a
previously acquired right to subscribe for shares.
REPURCHASE OF SHARES.
ARTICLE 7.
7.1 Subject to authorization by the general meeting, the managing board may
cause the company to acquire fully paid up shares in its own share
capital for consideration, provided:
a. the company's equity minus the acquisition price is not less
than the aggregate amount of the issued share capital and the
reserves which must be maintained pursuant to the law; and
b. the aggregate par value of the shares in its share capital to
be acquired and already held by the company and its subsidiary
companies does not exceed half of the issued share capital.
The validity of the acquisition shall be determined on the basis of the
company's equity as shown by the most recently adopted balance sheet,
minus the acquisition price for shares in the company's share capital
and any distribution of profits or reserves to other persons which have
become due by the company and its subsidiary companies after the
balance sheet date. No acquisition pursuant to this paragraph shall be
allowed if a period of six months following the end of a financial year
has expired without the annual accounts for such year having been
adopted.
7.2 Article 4 and 6 shall equally apply to the disposal of shares acquired
by the company in its
<PAGE>
own share capital, with the exception that such disposal may be made at
a price below par. A resolution to dispose of such shares shall be
deemed to include the approval as referred to in Section 2:196,
subsection 3 of the Civil Code.
7.3 If depository receipts for shares in the company have been issued, such
depository receipts for shares shall be put on par with shares for the
purpose of the provisions of paragraph 1.
7.4 In the general meeting no votes may be cast in respect of a share held
by the company or a subsidiary company; no votes may be cast in respect
of a share, the depository receipt for which is held by the company or
a subsidiary company. When determining to what extent the shareholders
cast votes, are present or represented or to what extent the share
capital is provided or represented, shares, the holders of which are
not entitled to voting rights pursuant to the preceding provisions,
shall not be taken into account.
7.5 Shares which the company holds in its own share capital shall not be
counted when determining the division of the amount to be distributed
on shares.
REDUCTION OF SHARE CAPITAL.
ARTICLE 8.
8.1 The general meeting may, provided it does so unanimously and in a
meeting in which the entire issued share capital is represented,
resolve to reduce the issued share capital by cancelling shares or by
reducing the par value of shares by an amendment to the articles of
association, provided that the amount of the issued share capital does
not fall below the minimum share capital as
<PAGE>
required by law in effect at the time of the resolution.
8.2 Cancellation of shares may apply to shares which are held by the
company itself or to shares for which the company holds depository
receipts. Partial repayment on shares shall be made on all shares.
8.3 Reduction of the par value of shares without repayment or partial
repayment on shares shall be effected pro rata to all shares. The pro
rata requirement may be waived by agreement of all shareholders
concerned.
8.4 The notice of a general meeting at which a resolution referred to in
this article is to be adopted shall include the purpose of the
reduction of the share capital and the manner in which such reduction
shall be effectuated. The resolution to reduce the share capital shall
specify the shares to which the resolution applies and shall describe
how such a resolution shall be implemented. The company shall file a
resolution to reduce the issued share capital with the trade register
of the Chamber of Commerce and Industry in the district in which the
company has its corporate seat and shall publish such filing in a
national daily newspaper.
SHAREHOLDERS REGISTER.
ARTICLE 9.
9.1 the managing board shall maintain a register in which the names and
addresses of all shareholders shall be recorded, stating the date on
which they acquired the shares, the number of shares held by each of
them, the date of acknowledgment or service, as well as the amount paid
up on each
<PAGE>
share and any other information that must be recorded under the law.
9.2 The register shall be kept up to date.
9.3 Upon request, the managing board provides a shareholder and a holder of
a right of usufruct, free of cost, with an extract from the register
regarding their respective rights with respect to a share.
9.4 The managing board shall make the register available at the office of
the company for inspection by the shareholders.
ARTICLE 10.
Each person, information with respect to which must be registered in the
shareholders register pursuant to article 2:194, subsection 1 of the Civil Code,
must provide the information that the law requires to be registered, as well as
its fax number, to the managing board.
NOTICES OF MEETINGS AND NOTIFICATIONS.
ARTICLE 11.
11.1 Notices of meetings and notifications shall be given by registered
letter or by bailiff's writ, in both case with a simultaneous copy by
fax, provided that the omission to send a copy by fax shall not
invalidate the notice or notification given. Notices of meetings and
notifications to shareholders and holders of depository receipts shall
be sent to the addresses and fax numbers most recently given to the
managing board. Notifications by shareholders or by holders of
depository receipts to the managing board or to the person as referred
to in article 20, paragraph 4, shall be sent to the office of the
company.
<PAGE>
11.2 The date that notice for a meeting or another type of notification has
been given, shall be deemed to be the date stamped on the receipt
issued for a registered letter, or the date of service of the writ, as
the case may be.
11.3 Notifications which, pursuant to the law or the articles of
association, are to be addressed to the general meeting may be included
in the notice of such meeting.
TRANSFER OF SHARES.
ARTICLE 12.
Any transfer of shares or of a right of usufruct on shares or the
creation or release of a right of usufruct shall be effected by
notarial deed in accordance with the provisions set out in section
2:196 of the Civil Code. Save in the event that the company is a party
to the transaction, the rights attached to a share may only be
exercised after:
a. the company has acknowledged the transaction;
b. the deed has been served upon the company; or
c. the company has acknowledged the transaction on its own
initiative by recording the same in the shareholders register.
all in accordance with the provisions set out in sections 2:196a and 2:196b of
the Civil Code.
TRANSFER RESTRICTIONS.
ARTICLE 13.
Shares may not be transferred freely in accordance with article 2:195 paragraph
1 of the Civil Code. Without prejudice to the provisions of article 19, any
transfer of shares in the company may only take place with due observance of
this article 13 through 19.
ARTICLE 14.
<PAGE>
A shareholder who wishes to transfer one or more shares, hereinafter also to be
referred to as: the offeror, shall first offer such shares to the other
shareholders. The company itself may only be a prospective purchaser pursuant to
this article with the consent of the offeror.
ARTICLE 15.
In its notification to the other shareholders, the offeror shall state the
number of shares it wishes to transfer and other particulars relating to the
shares, the name and address of the person to whom it proposes to transfer the
shares and the price for which this person would like to purchase the shares.
The offeror shall attach written evidence of the offer made by this person to
its notification.
ARTICLE 16.
Within thirty days after notice has been given to the other shareholders, the
latter shall notify the offeror whether they wish to purchase the shares on
offer. The offeror and the prospective purchasers shall agree on a price for the
shares. Failing agreement to set a price for the shares within fourteen days,
they shall agree on the designation of an independent expert to determine the
value of the shares.
ARTICLE 17.
17.1 Should the offeror and the prospective purchasers fail to reach
agreement on the designation of an independent expert, such designation
shall be made by the President of the Chamber of Commerce and Industry,
within the district in which the company has its corporate seat at the
request of the party who is first to take action, provided that if none
of the parties has taken such action within fourteen days after the
above fourteen day period,
<PAGE>
the entire right of first refusal procedure shall be deemed terminated
and the shareholder shall be prohibited from transferring its shares.
17.2 The managing board shall provide the designated independent expert -
hereinafter referred to as: the expert - with any information the
expert requests. The cost of determining the price of the shares on
offer shall be borne by the shareholder.
17.3 The expert shall notify the shareholder and the other shareholders as
soon as possible of the price of the shares on offer.
ARTICLE 18.
18.1 Until one month has lapsed after the independent expert has determined
the price of the shares, the shareholder shall remain entitled at any
time to withdraw its offer in its entirety by notification to the other
shareholders; in that case it shall not be entitled to transfer the
shares on offer.
18.2 If there are no prospective purchasers within one month after the
experts have notified the shareholders and the prospective purchasers
pursuant to article 17.2 above the shareholder may transfer the
offered shares, but only those shares and only to the person mentioned
by it in its initial notification and only for the price offered by
this person, during the three months following the initial thirty day
period referred to in article 16.
18.3 If there are prospective purchasers for all offered shares and the
shareholder has not withdrawn its offer, a purchase agreements shall be
deemed to have been entered into in respect of the shares concerned
between each prospective purchaser and the shareholder, and the
shareholder shall be required to transfer the shares and the
prospective purchasers shall be required to simultaneously pay
<PAGE>
the price of the shares to the shareholder in cash, all as soon as
reasonably possible.
18.4 If the shareholder, the prospective purchaser being ready and willing
to pay the price of the shares, fails to transfer shares to a
prospective purchaser, the company shall have irrevocable authority to
effect the transfer. The company shall effect this transfer within ten
days after the prospective purchaser has made a request to the company
to that effect.
ARTICLE 19.
Article 13 up to and including 18 do not apply:
a. if a shareholder is required to transfer its shares to a
former shareholder by operation of law; or
b. for a period of three months after all shareholders, other
than the shareholder who wishes to transfer shares, have
declared by private instrument or notarial deed that the
procedure prescribed by these articles does not need to be
followed.
MANAGEMENT.
ARTICLE 20.
20.1 The company shall be managed by a managing board, which is made up of
four persons. A legal entity may be appointed as a managing director.
One of the managing directors for whose appointment Canal+ S.A. made a
nomination shall be given the title of chairman.
20.2 Managing directors shall be appointed by the general meeting. For as
long as:
a. their subsidiaries, which term for the purposes of these
articles of association is defined as any entity which
controls or
<PAGE>
is controlled by or under common control with another entity
(control meaning the holding of more than eight (80) percent
of the capital and voting rights hold shares in the company;
OR
B. SUBSIDIARIES OF NETHOLD B.V. OR M.I.H. LIMITED HOLD SHARES IN
THE COMPANY, BUT ONLY OF CANAL+ S.A., RESPECTIVELY, M.I.H.
HOLDINGS LIMITED, OWN DIRECTLY OR INDIRECTLY A MAJORITY OF THE
ISSUED SHARES OF NETHOLD B.V. RESPECTIVELY M.I.H. LIMIITED, OR
POSSESS, DIRECTLY OR INDIRECTLY, THE POWER TO DIRECT OR CAUSE
THE DIRECTION OF THE MANAGEMENT AND POLICIES OF NETHOLD B.V.
RESPECTIVELY M.I.H. LIMITED, WHETHER THROUGH THE OWNERSHIP OF
VOTING SECURITIES, BY AGREEMENT OR OTHERWISE.
Canal+ S.A. and M.I.H. Holdings Limited shall be entitled to nominate
persons for the position of managing director (such managing director
where applicable to be given the title: Canal+ managing director,
respectively: M.I.H. managing director) as follows:
a. a nomination may be made for one position as long as the
relevant subsidiaries hold up to and including twenty-five
(25) percent of the issued share capital of the company in the
aggregate;
b. a nomination may be made for two positions as long as the
relevant subsidiaries hold more than twenty five (25) percent
but less than seventy five (75) percent of the
<PAGE>
issued share capital of the company in the aggregate; and
c. a nomination may be made for three positions as long as the
relevant subsidiaries hold seventy-five (75) percent or more
of the issued share capital of the company in the aggregate;
provided that at each occasion, Canal+ S.A. and/or M.I.H. Holdings
Limited have the right of nomination for the number of positions as
indicated above, minus the number of positions on the board that are at
that moment already occupied by managing directors for which they were
entitled to make a nomination. The management board shall invite Canal+
S.A., respectively M.I.H. Holdings Limited to prepare a nomination
within sixty (60) days, such that for each appointment a choice can be
made between at least two persons. The general meeting can,
nevertheless, remove the binding character of the nomination with a
resolution adopted by a two thirds majority of votes cast, in a meeting
in which more than half the issued capital is represented.
Has a nomination not been made, or not within the prescribed time
period, then this will be mentioned in the notification for the
general meeting in which the new managing directors are to be
appointed.
Has a nomination not been made, or not within the prescribed time
period, then the general meeting will be free to appoint the person of
its choice.
20.3 The general meeting may at any time suspend and dismiss managing
directors by a vote of shareholders representing at least 90% of the
outstanding share capital of the company. The general meeting shall
within three months after the suspension has
<PAGE>
taken effect resolve either to dismiss such managing director, or to
terminate or continue the suspension, failing which the suspension
shall lapse.
20.4 A managing director who has been suspended shall be given the
opportunity to account for his actions at the general meeting and to be
assisted by an adviser.
20.5 In the event that one or more managing directors is prevented from
acting, the remaining managing directors or the only remaining managing
director shall temporarily be in charge of the management. In the event
that all managing directors are prevented from acting, the person
designated or to be designated for that purpose by the general meeting
shall temporarily be in charge of the management.
ARTICLE 21.
The general meeting shall determine the terms and conditions of employment of
the managing directors, provided the terms and conditions shall at all times
be equal for all managing directors.
ARTICLE 22.
22.1 With due observance of these articles of association and any
instructions laid down in writing by the general meeting, the managing
board may adopt rules governing its internal proceedings. Furthermore,
the managing directors may divide their duties among themselves,
whether or not by rule.
22.2 The managing board shall hold its meetings in Hoofddorp or any other
place as the managing board shall determine.
<PAGE>
The managing board shall meet whenever a managing director so
requires, provided it meets at least once every 3 (three) calendar
months. The managing board can validly adopt resolutions only if AT
LEAST TWO MANAGING DIRECTORS THAT HOLD OFFICE ARE PRESENT, IN PERSON,
BY TELEPHONE, BY VIDEO CONFERENCE OR OTHER MEANS, OR REPRESENTED BY
ANOTHER MANAGING DIRECTOR. IN THE CASE OF RESOLUTIONS THAT REGARD
FUNDAMENTAL BUSINESS DECISIONS, ONE MANAGING DIRECTOR FOR WHOSE
APPOINTMENT CANAL+ S.A. MADE A NOMINATION, IF ANY, AND ONE MANAGING
DIRECTOR FOR WHOSE APPOINTMENT M.I.H. HOLDINGS LIMITED MADE A
NOMINATION, IF ANY, MUST ALSO BE SO PRESENT OR SO REPRESENTED. SHOULD
THE QUORUM REFERRED TO IN THE TWO IMMEDIATELY PRECEDING SENTENCES NOT
BE PRESENT WITHIN THIRTY (30) MINUTES AFTER THE TIME APPOINTED FOR THE
COMMENCEMENT OF A MEETING, THAT MEETING SHALL BE ADJOURNED TO THE DAY
AFTER THE FOLLOWING DAY, AT THE SAME TIME AND PLACE. WHERE A MEETING
HAS BEEN SO ADJOURNED, THE CHAIRMAN OF THE MANAGEMENT BOARD SHALL USE
HIS BEST EFFORTS TO INFORM, IN THE MOST REASONABLY EXPEDITIOUS MANNER,
EACH OF THE MANAGING DIRECTORS WHO WERE NOT PRESENT AT THE MEETING
THAT WAS ADJOURNED OF THE TIME, DATE AND PLACE TO WHICH THE MEETING
HAS BEEN ADJOURNED. IF AT ANY ADJOURNED MEETING, A QUORUM IS NOT
PRESENT WITHIN THIRTY (30) MINUTES AFTER THE TIME APPOINTED FOR THE
COMMENCEMENT OF SUCH MEETING, THEN THE MANAGING DIRECTORS PRESENT, IN
PERSON, BY TELEPHONE, BY VIDEO CONFERENCE OR OTHER MEANS, OR
REPRESENTED BY ANOTHER MANAGING DIRECTOR, SHALL
<PAGE>
CONSTITUTE A QUORUM. The managing board shall adopt its resolutions
by majority of votes cast. In a tie vote, the chairman of the managing
board shall have the casting vote.
22.3 The managing board may also adopt resolutions without holding a
meeting, provided such resolutions are adopted in writing, by cable, by
telex, or by telefax and all managing directors have expressed
themselves in favor of the proposal concerned.
22.4 Resolutions of the managing board regarding the following issues shall
in addition to an affirmative majority vote, also require the approval
of the managing directors for whose appointment Canal+ S.A. or M.I.H.
Holdings Limited made a nomination, provided that such additional
approval shall no longer be required if their direct and indirect
subsidiaries no longer hold in the aggregate:
A. at least FORTY-FIVE (45) percent of the issued share capital
of the company; OR
B. BETWEEN FORTY-FIVE (45) PERCENT AND FORTY-NINE (49) PERCENT OF
THE ISSUED SHARE CAPITAL OF THE COMPANY, AND THEIR AGGREGATE
INTEREST IN THE COMPANY IS NOT INCREASED TO AT LEAST
FORTY-NINE (49) PERCENT OF THE ISSUED SHARE CAPITAL OF THE
COMPANY BEFORE THE BEGINNING OF NEXT FISCAL YEAR:
a. adoption of annual budgets, or approval of any ten (10)
percent variance per annum in the aggregate (based on
operating costs);
b. approval of FIRST three-year business plan and material
amendments thereto;
<PAGE>
c. approval of the entering into or termination of any
partnership, joint venture or consortium with any other legal
entity, the creation of any subsidiary, or the acquisition or
sale of any equity interest in any other entity;
d. approval of stock issuances, stock splits, creation of new
classes of securities, grants or agreements to grant options
over stock or rights to subscribe for stock, reorganization
and any other change in the capital structure of the company;
e. appointment of exclusive marketing agents for the company's
technology;
f. authorisation of the lending or borrowing of funds or the
making of guarantees of amounts in excess of an aggregate of
US$ five (5) million per annum in any year;
g. approval of any development project not provided For in the
annual budget in excess of US$ five (5) million individually
and in excess of US$ five (5) million per annum in the
aggregate;
h. authorization of the release of the company's proprietary
source code to any person (including shareholders, except for
the purpose of SECA/Irdeto integration);
i. approval of any material change in the nature of the company's
business, as described in article 2, sub-paragraphs a. and b.;
j. the entering into any agreements to settle litigation
involving amounts in excess of US$ ten (10) million;
<PAGE>
k. change or adoption of any material accounting principle or
practice to be applied; and
l. approval of the filing for bankruptcy, or any decision not to
take action to prevent a filing for bankruptcy, or to protest
an involuntary filing for bankruptcy, or other procedure for
winding up the company, except as otherwise required by
applicable law.
REPRESENTATION.
ARTICLE 23.
23.1 Three managing directors acting jointly shall have power to represent
the company.
23.2 If a managing director, acting in his personal capacity, enters into an
agreement with the company, or if he or she, acting in his or her
personal capacity, conducts any litigation against the company, the
company may be represented in that matter jointly by the other managing
directors, unless the general meeting designates a person for that
purpose or unless the law provides otherwise for such designation.
AUTHORIZED SIGNATORIES.
ARTICLE 24.
The managing board may grant to one or more persons, whether or not employed by
the company, the power to represent the company (PROCURATIE) or grant in a
different manner the power to represent the company on a continuing basis. The
managing board may also grant such titles as it may determine to persons, as
referred to in the preceding sentence, as well as to other persons, but only if
such persons are employed by the company.
<PAGE>
The managing board shall in any event grant the power to represent the company
on a continuing basis to two persons employed by the company, one of whom shall
be the person in charge of day-to-day management of the company and who shall
carry the title Chief Executive Officer, and another who shall be the person in
charge of the day-to-day financial management of the company and who shall carry
the title Chief Financial Officer. FOR THESE LATTER TWO APPOINTMENTS, THE
MANAGEMENT BOARD MUST REQUEST CANAL+ S.A. TO MAKE A NOMINATION. THIS NOMINATION
SHALL BE BINDING ON THE MANAGING BOARD, UNLESS IT IS OF THE OPINION THAT THE
PERSON NOMINATED IS UNFIT FOR THE POSITION. IN THIS CASE, THE MANAGING BOARD
SHALL NOTIFY CANAL+ S.A. EXPLAINING THE GROUNDS FOR ITS OPINION, AND REQUEST
CANAL+ S.A. TO NOMINATE ANOTHER PERSON.
GENERAL MEETINGS.
ARTICLE 25.
25.1 The annual general meeting shall be held within six months after the
end of the financial year.
25.2 The agenda for this meeting shall in any event include the following
terms:
a. the consideration of the written annual report by the managing
board concerning the company's affairs and the management as
conducted;
b. the adoption of the annual accounts and the allocation of
profits.
The items referred to above need not be included on the agenda if the
period for preparing the annual accounts and for presenting the annual
report has been extended, or if the agenda includes a proposal to such
effect, the item referred to in a. need not
<PAGE>
be included on this agenda either if section 2:403 of the Civil Code
applies to the company. Furthermore, all items which are put on the
agenda with due observance of article 26, paragraph 3 shall be
discussed at the annual general meeting.
25.3 A general meeting shall be convened whenever the managing board or two
managing directors consider appropriate.
In addition a general meeting shall be convened as soon as possible if
one nor more persons, entitled to cast at least one-tenth of the total
number of votes that may be cast, so request the managing board,
stating the items to be discussed.
ARTICLE 26
26.1 General meetings shall be held in the municipality where the company
has its corporate seat, Amsterdam or I Haarlemmermeer (Schiphol).
Resolutions adopted at a general meeting held elsewhere shall be valid
only if the entire issued share capital is represented.
26.2 Shareholders shall be given notice of the general meeting by the
managing board or any managing director.
If in the event as referred to in the second sentence of article 25,
paragraph 3, a managing director does not convene the meeting such that
the meeting is held within four weeks of receipt of the request, any of
the persons requesting the meeting shall be authorized to convene the
same with due observance of that provided in these articles of
association.
The notice shall specify the items to be discussed.
26.3 Notice shall be given not later than on the fifteenth day prior to the
date of the meeting.
<PAGE>
If the notice period was shorter or if no notice was sent, no valid
resolutions may be adopted unless the resolution is adopted by
unanimous vote at a meeting at which the entire issued share capital is
represented.
The provision of the preceding sentence shall equally apply to matters
which have not be mentioned in the notice of meeting or in a
supplementary notice sent with due observance of the notice period.
ARTICLE 27
27.1 The general meeting shall appoint its chairman. The chairman shall
designate the secretary.
27.2 Minutes shall be kept of the business transacted at the meeting unless
a notarial record is prepared thereof. Minutes shall be adopted and in
evidence of such adoption be signed by the chairman and the secretary
of the meeting concerned, or alternatively be adopted by a subsequent
meeting; in the latter case the minutes shall be signed by the chairman
and the secretary of such subsequent meeting in evidence of their
adoption.
27.3 The chairman of the meeting and furthermore each managing director may
at any time give instructions that a notarial record be prepared at the
expense of the company.
ARTICLE 28
28.1 Each share confers the right to cast one vote at the general meeting.
Blank votes and invalid votes shall be regarded as not having been
cast.
<PAGE>
28.2 WITHOUT PREJUDICE TO WHAT HAS BEEN PROVIDED IN ARTICLE 30, resolutions
shall be adopted by an absolute majority of votes cast.
28.3 The chairman shall determine the manner of voting provided, however,
that if any person present who is entitled to vote so requires, voting
in respect of the appointment, suspension and dismissal of persons
shall take place by means of sealed, unsigned ballots.
28.4 In a tie vote concerning the appointment of persons, no resolution
shall have been adopted. In a tie vote concerning other matters, the
proposal shall have been rejected, without prejudice to the provisions
of article 31, paragraph 1.
28.5 Shareholders may be represented at a meeting by a proxy authorized in
writing.
28.6 Managing directors are authorized to attend general meetings and as
such they have an advisory opinion at the general meeting.
ARTICLE 29
29.1 Shareholders who are entitled to vote may adopt any resolutions which
they could adopt at a meeting, without holding a meeting, provided that
the managing board has prior knowledge of such resolution.
Such a resolution shall only be valid if all persons entitled to vote
have cast their votes in writing, by cable, by telex or by telefax in
favor of the proposal concerned.
Those who have adopted a resolution without holding a meeting shall
forthwith notify the managing board of the resolution so adopted.
<PAGE>
29.2 A resolution as referred to in paragraph 1 shall be recorded in the
minute book of the general meeting by a managing director; at the next
general meeting the entry shall be read out loud by the chairman of
that meeting. Moreover, the documents in evidence of the adoption of
such a resolution shall be kept with the minute book of the general
meeting and as soon as the resolution has been adopted, all persons
who have adopted such resolution shall be notified thereof.
ARTICLE 30
The resolutions by the general meeting regarding the following issues
shall, in addition to an affirmative majority vote, also require the
approval of Canal+ S.A. and M.I.H. Holdings Limited, provided that this
additional approval shall no longer be required from the aforementioned
person whose subsidiaries no longer hold in the aggregate:
A. at least FORTY-FIVE (45) percent of the issued share capital
of the company; OR
B. BETWEEN FORTY-FIVE (45) PERCENT AND FORTY-NINE (49) PERCENT OF
THE ISSUED SHARE CAPITAL OF THE COMPANY, AND THEIR AGGREGATE
INTEREST IN THE COMPANY IS NOT INCREASED TO AT LEAST
FORTY-NINE (49) PERCENT OF THE ISSUED SHARE CAPITAL OF THE
COMPANY BEFORE THE BEGINNING OF NEXT FISCAL YEAR:
a. approval of stock insurances, stock splits, creation of new
classes of securities, grants or agreements to grant options
over stock or rights to subscribe for stock, reorganization
and other changes in the capital structure of the company
(including actions taken in accordance with Article 6.2);
<PAGE>
b. approval of the merger of the company with any other company
(JURIDISCHE FUSIE);
c. amendment of these articles of association;
d. liquidation or dissolution of the company; and
e. the giving of an assignment to the auditor as referred to in
article 31.
FINANCIAL YEAR. ANNUAL ACCOUNTS.
ARTICLE 31
31.1 The financial year shall run from ^APRIL 1 TO MARCH 31.
31.2 Annually, within five months after the end of each financial year -
subject to an extension of such period not exceeding six months by the
general meeting on the basis of special circumstances - the managing
board shall prepare annual accounts and shall make these available at
the office of the company for inspection by the shareholders. The
annual accounts shall be accompanied by the auditor's certificate,
referred to in article 31, if the assignment referred to in that
article has been given, by the annual report, unless section 2:403 of
the Civil Code is applicable to the company, and by the additional
information referred to in section 2:392, subsection 1 of the Civil
Code, insofar as the provisions of that subsection apply to the
company.
The annual accounts shall be signed by all managing directors: if the
signature of one or more of them is lacking, this shall be disclosed,
stating the reasons thereof.
31.3 The company shall ensure that the annual accounts as prepared, the
annual report and the additional information referred to in paragraph 2
shall be
<PAGE>
available at the office of the company as of the date of the notice of
the general meeting at which they are to be discussed.
The shareholders may inspect the above documents at the office of the
company and obtain a copy thereof at no cost.
31.4 Adoption of the annual accounts by the general meeting shall
constitute a discharge of the managing board for its management during
the financial year concerned, unless a proviso is made by the general
meeting and without prejudice to the provisions of section 2:248 of the
Civil Code. If the company is required, in conformity with article 32,
paragraph 1, to give an assignment to an auditor to audit the annual
accounts and the general meeting has been unable to review the
auditor's certificate, the annual accounts may not be adopted, unless
the additional information referred to in paragraph 2, second sentence,
mentions a legal ground why such certificate is lacking.
31.5 If the annual accounts are adopted in an amended form, a copy of the
amended annual accounts shall be made available to the shareholders at
no cost.
AUDITOR
ARTICLE 32.
32.1 The company may give an assignment to an auditor, as referred to in
section 2:393 of the Civil Code, to audit the annual accounts prepared
by the managing board in accordance with subsection 3 of such section
provided that the company shall give such assignment if the law so
requires.
<PAGE>
If the law does not require that the assignment mentioned in the
preceding sentence be given the company may also give the assignment to
audit the annual accounts prepared by the managing board to another
expert; such expert shall hereinafter also be referred to as: auditor.
The general meeting shall be authorized to give the assignment,
referred to above. If the general meeting fails to do so, then the
managing board shall be so authorized.
The assignment given to the auditor may be revoked at any time by the
general meeting and by the managing board if it has given such
assignment. The auditor shall report on his audit to the managing board
and shall issue a certificate containing its results.
32.2 The managing board may give assignments to the auditor or any other
auditor at the expense of the company.
PROFIT AND LOSS.
ARTICLE 33.
33.1 Distribution of profits pursuant to this article shall be made
following the adoption of the annual accounts which show that such
distribution is allowed.
33.2 The profits shall be at the free disposal of the general meeting. In a
tie vote regarding a proposal to distribute or reserve profits, the
profits concerned shall be reserved.
33.3 The company may only make distributions to shareholders to the extent
that its equity exceeds the total amount of its issued share capital
and the reserves to be maintained pursuant to the law.
<PAGE>
33.4 A loss may only be applied against reserves maintained pursuant to the
law to the extent permitted by law.
ARTICLE 34
34.1 Dividends shall be due and payable four weeks after they have been
declared, unless the general meeting determines another date on the
proposal of the managing board.
34.2 Dividends which have not been collected within five years of the start
of the second day on which they become due and payable shall revert to
the company.
34.3 The general meeting may resolve that dividends shall be distributed in
whole or in part in a form other than cash.
34.4 Without prejudice to article 32, paragraph 3, the general meeting may
resolve to distribute all or any part of the reserves.
34.5 Without prejudice to article 32, paragraph 3, an interim dividend shall
be distributed out of the profits made in the current financial year,
if the general meeting so determines on the proposal of the managing
board.
LIQUIDATION
ARTICLE 35
35.1 If the company is dissolved pursuant to a resolution of the general
meeting, it shall be liquidated by the managing board, if and to the
extent that the general meeting shall not resolve otherwise.
35.2 The general meeting shall determine the remuneration of the
liquidators.
35.3 The liquidation shall take place with due observance of the provisions
of the law. During the
<PAGE>
liquidation period these articles of association shall, whenever
possible, remain in full force.
35.4 The balance of the assets of the company remaining after all
liabilities have been paid shall be distributed among the shareholders
in proportion to the par value of their ownership shares.
35.5 After the legal entity has ceased to exist, the books and records of
the company shall remain in the custody of the person designated for
that purpose by the liquidators for a period of ten years.
Finally, the person appearing declares that the issued capital of the company
amounts to forty-thousand Dutch guilders (NLG 40,000).
The required ministerial declaration of no-objection was granted on
(__________), nineteen hundred and ninety-seven, number B.V. (__________).
The draft of this deed, on which the ministerial declaration of no-objection was
endorsed and a document in evidence of the resolutions referred to in the head
of this deed, are attached to this deed.
In witness whereof the original of the deed, which shall be retained by me, is
executed in Rotterdam on the date first mentioned in the head of this deed.
Having explained the substance of this deed to the person appearing, (he/she)
declares to have noted the contents of the deed and does not require it to be
read out to (him/her) in full.
Immediately after reading those parts which the law required to be read out,
this deed is signed by the person appearing, who is known to me, notaris, and by
myself notaris.
* Indicates where text has been omitted pursuant to a request for confidential
treatment. The omitted text has been filed separately with the Securities and
Exchange Commission.
AGREEMENT
dated 16 February 1998
between
TELECOM HOLDING COMPANY LIMITED
and
SHINAWATRA COMPUTER AND COMMUNICATIONS PUBLIC COMPANY LIMITED
and
MIH LIMITED
and
INTERNATIONAL BROADCASTING CORPORATION
PUBLIC COMPANY LIMITED
----------------------------------------------------------------
SHAREHOLDERS' AGREEMENT
RELATING TO
INTERNATIONAL BROADCASTING CORPORATION
PUBLIC COMPANY LIMITED
----------------------------------------------------------------
Mallinicks
25 Savile Row
London W1X 1AA
<PAGE>
TABLE OF CONTENTS
1. RECITALS ............................................................ 3
2. DEFINITIONS AND INTERPRETATION ...................................... 5
3. CONDITIONS .......................................................... 10
4. BUSINESS OF THE GROUP ............................................... 10
5. CORPORATE GOVERNANCE ................................................ 11
6. BUDGETS ............................................................. 20
7. ACCOUNTS ............................................................ 22
8. FINANCE ............................................................. 23
9. TRANSFER OF SHARES .................................................. 24
10. NON-COMPETE ......................................................... 28
11. DIVIDEND POLICY ..................................................... 29
12. INDEMNITY ........................................................... 30
13. SCOPE, DURATION AND TERMINATION ..................................... 31
14. CONFIDENTIALITY ..................................................... 32
15. WAIVERS ............................................................. 34
16. ASSIGNMENT .......................................................... 34
17. ENTIRE AGREEMENT .................................................... 34
18. NOTICES ............................................................. 35
19. ANNOUNCEMENTS ....................................................... 36
20. RELATIONSHIP OF THE SHAREHOLDERS .................................... 36
21. CONFLICT WITH OTHER DOCUMENTS ....................................... 36
22. GOVERNING LAW AND ARBITRATION ....................................... 37
23. COUNTERPARTS ........................................................ 39
SCHEDULE 1: FORM OF UNDERTAKING (CLAUSE 9.2.1)............................. 41
SCHEDULE 2: FORM OF UNDERTAKING (CLAUSE 9.8.1)............................. 42
2
<PAGE>
SHAREHOLDERS' AGREEMENT
This agreement is made on 16 February 1998 between
(1) TELECOM HOLDING COMPANY LIMITED, with its registered office at Telecom
Tower, 18 Ratchadaphisek Road, Huai Khwang, Bangkok, Thailand ("TH");
(2) SHINAWATRA COMPUTER AND COMMUNICATIONS PUBLIC COMPANY LIMITED, with its
registered office at 414 Phaholyotin Road, Samsen-Nai, Phayathai,
Bangkok, Thailand ("SHIN");
(3) MIH LIMITED, with its registered office at 3rd Floor, Abbot Bulding,
Main Street, Road Town, Tortola, British Virgin Islands ("MIH"); and
(4) INTERNATIONAL BROADCASTING CORPORATION PUBLIC COMPANY LIMITED, with its
registered office at 1376/1 Nakornchaisri Road, Dusit, Bangkok,
Thailand (the "Company").
1. RECITALS
1.1. The Company is incorporated in Thailand with registration
number Bor.Mor.Jor 444 and has entered into an agreement dated
17 April 1989 (as amended on 19 May 1994) with MCOT in terms
of which the Company is entitled to conduct subscription
television in Thailand. The shares of the Company are listed
on the SET.
1.2. At the Effective Date -
1.2.1. if TOT will have exercised its option to acquire
shares in UTV, the issued and outstanding Shares of
the Company will comprise 475,564,751 ordinary Shares
of Baht 10 each;
1.2.2. if TOT will not have exercised its option to acquire
shares in UTV, the issued and outstanding Shares of
the Company will comprise 480,782,376 ordinary Shares
of Baht 10 each;
3
<PAGE>
1.2.3. SHIN and MIH will each own 84,176,550 of the issued
and outstanding Shares of the Company;
1.2.4. MCOT will own 3,000,000 of the issued and outstanding
Shares of the Company;
1.2.5. if TOT will have exercised its option to acquire
shares in UTV, TH will own 232,564,751 of the issued
and outstanding Shares of the Company;
1.2.6. if TOT will not have exercised its option to acquire
shares in UTV, TH will own 237,782,376 of the issued
and outstanding Shares of the Company;
1.2.7. the balance of the issued and outstanding Shares of
the Company will be owned by members of the public;
1.2.8. if TOT will have exercised its option to acquire
shares in UTV, the Company will own 222,864,600
(constituting 95.71 percent) of all the issued and
outstanding shares of UTV. The remaining issued and
outstanding shares in UTV will be owned by MCOT as to
5,000,000 (constituting 2.15 percent) and by TOT as
to 5,000,000 (constituting 2.15 percent);
1.2.9. if TOT will not have exercised its option to acquire
shares in UTV, the Company will own 227,864,600
(being 97.85 percent) of all the issued and
outstanding shares of UTV. The remaining 5,000,000
shares (constituting 2.15 percent of the total issued
and outstanding shares of UTV) will be owned by MCOT.
1.3. UTV has also entered into an agreement with MCOT dated 6 June
1994 (as subsequently amended on 7 September 1994 and 9
November 1994) in terms of which it is entitled to conduct
subscription television in Thailand.
1.4. The businesses of the Company and of UTV will be conducted
from the same registered head office premises and by the same
executive teams.
4
<PAGE>
1.5. The purpose of this Agreement is to record the terms and
conditions regulating the relationship among TH, SHIN and MIH
as Shareholders inter se and with the Company.
2. DEFINITIONS AND INTERPRETATION
In this Agreement -
2.1. clause headings are inserted for convenience only and shall
not be taken into account in its construction;
2.2. unless the context clearly indicates a contrary intention, an
expression which denotes any one gender includes the other
genders, a natural person includes a juristic person and vice
versa, the singular includes the plural and vice versa and the
following expressions bear the meanings assigned to them below
and cognate expressions bear corresponding meanings -
"Affiliate" - in relation to any company,
any other company which
directly or indirectly, (i)
is a parent company of the
first mentioned company,
(ii) is a Subsidiary of the
first mentioned company, or
(iii) is a fellow
Subsidiary of the parent
company of the first
mentioned company;
"Agreed Proportion" - such proportion as equals,
at the relevant time, the
proportion (expressed as a
percentage) which the par
value of the Shares owned
by a Shareholder bears to
the combined total par
value of all the Shares
owned by all the
Shareholders taken as a
whole or where applicable,
the combined par value of
all the Shares of the
relevant Shareholders
taken as a whole;
"Agreement" - this agreement, the
schedules hereto and all
supplementary and amendment
agreements thereto from
time to time;
5
<PAGE>
"Articles" - the Articles of Association
of any Group Company (as
applicable), as amended
from time to time;
"Auditors" - the auditors from time to
time of the Company, who
shall be appointed by a
general meeting of the
shareholders of the Company
and who shall comply with
all requirements, if any,
set for such auditors by
any applicable regulatory
and/or governmental
authorities;
"Board" - the board of directors of
the Company;
"Budgets" - the annual budgets for the
Group, as approved by the
Board from time to time in
accordance with this
Agreement;
"Business" the business of the Group
as set out in clause 4.1;
"Chairman" - the chairman of the Company
referred to in clause 5.16;
"Directors" - the members of the Board
from time to time elected
in accordance with this
Agreement;
"Effective Date" - the date on which Closing
(as defined in the Merger
Agreement) is completed in
accordance with clause 6 of
the Merger Agreement;
"Encumbrance" - includes, without
limitation, any pledge,
attachment, security
interest, the effect of
which is the creation of
security, and any option,
pre-emption, right of first
refusal or other such
right;
"Group" - the Company and its
Subsidiaries (including
UTV;
6
<PAGE>
"Group Company" - a member of the Group;
"MCOT" - the Mass Communications
Organisation of Thailand or
its successor from time to
time;
"Merger Agreement" - the Merger Agreement,
bearing the same date as
this Agreement, between the
Company, TH and UTV;
"Pay-TV" - (i) the exhibition or
transmission, whether by
wire, telephone wire,
over-the-air, cable, optic
fibre, satellite, microwave
signals or any other means
of delivery now known or
hereafter developed or
discovered, of audio,
visual and/or audio visual
data, programming or
services substantially in
scrambled or encrypted
format, to a subscriber,
capable of being
unscrambled or decrypted by
individually addressable
decoders or equivalent
devices, where a fee is
payable by such subscriber
(in addition, if
applicable, to being
charged by the Person
transmitting the signal
incorporating such
programming, data or
services) for the right to
view and/or participate in
such data, programs and
services in unencrypted
format; (ii) the provision,
enabling and disabling of
decoders or equivalent
devices, the marketing and
sale of subscriptions and
the provision of
customer/subscriber support
services and/or know-how
relating thereto, and (iii)
in connection with the
above, the production,
compilation and scheduling
of such data, services,
programming, signal
distribution and other
related activities and
know-how;
7
<PAGE>
"Permitted Transfer" - a Transfer of
Shares to a wholly owned
Subsidiary in accordance
with clause 9.2;
"Permitted Transferee" - a Person to whom Shares are
transferred in accordance
with clause 9.2;
"Person" - any individual, firm,
company, corporation,
government, State or agency
of a State or any joint
venture, partnership,
limited liability company
or other incorporated or
unincorporated body;
"SEC" - the Securities and Exchange
Commission of Thailand or
its successors from time to
time;
"SET" - the Stock Exchange of
Thailand or its successor
from time to time;
"Share" - subject to the provisions
of clause 13.1, an issued
and outstanding share in
the capital of the Company
of whatever class;
"Shareholders" - subject to the provisions
of clause 13, TH, SHIN, MIH
and their respective
Permitted Transferees and
any other Person to whom
Shares are from time to
time Transferred in
accordance with this
Agreement;
"Shareholder Loan" - any loan made by a
Shareholder or an Affiliate
of a Shareholder to the
Company;
"Subsidiary" - in relation to an
undertaking (the holding
company) any other
undertaking in which the
holding company (or persons
acting on its or their
behalf) for the time being,
directly or indirectly,
8
<PAGE>
- holds or controls either:
(i) a majority of the
voting rights exercisable
at general meetings of the
members of that undertaking
on all, or substantially
all, matters; or
(ii) the right to appoint
or remove directors having
a majority of the voting
rights exercisable at
meetings of the board of
directors of that
undertaking on all, or
substantially all, matters;
and any undertaking which
is a Subsidiary of another
undertaking shall also be a
Subsidiary of any further
undertaking of which that
other is a Subsidiary;
"TOT" - the Telephone Organisation
of Thailand or its
successor from time to
time;
"Transfer" - in relation to any Share or
any interest in a Share,
includes (i) the sale,
transfer, lease,
assignment, grant,
renunciation, alienation,
or disposal of such Share
or of any right or interest
which a Person may have in
the Company as result of
such right or interest in
that Share; (ii) entering
into any agreement in
respect of the votes
attached to such Share;
(iii) creating or granting
any Encumbrance over or in
respect of such Share; and
(iv) any agreement (whether
or not subject to
conditions) to do or create
or grant any of the
foregoing;
"Transfer Terms" - the terms and conditions
set out in clause 9.8;
"UTV" - UTV Cable Network Public
Company Limited, with its
registered office at
Telecom Tower, 18
Ratchadaphisek Road, Huai
Khwang, Bangkok,
9
<PAGE>
Thailand;
"UTV Board" - the board of directors of
UTV.
3. CONDITIONS
3.1. This Agreement (except for the provisions referred to in
clause 3.2, which take effect on the date hereof) shall take
effect on the Effective Date.
3.2. If the Effective Date does not occur on or before 30 April
1998 (or such other date as the parties may agree on in
writing before 30 April 1998), this Agreement shall
automatically terminate on that date. In that event no party
shall subsequently have any rights or obligations under this
Agreement other than for breach of clause 14
(Confidentiality), clause 18 (Notices) and clause 22
(Governing Law and Arbitration).
4. BUSINESS OF THE GROUP
4.1. Notwithstanding anything to the contrary in any other
document, the Shareholders agree amongst each other and with
the Company that the principal objective of the Group shall be
to engage in all aspects of Pay-TV, primarily in Thailand, and
thereafter in Myanmar, Laos, Vietnam, Malaysia and Cambodia,
and if the Memorandum of Association of any Group Company does
not reflect this objective then the Shareholders shall use all
their shareholder rights to ensure that the applicable
Memorandum of Association is amended to reflect this
objective. In addition, the Group shall conduct such other
business as the Board may resolve from time to time.
4.2. The Shareholders acknowledge and agree that the Business shall
be conducted in accordance with the Memorandum of Association,
the Articles and the Budget from time to time in force and
each Shareholder shall use its best endeavours to ensure that
the Directors nominated by it vote in such manner as to ensure
that -
4.2.1. the Group operates in the most profitable manner
possible;
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4.2.2. no Group Company carries on any business other than
the business set out or specified in the Budget from
time to time in force;
4.2.3. each Group Company complies with all its obligations
under all agreements to which it is expressed to be a
party and complies with the restrictions imposed upon
it under its constitutional documents;
4.2.4. each Group Company obtains and maintains all
authorisations necessary or desirable to carry on its
business;
4.2.5. each Group Company carries on its business on sound
commercial principles; and
4.2.6. the Group Companies carry on any business with
Shareholders and outside parties on arms' length
terms.
4.3. Notwithstanding anything to the contrary herein or in the
Articles, in relation to any resolution proposed to the board
of directors of any Group Company in terms whereof such Group
Company -
4.3.1. enters into, amends, varies, terminates, cancels or
determines the interpretation of any contract with
any Shareholder, or any director or officer of a
Shareholder or any Affiliate of a Shareholder (a
"Related Party"); or
4.3.2 takes, maintains or terminates any legal or
arbitration proceedings against a Related Party,
the Shareholder concerned shall use its best endeavours to
ensure that the Directors nominated by it pursuant to clause
5.4 abstain from voting and from participating in the
discussions on such resolution.
5. CORPORATE GOVERNANCE
5.1. The first Board shall comprise 14 members.
5.2. For as long as it is a shareholder in the Company and for so
long as it is legally
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entitled, whether pursuant to a contractual right or
otherwise, to be represented on the Board, MCOT shall be
entitled to nominate such number of Directors (not exceeding
two) as the Shareholders, after consultation with MCOT, may
determine from time to time.
5.3. For so long as the Company is required in terms of any
applicable rule of the SET and/or SEC to have independent
Directors, the general meeting of shareholders of the Company
shall elect, in accordance with the provisions of clause 5.13
below, two such Directors on to the Board. A Director shall be
deemed to be independent if he qualifies as such in terms of
any applicable SEC and SET rules and regulations in force from
time to time.
5.4. Whilst a Shareholder is the registered holder of Shares
representing in aggregate -
5.4.1. 5% (five percent) or more but not exceeding 10% (ten
percent) of all Shares it shall be entitled to
nominate one person for election as a Director;
5.4.2. more than 10% (ten percent), but not more than 20%
(twenty percent) of all Shares, it shall be entitled
to nominate two persons for election as Directors;
5.4.3. more than 20% (twenty percent), but not more than 30%
(thirty percent) of all Shares, it shall be entitled
to nominate three persons for election as Directors;
5.4.4. more than 30% (thirty percent), but not more than 40%
(forty percent) of all Shares, it shall be entitled
to nominate four persons for election as Directors;
5.4.5. more than 40% (forty percent), but not more than 50%
(fifty percent) of all Shares, it shall be entitled
to nominate five persons for election as Directors;
5.4.6. more than 50% (fifty percent) of all Shares, it shall
be entitled to nominate six persons for election as
Directors.
5.5. Each Shareholder shall be entitled from time to time, by
notice in writing to the other Shareholders, to remove any of
the persons nominated by it for election as Directors and to
nominate a replacement to any nominee designated by it who
ceases or is
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unable to serve on the Board for any reason.
5.6. Each Shareholder undertakes to the others to exercise all
voting rights exercisable by it as a holder of Shares, whether
at any annual or extraordinary shareholders' meeting or at a
Board meeting, to ensure that the persons nominated (including
all replacements) from time to time by each of the
Shareholders as Directors are duly elected as such and that
such Directors are duly appointed as Authorised Directors of
the Company.
5.7. If any Shareholder notifies the other Shareholders in writing
of its desire to remove any Director previously nominated by
it pursuant to clause 5.4 and such Director does not
voluntarily submit his resignation within 4 (four) days after
the date upon which such notice is served by the Shareholder
in question, each of the Shareholders shall exercise all
shareholder rights to ensure that the Board shall, within 14
(fourteen) days after the date on which the relevant
Shareholder served notice as aforesaid, convene a meeting of
the Shareholders to be held as soon as is legally possible
and, at such meeting, each Shareholder shall exercise all
shareholder rights so as to procure the removal of such
Director from the Board. In addition -
5.7.1. during the 14 (fourteen) or more day period following
such notice, the Shareholders shall use their best
endeavours to ensure that no action is taken by the
Board until such Director is removed, other than by a
unanimous vote of the Directors appointed pursuant to
clause 5.4, (excepting only the soon-to-be-removed
Director);
5.7.2. the Shareholders agree to refrain from exercising any
shareholder or other rights to procure the removal
from the Board of any Director without the consent of
the Shareholder which nominated such Director,
provided, however, that any Director may be removed
without such consent if such Director is placed under
guardianship, becomes bankrupt or subject to an order
prohibiting him from serving as a director of the
Company or is convicted of a serious criminal
offence. No such removal (under the provisions set
out above) of a Director nominated pursuant to clause
5.4 shall affect the rights of any Shareholder to
designate immediately a different individual pursuant
to such clause. A Shareholder which, pursuant to the
provisions of clause 5.4, has lost its right to
nominate one or more persons
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for election as Directors (because the number of
Shares held by such Shareholder has fallen below the
threshold in question) shall (if required in order to
procure the removal of the Director in question),
immediately on the occurrence of such loss, be deemed
to have requested the Chairman to convene a
shareholders' meeting as aforesaid to remove from the
Board such Director nominated by such Shareholder.
