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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: October 24, 1997
Date of Earliest Event Reported: October 9, 1997
TELE-COMMUNICATIONS INTERNATIONAL, INC.
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(Exact name of Registrants as specified in their charters)
State of Delaware
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(State or other jurisdiction of incorporation)
0-26264 84-1289408
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(Commission File Number) (I.R.S. Employer
Identification Number)
5619 DTC Parkway
Englewood, Colorado 80111
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(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code: (303) 267-5500
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Item 5. Other Events.
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On October 9, 1997, Tele-Communications International, Inc. ("TINTA" or the
"Company") sold 14.5% of its 51% interest in Cablevision S.A. and certain
affiliated companies ("Cablevision") to CEI Citicorp Holdings Sociedad Anonima
("CEI") and T.I. Telefonica Internacional de Espana S.A. ("Telefonica", together
with CEI, the "Buyers") for cash proceeds of $120 million ($21 million of which
was received during the third quarter of 1997) (the "Cablevision Sale"). Cash
proceeds received by TINTA from the Cablevision Sale of $120 million were based
on a negotiated value of $210 million for approximately one-half of TINTA's 51%
interest in Cablevision. In addition, on October 9, 1997, Cablevision issued
3,541,829 shares of stock in the aggregate to the Buyers (the "Cablevision Stock
Issuance") for $80 million in cash and notes receivable with an aggregate
principal amount of $240 million, plus accrued interest at LIBOR, due within the
earlier of two years or at the request of Cablevision's board of directors. The
Cablevision Stock Issuance further reduced TINTA's interest in Cablevision to
26.24%. TINTA will continue to have the right to manage Cablevision (pursuant to
a five-year management contract that was entered into in connection with the
Cablevision Sale), and all material corporate transactions of Cablevision will
require the Company's approval, so long as the Company maintains a 16% interest
in Cablevision. The Buyers also purchased the additional 39% interest in
Cablevision that the Company had the right to acquire.
Item 7. Financial Statements and Exhibits
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(c) Exhibits
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10.1 Stock Purchase and Capital Contribution Agreement entered into as of
September 22, 1997 by and among (i) Tele-Communications
International, Inc., (ii) Eduardo Eurnekian et.al., (iii) CEI
Citicorp Holdings S.A. and (iv) T.I. Telefonica Internacional de
Espana S.A.
10.2 Shareholders Agreement dated October 9, 1997 between (i) Tele-
Communications International, Inc., (ii) CEI Citicorp Holdings
Sociedad Anonima, (iii) Southtel Equity Corporation, (iv) T.I.
Telefonica Internacional de Espana S.A. and (v) Martin Eurnekian.
10.3 Management Agreement dated October 9, 1997 by and between
Cablevision S.A. and TINTA Cable Management, Inc., a wholly owned
subsidiary of Tele-Communications International, Inc.
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: October 24, 1997
TELE-COMMUNICATIONS INTERNATIONAL, INC.
(Registrant)
By: /s/ Graham Hollis
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Graham Hollis
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
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Exhibit 10.1
STOCK PURCHASE AND CAPITAL CONTRIBUTION AGREEMENT
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THIS STOCK PURCHASE AND CAPITAL CONTRIBUTION AGREEMENT (the "Agreement") as
herein defined, is entered into as of this 22nd day of September of 1997 by and
among:
(i) Tele-Communications International, Inc., a corporation duly incorporated
and registered in United States of America (hereinafter referred to as "TINTA"),
(ii) Basilia Jaliquias, I.D.N 3,303,838, Natalio Wende, I.D.N 4,203,286, and
Eduardo Eurnekian, I.D.N 2,073,443, all represented hereunder by Eduardo
Eurnekian (hereinafter referred to collectively as "EE"),
TINTA and EE collectively the "Stockholders",
(iii) CEI Citicorp Holdings S.A., a corporation duly incorporated and
registered in Argentina (hereinafter referred to as "CEI" or "Buyer"), and
(iv) T.I. Telefonica Internacional de Espana S.A., a corporation duly
incorporated and registered in Spain (hereinafter referred to as "TISA" or
"Buyer"),
CEI and TISA collectively the "Buyers".
WHEREAS
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A. The Stockholders own all the shares representing the stock and votes of the
Companies (as herein defined) as set out in detail in Exhibit A. Hereinafter,
the companies described in Exhibit A will be referred to individually as
"Company" and collectively as "Companies".
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B. Stockholders desire to sell to Buyers and Buyers desire to buy from
Stockholders the shares representing the capital stock and votes in the
Companies and in the percentages set forth in Exhibit B.
C. The Stockholders and the Buyers also desire to enter into the Stockholders
Agreement attached hereto as Exhibit C of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties herein contained, the parties hereto agree as
follows:
DEFINITIONS
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For purposes of this Agreement, the following terms shall have the following
meanings:
"Agreement": this Agreement and its exhibits.
"Assets": All properties, privileges, rights, interests and claims, real and
personal, tangible and intangible, of every type and description that are owned,
leased or held, used or useful in the Company Business in which Companies or
Subsidiaries have any right, title or interest or in which Companies or
Subsidiaries have acquired any right, title or interest on or before the Closing
Date, including Governmental Permits, Company Contracts, Equipment, Real
Property and cable inventory listed in the Inventory.
"Balance Sheet": with respect to Cablevision S.A. and its Subsidiaries means the
consolidated balance sheet as of June 30, 1997; with respect to Construred S.A.
means the balance sheet as of December 31, 1996; with respect to Univent's S.A.
means the balance sheet as of December 31, 1996.
"Balance Sheet Date": shall mean with respect to each Company or Subsidiary, the
date indicated in "Balance Sheet".
"Basic Services": the transmission of cable television programming sold to
Companies' and Subsidiaries' subscribers as a package as part of the Company
Business, for which subscribers pay a fixed monthly fee to Companies or
Subsidiaries, including the satellite transmission related to Televisora
Belgrano S.A. in the city of Chascomus,
<PAGE>
Province of Buenos Aires, UHF transmissions related to Televisora La Plata S.A.
and data transmissions made through FiberTel-TCI2 S.A.
"Closing": means the consummation of the transactions contemplated by this
Agreement.
"Closing Date": meaning the date in which the consummation of the transactions
contemplated by this Agreement takes place.
"COMFER": meaning the Comite Federal de Radiodifusion of Argentina.
"COMFER Approval": shall mean all necessary authorizations or consents from
COMFER required to consummate the transactions contemplated by this Agreement
and/or the obligations assumed and/or provisions contained herein.
"Company" (or jointly "Companies"): meaning Cablevision S.A., Construred S.A.
and Univent's S.A.
"Company Contracts": All material contracts and agreements, other than
Governmental Permits, pertaining to ownership, operation and maintenance of the
Companies or the Subsidiaries.
"Company Business": meaning the operation of a complete cable television
reception and distribution System located in the cities of Buenos Aires, Greater
Buenos Aires, La Plata, and in the city of Chascomus, Province of Buenos Aires
developed by the Companies and the Subsidiaries. In addition, it includes the
construction activities carried out by Construred S.A., data transmission
activities carried out by FiberTel-TCI2 S.A. and the UHF transmission related to
Televisora La Plata S.A.. Univent's is currently a dormant company, but will be
purchased hereby.
"Current Assets": those items classified as such in the Balance Sheet as of the
Balance Sheet Date prepared in accordance with GAAP.
"EBITDA": the Companies' and the Subsidiaries' -excluding Televisora La Plata
S.A.- earnings before deduction of interest, taxes, depreciation and
amortization for the six
<PAGE>
month period ended 30 June 1997, according to generally accepted accounting
principles in the United States of America.
"Effective Date": the date of the execution of this Agreement.
"Encumbrances": any mortgage, lien, security interest, security agreement,
conditional sale or other title retention agreement, limitation, pledge, option,
charge, assessment, restrictive agreement, restriction, encumbrance, adverse
interest, restriction on transfer or any exception to or defect in title or
other ownership interest (including reservations, rights of way, possibilities
of reverter, encroachments, easements, rights of entry, restrictive covenants,
leases and licenses).
"Equipment": all electronic devices, trunk and distribution coaxial and optical
fiber cable, amplifiers, power supplies, conduit, vaults and pedestals,
grounding and pole hardware, subscriber's devices (including converters,
encoders, decoders, transformers behind television sets and fittings), headend
hardware (including origination, earth stations, transmission and distribution
system), test equipment, vehicles and other tangible personal property owned,
leased, used or held for use in the Company Business.
"GAAP": generally accepted accounting principles in force in the Argentine
Republic from time to time.
"Governmental Authorities": (i) The Republic of Argentina, (ii) any province or
territory of the Republic of Argentina and any political subdivision thereof
(including provinces, municipalities and the like) or (iii) any agency,
authority or instrumentality of any of the foregoing, including any court,
tribunal, department, bureau, commission or board, including, but not limited
to, the COMFER.
"Governmental Permits": all franchises, approvals, authorizations, permits,
licenses, easements, registrations, qualifications, leases, variances and
similar rights obtained from any Governmental Authority.
"Legal Requirements": any statute, ordinance, code, law, rule, regulation, order
or other requirement, standard or procedure enacted, adopted or applied by any
Governmental Authority, including judicial decisions applying or interpreting
any Legal Requirement.
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"Liabilities": those items classified as liabilities on the Balance Sheet
prepared in accordance with GAAP as of the Balance Sheet Date.
"Net Debt": total Liabilities minus Current Assets, according to GAAP.
"Persons": any natural person, corporation, partnership, trust, unincorporated
organization, association, limited liability company, Governmental Authority or
other entity.
"Purchase Price": shall be that defined in Section 1.2.
"Real Property": all Assets consisting of realty, including appurtenances,
improvements and fixtures located on such realty, and any other interests in
real property, including fee interests (if any) in Companies' offices and
headend sites and leasehold interests and easements.
"Required Consents": all franchises, licenses, approvals and consents required
under Governmental Permits, Company Contracts or otherwise for (a) Stockholders
to transfer the Shares to Buyers, and (b) Buyers to assume and perform the
Governmental Permits and the Company Contracts after the Closing Date.
"Shares": meaning the percentage of shares of each of the Companies owned by
each of the Stockholders and transferred to Buyers, set out in Exhibit B,
including every right and benefits corresponding thereto; preferential rights
for the subscription of new shares of the Companies, whenever it is related to
their separate transfer irrespective of the corresponding shares, and rights
derived from advances on account of future subscriptions of shares of the
Companies indicated in Exhibit 2.18.
"Stockholders Agreement": meaning the document which shall govern the
relationship among the Companies' stockholders after the Closing as set out in
Exhibit C.
"System": a complete cable television reception and distribution system operated
in the conduct of the Company Business, consisting of one or more headends,
subscriber drops and associated electronic and other equipment, and which is, or
is capable of being without modification, operated as an independent system
without interconnections
<PAGE>
to other systems. Any systems which are interconnected or which are served in
total or in part by a common headend will be considered a single System. This
definition does also apply to the UHF activities of Televisora La Plata S.A. and
to FiberTel TCI2 S.A.
"Subscribed Shares": the shares of Cablevision S.A. to be subscribed by Buyers,
as set out in Section 1.3.
"Subsidiaries": the companies owned by Cablevision S.A., meaning FiberTel TCI2
S.A., Televisora Belgrano S.A., Oeste Cable Color S.A., Cable Rios de los Deltas
S.A. and Televisora La Plata S.A.
ARTICLE I
PURCHASE, SALE AND SUBSCRIPTION OF THE SHARES
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SECTION 1.1. Purchase and Sale of the Shares. At Closing, upon the terms and
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subject to the conditions set forth in this Agreement, the Stockholders shall
sell the Shares to Buyers and Buyers shall purchase the Shares from the
Stockholders. For said purpose, the Stockholders shall deliver to Buyers such
documents representing the Shares, in proper form for transfer, with appropriate
transfer notices, and any other documents or instruments which may be necessary
in order to vest Buyers with good and exclusive title to the Shares. Buyers
simultaneously will deliver cash denominated in United States Dollars in payment
of the Purchase Price (as hereinafter defined) pursuant to Section 1.2.
SECTION 1.2 Purchase Price. In consideration of the Shares and of the
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covenants, representations and warranties made by Stockholders in this
Agreement, Buyers hereby agree to pay the Purchase Price, that is to say:
(i) to TINTA the amount of U$S 120,000,000 (One Hundred Twenty Million United
States Dollars) and
(ii) to EE the amount of U$S 321,176,470 (Three Hundred Twenty One Million One
Thousand Seventy Six Four Hundred Seventy United States Dollars).
The parties agree that the Purchase Price was agreed to, on the basis of the
Stockholders' representations and warranties contained herein, including the
<PAGE>
representation and warranty that, as of 30 June 1997: (a) the EBITDA for the
previous six month period was U$S 43,000,000 and that Net Debt was U$S
182,000,000.
The Purchase Price will be paid by Buyers by way of wire transfer of readily
available funds, to the accounts to be indicated in writing, by each Stockholder
three days prior to Closing, as follows:
(i) To TINTA: The amount of U$S 21,000,000 (Twenty one million United States
Dollars) has been paid by Buyers to TINTA on July 25, 1997. The balance of U$S
99,000,000 (Ninety nine million United States Dollars) shall be paid at Closing;
(ii) To EE: The amount of U$S 32,117,647 (Thirty Two million One hundred
Seventeen Thousand Six Hundred Fourty Seven United States Dollars) has been
already paid by Buyers to EE on July 25, 1997. The balance of U$S
289,058,823.00(Two Hundred Eigthy Nine Million Fifty Eight Thousand Eight
Hundred Twenty Three United States Dollars) shall be paid at Closing
SECTION 1.3 Subscription of the Subscribed Shares.
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1.3.1 At Closing Buyers will subscribe the Subscribed Shares at a
Subscription Price of U$S 320,000,000, that is to say U$S 90.3488 per share. For
this purpose, Stockholders and Buyers will cause Cablevision S.A. to hold an
Unanimous Extraordinary Shareholders Meeting that will approve a capital
increase of $ 3,541,829, from $ 9,115,000 to $ 12,656,829 to be totally
subscribed by Buyers. Each Buyer will subscribe one half of the Subscribed
Shares. CEI will subscribe its portion of the Subscribed Shares through a wholly
owned subsidiary named Southtel Equity Corporation, a company organized
according to the laws of the Cayman Islands, BWI, with legal domicile at the
offices of Maples and Calder, P.O. Box 309, Grand Cayman ("Southtel").
1.3.2 TINTA and Martin Eurnekian hereby irrevocably renounce to preemptive
right to subscribe their pro rata portion of the Subscribed Shares.
1.3.3 The Subscribed Shares will be paid: (i) 25% of the Subscription Price
(the "Initial Payment") at Closing; and (ii) the balance, that is to say 75% of
the Subscription Price, within two (2) years as from Closing Date or, at the
request of the Board of Directors at an earlier time, plus interest thereon at
LIBOR from the Closing
<PAGE>
Date to the effective date of payment, payable in arrears. The obligations of
Buyers to pay the balance foreseen hereto will be evidenced by a Subscription
Agreement to be executed at Closing which will contain the unconditional and
irrevocable promise of the Buyers to pay such balance plus applicable interest
on the due date thereof. Southtel and TISA shall be jointly and severally liable
for the full payment of the Subscription Price and interest thereon.
1.3.4 If on April 30, 1998 Buyers have not paid in to Cablevision S.A. the
100% of the Subscription Price the Board of directors of Cablevision S.A. (with
the majority foreseen in Section 5.6 (ii) of the Stockholders Agreement) shall
decide either: (i) to request Buyers the full paying in of the Subscribed Shares
on or before June 30, 1998; or (ii) to submit to the Shareholders meeting of
Cablevision S.A. a proposal for a reduction of capital of Cablevision S.A. in an
amount equal to the unpaid portion of the Subscription Price divided by 90.3488
which reduction will result in a redemption of the Subscribed Shares (including
the Subscribed Shares purchased with the Initial Payment). The price per share
used in such reduction of capital will be U$S 90.3488 per share plus interest at
LIBOR from the date of subscription of the Subscription Price. The capital
reduction will be allocated in the following proportions: TINTA 28.27%;
Eurnekian 0%; CEI 35.865% and TISA 35.865%. For such purposes Stockholders and
Buyers agree to cause an Unanimous Extraordinary Shareholders Meeting of
Cablevision S.A. to approve said proposal.
If the Board determines to reduce Cablevision S.A.'s capital, TINTA will
receive a long-form, full recourse, United States promissory note, payable on
demand and subject to the exclusive jurisdiction of the laws and courts of the
State of New York (the "Note"). At TINTA's option, the maker of the Note will be
Cablevision S.A. or the Buyers (jointly and severally).
If Cablevision S.A.'s capital is reduced in an amount equal to US$ 320,000,000
divided by 90.3488, the principal amount of the Note will be US$ 90,000,000. If
Cablevision S.A.'s capital is reduced in an amount equal to US$ 240,000,000
divided by 90.3488, the principal amount of the Note will be US$ 67,848,000. All
reductions of Cablevision S.A.'s capital unders this Section shall be done
accordingly.
SECTION 1.4 Additional Agreements. (a) At Closing, Stockholders and/or
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Company will enter into the following agreements with Buyers and/or each
Company, as appropriate:
<PAGE>
(i) The Stockholders Agreement substantially according to the wording
contained in Exhibit C.
(ii) The Five Year Management Agreement between the Company and TINTA,
substantially in the wording attached as Exhibit 1.4 (ii).
(b) At Closing, Stockholders and Buyers will cause the Company to extend
the programming agreement with Pramer S.R.L. as provided in Section 3.4 of the
Stockholders Agreement.
SECTION 1.5 Late Payment. Default. The delay in the payment of any eventual
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monies due will occur automatically, with the expiration of the agreed dates,
without need of any judicial or out-of-court requirement, giving way to punitive
and compensatory interest at a daily rate equivalent to a rate of 15% per annum,
during which payment is due and until the date of payment.
SECTION 1.6 Deliveries by Stockholders Stockholders agree to deliver, prior to
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Closing, the following items and documents to Buyers or make them available at
Companies:
(a) a certified copy of the Articles of Incorporation of the Companies and the
Subsidiaries, as amended, and of the Companies and Subsidiaries By-laws.
(b) minutes and written actions containing an accurate record of proceedings
of, and actions by the shareholders and directors of the Companies and of the
Subsidiaries from their inception.
(c) copies of the shareholders books of the Companies and of the Subsidiaries
which accurately reflect all issuances, reissuances, cancellations, liens (if
applicable), transfers and encumbrances of Companies' and Subsidiaries' stock
which adequately reflect all ownership, cancellations, capital increases, liens
(if applicable), transfers and encumbrances of Companies and Subsidiaries
interest.
(d) copies of all Governmental Permits for the ongoing Company Business.
<PAGE>
(e) copies of Company Contracts and title documents.
(f) copies of any title documents or Company Contracts representing intangible
property and boundaries of all Real Property as owned or leased by the Companies
and the Subsidiaries together with any and all improvements, rights of way,
easements, roads and such other features as Buyers shall reasonably specify.
(g) copies of the insurance policies presently in force.
(h) copies of any employee incentive, bonus or benefit plans or agreements.
(i) the Balance Sheet of Cablevision S.A., Construred S.A. and Univent's S.A.
(j) copies of such other documents and items as Buyers may reasonably request.
SECTION 1.7 Closing The Closing of the transactions contemplated in this
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Agreement will take place at Tucuman 1, 18th floor, Buenos Aires, or at such
other place as Stockholders and Buyers mutually agree, on such date on which
all the conditions precedent set forth in Article IV shall have been satisfied
or waived in accordance with the terms hereof and applicable law. The date of
the Closing shall be a date on or before October 23, 1997, except that in case
US West (as defined hereunder) exercises its tag along right pursuant to the US
West Agreement and Buyers agree to purchase in accordance to said agreement, the
date of Closing shall be the earliest possible date thereafter , taking into
account that the closing under the US West Agreement must take place
simultaneously with the Closing.
At Closing
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1.7.1 Stockholders shall deliver to Buyers:
(A) the written resignations of the current members of the Board of directors,
of the current syndics and of the managers (which the parties may have agreed
that will not remain employees) of each of the Companies and the Subsidiaries,
resignations that will encompass their offices and fees as per the wording
attached as Exhibit 1.7.1 (A);
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(B) copies of the corresponding board of directors meetings approving the
resignations of the current members of the Board of directors and of the current
syndics of the Companies and the Subsidiaries;
(C) copies of the shareholders meetings of each of the Companies and the
Subsidiaries approving all the actions taken by the directors and syndics and
accepting the resignations of such directors and syndics and appointing new
members of the Board of directors and new syndics as Stockholders and Buyers
shall agree;
(D) the documents evidencing the Shares, duly endorsed, and such other
documents or instruments as Buyers may request, in order that Buyers be vested
with good and exclusive title to the Shares;
(E) to the extent not previously delivered, copies of the minute books,
shareholders books of the Companies and the Subsidiaries and such other papers,
evidence of title or interest, books, records, files, correspondence, memoranda
and other documents of the Companies and the Subsidiaries, as Buyers may
reasonably request;
(F) a report issued by a Real Estate Registry or by a notary or an officer of
the Companies and the Subsidiaries satisfactory to Buyers, to the effect that
(i) none of the Assets is subject to any recorded lien, including any lien for
federal, state or local taxes or assessments, and (ii) no suits or judgments
related to Real Property have been filed against the pertinent Company except
for those indicated in the Balance Sheet;
(G) employment Agreements, dated the Closing Date, executed by the Companies
and the Subsidiaries and mutually agreed key employees;
(H) duly certified copies of resolutions of the Board of Directors or similar
governing body of TINTA, authorizing the execution, delivery and performance of
this Agreement by such Stockholder which resolutions shall be in full force an
effect at and as of the Closing;
(I) duly certified copies of the powers of attorney granted by Messrs. Basilia
Jaliquias and Natalio Wende, in favor of EE, authorizing the execution, delivery
and performance of this Agreement by such Stockholders;
<PAGE>
(J) documentary proof that the Companies and the Subsidiaries timely
obtained or filed complete and timely applications for all authorizations needed
to carry all signals being carried and all authorizations needed to utilize the
frequencies on which these signals are carried and to carry out the Company
Business;
(K) all blueprints, schematics, drawings, diagrams, maps, system design
bill of material, engineering and technical data, used by the Companies and the
Subsidiaries in connection with the Assets and the Company Business, unless
Buyers shall direct in writing that the same or part thereof be delivered to
Buyers elsewhere;
(L) a certificate signed by the Secretary (or other person having and
exercising equivalent authority) of TINTA certifying to Buyers the incumbency of
TINTA's officers to execute this Agreement (or persons having and exercising
equivalent authority) as from the Closing Date, and bearing the authentic
signatures of all such officers (or other persons) who have executed this
Agreement;
(M) a long-form certificate of good standing for the Companies and the
Subsidiaries dated not more than five (5) days prior to the Closing Date, a
certificate of tax good standing for the Companies and the Subsidiaries dated
not more than five (5) days prior to the Closing Date and a "bring-down" tax
good standing letter for the Companies and the Subsidiaries dated the Closing
Date, in each case from the Company syndic or the Chairman of the board of
directors;
(N) such documents and instruments as parties may agree in order to change
the authorized signatures for all bank accounts of the Companies and the
Subsidiaries, and the persons authorized to have access to the Companies' and
the Subsidiaries' bank accounts;
(O) a list of the cable inventory of the Companies and the Subsidiaries as
of June 30, 1997 (hereinafter the "Inventory").
1.7.1.A Eurnekian shall deliver to Buyers an instrument by which Pramer
S.R.L. grants Cablevision S.A., free of charge, a 180 day term license for the
non exclusive use of the "Cablevision" and "CV" trademarks and any and all other
"Cablevision" and "CV" related trademarks.
<PAGE>
1.7.1B TINTA shall deliver to Buyers an instrument by which Tele-
Communications, Inc. grants Cablevision S.A., free of charge, a licence for the
use of the "TCI" denomination and related trademarks. Said license will be in
effect during the term of the Management Agreement and any extension thereof.
1.7.2. The following events shall take place:
(A) an Unanimous Extraordinary Shareholders Meeting of Cablevision S.A.
shall approve: (i) a capital increase of $ 3,541,829 from $ 9,115,000 to $
12,656,829 to be totally subscribed by Buyers. Stockholders will renounce their
preemptive right to subscribe their pro rata portion of the Subscribed Shares.
Buyers will subscribe the Subscribed Shares.The Subscribed Shares will be paid
as follows: (a) 25% of the Subscription Price, at Closing; and (b) the balance,
that is to say 75% of the Subscription Price, within two (2) years as from
Closing Date or at an earlier time as required in Section 1.3.4 of this
Agreement; and (ii) an amendment to Cablevision S.A.'s by-laws in order to
reflect as required or agreed, an to the fullest extent permitted by applicable
law, the provisions of the Stockholders Agreement;
(B) Stockholders shall notify the Companies the transfer of the Shares
according to the terms of Section 215 of Argentine law N degrees 19,550;
(C) Stockholders will cause to Companies to duly register the transfer of
the Shares in the respective Shareholders Registry Book of each of the Companies
and in the certificates representing the Shares;
(D) a Board of Directors meeting appointing the respective president and
vicepresident of each of the Companies and the Subsidiaries, will take place;
(E) the Board of Directors of Cablevision S.A. shall issue the provisional
certificates representing the Subscribed Shares;
(F) Stockholders and Buyers will cause Cablevision S.A. to duly register
the issue of the Subscribed Shares in Cablevision S.A.'s Shareholders Registry
Book.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
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<PAGE>
OF THE STOCKHOLDERS
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Stockholders represent and warrant to Buyers, as of the Closing, as
follows:
SECTION 2.1. Organization and Qualification. The Companies and the
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Subsidiaries are corporations duly organized, validly existing and in good
standing under the laws of Argentina and have all requisite corporate power and
authority to own, lease and use its Assets as they are currently owned, leased
and used and to conduct the Company Business as it is currently conducted. The
Companies and the Subsidiaries are duly qualified or licensed to do business and
are in good standing under the laws of each jurisdiction in which the character
of the Company Business makes such qualification necessary, except any such
jurisdiction where the failure to be so qualified or licensed and in good
standing would not have a material adverse effect on the relevant Company or
Subsidiary or on the validity, binding effect or enforceability of this
Agreement.
SECTION 2.2. Good title. Stockholders have good, valid, marketable and
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exclusive title to the Shares free and clear of any liens, encumbrances, rights
of first refusal (except as agreed herein and as provided in the current
shareholders agreement of the Companies), pledges or claims, with full right and
lawful authority to transfer the Shares to Buyers. At Closing, Stockholders will
reciprocally waive their right of first refusal to acquire the shares of the
Companies under the Amended and Restated Shareholders Agreement dated April 25,
1995. There are no other outstanding options, warrants or any other pre-emptive
rights or commitments of any kind for third parties to acquire or become
beneficiary of the Shares or the common stock of the Company and the Subsidiary
in any way. All of the Shares have been duly authorized and validly issued and
have been fully paid for and there are no pending increases of capital nor
convertible securities. There is a capital reduction pending of registration
before the Public Registry of Commerce of the City of Buenos Aires, which has
carried the corporate capital to $ 9,115,000.00 and there are no outstanding
certificates either provisional or not which have not been duly cancelled. All
existing certificates represent the corporate capital of $9,115,000.00.
SECTION 2.3. Authority and Validity. Each Stockholder has authority to
----------------------
execute and deliver, to perform its obligations under, and to consummate the
transactions contemplated by this Agreement. The execution and delivery by
Stockholders and the performance by Stockholders of their obligation hereunder,
and the consummation by Stockholders of the transactions contemplated by this
Agreement have been duly authorized by all requisite corporate and other
appropriate action of Stockholders. This Agreement has been duly executed and
delivered by Stockholders and is the valid and binding obligation of
Stockholders, enforceable against Stockholders in accordance with
<PAGE>
its terms, except insofar as enforceability may be affected by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect affecting creditor's rights generally or by principles
governing the availability of equitable remedies.
SECTION 2.4. No Breach or Violation. Subject to obtaining COMFER
----------------------
Approval, the execution, delivery and performance of this Agreement by
Stockholders will not: (a) constitute a violation of any provision of the
charter or bylaws of any Company or Subsidiary; (b) constitute a violation of
any Legal Requirement; (c) require any consent, approval or authorization of, or
any filing with or notice to, any Person save in accordance with applicable
Stockholders Agreement; or (d) (i) violate, conflict with or constitute a breach
of or default under, (ii) permit or result in the termination, suspension or
modification of, (iii) result in the acceleration of (or give any Person the
right to accelerate) the performance of the Company under, or (iv) result in the
creation or imposition of any Encumbrance under, any Company Contract or any
other instrument evidencing any of the Assets or any instrument or other
agreement to which any Company or any Subsidiary is a party or by which any
Company or any Subsidiary, any Company Business or any of their Assets is bound
or affected, except for purposes of this clause (d) such violations, conflicts,
breaches, defaults, terminations, suspensions, modifications, and accelerations
as would not, individually or in the aggregate, have a material adverse effect
on any System, any Company Business, any Company or any Subsidiary.
SECTION 2.5. Assets. Every Company and every Subsidiary has exclusive,
------
good and marketable title to (or, in the case of Assets that are leased, valid
leasehold interests in) the Assets (other than Real Property, as to which the
representations and warranties in Section 2.6 apply). The Assets are free and
clear of all Encumbrances of any kind or nature, except restrictions stated in
the Governmental Permits. Except as set forth on Exhibit 2.5 , none of the
Equipment is leased by any Company or Subsidiary from any other Person. The
Assets will remain in each Company and in each Subsidiary and are all the assets
necessary to permit Buyers to conduct the Company Business substantially as it
is being conducted on the date of this Agreement in compliance with all Legal
Requirements, save for the trademark exception referred to in Section 2.8
herebelow. All the Equipment is in good operating condition and repair, ordinary
wear and tear excepted and is suitable and adequate for continued use in the
manner in which it is presently used. Neither the Stockholders nor any affiliate
of Stockholders other than the Companies and the Subsidiaries has been granted
or has applied for a cable television franchise in any area currently served by
the Company Business.
SECTION 2.5.A Accounts Receivable The accounts receivable shown in the
-------------------
Balance Sheet of each of the Companies and the Subsidiaries, and any additions
made thereto
<PAGE>
since the Balance Sheet Date have arisen in the ordinary course of business and
are valid and genuine and are current and collectible net of the reserves shown
on such financial statements. All accounts for basic cable television services
furnished by any Company or Subsidiary which are more than sixty (60) days past
due are addequately provisioned in the Companies and Subsidiaries financial
statements.
SECTION 2.6. Real Property.
-------------
2.6.1. All the Assets consisting of Real Property interests are described
in Exhibit 2.6.1. Each Company and each Subsidiary has valid leasehold interests
in Real Property leased by each Company and by each Subsidiary and, with respect
to other Real Property not owned or leased by each said Company or each said
Subsidiary, each Company and each Subsidiary has the valid and enforceable right
to use all other Real Property pursuant to easements, licenses, rights-of-way or
other rights.
2.6.2. The documents delivered by each Company, each Subsidiary or
Stockholders to Buyers as evidence of each lease of Real Property constitute the
entire agreement with the landlord in question, except for the agreements
indicated under Exhibit 2.6.2 which will be renegotiated in order to have them
meet current practice and market prices. There are no leases or other
agreements, oral or written, granting to any Person other than the corresponding
Company or Subsidiary the right to occupy or use any Real Property. All
easements, rights-of-way and other rights appurtenant to, or which are necessary
for the corresponding Company's or Subsidiray's current use of, any Real
Property are valid and in full force and effect, and the corresponding Company
and Subsidiary has not received any notice with respect to the termination or
breach of any of those rights. Each parcel of Real Property, any improvements
constructed thereon and their current use conform in all material respects to
(a) all applicable Legal Requirements, including zoning requirements, and (b)
all restrictive covenants, if any, or other Encumbrances affecting all or part
of such parcel.
SECTION 2.7. Compliance with Law: Governmental Permits.
-----------------------------------------
2.7.1. The ownership, leasing and use of the Assets as they are currently
owned, leased and used, and the conduct of the Company Business as it is
currently conducted do not violate any Legal Requirement, which violation,
individually or in the aggregate, would have a material adverse effect on the
System, the Company Business, any of the Companies or any of the Subsidiaries.
None of the Companies or the Subsidiaries
<PAGE>
has received any notice claiming a violation by any Company or any Subsidiary or
the Company Business of any Legal Requirement applicable to a Company or a
Subsidiary or to the Company Business as it is currently conducted and to
Stockholders' best knowledge, there is no basis for any claim that such a
violation exists except for municipal charges and levies being pursued and which
the relevant Company or Subsidiary is diligently arguing. Stockholders,
Companies and Subsidiaries are in material compliance with the laws of the
Argentine Republic.