5.8. A quorum at meetings of the Board shall be 75% (seventy five
percent) of the Directors, which 75% (seventy five percent)
shall comprise at least one Director nominated by each
Shareholder which, pursuant to the provisions of clause 5.4,
is entitled to nominate more than one Director. Should a
quorum not be present within 30 (thirty) minutes after the
time appointed for the commencement of any meeting of the
Board, that meeting shall stand adjourned for 72 (seventy two)
hours, at the same time and place. The adjourned meeting may
only deal with the matters which were on the agenda of the
meeting which was adjourned. Where a meeting has been
adjourned as aforesaid the Chairman shall use his best
endeavours to inform, in the most reasonably expeditious
manner, each of the Directors of the time, date and place to
which the meeting has been adjourned. If at any adjourned
meeting, a quorum is not present within 30 (thirty) minutes
after the time appointed for the commencement of such meeting,
then the Directors present shall constitute a quorum.
5.9. Meetings of the Board shall be held in Bangkok (or such other
place as all Board members may agree on from time to time) and
at such times as the Board shall determine, provided that,
unless otherwise agreed between the Shareholders, a meeting of
the Board shall be held at least once every month. Not less
than 14 (fourteen) days notice (or such other period of notice
as may be agreed from time to time by at least a majority of
the Directors) of each meeting of the Board specifying the
date, time and place of the meeting and the business to be
transacted thereat shall be given to all Directors by the
Chairman. In addition, the Board shall also meet within 14
(fourteen) days after receipt by the Company and all Directors
of a written request to this effect from any two or more
Directors. The written request shall set out such information
(referred to above) as the Chairman would have been obliged to
provide if he had called the meeting. If, notwithstanding the
above provisions, a Director fails to receive full and proper
notice of a meeting, but nevertheless is present at such
meeting, then such Director shall be deemed to have
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<PAGE>
waived the notice requirements and shall thus not be entitled
to reply on any failure to comply with the provisions set out
above.
5.10. The Board shall establish an executive committee ("Executive
Committee") for the Group, consisting of the four executives
of the Group referred to in clauses 5.17, 5.18 and 5.19 and
one representative from each Shareholder which is the
registered holder of Shares representing more than 10% (ten
percent) of all Shares and two representatives from each
Shareholder which is the registered holder of Shares
representing more than 20% (twenty percent) of all Shares. The
Executive Committee shall report to the Board. The Board may
delegate such functions to the Executive Committee as it
resolves from time to time. The Board shall, from time to
time, stipulate the operating procedures and voting majorities
required for resolutions of decisions of the Executive
Committee, provided that such majorities shall be consistent
with the balance between the Shareholders and between their
Board representatives established by the provisions of clauses
5.12 and 5.13. During the first year after the Effective Date,
the Executive Committee shall meet weekly. Thereafter, the
Executive Committee shall meet at such times as the Board may
determine from time to time.
5.11. Notwithstanding anything to the contrary herein contained, but
subject to the following provisions being contained in the
Articles of the Company and such Articles being registered
with the appropriate authorities in Thailand, any resolution
signed by all the Directors shall be valid and effective as if
it had been passed at a meeting of the Board. Any such
resolution may consist of several counterparts, each of which
may be signed by 1 (one) or more Directors and shall be deemed
to have been passed on the date on which it was signed by the
last Director who signed it (unless a statement to the
contrary is made in that resolution).
5.12. Subject to the provisions of clause 5.11, all resolutions or
decisions of the Board shall require the affirmative vote of a
majority of the Directors present and voting at a Board
meeting, which majority shall include at least 75% (seventy
five percent) of the number of Directors nominated by the
Shareholders pursuant to clause 5.4 (but excluding the
Director(s) who, pursuant to any provision of this Agreement
or any other applicable law, rule or regulation, is(are)
obliged to abstain from voting on the resolution or decision
in question and excluding the Director(s) in respect of whom
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<PAGE>
the Shareholder which nominated him(them) for election
undertook in terms of this Agreement to use their best
endeavours to procure the abstention of such Director(s) from
voting). The Chairman shall not under any circumstances have
an additional or casting vote.
5.13. All resolutions or decisions of the shareholders of the
Company shall require the affirmative vote of shareholders of
the Company representing a majority of the votes then
exercisable by holders of all Shares carrying voting rights
who are present and voting at a meeting of shareholders of the
Company, which majority shall include Shareholders holding
Shares carrying voting rights representing at least 75%
(seventy five percent) of all Shares carrying voting rights
then held by Shareholders (but excluding the Shares of
Shareholders which pursuant to any provision in this Agreement
or any other applicable law, rule or regulation are obliged to
abstain from voting on the resolution or decision in
question).
5.14. The Shareholders shall procure that the Chairman ensures the
distribution of the agenda of any meeting of the Board or any
shareholders' meeting in advance of the meeting, and shall
call, by not less than 5 (five) days notice to the
Shareholders, a meeting (or such other form of consultation as
the Shareholders may agree) of the Directors nominated by the
Shareholders, to take place not less than 3 (three) business
days before the relevant meeting and determine the way in
which the representatives of the Shareholders, or the
Shareholders and their respective Affiliates, will vote at the
relevant Board or shareholders' meeting. If the Chairman for
any reason whatever fails to carry out any of his duties as
set out above, any two or more Directors may do so instead.
5.15. The remuneration of the Directors shall be determined by the
Shareholders, while any compensation payable to executives of
the Company, in addition to any remuneration which such
executive may receive by reason of being a Director, shall be
determined by the Board.
5.16. Whilst SHIN is the registered holder of Shares representing in
aggregate more than 10% (ten percent) or more of all Shares,
it shall be entitled -
5.16.1. to nominate one of the Directors nominated by it for
election as Chairman; and
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<PAGE>
5.16.2. to require the removal and replacement of such person
as Chairman.
Each Shareholder shall use its best endeavours to ensure that
the Directors nominated by it vote in such manner as to give
effect to the provisions set out above.
5.17. Whilst the Shareholding percentage of TH is larger than or
equal to the aggregate Shareholding percentage constituted by
the Shares held by SHIN and MIH together, or smaller by not
more than 5 percentage points, TH shall be entitled to
nominate (and to require the removal of) the Chief Executive
Officer from time to time of the Group ("CEO") and whilst it
is the registered holder of Shares representing more than
10%(ten percent) of all Shares, TH shall be entitled to
nominate (and require the removal of) the President from time
to time of the Group ("the President").
5.18. The Shareholders which each hold more than 10% (ten percent)
of all Shares shall be entitled, acting jointly and by
unanimous vote, to nominate the Chief Financial Officer from
time to time of the Group ("CFO").
5.19. Whilst MIH is the registered holder of Shares representing in
aggregate more than 10% (ten percent) of all Shares, MIH shall
be entitled to nominate (and to require the removal of) the
Chief Operating Officer from time to time of the Group
("COO").
5.20. If, at any time after a person has been appointed to one of
the positions referred to in clauses 5.16, 5.17, 5.18 or 5.19,
any * other than the Shareholder which nominated the person in
question) in the case of clauses 5.16, 5.17 or 5.19 or any *
in the case of clause 5.18, and/or any
*
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5.21. *
Each Shareholder agrees that all losses,
claims, damages or liabilities (or actions in respect of) to
which the Company and/or such Shareholders, as the case may
be, may be subject, shall, insofar as such losses, claims,
damages or liabilities arise out of or are based upon the
removal in accordance with clauses 5.18 and *, of the Chairman
or any executive, as the case may be, be borne and paid for by
the Company.
5.22. The CEO -
5.22.1. shall be the top executive in charge of the
management and operations of the Business and affairs
of the Group and shall, subject to the provisions of
this Agreement, have authority to -
5.22.1.1. deal with the employees of the Group,
including with respect to delegation of
duties, promotions, transfers,
terminations and the fixing of
remuneration, subject to any directives
of the Board, if any, in this regard;
5.22.1.2. execute the implementation by the Group
of all policies and directives laid down
by the Board; and
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5.22.1.3. conduct the Business in accordance with
the Budget from time to time in force.
5.22.2. shall, unless the Board decides to the contrary,
attend all Board meetings and report to the Board on
all activities and operations of the Group, provided
that the CFO, the President and the COO may also be
invited to attend Board meetings. The CEO, President,
CFO and COO shall not be entitled to vote at such
meetings in his/her capacity as CEO, President, CFO,
or COO (as the case may be), except that such a
person shall, of course, be entitled to attend all
Board meetings and to vote as a Director, if, in
addition to his/her position as an executive, he/she
has been appointed as a Director. For the avoidance
of doubt, TH shall have the right to nominate the
person whom it nominated as CEO and/or the President
for appointment to the Board pursuant to clause 5.4;
and
5.22.3. shall, subject to the provisions of clauses 5.17,
5.18, 5.19 and 5.23, appoint (and be entitled to
remove or terminate the employment of) the staff
members and officers of the Group as the Group;
5.22.4. shall report to the Board and the Executive
Committee, as appropriate, and comply with all
policies and directives (including such directives as
stipulate the authority of the CEO to bind a Group
Company) laid down by the Board;
The COO, CFO and President shall all report to and follow the
directives of the CEO and shall be accountable in relation to
their respective functions to the CEO. Unless the Board
decides to the contrary, the President shall be responsible
for all marketing and sales functions of the Group, the CFO
shall be responsible for all financial functions of the Group
and the COO shall be responsible for all operational
activities (other than the marketing and sales activities) of
the Group.
5.23. Subject to the provisions of clause 5.22, the day to day
management of the Group and its affairs shall be carried out
by the officers of the Company and all obligations and
responsibilities on the part of such officers shall be
performed under the direction of the Board, the Executive
Committee or the CEO (as appropriate).
5.24. The CEO shall represent the Company at all shareholders'
meetings of the Company's
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Subsidiaries, which meetings shall appoint the auditors of
each such Subsidiary (which shall be the same as the Auditors)
and elect the board of directors of each such Subsidiary, as
determined by the Board, subject, in the case of the UTV
Board, to the provisions of clause 5.25. In the event of the
Directors failing to adopt a resolution, as contemplated in
clause 5.12, as to the composition of the board of any such
Subsidiary (other than UTV), the composition of any board of
any such Subsidiary shall be the same as the Board except that
MCOT shall have no representation thereon nor shall the
Directors elected pursuant to clause 5.3 be appointed as
directors of such Subsidiary.
5.25. The Company shall ensure, through the exercise of all voting
and other rights which it has as a shareholder in UTV, that
the UTV Board shall consist of the same persons who have been
elected as Directors pursuant to clause 5.4 and of
representatives of MCOT and, in this regard, the provisions of
clause 5.2 shall apply, mutatis mutandis, to the UTV Board. In
addition, if at any time during this Agreement, TOT is a
Shareholder in UTV, it shall be entitled to nominate such
number of directors (not exceeding two) as the Shareholders,
after consultation with TOT, may determine from time to time.
5.26. The provisions of clauses 5.5 through to 5.15, excluding 5.10,
shall apply, mutatis mutandis, to UTV.
5.27. If required in terms of any applicable law, rule or
regulation, the Company shall establish an audit committee
which shall operate in accordance with the provisions of all
applicable laws, rules and regulations.
6. BUDGETS
6.1. The initial Budget of and 3 (three) year financial and
business plan for the Group, being a budget in respect of the
1998 fiscal year (being the year commencing on 1 January 1998
and terminating on 31 December 1998) and a 3 (three) year
budget and financial and business plan shall be prepared by
the Company and submitted to the Board for its approval as
soon as possible after the Effective Date. Each Shareholder
shall use its best endeavours to ensure that, provided the
aggregate funding which in terms of such draft budget is to be
contributed by the shareholders of the Company
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over the aforesaid 3 year period does not exceed the Peak
Funding Requirement referred to in clause 8.1, the Directors
nominated by such Shareholder shall approve the draft budget
and business plan within 30 days after its submission to the
Board.
6.2. The Shareholders shall use their best endeavours to ensure
that a budget in respect of each and every subsequent fiscal
year (which shall commence on 1 January and terminate on 31
December of each year) and, if required by the Board, a 3
(three) year financial and business plan, for the Group is
prepared by the CEO and CFO and submitted to the Directors for
their approval, not less than 30 (thirty) days prior to the
commencement of the fiscal year. If such budget is approved
(with or without amendment) by the Directors it shall
constitute the Group's Budget for the fiscal year (or shorter
period) in respect of which it was prepared. If any annual
budget shall not have been so approved by the Directors before
the start of the fiscal year of the Company to which it
relates, the Group shall, until the budget in question shall
have been so approved, continue to operate on a budget
equivalent, on a monthly basis, to the Budget then in force
with respect to the immediately preceding fiscal year with an
increase of 10% (ten percent) for all operating cost line
items specified in such Budget.
6.3. The Directors shall, at every Board meeting, review the
performance of the Group in the light of the Budget then in
force and shall be entitled, at any time during the fiscal
year in respect of which a Budget applies, to request the CFO
to prepare and submit to the Board for its approval a draft
revised budget for the Group. The approval procedure for a
draft budget set out in clause 6.2 shall apply, mutatis
mutandis, to such draft revised budget, provided that a copy
of such draft revised budget shall be supplied to each of the
Directors not less than 15 (fifteen) days prior to the Board
meeting at which such draft revised budget is to be
considered.
6.4. The Business shall be conducted in accordance with the Budget
in force from time to time. If, however, at any time the
income of the Group is materially less than anticipated in the
then current Budget, then the Board shall immediately take the
steps referred to in clause 6.3 and shall, until a revised
budget has been approved, take all reasonable steps to reduce
the expenditure of the Group.
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ACCOUNTS
7.1 Each Group Company shall at all times keep and maintain at its
principal offices true and accurate accounting and other
financial records and other books and records of its affairs.
7.2 The annual financial and related statements of each Group
Company shall be made up at the completion of each fiscal year
in both the Thai and English languages and the Shareholders
shall ensure that within 4 months after the end of each fiscal
year -
7.2.1. there shall be prepared proper financial statements,
including consolidated balance sheets as at the end
of the Company's fiscal year and a profit and loss
account in respect of such financial year, in
accordance with the requirements of the SET and with
generally accepted accounting principles and
practices in Thailand, and that the same shall be
duly audited by the Auditors; and
7.2.2. such audited financial statements together with the
Chairman's report thereon, shall be submitted by the
Directors to the shareholders of the Company for
approval at the next meeting of such shareholders.
7.3. Without prejudice to clause 7.1, the Company shall prepare in
both the Thai and English languages and send to each of the
Directors within 21 (twenty-one) days of the end of each
calendar month consolidated unaudited management accounts (for
internal purposes) and cash flow statements of the Group for
that month in such form as may be required from time to time
by the Directors.
7.4. Without prejudice to any rights granted to directors of
companies under Thai law, each Director shall have for
himself -
7.4.1. the right to full and complete access to all
properties, assets, books and records of each Group
Company;
7.4.2. the right to examine all accounting records kept by
the Group Companies; and
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7.4.3. the right to be supplied with all relevant
information, including operating statistics, budgets
and forecasts and such other trading and financial
information in such form as they may reasonably
require to keep each of them properly informed of the
financial and business affairs of the Group
Companies.
FINANCE
8.1. The Shareholders acknowledge and agree that the aggregate
capital expenditure, working capital and cash flow
requirements of the Group (but excluding all funds required to
repay the shareholders loans made to the UTV Business and the
IBC Business (as such terms are defined in the Merger
Agreement) between 30 September 1997 and the Effective Date)
for the first 12 months following the Effective Date shall be
Baht * unless otherwise agreed by the Shareholders (the "Peak
Funding Requirement").
8.2 If any Group Company requires any funds ("Funding") within the
Peak Funding Requirement and in terms of its then Budget to
carry out its Business -
8.2.1. each Shareholder shall, in the first place, use its
best endeavours to procure that the Funding is
financed, as far as practicable, from outside
sources, such as the financial and/or capital
markets, on terms acceptable to the Shareholders;
8.2.2. and the Company is unable, within a reasonable
period, to acquire any of the Funding in the manner
set out in clause 8.2.1, the Funding or the
unacquired portion thereof, as the case may be, shall
be funded by means of an increase in the share
capital of the Company and each Shareholder shall
(and each Shareholder shall use its best endeavours
to ensure that the Director(s) nominated by it
pursuant to clause 5.4 shall) vote in favour of all
resolutions required for such capital increase.
8.3. No shareholder shall be obliged to provide its pro rata
portion of any Funding ("Funding Contribution"). In the event
that any Shareholder does not provide its Funding Contribution
in whole or in part ("a Funding Non-Provider"), the provisions
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<PAGE>
of clause 8.4 shall apply in respect of such part of the
Funding as the Funding Non-Provider(s) has/have failed to
provide ("the Funding Shortfall"), but the Funding
Non-Provider shall have no obligation or liability to the
Company or otherwise in respect of the Funding Shortfall,
provided that if the funding is contributed by means of a
subscription for Shares then, to the extent that it does not
provide its Funding Contribution, its Shareholding shall be
diluted.
8.4. All Shareholders which are not Funding Non-Providers shall be
entitled to provide the Funding Shortfall in their Agreed
Proportions. If more than one Shareholder offers to provide
all of the Funding Shortfall, the Funding Shortfall shall be
so provided by each such Shareholder pro rata, as nearly as
may be, to their Agreed Proportions at the date on which the
Funding is to be provided.
8.5. Notwithstanding the other provisions of this clause 8, if any
of the Shareholders, with the prior written consent of all the
other Shareholders, issue any guarantees, indemnities,
suretyships or the like over their assets ("guarantees"), as
security for any Indebtedness of any Group Company, then
irrespective of whether such guarantees are issued by 1 (one)
or more or all of the Shareholders, or by any of them jointly,
or by any of them jointly and severally, each consenting
Shareholder hereby agrees to indemnify the others against
claims, actions, expenses, liabilities or losses which may be
suffered by the other pursuant to such guarantees, to the
extent that it is necessary to ensure that the loss shall be
shared equitably between the Shareholders in the Agreed
Proportions at the time that the loss is sustained.
8.6. The Shareholders undertake with each other to vote in favour
of (and to use their best endeavours to ensure that the
Directors appointed by them respectively vote in favour of)
all resolutions required to be passed for the issue of Shares
or the creation of Shareholders' Loans as contemplated in this
clause 8 and to do such other things as may be necessary in
order to give effect to the provisions of this clause 8.
9. TRANSFER OF SHARES
General Restriction on Transfers
9.1. The Shareholders agree and undertake that, except as may be
agreed between them pursuant to the provisions of clause 9.8,
no Transfer of any of their Shares or
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Shareholder Loans may be made or registered (or purport to be
made or registered) at any time after the date hereof, save as
provided for in this clause 9 and subject always to compliance
with the Transfer Terms.
Permitted Transfers
9.2. A Shareholder may at any time and on any terms Transfer all
(but not part only) of its Shares to a wholly owned Subsidiary
provided that:
9.2.1. it shall be a condition precedent to any such
Transfer (and any registration thereof) that the
transferor and the transferee enter into a written
undertaking in favour of the other Shareholder(s) and
the Company in the form set out in Schedule 1; and
9.2.2. if the transferee ceases to be a wholly owned
Subsidiary of the transferor, then the transferor
shall procure that the transferee shall have
Transferred to the transferor or another wholly owned
Subsidiary of the transferor all its Shares and
Shareholder Loans prior to the date of such
cessation;
provided always that, notwithstanding such Transfer, the
transferor shall for all purposes remain primarily liable for
the due and proper performance of the transferee's obligations
hereunder.
Rights of First Refusal
9.3 Subject to the provisions of clauses 9.1 and 9.4, if at any
time a Shareholder (the "Offeror") wishes to Transfer any of
its Shares it shall, by notice in writing (the "Offer") to the
Company and to the other Shareholders (the "Offerees"), offer
to sell to the Offerees such Shares ("Sale Shares"), together
with such proportion of the Shareholder Loans made by the
Offeror and/or its Affiliates as is equal (as nearly as
practicable) to the proportion of Shares to be Transferred
("Sale Claims"), at the price and on the terms specified in
the Offer. The Offer shall specify the material terms and
conditions including, without limitation, the price at which
the Offeror is prepared to sell the Sale Shares and Sale
Claims and shall remain open for acceptance by any Offeree for
30 days from the date of the Offer (the "Offer Period"). The
price for the Sale Claims shall be the face value thereof and
the price
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<PAGE>
for the Sale Shares shall be that agreed upon between the
Offeror and the Offerees and failing agreement, shall be the
average weighted middle market price of the Company's Shares
quoted on the SET during the 30 trading days preceding the day
on which the Offer is made (such middle market price to be
determined by the Company's stockbrokers who shall act as
experts and not as arbitrators and whose decision shall be
final and binding on the parties).
9.4. All Offerees shall be entitled to accept an Offer in
proportion to their Agreed Proportions of Sale Shares and Sale
Claims.
9.5. Each Offeree desiring to purchase its Agreed Proportion or
more of the Sale Shares and Sale Claims shall, within the
prescribed period, give notice in writing to the Company, the
Offeror and the other Offerees accordingly, specifying the
maximum number of Sale Shares and Sale Claims it is willing to
purchase. If any Offeree does not wish to purchase any Sale
Shares and Sale Claims, the remaining Sale Shares and Sale
Claims shall be allocated to the accepting Offerees pro rata
in proportion to their Agreed Proportions, provided that
accepting Offerees shall not be required to purchase in excess
of the number of Sale Shares and Sale Claims specified in the
notice aforesaid.
9.6. Subject to compliance with the provisions of clauses 9.3, 9.4
and 9.5, if the accepting Offerees shall not have accepted an
Offer in respect of all of the Sale Shares and Sale Claims,
the Offeror shall be entitled, within 30 (thirty) SET trading
days after such non-acceptance, to sell to a bona fide third
party, but at a cash price which shall not be less than that,
and on terms and conditions which are not, taken as a whole,
more favourable to the third party purchaser than those, at
which the Offerees were entitled to purchase the Sale Shares
and the Sale Claims in terms of clause 9.3, provided that if
the Sale Shares are sold to a bona fide third party on the
SET, the Offeree shall be entitled to sell the Sale Shares
for the market price of the Company's Shares quoted on the
SET on the date of the sale, even if such price is less than
that at which such Sale Shares were offered to the Offerees.
If no such sale shall have been effected during such 30
(thirty) SET trading day period, then the Offeror shall not
be entitled to effect any Transfer of any or all of its
Shares and Shareholder Loans thereafter unless the
provisions of clauses 9.3, 9.4 and 9.5 shall again have been
complied with in respect of such Shares and Loans.
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<PAGE>
9.7. The Shareholders acknowledge that a proposed Transfer may
result in a mandatory offer of Shares under the SET and/or SEC
and/or any other applicable rules (the "Applicable Rules")
having to be made. The Shareholders agree that in the event of
there being any irreconcilable inconsistency between any
mandatory Applicable Rule and any provision of this clause 9
set out above, then the mandatory Applicable Rule shall apply
(but to the extend of the inconsistency only) as between the
Shareholders.
Transfer Terms
9.8 Any Transfer of Shares and/or Shareholder Loans shall be made
on the following terms:
9.8.1. unless the transferee is an existing Shareholder, any
other Shareholder may stipulate as a condition
precedent to any such Transfer (and any registration
thereof) that:
9.8.1.1. the transferee enters into a written
undertaking in favour of the Company and the
other Shareholder(s) in the form set out in
Schedule 2; and
9.8.1.2 the transferee notifies the Company and the
Shareholder(s) (other than the transferor)
of its address for service of all notices
and communications to be given or made under
this Agreement;
9.8.2. if the transferee is an existing Shareholder, the
transferee shall indemnify the transferor (in the
case of a partial Transfer, in the proportion of the
Shares so Transferred) against any claim made against
the transferor by virtue of its liability as surety
or guarantor for any Group Company's obligations;
9.8.3. if the transferor shall have sold all of its Shares,
it shall continue to be bound by clauses 10
(Non-Compete) and 14 (Confidentiality) following the
sale, but shall otherwise cease to be bound by this
Agreement (except in relation to any antecedent
breach);
9.8.4. if the transferee is an existing Shareholder, the
transferor shall sell the Sale Shares and assign the
Shareholder Loans the subject of the Transfer, free
and
27
<PAGE>
clear of all Encumbrances, together with all rights
attaching thereto on or after the date of the
Transfer; and
9.8.5. if the transferee is an existing Shareholder, the
completion of the Transfer shall take place within 30
days after acceptance of the relevant Offer at the
registered office of the Company against delivery to
the transferee of duly executed transfer documents of
the Sale Shares and certificates therefor and
assignment of the Shareholder Loans to the
transferee.
10. NON-COMPETE
10.1. Subject to the provisions of clause 10.3, each of the
Shareholders undertakes to each other and the Group Companies
that while any Group Company carries on Business it shall not,
and shall procure that its Affiliates shall not, without the
prior written consent of the Company, either alone or in
conjunction with or on behalf of any other Person, or directly
or indirectly, do any of the following things while it or any
of its Permitted Transferees is a Shareholder and for a period
of 2 (two) years after it or its Permitted Transfers cease to
be a Shareholder -
10.1.1. carry on or be engaged or interested in any
Subscription Television Business in Thailand,
Myanmar, Laos, Malaysia, Vietnam or Cambodia (other
than as a holder of less that 5% (five percent) of
the stock of a corporation, the securities of which
are traded on a national securities exchange),
provided that if at any time it is proposed to the
Board that a Group Company should carry on or be
engaged or interested in a Subscription Television
Business in Myanmar, Laos, Malaysia, Vietnam or
Cambodia (as the case may be) and the Board fails for
any reason, to approve such proposal within 30 days
after the proposal was made, then the restriction on
Shareholders and their Affiliates not to carry on or
be engaged or interested in a Subscription Television
Business, as set out in this clause 10.1.1, shall, in
so far as it relates to the country in respect of
which the proposal was made, but not approved, lapse
and be of no further force or effect. For the purpose
of this clause 10.1.1, Subscription Television
Business means any business similar to that conducted
by UTV and IBC prior to the Effective Date (but
irrespective of the means of exhibition, distribution
or transmission of the
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<PAGE>
signals of the programmes, data and services of such
businesses) as well as pay-per-view services, video
on demand services, audio services and home shopping
services; or
10.1.2. solicit or entice away any employee of a Group
Company or, for a period of two years after the date
hereof, employ any existing or former employee or
officer of a Group Company, provided that a
Shareholder and/or any of its Affiliates shall be
entitled to employ any existing or former employee or
officer of a Group Company who had been seconded to a
Group Company by such Shareholder or any of its
Affiliates; or
10.1.3. use any business name, mark or style of any Group
Company which may suggest ownership thereof; or
10.1.4. assist any other Person to do any of the aforegoing
things.
10.2. It is agreed between the parties hereto that whilst the
restrictions set out in clause 10.1 are considered fair and
reasonable, if it should be found that any of the restrictions
are void or unenforceable and if by deleting part of the
wording or substituting a different geographical limit or a
more restricted range of activities for the geographical
limits or ranges of activities set out in clause 10.1 and it
would not be void then there shall be substituted such next
less extensive limit and/or activity or such deletions shall
be made as shall render clause 10.1 valid and enforceable.
10.3 The provisions of clause 10.1.1 shall not apply to Asia
Multimedia Company Limited and its Subsidiaries.
11. DIVIDEND POLICY
The Shareholders shall procure that the Company shall declare and pay
dividends equal to * of the distributable profits of the Company in
each of its fiscal years, which declaration and payment, if any, shall
be made within 150 days after the end of each fiscal year. The Company
may also declare and pay such interim dividends as the Shareholders may
agree to from time to time.
29
<PAGE>
12. INDEMNITY
12.1. The Shareholders acknowledge that -
12.1.1. * may have certain claims against UTV and/or Cineplex
Company Limited ("Cineplex") arising from the
agreement between *
12.1.2. * has claimed Baht * in compensation from Shinawatra
Satellite Public Company Limited ("SHIN"), Satellite
Service Company Limited ("SSV"), a Subsidiary of the
Company, and from the Company, arising from the
alleged *
12.1.3. litigation is pending (i) in the court of appeal of
the state of Washington, United States of America,
between CTVC and Dr Thaksin Shinawatra, SHIN and the
Company, and (ii) in the civil court of Thailand
between Mr William Limonson and the Company (as well
as 17 other parties);
12.2. * agrees to pay and to indemnify fully, hold harmless and
defend * from and against any and all claims, and/or
liabilities, damages, penalties, judgements, assessments,
losses, costs and expenses (including, but not limited to,
reasonable lawyers' fees) (collectively "Damages") incurred by
* arising out of, relating to or based upon the agreement
12.3. Each of * agrees, jointly and severably, to pay and to
indemnify fully, hold harmless and defend * from and against
any and all Damages incurred by * arising out of, relating to
or based upon the claims of *
12.4. * agrees to pay and to indemnify fully, hold harmless and
defend all * against any and all Damages incurred by any * and
* arising out of, relating to or based upon the claims of *
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<PAGE>
12.5. The Shareholders which give(s) the indemnity referred to in
clause 12.2, 12.3 or 12.4 (as the case may be) (the
"Indemnifying Shareholder") shall pay to the Person in whose
favour the indemnity is given (the "Indemnified Person") the
amount of any and all Damages on the date on which such
Damages are incurred by the Indemnified Person (in the case of
loss or damages) and on the date on which the Damages are
discharged by the Indemnified Person (in the case of claims,
liabilities, penalties, judgements, costs and expenses).
12.6. If, pursuant to the litigation instituted by * and *
(collectively, the "Claimants") as referred to in clause * any
of the Claimants become legally entitled to enforce a
judgement of a competent court against any Group Company,
which enforcement would result in a material diminution in the
value of * then Shareholding in the Company and after full
exhaustion by * of all remedies which it may have in terms of
the indemnity granted to it in clause 12.4, such diminution is
not remedied, then * shall be entitled to request the other
Shareholders that the Merger Agreement as well as the
Ancillary Agreements referred to therein, be * as may be
appropriate. In the event of such request, the Shareholders
shall meet in order to discuss and investigate mechanisms for
such * and for restitution of all shares, businesses, assets,
liabilities, employees and monies which were transferred
pursuant to those Agreements. If the Shareholders agree on
such mechanisms, then the Shareholders shall take such steps
in accordance with the agreed mechanisms in order to
implement, to the extent practicable, the proposed
restitution.
13. SCOPE, DURATION AND TERMINATION
13.1. The parties acknowledge that notwithstanding the fact that the
term "Shares" comprises all the issued and outstanding shares,
of whatever class, of the Company, the provisions of this
Agreement shall apply to Shareholders only in respect of their
holdings of the following pool of Shares: (i) their Shares as
referred to in clauses 1.2.1 to 1.2.6, (ii) all further Shares
which a Shareholder may acquire from another Shareholder
pursuant to the provisions of clause 9, and (iii) to all other
Shares which a Shareholder may acquire on account of its
holding of the Shares referred to in
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<PAGE>
paragraphs (i) and (ii) above pursuant to a rights and/or
a capitalisation issue or a distribution in lieu of cash
dividends by the Company. The provisions of this Agreement
shall not apply to a Shareholder in respect of any Shares
acquired (before or after the date of this Agreement) by it on
the SET, and such Shares shall not be taken into account in
relation to or be subject to any of the provisions of this
Agreement.
13.2. Except as otherwise provided herein, this Agreement shall
continue in full force and effect without time limit until the
Shareholders agree in writing to terminate this Agreement.
Notwithstanding the foregoing, this Agreement shall cease to
have effect as regards any Shareholder who ceases to be the
registered holder of at least 5% (five percent) of all the
Shares save that such Shareholder shall continue to be bound
by the obligations (but shall not be entitled to the rights)
of Shareholders under clauses 9.1 to 9.3, 9.6, 9.7 and 9.8 and
save for any provisions hereof which expressly provide that
they shall continue regardless of the holding of any Shares by
any party hereto and for any provisions which are expressed to
continue in force thereafter. Any Person who ceases to hold
the aforesaid percentage of Shares shall, subject to the
aforegoing qualifications, upon such cessation, cease to be a
Shareholder hereunder.
14. CONFIDENTIALITY
14.1. Each party undertakes with the others that it shall use (and
shall procure that each of its Affiliates shall use) all
reasonable endeavours to keep confidential (and to ensure that
its officers, employees, agents and professional and other
advisers keep confidential) any information:
14.1.1. which it may have or acquire (whether before or after
the date of this Agreement) in relation to the
customers, business, assets or affairs of any Group
Company;
14.1.2. which, in consequence of the negotiations relating to
this Agreement or being a shareholder in the Company
or having appointees on the Board or the exercise of
its rights or performance of its obligations under
this Agreement, it may have or acquire (whether
before or after the date of this Agreement) in
relation to the customers, business, assets or
affairs of any of the other parties
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<PAGE>
or their respective Affiliates;
14.1.3. which relates to the contents of this Agreement (or
any agreement or arrangement entered into pursuant to
this Agreement).
No party shall use (and shall ensure that none of its
Affiliates uses) for its own business purposes or disclose to
any third party any such information ("Confidential
Information") without the prior written consent of the other
parties.
14.2. The obligation of confidentiality under clause 14.1 shall not
apply to:
14.2.1. the disclosure on a "need to know" basis to a company
which is another member of the relevant party's group
where such disclosure is for a purpose reasonably
incidental to this Agreement;
14.2.2. information which is independently developed by the
relevant party or acquired from a third party to the
extent that it is acquired with the right to disclose
the same;
14.2.3. the disclosure of information to the extent required
to be disclosed by law, any stock exchange regulation
or any binding judgment, order or requirement of any
court or other competent authority;
14.2.4. the disclosure of information to any tax authority to
the extent reasonably required for the purposes of
the tax affairs of the party concerned or any member
of its group;
14.2.5. the disclosure in confidence to a party's
professional advisers of information reasonably
required to be disclosed for a purpose reasonably
incidental to this Agreement;
14.2.6. information which becomes within the public domain
(otherwise than as a result of a breach of this
clause 14); or
14.2.7. any announcement made in accordance with the terms of
this Agreement.
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<PAGE>
14.3. The provisions of this clause 14 shall survive any termination
of this Agreement and shall continue to bind a party even if
it ceases to be a Shareholder hereunder pursuant to the
provisions of clause 13.
15. WAIVERS
15.1. No delay in exercising or failure to exercise any right or
remedy under this Agreement shall operate as a waiver thereof
not shall any single or partial exercise of any right or
remedy preclude either the further exercise thereof or the
exercise of any other right or remedy. The rights and
remedies provided by this Agreement are cumulative and do
not exclude any rights, powers or remedies provided by law,
at equity or otherwise.
15.2. In the event that any party shall expressly waive any breach,
default or omission hereunder, without the prior written
consent of the other Shareholders, no such waiver shall apply
to, or operate as, a waiver of similar breaches, defaults or
omissions or be deemed to be a waiver of any other breach,
default or omission hereunder.
16. ASSIGNMENT
No party hereto shall be entitled to transfer this Agreement or any of
the rights and obligations hereunder without the prior written consent
of the other parties, except to a transferee of Shares in accordance
with this Agreement.
17. ENTIRE AGREEMENT
17.1. This Agreement constitutes the entire agreement between the
parties and supersedes all prior agreements between the
parties or any of them concerning the subject matter hereof
and each of them confirms that there is no other agreement
between any two of the Shareholders which affects their
relationship as Shareholders. No amendment, change or
additions hereto shall be effective or binding on any party
unless reduced to writing and executed by all the parties.
17.2. Each of the parties acknowledges that in entering into this
Agreement it is not relying on any representation or other
statement which is not set out in this Agreement or the
34
<PAGE>
other documents referred to herein.
17.3. This Agreement shall be binding upon and enure to the benefit
of the parties hereto and their respective successors and
permitted assigns. Subject to the immediately preceding
sentence, this Agreement shall not run to the benefit of or be
enforceable by any Person other than a party to this Agreement
and its successors and permitted assigns.
18. NOTICES
18.1. All notices and communications under this Agreement shall be
given in writing and shall be delivered to the relevant party
or sent by registered air mail or facsimile to the address of
that party or that party's facsimile number specified in
clause 18.2. Unless otherwise specified herein, each notice or
other communication shall be deemed effective (i) on the date
received, if personally delivered, (ii) 8 (eight) business
days after being sent, if sent by registered air mail, or
(iii) 1 (one) business day after being sent, if sent by
telecopier with confirmation of transmission.
18.2. Notices and communications shall be addressed as follows:
if to TH Telecom Tower, 18 Ratchadaphisek Road
Huai Khwang, Bangkok, Thailand
Attn: Dr Vallobh Vimolvanich
Fax No: +662 643 1883
if to MIH Planetenweg 6, 2132 HP Hoofddorp, The Netherlands
Attn: Cobus Stofberg/Allan Rosenzweig
Fax No: +31 2356 86880
and
MIH Asia, Admiralty Centre. Tower 2, 14th
Floor Office, 1406-07, 18 Harcourt Road,
Hong Kong
35
<PAGE>
Attn: Ha1ns Hawinkels
Fax No: +852 2529 0222
if to SHIN - 414 Phaholyotin Road, Samsen-Nai,
Phayathai, Bangkok, Thailand
Attn: Mr Boonklee Plangsiri
Fax No: +662 299 5039
if to the Company - 1376/1 Nakornchaisri Road, Dusit,
Bangkok, Thailand
Attn: The Chief Executive Officer
Fax No: +662 243 9021
or such other address of a party, person and/or fax number as
that party shall have notified in writing to all other parties
in accordance with clause 18.1.
18.3. All notices and communications shall be given and made in the
English language.
19. ANNOUNCEMENTS
No announcement or press release concerning this Agreement or the
transactions contemplated hereby shall be made by any party without the
prior written approval of the others, such approval not to be
unreasonably withheld or delayed.
20. RELATIONSHIP OF THE SHAREHOLDERS
It is expressly agreed that the relationship of the Shareholders shall
be that of joint venturers and not that of partners. Accordingly, the
Business shall be conducted as the business of the Group Companies and
no Shareholder shall represent to any person that such Shareholder is
authorised to act on behalf of any of the other Shareholder or that any
partnership, agency, employment or joint liability exists between the
Shareholders in respect of any person who is not a party to this
Agreement.
21. CONFLICT WITH OTHER DOCUMENTS
In the event of any conflict between the provisions of this Agreement
and the provisions of the Articles then, subject to the provisions of
the law of Thailand, the provisions of this
36
<PAGE>
Agreement shall prevail as between the Shareholders and the
Shareholders shall exercise all voting and other rights and powers
legally available to them (whether as Shareholders or otherwise) to
give effect to the provisions of this Agreement. If there is an
irreconcilable conflict between a provision of this Agreement and a
mandatory provision of the law of Thailand, the parties shall use best
efforts to agree on an alternative mechanism or provision which is as
close as reasonably possible to the provisions of this Agreement and
the conflicting provision contained in this Agreement shall be invalid
(but only to the extent necessary), provided that such invalidity shall
not affect the other provisions of this Agreement.
22. GOVERNING LAW AND ARBITRATION
22.1. This Agreement shall be governed by and construed in
accordance with the law of Thailand.
22.2. If any dispute arises at any time between any of the parties
in connection with this Agreement including, without
limitation, the formation or existence of, the implementation
of or the interpretation or application of, the parties'
respective rights and obligations in terms of or arising out
of this Agreement or its breach or termination or the
performance or non-performance of any party's obligations
hereunder or which relates in any way to any matter affecting
the interests of the parties in terms of this Agreement, and
the parties are unable to resolve their dispute, any party may
refer the matter in dispute, in the first instance, to the
respective chief executive officers of the parties for
resolution.
22.3. If after having been referred under clause 22.2, the matter in
dispute shall not have been resolved within 21 (twenty one)
days of the matter having been so referred, any of the parties
may request by notice in writing to the other parties that an
attempt be made to resolve the dispute by way of mediation by
a mediator agreed to between the parties. If the parties are
unable to agree on a mediator within 21 (twenty one) days of
receipt by the other parties of the request for mediation, the
mediation shall not take place. If the mediation occurs, the
following procedures shall be adhered to -
22.3.1. 1 (one) representative of each party shall be
entitled to attend the mediation and no party shall
be entitled to any other representation;
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<PAGE>
22.3.2. the mediator shall in his absolute discretion
determine the nature and form of the mediation with
the sole aim of resolving the dispute by way of
negotiation as soon as possible;
22.3.3. the decisions of the mediator shall not be binding on
the parties;
22.3.4. the cost of the mediation as determined by the
mediator shall be borne by the parties in equal
shares.
22.4. If mediation does not take place because the parties cannot
agree on a mediator or, if, after mediation pursuant to clause
22.3, the dispute shall not have been resolved or the
mediation agreement shall not have been implemented within the
time agreed to or, if no time had been agreed to, within a
reasonable time after completion of the mediation, any party
may refer the matter in dispute for determination by final
arbitration in Bangkok in accordance with the Rules of the
Arbitration Institute of the Ministry of Justice of Thailand
in force at the date of the request for arbitration ("Rules"),
which Rules are deemed to be incorporated by reference into
this clause), by 3 (three) arbitrators (unless the parties
agree in writing to have a single arbitrator only), one of
whom shall be appointed by the party referring the matter to
arbitration, a further one of whom shall be appointed by the
opposing party and the third appointed by the 2 (two) so
chosen. In the event of either the referring party or the
opposing party failing to appoint an arbitrator within 30 days
after the formal commencement of the arbitration proceedings
and/or failing agreement between the 2 (two) arbitrators
within 14 (fourteen) days of their appointment, upon the
appointment of a third arbitrator, such arbitrator or
arbitrators shall be appointed by the relevant appointing
authority under the Rules on the written request of any of the
relevant parties. The arbitrators shall establish the
procedural rules applicable to the proceedings. The
arbitration shall be conducted in Thai and also, if so
requested by a party to the arbitration proceedings, in the
English language. The arbitrators, if so required by any of
the parties, shall order the parties to make discovery of all
documents relevant to the issues in the arbitration. Subject
to any applicable law, any award of such arbitration shall be
non-appealable, be finally binding upon the parties and may be
entered into and enforced by any court having jurisdiction.
The fees, costs and expenses of any arbitration in terms of
this clause 22 shall be payable in such proportions as the
arbitrators may determine or, in the absence of such
38
<PAGE>
determination, shall be payable in accordance with the Rules.
22.5. This clause shall not preclude any party from obtaining
interim relief on an urgent basis from a court of competent
jurisdiction pending any decision of the arbitrator.
22.6. The provisions of this clause -
22.6.1. constitute an irrevocable consent by the parties to
any proceedings in terms hereof and no party shall be
entitled to withdraw therefrom or claim at any such
proceedings that it is not bound by such provisions;
22.6.2. are severable from the rest of this Agreement and
shall remain in effect despite the termination of or
invalidity for any reason of this Agreement.
23. COUNTERPARTS
This Agreement may be executed in any number of counterparts and by the
parties on separate counterparts, each of which shall constitute an
original, but all the counterparts shall together constitute but one
and the same instrument.
SIGNED BY ) /s/ VEERAVAT KANCHANADUE
)
)
)
for and on behalf of ) /s/ VALLOBH VIMOLVANICH
TELECOM HOLDING COMPANY LIMITED )
SIGNED BY ) /s/ HANS HAWINKELS
)
)
)
for and on behalf of )
MIH LIMITED )
SIGNED BY ) /s/ PAIBOON LIMPAPHAYOM
)
)
)
for and on behalf of ) /s/ BOONKLEE PLANGSIRI
SHINAWATRA COMPUTER AND COMMUNICATIONS )
PUBLIC COMPANY LIMITED )
39
<PAGE>
SIGNED BY ) /s/ NIWAT BOONSONG
)
)
)
for and on behalf of ) /s/ NEVILLE MEIJERS
INTERNATIONAL BROADCASTING CORPORATION )
PUBLIC COMPANY LIMITED )
40
<PAGE>
SCHEDULE 1: FORM OF UNDERTAKING (Clause 9.2.1)
To: Telecom Holding Limited
Shinawatra Computer and Communications Public Company Limited
MIH Limited
International Broadcasting Corporation Public Company Limited
From: [insert name of permitted transferee] (the "Covenantor")
Date: [insert date]
Dear Sirs
SHAREHOLDERS AGREEMENT RELATING TO INTERNATIONAL BROADCASTING
CORPORATION PLC (the "Agreement")
1 It is recorded that the Covenantor is a Permitted Transferee (as
defined in the Agreement) of [insert name of transferor] and that
[insert name of transferor] wishes to Transfer all of its Shares to the
Covenantor pursuant to clause 9.2 of the Agreement.
2 The Covenantor hereby confirms that it has been supplied with a copy of
the Agreement and hereby undertakes to each of the Parties to the
Agreement, that it shall observe, perform and be bound by the terms and
conditions of the Agreement and all documents expressed to be
supplementary or ancillary thereto as if references therein to [insert
name of the transferor] were references also to the Covenantor.
3 Notwithstanding anything contained herein or the transfer of [the
transferor's] Shares to the Covenantor, nothing in this Form of
Undertaking shall in any way release, discharge or diminish the
liability of [the transferor] for the due and prompt performance of its
(or the Covenantor's) obligations under the Agreement or any document
expressed to be supplemental or ancillary thereto.
4 The Covenantor confirms that its initial details for the purposes of
clause 18 of the Agreement are as follows: [insert name, address and
fax number]
Yours faithfully,
- -----------------------
For and on behalf of [insert name of Permitted Transferee]
41
<PAGE>
SCHEDULE 1: FORM OF UNDERTAKING (Clause 9.8.1)
To: Telecom Holding Limited
Shinawatra Computer and Communications Public Company Limited
MIH Limited
International Broadcasting Corporation Public Company Limited
From: [insert name of proposed transferee] (the "Covenantor")
Date: [insert date]
Dear Sirs
SHAREHOLDERS AGREEMENT RELATING TO INTERNATIONAL BROADCASTING
CORPORATION PLC (the "Agreement")
1 It is recorded that [insert name of transferor] wishes to Transfer
Shares to the Covenantor pursuant to clause 9 of the Agreement.
2 The Covenantor hereby confirms that it has been supplied with a copy of
the Agreement and hereby undertakes to each of the Parties to the
Agreement, that, following the Transfer of the Shares referred to in 1
above, it shall observe, perform and be bound by the terms and
conditions of the Agreement and all documents expressed to be
supplementary or ancillary thereto as a Shareholder.