2.7.2. Complete and correct copies of the Governmental Permits applicable
to each of the Companies and to each of the Subsidiaries have been delivered by
Cablevision S.A. to Buyers. The Governmental Permits are currently in full force
and effect, are not in default, and are valid under all applicable Legal
Requirements according to their terms. There is no legal action, governmental
proceeding or investigation, pending or threatened, to terminate, suspend or
modify any Governmental Permit and the Companies and the Subsidiaries are in
material compliance with the terms and conditions of all Governmental Permits
and with other applicable requirements of all Governmental Authorities relating
to the Governmental Permits, including all requirements for notification,
filing, reporting, posting and maintenance of logs and records, save for the
topics mentioned in Exhibit 2.7.2.
2.7.3. Without limiting the generality of the foregoing: (a) the operation
of each Company Business and each System has been, and is, in material
compliance with the rules and regulations of the Argentine Republic, (b)
Companies and Subsidiaries have made all filings required to be made with the
Governmental Authorities; (c) Companies and Subsidiaries have provided all
notices to subscribers and maintained all public files required under Argentine
Law; (d) each System is in material compliance with all signal leakage criteria
prescribed by the Argentine regulations; and (e) the Company and the
Subsidiaries have filed for or have completed authorizations to carry all
signals it carries and all authorizations needed to utilize the frequency on
which these signals are carried.
SECTION 2.8. Patents. Trademarks and Copyrights. Companies and the
-----------------------------------
Subsidiaries have timely and accurately made all requisite filings and payments
with the Register of Copyrights and are otherwise in material compliance with
all applicable rules and regulations of the Copyright Office. Stockholders have
delivered to Buyers complete and correct copies of all current reports and
filings, and all reports and filings for the past five years, made or filed
pursuant to copyright rules and regulations with respect to each Company
Business. Each Company and each Subsidiary has collected and paid to the
appropriate Governmental Authority all withholding taxes payable on fees and/or
royalties paid to non-resident suppliers and licensors. Companies and the
Subsidiaries do not
<PAGE>
possess any patent, patent right, trademark or copyright except for licenses
respecting program material and obligations applicable to cable television
systems generally. The operation of the Company Business as currently conducted
does not violate or infringe upon the rights of any Person in any copyright,
trademark, service mark, patent, license, trade secret or the like. A detail of
existing trademarks registered in each Companies and the Subsidiaries' name is
included under Exhibit 2.8. Stockholders and Buyers expressly acknowledge that
the "Cablevision" trademark, and any and all other Cablevision related
trademarks, are not included in the Assets and that therefor the use of said
trademarks, after the expiration of the term referred to in Section 1.7.1.A,
will be entirely dependant on the eventual agreements which may be reached with
their owners. Therefore, to this respect Stockholders give no representation or
warranty in relation to eventual future use of said trademarks.
SECTION 2.9. Financial Statements. Stockholders will and shall cause the
--------------------
Companies and the Subsidiaries to cooperate fully with Buyers in the production
of financial statements, and with the production of all financial statements and
related information required in connection with Buyers' reporting obligations to
the SEC.
SECTION 2.10
2.10.1 Balance Sheet: Stockholders have furnished to Buyers copies of the
-------------
Balance Sheets of Cablevision S.A., Construred S.A., and Univent's S.A. which
are true, correct and complete in all material effects, have been prepared in
accordance with GAAP consistently applied throughout the periods covered thereby
and fairly present the financial conditions of the Companies and the
Subsidiaries, the consolidated financial conditions of the Companies and the
Subsidiaries and the results of their operations as of the date thereof or
throughout the periods covered thereby.
Since Balance Sheet Date (i) each Company and each Subsidiary has been
operated only in the ordinary course, (ii) neither the Companies nor the
Subsidiaries has sold or disposed of any Assets other than in the ordinary
course of business, (iii) there has been no material adverse change in, and no
event has occurred which is likely, individually or in the aggregate, to result
in any material adverse change in, the business, operations, Assets, prospects
or condition (financial or otherwise) of Company or Subsidiary, other than
changes affecting the cable television industry generally. Between the Balance
Sheet Date and the Closing, there have not been modifications to the Balance
Sheet other than in the ordinary course of business, given the current
competitive climate in the Argentine cable market. Buyers agree that Cablevision
S.A.'s purchase of Televisora La Plata S.A. (and of
<PAGE>
any participation in any of the other Companies and the Subsidiaries) was done
in the ordinary course of the Company Business.
2.10.2 Undisclosed liabilites: There are no liabilities (whether direct,
----------------------
absolute, accrued, contingent, disputed or otherwise) of any of the Companies
nor of any of the Subsidiaries, other than liabilities (i) reflected or reserved
against, under GAAP if pertinent, on the Balance Sheet of Cablevision S.A.,
Univent's S.A. and Construred S.A. delivered to Buyers or, (ii) incurred since
the Balance Sheet Date in the ordinary course of the business and under normal
market prices and conditions, consistent with the past practice of the Companies
and the Subsidiaries and which do not, and could not have a material adverse
effect on each of the Companies or the Subsidiaries.
Stockholders represent that all Current Assets and Liabilities as of June
30, 1997 have been adequately reported and accounted for and that there is no
Net Debt, disclosed or undisclosed, for which reasonable provision have not been
accounted pursuant to GAAP, if pertinent.
SECTION 2.11. Company Contracts Except as disclosed in Exhibit 2.11,
-----------------
neither the Company nor any of the Subsidiaries has any contract that: (i) have
not been entered in the ordinary course of business and under normal market
conditions; or (ii) for a term of more than two (2) years that can not be
terminated without a reasonable notice or with a reasonable indemnification; or
(iii) between the Company or the Subsidiaries on the one hand, and Eduardo
Eurnekian, any of the Stockholders, or (in the case of TINTA, to the best of its
knowledge) any Affiliate of Eduardo Eurnekian or any of the Stockholders.
SECTION 2.12. Legal Proceedings. Except as set forth on Exhibit 2.12
-----------------
there is no judgment or order outstanding, or any action, suit, complaint,
proceeding or investigation by or before any Governmental Authority or any
arbitration pending, or to Stockholders' best knowledge, threatened, involving
or affecting all or any part of any Company Business or any Company or any
Subsidiary.
SECTION 2.13. Tax Returns: Other Reports. Every Company and every
--------------------------
Subsidiary has duly and timely filed in proper form all income, franchise,
sales, use, property, excise, payroll and other tax returns and all other
reports (whether or not relating to taxes) required to be filed with the
appropriate Governmental Authority. All taxes, fees and assessments of whatever
nature due and payable by every Company and every Subsidiary have been paid,
except such amounts as are
<PAGE>
being contested diligently and in good faith and are not in the aggregate
material. Each Company and each Subsidiary has filed all tax returns and other
documents necessary and is eligible to receive the tax treatment it has
requested under tax amnesty plans. There are no outstanding agreements or
waivers extending the statutory period of limitations applicable to any federal,
state, local or foreign income tax return for any period.
SECTION 2.14. Employment Matters.
------------------
2.14.1. Each Company and each Subsidiary has complied in all material
respects with all Legal Requirements relating to the employment of labor,
continuation coverage requirements with respect to group health plans, and those
relating to wages, hours, collective bargaining, unemployment compensation,
worker's compensation, equal employment opportunity and benefit plans, age and
disability discrimination, immigration control and the payment and withholding
of taxes.
2.14.2. Except as provided in Exhibit 2.14.2 no Company nor any Subsidiary
is bound by any contract with any labor organization. No other union or other
collective bargaining unit been certified as representing any of its employees,
neither the Companies nor the Subsidiaries have received any other requests from
any party for recognition as a representative of employees for collective
bargaining purposes.
SECTION 2.15. Finders and Brokers. Stockholders have not employed any
-------------------
financial advisor, broker or finder or incurred any liability for any financial
advisory, brokerage, finder's or similar fee or commission in connection with
the transactions contemplated by this Agreement for which Buyers, the Companies
or the Subsidiaries could be liable.
SECTION 2.16. Disclosure. No representation or warranty by Stockholders in
----------
this Agreement or in any Exhibit to this Agreement, or any statement, list or
certificate furnished or to be furnished by Stockholders in relation to the
Companies or the Subsidiaries pursuant to this Agreement, contains or will
contain any untrue statement of material fact, or omits or will omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein not misleading in light of the circumstances in which made.
Without limiting the generality of the foregoing, the information set forth
herein concerning each Company Business is accurate and complete in all material
respects.
<PAGE>
SECTION 2.17. Televisora La Plata S.A. Since this Subsidiary was acquired
------------------------
recently (August 1, 1997), Stockholders cannot make any representation or
warranties with respect to it. However, Cablevision S.A. received from sellers
of such System representations and warranties equivalent to the ones provided
herein.
SECTION 2.18. The Shares and the Subscribed Shares at Closing will
constitute the 64.5 % of the outstanding capital stock of each of the Companies.
Neither Stockholders nor any of the Companies has any obligation to issue shares
corresponding to capital contributions pending to be capitalized, except for
those indicated in Exhibit 2.18. which are hereby transferred to Buyers in
corresponding proportion.
SECTION 2.19 Neither Cablevision S.A. nor any of the Companies has any
obligation to pay any amount to Televisora La Plata S.A. related to the capital
increase approved by the Extraordinary Shareholders Meeting celebrated on July
13, 1997.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYERS
----------------------------------------
Buyers represent and warrant to the Stockholders that:
SECTION 3.1 Organization, Power and Authority. Buyers are corporations
---------------------------------
duly organized, validly existing and in good standing under the laws of their
countries of incorporation and have the sufficient legal power and authority to
own or lease and to operate their properties and to carry on their businesses as
now being conducted.
SECTION 3.2 Authorization. Buyers have the corporate power and
-------------
authority to execute and deliver this Agreement, to consummate the transactions
contemplated hereby and to perform their obligations under this Agreement, at
their sole discretion, their being lawfully entitled to participate in the
transaction described herein. This Agreement, upon its execution and delivery by
Buyers (assuming the due authorization, execution and delivery hereof by the
Stockholders), will constitute the legal, valid and binding obligation of
Buyers, enforceable against Buyers in accordance with its terms, and the rules
of law of the country and/or State to which this Agreement is submitted as per
Section 8.12 hereunder.
<PAGE>
SECTION 3.3 No Conflict or Violation. Neither the execution and
------------------------
delivery of this Agreement by Buyers nor the consummation of the transactions
contemplated hereby, will (a) violate any provision of the Articles of
Incorporation of Buyers, (b) violate, conflict with or result in the breach or
termination of, or otherwise give any other contracting party the right to
terminate, or constitute a default under the terms of, any mortgage, bond,
indenture or material agreement to which Buyers are parties or by which Buyers
or any of their property or assets may be bound or materially affected, or (c)
violate any judgment, order, injunction, decree or award of any court,
administrative agency or governmental body against, or binding upon, Buyers or
upon the property or business of Buyers.
SECTION 3.4. Brokers' Fees. No broker, finder or similar agent has been
-------------
employed by or on behalf of Buyers in connection with this Agreement or the
transactions contemplated hereby, and no person or entity with which Buyers have
had any dealings or communications of any kind is entitled to any brokerage
commission, finder's fee or any similar compensation in connection with this
Agreement or the transactions contemplated hereby, for which Companies and the
Subsidiaries could be liable.
SECTION 3.5. Disclosure. No representation or warranty by Buyers in this
----------
Agreement, or any statement, list or certificate furnished or to be furnished by
Buyers pursuant to this Agreement, contains or will contain any untrue statement
of material fact, or omits or will omit to state a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading in light of the circumstances in which made.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1 The following conditions precedent must be satisfied before any
party is obligated to close the transactions contemplated herein:
4.1.1 Stockholders shall provide to Buyers evidence satisfactory to Buyers
that either: (i) Stockholders have complied with all actions to give US West
Media Group Inc. ("US West") and Samuel Liberman the options contemplated in the
First Refusal/Tag Along Agreement executed between TINTA and US West on July
1997 (The "US West Agreement") and that the term for US West exercising such
options
<PAGE>
has expired without US West having exercised any such options; or (ii) US West
has waived the right to exercise such options.
4.1.2. Stockholders should have reciprocally waived their respective right
of first refusal to acquire the Shares.
4.1.3 Stockholders should have transferred to any of the Subsidiaries their
respective ownership of shares in Televisora Belgrano S.A., Fiber-Tel TCI2 S.A
and Oeste Cable Color S.A.
ARTICLE V
MISCELLANEOUS
-------------
SECTION 5.1 Survival of Representations, Warranties and Agreements. The
------------------------------------------------------
representations and warranties of Stockholders in this Agreement and in the
documents and instruments to be delivered by Stockholders pursuant to this
Agreement will survive until the third anniversary of the Closing Date, except
that (a) all such representations and warranties with respect to any federal,
state or local taxes, labor, social contributions, governmental authorizations,
employee benefits and tort and contract claims will survive until 180 days after
the expiration of the applicable statute of limitations (including any
extensions). The representations and warranties of Buyers in this Agreement and
in the documents and instruments to be delivered by Buyer pursuant to this
Agreement will survive until the third anniversary of the Closing Date. The
periods of survival of the representations and warranties prescribed by this
Section are referred to as the "Survival Period". The liabilities of the
parties under their respective representations and warranties will expire as of
the expiration of the applicable Survival Period; provided, however, that such
expiration will not include, extend or apply to any representation or warranty,
the breach of which has been asserted by Buyers in a written notice to
Stockholders before such expiration or about which Stockholders have given
Buyers written notice before such expiration indicating that facts or conditions
which exist or that, with the passage of time or otherwise, can reasonably be
expected to result in a breach.
SECTION 5.2 Indemnification by Stockholders. (a) Stockholders will jointly
-------------------------------
and severally indemnify and/or defend and/or hold harmless Buyers, their
successors and assigns, from and against:
<PAGE>
(i) all losses, damages, liabilities, deficiencies or obligations of or to
any Company (including, without limitation, any undisclosed or under reserved,
contingent liabilities, referred to in Section 2.10.2), Buyers or any such other
indemnified person resulting from or arising out of (A) any material
misrepresentation or breach of warranty or any material non-performance or
breach of any representation contained in this Agreement or any additional
agreements; (B) the ownership of the Shares, the ownership or operation of each
Company Assets, or the control, management or operations of each Company
Business, whether known or unknown, asserted or unasserted, now existing or
arising at any time including, without limitation, fines or forfeitures imposed
or threatened to be imposed by any authority for any operation of any Company
Business at or prior to the Closing Date which was not in material compliance
with applicable rules, or for any operation at or prior to the Closing Date of
any facility used in conjunction with the operation of any Company Business
which was not in material compliance with said rules and any future, additional
assessment imposed on Buyer or any Company or Subsidiary after the Closing Date
by the Copyright Tribunal, the liability for which occurred prior to the Closing
Date, but excluding any liabilities described in this Agreement; and
(ii) all claims, actions, suits, proceedings, demands, judgments, assessments,
fines, interest, penalties, costs and expenses (including, agreed to settlement
costs and reasonable legal, accounting, experts' and other fees, costs and
expenses) incident or relating to or resulting from any of the foregoing.
No amounts of indemnity shall be payable under this paragraph (a) as a result
of undisclosed or under reserved contingent liabilities referred to in Section
2.10.2, until and unless the amount of indemnification payable to Buyers
hereunder (either individually or in the aggregate) exceeds two million United
States Dollars (US$ 2,000,000). Any and all excess over such amount will make
Stockholders liable for all amounts payable under this paragraph (including the
US$ 2,000,000 referred to hereabove). The maximum aggregate amount of indemnity
payable by Stockholders as a result of undisclosed or under reserved contingent
liabilities referred to in Section 2.10.2, shall be fifteen million United
States Dollars (US$ 15,000,000).
(b) Stockholders will jointly and severally indemnify and/or defend and/or
hold harmless Buyers, their successors and assigns, from and against all losses,
damages, liabilities, deficiencies or obligations of or to any Company, Buyers
or any such other indemnified person resulting from or arising out any claims,
including courts costs and attorneys fees, made by employees of Construred S.A.
for any injuries or damages suffered prior to the Closing Date. Notwithstanding
the foregoing, such indemnity obligation shall not extend to any claim by any
employee of any of the Companies or Subsidiaries based on any -on -the- job
illness or disease to be indemnified by the employer which has originated prior
to the Closing Date if such
<PAGE>
claim is made by an employee whose employment has been terminated by such
Company or Subsidiary after the Closing Date with or without legitimate cause.
All other claims and monies payable will be faced exclusively by the pertinent
employer.