3 The Covenantor confirms that its initial details for the purposes of
clause 18 of the Agreement are as follows:
[insert name, address and fax number]
Yours faithfully
- --------------------------
For and on behalf of [insert name of proposed transferee]
42
<PAGE>
AGREEMENT
Dated 20th May 1998
between
SHINAWATRA COMPUTER AND COMMUNICATIONS
PUBLIC COMPANY LIMITED
and
TELECOM HOLDING COMPANY LIMITED
and
MIH LIMITED
and
INTERNATIONAL BROADCASTING CORPORATION
PUBLIC COMPANY LIMITED
SUPPLEMENTARY SHAREHOLDERS' AGREEMENT
Mallinicks
25 Saville Row
London W1X 1AA
<PAGE>
SUPPLEMENTARY SHAREHOLDERS' AGREEMENT DATED 20TH MAY 1998
BETWEEN
(1) SHINAWATRA COMPUTER AND COMMUNICATIONS PUBLIC COMPANY LIMITED,
with its registered office at 414 Phaholyotin Road, Samsen-Nai,
Phayathai, Bangkok, Thailand ("SHIN");
(2) TELECOM HOLDING COMPANY LIMITED, with its registered office at
Telecom Tower, 18 Ratchadaphisek Road, Huai Khwang, Bankkok,
Thailand ("TH");
(3) MIH LIMITED, with its registered office at 3rd Floor, Abbot
Building, Main Street, Road Town, Tortola, British Virgin
Islands ("MIH"); and
(4) INTERNATIONAL BROADCASTING CORPORATION PUBLIC COMPANY LIMITED,
with its registered office at 1376/1 Nakornchaisri Road, Dusit,
Bangkok, Thailand (the "IBC" or "the Company").
1. RECITALS
1.1. IBC requires additional funding in order to finance its business
operations and MIH has agreed to provide such funding in the
form of equity finance by subscribing for an additional sixty
million shares in IBC in accordance with the terms of the
Subscription Agreement (defined below), which shares shall fall
within the ambit of the Shareholders' Agreement (defined below).
1.2. Completion of the Subscription Agreement, upon which date MIH
will provide the equity funding to IBC, cannot be achieved
before 12 June 1998. Inasmuch as IBC has an immediate
requirement for funding, MIH has agreed to make such funding
available to IBC by way of a short term loan in accordance with
the terms of the Loan Agreement (defined below), on the basis
that the loan shall be repaid in full out of the proceeds of the
said equity funding.
1.3. TH and SHIN, being substantial shareholders in IBC, have
undertaken to MIH and IBC, to exercise all of their voting and
other powers of control in relation to IBC
2
<PAGE>
and do such other things as may be required, in order to
procure that IBC shall have the requisite authority to enter
into and perform all of its obligations under the Subscription
Agreement and the Loan Agreement.
1.4. This Agreement, which is supplementary to the Shareholders'
Agreement, records inter alia:
1.4.1. the terms of the undertaking by TH and SHIN referred to
in clause 1.3;
1.4.2. for the avoidance of any doubt, that the shares
subscribed for by MIH under the Subscription Agreement
will fall within the ambit of the Shareholders'
Agreement;
1.4.3. that TH, SHIN and MIH have agreed to take up, in full,
their pro-rata allocation of shares pursuant to a rights
issue undertaken by IBC in May\June 1998; and
1.4.4. that certain restrictions have been agreed to by TH,
SHIN and MIH in relation to the transferability of their
shares in IBC.
2. DEFINITIONS AND INTERPRETATION
In this Agreement-
2.1. clause headings are inserted for convenience only and shall not
be taken into account in its construction;
2.2. unless the context clearly indicates a contrary intention, an
expression which denotes any one gender includes the other
genders, a natural person includes a juristic person and vice
versa, the singular includes the plural and vice versa and the
following expressions bear the meanings assigned to them below
and cognate expressions bear corresponding meanings-
"Articles" the Articles of Association of IBC,
as amended from time to time;
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<PAGE>
"Baht" Thai Baht;
"Institutional Private the issue and allotment, by way of
Placement" private placement to various
institutions, of seventy million
common shares, ranking pari passu
with the existing issued common
shares in IBC;
"Loan Agreement" the agreement of that title between
MIH and the Company bearing the same
date as this Agreement and in terms
whereof MIH has agreed, subject to
certain conditions, to make a short
term Baht loan to the Company;
"Paribas Agreement" the agreement between MIH, IBC and
Paribas S.A. bearing the same date as
this Agreement (dealing inter alia
with the advance by Paribas S.A., on
behalf of MIH, of the subscription
monies for the Subscription Shares,
and the immediate application of such
monies towards discharge of the
indebtedness of IBC to MIH under the
Loan Agreement);
"Permitted Transferee" shall have the meaning ascribed
thereto in the Shareholders'
Agreement;
"Person" any individual, firm, company,
corporation, government, State or
agency of a State or any joint
venture, partnership, limited
liability company or other
incorporated or unincorporated body;
"Rights Issue" the issue and allotment by IBC, by 22
June 1998,
4
<PAGE>
of one hundred and ten million common
shares, ranking pari passu with the
existing issued common shares in IBC,
by way of rights issue to Persons
registered as shareholders of IBC on
15 May 1998, pro-rata to their
shareholdings in IBC at the relevant
time, at a subscription price of
twenty Baht per Share;
"Shareholders' the agreement of that title between
Agreement" the parties hereto dated 16 February
1998;
"Subscription the share subscription agreement
Agreement" between MIH and IBC bearing the same
date as this Agreement in terms
whereof, inter alia, MIH shall
subscribe for and IBC shall, by
way of private placement, issue and
allot to MIH, the Subscription
Shares at a subscription price of
twenty five Baht per share;
"Subscription Shares" sixty million common shares of Baht
10 (ten Baht) each in the share
capital of the Company, ranking pari
passu in all respects with the
existing issued common shares of IBC;
"Transfer" shall have the meaning ascribed
thereto in the Shareholders'
Agreement;
"USD" United States Dollars.
5
<PAGE>
3. VOTING AGREEMENT
3.1. Each of TH and SHIN undertakes to and in favour of MIH and
IBC, it being understood that such undertaking forms the basis
upon which MIH has agreed to enter into the Loan Agreement and
the Subscription Agreement, that each of TH and SHIN shall:
3.1.1. exercise all voting and other powers of control which
each has in relation to IBC and do such other things
as may be necessary, to procure that IBC shall have
the requisite authority to enter into and perform all
of its obligations under the Loan Agreement and the
Subscription Agreement;
3.1.1.1. in particular, but without derogating from
the generality of clause 3.1.1:
procure, in accordance with the Memorandum
and Articles of Association of IBC, that an
extraordinary general meeting of all the
shareholders of IBC is convened on 10 June
1998, for the purposes of passing a
resolution substantially in the following
form:
Resolution
"That sixty million common shares in the
authorized share capital of IBC, ranking
pari passu with the existing common shares
in the capital of IBC, be issued and
allotted by way of private placement to MIH
Limited at a subscription price of twenty
five Baht per share and that MIH Limited be
exempted from having to make a mandatory
tender offer to shareholders as a result of
such subscription by MIH Limited for shares
in IBC."
3.1.1.2. voted favour of the resolution specified in
clause 3.1.1.1 and procure that all
directors of IBC nominated by TH and SHIN
vote in favour of all necessary board
resolutions required to give effect to the
Loan Agreement and the Subscription
Agreement;
3.1.1.3. procure all necessary consents or other
permissions required in
6
<PAGE>
order for the IBC to enter into and perform
all of its obligations under the Loan
Agreement, the Subscription Agreement and
the Paribas Agreement;
3.1.1.4. to the extent each party is able to do so,
facilitate the fulfilment of the conditions
precedent in the Loan Agreement and the
Subscription Agreement.
4. SCOPE OF SHAREHOLDERS' AGREEMENT
It is recorded and agreed that the Subscription Shares to be issued and
allotted to MIH under the Subscription Agreement, shall together with
any other shares in IBC howsoever acquired by MIH from time to time
after the date hereof, fall within the ambit of the Shareholders
Agreement and the Shareholders' Agreement shall apply in respect of
such shares. For example, in computing the shareholding of MIH in IBC
from time to time for the purposes of determining the rights of MIH
under the Shareholders' Agreement, the Subscription Shares shall be
added to MIH's holding of shares in IBC at the relevant time.
5. RIGHTS ISSUE
5.1. It is recorded that the shareholders of IBC have passed a
resolution that IBC undertake the Rights Issue by 22 June
1998. TH, SHIN and MIH undertake to exercise their powers of
control in relation to IBC to procure that the Rights Issue
shall be effected on such date.
5.2 TH, SHIN and MIH agree and each undertake in favour the other
and IBC that each shall take up its full pro-rata allocation
of shares under the Rights Issue as follows:
5.2.1. TH shall subscribe in cash for and IBC shall issue
and allot to TH 54, 412, 443 (fifty four million four
hundred and twelve thousand four hundred and forty
three) common shares;
5.2.2. SHIN shall subscribe in cash for and IBC shall issue
and allot to SHIN 19, 246, 602 (nineteen million two
hundred and forty six thousand six hundred and two)
common shares;
7
<PAGE>
5.2.3. MIH shall subscribe in cash for and IBC shall issue
and allot to MIH 19,246,602 (nineteen million two
hundred and forty six thousand six hundred and two)
common shares.
6. RESTRICTION UPON TRANSFER OF SHARES
6.1. Each of TH, SHIN and MIH agrees and undertakes in favour of
the other that it shall not, and shall procure that any
Permitted Transferee to whom it may Transfer or may already
have Transferred any shares in IBC shall not, during the
period commencing on the date hereof and ending on such date
falling six months after the date upon which IBC shall have
issued all of the aggregate number of 240,000,000 (two
hundred and fourty million) shares pursuant to the Rights
Issue, the Subscription Agreement and the Institutional
Private Placement, or such shorter period as may be agreed
to in writing between all the parties, Transfer any of its
shares in IBC to any Person Save That:
6.1.1. shares may be Transferred to Permitted Transferees
pursuant to the provisions of the Shareholders'
Agreement, subject to the Permitted Transferee
undertaking in writing to be bound by the aforegoing
restriction; and
6.1.2. TH shall have the right to Transfer in accordance
with the terms of the Shareholders' Agreement, up to,
but no more than, one hundred and eighty nine million
shares in IBC for the sole purposes of the placement
of such shares by Paribas S.A. with institutions
together with the shares in IBC offered under the
Institutional Private Placement.
7. INDEMNITY
TH and SHIN hereby indemnify and hold MIH harmless against any losses,
costs, charges, expenses or other liabilities of whatsoever nature and
howsoever arising which MIH and\or IBC may incur as a result of TH
and\or SHIN breaching any other of their obligations under this
Agreement. In the latter regard, TH and SHIN acknowledge and agree that
MIH has agreed to enter into the Loan Agreement on the basis that the
Loan will be repaid out of the proceeds of the subscription under the
Subscription Agreement. In other words, that the
8
<PAGE>
conditions precedent in the Subscription Agreement will be fulfilled
and IBC shall perform all of its obligations thereunder and under the
Paribas Agreement so that the proceeds of the subscription will be
utilised only for the purpose of discharging the Loan.
8. FURTHER ASSURANCE
Each party shall do or procure to be done all such further acts and
things, and execute or procure the execution of all such other
documents, as the other may from time to time reasonably require, for
the purpose of giving the other parties the full benefit of all the
provisions of this Agreement.
9. CONFLICT WITH OTHER DOCUMENTS
In the event of any conflict between the provisions of the Agreement
and the provisions of the Shareholders' Agreement or the Articles then,
subject to the provisions of the law of Thailand, the provisions of
this Agreement shall prevail and the parties hereto shall exercise all
voting and other rights and powers legally available to them (whether
as shareholders or otherwise) to give effect to the provisions of this
Agreement. If there is an irreconsilable conflict between a provision
of the Agreement and a mandatory provision of the law of Thailand, the
parties shall use best efforts to agree on an alternative mechanism or
provision which will reflect as closely as possible the intention of
the parties as set out in this Agreement and the conflicting provision
contained in this Agreement shall be invalid (but only to the extent
necessary), provided that such invalidity shall not affect the other
provisions of this Agreement.
10. WAIVERS
10.1. No delay in exercising or failure to exercise any right or
remedy under this Agreement shall operate as a waiver thereof
nor shall any single or partial exercise of any right or
remedy preclude either the further exercise thereof or the
exercise of any other right or remedy. The rights and remedies
provided by this Agreement are cumulative and do not exclude
any rights, powers or remedies provided by law, at equity or
otherwise.
10.2. In the event that any party shall expressly waive any breach,
default or omission hereunder, without the prior written
consent of the other parties hereto, no such waiver shall
apply to, or operate as, a waiver of similar breaches,
defaults or
9
<PAGE>
omissions or be deemed to be a waiver of any other breach,
default or omission hereunder.
11. NOTICES
All notices and communications under this Agreement shall be given in
accordance with the provisions of clause 18 of the Shareholders'
Agreement.
12. GOVERNING LAW AND ARBITRATION
12.1. This Agreement shall be governed by and construed in
accordance with the law of Thailand.
12.2. If any dispute arises at any time between any of the parties
in connection with this Agreement including, without
limitation, the formation or existence of, the implementation
of or the interpretation or application of, the parties'
respective rights and obligations in terms of or arising out
of this Agreement or its breach or termination or the
performance or non-performance of any party's obligations
hereunder or which relates in any way to any matter affecting
the interests of the parties in terms of this Agreement, and
the parties are unable to resolve their dispute, any party may
refer the matter in dispute, in the first instance, to the
respective chief executive officers of the parties for
resolution.
12.3. If after having been referred under clause 12.2, the matter in
dispute shall not have been resolved within 21 (twenty one)
days of the matter having been so referred, any of the parties
may request by notice in writing to the other parties that an
attempt be made to resolve the dispute by way of mediation by
a mediator agreed to between the parties. If the parties are
unable to agree on a mediator within 21 (twenty one) days of
receipt by the other parties of the request for mediation, the
mediation shall not take place. If the mediation occurs, the
following procedures shall be adhered to -
12.3.1. 1 (one) representative of each party shall be
entitled to attend the mediation and no party shall
be entitled to any other representation;
12.3.2. the mediator shall in his absolute discretion
determine the nature and form
10
<PAGE>
of the mediation with the sole aim of resolving the
dispute by way of negotiation as soon as possible;
12.3.3. the decisions of the mediator shall not be binding
on the parties;
12.3.4. the cost of the mediation as determined by the
mediator shall be borne by the parties in equal
shares.
12.4. If mediation does not take place because the parties cannot
agree on a mediator or, if, after mediation pursuant to clause
12.3, the dispute shall not have been resolved or the
mediation agreement shall not have been implemented within
the time agreed to or, if no time had been agreed to, within
a reasonable time after completion of the mediation, any
party may refer the matter in dispute for determination by
final arbitration in Bangkok in accordance with the Rules of
the Arbitration Institute of the Ministry of Justice of
Thailand in force at the date of the request for arbitration
("Rules"), (which Rules are deemed to be incorporated by
reference into this clause), by 3 (three) arbitrators
(unless the parties agree in writing to have a single
arbitrator only), one of whom shall be appointed by the
party referring the matter to arbitration, a further one of
whom shall be appointed by the opposing party and the third
appointed by the 2 (two) so chosen. In the event of either
the referring party or the opposing party failing to appoint
an arbitrator within 30 days after the formal commencement
of the arbitration proceedings and/or failing agreement
between the 2 (two) arbitrators within 14 (fourteen) days of
their appointment, upon the appointment of a third
arbitrator, such arbitrator or arbitrators shall be
appointed by the relevant appointing authority under the
Rules on the written request of any of the relevant parties.
The arbitrators shall establish the procedural rules
applicable to the proceedings. The arbitration shall be
conducted in Thai and also, if so requested by a party to
the arbitration proceedings, in the English language. The
arbitrators, if so required by any of the parties, shall
order the parties to make discovery of all documents
relevant to the issues in the arbitration. Subject to any
applicable law, any award of such arbitration shall be
non-appealable, be finally binding upon the parties and may
be entered into and enforced by any court having
jurisdiction. The fees, costs and expenses of any
arbitration in terms of this clause 12 shall be payable in
such
11
<PAGE>
proportions as the arbitrators may determine or, in the
absence of such determination, shall be payable in accordance
with the Rules.
12.5. This clause shall not preclude any party from obtaining
interim relief on an urgent basis from a court of competent
jurisdiction pending any decision of the arbitrator.
12.6. The provisions of this clause -
12.6.1. constitute an irrevocable consent by the parties to
any proceedings in terms hereof and no party shall be
entitled to withdraw therefrom or claim at any such
proceedings that it is not bound by such provisions;
12.6.2. are severable from the rest of this Agreement and
shall remain in effect despite the termination of or
invalidity for any reason of this Agreement.
13. ENTIRE AGREEMENT
13.1. This Agreement (which for the avoidance of doubt is intended
to be supplementary to the Shareholders' Agreement) together
with the agreements referred to herein, constitute the entire
agreement between the parties and supersede all prior
agreements between the parties or any of them concerning the
subject matter hereof. No amendment, change or additions
hereto shall be effective or binding on any party unless
reduced to writing and executed by all the parties.
13.2. Each of the parties acknowledges that in entering into this
Agreement it is not relying on any representation or other
statement which is not set out in this Agreement or the other
documents referred to herein.
IN WITNESS WHEREOF this Agreement has been executed on the day and year first
above written.
SIGNED BY
/s/ Niwat Boonsong
duly authorised
for and on behalf of
SHINAWATRA COMPUTER AND
COMMUNICATIONS PUBLIC COMPANY LIMITED
12
<PAGE>
SIGNED BY
/s/ Allan Rosenzweig
duly authorised
for and on behalf of
MIH LIMITED
[SEAL OF TELECOM HOLDING CO. LTD.]
SIGNED BY
/s/ Vallobh Vimolvanich /s/ Soopakij Chearavanont
duly authorised
for and on behalf of
TELECOM HOLDING COMPANY LIMITED
[SEAL OF INTERNATIONAL BROADCASTING CORP.]
SIGNED BY
/s/ Neville Meijers /s/ Niwat Boonsong
duly authorised
for and on behalf of
INTERNATIONAL BROADCASTING CORPORATION
PUBLIC COMPANY LIMITED
13
<PAGE>
Telecom Holdings Limited
Telecom Tower, 18 Ratchadphisek Road, Huai Khwang, Bangkok, Thailand
Shinawatra Computer and Communications Public Company Limited
1376/1 Nakornchaisri Road, Dusit, Bangkok, Thailand
MIH Limited
Planetenweg 6, 2132 HP Hoofddorp, The Netherlands
Dear Sirs
Amendment to Shareholders Agreement dated 16 February 1998
- ----------------------------------------------------------
The Shareholders in United Broadcasting Corporation Public Company Limited ("the
Company"), wish to have the ability to pledge their shares in the Company.
Accordingly, notwithstanding the provisions of the Shareholders Agreement to the
contrary, the parties hereby agree that a Shareholder shall be entitled to
pledge its Shares without first offering to sell such Shares to the other
Shareholders, provided that--
1. The pledgor shall immediately after entering into such pledge advise the
other Shareholders, in writing, of the identity and full address of the
pledgee; and
2. The pledgor shall have ensured that in terms of the agreement of pledge,
the pledgee shall not be entitled to Transfer any of the pledged Shares
except in accordance with the provisions of clauses 9.3 (save that the
pledgee will not be bound by the provisions as to the price of the Sale
Shares as set out in this clause), 9.4, 9.5, 9.6 and 9.7 of the
Shareholders Agreement. After the compliance with the foregoing sentence,
the pledgee shall be entitled to transfer without having to comply with
clauses 9.2 and 9.8.
Capitalised terms have the same meaning herein as in the Shareholders Agreement.
Yours sincerely
/s/ Soopakij Chearavanont
United Broadcasting Public Company Limited
<PAGE>
We agree to the provisions set out above:
Signed by
/s/ Vallobh Vimolvanich
for and on behalf of Telecom Holding Company Limited Date: 25.9.98
Signed by
/s/ Niwat Boonsong
for and on behalf of
Shinawatra Computer and Communications Public Company Limited Date: 25.9.98
Signed by
/s/ Hans Hawinkels
for and on behalf of MIH Limited Date: 25.9.98
* Indicates where text has been omitted pursuant to a request for confidential
treatment. The omitted text has been filed separately with the Securities and
Exchange Commission.
1
CONTRACT OF TELEVISION BROADCASTING
AND
ADVERTISING EXPLOITATION OF MATCHES
In Athens, today the 29th day of December 1995, the day of Friday,
by and between
The legal entity of private law status with the title "FOOTBALL SOCIETES
ANONYMES ASSOCIATION" (EPAE), which has its registered office in 42
Themistokleous St. Athens, and is legally represented by the President of EPAE
Mr. George Dedes.
and
The societe anonyme with the company name "NETHOLD HELLAS S.A.", which has its
registered office in 76 Katechaki and Kifissias St., Athens and is legally
represented by the Vice-President of its Board of Directors Mr. Christodoulos
Ekonomides and its General Manager, Mr. Charalambos Tagmatarchis.
the following points are agreed upon and mutually accepted:
The first contracting party (hereinafter referred to as "EPAE"), which in this
case acts according to the provisions of Law 1958/91, the provisions of the
Statutes, Rules and Regulations of the Hellenic Football Federation (EPO), and
the provisions of the Regulations of Football Matches (KAP) which is in force at
the present (everything
<PAGE>
2
that is mentioned above came to the knowledge of the second contracting party of
the present contract), and according to the decision of its Board of Directors
dated on 19.12.1995, has negotiated the assignment of the live and tele-recorded
television broadcasting and advertising exploitation rights for the A, B and C
Divisions matches as well as of the television programme "THE TIME OF THE
CHAMPIONS". For this purpose it is agreed as follows:
1. ASSIGNED RIGHTS AND CO-EXPLOITATIONS
1.1. According to and in execution of the above mentioned points, EPAE with
the present contract assigns to NETHOLD the following rights or possibilities or
projects:
1.1.1. RIGHTS OF LIVE ENCRYPTED TELEVISION BORADCASTING IN GREECE AND CYPRUS
that is
a. the right of a live television broadcasting on Saturdays, of * entire matches
of the championship within the competence of EPAE, for the periods * of the A
Division (hereinafter referred to as "the SATURDAY MATCH").
b. the right of a live television broadcasting on Sundays, of * entire matches
of the championship within the competence of EPAE, for the periods * of the A
Division (hereinafter referred to as "the SUNDAY MATCH").
<PAGE>
3
c. the right of a live television broadcasting on Mondays, of * entire matches
of the championship within the competence of EPAE, for the periods * of the A
Division (hereinafter referred to as "the MONDAY MATCH").
d. the right of tele-recorded television broadcasting of the highlights of all
the matches of each playing day of the A Division championship within the
competence of EPAE. Especially, as far as the six matches simultaneously played
on Sundays are concerned, NETHOLD has the right to show tele-recorded highlights
in the context of a special NETHOLD programme (hereinafter referred to as "THE
TIME OF THE CHAMPIONS" or as any other title NETHOLD chooses). The above
mentioned programme will be broadcast forty-five minutes after the end of the
matches.
e. the right of a live or a tele-recorded television broadcasting of any and as
many of the entire matches or of the highlights of these matches, of the B and C
Division championships within the competence of EPAE (hereinafter referred to as
"B-C Division matches").
f. The total number of the A National Division matches which shall be broadcast
live in each playing period cannot be higher than * unless more matches must be
broadcast in execution of the present contract's stipulations.
1.1.2. RIGHTS OF RECORDED ENCRYPTED BROADCASTING FOR GREECE AND CYPRUS
that is, the right of the encrypted tele-recorded broadcasting in Greece and in
Cyprus of any and as many of the matches and highlights mentioned above.
(hereinafter referred to as "NETHOLD tele-recorded broadcastings").
<PAGE>
4
1.1.3. POSSIBILITIES AND CO-EXPLOITATION PRJECTS
meaning that the exploitation with joint efforts and for the mutual benefit
depending on the result, of the following rights and possibilities of EPAE, is
agreed:
A: OF BROADCASTINGS ABROAD
that is, of the exploitation abroad of the possibility of a live or/and one or
more tele-recorded broadcasting(s) by a foreign station/foreign stations or by a
Greek station for broadcastings abroad, or directly to satellite receivers, of
any and as many of the matches mentioned above or of highlights of these matches
or of the programme "THE TIME OF THE CHAMPIONS" or of a match or matches of the
B-C Division or of highlights of these matches (hereinafter referred to as
"broadcastings abroad", as it is especially defined in ANNEX A of the present
contract.
B. OF TELERECORDED BROADCASTINGS IN GREECE & CYPRUS BY A GENERAL RECEPTION
STATION OF NATIONAL RANGE
that is, of the exploitation of the right of tele-recorded broadcast in Greece
and Cyprus by one or more general reception station(s) of national range, of any
and as many of the matches mentioned above (A,B,C Divisions)(hereinafter
referred to as "tele-recorded broadcastings of national range"), with the
qualification that for a national range station/stations, only the tele-recorded
broadcastings of three of the A Division matches broadcast live by NETHOLD on
each playing day, is allowed. The tele-recorded broadcasting of the A Division
matches is allowed only after 11:45 p.m. of the same day when the same match was
broadcast live. On the revenues derived by this exploitation, NETHOLD is
entitled to receive * % and EPAE * %. NETHOLD is not obliged to proceed to this
exploitation if it does not wish to do so.
The settlement of the revenues coming in from this exploitation is made in the
same way as it is defined in ANNEX C of the present contract.
<PAGE>
5
C. OF TELE-RECORDED BROADCASTINGS TO REGIONAL & LOCAL GENERAL RECEPTION
STATIONS
that is, of the exploitation of one or more tele-recorded broadcasting(s) of any
and as many of the matches mentioned above or of the matches or of the programme
"THE TIME OF THE CHAMPIONS", by Greek regional or local television stations, as
defined in ANNEX B of the present contract.
D. OF HIGHLIGHTS EXPLOITATION
that is, of the exploitation of the highlights (or, if possible, of the
informative highlights too) as defined in ANNEX C of the present contract
(hereinafter referred to as "highlights exploitation").
E. OF PAY PER VIEW BROADCASTINGS' EXPLOITATION
that is, of the exploitation of the right of the live or tele-recorded
broadcasting of any and as many of the matches of the A, B, and C Divisions,
using the system of selective television viewing (PAY PER VIEW SYSTEM), as
defined in ANNEX D of the present contract.
F. OF THE EXPLOITATION OF THE POSSIBILITIES IN THE FIELD OF TV/FILM
PRODUCTIONS
that is, of the exploitation as well as of the development in any way of any
other rights and possibilities that EPAE has, regarding television or/and film
productions and productions in general, or possibilities in the field of
incorporating by the production, of the television rights on a material carrier
of sound or image or of sound and image and of trading of these rights, or in
the field of modern telematic for the sports funs (hereinafter referred to as
"co-exploitations/developments"), as
<PAGE>
6
defined in ANNEX F of the present contract, or in the field of radio
broadcastings as defined in ANNEX G of the present contract.
1.1.4. RIGHTS OF ADVERTISING EXPLOITATION
that is, the right of the exclusive advertising exploitation in any way
(television advertisements, television sponsorships, assignment of the
advertising exploitation right itself etc.) of the above mentioned rights of
television and radio broadcasting. Wherever, from now on or in the ANNEXES, the
use of any television or radio broadcasting right is mentioned, it is agreed
that NETHOLD has also the rights of advertising exploitation, without being
necessary to mention it expressly. (hereinafter referred to as "rights of
advertising exploitation").
2. *
2.1. *
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7
2.2. It is expressly agreed that the use of decoders in public places for the
broadcasting in these places of the matches mentioned above is forbidden.
NETHOLD has to take instant measures and stop the operation of such decoders.
However, the contracting parties agree to examine jointly the possibility of
allowing the use of decoders in public places for the broadcasting of the above
mentioned matches, if this action is combined with a raise of the subscription
fee and a right of EPAE to a percentage of this raised subscription fee.
3. EXCLUSIVITY OF THE ENCRYPTED BROADCASTING
3.1. The rights mentioned in clause 1 of the present contact, with the exception
of the "broadcastings abroad", the "national range general reception
broadcastings", the "co-exploitations developments" (except PAY FOR VIEW) and
the "radio broad-castings", concern exclusively the encrypted television
broadcastings by NETHOLD, in Greece and Cyprus (PAY TV) by the NETHOLD Pay TV
station in Greece and by "LUMIERE TV" station in Cyprus.
3.2. NETHOLD does not have the right to concede the * another legal entity or
natural person except if it is expressly provided in the present contract.
3.3. After a specific time limit of its own choice and following an earlier
written notice to EPAE, NETHOLD is entitled to carry out (entirely or partly)
the broadcastings mentioned in paragraphs 1.1. and 1.1.2. by another Pay TV
station in Greece, and this does not constitute a concession of NETHOLD's rights
and obligations, because - as long as the legitimate interests of EPAE are not
affected - NETHOLD is not restricted by the present contract regarding the
accession of the matches' broadcastings and, in general, the exercise of all or
some of the rights or possibilities or projects it acquires with the present
contract regarding the accession of the matches' broadcastings and, in general,
the exercise of all or some of the rights or possibilities or projects it
acquires with the present contract, by the programme NETHOLD broadcasts at the
moment, or by any other programme it will transmit in the future, or if NETHOLD
is going to use all the programmes it will probably
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8
transmit in the future in order to broadcast the matches, as long as all of its
programmes are broadcast encrypted.
3.4. By the present contract, NETHOLD is appointed by EPAE as * carrier of the
broadcasting rights for the matches of the A, B, and C Divisions Championships,
and, in the context of and by the present contract, NETHOLD is entitled to be
presented in any way as the official carrier of these rights or to use any term,
words, phrase or phrases or logo of its own choice, by which it should be
mentioned and followed that * NETHOLD * EPAE is liable to proceed in any
necessary action in order to prevent any third party - including the stations
which have highlights broadcasting contracts - from using a word or words, or a
phrase or phrases, or a logo or logos that are in conflict with the regulations
of the previous sub-paragraph, or violate them in any way, or give the
impression that *
* the broadcasting rights of the matches of the A, B, and C Divisions or the
other possibilities included in the present contract, in general.
4. FRAMEWORK OF THE CONCEDED RIGHTS' EXERCISE
For the best exercise of the rights that are conceded with the present contract
as well as that of the co-exploitations that are agreed, it is agreed as
follows:
4.1. DETERMINATION OF MATCHES
4.1.1 The Saturday, Sunday, and Monday match/matches that is/are going to be
broadcast by NETHOLD, are set by EPAE after NETHOLD's suggestion. NETHOLD's
suggestion will concern each time the four following playing days of
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9
the championships. It is possible for more entire matches to be broadcast on
Saturdays, Sundays and Mondays, if EPAE agrees.
4.1.2. EPAE has the right to refuse the determination of a match suggested by
NETHOLD if there are serious and justified reasons, such as reasons regarding
the obligations of the teams abroad, or the participation of the players in
matches of the National Team or the participation of the teams in Football Cup
matches. Also for the last four playing days, a match will not be set to be
played on Saturdays or Mondays, if the result of this match sways - as far as
the general football rating is concerned - a match played on Sunday.
4.1.3. The determination of the Saturday, Sunday or Monday matches, must be made
in a way that is convenient for the playing schedule of the teams, in
collaboration with NETHOLD and always on condition that at least three matches
must be broadcast live on each playing day.
4.1.4. At least eight of the matches of each team which is among the seven first
in the general rating of the previous period, must be included in the matches
broadcast in each football period.
4.2. PLAYING OF MATCHES
4.2.1. TIME
EPAE promises and guarantees that the entire Saturday, Sunday and Monday matches
schedules to be broadcast live, will be broadcast at the time scheduled by EPAE,
which must fall under the broadcasting zones provided in article 14 of UEFA. The
Sunday match is always set after the end of the broadcasting of the programme
"THE TIME OF THE CHAMPIONS", unless if NETHOLD asks for the match to start
earlier. EPAE must take into consideration NETHOLD's suggestions when it
schedules the starting time of the matches, especially if NETHOLD advances
important reasons for it such as better broadcasting of the match at the
suggested time, avoidance of match broadcast's coincidence with the
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10
broadcasting of another match and in general other events that can probably
affect either the television viewing ratings of the match to be broadcast, or
NETHOLD's engagements for the broadcasting of other events etc. EPAE has to
change the starting time of the match, to a time within thirty minutes earlier
or later from the above mentioned starting time, provided that such a change has
been asked for by NETHOLD in writing, at least three days before the day of the
match the starting time of which is requested to be changed, and provided that
there are not any exceptional facts forbidding the change (transportation
problems, public order reasons etc.).
4.2.2. DAY
EPAE has to set the Saturday match on Saturdays, the Sunday match on Sundays and
the Monday match on Mondays. In case of any special circumstances (such as team
obligations in European Cups, National Team obligations, Cup matches, public
order reasons and security reasons etc.), EPAE may for once set a playing day
other than Saturday for a match scheduled to be broadcast on Saturday (Saturday
match), or a playing day other than Sunday for a match scheduled to be broadcast
on Sunday (Sunday match), or a playing day other than Monday for a match
scheduled to be broadcast on Monday (Monday match). EPAE has to notify NETHOLD
of the probable change of the playing day of that match as soon as possible and
at least 15 days before the day a match was scheduled to be played. The match or
matches will be played on a day set after a joint agreement of the two
contracting parties, while NETHOLD has the right to broadcast these matches live
in a way most suitable to itself.
4.2.3. In case that a match scheduled to be broadcast by NETHOLD is postponed
because of force majeure, the rights of NETHOLD for the broadcasting and the
advertising exploitation are in force for the match when it will be played,
regardless of the fact that another match is going to be broadcast instead of
the one that was canceled, interrupted or postponed.
4.2.4. In case that any match is postponed, interrupted or canceled, NETHOLD
keeps the right either to broadcast another match or to broadcast the specific
one when played, or both of the above.
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11
4.2.5. If, for any reason, a Saturday, Sunday or Monday match or matches is/are
played and its/their live broadcast is not possible because of force majeure or
technical reasons, then the rights of NETHOLD are in effect for two recorded
broadcasts of this match or matches.
4.2.6. The present contract does not affect the rights of EPAE as well as those
of its members regarding the exploitation of the television broadcasting and
advertising exploitation rights for any of the matches played during
international tournaments and are not covered by the present contract.
4.2.7. EPAE has to provide NETHOLD for each playing day of the championship with
one hundred and fifty (150) free invitations or tickets for three A Division
matches (50 tickets for every match) selected by NETHOLD.
4.2.8. The above are equally valid for the matches of the B - C Divisions, but
their exploitation is not going to be a NETHOLD obligation. Furthermore, the
contracting parties are bound to find ways of a better exploitation of the
broadcasting rights of the B - C Division matches, and EPAE is obliged,
following a suggestion made by NETHOLD, to proceed to such arrangements on the
determination of the day and time when the matches that are going to be
broadcast will be played, that - without affecting the football rules and
regulations or the arrangements with the Greek Organization of Football
Prognostics (OPAP) - will secure the possibilities of exploiting the
broadcasting rights of these matches, especially if the broadcasting of these
matches is imperative because of the great general rating interest or local
interest they may have. However, it is expressly agreed that no more than three
matches of each Division will be broadcast live on each playing day. However, on
the playing days that there are not any broadcasts of A Division matches,
NETHOLD may broadcast matches of the B and C Divisions.
4.3. ASSISTANCE IN THE BROADCASTS
4.3.1. EPAE is obliged to provide NETHOLD with:
a. the uninterrupted broadcast of the matches which have been selected to be
broadcast.
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12
b. a special card which is issued only once, is in effect permanently, and will
be provided to NETHOLD's broadcasting teams and reporters. This card will
facilitate the direct access of the persons mentioned above to the playing field
or to any other areas or anywhere else it is necessary for them to be in order
to secure the best possible broadcast of the match. This card will also secure,
with a special and irrevocable order addressed to the match observer or the
stadium supervisor and the people responsible for the playing teams, that
NETHOLD's broadcasting teams and reporters will be provided with the necessary
facilities in order to have the best broadcasting of the matches.
c. the exclusive right to select inside the playing area or inside the general
stadium area, the spots where NETHOLD's broadcasting teams will place their
cameras and NETHOLD's reporters will cover the match, according to the FIFA and
UEFA directives and regulations regarding the television broadcasting of the
matches. If there are any particular spots where the better covering of the
match and the better sportscasting conditions for the reporters of NETHOLD are
secured in an exclusive or preferential way, it is obligatory that these spots
are granted - with EPAE's responsibility - to the technical teams and reporters
of NETHOLD. If these spots are taken by other stations, EPAE (through its
observer) has to remove their technical teams IMMEDIATELY and place there the
technical teams and reporters of NETHOLD. If the above are not provided, NETHOLD
is entitled to withdraw its technical teams and not to broadcast the match,
considering that EPAE did not fulfill its obligations regarding the particular
match.
4.3.2. *
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13
4.4. SPECIAL ASSIGNMENTS
4.4.1. EPAE concedes to NETHOLD the exclusive right of using a logo of NETHOLD's
choice on the front or back side of the tickets issued by EPAE, as well as the
exclusive right of using a part (that exists or is additional) of each ticket
for the possibility of draws for gifts that are meant for the holders of these
tickets. The use of this logo on the front side of the ticket must be made in
such a way that neither the right of the teams to promote the people who are
advertised by them or sponsor the teams is restricted, nor the reading of the
data shown on the front side of the ticket is illegible.
4.4.2. EPAE concedes to NETHOLD the exclusive right of organizing inside the
playing fields of the stadium and at its own expense activities for the
promotion of NETHOLD and of the Pay TV spirit (but not in a way that may sway
the playing of the match and as long as the type and content of the activity is
approved by EPAE which will take into consideration the opinion of the home
team). If the activity is sponsored by someone, the net income will be equally
split (50% each) between the contracting parties. NETHOLD is also obliged to
give the percentage of EPAE directly to the home team within five working days
from the day of the match when the activity took place. This right is exclusive
against third parties and not against the home team, when the latter one
organizes such activities with its own means.
4.4.3. Provided that this does not meet with the provisions of the compulsory
law, EPAE concedes to NETHOLD the right of encrypted broadcasting of the hearing
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14
before the athletic justice organ, whatever the title of that organ is and
provided that it falls within the competence of EPAE.
4.4.4. The right of * broadcasting of the draw of the championships which fall
within the competence of EPAE, is assigned to NETHOLD for the entire period that
the present contract is in force. If the activity is sponsored by someone, in
the first place are covered EPAE's expenses for organizing the activity and the
remaining income is split * between the two contracting parties. NETHOLD is also
entitled to concede the right of the above mentioned activity's tele-recorded
broadcasting to a general reception TV station or stations. In this case, this
concession's income is split * between the contracting parties, after deducting
the production costs.
5. REGULATIONS REGARDING THE CO-EXPLOITATIONS
5.1. Where the co-exploitations agreed with the present contract presuppose the
playing of matches, the provisions set in the previous clause of the present
contract are in force.
5.2. EPAE has to appoint up to two representatives who will consult the
representative appointed by NETHOLD, in order to, on the first hand, monitor the
course of the co-exploitations and, on the other hand, to make the necessary
efforts of maximization of profits which may derive from these co-exploitations,
for the benefit of both contracting parties.
5.3. Every three months, NETHOLD has to submit to EPAE a report on the course of
the exploitations/developments. EPAE has the right to proceed, through its above
mentioned representative or an authorized auditor, to the examination of the
documents of each exploitation, in order to ascertain their accuracy and secure
the rights of EPAE.
5.4 In case that NETHOLD, by a project assignment or independent services
providing contract, concedes to a third party (natural person or legal entity)
the assistance in any way in the exploitations/developments, NETHOLD itself
remains
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15
fully and exclusively responsible for any liability which may occur against EPAE
or third parties, due to the activities of these persons.
5.5. Where in the present contract or in its ANNEXES, the distribution of the
net income between the contracting parties is mentioned, we consider as net
income the gross income minus the expenses for the exploitation of the specific
right or project or co-exploitation. These expenses must be those usually
required for the better exploitation of similar rights or projects, taking also
into consideration the better quality result which must be accomplished
according to the present contract.
6. THE OBLIGATIONS OF NETHOLD
6.1. NETHOLD has to and guarantees the complete and thorough broadcasting of the
Saturday, Sunday and Monday matches, as well as that of the "THE TIME OF THE
CHAMPIONS" programme, as far as both the technical and journalistic aspects of
the broadcasting are concerned. NETHOLD will also take all the appropriate
measures for the observance of the objectivity and journalistic ethics
principle, without any interference by EPAE's representatives or by its members,
as NETHOLD is responsible against EPAE is this paragraph is violated. NETHOLD is
not responsible in case of a non-broadcasting of the matches because of force
majeure or because of an interruption of its programme by an Authority Act as
long as NETHOLD is not held responsible for it. Furthermore, EPAE is released
from the obligation of paying the relevant share of the price and if the break
of the TV station's operation is final, the agreement is terminated.
6.2. All kinds of expenses for the television covering of the matches are
charged exclusively on NETHOLD, regardless of the way of exploiting the rights.
The only services that are competent to fulfill the obligations of NETHOLD are
its technical services and its technical departments as well. If NETHOLD uses
third parties in order to meet its obligations, it is not entitled to claim
fraud or negligence of the third party in order to be released from the
obligations it undertakes with the present contract.
6.3. The material of the television production (films, videotapes etc.) will be
under the exclusive ownership and possession of NETHOLD, which is entitled to
make the
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16
exclusive use of this material, according to the clauses of the present
contract, and make all the known commercial television uses (such as special
weekly or other programmes for the promotion and development of football,
exploitation of the material which is kept in the record room etc.).
6.4. NETHOLD has to concede the use of the above mentioned material to third
parties, in the framework of the conceded rights and of the co-exploitations
agreed in the present contract (highlights, informative highlights,
tele-recorded broadcastings' shows etc.). However, the third party that is
involved has to, during the exploitation (through a show or in another way) of
this material, to mention the fact that it has been produced by NETHOLD
following EPAE's permission.
6.5. NETHOLD has to create and keep a record of the broadcastings on material
carriers copies, on which the productions of each previous week should be
incorporated, in order to create a methodical record for the benefit of EPAE.
This record is kept in the NETHOLD premises until the expiry date of the present
agreement and is allocated to any third party that wishes to make a use of it,
in a way that does not affect the rights conceded to NETHOLD by the present
contract, and against a cost which is agreed in advance with EPAE. The net
income derived by this exploitation will be * between the contacting parties *
and the amount which is owed to EPAE will be paid to EPAE in ten days after the
end of each championship round. The allocation to any third party wishing to use
and exploit this material, will be made with the third party's commitment that
it will mention in an explicit way that the production was made or based on
material produced by NETHOLD, after permission granted by EPAE.
7. COST
7.1. The price for the above mentioned concession of rights, is agreed to be (in
cash) the amount of *
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17
7.2. The price - in cash - will be paid in the following way:
a. * of the annual price, on * of each year during which the present contract
will be in force.
b. * of the annual price, on * of each year during which the present contract
will be in force.
c. * of the annual price, on * of each year during which the present contract
will be in force.
d. * of the annual price, on * of each year during which the present contract
will be in force.
For the above mentioned amounts, NETHOLD is charged with the VAT which
will be paid to EPAE within a month from the day of payment of each installment.
7.3. The above mentioned advertising time (of a net value of * drachmas) of the
television programmes of NETHOLD, may be exploited by EPAE directly or by third
parties at its suggestion, on the qualification that EPAE must, at its own
responsibility, use up the advertising time it is entitled to for each year
during which the present contract will be in force, that is, during the time
period from the * of the following year. EPAE is entitled to transfer for
exploitation in the following year an advertising time
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18
of a net value of * and in any case of a value not exceeding the 20% of the
value of advertising time that EPAE should exploit during the previous year.
The advertising time is agreed upon with a "net value", meaning that
the advertising taxes and any public burden in general that regards the
television advertisement, are charged on the party that is going to make use of
the above mentioned time.
The exploitation of the advertising time should take place in
collaboration with NETHOLD, so that the equal distribution of the above
mentioned advertising time is accomplished, in the framework of the total
planning of NETHOLD regarding the advertising time of its TV programmes (or
channels), and the flow of the advertising time towards all those who are
advertised is not affected.
8. GUARANTEES
8.1. NETHOLD guarantees and secures the execution of this contract's terms and
has to abide by its obligations, especially those regarding the payment of the
price and its installments, in the following way:
a. NETHOLD issues and delivers today to EPAE the following Credid Bank cheques
with the respective amounts:
*
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*
19
b. The above mentioned cheques will be delivered to EPAE in order to secure the
NETHOLD's payment of the agreed installments. It is expressly agreed that EPAE
is entitled to proceed to the sight of the cheque in order to collect and encash
each one of the above mentioned cheques, only if a month before the date of each
payment, NETHOLD does not exhibit an irrevocable, unconditional and forfeiting
ex parte in favour of EPAE, letter of guarantee for the payment of the amount
that NETHOLD has to pay on the above mentioned date.
8.2. In case that NETHOLD does not exhibit any of the above mentioned letters of
guarantee within the fixed time, EPAE has the right to proceed to the sight of
the relevant cheque in order to collect and encash this cheque which has been
delivered in order to secure the payment, and if this cheque is of no value EPAE
is entitled to apply paragraph 10.2. of the present contract.
9. PROTECTION AGAINST THIRD PARTIES
9.1. EPAE has to create the appropriate mechanism for the effective observation
and protection of the rights, possibilities and co-exploitations agreed upon in
the present contract, in order to preserve the interests of the contracting
parties. If EPAE is not in the position to create the above mentioned mechanism,
then NETHOLD is entitled to proceed by itself to the creation of the above
mentioned mechanism. The cost of that mechanism, which can not exceed the amount
of *
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*
20
is deducted from the income which is derived by any kind of co-exploitations,
before the distribution of the net operating earnings between the contracting
parties.
9.2. In any case that any third party infringes upon or uses without being
entitled to, the rights, possibilities and co-exploitations of the present
agreement, EPAE is obliged to take immediately all the necessary extrajudicial
or legal measures for the deregulation of the infringement, the avoidance of
this infringement in the future and the rectification of any loss that coming of
this infringement or the use without having the right to. NETHOLD undertakes the
obligation to provide EPAE - jointly with NETHOLD's legal advisors and at
NETHOLD's expense - with any assistance that is needed for this purpose, if EPAE
requests so. However, the relevant actions and claims will be made in the name
and on behalf of EPAE. At NETHOLD's expense, EPAE has to - at NETHOLD's expense
- - provide to NETHOLD with the services of its legal advisors, for the
accomplishment of the present contract.
9.3. If, after NETHOLD's request or claim, EPAE refuses to or neglects or
provides with ineffective protection to the rights of the present contract,
NETHOLD - after setting to EPAE a reasonable time-limit in order to act
immediately and effectively, and if this time-limit expires and no action was
taken - is entitled either to rescind the contract immediately, claiming the
rectification of any loss, or to proceed itself to the extrajudicial and legal
protection of the rights, possibilities and co-exploitations provided in the
present contract, in the name and on behalf of EPAE and at EPAE's expense.
9.4. Any amount that is to be collected after any extrajudicial or legal actions
aiming to protect the rights, possibilities and co-exploitations of the present
contract, devolves to the contracting party that, according to the present
contract, exclusively exercises and exploits the specific right. If the amount
concerned a right or possibility, that is co-exploited by the contracting
parties, then this amount is split between the contracting parties by the
percentages that are agreed upon for the specific co-exploitation, according to
the present contract.
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21
10. TERMS REGARDING THE RESPONSIBILITY
10.1. EPAE is not released from its obligations and responsibilities, in case
that, because of its members' (Football Societes Anonymes - PAE) behaviour it is
not in position to meet the obligations undertaken according to the present
contract.
10.2. In case that NETHOLD fails to pay the installments of the price that is
agreed upon above within the time-limit provided by the present contract, EPAE
is entitled to rescind the present contract within fifteen week days from the
day that EPAE asked NETHOLD to meet its obligation. If NETHOLD fails to do so
within the above mentioned time-limit, the present contract expires and EPAE is
entitled to keep the amounts that are already paid until that moment, and
concede the television broadcasting and advertising exploitation rights for the
rest of the matches, to any other TV station.
10.3. In case that EPAE does not meet an obligation that results from the
present contract, NETHOLD - as long as it has an interest in the further
accomplishment of the contract - is entitled to set a time-limit to EPAE for the
accomplishment of its obligation. If EPAE fails to meet the obligation within
the above mentioned time-limit, NETHOLD is entitled either to proceed to the
attachment on the payments made to EPAE until the latter one meets its
obligations, claiming the rectification of any loss it suffered because of this
delay, or to rescind the contract claiming the rectification of any loss it
suffered because of the termination of the contract.
11. CLAUSES
All the clauses that are included in the present contract are
considered as essential. Their modification or amendment takes place and is
proved only in writing. The contracting parties are obliged to execute the
clauses of the contract accurately as the good faith and the moral law indicate.
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22
12. DURATION OF THE CONTRACT - PREEMPTIVE RIGHT
1. The present contract shall remain in force from the 1st of July 1996 until
*
2. After the termination of the present contract, *
13. FINAL CLAUSES
13.1. The execution of the present contract must not be in conflict with UEFA's
regulations, especially with the provisions of article 14, in the way that it is
in effect each time. Any fines imposed because of the violation of UEFA's
regulations by NETHOLD, will be charged to NETHOLD.
13.2. The contracting parties undertake the obligation of resolving their
disputes with a spirit of good will and cooperation, and according to the
principles of the good faith and the moral law, taking into consideration the
other party's fair interests.
13.3. In case of a substantial change of the circumstances which led to the
drawing up of this contract, so that its continuation becomes an excessive and
unjustified
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23
burden for one of the contracting parties, these contacting parties are obliged
to renegotiate on the clauses of the present contract, in a way that its
continuation guarantees the ensuring of the fair interests of both contracting
parties. In case that certain provisions of the present contract are deemed to
be in conflict with the existing or future provisions of the compulsory law, the
contracting parties have to find ways in order to make possible the lawful and
as for the result similar exploitation of the rights, possibilities and
co-exploitations that are provided by the present contract. It is expressly
agreed that in case that the organization and the administration of the
professional championship is conceded to another carrier, or in case that the
exploitation of the rights or possibilities or co-exploitations is removed from
EPAE, the latter one has to secure that any measures and actions necessary for
the invariable continuation of the present contract will be taken. Otherwise,
EPAE is obliged to compensate NETHOLD for any losses resulting from the
termination of the present contract.
13.4. Within fifteen days from the day that the present contract will be signed,
each of the contracting parties has to inform the other party of the
identification of the persons who will represent it during the continuous
deliberations held between the parties for the accomplishment of this contract.
Any change of each contracting party's representative must be immediately
notified in writing to the other party.
13.5. The present contract is deemed to be confidential for both parties, and it
is agreed that neither of them has the right to make announcements and notices
in general on its content, without having consulted first the other contracting
party.
14. ARBITRATION
Any dispute arising from the execution of the present contract is
obligatory referred to arbitration, if the effort of the President of EPAE or of
the person he may appoint, as well as that of the Managing Director of NETHOLD
or of the person he may appoint to resolve it fails. Each of the contracting
parties appoints its arbitrator (and his/her substitute), and the arbitrators,
with a joint agreement, appoint the umpire. If the arbitrators disagree on the
umpire, the President of the Supreme Court, or the person he will appoint, is
appointed to be the umpire. The arbitrators give their arbitration award by
simple majority, and their award is final
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24
and binding for the contracting parties. The arbitrators must come to a decision
within thirty days from the day when the dispute was referred to arbitration.
The arbitration procedure is agreed upon by the arbitrators, at the first
session called by the umpire.
15. LIGHTING OF THE PLAYING FIELDS
In order to facilitate the accomplishment of the present contract in
the framework of the provisions of article 14 of UEFA regulations, NETHOLD is
offering to provide the electric lighting of the playing fields where the A
Division teams play. The electric lighting of these playing fields will take
place at NETHOLD's expense, while the relevant equipment will remain in
NETHOLD's possession and NETHOLD will have the right to withdraw this equipment
at any time. If the owner of the stadium refuses to commit itself in writing to
facilitate the installation of the equipment which is needed for the electric
lighting, by granting the necessary licenses, or facilitate the immediate
removal of this equipment whenever NETHOLD wishes so, NETHOLD withdraws its
offer to the team that is playing in that stadium.
The present contract was drawn up into 27 (38 translated in English)
one sided pages and is composed of fifteen main paragraphs and six (A, B, C, D,
E, F) ANNEXES. The present contract was signed on the annulling clause of
non-approval of this contract by the Assembly of Presidents of the A division
teams (or of their representatives) which had been convoked on the 8th of
January 1996 (8-1-1996). It was signed in three originals in Greek, and each
contracting party took one, while the third original will be submitted to the
qualified IRS in order to be countersigned.
FOR EPAE FOR NETHOLD
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25
ANNEX A
CO-EXPLOITATION OF RIGHTS ABROAD
1. For the whole period during which the present contract shall remain in force,
the contracting parties mutually accept and agree to proceed to the *
co-exploitation abroad (outside Greece and Cyprus) of the television
broadcasting rights of the matches referred to in the main contract. The
co-exploitation will concern the possibility of conceding to a foreign TV
station/to foreign TV stations or to a domestic TV station/to domestic TV
stations - in order to be broadcast abroad - of one live or/and one or more
tele-recorded broadcasting(s) of any and as many of the matches that are
included in the present contract, or of their highlights (Saturday match/
matches, Sunday match/matches, Monday match/matches, "THE TIME OF THE
CHAMPIONS" programme, matches played at the same time on Sundays, B-C Division
matches, highlights) (hereinafter referred to as "broadcasting abroad").
2. With the qualification of the next paragraph, any kind of expenses for the
television coverage and the distribution via satellite or other technical means,
as well as all the other expenses which do not concern the television coverage
and the distribution, such as the expenses for the promotion of the Greek
football abroad, the expenses of agreements with third parties, possible
commissions for the distribution of the programme, legal fees, dues probably
required in other countries etc., are exclusively charged on NETHOLD.
3. If the gross monthly income that derives from the co-exploitation of the
rights abroad exceeds the amount of * US Dollars, then the income - up to the
amount of * US Dollars - is retained by NETHOLD for the cover of any kind of
expenses that are mentioned in previous paragraph. The monthly income beyond the
amount of * US Dollars is split between the contracting parties by * % to EPAE
and * % to NETHOLD.
4. Within ten days from the day that each football round ends, NETHOLD has to
submit to EPAE a complete rendering of accounts on the results of the rights'
co-exploitation abroad, and pay to EPAE the share of the income EPAE is entitled
to receive. If the agreement with the foreign TV station or with the television
rights exploiting company concerns a period of time which is longer than that of
a football round, then the rendering of accounts is submitted at the end of this
period of time,
<PAGE>
26
or at each time when income is collected, if there is such a collection before
the termination of the agreement, while an estimate will always take place on a
monthly basis.
5. NETHOLD has to make any possible effort in order to make the Greek
football known to the television stations abroad and to the television rights
exploiting companies and inform them on the Greek football's worth.
6. In case that NETHOLD considers that the exploitation of the rights abroad
should be conceded to a television rights exploiting company (t.r.e company),
then EPAE from now on and by the present contract and with the qualification of
paragraph 7 of this contract, authorizes NETHOLD to act as EPAE's assignee and
draw up the relevant contract with such a company, on NETHOLD's initiative and
at NETHOLD's expenses. The percentage that EPAE is entitled to receive in this
case is estimated on the income of the above mentioned television rights
exploiting company that is derived from the concession of the rights to
television stations, unless if the collections of NETHOLD from this company are
higher, so EPAE's percentage shall be estimated on the collections of NETHOLD.
7. Any agreement between NETHOLD and a foreign television station or a
television rights exploiting company or between the television rights exploiting
company and the TV station/stations, must be made in writing or by exchanging
faxes, and is in effect only if it is approved by EPAE in writing or by fax.
8. The foreign TV stations which enter into a contract for broadcastings
abroad are not entitled to make any further concession of these rights. As far
as the above mentioned points are concerned, NETHOLD has to bind the parties
that are doing business with it, and in case of this clause's breach, NETHOLD
has to compensate EPAE fully for any kind of losses.
9. In case that NETHOLD fails to pay to EPAE its share of the income that
derives from the broadcastings abroad in due time as it is provided in the
present contract, EPAE has the right - as far as the broadcastings abroad are
concerned - to rescind unilaterally the present contract, by a simple statement,
within ten working days from the day that it required in writing NETHOLD to meet
its obligation. The failure of NETHOLD to do so within the above mentioned
period of time, brings about the termination of the present contract, as far as
the broadcastings abroad are concerned, and EPAE is entitled to retain in its
favour the amounts already paid
<PAGE>
27
until that moment and concede the same rights to another carrier. Furthermore,
EPAE is entitled to claim a certain rectification of any kind of losses.
FOR EPAE FOR NETHOLD
<PAGE>
28
ANNEX B
GENERAL RECEPTION BROADCASTINGS
1. For the whole period during which the present contract shall remain in
force, the contracting parties agree to proceed to the * exploitation of the
right of EPAE for one or more tele-recorded broadcast(s) of the matches that are
included in the main contract, by Greek regional or local TV stations. The
tele-recorded broadcast must take place at a time and in a way that achieves the
maximization of the exploitation without affecting the exclusivity of NETHOLD's
encrypted broadcasting.
2. The income that derives from the co-exploitation of these rights - after
the deduction of the television coverage and transmission expenses, the general
technical expenses and the expenses made for the exploitation of the advertising
time at the provincial TV stations which will be probably agreed upon against
the payment in cash - is shared out between the contracting parties by * % to
EPAE and * % to NETHOLD.
3. Within ten days from the end of each round of the championships that are
included in the main contract, NETHOLD has to submit to EPAE a full rendering of
accounts on the results of the co-exploitation of these rights and pay to EPAE
the share of the income it is entitled to receive.
4. NETHOLD has to make any possible effort in order to inform the Greek
regional or local TV stations which do not transmit their signals in the range
of NETHOLD's encrypted signal of the possibility to broadcast the matches that
are covered by the main contract.
5. Any agreement between NETHOLD and one of the above mentioned TV stations
must be made in writing or by exchanging faxes, and is in effect only if it is
approved by EPAE in writing or by fax.
<PAGE>
29
6. The above mentioned TV stations, to which broadcasting rights for the
above mentioned matches are conceded, are not entitled to concede in their turn
these rights to third parties and NETHOLD is obliged to bind the party that does
business with it, and, in case of this clause's breach, to compensate EPAE fully
for any loss.
7. In case that NETHOLD does not pay, in due time, to EPAE its percentage of
the income that derives from the co-exploitations, as it is provided in the
present contract, EPAE has the right - as far as the rights of this ANNEX are
concerned - to rescind unilaterally the present contract, by a simple statement,
within ten working days from the day that it required in writing NETHOLD to meet
its obligation. The failure of NETHOLD to do so within the above mentioned
period of time, entails the termination of the present contract, as far as the
rights mentioned in this ANNEX are concerned, and EPAE is entitled to retain in
its favour the amounts already paid until that moment, and concede the same
rights to an other carrier. Furthermore, EPAE is entitled to claim the
rectification of any kind of losses.
FOR EPAE FOR NETHOLD
<PAGE>
30
ANNEX C
CO-EXPLOITATION OF THE HIGHLIGHTS
1. For the whole period during which the present contract shall remain in
force, the contracting parties agree to proceed to the exclusive co-exploitation
of the broadcast of the highlights of the matches included in the main contract
in Greece.
2. The term "highlights" means the best moments during the course of the A
Division - and optionally of the B and C Divisions - matches included in the
main contract. Wherever in ANNEX C or in the main contract it is not expressly
provided in a different way, the term "highlights" means the non-informative
highlights, that is those conceded by EPAE for broadcasting by TV stations, and
those that the TV stations may exploit with advertisements.
3. NETHOLD has to proceed to the production (coverage, editing of the various
scenes that take place in the playing fields of the stadiums etc.) of the
Saturday match's highlights (3 to 5 minutes), of the highlights of the matches
played at the same time on Sundays (at least 5 minutes for each match), of the
highlights of the Sunday match (3 to 5 minutes) and that of the Monday match (3
to 5 minutes). These times may change after a common agreement of the
contracting parties, if it has to be attuned to the needs of the market as well
as to the promotion of the highlights' exploitation. As far as the above
mentioned production is concerned, NETHOLD is committed that the coverage of the
entire matches that it will broadcast, will take place with all the necessary
production equipment which will secure the existence of many "scenes" of the
match (simultaneous coverage by more than one cameras), while the production of
the coverage of the rest of the matches, meaning, those that are played at the
same time on Sunday, will be made as a simple news coverage (at least one
scene). So, NETHOLD promises to make any possible effort to include in the
highlights it will produce all the goals of the A Division matches. However,
NETHOLD is not held responsible for the non tele-recorded and the non included
goals in the highlights, because of force majeure, or because of technical
reasons or actions of third parties. However, it is in any case not possible,
not to include in the highlights a goal or a contentious/contested scene, that
NETHOLD has broadcast.
<PAGE>
31
4. NETHOLD has to make the highlights available (on the material carriers or
using any other technical method that is agreed with the buyers) to the TV
stations that enter into a contract with EPAE or with NETHOLD itself on behalf
of EPAE.
5. The trading of the highlights will be made on the basis of the following
clauses:
5.1. The highlights will be exclusively and solely given to TV stations which
enter into contracts with EPAE or with NETHOLD with long duration contracts (on
an annual, six-month or three-month basis) and not occasionally.
5.2. The trading will be made at a price based on a price list that is drawn up
following a joint agreement of the contracting parties and there will be no
exception from this price list. If it is essential for the co-exploitation
interest, the price list may be modified following a joint agreement. The price
will include the production cost and the cost of the highlights' distribution,
if made by delivery of the highlights to the interested party on a material
carrier. The distribution in any other way, shall be made on the buyer's
responsibility and at his expense.
5.3. EPAE may allow to the television stations which have entered into a
contract with EPAE or NETHOLD, to produce the highlights by themselves, but it
does not entail in any case that neither an agreement on the highlights' trading
at prices lower than the ones of the price list, nor a discount is made on the
prices agreed.
5.4. The broadcasting of highlights by the TV stations which have entered into
contracts, is allowed to take place only after * , unless if at this time
NETHOLD broadcasts live this match at that time. In this case, the broadcasting
of the highlights is allowed only * after the end of NETHOLD's live broadcast of
the match.
5.5. The above mentioned contracting TV stations shall have the right to
broadcast the highlights three times at maximum, within a five-days period from
the day that they got the relevant possibility. Any other use of the highlights
is forbidden to the above mentioned TV stations. It shall be allowed to the
above mentioned TV stations to intervene, at their responsibility, to the
production material given to them, or - according to their contract - to use
their own reporters for the sportscasting, as long as they do it with respect to
the exclusive and preferential coverage of the matches by NETHOLD. In any case,
the TV stations which have entered into contracts are obliged to mention clearly
and expressly the fact that the HIGHLIGHTS were produced by NETHOLD after the
granted permission of EPAE.
<PAGE>
32
5.6. The use of the highlights, in violation of the above mentioned clauses,
obliges EPAE - if EPAE has entered into contract with the violator, or NETHOLD -
if NETHOLD has entered into contract with the violator, to rescind the contract
immediately, claiming - as a penalty clause - the payment made by the TV station
that committed the breach of these clauses of the total amount that has been
agreed, jointly with the violator of the clauses. NETHOLD has the right to
refuse to provide a station which has entered into a contract with EPAE or
NETHOLD with highlights, if this TV station does not meet its obligations to
EPAE even if EPAE neglects and does not rescind the contract, or if this TV
station proceeds to actions that affect certain rights conceded to NETHOLD by
the main contract or its ANNEXES.
6. Regardless of which of the contracting parties distributed the highlights,
the net income that derives from this co-exploitation is split between the
contracting parties by * % to EPAE and * % to NETHOLD, on the qualification that
NETHOLD shall not be entitled to receive an amount higher than *
7. The mutual settlement of accounts takes place within fifteen days from the
end of each round, and within the same period of time each one of the parties is
obliged to pay to the other party the amount which is owed to it, according to
the above mentioned percentages. EPAE preserves the right to balance the amounts
that are owed to NETHOLD, with claims - even non delinquent - against NETHOLD.
8. NETHOLD is obliged to produce and dispose itself or as EPAE's assignee, a
certain highlights' material from the matches included in the main contract,
that last from 5 to 30 minutes. Of this material, the interested TV stations
shall be able to use a part of 2 minutes at maximum, in order to inform their
viewers without exploiting this material, according to the stipulations of
article 45, par.1., Law 1958/91. The distribution of these highlights
(informative highlights) shall be made at a price which shall be reasonable,
with respect to the cost of the price, to all the TV stations wishing to
purchase them from NETHOLD. The TV stations which will have entered into
contracts for the acquisition of the highlights, may also broadcast the
informative highlights from the same material without any additional price. The
contracting parties are committed to find ways and methods, in the framework of
the law, to impose on those who are interested in doing so the obligation of
getting the informative highlights from EPAE, so that the co-exploitation of
these
<PAGE>
33
informative highlights shall be made in the way that is agreed upon for the
highlights too.
9. It is expressly agreed that the co-exploitation agreed upon in ANNEX C, is
made for the purpose of controlling the highlights' trading for the benefit of
EPAE, on the one hand, and for the benefit of NETHOLD, on the other hand, in
order to protect the broadcastings' rights and the rights of advertising
exploitation and co-exploitation, which it acquires by the main contract. For
this purpose, each party is entitled to claim from the other, the immediate and
complete observance of the present contract against third parties, regardless of
which of the contracting parties has entered into a contract with the third
party.
FOR EPAE FOR NETHOLD
<PAGE>
34
ANNEX D
PAY PER VIEW
1. The contracting parties agree to proceed to the co-exploitation of the
right of EPAE for the live or tele-recorded broadcast of any and as many of the
A, B and C Division matches, by using the system of selective television viewing
(PAY PER VIEW), when and if the use of this system in Greece is technically and
legally possible.
2. According to the above mentioned system, every subscriber shall be able, at
a special subscription fee (television season ticket), to watch on his/her
television set all or some of the matches of the teams he/she shall choose, as
long as this team/teams wishes/wish, after consulting with EPAE, to proceed to
the materialization of this way of exploiting its/their television rights.
The level of this special subscription fee shall be determined after
consultations between EPAE, NETHOLD and the interested team.
3. After consulting with the team and EPAE, it will be possible to deactivate
the decoders of the subscribers who live in the home city of the team or within
a certain distance from the stadium, on the days when this team plays as home
team, or in general for the matches which the team does not wish to be broadcast
by the above mentioned system, so that the turn-out of the sports funs to the
stadiums is not prevented.
4. NETHOLD shall be obliged to give television coverage to the matches of the
teams, the matches of which have been agreed to be broadcast by the PAY PER VIEW
system.
The income that derives from the television season ticket - after deducting
the television coverage expenses - shall be split by * % for EPAE and * % for
NETHOLD.
5. If it is necessary, any other detail for the application of the above
mentioned system or of any other system which shall be providing more
exploitation
<PAGE>
35
possibilities of EPAE's television rights and those of the teams,
shall by regulated by special contracts between the contracting parties.
FOR EPAE FOR NETHOLD
<PAGE>
36
ANNEX E
RADIO BROADCASTINGS
1. The contracting parties agree to proceed to the exploitation of the right
of EPAE for live radio broadcasting of any and as many of the A, B, and C
Division matches which fall within the competence of EPAE (radio broadcastings).
2. The income from the exploitation of these rights beyond the amount of *
drachmas, is * between EPAE and NETHOLD. The income up to the amount of *
drachmas is by all means received by EPAE. The sundry expenses of the
co-exploitation are on the TV stations to which these rights shall be conceded.
3. The commitments regarding EPAE's assistance in the television
broadcastings, are also in effect for the radio broadcastings. More
specifically: EPAE is obliged to secure that any technical team or technical
facilities or equipment that is going to be used for radio broadcasts during the
match, shall not be permitted to enter or remain inside the playing fields or
the stadium premises.
4. As far as all the other issues regarding the radio broadcasts are
concerned, the stipulations provided in ANNEX C on the way of trading the
highlights are in effect as well.
FOR EPAE FOR NETHOLD
<PAGE>
37
ANNEX F
CO-EXPLOITATIONS / DEVELOPMENTS
1. The contracting parties agree to proceed to the exclusive co-exploitation
and to the development in any way, of any other existing or future rights and
possibilities of EPAE, with television and/or film productions and productions
in general, or possibilities in the field of incorporating, on material sound
or/and image carriers, of the television rights by the production, and of
trading them, or in the field of modern telematic for sports funs.
2. NETHOLD studies and submits to EPAE specific reports on the exploitation of
other existing rights or possibilities (hereinafter referred to as "project")
for the development of the Greek football in the above mentioned field. EPAE may
also make to NETHOLD similar suggestions.
3. As long as EPAE does not raise objections to the suggested way of
exploitation, NETHOLD proceeds at its own responsibility and expense to the
materialization and exploitation of the project, and the net profits from the
exploitation are split between the contracting parties by * % for EPAE and * %
for NETHOLD.
By the term "net profits" are meant the profits that remain after the
deduction of the production costs as well as that of the costs of the
exploitation products' trading.
4. The amounts due to EPAE (from the exploitation) are payable after the end
of the exploitation.
If the exploitation allows the gradual settlement and payment of these
amounts, then, after a special agreement between the contracting parties, these
points of the specific exploitation are defined.
<PAGE>
38
5. The * live or/and tele-recorded broadcast of the draw for the Championships
by NETHOLD that fall within the competence of EPAE, is agreed to be a special
co-exploitation case.
FOR EPAE FOR NETHOLD
<PAGE>
I certify that the translations into English of exhibits 10.4 and 10.5 to the
Registration Statement on Form F-1 of MIH Limited are fair and accurate.
/s/ LESLEY R. PENFOLD
- ----------------------------------
Name
LR PENFOLD
- ----------------------------------
Title
CHIEF FINANCIAL OFFICER
- ----------------------------------
Date
FEBRUARY 18, 1999
- ----------------------------------
* Indicates where text has been omitted pursuant to a request for confidential
treatment. The omitted text has been filed separately with the Securities and
Exchange Commission.
AGREEMENT
In Athens, today on July 3, 1998, by and between:
1. The private law entity with the name "GREEK ASSOCIATION OF BASKETBALL
SOCIETES ANONYMES (E.S.A.K.E.) registered in Athens at 1 Eratosthenous and
Vas.Konstantinou Strs, duly represented herein by Messrs. Theodore Karatza,
President of its B.O.D. and Panagiotis Blanas, Secretary General of its B.O.D.,
hereinafter mentioned as "E.S.A.K.E"
and
2. The Societe Anonyme with the name "NETHOLD HELLAS PAY-TV SOCIETE ANONYME"
pending the decision of the Prefect of Athens by which article 1 of its Articles
of Incorporation will be amended in reference to its name which will be amended
with the issue of the above decision to "NETMED HELLAS PAY-TV SOCIETE ANONYME"
with the title "NETMED HELLAS S.A.", registered in Athens at 76 Katechaki Str.,
which has the exclusive administration and exploitation of pay-tv programs, duly
represented herein in accordance to its Articles of Incorporation and the
relevant decisions of the General Meeting and its B.O.D. by Messrs.
Christodoulos Economides, Vice President of its B.O.D. and Charalampos
Tagmatarhis, hereinafter mentioned as "NETHOLD".
the following were agreed upon and mutually accepted:
CHAPTER A' - DEFINITIONS AND INTERPRETATIONS
Article 1
1.1. GAMES: are deemed to be herein, all the Greek Championship A1 Men's
National Division basketball games * organized by E.S.A.K.E. These games include
the regular games and the play-offs, which will take place in accordance to
Championship Proclamations issued exclusively by E.S.A.K.E.
1.2. TRANSMISSION: Deemed herein to be the direct to subscribers (showing) of
certain games mentioned above in par.1.1., and their recorded retransmission,
and the transmission of their highlights or extracts within the framework of
special sports programs, dedications, informative (news) programs, e.t.c. in
Greece, Cyprus and in foreign countries in general, to be effected by NETHOLD's
programs by any technical method (analogue or digital) or means (especially by
terrestrial relais and/or cable networks and/or satellite).
*
2
<PAGE>
*
1.3. EXPLOITATION: It is herein deemed to be any form (not restricted to
financial) of exploitation which will result from the above transmission of
games of their recording and future repetition of their re-transmission or the
showing of their extracts or the distribution of these programs in video tapes
and in general any kind of financial exploitation by any technical method of
transmission/audio video recording.
1.4. ADVERTISING: It is herein deemed to be the promotion of products and/or
services that appear during the transmission of the games or during their normal
breaks on the t.v. screen, and in case as provided by the effective national and
European legislation.
1.5. SPONSORS/SUPPORTERS OF TEAMS: Herein deemed to be the legal and/or natural
persons that either have undertaken the general financial support of the
contesting teams irrespective of the addition or not of their distinctions
(name/mark) to the name of the union/kae (kae), or that promote the
names/title/logo/product or service marks in the appearance of the athletes of
the contesting teams.
1.6.a. ADVERTISING BOARDS: Herein deemed to be all the advertising boards placed
in the courts that are used as home courts by those participating in the
Championship organized by E.S.A.K.E unions/kae, in the special available spaces
for their placement and specifically in the perimeter of the court and are shown
during the game (t.v. advertising boards) which may be revolving in a manner
that for each board more than one advertisement is shown, observing in each case
the safety specifications imposed by FIBA. Also for the above boards, new
technologies such as virtual reality can be used.
b. THE REST OF THE ADVERTISING SPACES: Herein deemed to be all the spaces in the
above courts in which steady advertising boards, tapes (self adhesive or not)
and other material of advertising content can be installed/placed, such as the
center circle, restraining circle, the perimeter of the internal lines of the
court e.t.c. which are shown on the tv screen. The use of new technology as
mentioned above such as virtual reality also applies for the rest of the
advertising spaces.
CHAPTER B' - TERM, SUBJECT
Article 2
2.1. The term herein is * years and it refers to the E.S.A.K.E. Championship
games (Greek Basketball Championship, A1 Men's National Division) for the
periods *
<PAGE>
2.2. *
2.3. *
2.4. *
Article 3 - Television transmission and exploitation
3.1. E.S.A.K.E assigns NETHOLD the *
In the foreign countries the above exploitation may be effected either
by direct transmission of the mentioned t.v. program by NETHOLD's pay-tv
programs, or by the further assignment of the t.v. transmission rights to a t.v.
station/channel of NETHOLD'S choice.
3.2. NETHOLD warranties to E.S.A.K.E the complete and thorough transmission of
the games as far as the technical coverage and journalistic diligence is
concerned.
<PAGE>
3.3. All expenses of any nature concerning the t.v. coverage of the games
(production, statistics e.t.c.) burden solely and exclusively NETHOLD. Solely
responsible for the fulfillment of the above undertakings are the technical and
sports departments of NETHOLD and its authorized crews.
3.4. The t.v. production material (films, videotapes e.t.c.) will remain is
NETHOLD'S exclusive proprietorship and possession, which is entitled to use it
in any legal manner. NETHOLD is obliged within two (2) business days from the
t.v. transmission of any game to deliver to E.S.A.K.E its copy in a VHS or BETA
tape in order for E.S.A.K.E. to create an archive for its showing to any
information media for the informing of the coaches, its unions/kae members and
for instructive purposes. E.S.A.K.E undertakes to ensure that this material will
not be exploited commercially by third parties.
3.5. NETHOLD undertakes to transmit at least * live * of each participating
union/kae in the E.S.A.K.E Championship * For the selection of the games to be
transmitted, before the commencement of each championship, a four member
committee will be created, comprised by two members of NETHOLD and two of
E.S.A.K.E. In the case of equality in votes, the opinion of the NETHOLD members
will prevail. NETHOLD is obliged in any case to notify E.S.A.K.E. in writing of
the games to be transmitted program at least fifteen days before the
transmission of each game. In the case that by a decision of the above
committee, the program of the games to be transmitted is modified, the above
fifteen day notice period is curtailed to ten days. It is explicitly defined
that E.S.A.K.E has the right to proceed to the postponement of a game programmed
to be transmitted for the reasons mentioned in the Proclamation and the
E.S.A.K.E. regulations, the content of which NETHOLD states that it acknowledges
and accepts. In this case E.S.A.K.E is obliged to notify NETHOLD immediately in
order for the t.v. transmission program to be modified without the above notice
periods being applied. The hours that the games will be transmitted will be
jointly defined by the parties herein, taking into consideration NETHOLD's
program needs. In any case, NETHOLD undertakes to show equally during the
regular period of each Championship of the term herein the first four unions/kae
of the final score rating of the previous period.
3.6. NETHOLD herein acquires the right and the obligation to transmit live only
* games for each game day of the E.S.A.K.E Championship, during its whole
duration in each period including the regular period and the play-offs, the
games to be chosen as above mentioned. It is defined that the games of the above
championship are conducted usually on Saturdays and Sundays, but during the
regular period and in the play-offs they can also be conducted on other
weekdays, in accordance to the E.S.A.K.E Championship Proclamation and the
relevant game program of the periods 1989-1999 (a copy of the program is
attached herein and after being signed by both parties it comprises an integral
part of the present agreement) NETHOLD thus being obliged and entitled to t.v.
transmit live only * games for each game day of the Championship. For NETHOLD's
program needs and for the fulfillment
<PAGE>
of its obligation to transmit * live games for each game day of the
Championship, one of the programmed games for each game day will be transferred
to the next or the previous day depending on the game obligations of the
contesting teams. Also, in case of a postponement of a programmed game or a
whole game day by E.S.A.K.E for the t.v transmission of the games the above will
also be in effect.
3.7. In addition to the above live transmitted games, NETHOLD is entitled to
show * additional games recorded for each game day of the Championship. The days
and hours of the showing of the above recorded games will be defined jointly by
the parties herein as provided by term 3.5 herein taking into consideration
NETHOLD's program needs. In this NETHOLD is obliged to transmit at least two of
the above recorded home games of each union/kae participating in the above
E.S.A.K.E Championship *
3.8. NETHOLD is entitled to assign one (1) game for each game day during the
term herein, to be transmitted by any t.v. station/channel of NETHOLD's choice,
ERT S.A.'s channels preferred, if the latter so request without any
consideration paid to NETHOLD or E.S.A.K.E by these tv stations/channels. The
transmission of this game will be in any case after 12:00 midnight to 05:00 in
the morning.
Article 4 - Use and Exploitation of Advertising Boards, Other Allowances to
the unions/kae
4.1. In addition to the above * right of t.v. transmission and exploitation of
the matches of the E.S.A.K.E Championship, as defined and specified herein, the
unions/kae which participate in it, in execution of a decision passed in the
General Meeting of 1/2/3-7-98 assign to NETHOLD the * right to allocate and
exploit the tv advertising boards placed in the courts where the above
Championship games that are transmitted take place and of the other advertising
spaces as defined in term 1.6 herein above, according to the terms, conditions
and consideration mentioned herein,
4.2. E.S.A.K.E will make all reasonable endeavours in case of a dispute between
NETHOLD and any of the union/kae members of E.S.A.K.E arising form the cause
above, to arrive at a conciliatory settlement.
Article 5 - Assignment of promotion Rights through the E.S.A.K.E
Championship
5.1. In addition to the aforementioned in terms (3) and (4) rights, E.S.A.K.E
assigns to NETHOLD during the term herein the *
choice or a group of these, through the E.S.A.K.E Championship.
<PAGE>
5.2. Such a promotion is consisted of the promotion of the logo/mark and of any
other distinct mark of NETHOLD's choice or those of a third legal or natural
person of its choice or a group of these:
a. In the trailers announcing the games to be transmitted in accordance to the
terms detailed in article 9.8. herein.
b. In the statistics cards with the information on the contesting teams which
will be shown in accordance to the terms detailed in article 9.6. herein.
c. During the shows mentioned in article 9.10 herein.
d. In the events to be organized by NETHOLD and E.S.A.K.E, according to the
terms detailed in article 9.20 herein and
e. By any other manner that the parties herein jointly agree upon, including the
addition of the aforementioned logo/mark or any other distinctive mark of
NETHOLD's mark, in a manner which the E.S.A.K.E Championship will be called
hereon "XXX Championship" as provided by the rest of terms agreed upon by the
parties.
5.3. In the case that NETHOLD assigns its above mentioned right to another
person as above mentioned, it undertakes to grant it without any consideration
advertising time of 3.000" for each year of the term herein.
CHAPTER C' - FINANCIAL TERMS - WARRANTIES
Article 6 - Financial Terms
6.1 NETHOLD will pay E.S.A.K.E as consideration for the * assignment to it of
the rights mentioned in articles *, the following sums and the advertising time
mentioned below in article 7.
6.1.1. For the assignment of the tv transmission and exploitation rights
mentioned above in articles * herein, and the promotion rights of NETHOLD's
products/services as these are specified through the E.S.A.K.E Championship *
NETHOLD will pay E.S.A.K.E the sum of *
This sum will be paid by NETHOLD to E.S.A.K.E as follows:
*
<PAGE>
*
6.1.2. For the assignment of the tv transmission and exploitation rights
mentioned above in articles 3 and 5 herein, and the promotion rights of
NETHOLD's products/services as these are specified through the E.S.A.K.E
Championship * NETHOLD will pay E.S.A.K.E. the sum of *
This sum will be paid by NETHOLD to E.S.A.K.E as follows:
*
6.1.3. It is explicitly specified that expenses of any nature, duties, V.A.T.
and other surcharges on the above sums exclusively and solely burden NETHOLD.
Also it is explicitly agreed that the above mentioned dates of payment of the
installments (partial payments) are deemed to be dates of maturity of payment
and the present agreement is deemed an agreement of "timely execution".
6.1.4. The payment of the corresponding to each above mentioned installment sum
will be proven by a written receipt of payment issued by E.S.A.K.E. which will
be followed by the issue of an invoice by E.S.A.K.E., with the payment of the
corresponding VAT.
6.1.5. Though unnecessary, it is specified that the above consideration of the
agreement of the parties herein in no manner whatsoever is subject to the
provisions of article 8 par. 1 ev. f of Law 2328/1997, NETHOLD not entitled to
the retaining of any amount for any entity, the Public Sector included.
6.2 NETHOLD will pay the unions/kae members of E.S.A.K.E. that participate in
the above Championship as consideration for the exclusive assignment to it of
the rights mentioned in article 4 herein, the following sums:
6.2.1. For the assignment of the right to use and exploit the tv advertising
boards placed in the courts that the games of E.S.A.K.E.'s competence take place
*
<PAGE>
*
6.2.2. For the calculation of the sum that each union and kae not able to
deliver the above documents of proof and other documents, is entitled to (for
example the unions/kae that have been promoted to the A1 National Men's
Basketball Division) the basis that will be taken into consideration for the
calculation is the sum that the last in the score ratings union/kae received for
the * increased by *
6.2.3 NETHOLD's above obligation concerns the payment of the sum of *
6.2.4. The manner of payment of the sum that each union/kae member of E.S.A.K.E.
is entitled to resulting from the liquidation of the rights to use and exploit
its tv advertising boards, as mentioned above, will be effected by NETHOLD to
each union/kae that participate in the E.S.A.K.E. Championship for the period *
on the basis of the specific agreements between NETHOLD and the union/kae enter
into, without E.S.A.K.E.'s intervention and on the basis of the criterion
mentioned in 6.2.2. In any case, NETHOLD's payment of the sums must be concluded
till the commencement of the Championship of the following period.
6.2.5. For the assignment of the right mentioned in article 4 to use and exploit
the tv advertising boards placed in the courts that the games of E.S.A.K.E.'s
competence take place during the period * NETHOLD will pay each of the unions
and kae members of E.S.A.K.E. that participate in the Championship of the above
period, the sums the latter has received due to the above cause (meaning from
the assignment of the right to use and exploit the tv advertising boards) during
the pervious period * plus the analogous to this sum VAT. The union/kae that
were promoted to the A1 National Division will participate in the Championship
of the above period * and will receive the sum that the union/kae promoted to
the A1 Division, received during the previous period *
6.2.6. NETHOLD's above obligation concerns the payment of the sum of *
<PAGE>
Article 7. Other Financial Terms
7.1. In addition to the aforementioned payable sums, NETHOLD will grant each
union/kae member of E.S.A.K.E. participating in the A1 National Division
Championship of the periods * and for each game day of the term herein,
advertising time of total duration * for the promotion of their
sponsors/supporters as these are determined above in 1.5. (meaning advertising
time of * and advertising time of * for each union/kae member of ESAKE
participating in the Championship). This advertising time can not be transferred
to the following year.
7.2. The relevant advertising will be effected in NETHOLD's programs in
accordance to the effective legislation, will be invoiced based on a special
price list which will be drawn up by it and submitted to the competent tax
authority, and it will concern the advertising promotion of the persons
mentioned in article 1.5. herein.
7.3. NETHOLD is obliged to grant to E.S.A.K.E. in its programs advertising time
of * or each year of the term herein at the price of * per second which
E.S.A.K.E. will use at his judgment solely for its promotion or the promotion of
its services. E.S.A.K.E. solely is entitled to transfer the advertising time
it's entitled to the next basketball period but not to a time period later than
two years after the effective term of the present agreement.
Article 8 - Warranties
8.1. Within an annulling time limit extended to 30-7-1998 NETHOLD as warranty
for the payment of the sums mentioned in articles 6.1., 6.1.1. and 6.1.2. herein
above, is obliged to deliver to E.S.A.K.E. * letters of guarantee of recognized
bank of E.S.A.K.E.'s acceptance, of rolling validity of equal sum to the
installments mentioned in 6.1.1. and 6.1.2. above, that is of * and as provided
explicitly in its text, at its termination it will be extended to cover the
corresponding monthly installment as these have been defined of the next year of
the term herein, so that in any case a time period * will be covered and up to
the coverage of the * * installment as mentioned above.
8.2. The above letters of guarantee that will be delivered to E.S.A.K.E. will be
issued by a recognized bank accepted by E.S.A.K.E. and their text will
correspond to text of the relevant draft drawn up by E.S.A.K.E. of the
no. 18546242 letter of guarantee of ERGO Bank which was delivered to the
mentioned representatives of NETHOLD and the text of which will be adjusted to
the herein agreed. In case the above time limit passes inactive, meaning that
the above letters of guarantee are not delivered by NETHOLD to E.S.A.K.E's
offices, the present agreement will be de jure terminated and NETHOLD will be
liable for E.S.A.K.E.'s and the union/kae indemnification of
<PAGE>
any damage caused due to it. Expenses of any nature concerning the issue of the
letters of guarantee exclusively burden NETHOLD.
8.3. In the case that E.S.A.K.E. exercises its right mentioned in *
8.4. NETHOLD delivered to E.S.A.K.E today * bank cheques issued by it the sum of
* with payment dates the ones mentioned in 6.1.1. herein above. The above
cheques except for the one payment date 7-7-98 will be returned to NETHOLD by
E.S.A.K.E. upon the delivery to the latter of the letters of guarantee.
CHAPTER D' RIGHTS AND OBLIGATIONS OF THE CONTRACTING
PARTIES.
Article 9 - Rights and Obligations of the contracting parties
9.1. In case that a programmed game is not transmitted on NETHOLD's liability,
NETHOLD is obliged to pay E.S.A.K.E. the sum of * as indemnity in addition to
the financial and e.t.c. allowances mentioned above in articles 3.4 and 5
herein. The contracting parties agree that the above sum is fair and reasonable
and covers the damage (restriction to the promotion of the advertised on the
shirts of the contesting teams e.t.c.) suffered by E.S.A.K.E. and its union/kae
members from the above cause.
9.2. In the case that a programmed game will not be transmitted on the liability
of a union/kae and under the condition that this game is not replaced by
another, NETHOLD is entitled to demand from E.S.A.K.E. and against the liable
union/kae the sum of * as indemnity for the damage it suffered by the game not
being transmitted as programmed live and the sum of * as indemnity for the
damage it suffered by the game not being transmitted as programmed recorded. The
contracting parties agree that the above sum is fair and reasonable and covers
the damage suffered by NETHOLD. NETHOLD cannot exercise this right in cases of
force majeure.
9.3. In a case of a game interrupted for any reason NETHOLD is entitled to
transmit (show) the repetition or continuation of the interrupted game without
any additional consideration. In case that a live game is cancelled such a game
will be replaced by another as mentioned specifically above.
9.4. In case of a force majeure event the regulations of the Civil Code will be
applied. Indicative are, the strike of NETHOLD's personnel, failure or other
technical problems in the signal transmission due to problems in the OTE
circuit, emergency news concerning national and solely matters of major
importance etc, athletes' strike, interruption of a game due to violence,
cancellation of a game by an act of authority, collapse of the satellite e.t.c.
<PAGE>
9.5. NETHOLD is obliged two months before the commencement of each period to
inspect with its technical crews if the courts in which the games of the above
Championship will be conducted and comply to the prerequisites and
specifications of tv transmission and to inform E.S.A.K.E. on this matter in
writing within the above time limit.
9.6. *
9.7. *
9.8. NETHOLD is obliged to transmit each week in its programs a satisfactory
number of trailers for each of the games to be transmitted. During the
transmission of the trailers which will be effected during prime time the
simultaneous promotion of the contesting teams will also be effected with their
full name as defined in 1.5. herein above and of E.S.A.K.E.'s logo.
9.9. The tv transmission of the matches will cover the whole game and its extra
time, the showing of the advertisements during each game or its extra time must
not interfere with its completeness and in any case it will be effected with the
restrictions of the effective legislation (normal interruptions, time out,
commercial time out).
9.10. NETHOLD is obliged to transmit each week a show, of which its sports dept.
will have the journalistic responsibility. Also reportage of all the games of
the game will be shown in NETHOLD's sports programs. NETHOLD is obliged to
present in its programs every week within the bounds of sports shows the
union/kae, their history, their activities, and the head of their
administration. The presentation of the union/kae will be to the extent that
this possible, on equal terms.
9.11. NETHOLD is obliged, on its own expenses and care, to create a special
audio-visual mark which will include the logo E.S.A.K.E.'s and of the person
that will assume the rights defined in article 5 herein rights, the duration of
which will be 8-10". This mark must be full and unconditionally accepted by
E.S.A.K.E. will be shown before the beginning and after the end of the
<PAGE>
transmitted game and before the beginning of the show mentioned above in 9.10.
9.12. Each showing on the tv screen of the teams' names, either during the
transmitted game or during the showing of highlights or in the reportage within
the framework of the above shows will include the full name of the team as
mentioned above, meaning it will include the particulars of its
sponsor/supporter in case this is added to its name and will be accompanied by
the showing of E.S.A.K.E.'s logo. E.S.A.K.E. is obliged to notify NETHOLD of a
catalog with full particulars, logos, etc., distinctive marks of
sponsors/supporters of its union/kae members.
9.13. Upon termination of each Championship, NETHOLD will deliver to E.S.A.K.E.
a BETA video tape and a VHS video tape of a up to a two hour duration each with
the best highlights of the transmitted games in order for E.S.A.K.E. to use
these with NETHOLD's written approval for educational reasons but in no case for
commercial exploitation.
9.14. NETHOLD is obliged to show in its programs without the payment of any
consideration and within the framework of its social contribution,
messages/announcements of a social content against violence in the courts which
will be created jointly with E.S.A.K.E. in order to contribute by this manner to
the attempt to stop the violence which appears in the athletic fields. All
relevant expenses burden NETHOLD.
9.15. NETHOLD is obliged to take care so that the journalists, sportscasters and
rest of its associates which will broadcast and comment the transmitted in
accordance to the above, games and the presenters of above mentioned sports
shows, mention the names and the rest of the distinctive marks of the teams as
these are defined in par. 1.5. above each time they refer to these. Also the
above persons are obliged to call the A1 National Division championship as "X
Championship" (person mentioned in article 5 herein) and to make all endeavours
for the promotion and upgrading of the E.S.A.K.E. Championship and of
professional basketball in general, avoiding in any case derogatory and
degrading for it and the organizing entity and the rest of the persons and
entities participating in it, remarks.
9.16. NETHOLD has the right of exploitation of the television advertising
broadcasted during the game with the above 9.9 restriction.
9.17. E.S.A.K.E. is obliged to provide to NETHOLD any element or information of
its disposition that could assist the better promotion of the teams and of the
championship in general.
9.18. NETHOLD solely is entitled to permit in writing the entrance of crews of
other t.v. stations/channels (either of national, or of regional or of local
coverage) in the courts where the games take place in order to receive extracts
for the information of the public as provided by article 45 par 1 of
law 1958/1991. In these cases E.S.A.K.E. should be notified in writing three
days before the conduct of the game in order to inform the personnel of the
courts.
<PAGE>
NETHOLD undertakes to commit the television channels/stations to which it will
provide the 3minutes of information by its own recording of tv programs carriers
as mentioned above, to mention the UNIONS/KAE by their complete names as
referred hereabove.
9.19. E.S A.K.E and its members UNIONS/KAE are obliged to permit the entrance in
the courts where the games will take place of the technicians and sportscasters
etc, employees of NETHOLD and to facilitate them during the performance of their
work, by providing the suitable and secured conditions. For example they should
facilitate the installation of recording, processing and transfer of signal
equipment, the access to the cameramen and sports casters to the appropriate,
according to their judgement, areas upon the condition that they do not hinder
the Secretary, the arbitrators, the games, and the rest factors of the games
during the performance of their duties etc.
9.20. E.S A.K.E promises to NETHOLd that in the framework of the above
cooperation it will support the events (press conferences, receptions etc) that
NETHOLD will organize for the promotion of their cooperation and provides to
NETHOLD the exclusive right of the tv transmission of such events (draw,
Commencement of the championship etc)
9.21. E.S A.K.E is obliged to deliver to NETHOLD any reproductions of all the
games of the championship, either broadcasted or not, that it has probably
recorded in VHS tapes.
9.22. E.S A.K.E is obliged to deliver for each day of competition of the
Championship of its competence for the period of * to NETHOLD a sufficient
number of invitations or free entrance invitations or free entrance for the
courts, where the above games take place in order the latter to distribute them
at its judgement.
9.23. With the prejudice of those provided in article 3.1, par. 2 herein, it is
agreed that it is not permitted to NETHOLD, by any mean to assign, with or
without consideration, to any other tv station/channel of national, regional or
local coverage, the right to broadcast any game of the above championship from
those that NETHOLD is entitled to transmit, as provided, specifically and
detailed herein, as well as to assign the co-exploitation of these games, in any
way, jointly with any other entity.
9.24. Legislative restrictions that could be imposed to tv broadcasting entities
do not affect E.S A.K.E and its members, the UNIONS/KAE. In case that due to
legislative restrictions NETHOLD will be obliged to exploit its programs via
other entities it is entitled to exploit its rights deriving hereby via an other
entity to which it will assign them. In any case it will be liable towards
E.S A.K.E and towards the Unions/kae jointly and severally with its
counter-party in accordance with the said above, entity, and it waives its
benefits of discussion and of division. Any exclusion of any technical method or
mean of transmission of NETHOLD, does not consist an occasion to it to terminate
the terms of the present agreement on its favor. Both parties waive their right
to
<PAGE>
raise any doubts of the present for any reason, including the concurrence of the
provisions of article 388 of the Civil Code.
CHAPTER E - MISCELLANOUS
Article 10
10.1. The parties agree that the terms of the present agreement, which are all
of the essential, consist their complete and unconditional agreement and any
other probable previous agreement, oral or in writing, is invalid.