5.2.A Guaranty. Eduardo Eurnekian hereby irrevocably and unconditionally
--------
guarantees to the Buyers as a principal obligor, not merely a surety, the
perfomance by Basilia Jaliquias and Natalio Wende of their obligations under
this Agreement.
SECTION 5.3 Indemnification by Buyers. Buyers agree, jointly and severally,
-------------------------
to indemnify, defend and hold harmless Stockholders, their successors and
assigns, from and against all losses, damages and expenses (including, agreed
to, settlement costs and reasonable legal or other expenses) incurred by
Stockholders or any other indemnified person in connection with any
misrepresentation or breach of any warranty made by Buyers in this Agreement or
the non-performance or breach of any representation, agreement or obligation of
Buyers contained in this Agreement.
SECTION 5.3.1 Buyers hereby represent that the Multicanal Stockholders
Agreement of February 20, 1996 was rescinded by the parties and that the "Clarin
Stockholders" do not have any right to any claim arising to such agreement.
Notwithstanding the foregoing, Buyers agree to indemnify and hold Stockholders
harmless from all claims or monies payable by Stockholders and/or Company
(including reasonable attorneys fees) arising from the breach of said certain
Multicanal S.A. stockholders agreement dated February 20, 1996 to which CEI and
TISA were part of or the Clarin Compromise (as definedin the Stockholders
Agreement) save, in case of the latter, if TINTA's agreement in the Stockholders
Agreement regarding the Clarin Compromise is breached by TINTA. Buyers represent
that they have no other commitments with the Persons included in Section 7.2 (f)
of the shareholders agreement other than the ones stated hereabove. Any
indemnification in this regard will be paid on an "as incurred" basis.
SECTION 5.4 Third Party Claims. Promptly after the receipt by any party hereto
------------------
of notice of any claim, action, suit or proceeding (other than a claim, action,
suit or proceeding against any of the Companies or the Subsidiaries) by any
person who is not a party to this Agreement (collectively, an "Action") which is
subject to indemnification hereunder, such party (the "Indemnified Party") shall
give reasonable written notice to the party from whom indemnification is claimed
(the "Indemnifying Party"). At the sole expense and liability of the
Indemnifying Party and within a reasonable time after the giving of such notice
by the Indemnified Party, the Indemnifying Party shall: (i) admit or decline in
writing to the Indemnified Party, the Indemnifying Party's liability to the
Indemnified Party for
<PAGE>
such Action, (ii) notify the Indemnified Party in writing of the Indemnifying
Party's intention to assume the defense thereof, (iii) post an indemnity or
similar bond (in form and substance satisfactory to the Indemnified Party), in
both cases for the full amount (including interest and penalties) for which the
Indemnified Party may be liable as a result of such Action or provide other
evidence satisfactory to the Indemnified Party of the Indemnifying Party's
ability to pay such amount in full, and (iv) retain legal counsel reasonably
satisfactory to the Indemnified Party to conduct the defense of such Action. The
Indemnified Party and the Indemnifying Party shall cooperate with the party
assuming the defense, in defending, compromising or settling any such Action in
any manner that such party reasonably may request. If the Indemnifying Party so
assumes the defense of any such Action, the Indemnified Party shall have the
right to employ separate counsel and to participate in (but not control) the
defense, compromise or settlement thereof, but the fees and expenses of such
counsel shall be to the expense of the Indemnified Party. No Indemnified Party
shall settle or compromise any such Action for which it is entitled to
indemnification hereunder without the prior written consent of the Indemnifying
Party, unless the Indemnifying Party shall have failed, after reasonable notice
thereof, to undertake control of such Action in the manner provided above in
this Section. No Indemnifying Party shall settle or compromise any such Action
in which any relief other than the payment of money damages is sought against
any Indemnified Party unless the Indemnified Party consents in writing to such
compromise or settlement.
SECTION 5.5 Assignment: Successors and Assigns; Third Parties. No party to
-------------------------------------------------
this Agreement shall convey, assign or otherwise transfer any of its rights or
obligations under this Agreement without the express written consent of the
other parties.
SECTION 5.6 Notices. All notices or other communications required or
-------
permitted to be given hereunder shall be in writing and shall be delivered by
hand (acknowledgment of receipt requested) or through a notary public, or sent
by facsimile, telegram or registered mail (carta documento) and shall be deemed
given when so delivered by hand or through a notary, or if faxed, telegraphed or
mailed when so delivered. Said notices and communications must be addressed as
follows:
If to TINTA, addressed to: If to EE, addressed to:
Tele-Communications International, Inc. Mr. Eduardo Eurnekian
5619 DTC Parkway Honduras 5663
Englewood, Colorado 80111, U.S.A. (1414) Capital Federal
<PAGE>
Attention: President Republica Argentina
Telephone: (1 303) 267 5216 Telephone: (54 1) 778 6796
Telecopier: (1 303) 267 6499 Telecopier: (54 1) 778 6761
with a copy to: with a copy to:
Tele-Communications International, Inc. Mr. Mariano Ibanez
5619 DTC Parkway Honduras 5663
Englewood, Colorado 80111, U.S.A. (1414) Capital Federal
Attention: General Counsel Republica Argentina
Telephone: (1 303) 267 4800 Telephone: (54 1) 778 6585
Telecopier: (1 303) 488 3245 Telecopier: (54 1) 778 6765
and to:
M & M BOMCHIL - Abogados
Suipacha 268, 12th floor
1355 - Buenos Aires, Argentina
Attention: Mr. Marcelo E. Bombau
Telephone: 328 8400
Fax: 326 7217
If to CEI, addressed to:
CEI Citicorp Holdings S.A.
Tucuman 1, 19th floor
1049 Buenos Aires
Attention: Legal Department
Telephone: (541) 310 6924
Fax: (541) 310 6971
If to TISA, addressed to:
T.I. Telefonica Internacional de Espana S.A.
Jorge Manrique 12
28006 Madrid, Spain
Attention: General Secretary
Telephone: (341) 362 6600
<PAGE>
Fax: (341) 362 6654
with a copy to:
Estudio de los Dres. O'Farrell
Avda. De Mayo 651, 4th floor
1085 Buenos Aires, Argentina
Attention: Pablo Hernan Miguens
Telephone: (541) 346 1091
Fax: (541) 346 1000 extension 4999
or in any case to such other address or addresses as hereafter shall be
furnished as provided in this Section 5.6 by any of the parties hereto to each
of the other parties hereto.
SECTION 5.7 Waiver: Remedies. No delay on the part of Buyers, on the one
----------------
hand, or the Stockholders on the other, in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of Buyers or the Stockholders of any right, power or privilege
hereunder operate as a waiver of any other right, power or privilege hereunder,
nor shall any single or partial exercise of any right, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder. Upon any default by the Buyers, on
the one hand, or any of the Stockholders, on the other hand, the Buyers or any
such Stockholder, as the case may be, may proceed to protect his or its rights
by suit in equity, action at law or other appropriate proceedings, whether for
the specific performance of any covenant or agreement contained in this
Agreement or to enforce any and all other legal or equitable rights.
SECTION 5.8 Entire Agreement. This Agreement, including the Exhibits
----------------
attached hereto, constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and supersede all other prior agreements or
understandings of the parties relating thereto. There are no representations,
warranties, agreements or undertakings of any party hereto with respect to the
transactions contemplated by this Agreement other than those set forth in this
Agreement or in the documents delivered at the Closing. All Exhibits annexed
hereto, are hereby incorporated in and made a part of this Agreement as if set
forth in full herein.
Exhibit A Companies Stock
<PAGE>
Exhibit B Shares
Exhibit C Stockholders Agreement
Exhibit 1.4. (ii) Management Agreement
Exhibit 1.7.1 (A) Resignations
Exhibit 2.5 Leased Equipment
Exhibit 2.6.1 Real Estate
Exhibit 2.6.2 Agreements under Renegotiation
Exhibit 2.7 Claims at Municipalities
Exhibit 2.8 Trademarks
Exhibit 2.11 Company Contracts
Exhibit 2.12 Legal Proceedings
Exhibit 2.18 Capital Contributions Pending to be Capitalized
SECTION 5.9 Amendments; Waivers. This Agreement may be modified or amended
-------------------
only by a written agreement signed by Buyers and Stockholders. Provisions
hereof may be waived, and other actions permitted hereunder or contemplated
hereby may be taken, in the case of Buyers, by an instrument signed by Buyers,
and in the case of the Stockholders, by an instrument signed by Stockholders.
SECTION 5.10 Further Assurances. Stockholders shall, at the request of
------------------
Buyers, at any time and from time to time following the Closing hereunder,
execute and deliver to Buyers all such further instruments and take all such
further action as may be reasonably necessary or appropriate in order more
effectively to sell, assign, transfer and convey to Buyers, or to perfect or
record Buyers' title to or interest in, the Shares sold hereunder. Buyers shall
at any time and from time to time following the Closing hereunder execute and
deliver to the Stockholders, all such further instruments and take all such
further action as may reasonably be necessary or appropriate in order more
effectively to confirm or carry out the provisions of this Agreement. The
parties hereto shall use their best efforts to consummate the transactions
contemplated by this Agreement.
<PAGE>
SECTION 5.11 Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original but all of which together shall
constitute a single instrument.
SECTION 5.12 Governing Law: Choice of Forum. This Agreement shall be
------------------------------
governed by and construed in accordance with the laws of the Republic of
Argentina.
SECTION 5.13 Submission to Arbitration. The parties will use their best
-------------------------
efforts to resolve amicably any disputes arising under this Agreement, or those
contained in its Exhibits or schedules. Except as otherwise expressly provided
herein, all disputes arising between the parties under this Agreement which
cannot be resolved amicably shall be resolved by submission to arbitration
pursuant to the Rules of the Inter-American Commission on International
Commercial Arbitration then in force. The arbitration shall be held in Geneva,
Switzerland. There shall be three arbitrators, one selected by the Stockholder,
one selected by the Buyer and the third selected by mutual agreement of the
parties, and failing their agreement, pursuant to the Rules of the Commission.
None of the arbitrators shall be citizens of the U.S.A. or the Republic of
Argentina. The arbitration shall be conducted in the English and Spanish
languages. The arbitrators shall decide the case on the basis of Argentine law,
and shall give written reasons for their award. The party in whose favour an
award is issued shall be entitled to recover its costs or the arbitration, and
any costs incurred in the enforcement of the award, including reasonable
attorney's fees. The award of the arbitrators may be enforced in any
jurisdiction where a party has assets or may be found, and the parties hereby
irrevocably waive, to the fullest extent permitted by law, any defenses to
recognition and enforcement of the award on the grounds of the invalidity of the
submission to arbitration, and improper constitution of the arbitral panel (if
constituted pursuant to this Section).
SECTION 5.14 Disclosure. This Agreement does not contain any untrue statement
----------
nor omit to state a material fact necessary to make the statements contained
herein not misleading. There is no fact known to Stockholders which materially
and adversely affects, or which in the future may so affect, the Shares which
has not been set forth in this Agreement.
SECTION 5.15 Captions. All section titles or captions contained in this
--------
Agreement, in any Exhibits annexed hereto and the table of contents to this
Agreement are for convenience only, and shall not be deemed a part of this
Agreement and shall not affect the meaning or interpretation of this Agreement.
All
<PAGE>
references herein to numbered sections, except otherwise indicated, are to
sections of this Agreement.
SECTION 5.17. This Agreement is executed in English. Prior to Closing, the
parties in good faith will execute an Spanish version, and once executed the
Spanish version shall prevail.
SECTION 5.18. The Stockholders and Buyers will execute those documents which
may be necessary for the best implementation of the agreements contained herein.
SECTION 5.19. (a) The parties agree that the transactions contemplated in this
Agreement and those to be carried out at Closing are made "ad referendum" of the
corresponding COMFER Approval. Notwithstanding said approval pending the
execution and undertanking of the obligations mentioned in this Agreement is
considered to be defintive between the parties. Should COMFER object Buyers
incorporation to the Company for reasons attributable to Buyers, and without
prejudice of carrying out administrative and/or judicial procedures which may be
pertinent, in the relation between the parties, the Buyers will be considered as
having acted on behalf of one or various third parties, whose names are pending
disclosure and who must count with pertinent COMFER Approval. The parties will
carry out the best efforts to obtain COMFER Approval for the incorporation of
the Buyers or their eventual assignees.
(b) Until COMFER Approval for the incorporation of Buyers or their assignees
is obtained, the internal corporate relation will recognize Buyers' rights as
herein described.
SECTION 5.20. (a) Termination. Anything herein to the contrary
-----------
notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing Date (a) by
mutual written consent of Buyers and Stockholders or (b) by any of the parties
if any of the conditions precedent to Closing set forth in Article IV of this
Agreement have not been met on the Closing Date and Buyers are not in default of
their obligations hereunder, or (c) by Stockholders if US West exercises the
first refusal option under the US West Agreement (as defined in Section 4.1.1).
Termination under points (b) and (c) of the immediately preceding sentence shall
be effective when a notice of termination is deemed to have been given pursuant
Section 5.6 hereof by the party
<PAGE>
or parties giving such notice to the other party or parties to whom such notice
is directed.
(b) Effects of Termination. If this Agreement is terminated as provided in
----------------------
paragraph (a) hereabove and the transactions contemplated hereby are not
consummated, this Agreement shall have no further force and effect and
Stockholders shall immidiatelly return to Buyers the amounts paid on July 25,
1997 referred to in Section 1.2, except if termination is caused by, or
attibutable to Buyers.
SECTION 5.21. The parties agree that this Agreement and its Exhibits may be
subject to minor adjustments that before Closing may be requested in good faith
by any of the parties.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
as of the day and year first above written.
1) Stockholders:
Tele-Communications International, Inc.
By: Mr. Fred A. Vierra
Chief Executive Officer
and
By: Eduardo Eurnekian
on behalf of
Natalio Wende and
Basilia Jaliquias
2) Buyers:
CEI CitiCorp Holdings S.A.
By: Mr. Ricardo Handley
Chairman.
and
T.I. Telefonica Internacional de Espana S.A.
By:
Attorney in fact
<PAGE>
EXHIBIT 10.2
SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT is entered into in the city of Buenos Aires, on the
9th day of October, 1997,
BETWEEN :
(1) Tele-Communications International, Inc., a company organized and existing
according to the laws of the State of Delaware, United States of America,
with legal domicile at 5619 DTC Parkway, Englewood, Colorado 80111, United
States of America ("TINTA");
(2) CEI Citicorp Holdings Sociedad Anonima, a company organized according to
the laws of the Argentine Republic and with domicile in the City of Buenos
Aires, at Tucuman 1, 19 degrees floor ("CEI");
(3) Southtel Equity Corporation ("SOUTHTEL") a company organized according to
the laws of the Cayman Islands, BWI, with legal domicile at the offices of
Maples and Calder, P.O. Box 309, Grand Cayman;
(4) T.I. Telefonica Internacional de Espana S.A., a company organized and
existing according to the laws of the Kingdom of Spain and with domicile at
Jorge Manrique 12, Madrid ("TISA"); and
(5) Martin Eurnekian (D.N.I. No _________), with legal domicile at Honduras
5663, Buenos Aires ("Eurnekian").
WHEREAS:
(A) TINTA, CEI, TISA and Eurnekian are shareholders of Cablevision S.A., a
company organized and existing according to the laws of the Argentine
Republic, with domicile at Bonpland 1773, City of Buenos Aires (the
"Company"); and
(B) TINTA, CEI, TISA and Eurnekian are interested in agreeing upon certain
conditions which shall govern their relations as shareholders of the
Company.
NOW, THEREFORE, the parties hereto agree as follows:
<PAGE>
SECTION I
DEFINITIONS, INTERPRETATION
---------------------------
1.1 Definitions. (a) In this Agreement, unless the context otherwise
-----------
requires, the expressions hereinafter stated shall have the following meaning:
"Shares" shall mean (i) shares of the Company, whether ordinary, with all
------
rights and benefits attaching thereto; (ii) preferential rights to subscribe new
shares of the Company, if being transferred without the respective shares; and
(iii) rights resulting from advance payments on account of future subscriptions
of shares of the Company.
"Agreement" means this agreement as from time to time amended and
---------
complemented in accordance with its terms.
"Affiliate" means, with reference to a specific Person, any Person that at
---------
the time of determination of Affiliate status directly or indirectly, whether
through one or more intermediaries, is the Controlling Person of, the
Controlled Person by or is under common Control with, such specific Person.