10.2. It is explicitly prohibited the assignment of the rights deriving hereby
to any third party without the relevant written approval of the counter-party
with the prejudice of the provisions of articles 3.1. par. 2 and 9.24 of the
present agreement. It is permitted especially to the assignment by NETHOLD of
those rights deriving from the provision of article 4 of the present article
(concerning the grant and exploitation of the t.v advertising boards as
specified hereabove) to the company named * and it's duly represented, under the
terms and consideration which will be agreed between them and under the
condition that NETHOLD is solely liable for the payment to the Union/KAE members
of E.S A.K.E, according to articles 6.2 and 6.2.6 herein agreed consideration.
10.3. Any probable agreement of the parties herein concerning the amendment or
modification of the present is drawn up only in writing.
10.4. Any omission of any of the parties to demand the accurate observance of
the hereby agreed terms or to make use of its rights deriving hereby cannot be
interpreted as a waiver.
10.5. In case that the terms of the present agreement will not be executed or
will not be duly executed, the other party is entitled to terminate the
agreement and demand to be indemnifies for any damages
10.6. The termination of the present agreement will be effected in accordance
with the provision of the Civil Code and is notified in accordance with the
provision of the Civil Procedure Code.
10.7. For any dispute or disagreement that may arise in relation with the
interpretation of the terms of the present agreement as well as for any dispute
that may arise from its performance, will be resolved by the Competent Courts of
Athens
The present agreement was executed in 4 originals and each party received two of
them
<PAGE>
THE PARTIES
- --------------------------------------------------------------------------------
1ST ROUND
- --------------------------------------------------------------------------------
- ------------------------------------------
1ST GAME
19/09/98
- ------------------------------------------
A.E.K. - OLYMPIACOS S.F.P.
PAOK - IRAKLIO O.A.A. MINOAN LINES
A.S. PAPAGOU KATSELIS - A.O.
SPORTING SOULIS
IRAKLIS - G.S. PERISTERIOU
A.S. APOLLON PATRON ACHAIA CLAUSS
- - G.S. PANIONIOS NUTELLA
G.S. AMAROUSSIOU - ARIS
A.O. NEAR EAST - PANATHINAIKOS A.O.
- ------------------------------------------
- ------------------------------------------
2ND GAME
26/09/98
- ------------------------------------------
IRAKLIO O.A.A. MINOAN LINES - A.E.K.
A.O. SPORTING SOULIS - PAOK
G.S. PERISTERIOUS - A.S. PAPAGOU
KATSELIS
G.S. PANIONIOS NUTELLA - IRAKLIS
ARIS - A.S. APOLLON PATRON ACHAIA
CLAUSS
PANATHINKAIKOS A.O. - G.S.
AMAROUSSIOU
OLYMPIACOS S.F.P. - A.O. NEAR EAST
- ------------------------------------------
- ------------------------------------------
3RD GAME
03/10/98
- ------------------------------------------
A.E.K. - A.O. SPORTING SOULIS
PAOK - G.S. PERISTERIOU
A.S. PAPAGOU KATSELIS -- G.S.
PANIONIOS NUTELLA
IRAKLIS - ARIS
A.S. APOLLON PATRON ACHAIA CLAUSS
- - PANATHINAIKOS A.O.
G.S. AMAROUSSIOU - A.O. NEAR EAST
OLYMPIACOS S.F.P. -- IRAKLIO O.A.A.
MINOAN LINES
- ------------------------------------------
- ------------------------------------------
4TH GAME
10/10/98
- ------------------------------------------
G.S. PERISTERIOU - A.E.K.
G.S. PANIONIOS NUTELLA - PAOK
ARIS - A.S. PAPAGOU KATSELIS
PANATHINKAIKOS A.O. - IRAKLIS
A.O. NEAR EAST - A.S. APOLLON
PATRON ACHAIA CLAUSS
G.S. AMAROUSSIOU - OLYMPIACOS
S.F.P.
A.O. SPORTING SOULIS - IRAKLIO O.A.A.
MINOAN LINES A.E.
- ------------------------------------------
- ------------------------------------------
5TH GAME
17/10/98
- ------------------------------------------
A.E.K. - G.S. PANIONIOS NUTELLA
A.S. PAPAGOU KATSELIS -
PANATHINAIKOS A.O.
IRAKLIS - A.O. NEAR EAST
A.S. APOLLON PATRON ACHAIA CLAUSS
- - G.S. AMAROUSSIOU
OLYMPIACOS S.F.P. - A.O. SPORTING
SOULIS
IRAKLIO O.A.A. MINOAN LINES - G.S.
PERISTERIOU
- ------------------------------------------
- ------------------------------------------
6TH GAME
24/10/98
- ------------------------------------------
ARIS - A.E.K.
PANATHINAKIOIS A.O. - PAOK
G.S. AMAROUSSIOS - IRAKLIS
A.S. APOLLON PATRON ACHAIA CLAUSS
- - OLYMPIACOS S.F.P.
G.S. PANIONIOS NUTELLA - IRAKLIO
O.A.A. MINOAN LINES
G.S. PERISTERIOU - A.O. SPORTING
SOULIS
- ------------------------------------------
- ------------------------------------------
7TH GAME
26/10/98
- ------------------------------------------
A.O. NEAR EAST - A.E.K.
G.S. AMAROUSSIOU - PAOK
A.S. PAPAGOU KATSELIS - G.S.
AMAROUSSIOU
IRAKLIS - A.S. APOLLON PATRON
OLYMPIAKOS S.F.P. - G.S. PERISTERIOU
IRAKLIO O.A.A. MINOAN LINES - ARIS
A.O. SPORTING SOULIS - G.S.
PANIONIOS NUTELLA
- ------------------------------------------
- ------------------------------------------
8TH GAME
17/10/98
- ------------------------------------------
A.O. NEAR EAST - A.E.K.
G.S. AMAROUSSIOU - PAOK
A.S. APOLLON PATRON ACHAIA CLAUSS
- - A.S. PAPAGOU KATSELIS
IRAKLIS - OLYMPIAKOS S.F.P.
PANATHINAIKOS A.O. - IRAKLIO O.A.A.
MINOAN LINES
ARIS - A.O. SPORTING SOULIS
G.S. PANIONIOS NUTELLA - G.S.
PERISTERIOU
- ------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
2ST ROUND
- --------------------------------------------------------------------------------
- ------------------------------------------
9TH GAME
07/11/98
- ------------------------------------------
A.E.K. - G.S. AMAROUSSIOU
PAOK - A.S. APOLLON PATRON ACHAIA
CLAUSS
A.S. PAPAGOU KATSELIS - IRAKLIS
OLMPIAKOS S.F.P. -- G.S. PANIONIOS
NUTELLA
IRAKLIO O.A.A. MINOAN LINES - A.O.
NEAR EAST
A.O. SPORTING SOULIS -
PANATHINAIKOS A.O.
G.S. PERISTERIOU - ARIS
- ------------------------------------------
- ------------------------------------------
10TH GAME
14/11/98
- ------------------------------------------
A.S. APOLLON PATRON ACHAIA CLAUSS
- - A.E.K.
IRAKLIS - PAOK
A.S. PAPAGOU KATSELIS - OLYMPIACOS
S.F.P.
G.S. AMAROUSSIOU - IRAKLIO O.A.A.
MINOAN LINES
A.O. NEAR EAST - A.O. SPORTING SOULIS
PANATHINAIKOS A.O. - G.S.
PERISTERIOU
ARIS - G.S. PANIONIOS NUTELLA
- ------------------------------------------
- ------------------------------------------
11TH GAME
05/12/98
- ------------------------------------------
A.E.K. - A.O. SPORTING SOULIS
PAOK - G.S. PERISTERIOU
A.S. PAPAGOU KATSELIS - G.S.
PANIONIOS NUTELLA
IRAKLIS - ARIS
A.S. APOLLON PATRON ACHAIA CLAUSS
- - PANATHINAIKOS A.O.
G.S. AMAROUSSIOU - A.O. NEAR EAST
OLYMPIACOS S.F.P. - IRAKLIO O.A.A.
MINOAN LINES
- ------------------------------------------
- ------------------------------------------
12TH GAME
12/12/98
- ------------------------------------------
G.S. PERISTERIOU - A.E.K.
G.S. PANIONIOS NUTELLA - PAOK
ARIS - A.S. PAPAGOU KATSELIS
PANATHINAIKOS A.O. - IRAKLIS
A.O NEAR EAST - A.S. APOLLON
PATRON ACHAIA CLAUSS
G.S. AMAROUSSIOU - OLYMPIACOS
S.F.P.
A.O. SPORTING SOULIS - IRAKLIO O.A.A.
MINOAN LINES A.E.
- ------------------------------------------
- ------------------------------------------
13TH GAME
19/10/98
- ------------------------------------------
A.E.K. - PAOK
OLYMPIACOS S.F.P. - PANATHINAIKOS A.O.
IRAKLIO O.A.A. MINOAN LINES -
A.S. PAPAGOU KATSELIS
A.O. SPORTING SOULIS - IRAKLIS
G.S. PERISTERIOU - A.S. APOLON
PATRON ACHAIA CLAUSS
G.S. PANIONIOS NUTELLA -
G.S. AMAROUSIOU
ARIS - A.O. NIAR IST
<PAGE>
- ------------------------------------------
- ------------------------------------------
14TH GAME
23/12/98
- ------------------------------------------
OLYMPIACOS S.F.P. - AEK
IRAKLIO O.A.A. MINOAN LINES - PAOK
A.O. SPORTING SOULIS - A.S. PAPAGOU
KATSELIS
G.S. PANIONIOS NUTELLA - A.S. APOLON
PATRON ACHAIA CLAUSS
ARIS - G.S. AMAROUSIOU
PANATHINAIKOS A.O. - A.O. NIAR IST
- ------------------------------------------
- ------------------------------------------
- ------------------------------------------
15TH GAME
02/01/99
- ------------------------------------------
AEK - IRAKLIO O.A.A. MINOAN LINES
PAOK - A.O. SPORTING SOULIS
A.S. PAPAGOU KATSELIS - G.S.
PERISTERIOU
IRAKLIS - G.S. PANIONIOS NUTELLA
A.S. APOLON PATRON ACHAIA CLAUSS-
ARHS
G.S. AMAROUSIOU - PANATHINKAIKOS
A.O.
A.O. NIAR IST - OLYMPIACOS S.F.P
- ------------------------------------------
- ------------------------------------------
16TH GAME
09/01/99
- ------------------------------------------
A.O. SPORTING SOULIS - AEK
G.S. PERISTERIOU - PAOK
G.S. PANIONIOS NUTELLA
A.S. PAPAGOU KATSELIS
ARIS IRAKLIS
PANATHINKAIKOS A.O. - A.S. APOLON
PATRON ACHAIA CLAUSS
A.O., NIAR IST - G.S. AMAROUSIOU
IRAKLIO O.A.A. MINOAN LINES -
OLYMPIACOS S.F.P.
- ------------------------------------------
<PAGE>
- ------------------------------------------
17TH GAME
16/01/99
- ------------------------------------------
AEK - G.S. PERISTERIOU
PAOK - G.S. PANIONIOS NUTELLA
A.S. PAPAGOU KATSELIS - ARIS
IRAKLIS - PANATHINAIKOS A.O.
A.S. APOLON PATRON ACHAIA CLAUSS -
A.O. NIAR IST
OLYMPIACOS S.F.P. - G.S. AMARUSIOU
IRAKLIO O.A.A. MINOAN LINES -
SPORTING SOULIS
- ------------------------------------------
- ------------------------------------------
18TH GAME
23/01/99
- ------------------------------------------
G.S. PANIONIOS NUTELLA - AEK
ARIS - PAOK
PANATHINAIKOS A.O. - A.S. PAPAGOU
KATSELIS
A.O. NIAR IST - IRAKLIS
G.S. AMAROUSIOU - A.S. APOLON
PATRON ACHAIA CLAUSS
A.O. SPORTING SOULIS - OLYMPIACOS
S.F.P.
G.S. PERISTERIOU - IRAKLIO O.A.A.
MINOAN LINES
- ------------------------------------------
- ------------------------------------------
19TH GAME
- ------------------------------------------
27/01/99
- ------------------------------------------
AEK - ARIS
PAOK - PANATHINAIKOS A.O.
A.S. PAPAGOU KATSELIS - A.O. NIAR IST
IRAKLIS - G.S. AMAROUSIOU
OLYMPIACOS S.F.P. - A.S. APOLON II.
ACHAIA CLAUSS
IRAKLIO O.A.A. MINOAN LINES - G.S.
PANIONIOS NUTELLA
A.O. SPORTING SOULIS
G.S. PERISTERIOU
- ------------------------------------------
- ------------------------------------------
20TH GAME
06/02/99
- ------------------------------------------
PANATHINAIKOS A.O. - AEK
A.O. NIAR IST PAOK
G.S. AMARUSIOU - A.S. PAPAGOU
KATSELIS
A.S. APOLON PATRON ACHAIA CLAUSS -
IRAKLIS
G.S. PERISTERIOU - OLYMPIACOS S.F.P.
ARIS - IRAKLIO O.A.A. MINOAN LINES
G.S. PANIONIOS NUTELLA
A.O. SPORTING SOULIS
- ------------------------------------------
- ------------------------------------------
21ST GAME
13/02/99
- ------------------------------------------
AEK - A.O. NIAR IST
PAOK - G.S. AMAROUSIOU
A.S. PAPAGOU KATSELIS
A.S. APOLON ACHAIA CLAUSS
OLYMPIACOS S.F.P. - PANTHINAIKOS
A.O.
A.O. SPORTING SOULIS - ARIS
G.S. PERISTERIOU - G.S. PANIONIOS
NUTELLA
<PAGE>
- ------------------------------------------
- ------------------------------------------
22ND GAME
20/02/99
- ------------------------------------------
G.S. AMAROUSIOU - AEK
A.S. APOLON PATRON ACHAIA CLAUSS
- - PAOK
IRAKLIS - A.S. PAPAGOU KATSELIS
G.S. PANIONIOS NUTELLA - OLYMPIACOS
S.F.P.
A.O. NIAR IST - IRAKLIO O.A.A. MINOAN
LINES
PANATHINAIKOKS A.O. - A.O. SPORTING
SOULIS
ARIS - G.S. PERISTERIOUS
- ------------------------------------------
- ------------------------------------------
23RD GAME
06/03/99
- ------------------------------------------
AEK - A.S. APOLON PATRON ACHAIA
CLAUSS
PAOK -IRAKLIS
OLYMPIACOS S.F.P. - A.S. PAPAGOU
KATSELIS
IRAKLIO O.A.A. MINOAN LINES - G.S.
AMAROUSIOU
A.O. SPORTING SOULIS - A.O. NIAR IST
G.S. PERISTERIOU - PANTHINAIKOS A.O.
G.S. PANIONIOS NUTELLA - ARIS
- ------------------------------------------
- ------------------------------------------
24TH GAME
13/03/99
- ------------------------------------------
IRAKLIS - AEK
A.S. PAPAGOU KATSELIS - PAOK
ARIS - OLYMPIACOS S.F.P.
A.S. APOLON PATRON - IRAKLIO O.A.A.
MINOAN LINES
G.S. AMAROUSIOU - A.O. SPORTING
SOULIS
A.O. NIAR IST - G.S. PERISTERIOU
PANATHIAKOS A.O. - G.S. PANIONIOS
NUTELLA
- ------------------------------------------
- ------------------------------------------
25TH GAME
20/03/99
- ------------------------------------------
AEK - A.S. PAPAGOU KATSELIS
OLYMPIACOS S.F.P. PAOK
IRAKLIO O.A.A. MINOAN LINES - IRAKLIS
A.O. SPORTING SOULIS - A.S. APOLON II
ACHAIA CLAUSS
G.S. PERISTERIOU - G.S. AMAROUSIOU
G.S. PANIONIOS NUTELLA - A.O. NIAR IST
ARIS - PANATHINAICOS A.O.
- ------------------------------------------
- ------------------------------------------
26TH GAME
27/03/99
- ------------------------------------------
PAOK-AEK
PANATHINAICOS A.O. - OLYMPIACOS
S.F.P.
A.S. PAPAGOU KATSELIS - IRAKLIO
O.A.A. MINOAN LINES
IRAKLIS - A.O. SPORTING SOULIS
A.S. APOLON PATRON ACHAIA CLAUSS -
G.S. PERISTERIOU
G.S. AMAROUSIOU - G.S. PANIONIOS
NUTELLA
A.O. NIAR IST - ARIS
- ------------------------------------------
<PAGE>
I certify that the translations into English of exhibits 10.4 and 10.5 to the
Registration Statement on Form F-1 of MIH Limited are fair and accurate.
/s/ LESLEY R. PENFOLD
- ----------------------------------
Name
LR PENFOLD
- ----------------------------------
Title
CHIEF FINANCIAL OFFICER
- ----------------------------------
Date
FEBRUARY 18, 1999
- ----------------------------------
* Indicates where text has been omitted pursuant to a request for confidential
treatment. The omitted text has been filed separately with the Securities and
Exchange Commission.
CHANNEL DISTRIBUTION AGREEMENT
between
MULTICHOICE AFRICA (PROPRIETARY) LIMITED
and
ELECTRONIC MEDIA NETWORK LIMITED
Mallinicks
25 Savile Row
London W1X 1AA
<PAGE>
TABLE OF CONTENTS
1. PARTIES.................................................................3
2. DEFINITIONS AND INTERPRETATION..........................................3
3. INTRODUCTION...........................................................16
4. GRANT OF RIGHTS........................................................17
5. TERM...................................................................21
6. PER SUBSCRIBER FEES, REPORTING AND PAYMENT.............................21
7. RECORDS AND AUDIT......................................................29
8. PROPRIETARY AND INTELLECTUAL PROPERTY RIGHTS...........................31
9. DELIVERY AND TRANSMISSION OF CHANNELS..................................32
10. TIERING...............................................................35
11. ENCRYPTION AND DISTRIBUTION OF THE CHANNELS...........................37
12. SMS...................................................................40
13. ADVERTISING...........................................................41
14. OPEN TIME.............................................................42
15. PROGRAMMING...........................................................42
16. MARKETING.............................................................45
17. ANALOGUE PROGRAMME GUIDE..............................................49
18. DIGITAL PROGRAMME GUIDE...............................................50
19. ELECTRONIC PROGRAMMING GUIDE..........................................51
20. REPRESENTATIONS AND WARRANTIES........................................52
21. INDEMNITIES...........................................................54
22. THIRD PARTY INFRINGEMENTS OF VIEWING CARDS............................55
23. PROGRAMME SUPPLIER OBLIGATIONS........................................56
24. PARTIAL TERMINATION...................................................56
25. TERMINATION AND REMEDIES..............................................58
26. FORCE MAJEURE.........................................................64
27. GOVERNING LAW AND DISPUTES............................................65
28. RESTRUCTURING FOR TAX OR REGULATORY REASONS...........................66
29. CONFIDENTIALITY.......................................................67
30. NOTICES...............................................................68
31. MISCELLANEOUS.........................................................69
SCHEDULE 1
SCHEDULE 2A
SCHEDULE 2B
SCHEDULE 3
SCHEDULE 4
SCHEDULE 5
+SCHEDULE 6
SCHEDULE 7
SCHEDULE 8
SCHEDULE 9
SCHEDULE 10
2
<PAGE>
CHANNEL DISTRIBUTION AGREEMENT made on 18 June 1998 between:
1. PARTIES
1.1. MULTICHOICE AFRICA (PROPRIETARY) LIMITED, a company registered
in South Africa, whose principal place of business is at 75
Republic Road, Randburg, South Africa ("MultiChoice"); and
1.2. ELECTRONIC MEDIA NETWORK LIMITED a company registered in
South Africa whose principal place of business is at 137
Hendrik Verwoerd Drive, Randburg, South Africa ("M-Net").
2. DEFINITIONS AND INTERPRETATION
In this Agreement -
2.1. clause headings are inserted for convenience only and shall
not be taken into account in construing this Agreement;
2.2. references to clauses are references to the clauses of this
Agreement;
2.3. if any provision in a definition is a substantive provision
conferring rights or imposing obligations on any Party, effect
shall be given to it as if it were a substantive clause in the
body of this Agreement, notwithstanding that it is only
contained in the interpretation clause;
2.4. if any period is referred to in this Agreement by way of
reference to a number of days, the days shall be reckoned
exclusively of the first and inclusively of the last day
unless the last day falls on a Saturday, Sunday or public
holiday within the Republic of South Africa, in which case the
last day shall be the next succeeding day which is not a
Saturday, Sunday or public holiday;
3
<PAGE>
2.5. unless the context clearly indicates a contrary intention, an
expression which denotes any one gender includes the other
genders, a natural person includes an artificial person and
vice versa, the singular includes the plural and vice versa
and the following expressions bear the meanings assigned to
them below and cognate expressions bear corresponding meanings
"Accounting Period" : each calendar month during this
Agreement (with the exception of the
last Accounting Period which will
end on the final day of this
Agreement);
"Affiliate" : either
a) in relation to both
Parties, any Person which,
directly or indirectly:
(i) is controlled by that
Party; or
(ii) controls that Party;
(iii) is under common control
with that Party;
or
b) in relation to MultiChoice:
(i) any Person in whom
MultiChoice has a direct
shareholding greater than
or equal to 30% of the
issued share capital; or
(ii) any Person where
MultiChoice, directly or
indirectly has the right to
appoint or remove directors
holding a majority of the
voting rights at meetings
of the board of directors
of such Person;
"Agreement" : this document together with the
Schedules attached hereto;
4
<PAGE>
"A la Carte
Channels" : any television programme service
which is marketed by MultiChoice as
a so-called "stand alone channel"
i.e. a channel which is not marketed
as part of a group of other channels
and does not form part of either the
Premium Tier, Free Tier or the Basic
Tier or any other tier of television
programme services;
"Basic Tier" : an envisaged standard MultiChoice
programming tier which, if
implemented, will consist of
television programme services
administered via the MultiChoice
subscriber management system, and
will include, without limitation,
all programme services, which are
from time to time included in such
tier subject to the provisions of
this Agreement, but will exclude all
A la Carte Channels, Free Channels
and channels comprising the Premium
Tier;
"Channels" : those programme services referred to
in clause 4.1. of this Agreement as
currently named or as they may be
renamed in the future;
"Channel Signals" : the signals comprising the Channels;
"Clearances" : all consents, clearances and
licenses required from the copyright
holders of the programming
transmitted as part of the Channels
to distribute such programming in
the Territory, including all
clearances and licenses from
programming suppliers contracted as
such by M-Net and all necessary
music, mechanical transfer and
public performing
5
<PAGE>
rights clearances;
"Commercial
Subscriber" : any Person who owns or operates any
premises, establishment or location
in the Territory, whether operated
for commercial gain or otherwise,
containing rooms for occupation
including hotels, motels, inns,
bungalow parks and guest houses, who
has been authorised by MultiChoice
to receive and decrypt the Channel
Signals;
"Communal
Subscriber" : any Person who owns or operates any
premises, establishment, area or
location in the territory, whether
operated for commercial gain or not,
which is a community meeting place,
including but not limited to
restaurants, clubs, bars, pubs and
the like and is capable of receiving
and has been duly authorised by
MultiChoice specifically to receive
and decrypt the Channel Signals;
"Computicket" : Computicket Limited, a company
registered in South Africa, having
its principal place of business in
Cape Town;
"CPI" : when used in connection with amounts
expressed in Rands means the
weighted average consumer price
index, all items, as notified by the
South African Secretary of
Statistics, of the 12 (twelve) areas
specified in the notice with the
average for 1990 as the base which
equals 100 (one hundred) or when
used in connection with amounts
expressed in United States Dollars
means the United States
6
<PAGE>
Consumer Price Index as published by
the United States Department of
Commerce. In the case of either
index being replaced by an index of
a different nature, such index shall
be used duly adjusted as if the same
index is used, provided that if such
index is replaced by an index with a
different base, the replacing index
shall be used but it shall be
adjusted in order to correspond with
the index as set out above. All
adjustments to either index shall be
made by a firm of Chartered
Accountants and Auditors agreed by
the Parties or, in the absence of
agreement, by a firm nominated by
the President for the time being of
the South African Institute of
Chartered Accountants;
"Decoder" : an individually addressable
stand-alone device or an integrated
satellite receiver/decoder existing
now or developed in the future,
capable of receiving and, when
enabled, of decrypting the Channels'
Signals, either alone or in
conjunction with a Viewing Card;
"Delivery Failure" : any material disruption,
discontinuance or interruption in or
other interference with the delivery
of the Channels' Signals by M-Net to
MultiChoice (but excluding
interruption for routine
maintenance, adjustment or repair of
the delivery satellite);
"Effective Date" : * 1995
"Employee Subscribers": any person who is an employee of
M-Net, MultiChoice, M-Web,
SuperSport, Computicket and other
associated companies agreed by the
Parties
7
<PAGE>
from time to time who, for the
payment of a discounted amount, is
duly authorised to decrypt the
Channels' Signals and to view the
Channels in unencrypted format;
"Encryption" : the scrambling and encryption of the
Channels' Signals so that such
Signals can only be decrypted and
viewed either by means of a
compatible Decoder only or by the
insertion of an enabled Viewing Card
in such Decoder;
"Free Tier" : the MultiChoice programming tier
consisting of the Free Channels;
"Free Channels" : the television programme services
for which a Viewing Card is required
and for which no subscription fee is
payable by any person for the right
to view such programme services in
an unencrypted format;
"Free TV Systems" : any form of television or other
transmission system by means of
which a person can receive audio
visual programming or services on a
television set without charge (other
than compulsory fees charged by a
government or governmental agency
assessed on those who use television
sets) including free satellite and
free cable systems;
"Gross Subscription
Revenue" : the total amount of fees excluding
discounts, for each country
comprising the Territory actually
billed (whether or not received) by
MultiChoice or its Affiliates to all
Subscribers during a particular
Accounting Period.
8
<PAGE>
"Hotel Room" : a room in any premises,
establishment or location, owned or
operated by a Commercial Subscriber,
which is wired and equipped to
decrypt the Channel Signals and to
view the Channels on a television
set in that room in unencrypted
format;
"Marks" : the trade names, trade marks, logos,
and service marks used from time to
time in connection with the
Channels, the name of the Channels,
the titles of the programmes
transmitted as part of the Channels
and the corporate names of M-Net,
being Marks belonging solely and
exclusively to M-Net or the owner of
the copyright in the relevant
programme(s) ("the Relevant Owner"),
as the case may be;
"M-Web" : M-Web Limited, a company registered
in South Africa, whose principal
place of business is in Cape Town;
"MUD (Multiple
Unit Dwelling)
Subscriber" : any person who owns or operates any
premises, establishment or location
in the territory, whether operated
for commercial gain or otherwise,
containing individual living units
including, but not limited to,
blocks of flats, townhouse
complexes, cluster home complexes
(and specifically excluding those
premises, establishments and
locations owned or operated by
Commercial Subscribers) who have
been authorised by MultiChoice on a
bulk billing basis to receive and
decrypt the Channel Signals;
9
<PAGE>
"MUD Unit" : a dwelling unit in any premises,
establishment or location, owned or
operated by a MUD Subscriber, which
is wired and equipped to decrypt the
Channel Signals and to view the
Channels on a television set in that
dwelling unit in unencrypted format;
"MultiChoice
Bouquets" : the MultiChoice C Bouquet and the
MultiChoice Ku Bouquet;
"MultiChoice C
Bouquet" : all the DSTV visual, audio and data
programme services digitally
transmitted via the C band beam of
the Satellite and in respect of
which MultiChoice provides SMS;
"MultiChoice
Ku Bouquet" : all the DSTV visual, audio and data
programme services digitally
transmitted via the Ku band beam of
the Satellite and in respect of
which MultiChoice provides SMS;
"MultiChoice SUD
Subscriber Charge" : the monthly price charged by
MultiChoice to a SUD Subscriber for
the right to view the Channels in an
unencrypted format, it being
understood that different prices may
be charged by MultiChoice within
each country comprising the
Territory and in respect of
different methods of delivery of the
Channels' Signals;
"MultiChoice Marks" : the tradenames, trademarks, logos
and service marks belonging to and
used from time to time by
10
<PAGE>
MultiChoice and its Affiliates
excluding the Marks;
"Open Time" : periods of time on Pay TV Systems
during which programmes and services
broadcast on such systems may be
viewed in unencrypted format without
the payment of a fee in respect of
such programmes and services;
"Parties" : the parties to this Agreement;
"Pay Per View" : the scheduled television exhibition
of programmes which are transmitted
via Pay TV Systems in respect of
which a separate fee is payable in
order to view each event or group of
events;
"Pay TV Systems" : any cable system, multi-point
microwave distribution system,
over-the-air television system,
close circuit television system,
satellite master antenna television
system, direct to home system,
television receive only system,
hotel/motel television system,
privately maintained satellite
receiving antennae and all other
forms of pay or subscription
television or communication systems
and any other telecast, broadcast or
transmission system, now known or
hereafter discovered or developed,
by means of which a Person can
receive audio-visual programming or
services substantially in Encrypted
format, where a fee is payable by
such Person for the right to view
and/or participate in such
programmes and services in
unencrypted format (except for Open
Time), but excluding Pay Per View;
11
<PAGE>
"Pay TV Viewers" : Persons in the Territory who are
capable of receiving programming
services by means of Pay TV Systems;
"Person" : individual, company, partnership,
trust, unincorporated association,
government authority or agency or
any other entity;
"Per Subscriber Fees" : the fees payable by MultiChoice to
M-Net determined according to the
provisions of this Agreement;
"Piracy" : the unauthorised use of the
MultiChoice algorithm to decrypt the
Channel Signals and/or the
unauthorised reception of the
Channels inside or outside the
Territory and/or the unauthorised
distribution or broadcasting of the
Channel Signals and/or the
authorised or unauthorised reception
of the Channels outside the
Territory and/or the unimpaired
and/or unauthorised reception of the
Channels and or Channel by any
Person other than a Subscriber;
"Premium Movie
Channel" : a channel consisting of first run
feature length films, being mainly
current first run feature length
films, where a "current" film is one
which had a United States theatrical
release no more than 36 months
previously and a "first run" film is
one which has not previously been
exhibited on any television service
or television channel which is
broadcast or distributed via Pay or
Free TV Systems in the Territory and
a "film" is a motion picture which
was originally produced in the
English language (which
12
<PAGE>
shall include a film containing
limited portions of dialogue that
are spoken in a foreign language but
originally subtitled in the English
language). In terms of this
definition, "mainly" shall be
determined over an average 4 (four)
month period and shall mean a
predominant percentage except: (i)
where a predominant percentage is
not available from programme
suppliers; or (ii) where the terms
proposed by programming suppliers
(excluding Affiliates of M-Net) are
so commercially unreasonable when
considered in view of M-Net's rights
and obligations under this Agreement
that M-Net could not be expected to
acquire a predominant percentage on
such terms, in which event "mainly"
shall mean either (i) in respect of
the former situation, that
percentage which is available from
programme suppliers; or (ii) in
respect of the latter situation, the
percentage that M-Net can reasonably
be expected to acquire on such terms
provided, however, that any such
determination shall take into
consideration, without limitation,
M-Net's rights and obligations under
this Agreement;
"Premium Movie/
Sports Channel" : a channel which is a combination of
a Premium Movie Channel and a
Premium Sports Channel;
"Premium Sports
Channel" : a channel which consists of sports
and sports related coverage, a
significant proportion of which is
live coverage, of a cross-section of
Premium Sports (at least three such
sports during any particular month),
and provides live local studio links
between
13
<PAGE>
programmes or events;
"Premium Sports" : leading South African and major
international sporting events,
tournaments or matches, as the case
may be, primarily focusing on but
not necessarily limited to, the
sports of rugby, soccer, cricket,
golf, tennis and boxing;
"Premium Tier" : a premium programming tier which
would consist of premium television
programme services administered via
the MultiChoice subscriber
management system and would include
the programme services set out in
Schedule 1 and all other programme
services which would from time to
time be included in such tier,
subject to the provisions of this
Agreement, from the date upon which
MultiChoice tiers the MultiChoice
Bouquet;
"Promotional
Advertisements" : advertisements which aim to promote
the MultiChoice Ku and C Bouquets,
as applicable;
"RAVE (Restricted
Access Viewing
Establishment)
Subscriber" : any person who is sold and marketed
to by MultiChoice under a separate
rate and who owns or operates a
common area in an institution in the
Territory which has been wired and
equipped to receive and decrypt the
Channel Signals, such as but not
limited to hospitals, nursing homes,
prisons, offices, schools,
factories, fire stations, police
stations, military installations,
oil rigs and the like
14
<PAGE>
but excluding any private rooms or
living areas in such institutions,
which, for the avoidance of doubt,
shall be MUD Units);
"Satellite" : the PanAmSat 4 satellite or such
other satellite having substantially
the same footprint and power as may
be determined by MultiChoice from
time to time in accordance with
clause 9.9;
"SMS" : subscriber management services
supplied from time to time by
MultiChoice as stipulated in this
Agreement;
"Subscribers" : all Persons who have contracted to
pay a fee to MultiChoice to receive
any or all of the Channels, on an
audio visual monitor, including, but
not limited to, SUD Subscribers, MUD
Subscribers, Commercial Subscribers,
Communal Subscribers, RAVE
Subscribers and notwithstanding the
fat that no fee is payable by such
persons, VIP Subscribers;
"SUD (Single Unit
Dwelling) Subscriber" : any person who owns, leases or
occupies a private single dwelling
unit or other dwelling unit in the
Territory and has been sold and
marketed to by MultiChoice including
Employee Subscribers on an
individual basis and is duly
authorised to receive and decrypt
the Channel Signals;
"SuperSport" : SuperSport Limited, a company
registered in South Africa, whose
principal place of business is in
Johannesburg;
15
<PAGE>
"Territory" : the continent of Africa excluding
those countries listed in paragraph
1.1 of Schedule 2A of this Agreement
but including those Indian Ocean
Islands set out in paragraph 1.2 of
Schedule 2A;
"Transmission Failure": any material disruption,
discontinuance or interruption in or
other interference with the delivery
of the Channels' Signals by
MultiChoice to Subscribers (but
excluding interruption for routine
maintenance, adjustment or repair of
the Uplink Facility or Satellite);
"Transponder Costs" : the cost of the transponder capacity
for the Channels paid by M-Net as
set out in clause 9.8;
"VIP Subscriber" : any Person of strategic or
promotional importance either to
MultiChoice or M-Net whom either of
the Parties have agreed to authorise
to decrypt the Channels' Signals and
to view the Channels in unencrypted
format without the payment of any
fee;
"Viewing Card" : an electronic smart card which, when
it is enabled by or on behalf of
MultiChoice and inserted into a
Decoder, is designed to decrypt the
Channels' Signals and which enables
the Subscriber to view, inter alia,
the Channels in unencrypted format.
3. INTRODUCTION
3.1. It is recorded that -
3.1.1. MultiChoice and M-Net are Parties to an existing
agreement, which took
16
<PAGE>
effect on * 1995 (the "Analogue Agreement"), and
which deals with the analogue distribution by
MultiChoice of the M-Net Domestic and M-Net Africa
channels in Africa;
3.1.2. this Agreement is entered into as being supplementary
to, rather than in replacement of the Analogue
Agreement and shall be construed accordingly;
3.1.3. to the extent that this Agreement conflicts with the
Analogue Agreement then this Agreement shall prevail
to the exclusion of the Analogue Agreement.
3.2. It is also recorded that M-Net is party to an existing
agreement with CNE for the exclusive distribution of its
channel, M-Net Egypt, in Egypt. M-Net and MultiChoice agree to
hold good faith discussions with a view to including Egypt in
the definition of Territory in this Agreement when the
agreement with CNE expires and should MultiChoice no longer
hold any financial interest in CNE.
4. GRANT OF RIGHTS
4.1. M-Net hereby grants to MultiChoice the * right to distribute
and license the reception and redistribution of, and to
market, the channels known as M-Net (Domestic) ("MND"), M-Net
(Africa ) ("MNA"), Movie Magic (Domestic) ("MMD"), Movie Magic
(Africa) ("MMA"), KTV ("KTV") and SuperSport ("SS") from the
Effective Date, throughout the Territory by means of Pay TV
Systems (excluding the analogue distribution of MND and MNA
which is governed by the Analogue Agreement), on the terms set
out herein.
4.2. In addition, but subject to the terms and conditions of this
Agreement, M-Net undertakes that M-Net and/or any Affiliate of
M-Net *
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4.3. It is recorded that:
4.3.1. the MND channel is a 24 hour per day premium general
entertainment channel and is comprised predominantly
of premium Pay TV programmes consisting mainly of
current feature films consistent with a Premium Movie
Channel, occasional specials, occasional series,
(predominantly) live sport consistent with a
Premium Sports Channel, local production and
children's programming primarily targeting audience
needs in South Africa, Namibia and Lesotho, Southern
Zimbabwe, Southern Mozambique, Swaziland, and
Botswana;
4.3.2. the MNA channel is a premium general entertainment
channel comprised predominantly of premium Pay TV
programmes consisting mainly of current feature films
consistent with a Premium Movie Channel, occasional
specials, occasional series and local productions,
and children's programmes, primarily targeting
audience needs in Africa excluding South Africa,
Namibia and Lesotho, Southern Zimbabwe, Southern
Mozambique, Swaziland, and Botswana, and is
transmitted on at least a 16 hour per day basis;
4.3.3. the MMD and MMA channels are Premium Movie Channels
transmitted on at least a 20 hour per day basis,
which target South African and African Pay TV Viewers
respectively; notwithstanding the definition of
Premium Movie Channel, it is agreed and understand
that MMA and MMD shall, from time to time, include
occasional library movies and that movies will
premiere on the MND channel prior to being screened
on MMD and MMA. Nevertheless, the Parties shall, from
time to time, review in good faith the provisions of
this clause in the best interests of both Parties
with a view, when appropriate, to procuring that a
percentage of movies will premier first on MMD and
MMA;
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4.3.4. the KTV channel is comprised of children's programmes
targeting all African Pay TV viewers and is
transmitted on a 12 hour per day basis from 07h00 to
19h00 (Central African Time);
4.3.5. the SS channel is a 24 per hour day Premium Sports
Channel and is also referred to as Supersport 1.
4.4. Where the hours of transmission of MNA and/or KTV are
increased, the Per Subscriber Fees payable by MultiChoice to
M-Net hereunder shall not increase as a result thereof.
4.5. In consideration of the * rights granted by M-Net to
MultiChoice in terms of clause 4.1, MultiChoice undertakes
that MultiChoice and all of its Affiliates shall not, during
the Term:
4.5.1. *
4.5.2. *
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4.6. In regard to Pay Per View:
4.6.1. MultiChoice shall have a right of first refusal to
market and licence, on a sole and exclusive basis,
any Pay Per View programmes in respect of which M-Net
acquires the Pay Per View distribution rights from
time to time for such distribution within the
Territory or part thereof.
4.6.2. M-Net shall notify MultiChoice forthwith upon
acquiring Pay Per View distribution rights for the
Territory for any such programmes, whereupon the
Parties shall negotiate in good faith the terms of
such distribution by MultiChoice.
4.6.3. If the Parties fail to agree the terms for such
distribution within a period of 60 days from the
notification by M-Net, M-Net (i) shall not itself be
entitled to undertake such Pay Per View distribution,
and (ii) undertakes that it shall not authorise the
Pay Per View distribution of the relevant programme
in the Territory by a third party SMS provider (the
"Third Party"); without first having afforded
MultiChoice the opportunity, on 60 (sixty) days
notice (or such shorter period as may be agreed
between the Parties, taking into account the date of
broadcast of the relevant event) in writing to
MultiChoice, to conclude an agreement on terms and
conditions substantially the same as those agreed
with the Third Party for such Pay Per View
distribution.
4.6.4. M-Net shall have a right of first refusal to supply a
full service Pay Per View, offering 24 (twenty four)
hours per day consisting of premium movies
(consistent with the definition of Premium Movie
Channel) and/or Premium Sports Programming for sole
and exclusive distribution by MultiChoice in the
Territory.
4.7. M-Net shall be entitled to sell or syndicate its programmes
known as Egoli, Carte Blanche and Front Row and also films and
one-off local productions (i.e. one-off specials) in which
M-Net has invested, for third party distribution in the
Territory by any means whatsoever.
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4.8. M-Net shall not be entitled to sell or otherwise syndicate in
any other programmes which have been or are to be included in
any of the Channels for third party distribution in the
Territory by any means whatsoever save that:
4.8.1. M-Net shall be entitled to approach MultiChoice, on a
case by case basis, in relation to the sale or
syndication of other programmes in order to obtain
MultiChoice's approval which shall not be
unreasonably withheld to syndicate same to a third
party broadcaster in the Territory.
4.8.2. *
5. TERM
5.1. Notwithstanding the date of signature hereof, the Agreement
shall be deemed to have commenced on the Effective Date and
shall continue thereafter for a period of 10 (ten) years.
5.2. During the last year of the Term the Parties shall renegotiate
the fees and commercial terms which will apply during the *
years following the Term. If the Parties are able to agree
such fees and commercial terms then this Agreement shall
automatically continue for a further * years on the same terms
and conditions set out herein and in the Standard Terms.
6. PER SUBSCRIBER FEES, REPORTING AND PAYMENT
6.1. In consideration of the grant of rights to MultiChoice as set
out in clause 4.1, MultiChoice shall pay to M-Net in respect
of each Accounting Period, a Per Subscriber Fee in respect of
each Subscriber as set out in Schedule 3 hereto;
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6.2. It is recorded that MultiChoice intends offering incentives to
potential subscribers to persuade such potential subscribers
to purchase a Viewing Card and/or commence payment of monthly
subscription charges; excluding circumstances where a
subscriber is in default of any obligation to MultiChoice. The
incentives may take the form of one or two free viewing
periods ("Free Trials") not exceeding 1 (one) months
cumulative duration during any year (calculated with reference
to the Effective Date or any anniversary thereof); provided
that all such Free Trials involving the Channels shall be
subject to the prior written consent of M-Net, which consent
M-Net shall be entitled to withhold if any supplier of
programmes or material to M-Net has not given its consent to a
Free Trial. M-Net undertakes to use its reasonable endeavors
to obtain the consent of such suppliers to such Free Trials as
may be reasonably requested by MultiChoice.
6.3. *
6.4. It is recorded that at the date of signature hereof the
subscriber charge payable to MultiChoice by SUD Subscribers
within the Ku Band footprint of the Satellite who receive the
Channel Signals on a Direct to Home basis (the "Ku SUD
Subscriber Charge") * per Ku SUD Subscriber inclusive of VAT.
The determination of the Ku SUD Subscriber Charge shall be
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within the reasonable direction of MultiChoice; provided,
however, that MultiChoice shall consult with M-Net prior to
any increase in the Ku SUD Subscriber Charge.
6.5. Price Increases
6.5.1. Increases in the Per Subscriber Fees payable in
respect of the digital distribution of the Channels
in South Africa (the "South African Digital
Increase") shall be negotiated in good faith between
the Parties on an annual basis with a view to
implementing the South African Digital increase on *
each year during the Term. The factors that shall be
taken into account in determining the South African
Digital Increase shall include but not be limited to:
(i) the basis of determining the previous year's
South African Digital Increase;
(ii) the increase in the CPI in respect of the then
preceding calendar year;
(iii) the Rand/US Dollar exchange rate movement in
respect of the then preceding calendar year;
(iv) the total amount of Per Subscriber Fees paid to
M-Net by MultiChoice in respect of the digital
distribution of the Channels in South Africa during
the then preceding calendar year; and, after taking
into consideration any and all additional channels
added to MultiChoice Ku Band Bouquet in the preceding
year, the percentage proportion that this represents
in relation to MultiChoice's overall programming
costs for the then preceding calendar year;
(v) the quality of the Channels, including the number
of major Hollywood studios contracted to supply
movies to M-Net in respect of the then preceding
calendar year;
(vi) M-Net's programming acquisition costs in respect
of the then preceding calendar year;
(vii) economic forecast materials or data which could
have a bearing on the business of either M-Net or
MultiChoice in respect of the calendar year following
implementation of the South African Digital Increase;
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(viii) the results of the latest retail price survey
conducted on behalf of the Parties; and
(ix) the forecast growth in Subscribers for the then
following calendar year: (collectively, the "South
African Digital Increase Factors").
6.5.2. The respective increases in the Per Subscriber Fees
payable in respect of the digital distribution and
analogue distribution of the Channels outside South
Africa (the "ROT Digital and Analogue Increases")
shall also be negotiated in good faith between the
Parties on an annual basis with a view to
implementing the ROT Digital and Analogue Increases
on * each year during the Term. If notwithstanding
reasonable endeavours the parties are unable to reach
agreement on the ROT Digital and Analogue Increases
then the previous year's Per Subscriber Fees shall be
increased by the percentage increase in the USA CPI
occurring in the 12 (twelve) months period prior to
the relevant increase.
6.5.3. The Parties shall use all reasonable endeavours to
ensure that their respective Chief Financial Officers
reach agreement in respect to the South African
Digital Increase prior to * each year, with a view to
implementing such increases on * or thereafter. If,
notwithstanding such reasonable endeavours, the
Parties are unable to reach agreement on the South
African Digital Increase, then the matter shall first
be referred to the Parties' respective Chief
Executive Officers who shall use all reasonable
endeavours to reach agreement concerning the relevant
increase or increases, taking into account the South
African Digital Increase Factors (in respect of the
South African Digital Increase). If the Chief
Executive Officers fail to reach agreement by * then
the matter shall be referred to the Parties'
respective chairpersons who shall use all reasonable
endeavours to reach agreement taking into account the
relevant applicable increase factors. If the Parties'
chairpersons fail to reach agreement by * then the
matter shall be referred to the President (for the
time being) of the South African Institute of
Chartered Accountants who shall be asked to appoint a
suitably
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qualified expert to determine the South African
Digital Increase taking into account the South
African Digital Increase Factors, who shall be
requested to use all reasonable endeavours to make
such a determination by not later than * and who
shall be entitled to consult with any employees or
officers of either Party at his discretion. For the
avoidance of doubt, if at the time of a proposed
referral to the chairpersons envisaged above, the
chairpersons are the same individual, then the
referral shall be directly from the Chief Executive
Officers to the President (for the time being) of the
South African Institute of Chartered Accountants by
not later than *
6.5.4. For the avoidance of doubt, if, notwithstanding the
provisions of sub-clauses 6.5.1 to 6.5.3 inclusive,
the South African Digital Increase has not been
determined by * in any particular year during the
Term, then: (i) MultiChoice shall not be entitled to
increase the retail charge levied on Subscribers
arising from their entitlement to receive the
MultiChoice Ku Band Bouquet until the South African
Digital Increase has been determined; and (ii) the
Per Subscriber Fees payable in respect of the digital
distribution of the Channels in South Africa shall
not be increased until the retail charge levied on
Subscribers arising from their entitlement to receive
the MultiChoice Ku Band Bouquet has been increased
pursuant to the determination of the South African
Digital Increase and such increased retail charge has
been applied on the first day of an Accounting
Period.
6.5.5. Increases in the Per Subscriber Fees in respect of
analogue distribution on the Channels in South Africa
shall be implemented on * during each year of the
Term and shall be proportionate to the increase in
the retail charge to Subscribers (excluding VAT) who
receive the Channels by analogue means, applied in
respect of the twelve month period preceding the
relevant * increase implementation date.
6.5.6. Increases in the Per Subscriber Fees payable in
respect of the analogue distribution of MDN and
Community Service Network ("CSN") shall be
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proportionate to the increase in the charge
(excluding VAT) to Subscribers for MND and CSN
collectively for so long as they are sold
collectively.
6.5.7. If MultiChoice decides to sell MND to Subscribers
separately from CSN, then it shall notify M-Net and
the Parties shall negotiate the mechanism by which
the Per Subscriber Fees payable in respect of MND
hereunder will be varied.
6.6. Minimum Guarantees
6.6.1. Should M-Net be required to pay any minimum
guarantees to * * pursuant to an agreement between *
* whether in short form or long form, MultiChoice
undertakes and guarantees that it shall pay to M-Net
the minimum guarantees payable by M-Net in respect of
those 20 countries listed in Schedule 2B hereto but
only in respect of a maximum of 10,000 (ten thousand)
Subscribers for all such countries taken together.
The amount payable by MultiChoice to M-Net pursuant
to the guarantee set out in this clause 6.7.1 shall
be 10,000 less the actual number of Subscribers in
all Schedule 2B countries during the relevant period
multiplied by the actual programming cost payable per
Subscriber paid by M-Net to * in respect of the
countries set out in Schedule 2B for that period. If
M-Net removes any country from Schedule 2B in terms
of clause 24 or if M-Net appoints a third party
distributor under clause 24.6.2, then the number of
Subscribers in respect of which MultiChoice
guarantees payment under this clause 6.7.1 shall be
reduced by 500 in respect of each such removed
country. Any amount payable by MultiChoice in
accordance with this clause 6.7 will be payable by
MultiChoice to M-Net on the last day of the
Accounting Period in which such amounts are payable
by M-Net to * and will be set out in an invoice which
will be submitted by M-Net to MultiChoice conditional
on the submission by MultiChoice to M-Net of the
information set out in Schedule 4 in accordance with
clause 7.
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6.6.2. M-Net shall make available, upon reasonable notice by
MultiChoice, and MultiChoice shall be entitled to
examine and take copies of, all relevant books,
records and/or contracts or extracts thereof
containing information which may be required for the
determination and verification of (i) any minimum
guarantees payable by M-Net to * and (ii) the actual
programming per Subscriber cost paid by M-Net to * as
referred to in clause 6.7.1.
6.7. All Per Subscriber Fees payable by MultiChoice to M-Net
pursuant to the provisions of this Agreement:
6.7.1. which relate to the distribution of the MNET Analogue
channel in South Africa and MultiChoice Ku and C
Bouquets will be payable in South African Rand
monthly in arrears within 15 (fifteen) days of the
last day of each Accounting Period applying (where
applicable) the US Dollar/South African Rand exchange
rates (as published by the Standard Bank of South
Africa from time to time) applicable on the last day
of the Accounting Period, in respect of which payment
is due; and
6.7.2. which relate to the analogue distribution of the
Channels in South Africa will be payable in South
African Rand monthly in arrears within 15 (fifteen)
days of the last day of each Accounting Period;
6.7.3. which relate to any of the Channels transmitted in
analogue format or by terrestrial means outside of
South Africa will be payable in South African Rand
annually in arrears within 15 (fifteen) days after 31
March in respect of the preceding 12 (twelve)
Accounting Periods of the Term (pro rated where
applicable), calculated on a monthly basis for each
Accounting Period comprising the relevant year with
reference to the average US Dollar/South African Rand
exchange rate over the Accounting Period to which
such payment relates, as published from time to time
by the Standard Bank of South Africa Limited.
6.8. With effect from the Start Date, MultiChoice shall deliver to
M-Net a statement (i)
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(ii) subject to the consent of M-Net which shall not be
unreasonably withheld or delayed, such other date as
MultiChoice may advise from time to time but which will be no
later than fifteen (15) days after the end of each Accounting
Period, MultiChoice shall deliver to M-Net a report relating
to that Accounting Period recording in detail the information
set out in Schedule 4 and such report shall be certified as
accurate in all respects by the MultiChoice Chief Executive or
Chief Financial Officer or such other person who may be
appointed by either of the aforementioned.
6.9. Following receipt of the report referred to in clause 6.9,
M-Net shall deliver to MultiChoice an invoice showing the Per
Subscriber Fees due by MultiChoice to M-Net and MultiChoice
shall pay such invoice in full in accordance with clauses 6.1
and 6.8 above.
6.10. Any payment made by either Party in terms of this Agreement
shall, except in the case of fraud or manifest error or, in
the case of payment by MultiChoice to M-Net where M-Net's
records are subject to an audit by a supplier of programming
to M-Net, be deemed to be accurate and complete if neither
Party has disputed the accuracy of completeness of such
payment by notice to the other within 12 (twelve) months from
the date of receipt by the relevant Party of such payment.
6.11. Notwithstanding any inability to obtain exchange control
approvals from any country in the Territory to remit Per
Subscriber Fees to South Africa, MultiChoice shall make
payment of all such Per Subscriber Fees to M-Net in South
Africa in accordance with this Agreement.
6.12. Neither Party shall be entitled to apply set off in respect of
any fees or charges due in terms of this Agreement or related
agreements.
6.13. MultiChoice and/or its Affiliates shall be liable for all bad
debts arising out of failure to collect such subscription
fees.
6.14. It is recorded that the portion of the per Subscriber charge
which is reflected in this
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Agreement as a Per Subscriber Fee is collected by MultiChoice
acting as an agent for M-Net. Accordingly, MultiChoice in
consideration for the grant of the rights set out in clause 4
acts as M-Net's agent in the collection and payment to M-Net
of Per Subscriber Fees which are payable by MultiChoice to
M-Net in terms of this Agreement.
6.15. Subject to the provisions of clause 31.2 and provided that
there will be no additional fees or costs of whatsoever kind
payable under this Agreement as a result of the following
assignment, M-Net may, upon not less than one month's notice
in writing to MultiChoice, assign all of its rights, in
relation to SS only, to receive payment in terms of this
clause 6, to SuperSport. On receipt of such notice,
MultiChoice shall thereafter be obliged to effect payment of
any Per Subscriber Fees payable hereunder in respect of the
rights so assigned, directly to SS (or at the request of M-Net
to M-Net as agent for SS). Such payment shall be on full
discharge of MultiChoice's obligations to in respect of all
rights granted in terms of this Agreement.
7. RECORDS AND AUDIT
7.1. Notwithstanding the certification of the monthly reports
contemplated in 6.9, MultiChoice shall supply to M-Net within
120 (one hundred and twenty) days of each anniversary of the
Effective Date, or in the case of termination of this
Agreement for whatever reason, within 120 (one hundred and
twenty) days of the date of termination, a statement certified
by the duly appointed auditors of MultiChoice certifying the
completeness and accuracy of all information contained in all
of the reports and statements supplied by MultiChoice to M-Net
in respect of the preceding year or aforesaid portion as the
case may be.
7.2. MultiChoice shall keep, or cause to be kept, and shall
maintain for a period of 5 years, complete, detailed and
accurate records and books of account in respect of its
subscriber base including, but not limited to, the number of
Subscribers in each Accounting Period and of all payments
effected under this agreement, and such records shall contain
all information which may be required for the determination
and verification of all Per Subscriber Fees paid or payable
under this Agreement and
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of all information required for the purposes of the reports
contemplated in 6.9.
7.3.
7.3.1. During this Agreement and subject to clause 8.1,
M-Net shall be entitled to examine or audit the books
and/or records contemplated in clause 7.2 and take
copies and extracts therefrom during normal business
hours upon not less than 5 (five) days prior written
notice, provided that such inspection or audit shall
take place not more frequently than once in any 12
(twelve) month period except if a material
discrepancy is found in which case M-Net shall have
the right to make two further such inspections within
the same twelve month period.
7.3.2. MultiChoice shall permit independent auditors and/or
representatives appointed by any supplier of
programming to M-Net to examine, inspect or audit the
books and records contemplated in 7.2 in accordance
with the provisions contained in 7.3.1; provided that
such independent auditors and/or representatives are
appointed solely on the basis that they convey the
results (rather than any documents supporting the
results) of any audit report to the programme
supplier concerned.
7.4. If any inspection or audit carried out by or on behalf of
M-Net pursuant to clause 7.3 reveals that MultiChoice has
under-reported the amount payable to M-Net, then,
notwithstanding clause 6.11, MultiChoice shall make immediate
payment to M-Net of the amount due and owing. If any
inspection or audit reveals that MultiChoice has over-reported
the amount payable to M-Net, then, notwithstanding clause
6.11, M-Net shall immediately raise a credit note for the
appropriate refund to MultiChoice save where M-Net has paid
programme suppliers based on inaccurate figures and is unable
to obtain refunds from such suppliers, notwithstanding all
reasonable efforts being made by M-Net to do so, in which
event the amount to be refunded to MultiChoice shall be
reduced accordingly.
7.5. All costs of auditing, excluding costs incurred by MultiChoice
pursuant to clause 7.1, shall be borne by M-Net unless any
report or information submitted to M-Net by
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MultiChoice is found to be materially inaccurate, in which
case the costs shall be borne by MultiChoice. For the purposes
of this clause 7.5 a report or any information which differs
in respect of any figure from the correct figure by more than
5% shall be deemed to be materially inaccurate.
7.6. Should M-Net incur any liability to pay any interest, fine or
penalty to third parties as a direct result of incorrect,
inaccurate, incomplete or late reporting by MultiChoice,
MultiChoice shall indemnify M-Net to the full extent of the
amount of such interest, fine or penalty actually paid by
M-Net.
8. PROPRIETARY AND INTELLECTUAL PROPERTY RIGHTS
8.1. M-Net acknowledges that all proprietary and intellectual
property rights (specifically including MultiChoice's
confidential Subscriber data base) arising from the conduct by
MultiChoice of its business shall, as between M-Net and
MultiChoice vest exclusively in MultiChoice.
8.2. M-Net shall, with MultiChoice's prior written consent, which
consent MultiChoice shall not be entitled unreasonably to
withhold or delay, be furnished by MultiChoice with the
identities and addresses of all Subscribers for the sole
purpose of conducting market research and/or relationship
direct marketing during the term of this Agreement (as
specified in Schedule 5 to this Agreement or as determined
otherwise by agreement between the Parties); provided that,
subject to clause 8.3, MultiChoice shall not otherwise be
obliged to disclose to M-Net the identity and addresses of
Subscribers in any circumstances whatsoever.
8.3. MultiChoice shall, as soon as its systems enable it to do so,
(which MultiChoice will use all reasonable endeavours to
expedite) provide M-Net within 48 hours after the last day of
each 3 month period of this Agreement (i.e. on a quarterly
basis) with a list of the names and addresses of all MUD
Subscribers, Commercial Subscribers and the number of MUD
Units and Hotel Rooms, respectively, (where applicable) within
the premises operated by each MUD and Commercial Subscriber,
for each country comprising the Territory. M-Net will be
entitled to provide the information
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contemplated in this clause 8.3 to any supplier of programming
to M-Net.
8.4. In each case, M-Net shall treat such identity and addresses of
subscribers as confidential and shall not utilise or disclose
any such names and addresses to any person for any purposes
other than as set out in 8.2 above or, in the case of
information supplied pursuant to 8.3, for the purposes of
disclosing such information to its programme suppliers. The
obligations described in this sub-clause shall be regarded as
material obligations of M-Net. Upon termination of this
Agreement other than by reason of default by M-Net,
MultiChoice shall undertake one mailshot to all Subscribers to
the Channels on behalf of M-Net, subject to MultiChoice
approving the content and wording of the mailshot (such
approval not to be unreasonably withheld) and M-Net shall, for
the avoidance of doubt, be entitled to include in the mailshot
its address and telephone number to enable Subscribers to
contact M-Net.
9. DELIVERY AND TRANSMISSION OF CHANNELS
9.1. M-Net shall, with effect from the Effective Date, at its own
cost and in accordance with the signal quality specifications
set out in Schedule 6 hereto deliver the Channels' Signals to
the MultiChoice Satellite uplink facility which is situated at
75 Republic Road, Randburg, South Africa (the "Facility").
MultiChoice may elect to change the location of the Facility
in which event M-Net shall deliver the Channels' Signals to
such new location; provided that all additional costs
necessarily incurred by M-Net as a result of such change of
location shall be for the account of MultiChoice and shall be
payable by MultiChoice to M-Net on demand.
9.2. M-Net shall ensure that the quality of the Channels' Signals
as delivered in accordance with this Agreement is sufficient
at all times to ensure that if they are properly transmitted
by MultiChoice by means of the Satellite and (if applicable)
by rebroadcast systems, all Subscribers with properly
functioning Decoders will be able to receive a clear broadcast
quality signal for the Channels, without interruption or
interference.
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9.3. If Delivery Failure is anticipated or occurs, M-Net shall
notify MultiChoice as soon as practicable and M-Net shall take
all reasonably possible steps to prevent and/or rectify
Delivery Failure.
9.4. The Channels' Signals shall, upon being received at the
Facility, be transmitted by MultiChoice or its Affiliates, on:
9.4.1. such terrestrial and rebroadcast transmission
networks as may be required to ensure reception of
the Channels as provided hereunder by Non-DTH
Subscribers as part of existing television
programming packages offered as at the date hereof by
MultiChoice in the Territory in accordance with
Schedule 7 hereto; and
9.4.2. the Satellite on both Ku and C Band transponders as
part of the MultiChoice Bouquets to be offered by
MultiChoice in the Territory in accordance with the
Ku and C band coverage areas reflected in Schedule 8
hereto; and
9.4.3. such other terrestrial and/or rebroadcast
transmission networks or other non-DTH transmission
networks as may be required to deliver any of the
Channels to non direct to home Subscribers who
subscribe to any of the Channels as a result of such
Channels' inclusion in non-DTH MultiChoice television
channel(s) bouquet(s) which is/are developed in the
Territory after the Effective Date.
9.5.
9.5.1. MultiChoice shall, in respect of the transmission of
the Channels' Signals on the Satellite, ensure that:
9.5.1.1. the Channels' Signals are of a clear
broadcast quality; and
9.5.1.2. the Channels' Signals comply with the
technical criteria set out in CCIR601
(rating 4);
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9.5.1.3. comparable bit rates will be used for
comparable television channels on the
MultiChoice Bouquets; and
9.5.1.4. the minimum bit rate used for the Channels
when employing statistical multiplexing
technology will not be less than the bit
rate used for comparable channels and may be
more than that bit rate, subject always to
availability and cost;
9.5.2. MultiChoice shall, in respect of the transmission of
the Channels' Signals on any terrestrial and
rebroadcast transmission network, ensure that the
Channels' Signals are of a clear broadcast quality
equivalent to any Free TV system within the relevant
country and comply with the specifications and
service levels set out in Schedule 9.
9.6. M-Net shall at any stage during this Agreement be entitled to
appoint an independent technical representative to ensure
compliance with the provisions of clause 9.5 and MultiChoice
shall, in such instance, grant all reasonable access to all
relevant transmission facilities.
9.7. If Transmission Failure is anticipated or occurs, MultiChoice
shall notify M-Net as soon as practicable and MultiChoice
shall take all reasonably possible steps to prevent and/or
rectify Transmission Failures.
9.8. In consideration of the transmission of the Channels' Signals
by MultiChoice via the Satellite in terms of this clause 9,
M-Net shall throughout the Term pay to MultiChoice, in respect
of each Accounting Period, Transponder Costs of an amount
equal to the monthly transponder, uplink, staff, overhead and
related operational costs of transmission of the Channels on
the Satellite (such Transponder costs being calculated pro
rata with reference to that proportion of transponder capacity
being used by the Channels when compared to the total amount
of transponder capacity being used by all channels on the
MultiChoice Bouquets). For the avoidance of
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doubt nothing in this clause 9.8 shall be construed as
requiring M-Net to pay any costs associated with dormant
transponder capacity not used for transmission of the
MultiChoice Bouquets.
9.9. MultiChoice, in recognition of the fact that M-Net pays the
Transponder Costs in accordance with 9.8, undertakes that, if
sufficient satellite transponder capacity is not available to
transmit all of the channels comprising the Basic Tier and the
Premium Tier and the A la Carte Channels or the MultiChoice
Bouquet, then MultiChoice will in utilising such transponder
capacity as may be available to MultiChoice treat the Channels
in the same manner as MultiChoice treats any other channels
which are supplied by a programme supplier who pays fees in
respect of transponder capacity and the Channels will be given
preference over any channel in respect of which transponder
costs are not paid by the programme supplier.
10. TIERING
10.1. MultiChoice undertakes that the Channels shall be transmitted
and packaged as premium channels in the MultiChoice Bouquets
throughout the Term, and shall be included in the Premium Tier
from the date upon which MultiChoice tiers the MultiChoice
Bouquet. In addition, MultiChoice further undertakes that the
Channels shall be marketed as premium channels on non
direct-to-home Pay TV Systems in South Africa, Lesotho,
Botswana, Namibia, Nigeria, Ghana, Kenya, Uganda, Tanzania and
Zambia in accordance with Schedule 7 hereto. The Channels
shall continue to be transmitted in this manner on such non
direct to home pay TV systems during the Term provided that
MultiChoice or its Affiliates are able to maintain the
necessary broadcast licences and such other permissions as may
be required and provided further that MultiChoice is able to
continue providing subscriber management services in these
countries on a basis that is commercially viable; provided
further that:
10.1.1. in those countries set out Schedule 7 where
MultiChoice has the rights to transmit a television
channel on one frequency only, the frequency shall be
used for either MNA or MND, or subject to M-Net's
consent, SS, depending
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on whether the rights acquired by M-Net in respect of
the relevant channel cover the relevant country;
10.1.2. in those countries set out in Schedule 7 where
MultiChoice has the rights to transmit television
channels on 2 frequencies only, MultiChoice shall
distribute in accordance with 10.1.1, one of the
Channels contemplated in that clause on the first
frequency and shall distribute any other Channel on
the second frequency;
10.2. It is recorded that the tiering structure and/or
channel/programming content of the MultiChoice C Bouquet may
be different to that of the MultiChoice Ku Bouquet, and in
addition, the tiering structure and/or the channel/programming
content of the MultiChoice Bouquets may differ from country to
country and/or area to area within the Territory.
10.3. The Channels shall also be included, whenever this is deemed
desirable by MultiChoice acting in accordance with the
criteria and requirements referred to hereunder, as part of
any non direct to home Pay TV Systems set up after the
Effective Date in countries forming part of the Territory
where such Pay TV Systems are managed by MultiChoice or an
Affiliate. The criteria and requirements which MultiChoice
shall adhere to in this regard are as follows:
10.3.1. in countries forming part of the Territory where
MultiChoice has rights to transmit a television
channel on either one or two frequencies, M-Net may
nominate its preferred Channel or Channels, as the
case may be, for such transmission and MultiChoice
shall consult with M-Net prior to the finalisation of
MultiChoice's decision concerning such transmission,
taking into account the needs of the Territory.
10.3.2. M-Net shall be entitled to attend all meetings and/or
negotiations between MultiChoice, its Affiliates and
any local Pay TV Systems operator in any part of the
Territory called by MultiChoice for the specific
purpose of discussing the proposed inclusion or
exclusion of any of the Channels in or from such non
direct to home Pay TV Systems and MultiChoice shall
give
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M-Net reasonable and timely notice of all such
meetings.
10.4. For the avoidance of doubt MultiChoice shall only be entitled
to supply Communal Subscribers with the SS Channel and no
other Channel shall be supplied to any Communal Subscriber.
10.5. MultiChoice shall not knowingly cause, allow or permit any
Channel or any part thereof other than SS to be exhibited in
any common area in a non-residential establishment.
10.6. MultiChoice shall not be entitled to charge Subscribers any
specific subscription fee for the right to receive the MMD or
MMA channels. In addition, MMD may only be distributed by
MultiChoice to Subscribers who have the right to receive MND
(and MMA to subscribers who have the right to receive MNA).
10.7. For the avoidance of doubt, the Parties record that
MultiChoice shall only distribute the relevant Channels in the
appropriate countries as set out in Schedule 7.
10.8. Subject to the provisions of this Agreement, MultiChoice shall
have the right to charge such Viewing Card connection fee
and/or such other subscription charges as MultiChoice may
determine in its discretion.
11. ENCRYPTION AND DISTRIBUTION OF THE CHANNELS
11.1. During this Agreement, MultiChoice shall -
11.1.1. Encrypt the Channels' Signals before transmitting the
Channels' Signals from the Facility and shall ensure
that, subject to clause 14, the Channels' Signals are
Encrypted when transmitted into the Territory by the
Satellite;
11.1.2. procure the transmission of the Channels' Signals
(together with all over-the-air addressing
information) from the Facility to the Territory by
means of the Satellite;
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11.1.3. conclude, in its name or through its
nominees, agents or Affiliates, subscription
agreements with Subscribers and potential
subscribers, which agreements confer upon
Subscribers the right to receive and decrypt
the Channels' Signals and to view, inter
alia, the Channels in unencrypted format, on
such terms (including the price to such
Subscribers) as MultiChoice may determine,
subject to the provisions of this Agreement;
and
11.1.4. procure that each Subscriber is in
possession of such enabled Viewing Card as
may be necessary to receive and decrypt the
Channels' Signals.
11.1.5. at all times ensure that Subscribers pay for
their right to receive the Channels save as
provided elsewhere in this Agreement;
11.1.6. shall in no circumstances whatsoever enable
any Decoder in any area for which an
admission fee is charged other than a
Decoder operated by a Communal Subscriber
and then solely in respect of the SS Channel
(in conjunction with the Supersport
Package);
11.1.7. shall not knowingly enable any Decoder to
receive the Channels outside the Territory
nor shall MultiChoice promote the Channels
outside the Territories.
11.2. MultiChoice warrants that MultiChoice shall at all times (save
for the MND Open Time window) encrypt the Channels using the
Irdeto technology or such other form of substituted encryption
technology as may be determined by MultiChoice and approved by
M-Net provided that such approval shall not be unreasonably
delayed or withheld.
11.3. MultiChoice shall notify M-Net as soon as is practicable but,
in any event, at least 60 (sixty) days prior to any proposed
material change to any of its encryption systems or devices.
11.4. M-Net and any programme supplier with whom M-Net concludes any
agreement
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shall be entitled on reasonable notice to MultiChoice to
inspect the premises of MultiChoice, and/or its Affiliates,
for the purposes of ascertaining the safety and security
measures implemented by MultiChoice and/or its Affiliates
pursuant to this Agreement. However, neither M-Net nor any
programme supplier shall be entitled to have access to any
confidential information which is proprietary to MultiChoice
save that an appropriately qualified third party nominated by
M-Net or the relevant programme supplier, as the case may be,
will be permitted to verify the information requested without
divulging to M-Net or the relevant programme supplier the
confidential information itself, provided that third party has
signed MultiChoice's standard confidentiality agreement.
11.5. MultiChoice shall ensure that all decoders are correctly
enabled and tiered to receive the channels and hereby
indemnifies M-Net against any damages, liabilities, fines or
penalties sustained or incurred by M-Net arising out of or
connected to a breach of this clause 11.5 by MultiChoice.
11.6. MultiChoice shall immediately notify M-Net of any Piracy of
which it becomes aware and shall, together with M-Net,
determine the steps which should be taken, such as the
upgrading of decoders and/or other anti-piracy campaigns in
order to cause such Piracy to cease and shall keep M-Net fully
informed of the implementation of such steps; provided that if
the Parties are not able to agree on the steps which should be
taken then this matter shall be determined in accordance with
clause 27. If M-Net incurs or suffers expenses, damages,
losses, penalties or fines as a result of Piracy which was
known to MultiChoice but not notified by MultiChoice to M-Net
then MultiChoice shall indemnify M-Net and hold it harmless
from and against all such expenses, damages, losses, penalties
or fines.
11.7. MultiChoice shall, if it becomes aware that Piracy is
occurring pursuant to a breach of the encryption technology
contemplated in clause 11.2, exercise all rights which it has
or may have against Irdeto BV ("Irdeto") whether at common law
or in terms of the agreement between MultiChoice and Irdeto
relating to the use of the Irdeto Technology in order to
procure the termination of the Piracy within the shortest time
which is reasonably possible.
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12. SMS
During this Agreement MultiChoice shall provide SMS in respect of the
Channels, such SMS to consist, inter alia, of the following:
12.1. maintaining a current computerised subscriber database capable
of recording sufficient details of each Subscriber, including
records of the status of Subscribers;
12.2. administering the subscriptions of Subscribers by producing
and (when required) distributing in the Territory contracts
for new Subscribers and setting up and maintaining an
infrastructure whereby the subscription contracts are
collected, returned and recorded;
12.3. procuring the distribution, sale, maintenance and repair of
Decoders in the Territory;
12.4. obtaining and distributing Viewing Cards to Subscribers (if
applicable) and issuing replacement Viewing Cards from time to
time as MultiChoice may deem appropriate;
12.5. enabling new Subscribers and disenabling defaulting
Subscribers or those wishing to cancel their subscriptions,
via the conditional access over-the-air addressing system;
12.6. administering the upgrades and downgrades for Subscribers who
request a variation in their chosen programme package;
12.7. handling the despatch of invoices in respect of the collection
of subscription monies payable by subscribers or administering
payments in respect thereof;
12.8. receive and respond promptly to all enquiries from the public
and subscribers within the Territory concerning the Channels
and, in particular establish and maintain telephonic customer
help and support lines and customer service centres within
each country in which the Channels are broadcast by means of
non direct to home pay TV Systems;
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12.9. timeously communicating all changes in the scheduling or
programming of the Channels which are notified by M-Net to
MultiChoice to the customer service centres contemplated in
12.8;
12.10. supplying M-Net in November of each year with MultiChoice's
projections for subscriber growth for the forthcoming
financial year.
13. ADVERTISING
13.1. All advertising revenue from the flighting of advertisements
on the Channels shall be for M-Net's sole benefit.
13.2. It is recorded that a separate agreement has been reached
between the Parties regarding the allocation of time, inter
alia, for Promotional Advertisements on the Channels and
channel-specific and event-specific promotions on other
channels in the applicable MultiChoice Bouquet.
13.3. In respect of MND and CSN collectively, M-Net will provide
MultiChoice, free of charge, with airtime with a reach of 150
audience rating points ("ARs") per month for the sole purpose
of screening Promotional Advertisements. MultiChoice shall be
entitled, in respect of those Promotional Advertisements
utilising the ARs, to incorporate any promotional materials
promoting the MultiChoice Bouquets, including materials that
are channel specific. With respect to promotional materials
that are programme specific, MultiChoice shall be required to
obtain M-Net's consent before proceeding.
13.4. The Promotional Advertisements referred to in clause 13.2
above shall be booked in accordance with guidelines to be
agreed between the Parties from time to time.
13.5. The air time provided for Promotional Advertisements on the
Channels or on the MultiChoice Bouquets, if not used in an
Accounting Period will not be transferable to
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any subsequent Accounting Period.
13.6. The scheduling of the promotional slots shall be at M-Net's
discretion, provided that:
13.6.1. M-Net shall consult with MultiChoice from time to
time regarding such scheduling; and
13.6.2. the scheduling shall be based on a regular pattern to
be agreed between the Parties from time to time.
14. OPEN TIME
14.1. Notwithstanding MultiChoice's obligations to encrypt the
Channels, M-Net shall, in its sole discretion, but after
consultation with MultiChoice determine from time to time
periods of Open Time during which the MND channel shall be
transmitted in an unencrypted format and shall notify
MultiChoice of such periods. Subsequent to the implementation
of tiered broadcasting by MultiChoice, MultiChoice shall,
during such periods, transmit the MND Channel in an
unencrypted format to all Subscribers within the Ku-band
footprint of the Satellite and to all other Persons within
such footprint in possession of a Decoder.
14.2. The Parties record that, until determined otherwise by M-Net
in accordance with clause 14.1, the periods of Open Time will
be 17:00 to 19:00 (CAT) each day of the week.
15. PROGRAMMING
15.1. The programmes comprising the Channels will be determined by
M-Net in its sole discretion and in accordance with the terms
of this Agreement. All copyright to the Channels' Signals and
the broadcasts in respect of the Channels shall remain vested
in M-Net.
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15.2. M-Net will ensure that the content (including advertising) of
the Channels complies with the applicable laws, regulatory
codes, orders and directions issued from time to time by any
competent regulatory authority in South Africa, and M-Net
shall use its reasonable endeavours to do the same with regard
to any other countries in which the Channels are exhibited
from time to time by way of terrestrial non direct to home
distribution systems ("non DTH countries").
15.3. If M-Net becomes aware of the fact that the content of the
Channels does not comply with applicable laws and regulations
in any such non DTH countries, it shall advise MultiChoice of
such fact as soon as practicable and the Parties undertake to
meet and to negotiate, in good faith, with a view to agreeing
the action which should be taken in respect of such country;
provided that if the Parties are unable to reach agreement
then MultiChoice shall be entitled, in respect of the relevant
non DTH country to terminate the distribution of the relevant
Channel in such non DTH country via the relevant non direct to
home network but shall not be entitled to withdraw the country
from the Territory and shall, further, not be entitled to
black out any Channel (or part thereof) in respect of which
such advice has been received and action has not been agreed.
15.4. MultiChoice recognises that it will be difficult for M-Net to
keep abreast of all censorship laws, rules, regulatory codes,
orders and directions applicable throughout the Territory.
MultiChoice will be obliged to pass on information relating to
such censorship laws, rules, regulatory codes, orders and
directions which are reasonably likely to be relevant to the
Channels and which are applicable in the Territory, that
MultiChoice may come across in the course of its business
activities in the Territory. However, nothing in this clause
15.4 shall be construed as obliging MultiChoice to familiarise
itself with all such laws, rules, regulatory codes, orders and
directions, that may be applicable in the Territory.
15.5. M-Net shall not be liable to MultiChoice and/or to any
Affiliate for any breach of laws, rules, regulatory codes,
orders, directions or regulations arising from the exhibition
by MultiChoice of the Channels in the Territory or in any
country forming
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exhibition by MultiChoice of the Channels in the Territory or
in any country forming part of the Territory in circumstances
where M-Net is unable to comply with or to ascertain the laws,
rules, regulatory codes, orders, directions or regulations of
the relevant country forming part of the Territory and has
given MultiChoice 30 days prior written notice in writing that
it is unable to do so.
15.6. Notwithstanding the provisions of 15.1 and the obligation
placed on M-Net to obtain Clearances in respect of the
programming which is included in the Channels, the obtaining
of clearances by M-Net in respect of all rights concerning all
music which is included in the Channels ("Music Rights") shall
be dealt with in accordance with this clause. M-Net shall use
reasonable endeavours to procure the clearance of all Music
Rights in respect of the Territory. The Parties record that
the obtaining of clearances in respect of Music Rights may
necessitate the payment, in those countries within the
Territory in which the Channels are distributed via a non
direct to home distribution system, to Music Rights
collection agencies or other organisations within such
countries. M-Net shall use its reasonable endeavours to
negotiate with and effect payment to such agencies or
organisations and MultiChoice shall offer its advice and
assistance to M-Net to facilitate such negotiations. If,
notwithstanding M-Net's reasonable endeavours, M-Net is unable
to clear the necessary Music Rights in respect of any country
on commercially viable terms then M-Net shall inform
MultiChoice in writing of the nature of the rights which M-Net
has been unable to clear and the reasons for such failure. *
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15.7. MultiChoice shall not, without the consent of M-Net, in any
way add to, alter or delete any part of the programming
comprising the Channels (other than as provided for in this
Agreement) and shall ensure that the Channel Signals are
distributed contemporaneously and on an uninterrupted basis at
all times except for encryption or by agreement.
15.8. MultiChoice undertakes to use its reasonable endeavours to
protect the copyright of authors of the works exhibited
pursuant to this agreement and the copyright of M-Net of any
broadcast of the Channels. Should MultiChoice become aware of
any third party infringing the rights of M-Net or the rights
of copyright holders of works exhibited as part of the
Channels, pursuant to the exhibition of the Channels,
MultiChoice will promptly inform M-Net of all the
circumstances of the infringement within MultiChoice's
knowledge at the time. Should M-Net decide to take legal or
other action of any kind against any such party, MultiChoice
shall assist M-Net in every reasonable way requested by M-Net
in pursuing any such action. Each Party shall, however, bear
its own costs arising out of or pursuant to such action,
unless otherwise agreed between the Parties. It is recorded
that M-Net has obligations similar to the aforegoing
obligations in its agreements with its programme suppliers.
15.9. Should MultiChoice decide to take legal or other action of any
kind against any Party alleged to be infringing the rights of
M-Net in relation to any material provided by M-Net,
MultiChoice shall first seek and obtain the written consent of
M-Net to such action and further shall keep M-Net fully
informed of the progress of such action. M-Net shall be
obliged to assist MultiChoice in every reasonable way
requested by MultiChoice in pursuing such action. Each Party
shall however bear its own costs arising out of or pursuant to
such action, unless otherwise agreed between the Parties.
16. MARKETING
16.1. MultiChoice shall promote and market the Channels to Pay TV
Viewers in the Territory and shall conduct marketing and
promotion activities with a view to maximising the number of
Subscribers to the Channels. The nature of such activities
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shall, subject to the provisions of this Agreement, be in the
absolute discretion of MultiChoice. The marketing and
promotion shall be of a high standard and shall not reflect
adversely upon the Channels or M-Net or any programme supplier
contracted as such by M-Net.
16.2. The Parties shall develop guidelines for the preparation,
production, distribution and otherwise of all promotional and
marketing material which relates or is connected in any way to
the Channels ("the Guidelines"). MultiChoice undertakes that
all marketing and promotional material which in any way refers
or relates to the Channels will comply with such Guidelines.
16.3. If M-Net undertakes any promotion of the Channels, then it
shall ensure that -
16.3.1. all promotional materials are prepared and
distributed in accordance with the Guidelines;
16.3.2. any such materials do not in any way reflect
adversely on MultiChoice or imply that any programme
service in the MultiChoice Bouquet (other than the
Channels or any other programme service owned by
M-Net) is owned, operated or controlled by it.
16.4. M-Net shall provide to MultiChoice, at M-Net's cost, monthly
listings of the programme schedules for the Channels, which
shall, whenever possible, be provided at least ninety (90)
days before the start of the calendar month in which such
programmes are to be transmitted and which shall be provided
in such format as MultiChoice may reasonably require from time
to time. Such listings shall be as accurate as possible and
M-Net shall notify MultiChoice promptly upon any change being
made thereto and MultiChoice shall, in turn, employ all
reasonable endeavours to make such changes in all promotional,
advertising and marketing materials and also to reflect such
changes in the electronic programming guide. MultiChoice may
use such information in any printed or electronic media in
order to market and promote the Channels.
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16.5. MultiChoice acknowledges that the Marks belong solely and
exclusively either to M-Net or the Relevant Owner. M-Net
hereby grants to MultiChoice (or where the Relevant Owner is
not M-Net, M-Net will use its reasonable endeavours to procure
that the Relevant Owner grants to MultiChoice) a licence to
use the Marks during the Agreement (free of charge to
MultiChoice) in all media for the sole purpose of advertising
and marketing the MultiChoice Bouquets and/or the Channels,
such licence to be restricted to the non-commercial usage of
such Marks and to terminate automatically if this Agreement
terminates. MultiChoice's use of the Marks shall be in
accordance with the Guidelines. All goodwill in the Marks
shall automatically vest in M-Net or the Relevant Owner, as
appropriate. MultiChoice shall at its own cost promptly make
available to M-Net, at its reasonable request, copies of any
promotional advertising material created or disseminated by
MultiChoice which mentions or uses any of the Marks.
16.6. M-Net acknowledges that the MultiChoice Marks belong solely
and exclusively either to MultiChoice or to Affiliates of
MultiChoice. MultiChoice hereby grants to M-Net a licence to
use the MultiChoice Marks during this Agreement (free of
charge to M-Net) in all media for the sole purpose of
advertising and marketing the MultiChoice Bouquets and/or
the Channels, such licence to be restricted to the
non-commercial usage of such marks and to terminate
automatically if this Agreement terminates. M-Net's use of
the MultiChoice Marks shall be in accordance with the
Guidelines. All goodwill in the MultiChoice Marks shall
automatically vest in MultiChoice or the Relevant Owner, as
appropriate. M-Net shall at its own cost promptly make
available to MultiChoice, at its reasonable request, copies
of any promotional advertising material created or
disseminated by M-Net which mentions or uses any of the
MultiChoice Marks.
16.7. M-Net will provide MultiChoice with such research results from
image tracking and disconnect, quantitative and qualitative
studies (unless, in the case of particular quantitative and/or
qualitative studies, M-Net determines that these are of
sufficient strategic importance to be damaging if provided to
MultiChoice) as may be necessary and useful for MultiChoice to
position, market and sell the Channels and to enhance the
service which MultiChoice offers to Subscribers. In return
MultiChoice shall
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provide M-Net with access to the market research which is
carried out by MultiChoice concerning the Channels and the
MultiChoice Bouquets, and MultiChoice shall provide regular
reports to M-Net concerning MultiChoice's GAP survey results.
M-Net may, in addition, request MultiChoice to include certain
incremental supplementary market research relating to the
Channels as part of the ongoing MultiChoice market research
to which M-Net has access pursuant to this clause and such
incremental research will be conducted by MultiChoice but at
M-Net's incremental cost. Each Party will make research
results and reports available to the other within 21 days of
such results or reports becoming available to the Party
commissioning the relevant research.
16.8. M-Net will make available to MultiChoice, free of charge on a
monthly basis, a variety of materials, including in tape
format, promoting the Channels, insofar as the rights granted
to M-Net by its licensors permit it to do so.
16.9. Each Party will be entitled to preview promotional materials
produced by the other for the purposes of ascertaining factual
accuracy prior to the production of such promotional materials
and each Party shall comply with any reasonable instructions
issued by the other concerning the rectification of factual
errors. MultiChoice shall, in addition, be obliged: (1) to
obtain M-Net's approval to access M-Net's tape library for the
purposes of obtaining and using recorded extracts from, or
relating to, the Channels for promotional purposes; and (2) to
clear with M-Net, at the conceptual stage, all promotional and
marketing material pertaining to the Channels and/or
MultiChoice Bouquet, whether for broadcast or other
distribution, where such material will incorporate material
owned by M-Net or which M-Net has obtained from its programme
suppliers. M-Net shall not unreasonably withhold or delay its
approval (which shall be deemed to be given if M-Net has not
responded within one working day save in exceptional
circumstances where M-Net has indicated that the approval will
take longer).
16.10. MultiChoice shall promptly inform M-Net in the event that
MultiChoice becomes aware that a significant decrease in the
availability of Decoders in the Territory has occurred or is
likely to occur.
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17. ANALOGUE PROGRAMME GUIDE
17.1. MultiChoice shall be responsible, at its cost and expense,
subject to clauses 17.3 and 17.4, for compiling a monthly
television guide magazine (the "Analogue Guide") including a
separate programme guide section of at least 10 pages in
length setting out details of the programming comprising the
Channels, for distribution to analogue Subscriber in the
Territory. The Analogue Guide shall include information to be
supplied to MultiChoice by M-Net in digital data format
concerning the programmes on the Channels during the month to
which the relevant edition of the Analogue Guide relates.
Editorial control of the Analogue Guide shall vest in
MultiChoice, subject to due consultation with M-Net; provided
that all pages allocated to M-Net pursuant to clause 17.2
shall be subject to M-Net's approval and shall be submitted to
M-Net in electronic final proof form prior to the reproduction
of the magazine and the guide to which such pages relate. In
addition, the clearance procedure contemplated in clause 16.9
shall apply in respect of all visual material which is
included in the guide which is proprietary to M-Net or to any
programme supplier contracted as such by M-Net.
17.2. It is recorded that M-Net is currently allocated 30 (thirty)
pages in respect of the Analogue Guide and the Digital Guide
(as defined hereafter) at the MultiChoice programme guide per
page rate card less a 30% (thirty percent) discount with no
Oracle or other commissions applied. M-Net shall continue to
be obliged to take up and pay for the aforementioned pages
allocated to it.
17.3. M-Net shall be entitled to purchase such additional insert and
advertising pages in the Analogue and Digital Guides from
MultiChoice as MultiChoice may determine in its discretion at
the price rate referred to in clause 17.2 and M-Net shall be
entitled to sell such pages to any Person and retain the whole
of the proceeds of such sales. No such sales shall be
concluded by M-Net without MultiChoice's prior written
confirmation (which shall not be unreasonably delayed or
withheld) of the availability of such inserts or pages and the
prices applicable thereto.
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17.4. One Analogue Guide per month shall be mailed by MultiChoice to
each analogue Subscriber to the Channels at MultiChoice's cost
save that M-Net shall bear any additional mailing costs in
respect of any additional pages requested by it in terms of
clause 17.3. MultiChoice shall also provide M-Net with such
additional programme guides as M-Net may order from
MultiChoice and MultiChoice shall be entitled to charge M-Net
for such programme guides at a rate agreed upon between the
Parties.
17.5. Sales of pages of advertising and inserts in the Analogue
Guide will be effected by M-Net or its nominee who will bear
all the cost of the sales but retain 20% of the net proceeds
of the sales of advertising and inserts as a commission or
such other amount as may be agreed by the Parties from time to
time.
17.6. All costs associated with the production of the magazine and
programme Analogue Digital Guide, including but not limited
to printing, distribution and mailing, shall be borne by
MultiChoice save for those costs which are borne by M-Net at
present in accordance with the usual course of business
between the Parties, such as, for example, certain charges
relating to transparencies, duplication, picture scanning,
photography and database subscribers (M-Lib) which shall
continue to be borne by M-Net.
17.7. MultiChoice shall allocate to M-Net at least 8 cover pages of
the Analogue Guide, at no extra cost, and M-Net shall be
entitled in its sole discretion to determine the topics which
will comprise such cover pages, save that the purpose of such
cover pages will be the promotion of all or any of the
Channels.
18. DIGITAL PROGRAMME GUIDE
18.1. MultiChoice may, at its sole discretion, compile television
guide magazines (the "Digital Guides") for distribution to
digital Subscribers. MultiChoice shall include in each of the
Digital Guides a selection of highlights from the listings
schedules for the Channels, as well as inclusion in the
listing of programme titles in the central section of the
Digital Guides, for as long as MultiChoice, in its sole
discretion,
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continues to produce the Digital Guides. Editorial control of
the Digital Guides shall vest solely in MultiChoice, subject
to due consultation with M-Net; provided that all pages
allocated to M-Net pursuant to clause 18.2, if produced by
MultiChoice, shall be subject to M-Net's written approval and
shall be submitted to M-Net in final proof form prior to the
printing of the magazine and guide to which such pages relate.
In addition, the clearance procedure contemplated in clause
16.9 shall apply in respect of all visual material which is
included in the guide which is proprietary to M-Net or any
programme supplier contracted as such by M-Net.
18.2. MultiChoice shall mail one Digital Guide per month to each
applicable Subscriber to the Channels at MultiChoice's cost
save that the mailing costs of any pages purchased by M-Net in
terms of clause 17.3 shall be borne by M-Net.
18.3. The Parties have appointed Oracle as exclusive agent to sell
pages of advertising and inserts in both the Analogue and
Digital Guides on the terms and conditions of the agency
appointment as set out in the Letter of Understanding.
19. ELECTRONIC PROGRAMMING GUIDE
19.1. The Parties record that MultiChoice has developed an
electronic programming guide which will be made available to
Subscribers within the Territory. All costs and expenses
associated with the development and the provision of the
electronic programming guide shall be for the account of
MultiChoice, unless otherwise agreed between the Parties.
19.2. MultiChoice undertakes to consult with M-Net prior to the
final determination of the format of the electronic
programming guide; provided that MultiChoice undertakes, for
as long as MultiChoice, in its sole discretion, continues to
make such guide available, to afford to the Channels, the
first three positions in the default mode of such electronic
programme guide, or where Channels are grouped by genre, the
first position of the applicable genre, and in addition, the
same prominence in such electronic programming guide as is
afforded to the Channels in the magazine and
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guide in respect of the Ku band portion of the Territory;
provided further that nothing in this clause shall be
construed as precluding MultiChoice from earning additional
revenue from any channel which pays additional charges for
extra space in any electronic marketing materials aimed at
marketing the MultiChoice Bouquets or any part thereof.
20. REPRESENTATIONS AND WARRANTIES
20.1. M-Net and MultiChoice each represents, warrants and undertakes
to the other that it has the requisite power and authority to
enter into this Agreement and to perform fully its obligations
hereunder.
20.2. MultiChoice represents, warrants and undertakes to M-Net that:
20.2.1. MultiChoice will use and will procure that its
Affiliates use all reasonable endeavours to obtain
and hold such licences, consents and permissions as
are required from any third party and each
appropriate governmental authority and/or regulatory
body or authority for MultiChoice and such Affiliates
to perform their obligations under this Agreement (if
any) and that such licences, consents and permissions
are and will during this Agreement remain in full
force and effect and that MultiChoice is not in
breach of any of the terms of the same and
MultiChoice will not knowingly do or permit anything
to be done which might cause any such licences,
consents or permissions awarded to or obtained by it
to be suspended or revoked;
20.2.2. MultiChoice shall not record the Channels or any part
thereof and shall not knowingly permit any other
Person so to do, except as may be required by law or
otherwise to comply with the terms of any licence,
consent or permission referred to in clause 20.2.1.
or as may be agreed to in writing between the
Parties;
20.2.3. The Channels' Signals will only be transmitted in an
Encrypted format over Pay TV Systems except as may be
permitted by M-Net in accordance with
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clause 14;
20.2.4. Save as disclosed there is no significant breach of
the security of the Encryption technology as at the
date of signature hereof and shall employ all
reasonable security systems and procedures to prevent
any loss, theft, Piracy of which it become aware,
unauthorised use, reception or copying of the
Channels or any part thereof and shall immediately
notify M-Net if it knows that such an event has
occurred in accordance with clause 11.6.
20.3 M-Net represents, warrants and undertakes to MultiChoice that:
20.3.1. subject to clause 15.6, it has or will secure prior
to the delivery of the Channels' Signals all
Clearances required of M-Net in relation to the
broadcast, transmission and distribution of the
Channels throughout the Territory and, in
particular, that M-Net will subject to any
notification by M-Net to MultiChoice in terms of
clause 15.6, at all times during this Agreement hold
and comply with the terms of the Clearances and will
not do nor permit anything to be done nor omit to do
anything which might cause any such Clearances to be
suspended or revoked;
20.3.2 subject to clause 15, ensure compliance with the
applicable laws, rules, regulatory codes, orders and
directions issued from time to time by any competent
regulatory authority within the Territory, and with
relevant legislation enacted within the Territory
relating to the content of and/or advertising
contained in the Channels (except in relation to any
advertising inserted into the Channels by
MultiChoice);
20.3.3. it shall ensure that, subject to clause 15, neither
the Channels provided to MultiChoice by M-Net nor any
part thereof will infringe the copyright, performing
right, trademark, or other proprietary right or
interest of any third party or will constitute a
misuse of any confidential information of a third
party within the Territory;
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20.3.4. it shall retain possession of copies of the
transmissions of the Channels for such period and in
such form as is required to be retained by all
applicable South African regulations or legislation
and shall at the reasonable request of MultiChoice
provide (free of charge) a copy of any such part of
the transmissions of the Channels to any relevant
South African regulatory authority or agency;
20.3.5. it shall ensure that during this Agreement the
Channels retain their current quality, presentation,
style and character;
20.3.6. *
21. INDEMNITIES
21.1. MultiChoice hereby indemnifies M-Net and holds it harmless
from and against all liabilities, claims, costs, damages and
expenses (including, without limitation, reasonable legal
costs reasonably and properly incurred pursuant to a claim by
a third party) arising out of any breach by MultiChoice or any
Affiliate of MultiChoice of any term, condition,
representation, warranty, undertaking or obligation contained
in this Agreement.
21.2. M-Net hereby indemnifies MultiChoice and holds it harmless
from and against all liabilities, claims, costs, damages and
expenses (including, without limitation, reasonable legal
costs reasonably and properly incurred pursuant to a claim by
a third party) arising out of any breach by M-Net or any
Affiliate of M-Net of any term, condition, representation,
warranty, undertaking or obligation contained in this
Agreement.