However, for the exclusive purposes of Sections 2.2 and 7.3, a Person will not
be considered to Control another if it is not the owner of shares, quotas or
equity interest that represent at least ninety nine percent (99%) of the capital
of such other Person. In the case of Eurnekian said condition shall be fulfilled
at all times, in the aggregate, by the individual Persons that are members of
such party. It will be understood that said condition is fulfilled by said
individuals Persons if the same are directly or indirectly beneficiaries in said
proportion of a trust to which the shares, quotas or equity interest of said
other Person are transferred.
"Auditors" means any of the following auditing firms which may be appointed
--------
by simple majority of the Board, from time to time: Arthur Andersen, Price
Waterhouse, KPMG, Deloitte & Touche, Coopers & Lybrand or Ernst and Young.
"Management Agreement" means the Management Agreement of even date herewith
--------------------
executed by the Company and TINTA Cable Management, Inc., a corporation
organized in Colorado, U.S.A., a wholly owned subsidiary of TINTA.
"Control" means, with reference to a specific Person (other than an
-------
individual or a natural person), the possession, directly or indirectly, of the
power to direct or
<PAGE>
cause the direction of the management of a Person, whether through the ownership
of voting securities, quotas or equity interest, by a contract or otherwise.
"Controlled Person" means, with reference to a specific Person (other than
-----------------
an individual or a natural person), any Person that at the time of
determination of Controlled Person status directly or indirectly, whether
through one or more intermediaries, is under Control of such specific Person.
However, for the exclusive purposes of Sections 4.2, 4.2A, 4.3, 4.3A y 5.3, a
Person will not be considered to Control another if it is not the owner of
shares, quotas or equity interest that represent at least ninety nine percent
(99%) of the capital of such other Person.
"Controlling Person" means, with reference to a specific Person, any Person
------------------
that at the time of determination of Controlling Person status directly or
indirectly, whether through one or more intermediaries, exercises Control over
such specific Person.
"Corporate Committee" means the committee provided for in Section 5.2.
-------------------
"VCC Agreement" means the agreement executed on August 27, 1997 among (i)
-------------
Ernestina Laura Herrera de Noble, Hector Horacio Magnetto, Jose Antonio Aranda
and Lucio Rafael Pagliaro; (ii) CEI and (iii) TISA, in relation to the
acquisition of Fintelco S.A. and the companies in which Fintelco S.A. owns an
equity interest, including Video Cable Comunicacion S.A.
"Board of Directors" means the board of directors of the Company.
------------------
"Venture" has the meaning designated thereto in Section 8.2(b).
-------
"By-laws" means the By-laws of the Company as modified from time to time.
-------
"Encumbrance" means any fiduciary transfer, mortgage, pledge, security
-----------
interest, assignment by way of guarantee, usufruct, easement, privilege,
restriction, attachment or any other charge whatsoever.
"Person" means any individual or natural person, and any company,
------
association or any other business organization being an entity.
"Controlled Companies" mean the Persons of which the Company is the
--------------------
Controlled Person.
<PAGE>
"Related Companies" mean the Persons which are a Related Person to the
-----------------
Company.
"Partner" means each of Eurnekian, TINTA, CEI, TISA and any other
-------
shareholder of the Company which may become thereafter a party to this Agreement
pursuant to the provisions of Sections 7.1(b) and 7.5(f).
"TASA" means Telefonica de Argentina S.A.
----
"Territory" has the meaning designated thereto in Section 8.2.
---------
"Related Person" means, with reference to a specific Person, any Person
--------------
that at the time of determination of Related Person status directly or
indirectly, whether through one or more intermediaries, owns a share in the
capital of such specific Person of more than ten per cent (10%) and any Person
in which capital such specific Person owns a share of more than ten per cent
(10%).
1.2 Interpretation. In this Agreement: (i) titles of Sections are included
---------------
for a better reference only and shall not be taken into account for the
construction thereof, (ii) each accounting term not otherwise defined in this
Agreement has the meaning assigned to it in accordance with generally accepted
accounting principles in Argentina, (iii) as the context may require, words in
the singular include the plural and words in the plural include the singular,
and words in the masculine, feminine or neuter gender include the masculine,
feminine and neuter genders, (iv) unless otherwise indicated, all references
to Appendices are references to Appendices to this Agreement (each of which
shall be considered an integral part hereof) and all references to Sections are
references to Sections of this Agreement.
SECTION II
ORGANIZATION OF PARTNERS
------------------------
2.1 Eurnekian. (a) For the purposes of this Agreement, if the Persons who
----------
are members of the party to this Agreement named "Eurnekian" were more than one,
the Persons who from time to time are members of such party: (i) shall be deemed
to be a single party or Partner, (ii) shall exercise jointly all rights,
options, powers and privileges of such party or Partner under this Agreement,
and as a condition for such exercise shall at all times have a single
representative, be him one of such Persons or a third party appointed by such
Persons or by a number of such Persons as may hold in the aggregate a majority
of votes corresponding to the total number of shares of the
<PAGE>
Company held by such Persons, (iii) shall have a single address for notices,
(iv) shall comply severally (but not jointly) with all obligations assumed by
such Persons on an individual basis and jointly and severally with all
obligations assumed by such party or Partner under this Agreement and (v) non-
performance of any such obligations by any such Person shall be deemed to be
non-performance by such party or Partner.
(b) The violation of Sections 8.1 or 8.2 by any of the individual Persons
mentioned in Section 7.4 who has been or is a shareholder of the Company, shall
be considered a breach of Eurnekian and if the Persons who are members of the
party to this Agreement named "Eurnekian" were more than one, the Persons who
are members of such party shall be jointly and severally liable for such breach.
(c) The representative of the party designated as "Eurnekian" shall be Mr.
Eduardo Eurnekian or whomever he may appoint.
(d) Eduardo Eurnekian executes this Agreement on his own and constitutes
himself as jointly and several guarantor and principal payor of all and each of
the obligations of the party named Eurnekian.
2.2. CEI. SOUTHTEL executes this Agreement in its capacity as an Affiliate
---
of CEI as if CEI had on the date hereof transferred to it, pursuant to the
provisions of Section 7.3, all the Shares owned by SOUTHTEL. Therefore, CEI
will continue to be a party to this Agreement and shall maintain its rights and
obligations as if all such Shares were registered in its name and for the
purposes of ownership of shares in the capital and votes of the Company to which
several provisions in this Agreement refer to, the Shares registered in the name
of SOUTHTEL will be considered as belonging to CEI. SOUTHTEL hereby accepts to
be bound by the provisions of this Agreement jointly and severally with CEI and
SOUTHTEL shall not cease to be an Affiliate of CEI unless CEI previously
repurchases all the Shares then owned by SOUTHTEL.
SECTION III
OBLIGATIONS OF PARTNERS
-----------------------
3.1 General Obligations. (a) Notwithstanding any provision set forth in
-------------------
the By-laws, the Partners mutually undertake to (i) personally carry out all the
necessary acts to comply with each and every provision of this Agreement, and
(ii) make that those persons appointed as a result of their proposal or
indication in order to act as president, vice president, director, Corporate
Committee member, syndic, member of the audit commission or manager of the
Company or of any Controlled or Related
<PAGE>
Company carry out all the necessary acts in order to comply with each and every
provision of this Agreement.
(b) Any act or omission of any of the persons acting in the capacities
mentioned in (a) above of this Section 3.1, which is inconsistent with the
provisions of this Agreement shall, for the purposes of this Agreement, be
considered as an act or omission of the Partner at whose proposal or indication
such person was appointed.
3.2 Contributions. No Partner will be obliged to make capital
-------------
contributions or guarantee or counter-guarantee any debts of the Company or of
any Controlled or Related Company.
3.3 VCC Agreement. (a) Eurnekian and TINTA acknowledge having received
--------------
before the date hereof, full and complete copies of the VCC Agreement, and
knowledge of its terms is hereby expressly acknowledged.
(b) The Partners hereby agree that the "ACQUISITION" of "VCC" (as defined
in the VCC Agreement) may be made by the Company or by CEI for the account of
the Company in such terms and conditions as the Board may approve.
(c) Each of Eurnekian, TINTA and TISA hereby undertakes that, in case such
ACQUISITION of VCC shall be made, they shall perform all such acts as may be
necessary on its part so as to permit CEI to comply directly or through the
Company with all and every obligations that in such case are imposed on CEI by
sections 4, 5 and 7 of the VCC Agreement.
(d) In case said PURCHASE of VCC shall not be made, TINTA hereby
undertakes vis-a-vis CEI that TINTA and its Controlled Persons shall abstain,
during a five year period counted as from the date of the VCC Agreement, from
making and ACQUISITION of VCC, unless at the time such ACQUISITION of VCC is
made by TINTA or any of its Controlled Persons CEI has ceased to be a Partner in
the Company.
(e) The obligations established in this section 3.3 shall survive the
termination of this Agreement with respect to any of the Partners.
3.4 Programming Agreement. In relation to the current programming
---------------------
agreement between the Company and Pramer S.R.L. (the "Programming Agreement"),
Partners agree that they will cause the Company to extend the term or
<PAGE>
effectiveness of the Programming Agreement until September 30, 2002 in the same
terms and conditions.
The Programming Agreement may be extended afterwards if both parties so
agree, Notwithstanding the foregoing, the Company will be obliged to give Pramer
S.R.L. a 12-month prior notice of its intention of not renewing the Programming
Agreement on the expiry date thereof (September 30, 2002), should it be the
case. Should the Company fail to give such notice, then the Programming
Agreement will be automatically extended until that date which is twelve (12)
months after the date of such notice, but in no case, irrespective of whether or
not such notice was given, later than March 31, 2003.
The Programming Agreement shall encompass and will be extended to the
systems which the Company may incorporate, acquire, administer or manage, either
on its own or through TINTA or its Affiliates, in the terms established in the
Programming Agreement.
As regards the Programming Agreement, the Company shall enjoy at all times
the most-favored-nation status, without giving consideration to the cases in
which Pramer S.R.L. provides programming for free or under temporary promotions.
SECTION IV
SHARE OF PARTNERS. OPTIONS
--------------------------
4.1 Share of Partners. (a) Initial share of Partners in the capital and
-----------------
votes of the Company are the following: TINTA 26.23%; CEI 33.28 %; TISA 33.28 %
and Eurnekian 7.2%.
(b) The proportion existing among such shares shall only be modified
hereafter as a result of (i) the lack of subscription, by any of the Partners,
of the Shares he has the right to subscribe upon any increase of capital
approved by Shareholders' Meeting with the majority required by this Agreement;
(ii) the sale or cancellation of subscription rights of Shares of any Partner
due to default in payment (section 193 of Companies and Partnerships Act); (iii)
the total or partial sale of Shares by any Partner to other Partner or Partners
or to third parties, according to the provisions of this Agreement; (iv) the
incorporation of new Partners through the subscription of Shares, according to
the provisions of this Agreement; or (v) the implementation or application of
any other provision from this Agreement which require such modification.
<PAGE>
4.2 Eurnekian Sale Option. (a) CEI, TISA and TINTA, each of them for so
---------------------
long as directly or indirectly owns Shares which represent more than ten per
cent (10%) of the capital stock of the Company (the "Optionors") grant hereby
Eurnekian the option to sell them all or part of the Shares owned by Eurnekian
(the "Eurnekian's Option") and in such case CEI, TISA and TINTA agree to buy
such Shares severally and in proportion to their holdings of Shares.
(b) The Eurnekian's Option is subject to the following conditions: (i) in
case of exercising such Option, Eurnekian shall give written notice to the
Optionors informing them about his decision to exercise the Eurnekian's option,
and such notice shall be of an irrevocable nature for Eurnekian; (ii) such
notice shall be received by CEI, TISA and TINTA on any date after the first
anniversary of the signing of this Agreement; (iii) the Shares included in the
Eurnekian's Option shall be transferred with all the rights and benefits
pertaining to the same as of the date of exercise of the option (including, but
not limited to, the right to dividends and other distribution, declared or not
at said date, which have not been paid or distributed at said date, without
regard the fiscal year to which them may correspond) and free of any Encumbrance
and all right or option in favor of a third party, within such term as Eurnekian
and the Optionors may mutually agree upon, which in no case shall be later than
15 (fifteen) days as from the date of determination of its market value
according to paragraph (v) below; (iv) the payment of the price of the Shares
included in the Eurnekian's Option, shall be made (A) a one third cash and the
balance in four semi annual, equal consecutive instalments, the first on the
date which is six (6) months after the date of transfer of such Shares, with
interest on the unpaid amounts at LIBOR plus 1% per annum, or, (B) at the option
of the Grantor, cash; (v) the Shares included in the Eurnekian's Option shall
be purchased at their market value on the date of exercise of the option, and in
the event the interested parties can not agree on the market value of such
Shares, such value shall be the value in United States Dollars that might be
obtained on such date for such Shares in a private placement thereof in a
transaction between independent parties, in which the buyer is an informed buyer
interested in buying, and the seller is an informed seller interested in
selling, as determined by a private investment bank of international repute
chosen by mutual agreement of the parties (and failing so by lottery) as among
the following: Merrill Lynch, Morgan Stanley, Goldman Sachs, Salomon Brothers,
Bear Stearns and J.P. Morgan, which investment bank will have to determine the
price within thirty (30) days of its appointment and notify the valuation
Eurnekian and the Optionors, it being understood that (A) the determination of
the market value of such Shares so made shall be definitive and binding for the
seller and the buyers, and (B) all costs and expenses of such determination of
value shall be borne equally by Eurnekian, on the one side, and the Optionors,
on the other; (vi) between the first and the second
<PAGE>
anniversary of this Agreement the purchase price of the Shares subject to the
Eurnekian's Option shall not be less than US$ 82,300,000, it being understood
that, at this price TISA will not be obliged to buy, and that if TISA would not
buy its portion, such portion will be purchased by TINTA and CEI pro rata to
their holdings of Shares; and (vii) the Shares included in the purchase or sale
shall be transferred to the buyers, against payment of the price or, should it
be the case, the cash portion thereof and the granting of such guarantees for
the balance as may be agreed upon.
(c) Eurnekian's Option can not be assigned or transferred (except to an
Affiliate of Eurnekian) or subject to any Encumbrance by Eurnekian.
(d) CEI and TINTA agree that in the case Eurnekian exercises the
Eurnekian's Option, CEI, if so required by TINTA, shall make its best efforts to
procure to TINTA third party financing in normal market conditions for the
payment of the price of the Shares subject to the Eurnekian's Option which TINTA
must purchase. If by the time in which said payment must be made, such financing
had not been obtained and TINTA had not purchased such Shares, CEI will replace
TINTA in the performance of the obligation to purchase and will acquire such
Shares for its own. TINTA's failure to finance the purchase will not constitute
a breach of this Agreement.
4.2A Purchase Option. (a) If by October 31, 1997 the agreement referred to
---------------
in paragraph (f) of Section 8.2 relating to the trademarks mentioned therein has
not been signed, CEI, TISA and TINTA (or one or more of them if the other party
or parties do not wish to do so) (the "Opting Party") shall jointly have an
option to purchase from Eurnekian all of the Shares owned by Eurnekian in
proportion to their holding of Shares, and in such case Eurnekian agrees to sell
said Shares.
(b) This option is subject to the following conditions: (i) in case of
exercise, the Opting Parties shall notify in writing to Eurnekian that they have
decided to exercise this option, and such notice shall be irrevocable for the
Opting Parties; (ii) said notice will have to be received by Eurnekian before
November 30, 1997 or, if later, within ten (10) days from the date on which
Eurnekian notifies CEI, TISA and TINTA that he withraws from the negotiations
for the signature of the agreement referred to in paragraph (f) of Section 8.2;
(iii) the Shares subject to this option shall be transferred with all rights and
benefits attaching thereto at the time of exercise of the option (including,
without limitation, the right to dividens and other distributions, declared or
not at such date, which have not been paid or distributed at such date,
irrespective of the fiscal year to which they belong) and free of all
Encumbrances and all right or option in favor of any third party, within the
term as the Opting Parties and Eurnekian may mutually agree but in no event
before December 1, 1997 or after
<PAGE>
December 15, 1997; (iv) the payment of the price of the Shares subject to this
Option shall be made fully cash; (v) the Shares subject to this option shall be
purchased at the price of U$S 95,000,000; and (vi) the Shares included in the
purchase or sale shall be transferred to the buyers against payment of the
price.
(c) This option may not be assigned or transferred (except to an Affiliate
of the Opting Parties).
4.3 TINTA Sale Option-I. (a) CEI and TISA, each for so long as it owns
-------------------
directly or indirectly Shares representing more than ten per cent (10%) of the
capital stock of the Company (the "Optionors"), grant hereby TINTA the option to
sell them all or part of the Shares owned by TINTA (the "TINTA Option-I") and in
such case they agree to jointly purchase such Shares in proportion to their
holdings of Shares.
(b) The TINTA Option-I is subject to the following conditions: (i) in case
of exercise, TINTA shall serve a written notice upon CEI and TISA informing
them it has decided to exercise the TINTA Option-I, and such notice shall be of
an irrevocable nature for TINTA; (ii) such notice shall be received by the
Optionors on any date falling between the first and second anniversary of the
signing of this Agreement; (iii) the Shares included in the TINTA Option-I shall
be transferred with all rights and benefits attaching thereto at the date of
exercise of the option (including, but not limited to, the right to dividens and
other distributions, declared or not at such date, which have not been paid or
distributed at such date, irrespective of the fiscal year to which they belong)
and free of any Encumbrance and all right or option in favor of any third party,
within such term as TINTA and the Optionors may mutually agree, which term in no
case shall exceed 15 days as from the date of determination of their market
value according to paragraph (v) below; (iv) the payment of the price of the
Shares subject to TINTA Option -I, shall be made (A) in three annual, equal and
consecutive instalments, the first to be made on the date of transfer of such
Shares, and the remaining two at the subsequent anniversaries, with interest on
the unpaid balances at the higher of: the LIBO rate plus 1% per annum and
TINTA's verifiable marginal cost of funding or (B) at the option of the
Optionors, all cash; (v) the Shares subject to the TINTA Option -I shall be
purchased at their market value on the date of exercise of the option, and in
the event the interested parties can not agree on the market value of such
Shares, such value shall be the value in United States Dollars that might be
obtained on such date for such Shares in a private placement thereof in a
transaction between independent parties, in which the buyer is an informed buyer
interested in buying, and the seller is an informed seller interested in
selling, as determined by a private investment bank of international repute
chosen by mutual agreement of the parties (and failing so by
<PAGE>
lottery) as among the following: Merrill Lynch, Morgan Stanley, Goldman Sachs,
Salomon Brothers, Bear Stearns and J.P. Morgan, which investment bank will have
to determine the price within thirty (30) days of its appointment and notify the
valuation TINTA and the Optionors, it being understood that (A) the
determination of the market value of such Shares so made shall be definitive and
binding for the seller and the buyers, and (B) all costs and expenses of such
determination of value shall be borne equally by TINTA and the Optionors; and
(vi) the Shares included in the purchase or sale shall be transferred to the
buyers, against payment of the price or, should it be the case, the cash portion
thereof and the granting of such guarantees for the balance as may be agreed
upon.
(c) TINTA Option-I can not be assigned or transferred (except to an
Affiliate of TINTA) or subject to any Encumbrance by TINTA.
4.3A. TINTA Sale Option-II. (a) In case the Board shall not give its
---------------------
consent for the renewal of the Management Agreement as contemplated in Section
15 of the Management Agreement, CEI and TISA, each for so long as owns directly
or indirectly Shares which represent more than ten per cent (10%) of the capital
stock of the Company (the "Optionors"), hereby grant TINTA the option to sell
them all (but not a part) of the Shares owned by TINTA (the "TINTA Option-II")
and in such case they agree to jointly purchase such Shares pro rata to their
holdings of Shares.
(b) The TINTA Option-II is subject to the following conditions: (i) in case
of exercise, TINTA shall serve a written notice upon CEI and TISA informing them
it has decided to exercise the TINTA Option-II, and such notice shall be of an
irrevocable nature for TINTA; (ii) such notice shall be received by the
Optionors within sixty (60) days of the date on which the initial term of the
Management Agreement shall expire; (iii) the Shares included in the TINTA
Option-II shall be transferred with all rights and benefits attaching thereto at
the date of exercise of the option (including, but not limited to, the right to
dividens and other distributions, declared or not at such date, which have not
been paid or distributed at such date, irrespective of the fiscal year to which
they belong) and free of any Encumbrance and all right or option in favor of any
third party, within such term as TINTA and the Optionors may mutually agree,
which term in no case shall exceed 15 days as from the date of determination of
their market value according to paragraph (v) below; (iv) the payment of the
price of the Shares subject to TINTA Option-II, shall be made (A) in three
annual, equal and consecutive instalments, the first to be made on the date of
transfer of such Shares, and the remaining two at the subsequent anniversaries,
with interest on the unpaid balances at the higher of: the LIBO rate plus 1%
per annum
<PAGE>
and TINTA's verifiable marginal cost of funding or (B) at the option of the
Optionors, all cash; (v) the Shares subject to the TINTA Option-II shall be
purchased at their market value on the date of exercise of the option, and in
the event the interested parties can not agree on the market value of such
Shares, such value shall be the value in United States Dollars that might be
obtained on such date for such Shares in a private placement thereof in a
transaction between independent parties, in which the buyer is an informed buyer
interested in buying, and the seller is an informed seller interested in
selling, as determined for the benefit of TINTA and the Optionors by a private
investment bank of international repute selected by TINTA as among the
following: Merrill Lynch, Morgan Stanley, Goldman Sachs, Salomon Brothers, Bear
Stearns and J.P. Morgan, which investment bank will have to determine the price
within thirty (30) days of its appoint ment and notify the valuation TINTA and
the Optionors, it being understood that (A) the determination of the market
value of such Shares so made shall be definitive and binding for the seller and
the buyers, and (B) all costs and expenses of such determination of value shall
be borne equally by TINTA, on the one side, and the Optionors, on the other; and
(vi) the Shares included in the purchase or sale shall be transferred to the
buyers, against payment of the price and, should it be the case, the granting of
such guarantees for the balance as may be agreed upon.
(c) TINTA Option-II can not be assigned or transferred (except to an
Affiliate of TINTA) or subject to any Encumbrance by TINTA.
4.4. Shotgun Buy/Sell (Opcion de Compra/Venta) (a) CEI, TISA and TINTA,
-----------------------------------------
each for so long as it owns directly or indirectly Shares which represent more
than ten per cent (10%) of the capital stock of the Company, reciprocally grant
hereby each other an option by which any one of them (the "Opting Party") may
force the other (the "Optionors") to buy or sell, at the option of the
Optionors, and at a price per share payable cash in full which price per Share
will be stipulated by the Opting Party: (i) in the case of a purchase, all (but
not a part) of the Shares owned by the Opting Party, and (ii) in the case of a
sale, all (but not a part) of the Shares owned by the Optionors, all in
accordance with the provisions of the following paragraph.
(b) This option may be exercised by the Opting Party at any time after the
first anniversary of the signing of this Agreement. The option shall be
exercised by written notice to the Optionors, indicating the stipulated price
per share. The Optionors, within thirty (30) days of receipt of the last such
notice, shall notify in writing the Opting Party whether they elect to buy or
sell. In case there are two Optionors: (i) if both shall elect to buy, both will
be entitled and obliged to buy the Shares of the Opting Party in proportion to
their holding of Shares (or in any other proportion as
<PAGE>
they may agree upon between themselves); (ii) if both shall elect to sell both
will be entitled and obliged to sell to the Opting Party all Shares then owned
by the Optionors; (iii) if one shall elect to buy and the other shall elect to
sell or shall make no election whatsoever, the Optionor that elected to buy
shall be entitled and obliged to buy the Shares owned by the Opting Party and
the other shall not then be entitled or obliged to buy or sell (save as
indicated in paragraph (B) below) except that: (A) if the Opting Party had so
stipulated when notifying its option, the Opting Party shall not be obliged to
sell but to purchase together with the Optionor that elected to buy, the Shares
owned by the Optionor that elected to sell or made no election whatsoever, in
propportion to their holdings of Shares all in such other proportion as they may
agree between themselves) and (B) provided that the Opting Party has not
stipulated as aforesaid, the Optionor who has elected to purchase may, if so
wishes, also purchase the Shares of the Optionor that elected to sell or made no
election whatsoever; (iv) if one shall elect to sell and the other shall make no
election whatsoever, the Optionor that elected to sell as well as the Optionor
that made no election whatsoever, shall be obliged to sell to the Opting Party
all Shares then owned by them, and (v) if no Optionor had made an election they
both shall be obliged to buy the Shares owned by the Opting Party in proportion
to their holdings of Shares (or in such other proportion as they may agree
between themselves) or sell to the Opting Party all Shares then owned by them,
at the election of the Opting Party which shall be notified to them within ten
(10) days following the expiration of the 30-day term. If the Opting Party shall
not make this election there will be no sale or purchase, without prejudice to
the right of the Opting Party to re-initiate the procedure contemplated in this
Section. 4.4.
(c) The Shares included in the sale or purchase shall be transferred to the
buyer or buyers, against the payment of the price, within thirty (30) days
following the expiration of the first 30-day term, with all the rights and
benefits attaching thereto at the time of exercise of the option (including, but
not limited to, the right to dividends and other distributions, declared or not
at such date, which have not been paid or distributed at such date, irrespective
of the fiscal year to which the belong) and free of any Encumbrance and all
right or option in favor of any third party.
SECTION V
MANAGEMENT, GOVERNANCE AND FISCALIZATION
----------------------------------------
5.1 Board of Directors. (a) Unless otherwise agreed in writing by the
-----------------------
Partners, the Board shall consist of ten (10) directors. Each Partner shall be
entitled to have
<PAGE>
appointed one (1) director per each ten (10) percentage points of share in the
capital stock and votes of the Company owned by such Partner at the time of each
renewal of the Board. Holdings of less than ten (10) points any surplus of less
than 10 points that belonging to more than one Partner can not be added up to
reach in the aggregate the required ten (10) points so as to appoint with them
one (1) joint director. When by virtue of the preceedings provisions there were
one or more director seats which remain vacant, then the remaining director or
directors shall be appointed by the Partner or Partners having the largest
shareholdings among the holdings of less than ten (10) percentage points. Each
Partner shall also be entitled to have appointed at its indication an equal or
lesser number of alternates. Alternate directors shall automatically replace the
directors in case of absence or impediment. For the avoidance of doubts it is
clarified that, with current shares, Eurnekian shall be entitled to appoint one
director with not less than seven point two (7.2) percentage points of shares in
the capital stock and votes of the Company.
(b) At the time of each renewal of the Board, the Partners will cause the
shareholders meeting to establish the number of directors in such number as may
be necessary to comply with the provisions of paragraph (a) of this Section,
and to appoint as directors and alternate directors such persons as each
Partner may indicate. For such purpose, each Partner shall, prior to the date
when the shareholders meeting is to be held, notify to the other the name and
other data of the directors and alternate directors the appoinment of which is
being requested.
(c) Each Partner shall be entitled to remove or replace, at any time, any
of the directors or alternate directors appointed at its indication, and shall
hold the Company and the other Partners harmless with respect to any claim
deriving from the directors so replaced.
(d) The directors appointed at the indication of each Partner shall comply
with all the requirements of the Argentine laws, and shall be persons known
being held in high repute and "buenos hombres de negocios" (good businessmen),
as this expression is understood in Argentina.
(e) The appointment of the chairman and vice chairman of the Board shall be
made by the Board itself. The Partners agree that, notwithstanding any provision
to the contrary in the applicable law or the By-laws and without prejudice to
the rights of third parties, the chairman of the Board (or the vice chairman
when replacing the Chairman) shall in no case have any power to bind the Company
without a prior resolution of the Board so authorising or, in the event it is
not possible or advisable
<PAGE>
to wait for a meeting of the Board meeting, without the approval of the
directors dessignated for this purposes by the Board or of the Corporate
Committe.
(f) The quorum for the transaction of business at any meeting of the Board
shall be of a number of directors representing more than fifty per cent (50%) of
the directors holding office at such time, whether they are directors or
alternate directors.
Nevertheless if any board meeting duly convenied according to the By-laws
and this Agreement, were not quorate, said meeting may be postponed once up to a
date not earlier than five (5) working days thereafter.
Said postponed meeting will be quorate if the majority of the directors
then in office, wether directors or alternate directors, are in attendance and
any resolution approved in such postponed meeting shall be valid if approved
with the majorities requireds by this Agreement.
(g) In order to calculate the majority, each director or alternate director
shall be entitled to cast one (1) vote, and in case of a tie vote, neither the
chairman (nor the vice chairman, as the case may be), nor any other director
shall be entitled to cast a second or a tie breaking vote.
(h) The meetings of the Board shall be held from time to time as agreed
upon by the Partners and/or Directors but in no case shall the time between
meetings be longer than three (3) months. Unless otherwise agreed to by all
directors, each director shall be notified of each meeting or postponed meeting
at the domiciles (in the Argentine Republic or in any other place) they have
from time to time notified to the Company for the purposes of receiving notices,
with not less than ten (10) working days in advance (or in the case of a
postponed meeting, not less than five (5) calendar days in advance).
Any notice calling for a meeting of the Board shall fully and clearly state
the agenda to be transacted therein. No subject not included in such agenda may
be discussed and voted or considered at the meeting unless all the directors of
the Company are in attendance and unanimously agree so to do.
(i) The directors which the Company is entitled to appoint, or propose or
indicate for appointment in the Controlled Companies and Related Companies
pursuant to the law, the By-laws of such companies and/or the agreements
entered into with other shareholders of such companies shall be appointed,
proposed or indicated for appointment by the Board. In all instances, such
directors shall act in a
<PAGE>
manner consistent with the decisions adopted by the Board or the Corporate
Committee, as the case may be.
(j) The directors of the Company and those appointed in the Controlled
Companies and Related Companies at the proposal or indication of the Company
will not receive any remuneration for holding such office.
(k) The Board of directors will be able to appoint a secretary not being a
director with such powers as the Board may assign to him.
5.2 Executive Committe. Without prejudice to the powers of the Board, the
------------------
Company shall have a Corporate Committe which will consist of one
representative, who may be or be not director of the Company, of each Partner
having the right to have appointed at least one director. This Corporate
Committe shall meet at least once a month in person or by telephone conference
and shall have the following functions: (i) to follow up the management and
supervise the administration by the managers; (ii) to prepare proposals in
relation within the authority of the Board or the shareholders meeting; (iii) to
authorize, provided there exists unanimity of the members of the Corporate
Committee, any matters within the authority of the Board; (iv) to evaluate and
propose new business; (v) to evaluate and analyse and make recommendations to
the Board with respect to contracts with Persons which are Affiliates of or
Related Persons to any of the Partners; (vi) to analyse and make recommendations
to the Board on compensation policies for the Company's executive officers. In
order to exercise its powers, the Corporate Committe shall be entitled to use
the Company's services and resources. The Partners will cause the directors
appointed pursuant at their indication to vote in the Board for the
ratification of the unanimous resolutions of the Committee, provided that such
resolutions are in writing and signed by all members of the Committee.
5.3 Management. (a) The management of the Company and of the Controlled
----------
Compa nies shall be in charge of a company Controlled by TINTA under the terms
of the Manage ment Agreement.
(b) In additon to the provisions of the Management Agreement, the
appointment of the following officers of the Company and of any Person which the
Company controls or otherwise power to manage, shall be made as follows:
(i) the Financial Manager (Financial Controller-CFO) shall be proposed to
the General Manager, and through him to the Board of Directors, by CEI;
<PAGE>
(ii) the Network Manager shall be proposed to the General Manager, and
through him to the Board of Directors, by TISA;
(iii) the internal auditor shall be initially proposed to the Board, by CEI
and TISA jointly, and thereafter by any of the Partners; this officer shall
report to the General Manager and the Board; and
(iv) the remaining managers shall be proposed to the Board by the General
Manager, who may receive suggestions from any of the Partners.
(c) The General Manger shall be removed at the request of a simple
majority of the members of the Board, without being necessary to give any cause
for such request of removal. The General Manager will be entitled to remove any
of the managers with notice to the Board.
(d) The Partners agree that, except for short term bank financing
agreements (less than one year), the CFO of the Company shall invite one
representative of TINTA (whether or not member of the Board) in order to
participate in all meetings within and outside the country where the Company's
relevant financing aspects are discussed (whether through debt or capital
contributions). This invitation to participate shall be made with time enough so
as to permit TINTA to be personally represented in such meetings or, if TINTA so
desires, be able to participate through telephone conferences in said meetings.
TINTA commits its best efforts to participate in said meetings.
5.4 Fiscalization Committee (a) The fiscalization committee of the
-----------------------
Company shall consist of three (3) members of which TINTA, CEI and TISA, for
long as they are shareholders of the Company and have a share in the capital and
the votes of the Company of not less than twenty per cent (20%), shall have the
right to have appointed one (1) member and his alternate.
(b) Each Partner shall be entitled to remove or replace, at any time, any
of the members or alternate members appointed at its indication and, and shall
be obliged to hold the Company and the other Partners harmless from any claim of
the members so replaced.