21.3. MultiChoice hereby indemnifies M-Net and holds it harmless
against all liabilities, claims, costs, damages and expenses
(including, without limitation, reasonable legal costs
reasonably and properly incurred pursuant to a claim by a
third party) arising
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out of any claim brought about as a result of MultiChoice or
any of its Affiliates not obtaining any licence, consent any
permission referred to in clause 20.2.1, notwithstanding its
reasonable endeavours to do so.
21.4. If either Party wishes to assert a right to be indemnified for
claims by third parties as set forth in this clause 21 it
shall:
21.4.1. promptly notify the other of the claim or legal
proceeding which gives rise to such right as soon as
reasonably practicable upon becoming aware of the
same;
21.4.2. afford the other the opportunity to participate in
and fully control any compromise, settlement or other
resolution or disposition of such claim or
proceedings (subject to being fully indemnified by
that other Party); and
21.4.3. co-operate fully with any reasonable request of the
other Party in respect of the third Party claim, but
that other Party shall pay the costs of the
participation in and control of any compromise,
settlement or resolution or other disposition of such
claim or proceeding.
21.5. After the termination of this Agreement, the indemnity set out
in this clause 21 shall cease to have any force or effect
except in relation to antecedent breach by MultiChoice or
M-Net.
21.6. Notwithstanding the aforegoing, neither Party shall be liable
to the other for any indirect or consequential loss or damage
including, without limitation, loss of business or profits
arising out of any breach of this Agreement.
22. THIRD PARTY INFRINGEMENTS OF VIEWING CARDS
Each Party shall notify the other forthwith in the Territory upon
becoming aware that Viewing Cards intended for Subscribers and issued
by MultiChoice are being supplied outside the Territory or Pirated
(whether inside or outside the Territory) and M-Net shall, if
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so requested by MultiChoice, provide all reasonable assistance to
MultiChoice in taking appropriate action to prevent or combat such
distribution or piracy, provided that all costs and expenses incurred
by M-Net in this regard shall be for the account of MultiChoice.
23. PROGRAMME SUPPLIER OBLIGATIONS
23.1. The Parties record that M-Net, pursuant to agreements with
suppliers of programming to M-Net, ("the Supplier Agreements")
has assumed certain obligations which are set out in Schedule
10. MultiChoice undertakes that it will not take any action
which causes M-Net to breach such obligations. In addition,
MultiChoice undertakes to procure that all of MultiChoice's
Affiliates comply in full with the obligation assumed by
MultiChoice in terms of this clause 23.1.
23.2. MultiChoice agrees not to knowingly take any action which may
have the effect of frustrating the Supplier Agreements (or any
term of any such agreement) and to assume liability for and
indemnify M-Net against any and all liabilities, claims cost
and expenses arising out of actions by MultiChoice and/or its
Affiliates contrary to the obligations set out in Schedule 10
which may be amended by agreement between the Parties from
time to time in accordance with changes or additions to the
terms and conditions of the Supplier Agreements.
24. PARTIAL TERMINATION
24.1. If any Clearance, necessary regulatory clearance, permission,
licence or approval (the "Approvals") obtained by M-Net
terminates or is terminated (other than by reason of M-Net's
breach or failure to renew such Approval other than as a
consequence of a breach by MultiChoice of its obligations
hereunder); or
24.2. if M-Net demonstrates to MultiChoice that any such Approval
has been varied by (or that the renewal of such an Approval
would result in) the imposition on M-Net of a material
monetary burden which makes the provision of all or any of the
Channels to any country within the Territory not commercially
viable for M-Net; or
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24.3. if MultiChoice determines that the provision of the Channels
to any of the countries set out in Schedule 2B, results
pursuant to clause 6.7.1, in the imposition on MultiChoice of
a material monetary burden which makes the provision of any of
the Channels to any such country not commercially viable for
MultiChoice;
24.4. if MultiChoice wishes to terminate the distribution of any of
the Channels in the countries set out in Schedule 7 hereto
either for commercial reasons or as a consequence of a failure
to maintain the necessary broadcast licences or other
permissions in any of such countries;
24.5. if Piracy in any countries within the Territory is of such a
nature that M-Net is or is likely to be in breach of its
programme licensing agreements with its Licensors; or
24.6. if any re-broadcast operators authorised by MultiChoice to
rebroadcast any of the Channels within any country in the
Territory has failed or is failing to provide accurate
detailed accounting and reporting information in terms of this
Agreement to M-Net, such that M-Net is or is likely to be in
breach of its programme licensing agreement with its
Licensors;
then the relevant Party shall consult with the other Party
with a view to determining the appropriate action to be taken
in respect of the relevant country provided that if the
Parties are unable to reach agreement within a reasonable
period, then on the giving of 180 days written notice by M-Net
to MultiChoice where clauses 24.1, 24.2,24.5 or 24.6 apply or
by MultiChoice to M-Net where clauses 24.3 or 24.4 apply, the
notifying Party shall be entitled to remove such country from
the Territory or Schedule 2B, as applicable, and this
Agreement shall cease to apply in respect of such country,
without any liability of M-Net to MultiChoice or vice versa
except in respect of Per Subscriber Fees due and payable or
guarantee payments accrued at the date of withdrawal of such
country (but always subject to any contrary provisions in
clause 6.7).
The notifying Party may only remove a country from the ambit
of this Agreement in
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terms of this clause 24 in circumstances where it has fully
explained and disclosed to the other Party the nature of the
relevant difficulty and has consulted with the other Party in
accordance with this clause 24 provided that in terms of this
clause 24:
24.6.1. Neither Party shall be entitled to remove South
Africa from the Territory; and
` 24.6.2. M-Net shall be entitled subsequent to the removal of
any country, in terms of clauses 24.3 or 24.4, to appoint any
person to distribute the Channels within the relevant country
and to provide such other ancillary services as may be
provided.
25. TERMINATION AND REMEDIES
25.1. A Party may terminate this Agreement without prejudice to any
other rights or remedies available to such Party either at law
or in terms of this Agreement, including without limitation,
the right to claim damages (either in addition to or in
substitution for such termination) at any time by giving
notice in writing to the other Party where:
25.1.1. the other Party has committed a material breach of
any of its obligations under the Agreement which is
incapable of remedy; or
25.1.2. the other Party has committed a material breach of
any of its obligations under the Agreement which is
capable of remedy and which the other Party has not
remedied within 60 (sixty) days of receipt of written
notice to do so (or, in the case of M-Net issuing
notice subsequent to a breach of a Supplier Agreement
caused by MultiChoice's default, then such lesser
period (if any) set out in the relevant Supplier
Agreement or, in the case of M-Net issuing a notice
subsequent to both MultiChoice's default and notice
by the relevant supplier, then such lesser period (if
any) set out in the relevant Supplier Agreement less
a reasonable period for M-Net to receive such notice
and
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issue notice as contemplated herein); or
25.1.3. the other Party has committed a second or subsequent
material breach of any of its obligations under this
Agreement after having remedied an earlier similar
breach during the preceding 6 months after written
notice to do so;
25.1.4. proceedings are started for the other Party's winding
up, dissolution or reorganisation (otherwise than
while solvent and for the purpose of a bona fide
reconstruction or amalgamation) or for the
appointment of a receiver, trustee or similar officer
of any or all of the other Party's revenues or
assets; or
25.1.5. the other Party ceases to carry on business or
suffers any execution or distress over a material
part of its assets; or
25.1.6. the other Party becomes bankrupt or insolvent or
files any application, petition or action for relief
under any bankruptcy, insolvency or moratorium law;
or
25.1.7. the other Party admits in writing its inability to
pay its debts or is unable to pay its debts as they
fall due; or
25.1.8. the other Party suffers any similar event of
insolvency or bankruptcy under the terms of the
jurisdiction of its domicile; or
25.1.9. an application is made for an administration (or
similar) order to be made in respect of the other
Party; or
25.1.10. the other Party suspends or threatens to suspend its
operations.
25.2. In addition, and without prejudice to any other rights or
remedies which M-Net may have either at law or in terms of
this Agreement, including, without limitation the right to
claim damages (either in addition to or in substitution for
such termination), M-Net may terminate this agreement at any
time by giving notice in writing to
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MultiChoice where:
25.2.1. M-Net, pursuant to a breach of any provision of this
Agreement by MultiChoice, breaches any Supplier
Agreement with any major studio which is or becomes a
member of the Motion Picture Association of America
and such Supplier Agreement is terminated pursuant to
such breach, without notice to M-Net to remedy such
breach; provided that M-Net shall be required to
exercise such right to terminate within 30 days of
the date of termination of the relevant Supplier
Agreement; or
25.2.2. Transmission Failure occurs for an average of 15
minutes per day over any period of 30 days within a
continuous period of 90 days or for a continuous
period of 30 days; provided that if such Transmission
Failure occurs in only one country (with the
exception of South Africa) and relates solely to the
non direct to home transmission system within such
country M-Net shall be entitled to terminate this
Agreement only with respect to the country in which
such transmission failure occurs and this Agreement
shall cease to apply in respect of such country;
provided further that where such Transmission Failure
occurs for lesser periods than those contemplated in
this clause 25.2.2 and such Transmission Failure
constitutes a breach by MultiChoice of its
obligations in terms of this Agreement, M-Net shall
not be entitled to terminate this Agreement but shall
be restricted to such other rights and remedies as
may be available to M-Net either at law or in terms
of this Agreement. For the avoidance of doubt, M-Net
shall be entitled to terminate this Agreement as a
whole where the Transmission Failure (described
above) occurs only in South Africa.
25.3. In addition, MultiChoice may terminate this agreement without
prejudice to any other rights or remedies available to
MultiChoice either at law or in terms of this agreement
including, without limitation, the right to claim damages
(either in addition to or in substitution for such
termination) at any time by giving notice in writing to M-Net
where Delivery Failure occurs for an average of 15 minutes per
day over any period of 30 days within a continuous period of
90 days or for a continuous
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period of 30 days. Where Delivery Failure occurs in respect of
one or more (but not all) the Channels, MultiChoice shall be
entitled to elect whether to terminate this Agreement as a
whole or in relation only to those Channels affected by the
Delivery Failure. Where Delivery Failure occurs for lesser
periods than those contemplated in this clause 25.3 and such
Delivery Failure constitutes a breach by M-Net of its
obligations in terms of this Agreement, MultiChoice shall not
be entitled to terminate this Agreement but shall be
restricted to such other rights and remedies as may be
available to MultiChoice either at law or in terms of this
Agreement.
25.4. Notwithstanding any provision to the contrary contained in
this Agreement, should standards of quality, presentation,
style and character of any of the Channels becomes
significantly inferior during the course of this agreement as
demonstrated by consistent independent market research
conducted by an independent body jointly appointed by the
Parties ("Independent Market Research") over a four month
period. MultiChoice shall be entitled to give notice to M-Net
requiring the standard as at the Effective Date to be
restored. Such request shall be considered at a review forum
to be held by the Parties not later than 30 days after such
request and at a second review forum to be held not later than
30 days thereafter. Should the standard as at the Effective
Date not be restored to the reasonable satisfaction of
MultiChoice within 120 days (or such longer period as may be
agreed between the Parties) after the second review forum,
MultiChoice shall be entitled, after a period of 30 days of
negotiation between the Parties regarding the exclusivity of
and fees payable for the applicable Channel, in the event that
agreement cannot be reached, to terminate this Agreement in
respect of the Channel concerned but shall not be entitled to
terminate this Agreement in its entirety.
25.5. If either the composition, standards, quality, character or
style of the MultiChoice C Bouquet or the MultiChoice Ku
Bouquet become(s) significantly inferior during the course of
this Agreement or the packaging of other channels on either of
the MultiChoice Bouquets is detrimental to the growth of
Subscribers having the right to receive the Channels, both as
demonstrated by consistent Independent Market Research
conducted over a four month period, then M-Net shall be
entitled to give notice to MultiChoice requiring the standard
to be restored. Such request shall be
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considered at a review forum to be held by the Parties not
later than 30 days after such request and at a second review
to be held not later than 30 days thereafter. If the standard
is not restored to the reasonable satisfaction of M-Net within
120 days (or such longer period as may be agreed between the
Parties) after the second review forum, M-Net shall be
entitled, after a period of negotiation between the Parties
regarding the exclusivity of and fees payable for the
Channels, in the event that agreement cannot be reached, to
terminate this Agreement in respect of the applicable C or Ku
MultiChoice Bouquet only and not the Agreement in its
entirety. If, as a result of termination of this Agreement in
respect of the Ku MultiChoice Bouquet, it proves commercially
unviable for M-Net to acquire the programming rights for
distribution of the Channels in the C-Band Territory as part
of the MultiChoice C Bouquet, then M-Net shall be entitled to
terminate this Agreement in its entirety upon at least 6 (six)
months written notice to MultiChoice.
25.6. Notwithstanding any provision to the contrary contained in
this Agreement.
25.6.1. should any of the Channels defined in clause 4.3 with
reference to a Premium Movie Channel -
25.6.1.1. cease to fall within the parameters
of the definition of a Premium Movie
Channel; or
25.6.1.2. when compared over a period of at
least three months, in terms of
programming quality and content to
three other English premium movie
channels (on other non MultiChoice
bouquets) as determined by an
independent third party, but at
least one of which must be
distributed in a market where
competing movie channels exist,
cease to be comparable to or better
than such channels; or
25.6.2. should any of the Channels defined in clause 4.3 with
reference to a Premium Sports Channel cease to fall
within the parameters of the definition of a Premium
Sports Channel -
then MultiChoice shall be entitled, upon 3 (three) months
notice to M-Net, to terminate this Agreement in respect of the
Channel concerned but shall not be
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entitled to terminate this Agreement in its entirety.
25.7. Notwithstanding the provisions of this agreement which provide
otherwise, if this Agreement is terminated for any reason
whatsoever, MultiChoice shall be obliged to continue
transmitting the Channels' Signals in terms of and in
accordance with the provisions of this Agreement and providing
SMS in accordance with this Agreement for a period of 120 days
calculated from the date of such termination. For the
avoidance of doubt, the provisions of this clause 25.7 shall
survive the termination of this Agreement and, notwithstanding
such termination, M-Net shall be liable to pay to MultiChoice
Transponder Costs in respect of such 120 day period and
MultiChoice shall be liable to pay to M-Net Per Subscriber
Fees in respect of such 120 day period provided that neither
Party shall be restrained from entering into negotiations of
any nature whatsoever with any other Person relating, in the
case of M-Net to the distribution of the Channel Signals
within the Territory and, in the case of MultiChoice, to the
inclusion of any other channels in the MultiChoice Bouquet
including on the Premium Tier.
25.8. Within 20 (twenty) days after the termination of the period
contemplated in 25.7 (howsoever occasioned), each Party shall
at the direction of the other either destroy or return to the
other Party all materials furnished to it under this agreement
and in its possession or under its control (other than copies
and extracts of audit documents taken under clause 7.3) and
each Party shall certify in writing to the other Party that
the relevant direction has been complied with.
25.9. Except as may otherwise be agreed immediately on termination
of this Agreement for whatever reason, MultiChoice shall at
the expiry of the period contemplated in 25.7 disenable
Subscribers from receiving and decrypting the Channels'
Signals whereafter Subscribers and shall cease to be entitled
to receive and decrypt the Channels.
25.10. Termination of this Agreement by either Party for whatever
reason shall not prejudice or affect the rights or remedies of
such Party against the other Party in
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respect of any antecedent breach of this Agreement.
25.11. In the event that more than 50% (fifty percent) of the
shareholding in either Party is acquired by a new shareholder
in a manner that allows such new shareholder to control the
relevant Party, then the Party not affected by such change in
control shall be entitled upon 60 (sixty) days notice to
terminate this Agreement.
26. FORCE MAJEURE
26.1. A Party shall not be liable for any loss suffered by the other
Party arising out of delay in or prevention of performance of
the Party's obligations due to any cause or reason beyond its
control, such as Satellite failure, Acts of God, war (declared
or undeclared), strikes, riots, political insurrection,
rebellion, revolution, fire, flood, explosion, prohibition of
import, acts or orders of Government or any agency or
instrumentality thereof (whether de facto or de jure), or any
law or regulation having force of law.
26.2. The Party whose performance is delayed or prevented shall
immediately give notice in writing to the other Party.
26.3. If a Party's performance is delayed by such a cause the
Party shall be entitled to a reasonable extension not
exceeding 30 days for performance. If performance is or will
be delayed for longer than this period the performance shall
be regarded as having been prevented.
26.4. If a Party's performance is prevented by such a cause the
Parties shall:
26.4.1. if the obligation of which performance is prevented
is not material, make such financial or other
adjustment between them as may be equitable;
26.4.2. if the obligation of which performance is prevented
is material, endeavour in good faith to agree on an
alternative basis for achieving the objects of this
Agreement. If agreement on an alternative basis is
not reached this
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Agreement shall terminate and -
26.4.2.1. either Party may retain the other's
performance to the extent
performance has taken place;
26.4.2.2. if a Party does not elect to retain
the other's performance the other
Party may nevertheless require that
Party to retain the performance,
unless to do so would be inequitable
in the circumstances;
26.4.2.3. if a Party elects or is required to
retain the other's performance, the
Parties shall make such financial
adjustment between them as may be
equitable.
27. GOVERNING LAW AND DISPUTES
27.1. This Agreement shall be governed by and construed in all
respects in accordance with the laws of South Africa.
27.2 If any dispute arises at any time between any of the Parties
in connection with this Agreement including without
limitation, the formation or existence of, the implementation
of or the interpretation or application of, the Parties'
respective rights and obligations in terms of or arising out
of this Agreement or its breach or termination or the
performance or non-performance of any Party's obligations
hereunder or which relates in any way to any matter affecting
the interests of the Parties in terms of this Agreement, and
the Parties are unable to resolve their dispute, any Party may
refer the matter in dispute, in the first instance, to the
respective chief executive officers of the Parties for
resolution.
27.3. If, after having been referred under clause 27.2, the matter
in dispute shall not have been resolved by the said chief
executive officers within 30 (thirty) days of such matter
having been so referred, any Party may refer the matter in
dispute for determination by final arbitration in Johannesburg
in accordance with the Arbitration Act 1965 or any replacement
Act, by 3 (three) arbitrators (unless the Parties agree in
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writing to have a single arbitrator only), 1 (one) of whom
shall be appointed by the referring Party(ies), a further 1
(one) of whom shall be appointed by the opposing Party(ies)
and the third appointed by the 2 (two) so chosen. In the event
of the referring Party(ies) or the opposing Party(ies) failing
to appoint an arbitrator and/or failing agreement between the
2 (two) arbitrators within 14 (fourteen) days of their
appointment upon the appointment of a third arbitrator, such
arbitrator or arbitrators shall be appointed by the president
for the time being of the Law Society of the Transvaal on the
written request of either the referring Party(ies) or the
opposing Party(ies). The arbitrator shall establish the
procedural rules applicable to the proceedings. The
arbitration shall be conducted in the English language. The
arbitrator, if so required by any of the Parties, shall order
the Parties to make discovery of all documents relevant to the
issues in the arbitration. Any award of such arbitration shall
be finally binding upon the Parties and may be entered into
and enforced by any court having jurisdiction.
27.4. This clause shall not preclude any Party from obtaining
interim relief on an urgent basis from a court of competent
jurisdiction pending any decision of the arbitrator.
27.5. The provisions of this clause 27 -
27.5.1. constitute an irrevocable consent by the Parties to
any proceedings in terms hereof and no Party shall be
entitled to withdraw therefrom or claim at any such
proceedings that it is not bound by such provisions;
27.5.2. are severable from the rest of this Agreement and
shall remain in effect despite the termination of or
invalidity for any reason of this Agreement.
28. RESTRUCTURING FOR TAX OR REGULATORY REASONS
28.1. The Parties shall co-operate with each other and take all such
reasonable steps (including the re-structuring of this
Agreement) as may be legally available to them -
28.1.1. to minimise the incidence of any taxes, levies,
imposts, duties, charges, fees,
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deductions, withholdings, restrictions or clauses of
any description on any amounts payable by or to a
Party pursuant to this Agreement;
28.1.2. to avoid the imposition by any competent regulatory
authority of any burdensome obligation on either of
the Parties,
provided that in taking such steps the Parties shall preserve
the commercial intention underlying this Agreement.
28.2. In the event that this Agreement or any term in it is
determined to be void and/or unenforceable by any competent
regulatory or judicial authority, the Parties shall consult
one another with a view to amending this Agreement to the
satisfaction of such regulatory or judicial authority,
provided that in the event that the Parties are unable within
three months of such authority's decision to agree an
amendment satisfactory to such authority which, in the
reasonable opinion of both Parties, substantially gives effect
to their respective original intentions, either Party may, by
serving written notice on the other, terminate this Agreement
without further liability.
29. CONFIDENTIALITY
29.1. Subject to clause 29.2, each Party undertakes to the other
that it will treat as confidential the terms of this Agreement
together with all information whether of a technical nature or
otherwise relating in any manner to the business or affairs of
the other Party as may be communicated to it hereunder or
otherwise in connection with this Agreement and will not
disclose such information to any person, firm or company
(other than to its auditors and other professional advisers)
or to the media, and will not use such information other than
for the purposes of this Agreement, subject always to any
prior specific authorisation in writing by the other Party to
such disclosure or use.
29.2. The provisions of clause 29.1 shall not apply to any
information which:
67
<PAGE>
29.2.1. is in the public domain other than by default of the
recipient Party;
29.2.2. is obtained by the recipient Party from a bona fide
third Party having the right to disseminate such
information;
29.2.3. is or had already been independently generated by the
recipient Party;
29.2.4. is required to be disclosed by any programme supplier
contracted as such by M-Net or any Affiliate of M-Net
or by law or the valid order of a court of competent
jurisdiction or the request of any governmental or
other regulatory authority or agency, in which event
the disclosing Party shall so notify the other as
promptly as practicable (and if possible prior to
making any disclosure) and shall use its reasonable
endeavours to seek confidential treatment of such
information.
29.3. The obligations contained in this clause 29 shall endure
beyond the termination of this Agreement without limit in time
except and until any confidential information enters the
public domain otherwise than through default of the Party
receiving the same.
30. NOTICES
30.1. Notices and communications under this agreement shall be given
in writing and may be delivered to the relevant Party or sent
by registered air mail or facsimile to the address of that
Party or that Party's facsimile number specified in 30.2 which
shall be regarded as the respective Parties domiciliar citandi
et executandi.
30.2. Notices and communications shall be addressed as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
30.2.1. if to MultiChoice: 75 Republic Road, Randburg, South Africa
Fax No: 00 27 11 329-5420
30.2.2. if to M-Net: 137 Hendrik Verwoerd Drive, Randburg, South
</TABLE>
68
<PAGE>
Africa
Fax No: 00 27 11 789-7002
or such other address of a Party, person and/or fax number as
that Party shall have notified in writing to the other Party.
30.3. Notices and communications shall be given and made in the
English language.
31. MISCELLANEOUS
31.1. NO PARTNERSHIP
Nothing in this Agreement shall be deemed to create any joint
venture, partnership or principal and agent relationship
between MultiChoice and M-Net except with regard to the
collection of Per Subscriber Fees where MultiChoice acts as
the agent of M-Net in accordance with provisions of this
agreement and neither such Party shall hold itself out in its
advertising or otherwise in any manner which would indicate or
imply any such relationship with the other.
31.2. ASSIGNMENT
Neither Party shall be entitled to assign, transfer or
otherwise encumber this Agreement or any of the rights or
obligations hereunder without the prior written consent of the
other (such consent not to be unreasonably withheld or
delayed), save that either Party may transfer any of its
obligations to an Affiliate, provided that (i) the relevant
Party (being the assignor) shall guarantee the performance of
such obligations by such Affiliate; (ii) the relevant Party
shall be jointly and severally liable together with such
Affiliate for the fulfilment by such Affiliate of such
obligations; (iii) the relevant Party shall indemnify the
other Party against any loss sustained by it as a result of
the non performance of such obligations; (iv) if the relevant
Party is M-Net, and if M-Net sells or transfers its ownership
of any of the Channels, it shall itself remain bound by clause
4.2 throughout the Term and shall, in addition, procure that
the assignee binds itself to the undertaking set out in clause
4.2
69
<PAGE>
hereof; and for the avoidance of doubt, the Fees payable by
MultiChoice to M-Net under this Agreement shall not increase
as a consequence of such sale or transfer of ownership; and
(v) in the event that the assignee ceases to be an Affiliate,
it shall immediately reassign all assigned rights and
obligations back to the Relevant Party unless the prior
consent of the other Party shall have been obtained.
31.3. SUBCONTRACTING
MultiChoice shall be entitled to appoint Affiliate and/or
third party sub-contractors to perform any of its rights or
obligations set out herein upon notifying M-Net thereof in
writing provided that MultiChoice shall remain liable to M-Net
as primary obligor in respect of any rights and/or obligations
sub-contracted in terms of this clause 31.3.
31.4. ENTIRE AGREEMENT
This Agreement constitutes the entire understanding between
the Parties relating to the subject matter of this Agreement
and no oral representations, warranties or promises shall be
implied as terms of this Agreement.
31.5. WAIVER
Any waiver by either Party of a breach of any term or
condition of this Agreement shall be in writing and shall not
be deemed to be a continuing waiver or a waiver of any other
or subsequent breach unless the written notice so provides.
AS WITNESS whereof this Agreement was executed by the Parties on the day and
year first above written.
SIGNED BY /s/ Jim Volkwyn ) /s/ George Safzides
)
for and on behalf of )
70
<PAGE>
MULTICHOICE AFRICA (PROPRIETARY) )
LIMITED )
in the presence of: )
SIGNED BY /s/ Lazarus Zim ) /s/ Russell McMillan
)
for and on behalf of )
ELECTRONIC MEDIA NETWORK )
LIMITED )
in the presence of: )
71
<PAGE>
SCHEDULE 1
PREMIUM TIER CHANNELS
M-Net (Domestic) : MND
Movie Magic (Domestic) : MMD
KTV
Super Sport : SS
Movie Magic (Africa) : MMA
M-Net (Africa) : MNA
SuperSport II : SS II
<PAGE>
SCHEDULE 2A
SPECIFIC INCLUSIONS AND SPECIFIC EXCLUSIONS TO THE TERRITORY
1.1 THOSE PARTS OF WEST AND NORTH AFRICA EXCLUDED FROM THE TERRITORY
1.1.1 Completely excluded
Algeria
Chad
Djibouti
Egypt
Gambia
Guinea-Bissau
Libya
Mauritania
Morocco
Senegal
Somalia
Tunisia
1.1.2 Partially Excluded (including approximate percentage of
country excluded assuming that all satellite dishes are
pointing to the relevant horizon)
Sierra Leone 30 (thirty) per cent
Guinea 50 (fifty) per cent
Mali 90 (ninety) per cent
Spanish Sahara 20 (twenty) per cent
1.2 THE INDIAN OCEAN ISLANDS INCLUDED AS PART OF THE TERRITORY
The Cornoros
Mauritius
The Seychelles
Madagascar
Reunion
<PAGE>
SCHEDULE 2B
Those countries in respect of which minimum guarantees are payable
by MultiChoice
Angola
Benin
Burkina Faso
Burundi
Central African Republic
Congo
Equatorial Guinea
Eritrea
Ethiopia
Guinea
Liberia
Mali
Niger
S>o TormII and Principe
Reunion
Rwanda
Sierre Leone
Togo
Western Sahara (also known as Spanish Sahara)
Zanzibar
<PAGE>
SCHEDULE 3*
<PAGE>
SCHEDULE 4
INFORMATION TO BE REPORTED ON BY MULTICHOICE FOR EACH ACCOUNTING PERIOD
1.1 Total number of actual Subscribers
- on first day of Accounting Period
- on last day of Accounting Period
1.2 Total number of Equated Subscribers (including all information which
may be necessary in order to calculate the number of Equated
Subscribers)
- on first day of accounting period
- on last day of accounting period
1.3 The information set out in 1.1 and 1.2 by Subscriber category ie:
1.3.1 SUD Subscribers
1.3.2 MUD Subscribers by sub-category of Subscribers (including
the number of Wired Rooms)
- apartments
- hotels/motels and other transient dwellings
- hospitals
- all other MUD subscribers
1.3.3 Communal Subscribers (including number of Television Sets)
1.3.4 Commercial Subscribers
1.3.5 VIP Subscribers
1.3.6 Employee Subscribers
1.3.7 Free Trials given in accordance with clause 6.3.
1.4 The information set out in 1.1, 1.2 and 1.3 on a country by country
basis in respect of each country within the territory
1.5 The information required in terms of 1.1, 1.2, 1.3 and 1.4 in respect
of each Channel together with the MultiChoice SUD Subscriber Charge,
charged by MultiChoice in respect of each Channel within each country
and the actual revenue derived by MultiChoice.
1.6 The information required in terms of 1.1, 1.2, 1.3, 1.4 and 1.5 showing
the number of Subscribers receiving each channel via DTH distribution
systems reflecting the Subscribers receiving via the C-Band and those
receiving via the Ku-Band of the Satellite and the number of
Subscribers receiving each Channel via non-direct to home distribution
systems
<PAGE>
SCHEDULE 5
M-Net Market Research
- - Framework Market Segmentation
- - Image Tracking
- - Delphi Segmentation
- - KTV Quantitative and Qualitative
- - M-Net Advertising Campaign Survey
- - Local Productions Qualitative and Quantitative
- - Super Sport Image Tracking
- - Disconnect Survey
- - TVQ Panel
This schedule may be amended from time to time by mutual agreement between the
parties.
<PAGE>
SCHEDULE 6
SIGNAL QUALITY SPECIFICATIONS
1. VIDEO
The following specifications detail the minimum requirements for the
video output signal that will be delivered to the MultiChoice's
equipment from the M-Net Network Switching Room.
1.1 ANALOGUE DELIVERY
Standard : PAL
Level : 1V p-p
Impedance : 75 ohm
Signal to noise ratio: : -48 dB
(Unified weighted CCIR Rec.567-3)
Frequency response : 30 Hz to 5.5 MHZ
+/- 0.3 dB
Group delay response : 30 Hz to 5.5 MHZ
+/- 25 nS
1.2 DIGITAL DELIVERY
Standard : SMPTE 259m
PAL sourced
: 270 Mbits per sec SDI
1.3 GENERAL
1.3.1 The video signal subjective quality shall confirm to
CCIR 500-2 quality rating 5.
1.3.2 In the case of the signal being delivered by a
compressed digital system, the video bit rate shall
be at least 8 MB/S.
1.3.3 Standard converters must be avoided where possible.
2. AUDIO
<PAGE>
2.1 ANALOGUE DELIVERY
Maximum level : + 6dBm
Reference Level : 0 dBm
Impedance : 600 ohm
Frequency response : 15 Hz to 15 kHz
+/- 1 dB
Signal-to-noise ratio : -55 dB
(CCIR 468-3 Q-Pk mean weighted)
2.2 DIGITAL DELIVERY
Standard : AES/EBU digital
(not imbedded)
<PAGE>
SCHEDULE 7
A. MULTICHOICE - PROVISION OF EXISTING SMS TO M-NET CHANNELS FOR NON DTH
SUBSCRIBERS IN
(i) NIGERIA:
MNA (West) [- covered by Analogue Agreement]
SS on a 24 hour basis
MM and KTV totalling 24 hours, being 12 hours each per day
(ii) GHANA:
MNA (West) [- covered by Analogue Agreement]
MM and SS on a 24-hour basis
(iii) KENYA AND UGANDA:
MNA (East), MM and SS on a 24 hour basis [MNA - covered by Analogue
Agreement
(iv) TANZANIA:
From October 1997:
MNA (East), SS on a 24 hour basis [MNA - covered by Analogue Agreement
(v) ZAMBIA:
SS and MNA (East) on a 24 hour basis
(vi) LESOTHO:
MND
(vii) NAMIBIA:
MND, SS 24
(viii) BOTSWANA:
<PAGE>
MNA (East): SS 24
(ix) ZAIRE (Congo):
MNA (West), SS 24
(x) MALAWI:
MNA (East), SS 24
(xi) RWANDA:
MNA (East), SS 24
(xii) BURUNDI
MNA East, SS24
(xiii) MALI:
SS, MNA
(xiv) ST HELENA:
SS 24
<PAGE>
SCHEDULE 8
PanAmSat 4 Footprints
<PAGE>
[GRAPHIC OMITTED]
PAS-4 Southern Africa Horizontal Beam Ku-Band (CONTOURS 55, 54, 53, 52, 50, 48,
46, 44 dBW)
<PAGE>
[GRAPHIC OMITTED]
PAS-1 Africa Beam V C-Band (CONTOURS 39, 38, 37, 35, 33, 31, 29, 27 dBW)
<PAGE>
SCHEDULE 9
SPECIFICATIONS AND SERVICE LEVELS
<TABLE>
<CAPTION>
MAX NORM HOURS UNSCHEDULED MAX NORM HOURS SCHEDULED
CATEGORY DOWN DURA- LOW LOW DOWN DURA- LOW LOW
TIME TION POWER POWER TIME TION POWER POWER
PER PER PER PER PER PER PER PER
ANNUM EVENT ANNUM EVENT ANNUM EVENT ANNUM EVENT
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SATELLITE 17 4 12 4 12 2 12 4
TRANSMISSION
("A")
TERRESTRIAL 17 4 12 4 12 2 12 4
OR OTHER
REBROADCAST
TRANSMISSION
("B")
NETWORK AVAILABILITY: 99-8% PER MONTH BASED ON 24 HOURS OF
(BOTH A & B) BROADCASTING PER DAY
RESPONSE TIMES: NORMAL OFFICE HOURS (7:30 TO 23:00) 1 HOUR
(BOTH A & B) AFTER HOURS (23:00 TO 07:30) 2 HOURS
EQUIPMENT MAINTENANCE: i) PREVENTATIVE MAINTENANCE : THREE MONTHLY
(BOTH A & B) ii) BASIC REGULAR MAINTENANCE : WEEKLY
iii) SYSTEM CHECKS : DAILY
MONITORING: 24 HOURS PER DAY
AUDIO VISUAL QUALITY
(BOTH A & B)
REPORTING: DAILY: TELEPHONICALLY / E-MAIL
(Both A & B) WEEKLY: E-MAIL
MONTHLY: DETAILED WRITTEN REPORT (ON A COUNTRY BY
COUNTRY BASIS IN RESPECT OF DIRECT TO HOME AND NON
DIRECT TO HOME TRANSMISSION SYSTEMS)
STANDBY FACILITY: 24 HOURS A DAY
(BOTH A & B)
</TABLE>
<PAGE>
SCHEDULE 10
A. MultiChoice - Provision of SMS for M-Net Channels to DTH Ku Band
Subscribers
South Africa, Lesotho, Namibia, Botswana, Zimbabwe and Swaziland
MND - Premium Tier
MM - Premium Tier
SS - Premium Tier
KTV - Premium Tier
B. MultiChoice - Provision of Future SMS for M-Net Channels to DTH C band
Subscribers.
The Territory (excluding South Africa, Lesotho, Botswana, Zimbabwe and
Swaziland)
MNA - Premium Tier
SS - Premium Tier
MMA - Premium Tier
KTV - Premium Tier
<PAGE>
SCHEDULE 11
LETTER AGREEMENT BETWEEN ORACLE AND MULTICHOICE
<PAGE>
SCHEDULE 12*
* Indicates where text has been omitted pursuant to a request for confidential
treatment. The omitted text has been filed separately with the Securities and
Exchange Commission.
AGREEMENT
1 PARTIES
1.1 The parties to this agreement are
1.1.1 Electronic Media Network Limited; and
1.1.2 MultiChoice African (Proprietary) Limited.
1.2 The parties agree as set out below.
2 INTERPRETATION
2.1 In this agreement, unless inconsistent with or otherwise indicated by
the context -
2.1.1 "The Act" means the Independent Broadcasting Authority Act, No. 153 of
1993, as amended;
2.1.2 "Affiliate" means, in relation to any party, any person which, directly
or indirectly
2.1.2.1 is controlled by that party;
2.1.2.2 controls that party; or
2.1.2.3 is under common control with that party;
2.1.3 "this agreement" means this document together with all appendices
attached hereto;
<PAGE>
2
2.1.4 "the channel" means the television programming services known as
M-Net Domestic and M-Net Africa operated by M-Net;
2.1.5 "clearances" means all consents, clearances and licenses required from
the copyright holders of the programming material transmitted as part
of the channel to distribute such programming material in the
territory, including all necessary music, mechanical transfer and
performing rights clearances;
2.1.6 "the CPI" means when used in connection with subscription fees for
the M-Net domestic service the weighted average consumer price index,
all items, as notified by the Secretary of Statistics, of the 12
(twelve) areas specified in the notice (with the average for 1990 as
the base which equals 100 (one hundred)) or when used in connection
with subscription fees for the M-Net Africa service, the United States
Consumer Price Index as published by the United States Department of
Commerce. In the case of either index being replaced by an index of a
different nature, such index shall be used duly adjusted as if the
same index is used, provided that if such index is replaced by an
index with a different base, the replacing index shall be used but it
shall be adjusted in order to correspond with the index as set out
above;
2.1.7 "decoder" means an individual addressable stand-alone device capable
of receiving and, when enabled, of decrypting the M-Net signals;
2.1.8 "delivery failure" means any material disruption, discontinuance or
interruption in or other interference with the delivery of the M-Net
signals by M-Net to MultiChoice or delivery of the M-Net signals by
MultiChoice to the subscribers;
<PAGE>
3
2.1.9 "the effective date" means, notwithstanding the date on which this
agreement is signed, * 1995;
2.1.10 "encryption" means the scrambling of a signal so that such signal can
only be clearly viewed by means of a compatible decoder;
2.1.11 "the equated number of subscribers" means a notional number of
subscribers calculated by dividing the gross subscription fees
actually charged by MultiChoice for the month to all the subscribers
to the channel by the subscription fee which applies during that
month;
2.1.12 "free television systems" means any form of television or other
transmission system by means of which a person can receive audio
visual programming or services on a television set free of the payment
of the subscription fee;
2.1.13 "miscur report" means a monthly report generated by MultiChoice
detailing the status and number of gross and equated subscribers for
that month;
2.1.14 "M-Net" means Electronic Media Network Limited, a company duly
incorporated in the Republic of South Africa with registration number
85/02853/06 and having its principal place of business at 11 Grove
Street, Randburg, South Africa;
2.1.15 "the M-Net marks" means the trade names, trade marks, logos and
service marks used from time by M-Net in connection with the M-Net
signals, the name of the channel, the titles of the programmes
transmitted as part of the channel and the corporate names of M-Net,
being marks belonging solely and exclusively to M-Net or the owner of
the copyright in the relevant programme(s), as the case may be;
<PAGE>
4
2.1.16 "M-Net signals" means the signals comprising the MND signal and MNA
signal;
2.1.17 "MNA signal" means the signal comprising the television programming
service known as "M-Net Africa" which is a service comprising
predominantly current feature films, occasional specials, occasional
series, and, local production targeting audience needs in Africa
excluding South Africa, Namibia and Lesotho;
2.1.18 "MND signal" means the signal comprising the television programming
service known as "M-Net Domestic" which is a service comprising
predominantly current feature films, occasional specials, occasional
series, predominantly live sport, local production and children's
programming targeting audience needs in South Africa, Namibia and
Lesotho;
2.1.19 "MCL" means MultiChoice Limited, a public company duly incorporated in
the Republic of South Africa with registration number 93/05613/06 and
having its principal place of business at 75 Republic Road, Randburg,
South Africa;
2.1.20 "month" means each calendar month throughout the duration of this
agreement;
2.1.21 "MultiChoice" means MultiChoice Africa (Proprietary) Limited, a
private company with a share capital duly incorporated in the Republic
of South Africa, with registration number 94/09083/07 and having its
principal place of business at 75 Republic Road, Randburg, South
Africa;
2.1.22 "the MultiChoice marks" means the trade names, trade marks, logos and
service marks used from time to time by MultiChoice;
<PAGE>
5
2.1.23 "the parties" means the parties to this agreement;
2.1.24 "pay television systems" means any form of television or other
transmission system by means of which a person can receive
substantially encrypted audio-visual programming or services on a
television set in unencrypted format, subject to payment of the
subscription fee;
2.1.25 "privacy" means the unauthorised use of the MultiChoice algorithm for
decrypting the M-Net signals or the unauthorized broadcasting of the
M-Net signals;
2.1.26 "the satellites" means the Intelsat satellites situated at 63 degree E
and 332,5 degree E;
2.1.27 "signal" means a programme carrying signal incorporating a broadcast
as defined in the Copyright Act 1976;
2.1.28 "SMS" means Subscriber Management Services supplied by MultiChoice as
stipulated in this agreement;
2.1.29 "South Africa" means the Republic of South Africa;
2.1.30 "subscriber" means a person who has contracted to pay a fee to
MultiChoice to receive the channel as supplied by MultiChoice on an
audio-visual monitor;
2.1.31 "subscription fee" means a monthly fee charged by MultiChoice to a
single unit dwelling subscriber in consideration for the right
afforded to that subscriber to receive and view the channel on an
audio-visual monitor;
<PAGE>
6
2.1.32 "television programming services" means the compilation and
origination of all forms of television programming for exhibition to
members of the public, including subscribers, which shall include the
generation of television broadcasts and programme- carrying signals;
2.1.33 "television systems" means free and/or pay television systems;
2.1.34 "Territory" means the countries listed in Appendix 1 hereto;
2.1.35 any reference to the singular includes the plural and vice versa;
2.1.36 any reference to natural persons includes legal persons and vice
versa;
2.1.37 any reference to a gender includes the other genders.
2.2 The clause headings in this agreement have been inserted for
convenience only and shall not be taken into account in its
interpretation.
2.3 Words and expressions defined in any sub-clause shall, for the purposes
of the clause of which that sub-clause forms part, bear the meaning
assigned to such words and expressions in that sub-clause.
2.4 If any provision in a definition is a substantive provision conferring
rights or imposing obligations on any party, effect shall be given to
it as if it were a substantive clause in the body of the agreement,
notwithstanding that it is only contained in the interpretation clause.
2.5 If any period is referred to in this agreement by way of reference to a
number of days, the days shall be reckoned exclusively of the first and
inclusively of the last day unless the last day falls on a Saturday,
Sunday
<PAGE>
7
or public holiday, in which case the day shall be the next succeeding
day which is not a Saturday, Sunday or public holiday.
2.6 This agreement relates only to analogue television programming services
and not to digital television programming services.
2.7 This agreement shall be governed by and construed and interpreted on
accordance with the law of South Africa.
3 INTRODUCTION
3.1 It is recorded that -
3.1.1 M-Net entered into a service agreement with MCL pursuant to the
disposal of its SMS business to MCL;
3.1.2 MCL has disposed of its SMS business to MultiChoice in terms of the
MultiChoice Contribution Agreement entered into between MCL,
MultiChoice and M-Net on 27 March 1995;
3.1.3 the MultiChoice Agreement is subject to the suspensive condition
that the service agreement referred to in 3.1.1 be assigned to
MultiChoice subject to such alterations as Richemont SA may require.
3.2 The parties have agreed to affect the assignment contemplated in 3.1.3
by entering into a new agreement containing the terms and conditions
set out herein.
<PAGE>
8
PART 1 - EXHIBITION OF CHANNEL
4 RIGHT TO EXHIBIT THE M-NET TELEVISION PROGRAMMING SERVICES
4.1 M-Net hereby grants to MultiChoice, which hereby accepts, the right, to
exhibit and otherwise license the reception and distribution of the
channel over pay and/or free television systems within the territory
and to encrypt and decrypt the M-Net signals for the benefit of such
subscribers in the territory on the terms and conditions set out in
this agreement.
4.2 The M-Net signals shall be received and distributed every day of the
week for a minimum of 12 (twelve) hours in the case of MND and for a
minimum of 8 (eight) hours in the case of MNA which shall include the
period from 18:00 to 24:00 on every day.
4.3 Except for the employment of Orbicom (Proprietary) Limited as signal
distributor MultiChoice shall not grant any sub-licence for the purpose
of transmitting the M-Net signals nor assign any of its rights and
obligations under this agreement to any third party without the prior
written consent of M-Net, which shall not be unreasonably withheld.
5 SUBSCRIPTION FEES
5.1 It is recorded that the subscription fees payable by subscribers for
the channel for the year starting 1 June 1995 are set out in Appendix 2
for the various countries and areas falling within the territory.
5.2 Increases in subscription fees shall be determining from time to time
in respect of the annual periods commencing on 1 June 1996 by agreement
between the parties and such increases shall take effect on 1 June each
year or on such other date as the parties may agree upon in writing.
<PAGE>
9
5.3 The parties shall negotiate any increase in subscription fees in good
faith, and in particular taking into account affordability,
profitability and the competitive environment.
5.4.1 In the event of the parties not being able to reach agreement on the
levels of subscription fees on or before a day two months prior to the
date on which the new subscription fees are to take effect, the matter
shall be determined in terms of 20, provided that notwithstanding
anything to the contrary contained in this agreement, pending such
determination the subscription fees shall be increased on the date on
which the new subscription fees are to take effect by the same
percentage as the percentage increase in the CPI for May (or such
other month as may be agreed upon) over the CPI for the same month of
the immediately preceding year.
5.4.2 Should the adjudicators mentioned in 20 not reach a decision within
the period contemplated in 20.3, the parties shall not be entitled to
cancel this agreement as contemplated in the sub-clause but after the
expiry of four months of the six month period referred to in 5.4.1 the
parties shall again engage in negotiations in an attempt to reach
agreement on the increase in the subscription fees and should they
fail to reach agreement within 30 days, the matter shall again be
determined in terms of 20 and the balance of the provisions of 5.4.1
shall again apply.
5.5 MultiChoice shall collect the subscription fee from each subscriber
having the right to receive the channel.
5.6 MultiChoice shall be liable for all bad debts arising out of the
failure to collect monthly subscription fees from subscribers.
<PAGE>
10
5.7 The charges levied on all other subscribers than single unit dwelling
subscribers shall be determined by MultiChoice in its discretion.
6 CONSIDERATION
6.1 It is recorded that the portion of the subscription fee charged by
MultiChoice, acting as M-Net's agent for the year starting 1 June 1995
is as set out in Appendix 3 for the various countries or areas falling
within the territory.
6.2 In consideration of the grant of the right to exhibit the channel,
MultiChoice, acting as M-Net's agent, shall collect monthly and pay to
M-Net the portion of the fee per subscriber set out in Appendix 3
multiplied by the enabled equated number of subscribers in respect of
the country, or area concerned at the end of the month concerned.
6.3 All fees payable pursuant to the provisions of this clause 6 to M-Net
in respect of the MND channel shall be paid within 14 (fourteen) days
of the end of the relevant month. Fees in respect of the MNA channel
shall be paid to M-Net annually in arrears within 30 (thirty) days of
MultiChoice's financial year end.
6.4 To enable M-Net to verify any fees payable to it, MultiChoice shall
submit to M-Net, together with each payment, but in any event within 14
(fourteen) days of the end of each month, a certificate signed by an
authorised representative of MultiChoice, setting out-
6.4.1 the total number of subscribers on the first day and on the last
day of the month in question; and
<PAGE>
11
6.4.2 the total number of new subscribers connected and the total number of
former subscribers disconnected from the channel during such month;
and
6.4.3 the computations effected to determine the amount due in terms of 6.1;
and
6.4.4 the closing miscur report for that month.
6.5 Any payment made by MultiChoice shall, expect in the case of fraud or
manifest error or where the amount concerned is subject to a studio
audit, be deemed to be accurate and complete if neither MultiChoice nor
M-Net has disputed the accuracy or completeness of such payment by
notice to the other within 12 (twelve) months from the date of receipt
by M-Net of such payment.