(c) The syndic or syndics or members of the fiscalization committees that
the Com pany is entitled to appoint, or propose or indicate for appointment in
the Controlled Companies and Related Companies pursuant to the law, the by-laws
of such companies and/or the agreements entered into with other shareholders of
such
<PAGE>
Companies shall be appointed, proposed or indicated for appointment by the
Board. Such syndics or members of the fiscalization committees shall act in a
manner consistent with the decisions adopted by the Board or the Corporate
Committee, as the case may be.
(d) The syndics or members of the fiscalization committee of the Company
and those appointed in the Controlled Companies and Related Companies at the
proposal or indication of the Company will not receive any remuneration for
holding such office.
5.5. Shareholders Meetings. (a) Without prejudice to the provisions of
---------------------
Section 5.6, no shareholders meeting of the Company shall be quorate unless the
representatives of Partners having in aggregate a share in the capital and the
votes of the Company of more than a fifty per cent (50%) are in attendance.
(b) Notwithstanding any provision of the applicable law or the By-laws
which may authorize a shorter term, and at least fifteen (15) working days prior
written notice of each shareholders meeting shall be given to each Partner,
unless such notice has been waived.
(c) Each notice of a shareholders meeting of the Company shall clearly and
thoroughly state the agenda to be transacted therein. No matter not included in
such agenda can be discussed and voted or considered in the meeting unless all
the Partners are in attendance and give their unanimous consent.
5.6. Majorities. All matters of the Company within the authority of the
----------
Board or of the shareholders meeting shall be decided by the favorable vote of a
number of directors representing more than fifty per cent (50%) of the directors
then holding office, whether directors or alternate directors replacing
directors, in the case of the Board, or by a majority of more than fifty
percent (50%) of the Shares, in the case of the shareholders meetings, subject
to the following special rules:
(i) The favorable vote of at least one director proposed by each Partner
then holding a share in the capital stock of the Company of not less than ten
per cent (10%), and/or the attendance and favorable vote of shareholders owning
more than 90% of the Shares of the Company, as the case may be, shall be
required in order to approve any of the following resolutions:
(A) make loans to third parties (excluding loans to Controlled Companies
or Related Companies) or to any of the Partners, and grant of guaranties for
third parties'
<PAGE>
obligations (excluding Controlled Companies or Related Companies) or for any of
the Partners'obligations.
(B) disposition or encumbrance of all or a substantial part of the assets
of the Company;
(C) grant of powers of attorney and/or delegation of powers for any of the
acts listed in the foregoing subparagraphs;
(D) limitation or suspension of the preemptive right for the subscription
of new Shares;
(E) transformation, extension of term or resumption of the Company (as
such terms are understood under Argentine law);
(F) Company's early dissolution;
(G) transfer of the Company's domicile abroad;
(H) fundamental change of the Company's purpose;
(I) merging of the Company in a merge in which the Company is not the
surviving corporation, or split up of the Company; or
(J) commencement of litigation for damages and/or removal against
directors or syndics based on misperformance.
(ii) The attendance and favorable vote of at least 7 directors (in the case
of the Board) and the attendance and the favourable vote of shareholders owning
at least seventy five per cent (75%) of the Shares of the Company (in case of
shareholders meetings), including, for so long as TINTA maintains a share in
the capital stock of the company of not less than sixteen per cent (16%), the
vote of a director appointed at the indication of TINTA (in the case of the
Board) and the vote of the representative of TINTA in the shareholders meetings
(in the case of the shareholders meetings), shall be required in order to
approve any of the following resolutions:
(A) approval of the strategic plan, the yearly action plans and the annual
budget of the Company, and their respective modifications (including any capital
increase which require a disbursement from the Partners and which is not
foreseen in the annual budget);
<PAGE>
(B) creation of companies or acquisition of interest in other existing
companies, whether through the purchase of shares or subscription of capital;
execution of business collaboration contracts;
(C) entering into of contracts and/or transactions with any of the
Partners or with their Affiliates or Related Companies;
(D) entering into material agreements and/or transactions having a
substantial impact over the assets, business or perspectives of the Company;
(E) development of the Venture outside the Territory, it being understood
that the directors of the Company appointed at the request of any of the
Partners shall abstain from voting in such decision when such Partner or/an
Affiliate thereof develops or foresees to develop in such country activities
which may compete with the activities of the Company, and in such case the
decision may be adopted by a majority of seventy per cent (70%) of the remaining
directors; or
(F) grant of powers of attorney and/or delegation of powers for any of the
acts listed in the foregoing subparagraphs.
SECTION VI
ACCOUNTING, REPORTS, AUDIT, INSPECTION RIGHTS AND OTHER
--------------------------------------------------------
FINANCIAL MATTERS
-----------------
6.1. Accounting and Reports. (a) The Partners shall procure that :
-----------------------
(i) the annual financial statements of the Company and of the Controlled
Companys shall be prepared as at December 31, and the quarterly statements as at
the last day of each calendar quarter according to the generally accepted
accounting principles in Argentina and the United States;
(ii) the Company supplies the Partners, according to the requirements and
systems of the Partners, in a monthly, quarterly and annual basis, with the
information, on the business of the Company, the Controlled Companies, and, to
the extent possible, to the Related Companies.
Deal with the following matters:
<PAGE>
1. financial, commercial and operative matters;
2. financial and sales prospectives;
3. proposals on policies related to financing, marketing, supplies,
investments, expenses, services, staff and compensations;
4. insurance contracts;
5. any other matter that may be reasonably requested by any of the
Partners.
(b) All of the annual and quarterly financial statements shall fully
comply with the requirements of the Securities and Exchange Commission of the
United States. The quarterly financial statements shall be delivered to the
Partners within thirty (30) days following the end of each quarter. The annual
financial statements shall be delivered to the Partners within forty-five (45)
days following the end of each fiscal year. The Partners shall fully cooperate
for the timely preparation of the reports herein requested.
(c) The Company shall, in the manner requested by the Partners, prepare
monthly accounts of administration, and such monthly information shall be
provided to the Partners in the manner and time in which they are reasonably
requested by the Partners for the purposes of their own administrative accounts
and, in addition, the Company shall provide any other information which any of
the Partners may reasonably require in order to prepare its regulatory financial
statements.
6.2. Audit. Financial statements and records of the Company and of the
-----
Controlled Companies shall be audited by the Auditors.
6.3 Individual Control. Eurnekian, TINTA, CEI and TISA, each for so long
------------------
as it holds a share in the capital stock of the Company of at least five per
cent (5%), or their duly authorized representatives, shall have full and
complete access, during normal working hours and with a prior reasonable notice,
to the books and records, accounts, properties and/or operations of the Company,
the Controlled Companies and, to the extent the Company or the Controlled
Companies may have such access, to the Related Companies for the purposes of
inspection, examination, copying or for any other purpose. The corresponding
directors, officers, employees, accountants and auditors shall fully cooperate.
Such examinations or inspections may be conducted by such Partner's employees,
or by its independent certified public accountants and/or by any other
representative of such Partner. Without prejudice to the foregoing, each of
<PAGE>
such Partners may, at his own expense, at any time and from time to time,
request the Auditors to conduct an audit of the Company or of any of the
Controlled Companies and, to the extent possible, of the Related Companies.
6.4 Annual Budget and Action Plans. (a) The Company as well as the
-------------------------------
Controlled Companies shall be administered according to the guidelines of an
annual budget and of a yearly action plan. At least sixty (60) days prior to the
end of each fiscal year (except as otherwise provided in the Management
Agreement), the General Manager shall submit to the Board a draft of the annual
budget and of the action plan for the coming year, and the Board shall
immediately meet and shall attempt to agree upon such annual budget and yearly
action plan for the coming year.
(b) Should the Board not manage to reach an agreement regarding the above
referred annual budget, it shall continue to apply the budget of the previous
year, automatically adjusted according to Argentina's Consumer Price Index
variations for the previous year, and increased by the 10%
6.5. Strategic Plan. Together with the submission of the draft of the
--------------
annual budget and the annual action plan, the General Manager shall submit to
the Board a strategic plan for the next five years, where the first year of
shall be the year for which the draft of the annual budget is being submitted.
SECTION VII
SHARE ISSUE, TRANSFER AND ENCUMBRANCE
-------------------------------------
7.1. Share Issue. (a) The Partners shall have the preemptive right to
-----------
purchase all the new Shares that the Company may issue, which shares shall have
to be offered to the Partners in proportion to their share in the Company at the
time of such issue.
(b) Unless otherwise agreed with the favorable vote of all the Partners,
the conditions of issue of the new Shares will always contemplate an additional
ninety (90) day term for the exercise of the pre-emptive rights and the
subscription and payment of the new Shares by any of the Partners. The Partner
which takes advantage of this additional term shall pay to the Company, in
addition to the subscription price, an interest calculated over the amount which
has been paid in during the additional term at a rate equal to the cost of
funding of the Company which will accrue from the date in which such additional
period has commenced and up to the date of payment. At the end of such
additional term the remaining partners will be entitled to exercise their
accession rights over the new Shares which have not been subscribed for.
<PAGE>
(c) Unless otherwise agreed with the favorable vote of all the Partners,
the conditions of issue of the new Shares shall, except that the market value of
the Company is equal or less than the corporate capital, contemplate a
subscription price in which a premium is added to the face value of the new
Shares in order to avoid the dilution of the equity interest of any Partners
which do not desire to subscribe for the new Shares. In case the Partners do not
agree on such subscription price (including the corresponding premium), said
price will be determined considering the fair market value of the Company to be
determined by the shareholders in accordance with paragraph (e) of this Section
7.1. Any Partner who disagree with this determination will be able to request,
at his own expense, that said determination be made by one of the investment
banks mentioned therein, which investment bank shall be chosen by lottery and
will have to determine said market value within the term of thirty (30) days as
from its appointment. The determination of the market value of such Shares so
made shall be definitive and binding for all the Partners who, should it be the
case, will cause a new shareholders meeting to modify the subscription price.
(d) The new Shares of the Company may be offered to third parties when it
is so decided by the Company's meeting of shareholders with the majority
required in this Agreement. In such a case, the third party, prior to the Shares
subscription, shall execute with the Partners an instrument of adherence to this
Agreement and once such instrument has been executed, as from the date of
subscription of the new Shares, the third party shall become a party to this
Agreement with all the rights and obligations of which arise from this Agreement
for the Partners generally. This provision will not be applicable in any case in
which the third party subscribes for new Shares of the Company in a public
offering.
(e) For purposes of paragraph (c) of this Section 7.1, it shall be
understood that the market value of the Company shall be the value in United
States Dollars that might be obtained for such Shares in a private placement
thereof in a transaction between independent parties, in which the buyer is an
informed buyer interested in buying, and the seller is an informed seller
interested in selling, as determined by an investment bank of international
repute selected as among the following: Merrill Lynch, Morgan Stanley, Goldman
Sachs, Salomon Brothers, Bear Stearns and J.P. Morgan. The determination of the
market value of such Shares so made shall be definitive and binding for all the
Partners. All costs and expenses of such determination of value shall be borne
by the Company.
7.2 Restrictions to the Transfer of Shares. (a) For the purposes of this
--------------------------------------
Article VII, Transfer of Shares shall mean the transfer of Shares by any title,
including without limitation transfers by sale, barter, donation, assignment and
any transfer
<PAGE>
resulting from acts such as merger of any Partner (unless the Partner is the
surviving company), distributions or reimbursements of capital, distribution of
dividend in kind and capital contributions to any Person. Except as provided for
in Section 7.3, nothing in this Agreement is intended to nor does it restrict
the transfer of any Share in the capital stock of any Partner and the
restrictions contained herein refer solely to the ability of the Partners to
transfer Shares.
(b) No Partner may make a total or partial transfer of Shares owned by it
if such transfer is not expressly permitted by the provisions of this Agreement
and may in accordance therewith.
(c) Notwithstanding any provision of this Agreement authorizing the
transfer of Shares, no Partner shall make a transfer other than a transfer to a
corporate entity, in consideration of a price per share payable in money or
consideration which may be estimated in money for Shares free from any
Encumbrance and from any right or option in favor of any third party. This
restriction shall not be applied to: (i) the intra-Eurnekian transfers referred
to in Section 7.4 nor (ii) the transfers referred to in paragraph (e) of this
Section.
In case the price per share is not in money, the value of the consideration
shall be the market value of the consideration estimated at the expense of the
selling Partner by one of the investment banks mentioned in paragraph (e) of
Section 7.1 which shall be chosen by lottery with notice to the other Partners
and which shall make such determination within the term of thirty (30) days of
its designation. If the selling Partner shall not agree with the estimation he
may abandon the transaction. The estimation so made shall be definitive and
binding upon all the Partners who can not challenge the same before or after the
Preference Notice referred to in paragraph (b) of Section 7.5.
(d) Notwithstanding any provision of this Agreement authorizing the
transfer of Shares, no Partner shall (i) share with another person his
entitlements as Partner; (ii) transfer rights, economic or not (including the
pre-emptive rights and the desidual pre-emptive rights subscribed for new shares
of the Company and voting rights) separate from the Shares to which such rights
attach, (iii) transfer Shares without transferring, at the same time, to the
same person and in the same proportion, rights resulting from advance payments
on account of future subscriptions of Shares then owned by it, or (iv) transfer
rights resulting from advanced payments on account of future subscriptions of
Shares, without transferring, at the same time, to the same person and in the
same proportion, Shares then owned by it.
<PAGE>
(e) Transfers of Shares between Partners which are made as a result of the
options provided in Sections 4.2, 4.2A, 4.3., 4.3A and 4.4. will be free and
therefore not subject to the provisions of Section 7.5.
(f) Due to the characteristics of their companies, any of the Partners
holding a share in the capital stock of the Company of more than ten percent
(10%) shall be entitled to veto any transfer of Shares to companies where
Ernestina Laura Herrera de Noble, Hector Horacio Magnetto, Lucio Rafael
Pagliaro, Jose Antonio Aranda, Jose Maria Saenz Valiente (Jr.) or Julio Martinez
Vivot (Jr.) directly or indirectly hold an equity interest, since the Partners
recognize as competitors of the Company.
7.3 Transfers to Affiliates (a) Any Partner may transfer all or any part
-----------------------
of the Shares owned by it to any of its Affiliate under the following
conditions: (i) the transferring Partner shall continue to be a party to this
Agreement and shall keep its rights and obligations as if such transfer had not
been made and for the purposes of the share in the capital and votes of the
Company which is required in several provisions of this Agreement the Shares
transferred to such Affiliate shall be considered as owned by the transferring
Partner; (ii) such Affiliate must accept in writing to be bount by the
provisions of this Agreement jointly and severally with the transferring
Partner; and (iii) such Affiliate shall not cease to be an Affiliate of the
transferring Partner, unless the transferring Partner shall have previously
reacquired all the Shares then owned by such Affiliate.
(b) The provisions of Section 7.5 shall not be applicable to the transfers
permitted under Section 7.3.
7.4. Intra-Eurnekian Transfers. (a) The natural person or persons who from
-------------------------
time to time are members of the party named "Eurnekian" may transfer any of the
Shares owned by them, (i) by a mortis causa transfer to his universal heirs
appointed by will or called by law or (ii) by an inter vivos transfer to Eduardo
Eurnekian, Basilia Jaliquias, Natalio Wende and to Eduardo Eurnekian's spouse,
brothers, nephews and nieces and to the spouses of same. In the event of a
mortis causa transfer, the heirs shall become party to this Agreement as
successors of the decedent and as members of the party called "Eurnekian", as
from the date they are in possession of the estate. In both cases (i) and (ii)
the heir/s or transferee/s shall assume, without the need of any statement
whatsoever, in the proportion of the Shares transferred, all the rights and
obligations of the decedent or transferor arising from this Agreement.
(b) The provisions of Section 7.5 shall not be applicable to the transfers
allowed by this Section 7.4.
<PAGE>
7.5. Other Transfers. (a) Unless otherwise provided for by this Agreement
---------------
and subject to the prior compliance with the provisions of Section 7.6., if any
of the Partners (the "Selling Partner") decides to make a total or partial
transfer of its Shares to another Partner or to a third party, it must have
received a bonafide offer from such Partner or third party (the "Offer") and in
such case, the other Partners, including the Partner who has made the Offer,
shall have preference to purchase the Shares included in the Offer in proportion
to their holdings of Shares, with accession rights in equal proportion, in case
any of the other Partners shall not exercise its preference or exercise its
preference for a number of Shares lower than the number which in proportion is
entitled to.