6.6 All amounts specified in this agreement shall be exclusive of any
value-added tax which may be levied in terms of the Value-Added Tax
Act, 1991, as amended and/or any other similar fee or levy which may be
payable. In this regard such VAT, levy or fee shall be added to the
price payable by any party.
7 INSPECTION OF RECORDS
7.1 MultiChoice shall supply to M-Net within 120 (one hundred and twenty)
days of each anniversary of the effective date, or in the case of
termination for whatever reason, within 120 (one hundred and twenty)
days of the date of termination, a statement certified by the chief
financial officer of MultiChoice certifying the completeness and
accuracy of all information contained in all of the reports and
statements supplied by
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12
MultiChoice to M-Net with respect to the preceding year or aforesaid
portion.
7.2 MultiChoice shall keep, or cause to be kept, detailed and accurate
records and books of account in respect of its subscriber base and of
all payments effected under this agreement, containing all information
required for the determination and verification of all fees paid or
payable under this agreement.
7.3 MultiChoice shall use all reasonable endeavours to maintain for a
period of 5 (five) years records relating to the number of subscribers
during each month and all information which is to be provided to M-Net
pursuant to this agreement.
7.4.1 M-Net shall be entitled to examine or audit any such books and records
(including the miscur report) and take coples and extracts therefrom
during normal business hours upon less than 5 (five) days prior
written notice, provided that such inspection or audit shall take
place not more frequently than twice in any 12 (twelve) month period.
7.4.2 MultiChoice shall permit any studio contracted to M-Net to examine or
audit the miscur report in accordance with the provisions contained in
7.4.1.
7.5 If any inspection or audit carried out by or on behalf of M-Net
reveals that MultiChoice has underreported the amount payable to
M-Net, MultiChoice shall make immediate payment to M-Net of the amount
due and owing. If any inspection or audit reveals that MultiChoice has
over reported the amount payable to M-Net, M-Net shall make immediate
payment to MultiChoice of the amount overpaid save where M-Net has
paid third party programme suppliers based on over reported figures
and is
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13
reasonably unable to obtain refunds from such third parties, in which
event the amount to be refunded to MultiChoice shall be reduced
accordingly.
7.6 All costs of auditing shall be borne by M-Net unless the miscur report
is found to be materially inaccurate, in which case the costs shall be
borne by MultiChoice. For purposes of this sub-clause a miscur report
which differs in respect of any figure from the correct figure by more
that 5% shall be deemed to be materially inaccurate. Should M-Net
incur any liability to pay fines or penalties to third parties as a
direct result of incorrect reporting by MultiChoice, MultiChoice shall
be liable to M-Net to reimburse it any such fines or penalties
actually paid by M-Net.
8 PROPRIETARY AND INTELLECTUAL PROPERTY RIGHTS
8.1 M-Net acknowledges that all proprietary and intellectual property
rights arising from the conduct by MultiChoice of its business shall,
as between M-Net and MultiChoice vest exclusively in MultiChoice.
8.2 MultiChoice shall not at any time be obligated to disclose to M-Net the
identity or addresses of subscribers except at the special written
request of M-Net for the sole purpose of conducting market research as
specified in Appendix 4 or otherwise by agreement between the parties.
8.3 In each case, M-Net shall treat such identity and addresses of
subscribers as confidential and shall not utilise or disclose any such
names and addresses to any person for any purpose other than as set
forth in 8.2 above. The obligations described in the sub-clause shall
be regarded as material obligations of M-Net.
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14
9 PERIOD
9.1 This agreement shall
9.1.1 commence on the effective date; and
9.1.2. continue for an initial period of 7 years.
9.2 This agreement shall be automatically renewed after 7 years, subject to
the renewal of M-Net's broadcast licence in terms of the Act, on the
same terms and conditions set out herein for a period * and,
thereafter, for successive periods of 12 months provided that the
parties are able to reach an agreement regarding the fees payable
during each renewal period within 30 days prior to the expiry of the
current period. The provisions of 5 shall apply for the five-year
renewal period only.
10 OBLIGATIONS OF M-NET
10.1 M-Net shall, at its own cost deliver the M-Net signals as set out in
Appendix 5. The M-Net signals shall include audio, video and data
signals comprising the channel as a fully mixed feed of moving and
still pictures in unencrypted form.
10.2 M-Net shall ensure that the technical specifications of the M-Net
signals shall at all times be such that, if they are properly
transmitted, all subscribers with properly functioning decoders shall
be able to receive the channel in broadcast quality, without
interruption or interference, as set out in Appendix 5.
10.3 M-Net shall notify MultiChoice of all relevant material information
relating to the delivery of its channels as soon as it becomes aware of
it.
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15
10.4 M-Net shall take all possible steps to prevent and rectify delivery
failures.
10.5 M-Net will provide MultiChoice with suitable video tape library and
storage services as may be required from time to time, subject to
availability and the acceptance of a market related quote.
10.6 M-Net will provide a suitable un-interrupted power supply to its
Broadcast Centre so as to ensure minimum breakdowns of MultiChoice's
equipment housed in Broadcast Centre, at a pre-negotiated fee, which
shall be subject to annual revision. The provisions of this clause
shall apply mutatis mutandis to the computer and uplink rooms.
10.7 M-Net will make available its studio and post-production facilities to
MultiChoice at its per hour rate in accordance with the Broadcast
Services rate card as may be required from time to time, subject to
M-Net's own usage requirements.
11. OBLIGATIONS OF MULTICHOICE
MultiChoice shall -
11.1 ensure the encryption of the M-Net signals before transmitting the
M-Net signals from the uplink facility and the Ovid room except as may
be required by M-Net and otherwise authorised by its broadcasting
license;
11.2 procure the transmission of the M-Net signals from the uplink facility
and the Ovid room to the territory by means of satellite or otherwise;
11.3 market the channel to pay TV viewers in the territory as part of the
MultiChoice package and, either itself or through its nominees, agents
or affiliates, conclude subscription agreements with such pay TV
viewers;
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16
11.4 arrange for the availability of appropriate hardware capable of
receiving and decoding encrypted signals throughout the territory and
for this purpose procure at its own risk the manufacture, distribution,
sale, maintenance and repair of decoders;
11.5 receive and respond promptly to all enquiries from the public and
subscribers within the territory concerning the channel and, in
particular, establish and maintain telephonic customer help and support
lines;
11.6 hold and maintain a computerised subscriber database capable of
recording sufficient details of each subscriber, including records of
the status of subscribers and prospective subscribers;
11.7 administer the subscriptions of subscribers by setting up and
maintaining an infrastructure to administer contracts with subscribers
and collection of subscription fees;
11.8 handle the dispatch of invoices in respect of the collection of
subscription monies payable by subscribers or administer direct debits
and credit card payments in respect thereof;
11.9 ensure the supply to and authorisation of subscribers, or activation of
decoders in a timely and accurate manner and, in particular, enable new
subscribers and disenable defaulting subscribers or those wishing to
cancel their subscriptions, via the SMS over the air addressing system;
11.10 provide M-Net with written monthly feedback reports from subscribers
regarding the M-Net channels;
11.11 effect direct mail shots to subscribers at M-Net's request and expense;
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17
11.12 itself exercise or perform, and not authorise anyone else to exercise
or perform any of its rights or obligations in terms of this agreement
except as contemplated in 4.3; and
11.13 if a delivery failure is anticipated, notify M-Net as soon as
practicable and take all steps possible to prevent the delivery
failure from occurring.
12 PROGRAMMING
12.1 The programmes compromising the channel will be determined by M-Net in
its sole discretion. All copyright in the M-Net signals and the
broadcasts in respect of the channel shall remain vested in M-Net.
12.2 M-Net will ensure compliance with the applicable laws, regulatory
codes, orders and directions issued from time to time by any competent
regulatory authority in South Africa, and with relevant legislation
enacted within South Africa relating to the content and/or advertising
contained in the channel and it shall endeavour to do the same with
regard to any other countries in which the channel is exhibited. Should
M-Net become aware of the fact that they are unable to comply with
applicable laws and regulations in such other countries, it shall
advise MultiChoice of same as soon as practicable;
12.3 M-Net shall not be liable to MultiChoice for any breach of laws or
regulations arising from the exhibition by MultiChoice of the channel
in a territory in circumstances where M-Net has informed MultiChoice in
writing that it is unable to comply with the laws or regulations of
that territory.
12.4 MultiChoice shall not in any way add to, alter or delete any part of
the programming comprising the channel and shall ensure that the
channel
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18
is distributed contemporaneously and on an uninterrupted basis at all
times except for encryption or by agreement.
13 RIGHTS OF THIRD PARTIES
13.1 M-Net shall use its best endeavours to ensure that the exhibition of
any programming pursuant to this agreement does not infringe or exceed
the rights of any third party, including without limitation, rights
granted by the owner of the copyright in a programme to M-Net. Save as
set out in 13.2 below, M-Net hereby indemnifies and holds MultiChoice
harmless against any and all claims by third parties arising out of the
unauthorised exhibition of any programme on the channel or the
exhibition of programming which infringes the rights of third parties.
13.2 M-Net shall not incur any liability of any nature to MultiChoice as a
result of an unauthorised exhibition of a particular programme within
the territory in respect of which M-Net has informed MultiChoice in
writing that it does not have the necessary rights. Should MultiChoice
nevertheless exhibit the programme, MultiChoice shall indemnify M-Net
against any penalty or other similar damage payable by M-Net to the
owner or licensee of the rights.
13.3 MultiChoice undertakes to use its reasonable endeavours to protect the
copyright of the authors of the works exhibited pursuant to this
agreement and the copyright of M-Net in any broadcast and M-Net signal.
13.4 Should MultiChoice become aware of any third party infringing the
rights of M-Net pursuant to the exhibition of the channel, MultiChoice
will promptly inform M-Net of all the circumstances of the infringement
within MultiChoice's knowledge at that time. Should M-Net decide to
take legal or other action of any kind against any such party,
MultiChoice shall
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19
assist M-Net in every reasonable way requested by M-Net in pursuing any
such action. Each party shall however bear its own costs.
13.5 Should MultiChoice decide to take legal or other action of any kind
against any party alleged to be infringing the rights of M-Net in
relation to any material provided by M-Net, MultiChoice shall first
seek and obtain the written consent of M-Net to such action and further
shall keep M-Net fully informed of the progress of such action. M-Net
shall be obliged to assist MultiChoice in every reasonable way
requested by MultiChoice in pursuing any such action. Each party shall
however bear its own costs.
13.6 M-Net shall be liable for the payment of all licence fees which may be
due in respect of all clearances.
13.7 Each party shall notify the other forthwith upon becoming aware of
piracy, (whether inside or outside the territory) and either party
shall, if so requested by the other, provide all reasonable assistance
to the other in taking appropriate action to prevent or combat such
piracy. Each party shall however bear its own costs.
14. MARKETING
14.1 General
14.1.1 The parties undertake to market the channel actively.
14.1.2 In performing their obligations under the terms of this agreement, each
of M-Net and MultiChoice will uphold the other party's image at all
times. In particular, neither party shall perform or authorise others
to perform any act which can be reasonably construed as reflecting
adversely upon each other.
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20
14.1.3 If M-Net or MultiChoice undertakes any promotion of the channel, then
it shall ensure that all promotional materials are prepared and
distributed in accordance with guidelines to be agreed between the
parties.
14.1.4. Wherever practical, M-Net campaigns shall state that the channel is
exhibited by MultiChoice and mention the locations of MultiChoice
offices.
14.1.5 M-Net shall provide to MultiChoice at M-Net's cost monthly listings of
the programme schedules for the channel, which shall, whenever
possible, be provided at least 90 (ninety) days before the start of the
month in which such programmes are to be transmitted and which shall be
provided in such format as MultiChoice may reasonably require from time
to time. Such listings shall be as accurate as possible and M-Net shall
notify MultiChoice promptly on any change being made thereto.
MultiChoice may use such information in any printed or electronic media
in order to market and promote the channel.
14.1.6 MultiChoice shall, in using visual material relating to the channel,
observe and abide by the contractual restrictions by which M-Net is
bound in respect of such material. M-Net shall advise MultiChoice of
such conditions and restrictions. Should MultiChoice, having been so
advised, breach such conditions, it shall indemnify M-Net against any
penalty or damage which M-Net is required to pay to the owner of the
material or its licensee.
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21
14.2 Programme Guide - South Africa, Lesotho, Namibia
14.2.1 MultiChoice shall be responsible for compiling the programme guide of
the channel for distribution in South Africa, Lesotho and Namibia
pursuant to information to be supplied to it by M-Net on a monthly
basis. Editorial control of the programming guide shall vest in
MultiChoice, subject to due consultation with M-Net.
14.2.2 One programme guide per month shall be mailed by MultiChoice to each
subscriber to the channel free of charge. MultiChoice shall also
provide M-Net with such additional programme guides as M-Net may order
from MultiChoice. MultiChoice shall be entitled to charge for such
programme guides at a rate agreed upon with M-Net.
14.2.3 Sales of pages of advertising in the programme guide will be, effected
by M-Net who will bear all the cost of the sales but retain * of the
net proceeds of the sales of advertising as a commission or such other
amount as may be agreed by the parties from time to time.
14.2.4 All costs associated with the production of the programme guide,
including but not limited to transparencies, lay-out, re-production,
printing, distribution and mailing, shall be borne by MultiChoice. It
is recorded that M-Net is guaranteed * pages in the programming guide
in its current format.
14.2.5 Should the M-Net pages in the programme guide in its current format
exceed * pages per month (or pro rata in the case of smaller or larger
formats), the excess M-Net pages shall be charged to M-Net at an agreed
fee per page.
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22
14.3 The Multichoice Africa Guide
14.3.1 MultiChoice shall be responsible for compiling the programme guide of
the channel for distribution in Africa pursuant to information to be
supplied to it by M-Net on a monthly basis.
14.3.2 All origination costs for the production of the programme guide
including transparencies and reproduction costs (excluding origination
costs for commercial time sales) shall be borne by MultiChoice.
14.3.3 All printing, distribution and mailing costs shall be borne by
MultiChoice.
14.3.4 Sales of pages of advertising in the programme guide will be effected
by M-Net who will bear all the costs of the sales but retain * of the
net proceeds of the sales of advertising as a commission or such other
amount as may be agreed by the parties from time to time.
14.35 Should the M-Net pages in the programme guide in its current format
exceed * pages per month (or pro rata in the case or smaller or larger
formats), the excess M-Net pages shall be charged to M-Net at an agreed
fee per page. It is recorded that M-Net is guaranteed * pages in the
programming guide in its current format.
14.4 Reference to MultiChoice in M-Net advertising material
Whenever practical, M-Net printed advertising material will contain a
reference to the fact that the channel is available through
MultiChoice.
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14.5 Marks and merchandising
14.5.1 M-Net acknowledges that the MultiChoice marks belong solely and
exclusively to MultiChoice or are used by MultiChoice, being owned by
an affiliate of MultiChoice. MultiChoice hereby grants to M-Net a
licence to use the MultiChoice marks, free of charge in all media for
the sole purpose of advertising and marketing the channel, such license
to terminate automatically if this agreement terminates. M-Net's use of
the MultiChoice marks shall be in accordance with guidelines to be
agreed between the parties from time to time. All goodwill in the
MultiChoice marks shall automatically vest in MultiChoice or the
relevant owner, as appropriate. M-Net shall promptly make available to
MultiChoice at its request copies of any promotional advertising
material created or disseminated by M-Net which mentions or uses any of
the MultiChoice marks.
14.5.2 MultiChoice acknowledges that the M-Net marks belong solely and
exclusively to M-Net or are used by M-Net, being owned by an affiliate
of M-Net. M-Net hereby grants to MultiChoice a licence to use the M-Net
marks, free of charge in all media for the sole purpose of advertising
and marketing the channel, such licence to terminate automatically if
this agreement terminates. MultiChoice's use of the M-Net marks shall
be in accordance with guidelines to be agreed between the parties from
time to time. All goodwill in the M-Net marks shall automatically vest
in M-Net or the relevant owner, as appropriate. MultiChoice shall
promptly makes available to M-Net at its request copies of any
promotional advertising material created or disseminated by MultiChoice
which mentions or uses any of the M-Net marks.
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24
15. WARRANTIES AND UNDERTAKINGS
15.1 M-Net hereby represents, warrants and undertakes that it -
15.1.1 has the legal power and authority to enter into and fully perform all
of its obligations under this agreement, and is not and will not enter
into any agreement which may preclude it from fully observing and
performing this agreement;
15.1.2 has or will secure prior to delivery of the M-Net signals all
clearances necessary to enable MultiChoice to exercise in accordance
with this agreement the rights granted to MultiChoice hereunder without
incurring obligations or liabilities to anyone save as provided for in
this agreement, and in particular, M-Net will at all times hold and
comply with the terms of the clearances and will not do nor permit
anything to be done nor omit to do anything which might cause any such
clearances to be suspended or revoked;
15.1.3 shall retain possession of copies of its transmissions of the channel
for one month or such longer period and in such form as is required to
be retained by all applicable regulations or legislation in South
Africa and shall at the request of MultiChoice provide (free of charge)
a copy of any such part of the transmissions of the channel to the
relevant regulatory authority or agency;
15.1.4 Shall maintain the current standards of quality, presentation, style
and character of the channel.
15.2 MultiChoice hereby represents, warrants and undertakes that it -
15.2.1 has the legal power and authority to enter into and fully perform all
of its obligations under this agreement and is not and will not enter
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25
into any agreement which may preclude it from fully observing and
performing this agreement;
15.2.2 has or will secure prior to the delivery of the M-Net signal any
permission or authority required for the distribution of the channel to
and within the territory and, in particular, MultiChoice will at all
times hold and comply with the terms of such permissions and
authorities and will not do nor permit anything to be done nor omit to
do anything which might cause any such permission or authority to be
suspended or revoked.
16 INDEMNITY
16.1 The parties hereby indemnify each other and hold each other harmless
against all liabilities, claims, costs, damages and expenses
(including, without limitation, reasonable legal costs) -
16.1.1 arising out of any breach by the other of them of any representation,
warranty, undertaking or obligation contained in this agreement;
16.1.2 reasonably and properly incurred pursuant to a claim by a third party
arising out of any breach by the other of any representation, warranty,
undertaking or obligation contained in this agreement.
16.2 If either party wishes to assert a right to be indemnified for claims
by third parties as set forth in this clause, it shall -
16.2.1 promptly notify the other of the claim or legal proceeding which gives
rise to such right as soon as reasonably practicable upon becoming
aware of the same;
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26
16.2.2 afford the other the opportunity to participate in and fully control
any compromise, settlement or other resolution or disposition of such
claim or proceedings (subject to being fully indemnified by that other
party); and
16.2.3 co-operate fully with any reasonable request of the other party in
respect of the third party claim, but the other party shall pay the
costs of the participation in and control of any compromise, settlement
or resolution or other disposition of such claim or proceeding.
16.3 The indemnity set out in this clause shall cease to have any force or
effect upon termination of this agreement, except for any antecedent
breach by any of the parties.
PART II - GENERAL
17 CESSION
Neither party is entitled to cede its right and/or delegate its
obligations in terms of this agreement without the prior written
consent of the other party, which consent shall not be unreasonably
withheld.
18. FORCE MAJEURE
18.1 A party shall not be liable for any loss suffered by the other party
arising out of delay in or prevention of performance of the party's
obligations due to any cause, the adverse effects of which the party
could not and cannot reasonably and practically avoid in the ordinary
conduct of that party's
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27
business, including without limitation, as a result of the failure of
the satellites for any reason whatsoever.
18.2 The party whose performance is delayed or prevented shall immediately
give notice in writing to the other party.
18.3 If a party's performance is delayed be reason of a cause envisaged in
18.1, the party shall be entitled to a reasonable extension for
performance not exceeding 30 (thirty) days. If performance is or will
be delayed for longer than this period, the performance shall be
regarded as having been prevented.
18.4 If a party's performance is prevented by such a cause, the party shall
18.4.1 If the obligation or obligations of which performance is prevented are
not material, make such financial adjustment between them as may be
equitable;
18.4.2 if the obligation or obligations of which performance is prevented are
material, endeavour in good faith to agree on an alternative basis for
achieving the objects of this agreement. If agreement on an alternative
basis is not reached this agreement shall terminate and each party
shall retain the other's performance to the extent performance has
taken place.
19 CONFIDENTIALITY
19.1 The parties acknowledge that any information supplied in connection
with this agreement or in connection with each other's technical,
industrial or business affairs which has or may in any way whatsoever
be transferred or come into the possession or knowledge or any other of
them ("the
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28
receiving party") may consist of confidential or proprietary data,
disclosure of which to or use by third parties might be damaging to the
party concerned.
19.2 The receiving party therefore agrees to hold such material and
information in the strictest confidence, to prevent any copying thereof
by whatever means and not to make use thereof other than for the
purposes of this agreement and to release it only to such properly
authorised directors, employees or third parties requiring such
information for the purposes of this agreement and agrees not to
release or disclose it to any other party who has not signed an
agreement expressly binding himself not to use or disclose it other
than for the purposes of this agreement.
19.3 The undertakings and obligations contained in this clause 19 do not
apply to information which
19.3.1 is publicly available at the date of disclosure or thereafter becomes
publicly available from sources other than the parties;
19.3.2 the receiving party demonstrates was already in its possession prior to
its receipt by or disclosure to such receiving party;
19.3.3 is required by law or any regulatory authority to be disclosed;
19.3.4 after being disclosed to the receiving party is disclosed by any other
person to the receiving party otherwise than in breach of any
obligation of confidentiality.
19.4 The parties shall take such precautions as may be necessary to maintain
the secrecy and confidentiality of such material and information in
respect of its directors, employees, agents and/or directors or
employees or
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29
agents of any assignee, sub-contractor or distributor or any other
person to whom any such confidential or proprietary data may have been
or will be disclosed.
19.5 Save as may be required by law or any regulatory authority, no
announcement or publicity of the existence of this agreement or its
content or the transaction embodies in this agreement shall be made or
issued by or on behalf of any party without the prior written agreement
of all the parties.
20 DETERMINATION
20.1 Should any dispute arise between the parties in connection with
20.1.1 the formation or existence of:
20.1.2 the implementation of;
20.1.3 the interpretation or application of the provision of;
20.1.4 the parties' respective rights and obligations in terms of or arising
out of, or the breach or termination of;
20.1.5 the determination of any amount payable by either party in terms of;
20.1.6 the validity, enforceability, rectification, termination or
cancellation, whether in whole or in part of; or
20.1.7 any document furnished by the parties pursuant to the provisions of;
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this agreement or which relates in any way to any matter affecting the
interests of the parties in terms of this agreement, that dispute shall
be referred to the managing directors of MultiChoice and M-Net ("the
adjudicators") for a decision.
20.2 Any decision of the adjudicators on the issue referred to them shall be
deemed to be a decision of the parties in terms of this agreement and
shall be given effect to accordingly.
20.3 If the adjudicators fail to reach a unanimous decision on a material
issue referred to them within 30 (thirty) days of it being submitted to
them, either party will be entitled to cancel this agreement upon 6
(six) months prior written notice to such effect being given to the
other, provided that the established interpretation or application of
the agreement will prevail until such termination.
20.4 Any party to this agreement may demand that a dispute be determined in
terms of this clause by written notice given to the other party.
20.5 This clause shall not preclude any party from obtaining interim relief
on an urgent basis from a court of competent jurisdiction pending the
decision of the adjudicators.
20.6 The provisions of this clause
20.6.1 constitute an irrevocable consent while the parties to any proceedings
in terms hereof and no party shall be entitled to withdraw therefrom or
claim at any such proceedings that it is not bound by such provisions;
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20.6.2 are severable from the rest of this agreement and shall remain in
effect despite the termination or invalidity for any reason of this
agreement.
21 BREACH
21.1 Should any party -
21.1.1 commit a material breach of any of the terms and/or conditions of this
agreement which is incapable of remedy; or
21.1.2 commit a material breach of any of its obligations under this agreement
which is capable of remedy and which it does not remedy within 15
(fifteen) days of receipt of written notice to do so (or such longer
period as may be reasonable in the circumstances); or
21.1.3 be wound-up, dissolved or re-organised (otherwise than while solvent
and for the purpose of a bona fide reconstruction or amalgamation); or
21.1.4 cease to carry on business or suffer any execution or attachment over a
material part of its assets; or
21.1.5 be liquidated or placed under judicial management (whether provisional
or final); or
21.1.6 commit any act of Insolvency as if it were a natural person as
envisaged in the Insolvency Act, 1936; or
21.1.7 have its business sold or disposed of; or
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21.1.8 suspends or threatens to suspend its operations,
the other party ("the innocent party"), shall, notwithstanding any
other provision contained in this agreement, be entitled to either
21.1.9. claim immediate specific performance; or
21.1.9 cancel this agreement and claim damages,
without prejudice to any other remedy which the innocent party may have
in terms of this agreement or in law.
21.2 Should the standards of quality, presentation, style and character of
the channel change substantially during the course of this agreement as
demonstrated by consistent market research, MultiChoice shall be
entitled to give notice to M-Net requiring the current standard to be
restored. That request shall be considered at two successive quarterly
channel review meetings held by the parties and should the current
standard not be restored to the satisfaction of MultiChoice within 90
days after the second channel review meeting, MultiChoice shall be
entitled to terminate this agreement.
21.3 Within 20 (twenty) days of termination of this agreement (howsoever
occasioned), -
21.3.1 M-Net shall, at the direction of MultiChoice, either destroy or return
to MultiChoice all materials furnished to it under this agreement and
in its possession or under its control and M-Net shall certify in
writing to MultiChoice that MultiChoice's direction has been complied
with;
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21.3.2 MultiChoice, shall at the direction of M-Net, either destroy or return
to M-Net all materials furnished to it under this agreement and in its
possession or under its control and MultiChoice shall certify in
writing to M-Net that M-Net's direction has been complied with.
21.4 Upon termination of this agreement for whatever reason, MultiChoice
shall at the expiry of 3 (three) months after the termination,
disenable subscribers from receiving and decrypting the M-Net signals
whereafter subscribers shall cease to be entitled to receive and
decrypt the channel. M-Net shall, notwithstanding the termination of
this agreement, be entitled to receive the consideration referred to in
6.2 in respect of the 3 (three) month period.
22 NO PARTNERSHIP
Nothing in this agreement shall be deemed to create any joint venture
or partnership between MultiChoice and M-Net and neither such party
shall hold itself out in its advertising or otherwise in any manner
which would indicate or imply any such relationship with the other.
23 NOTICES AND DOMICILIA
23.1 The parties choose as their domicilia citandi et executandi their
respective addresses set out in this clause for all purposes arising
out of or in connection with this agreement at which addresses all
processes and notices arising out of or in connection with this
agreement, its breach or termination may baldly be served upon or
delivered to the parties.
23.2 For purposes of this agreement the parties' respective addresses shall
be -
<PAGE>
34
23.2.1 M-Net at 137 Hendrik Verwoerd Drive, Randburg (for the attention of Mr.
G De Villiers);
facsimile number (011) 789-7002,
23.2.2 MultiChoice at 75 Republic Road, Randburg, (for the attention of Mr.
Hans Hawinkels);
facsimile number (011) 789-1644,
or at such other address of which the party concerned may notify the
other in writing provided that no street address mentioned in this
sub-clause shall be changed to a post office box or poste restante.
23.3 Any notice given in terms of this agreement shall be in writing
and shall
23.3.1 if delivered by hand be deemed to have been duly received by the
addresses on the date of delivery;
23.3.2 if posted be prepaid registered post be deemed to have been received by
the addressee on the 8th (eighth) day following the date of such
posting;
23.3.3 if transmitted by facsimile be deemed to have been received by the
addressee on the day following the date of despatch,
unless the contrary is proved.
23.4 Notwithstanding anything to the contrary contained or implied in this
agreement, a written notice or communication actually received by one
of the parties from another including by way of facsimile transmission
shall be adequate written notice or communication to such party.
<PAGE>
35
24 VARIATION
No addition to or variation, consensual cancellation or novation of
this agreement and no waiver of any right arising from this agreement
or its breach or termination shall be of any force or effect unless
reduced to writing and signed by all the parties or their duly
authorised representatives.
25 RELAXATION
No latitude, extension of time or other indulgence which may be given
or allowed by either party to the other party in respect of the
performance of any obligation hereunder and no delay or forbearance in
the enforcement of any right of either party arising from this
agreement, and no single or partial exercise of any right by either
party under this agreement, shall in any circumstances by construed to
be an implied consent or election by such party or operate as a waiver
or a novation of or otherwise affect any of the party's rights in terms
of or arising from this agreement or estop or preclude any such party
from enforcing at any time and without notice, strict and punctual
compliance with each and every provision or term hereof.
26 WHOLE AGREEMENT
This agreement constitutes the whole agreement between the parties as
to the subject matter hereof and no agreements, representations or
warranties between the parties regarding the subject matter hereof
other than those set out herein are binding on the parties.
<PAGE>
36
SIGNED at on
AS WITNESS:
________________________________ For: ELECTRONIC MEDIA, NETWORK LIMITED
________________________________ ______________________________________
(Name in Block Letters) Duly authorised
SIGNED at on
AS WITNESS:
________________________________ For: MULTICHOICE AFRICA
(PROPRIETARY) LIMITED
________________________________ ______________________________________
(Name in Block Letters) Duly authorised
<PAGE>
APPENDIX 1
TERRITORY
MND REBROADCAST TERRITORY
South Africa (excluding Transkei)
Lesotho
Namibia
Transkei
MNA REBROADCAST TERRITORY
Ghana
Botswana
Nigeria
Kenya
Uganda
Zambia
Zimbabwe
Swaziland
Tanzania
MNA DTH TERRITORY
All countries in Africa excluding: Egypt
South Africa
Lesotho
Namibia
<PAGE>
APPENDIX 2
SUBSCRIPTION FEES
The subscription fee payable by a single unit dwelling subscriber to MultiChoice
is as follows -
1. MND:
South Africa (excluding Transkei):
1 June 1995 to 31 May 1996 - R73,24
Lesotho:
1 June 1995 to 31 May 1996 - R74,70
Namibia:
1 June 1995 to 31 May 1996 - N$74,00
Transkei:
1 June 1995 to 31 May 1996 - R73,24
2. MNA:
1 April 1995 to 31 March 1996 - $19.00 (excluding BBC)
It is recorded that the above subscription fees exclude any value-added
tax or other levy pursuant to 6.6.
<PAGE>
APPENDIX 3
PORTION OF THE SUBSCRIPTION FEE COLLECTED ON BEHALF OF M-NET
Based on the subscription fees described in APPENDIX 2, the portion of
the subscription fee per subscriber collected on behalf of M-Net is as
follows
1. MND
South Africa (excluding Transkei):
*
Lesotho:
*
Namibia:
*
Transkei:
*
2. MNA:
*
It is recorded that the above subscription fees exclude any value-added tax or
other levy pursuant to 6.6.
<PAGE>
APPENDIX 4
M-NET MARKET RESEARCH
- - Framework Market Segmentation
- - Image Tracking
- - Delphi Segmentation
- - KTV Quantitative and Qualitative
- - Presenter Quantitative and Qualitative
- - M-Net Advertising Campaign Survey
- - Local Productions Qualitative and Quantitative
- - Supersport Image Tracking
- - Disconnect Survey
- - TVQ Panel
<PAGE>
APPENDIX 5
DELIVERY OF THE M-NET SIGNALS
1. MND Signal:
The MND signal (Video/Audio/Data) shall be handed over to MultiChoice
at the input of the Telkom/Orbicom OVID ROOM (area 0/29 cable prefix).
M-Net shall issue this signal in the form of an analogue composite
video signal. The video signal shall carry data on the vertical
blanking interval for sub titling and other M-Net uses. The audio feed
shall be a balanced analogue audio signal comprising, one stereo pair
and one single audio feed per video feed.
The above signals shall adhere to the CCIR 624-3 report for PAL
System 1.
2. MNA Signal:
The MNA signal shall be handed to MultiChoice at the input of the
analogue satellite uplink room (area 28 cables prefix) managed by
MultiChoice.
M-Net shall issue this signal in the form of an analogue composite
video signal. The video signal shall carry data on the vertical
blanking interval for sub titling and other M-Net uses. The audio feed
shall be a balanced analogue audio signal comprising two stereo pairs
per videofeed.
The above signals shall adhere to the CCIR 624-3 report for PAL System
1.
* Indicates where text has been omitted pursuant to a request for confidential
treatment. The omitted text has been filed separately with the Securities and
Exchange Commission.
ABSA BANK 52/54 Gracechurch Street
London Branch London EC3V OEH
Telephone 0171-528 8296
Facsimile 0171-528 8298
Telex 920225 ABSA G
MIH Limited
3rd Floor, Abbot Building
Main Street
Road Town
Tortola
British Virgin Islands
29th September, 1998
Dear Sirs,
ABSA Bank Limited ("the Bank") is pleased to confirm to you MIH Limited ("the
Borrower") an offer of an uncommitted revolving credit facility ("the Facility")
on the following terms and conditions.
1 Facility Amount
The maximum amount at any time outstanding under the Facility shall be
US$40,000,000 (forty million United States Dollars).
Up to US$7,000,000 (seven million United States Dollars) of the
Facility Amount may be drawn by way of Guarantees.
2. Purpose of Facility
The Facility is to be used for the Borrower's general corporate
purposes.
3 Availability
The Facility is made available at the sole discretion of the Bank and
may be withdrawn in whole or in part at any time.
4 Drawings
Notice of drawing shall be given verbally by the Borrower by 11.00
a.m. two Business Days prior to the intended drawdown date. Once
given, notices of drawings are irrevocable. Notice of drawings must be
confirmed by facsimile or telex by an authorised signatory of the
Borrower as soon as possible, and in any event by no later than the
end of the Business Day following the date of the notice of drawing.
Drawings by way of Guarantees must be evidenced by way of a request and
Counter Indemnity in a form acceptable to the Bank.
Continued....
<PAGE>
ABSA BANK LIMITED - LONDON BRANCH
MIH Limited (BVI) 29th September, 1998
Continuation 2
5 Terms
5.1 Amount: Minimum drawings of US$1,000,000 and
integral multiples of US$100,000
(each a "Drawing," subject to
aggregate outstanding Drawings not
exceeding the Facility Amount.
5.2 Currency: United States Dollars.
5.3 Interest Periods: One month or such other period as may
be agreed between the Borrower and
the Bank at the time of each Drawing.
5.4 Interest Rate: (a) LIBOR (as defined below) and
(b) 2.00% per annum ("the Margin")
to be calculated on the basis of a
360 day year.
5.5 Interest Payments: The Borrower shall pay interest on
the last Business Day of each
Interest Period.
For the purpose of Clause 5.4 LIBOR means the rate shown on Page LIBO
on the Reuters monitor screen as the London InterBank Offered Rate for
deposits in United States Dollars and for amounts comparable to the
Drawing for a period equal to the Interest Period at approximately
11.00 (London time) (or one hour after the receipt by the Bank of the
notice of drawing if later) on the Quotation Date.
Quotation Date means in relation to any period for which an interest
rate is to be determined the day on which quotations would normally be
given by prime banks in the London InterBank Market for deposits in
United States Dollars.
6 Business Day
Means a day on which banks are open for business in London and New
York. If any day on which a payment is otherwise due hereunder is not a
Business Day such payment shall be made on the next succeeding Business
Day (unless that day would thereby fall in the next calendar month in
which case payment shall be made on the preceding Business Day).
Continued....
<PAGE>
ABSA BANK LIMITED - LONDON BRANCH
MIH Limited (BVI) 29th September, 1998
Continuation 3
7 Security
7.1 Guarantee from Multichoice Africa (Pty) Ltd (the
"Guarantor"); and
7.2 (i) Cession and pledge of up to *
and/or
(ii) Cession and pledge of up to *
in such proportions as to provide coverage of EITHER * % ( *
per cent) of utilisation of the Facility, in the case of
cession and pledge of shares in * OR coverage of * % *
percent) of utilisation of the Facility, in the case of
cession and pledge of shares in *
7.3 Utilisation of the Facility will be limited to US$ *
United States Dollars) in the event that only *
are pledged as
Security.
7.4 The value of the Security will be calculated using the Bank's
relevant spot rate for foreign exchange prevailing from time
to time.
7.5 In the event that the value of the Security falls below the
minimum coverage levels specified in 7.2 above and the
situation is not rectified by the Borrower within ten working
days then the Bank may without further notice to the Borrower
realise such portion of the value of the Security as is
necessary after the application of such realised value towards
the then utilised portion of the Facility to restore the
minimum coverage levels specified in 7.2 above. The Bank may
realise such value in such manner as the Bank shall deem fit
provided however that any realisation of the value of the
Security contemplated in 7.2 (ii) will be subject to
pre-emptive rights in favour of *
7.6 The Bank will at the request of the Borrower release from the
cessions and pledges contemplated in 7.2 (i) and/or 7.2 (ii)
any of the Security then given by the Borrower provided that
after such release the remaining Security provides the
coverage levels specified in 7.2 in respect of the then
utilised portion of the Facility.
Continued....
<PAGE>
ABSA BANK LIMITED - LONDON BRANCH
MIH Limited (BVI) 29th September, 1998
Continuation 4
7.7 The Bank will release the shares in *
from the cessions and pledges, if any, referred to in Clauses
7.2 (i) and (ii) above as soon as reasonably practicable after
all obligations and liabilities of the Borrower to the Bank
under this letter and any counter indemnity given by the
Borrower to the Bank pursuant hereto have been fully and
unconditionally paid and satisfied.
8. Prepayment
The Borrower may prepay any sums due hereunder (together with interest
on that sum accrued to the date of prepayment) provided the Bank
receives at least 7 Business Days notice in writing of the prepayment
date and the Borrower pays the cost incurred by the Bank in breaking
its matching funding deposit, such amount to be conclusively
determined and certified by the Bank.
9. Fees and Expenses
9.1 An Arrangement Fee of US$ * is payable by the Borrower on
signing hereof.
9.2 The Borrower will reimburse the Bank on demand for all
reasonable costs, expenses and legal fees incurred by the Bank
in the negotiation, preparation, execution, administration,
enforcement or attempted enforcement of this letter and the
documents referred to in it.
10. Illegality and Increased Costs
10.1 If any law or official directive (whether or not having the
force of law) increases the cost to the Bank of maintaining
the Facility or reduces the amount of principal interest or
other sums payable to the Bank under this Facility then upon
demand the Borrower shall pay to the Bank such amount as the
Bank shall conclusively determine is necessary to compensate
it for such increased cost or reduction.
10.2 All payments by the Borrower under the terms of the Facility
shall be made without any deduction and free and clear of and
without deduction for or on account of any taxes except to the
extent that the Borrower is required by law to make payment
subject to any taxes.
Continued....
<PAGE>
ABSA BANK LIMITED - LONDON BRANCH
MIH Limited (BVI) 29th September, 1998
Continuation 5
If any tax or amount in respect of tax is deducted or any
other deduction is made from any amount payable or paid by the
Borrower under the Facility then the Borrower shall pay such
additional amount as may be necessary to ensure that the Bank
receives a net amount equal to the full amount which it would
have received had payment not been made subject to such tax or
deduction.
11. Currency Indemnity
If any amount payable by the Borrower is received by the Bank in a
currency ("the Payment Currency") other than United States Dollars (or
such other currency as the Bank may agree in writing) (the "Agreed
Currency") and the amount produced by converting at the Bank's then
spot rate the Payment Currency into the Agreed Currency is less than
the amount payable in the Agreed Currency then the Borrower shall as
an independent obligation indemnify the Bank against (a) such
deficiency and (b) the incidental costs of such conversion.
12 Representations and Warranties
The Borrower represents and warrants to the Bank on the date hereof as
follows:
12.1 The execution and performance of this agreement are within its
authority, have been authorised by all necessary corporate
action, do not contravene any provision of law, its Memorandum
and Articles of Association or any agreement binding on it and
create valid and enforceable obligations.
12.2 There has been no material adverse change in its business,
operations, assets or financial condition since the date of
its last audited accounts which may (in the reasonable opinion
of the Bank) impair its ability to meet its obligations
hereunder.
These representations shall be deemed to be repeated by the Borrower on
the date of each notice of drawing as if made with reference to the
facts and circumstances existing at each such date.
13 Default Interest
In the event that the Borrower fails to pay any sum on the due date
hereunder the Bank shall be entitled to charge interest thereon at the
rate of the aggregate of (a) 2% per annum and (b) the Interest Rate.
Continued....
<PAGE>
ABSA BANK LIMITED - LONDON BRANCH
MIH Limited (BVI) 29th September, 1998
Continuation 6
14 Notices
All notices, demands or other communications under or in connection
with the Facility shall be in writing and shall be delivered personally
or by post, telex or facsimile and shall be deemed to be duly given or
made when delivered (in the case of personal delivery or post) and when
dispatched (in the case of telex or facsimile) and shall be addressed:-
(a) if to the Bank at 52/54 Gracechurch Street, London EC3V 0EH
(telex number 920225, facsimile number 0171-528 6036) marked
for the attention of Corporate Banking Department;
(b) if to the Borrower at 3rd floor, Abbot Building, Main Street,
Road Town, Tortola, British Virgin Islands with a copy to MIH
Holdings Ltd, 251 Oak Avenue, Randburg 2125, South Africa
(facsimile number 011-886 5785), in each case marked for the
attention of the Chief Financial Officer;
or at such other address as the relevant addressee may notify the other
from time to time.
15 No Waiver
No failure to exercise and no delay on the part of the Bank in
exercising any right, power or privilege shall be construed as a waiver
thereof. The rights and remedies herein are cumulative and are not
exclusive of any rights or remedies provided by law. If any one or more
provisions hereof shall be adjudged to be illegal, invalid or
unenforceable the legality, validity and enforceability of the
remaining provisions shall not be affected or impaired.
16 Previous facility letters
This facility letter supersedes all previous facility letters and all
utilisations under past facility letters shall be deemed to have been
made under the Facility contemplated by this facility letter.
17 Law
This Facility shall be governed by and construed in accordance with
English law.
Continued....
<PAGE>
ABSA BANK LIMITED - LONDON BRANCH
MIH Limited (BVI) 29th September, 1998
Continuation 7
18 Conditions Precedent
If the terms of the Facility are acceptable to you please return to
us:-
18.1 The duplicate of this letter signed by an authorised signatory
or signatories.
18.2 Evidence of approval by the Board (or by named officials to
whom the Board has delegated its authority for that purpose)
of the terms of the Facility and their authorisation of a
named person or persons to sign the duplicate of this letter.
18.3 Evidence of approval by the South African Reserve Bank of:-
(i) The Facility; and
(ii) the proposed offshore listing of the Borrower.
18.4 A Letter of Awareness from MIH Holdings Ltd in a form
acceptable to the Bank.
18.5 The security specified in paragraph 7 above.
18.6 A certified true copy of the Borrower's Certificate of
Incorporation and Memorandum and Articles of Association (or
equivalent documents).
Conditions Precedent are to be satisfied by not later than 31st
October, 1998.
Yours faithfully,
for and on behalf of
ABSA Bank Limited
/s/ M.S. COLLARD /s/ D. W. COLGAN
- --------------------- ----------------------------
M.S. Collard D. W. Colgan
Senior Manager Assistant General Manager
Corporate Banking Corporate Banking
Agreed and accepted.
/s/ LESLEY R. PENFOLD
- ---------------------
for and on behalf of
MIH LIMITED
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: MIH Limited
Registration on Form F-1
We are aware that our report dated November 30, 1998 on our review of
interim financial information of MIH Limited as of September 30, 1998 and for
the six month periods ended September 30, 1998 and 1997 is included in this
registration statement. Pursuant to Rule 436(c) under the Securities Act of
1933, this report should not be considered a part of the registration statement
prepared or certified by us within the meaning of Sections 7 and 11 of that Act.
/s/ PricewaterhouseCoopers Inc.
PricewaterhouseCoopers Inc.
[Leterhead of Harney Westwood & Riegels]
12 February 1999
To whom it may concern
We are aware that we are referred to under the heading "Risk Factors
Enforceability of Civil Liabilities" in the Prospectus forming a part of a
Registration Statement on Form F-1 submitted to the Securities and Exchange
Commission by MIH Limited and hereby consent to such use of our name therein. By
giving such consent, we do not hereby admit that we are experts with respect to
any part of such Registration Statement within the meaning of the term "expert"
as used in, or that we come within the category of persons whose consent is
required under, the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
Yours faithfully
HARNEY WESTWOOD AND RIEGELS
By /s/ Jose Santos
-------------------------
Jose Santos
[Leterhead of Mallinicks]
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
USA
8 December, 1998
Dear Sirs
CONSENT OF MALLINICKS
We are aware that we are referred to under the heading "Risk Factors -
Enforceability of Civil Liabilities" in the Prospectus forming a part of a
Registration Statement on Form F-1 submitted to the Securities and Exchange
Commission by MIH Limited and hereby consent to such use of our name therein. By
giving such consent, we do not hereby admit that we are experts with respect to
any part of such Registration Statement within the meaning of the term "expert"
as used in, or that we come within the category of persons whose consent is
required under, the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
Yours faithfully
/s/ David Tudor
- -------------------------
MALLINICKS
By David Tudor
CONSENT OF NAUTA DUTILH
We are aware that we are referred to under the heading "Risk
Factors--Enforceability of Civil Liabilities" in the Prospectus forming a part
of a Registration Statement on Form F-1 submitted to the Securities and Exchange
Commission by MIH Limited and hereby consent to such use of our name therein. By
giving such consent, we do not hereby admit that we are experts with respect to
any part of such Registration Statement within the meaning of the term "expert"
as used in, or that we come within the category of persons whose consent is
required under, the Securities Act 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
NAUTA DUTILH
/s/ Dirk W. Blaisse
-------------------------
By: Dirk W. Blaisse
London, England
January 27, 1999
CONSENT OF ZEPOS & ZEPOS
We are aware that we are referred to under the heading "Risk
Factors--Enforceability of Civil Liabilities" in the Prospectus forming a part
of a Registration Statement on Form F-1 submitted to the Securities and Exchange
Commission by MIH Limited and hereby consent to such use of our name therein. By
giving such consent, we do not hereby admit that we are experts with respect to
any part of such Registration Statement within the meaning of the term "expert"
as used in, or that we come within the category of persons whose consent is
required under, the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
ZEPOS & ZEPOS
By /s/ Nicholas A. Dessypris
-------------------------
Nicholas A. Dessypris
Partner
Athens, Greece
January 26, 1999
CONSENT OF WHITE & CASE (THAILAND) LIMITED
We are aware that we are referred to under the heading "Risk
Factors--Enforceability of Civil Liabilities" in the Prospectus forming a part
of a Registration Statement on Form F-1 submitted to the Securities and Exchange
Commission by MIH Limited and hereby consent to such use of our name therein. By
giving such consent, we do not hereby admit that we are experts with respect to
any part of such Registration Statement within the meaning of the term "expert"
as used in, or that we come within the category of persons whose consent is
required under, the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
WHITE & CASE (THAILAND) LIMITED
By /s/ Weerawong Chittmittrapap
-----------------------------
Weerawong Chittmittrapap
Bangkok, Thailand
December 16, 1998
Exhibit 23.6
Consent of Independent Accountants
We consent to the inclusion in this registration statement on Form F-1
(File No. ) of our reports dated June 15, 1998, on our audits of the financial
statements of MIH Limited and the Acquired MIH Businesses (predecessor to MIH
Limited). We also consent to the reference to our firm under the caption
"Experts".
/s/ Coppers & Lybrand
Johannesburg, Coopers & Lybrand
Republic of South Africa
March 11, 1999