(b) In order to exercise this preferential right, the other Partners must
equal the terms and conditions of the Offer and, as a whole, including the
Partner who has made the Offer, purchase the total number of Shares comprised in
the Offer. For such purpose, the Selling Partner must give notice in writing
(the "Preference Notice") to the other Partners, including the Partner who has
made the Offer, of the number of Shares comprised in the Offer, the name and
other data of the Partner or third party who has made the Offer, the price or
consideration per share (attaching, as the case may be, the determination made
in accordance with paragraph (c) of Section 7.2) and the terms of payment and
other terms and conditions of the Offer. Within thirty (30) days after receipt
of the Preference Notice, the other Partners, including the Partner who has made
the Offer, shall notify in a conclusive manner to the Selling Partner, whether
they shall exercise the preferential right (the "First Notice of Purchase").
(c) Once the preferential right has been exercised by Partners, including
the Partner who has made the Offer, which as a whole are not purchasing the
total number of the Shares of the Offer, the Selling Partner must give notice
(the "Notice of Accession") to those Partners, including the Partner who has
made the Offer, which had fully exercised their preferential right so that
within fifteen (15) days after receiving the last Notice of Accession, they
notify in a conclusive manner whether they shall exercise their right of
accession (the "Second Notice of Purchase"). Upon expiration of this term, if
the right of accession had been exercised as a whole, including the Partner who
has made the Offer, by a number that exceeds the number of Shares remaining
from the First Notices of Purchase, the Shares shall be distributed among the
interested Partners, in the first place, in accordance with the First Notices of
Purchase and the remainder shall be allocated among such other Partners which
have exercised the accession right, pro rata their holdings of Shares at the
date of Preference Notice.
<PAGE>
(d) Once all the preferential rights and, as the case may be, the
accession rights have been exercised for the total number of Shares comprised in
the Offer, the Selling Partner shall be obliged to transfer such Shares to such
of the other Partners, including the Partner who has made the Offer, who have
elected to purchase, at the price, terms of payment and other terms and
conditions of the Offer within thirty (30) days of the First Notice of Purchase
or, as the case may be, the Second Notice of Purchase.
(e) Should the preferential right, and as the case may be, the accession
right for the total number of Shares comprised in the Offer not be exercised,
the Selling Partner may transfer the Shares comprised in the Offer to the
Partner or to the third party which has made the Offer provided, however, such
Selling Partner strictly adheres to the Offer and not more than one hundred
and eighty (180) days as from the Preference Notice have elapsed. Upon the
expiration of such term, the transfer shall not be carried out without starting
once again the procedure contemplated in this Section 7.5.
(f) In case the transfer is made to a third party, the third party prior
to the transfer, must execute with the Partners an instrument of adherence to
this Agreement and once this instrument has been executed, as from the time in
which the transfer is completed, the third party shall become a party to this
Agreement with all the rights and obligations arising from this Agreement for
the Partners, except for such rights the assignement of which is not permitted
in Section 10.4.
(g) The acceptance of the conditions set forth in this Section 7.5. by the
Partner or third-party which/who has made the Offer shall be included in the
Offer.
7.6. Obligation of First Negotiation. If any of the Partners (a "Selling
-------------------------------
Partner") is interested in making a total or partial transfer of its Shares to a
third party, it must notify such intention to the other Partners and submit them
a bona fide and detailed description of the possible transaction in order to
determine whether the Partners may agree upon financial and commercial
conditions mutually acceptable, under which one or more of the Partners shall
acquire such Shares. Such bona fide description shall be discussed for at least
90 (ninety) days, and only in case such discussions fail to result in an
agreement to sell to a Partner, the Selling Partner shall be able to make the
transfer of the Shares subject to prior fulfilment of the provisions of Section
7.5 and other provisions of this Agreement.
7.7. Restrictions to Encumbrances on Shares. (a) Unless otherwise expressly
--------------------------------------
allowed or required by this Agreement, none of the Partners shall be able,
without the
<PAGE>
written consent of the others, to constitute or allow for the constitution of
any Encumbrance on any of the Shares owned by them.
(b) Any Partner shall be able to constitute an Encumbrance on any of the
Shares owned by said Partner subject to the condition that said Partner and the
holder of said Encumbrance irrevocably agrees in writing for the benefit of the
remaining Partners, that: (i) the debt of said Partner may be prepaid and the
Encumbrance cancelled in order to allow any transfer of the encumbranced Shares
to the other Partners as a result of the exercise by any of such Partners of any
preferential right or purchase option contemplated in this Agreement; and (ii)
any forced sale of encumbranced Shares, whether by adjudication, sale or private
auction or judicial auction, shall be carried out in a manner so as to assure to
the other Partners the opportunity to exercise the same options which they have
under this Article VII if the sale had been made by such Partner by its own.
7.8 Registration of Transfers and Encumbrances. The Board of Directors of
------------------------------------------
the Company shall not register any transfer or Encumbrance that has been made or
constituted without fully complying with the provisions of this Agreement.
SECTION VIII
RESTRICTIONS: COMMITMENTS
-------------------------
8.1. Purchase of Shares of Controlled Companies or Related Companies. None
---------------------------------------------------------------
of the Partners (including in the case of Eurnekian, the individual Persons
mentioned in Section 7.4, even they are not shareholders of the Company) may,
without express authorization in writing of the other Partners, purchase from
third parties shares of Controlled Companies or Related Companies.
8.2. Exclusivity: Non-Competition. (a) The rules on exclusivity and non-
----------------------------
competition set forth in this Section 8.2. are exclusively applicable to the
activities that the Partners (including in the case of Eurnekian individual
Persons mentioned in Section 7.4 who have been or are shareholders of the
Company) develop within the Republica Argentina, the Republica Oriental del
Uruguay and any other country to which the Partners by mutual agreement decide
to include in this provision by the execution of an addendum to this Agreement
(the "Territory").
(b) The Partners (including in the case of Eurnekian the individual Persons
mentioned in Section 7.4 who have been or are shareholders of the Company) agree
that they shall, through the Company, develop all of their future activity in
the
<PAGE>
Territory, which is related to the video/entertainment distribution business
through per subscriber systems of cable, MMDS, DTH, UHF (hereinafter the
"Venture"). It shall not be understood that the Venture includes the activities
of production and commercialization of programming as now conducted by companies
such as Pramer S.R.L. or Torneos y Competencias S.A. The Company, the Controlled
Companies and/or the Related Companies shall also be entitled to participate in
business related to music, Internet, "back haul", "trunking" and data
transmission activities, and they shall also be able to be engaged in any other
business opportunities related to telecommunications within the Territory so
long as such business is reasonable from an economic, technical and regulatory
point of view. The Partners agree to instruct their directors such that they
approve or disapprove the pursuit of such opportunities without giving regard to
any interest they may have in conflict with best interest of the Company.
(c) None of the Partners (including in the case of Eurnekian the
individual Persons mentioned in Section 7.4 who have been or are shareholders of
the Company) shall compete within the Territory, either directly or indirectly,
with the businesses of the Company or any of the Controlled Companies which are
included in the Venture. This restriction shall not apply to the businesses
included in the Venture which any of the other Partners, either directly or
indirectly, may currently be carrying out or may currently foresee to carry out
which are listed in Exhibit I of this Agreement. Any Partner's participation in
any of said businesses shall not give rise to any conflict of interests which
may prevent such Partner from voting in the shareholders meetings of the Company
or that may prevent any director appointed by such Partner from discussing and
voting with respect to any subject being considered by the Board. The limitation
to competition herein set forth constitutes the only limitation of this type
assumed by the Partners who shall not be subject to any other restriction on
competition or undertaking relating thereto. Subject to the provisions of
paragraph (e) of this Section, the non compete obligation included in this
paragraph (c) shall not be applicable to TASA.
(d) The Partners which maintain a participation in the capital of the
Company of ten per cent (10%) or more will make their best efforts to support
the Company's businesses included in the Venture by granting to it a most-
favored-nation treatment with respect to the businesses listed in Exhibit I.
(e) The Partners will make their best efforts to explore and develop the
possible synergies between the Company and TASA. Notwithstanding the foregoing,
TISA and CEI (as jointly Controlling companies of TASA) and all the Partners (as
Controlling Persons of the Company), agree that: (i) TASA (and its successors
and
<PAGE>
assigns) shall permit the use of its distribution network by the Company (and
its successors and assigns), and (ii) the Company (and its successors
andassigns) shall permit the use of its distribution network by TASA (and its
successors and assigns), subject to the following conditions: (1) said
reciprocal use be permitted by applicable legislation, (2) the party allowing
the use of its network (the "Supplier") by the other party (the "User") has
distribution capacity available; (3) the Supplier and the User agree in each
case the economic terms for the use of each network for the transmission
services and other related services, granting to the User by the Supplier
conditions of the "most-favored-nation" to said effect, and (4) the reciprocal
treatment contemplated herein is complied with by both parties.
(f) The restriction to competition contained in paragraph (c) of this
Section 8.2 shall become effective in respect of Eurnekian (including the
individual Persons indicated in Section 7.4 who have been or are shareholders of
the Company) only if it is executed and from the date of execution of an
Agreement by which the Company, any of the other Partners or any Affiliate
thereof acquires directly or indirectly the ownership or the exclusive rights of
use of the trademarks "Cablevision", "CV" and any other trademark which in any
way contains said words and which at said time is owned by Pramer S.R.L. or any
other Person Controlled individually or jointly by any of the individuals
mentioned in Section 7.4. It will be considered that the Company, any of the
Partners or any Affiliate thereof has indirectly acquried the ownership or the
exclusive use of said trademark if it has acquired the control of the Person who
is the holder of the ownership or of the exclusive use of said trademark.
In case that the aforementioned Agreement is not executed, this Section 8.2
shall not apply to or bind Eurnekian (or the individual Persons mentioned in
Section 7.4 who have been or are shareholders of the Company).
8.3. Company's Business. The Partners shall make their best efforts so that
-------------------
TASA and the Company combine their activities on the marketing of services in
order to provide a combined package of services (including telephony and
video/entertainment services) through their respective distribution networks and
to a consolidated base of clients, it being understood, however, that (i)
--------------------
neither of the Partners guarantee any success from such efforts, and (ii) such
efforts do not include the entering into of commercial agreements other than in
the best interest of each, the Company and TASA.
8.4 Confidentiality. (a) None of the Partners shall make any announcements
----------------
to the press, nor shall they make any other type of public announcement in
relation to this Agreement or to the issues contemplated in it, without the
consent of the other Partners.
<PAGE>
(b) Each Partner shall maintain and shall make sure that its directors,
employees, consultants and agents maintain under strict confidentiality, the
terms of this Agreement and any other non public information related to the
Company, the Controlled Companies or Related Companies or to the other Partners
that could have been obtained for the purpose of this Agreement or as a result
of it. Notwithstanding the above, any Partner shall be entitled to disclose such
information in so much as it is legally compelled to do so, by virtue of the
national or provincial laws of the Argentine Republic regarding securities
and/or the federal or state laws of the United States of America and/or the
Kingdom of Spain regarding securities, but the Partner who plans to make any
such disclosure must to the extent reasonably possible, previously notify and
consult the other Partners. The obligation of each Partner to maintain such
information under strict reserve and confidentiality shall be fulfilled if such
Partner treats the aforementioned information with the same care he would have
exercised to keep the confidentiality of like information owned by it. Each
Partner and/or their assignees are authorized to use all the information that,
according to their criteria, might be advisable or necessary for their filings
and those of their Subsidiaries before the Securities and Exchange Commission
and before the corresponding state securities agencies of the United States of
America and of the Kingdom of Spain, and for their filings and those of their
Subsidiaries before the Comision Nacional de Valores (National Securities
Commission) and the Bolsa de Comercio de Buenos Aires (Buenos Aires Stock
Exchange). The obligations established in this Section 8.4 shall remain in force
after termination of this Agreement in relation to any of the Partners for a
term of three (3) years.
(c) The obligations established in subsection (b) of this Section 8.4 shall
not be applied to any information which:
(i) the receiving party can prove with documentary evidence that it has
been held by it or by any of its Affiliates before the reception of this
information, excluding all information which has been confidentially exchanged
between the parties before entering into this Agreement;
(ii) the receiving party can prove with documentary evidence that such
information has been created or obtained independently by it or by its
Affiliates before or after the reception of the information.
(iii) is of public domain but not as a result of a breach of this Section
8.4 by the receiving party or by a third party to whom the receiving party has
disclosed the information;
<PAGE>
(iv) has been or is disclosed to the receiving party by a third party in
such a manner that does not imply the breach of the disclosing party's
confidentiality obligation; or
(v) is disclosed by rule of law or by the standards of any pertinent
securities market.
8.5. Compliance with law. The Partners acknowledge to know the provisions
--------------------
of the United States Foreign Corrupt Practices Act of 1977, as amended (the
"FCPA"). The Members will take no action -directly or indirectly- on behalf of
the Company and its Controlled Companies that would be illegal under the laws of
the United States, including, without limitation, under the FCPA, if taken by
any Partner.
In connection with the Partners' obligations under the Stockholders
Agreement, this Agreement and all agreements ancillary thereto, and in
connection with the activities of the Partners in relation to the formation,
establishment, licensing and operation of the Company, the Controlled Companies
and the Related Companies, the Partners will not, directly or indirectly pay,
authorize, offer, give or promise to pay or make a gift of any thing of value to
any Official for a Proscribed Purpose.
"Official" shall mean any official or employee of the Argentine Republic or
any agency, department, instrumentality or political subdivision thereof or any
corporate or other business entity that is owned or controlled -directly or
indirectly- by such government or any such agency, department, instrumentality
or political subdivision (the "Government") or any person acting in an official
capacity for or on behalf of the Government.
"Proscribed Purpose" shall mean for the purpose of (a) influencing any act
or decision of an Official in such Official's official capacity, (b) inducing
any such person to do or omit to do any act in violation of the lawful duty of
such person or (c) inducing any such person to use his influence with the
Government to affect or influence any act or any decision thereof in order to
obtain the assistance or the Government in consummating any of the transactions,
matters or things contemplated in Argentina referred above.
The Partners comit to comply with laws in effect in the Republic Argentina.
<PAGE>
SECTION IX
NON-FULFILLMENT. INDEMNIFICATIONS
---------------------------------
9.1 Serious Non-fulfillment. If one of the Partners (the "non-fulfilling
------------------------
Partner") shall incur in a serious non-fulfillment of this Agreement, one or
more of the other Partners (the "Denouncing Partners") may notify the non-
fulfilling Partner and the other Partners, reporting the incurred non-
fulfillment ("Notice of Non-fulfillment") and, in such a case: (i) the non-
fulfilling Partner shall have thirty (30) days as from the reception of the
Notice of Non-fulfillment to cure such non-fulfillment; and (ii) the other
Partners may, within an equal period of time, adhere to the Notice of Non-
fulfillment, and thereby become, in turn, Denouncing Partners. During this
period of thirty (30) days the Partners shall make their best effort to clear
the matter to their mutual satisfaction. For the purposes of this Section 9.1,
it shall only be considered serious, a non fulfillment by any Partner of its
obligations under paragraph (c) of Section 8.2 only. If, at the expiration of
the aforementioned period of thirty (30) days, the Non-fulfilling Partner has
not cured the non-fulfillment, the Denouncing Partner or Partners shall entitle
to require the Non-fulfilling Partner, if it is possible and makes sense, that:
(A) restore the situation to the state existing prior to the non-fulfillment or
perform the act or acts which were omitted and, in addition (B) that the non-
fulfilling Partner pay, additionally, as a penalty, twenty million United States
Dollars (U$S 20,000,000) or, at its option, the damages, if greater. Any dispute
between the Non-fulfilling Partner and the Denouncing Partners will be submitted
to arbitration pursuant to Section 10.12 and if the award were favorable to the
Denouncing Partner/s the Non-fulfilling Partner must comply with the award
within the time frame established by the arbitrators.
9.2 Other non-fulfillments. If a non-fulfillment occurs which is not
-----------------------
considered serious by Section 9.1, the non-fulfilling Partner, at the request of
any of the Partners, shall have a term of thirty (30) days to restore the
situation to the state existing prior to the non-fulfillment or perform the act
or acts which were omitted and, if this were not possible, shall repair the
damage. Any dispute between the non-fulfilling Partner and the Denouncing
Partner(s) shall be submitted to arbitration in accordance with the Section
10.12 and should the arbitration award be favorable to the Denouncing Partner(s)
the non-fulfilling Partner shall be bound to comply with the award within the
terms specified by the arbitrators or it shall incur in a serious non-
fulfillment under the terms set forth in Section 9.1.
9.3 Indemnification. (a) Each Partner (the "Indemnifying Partner") agrees
----------------
and undertakes to indemnify each of the other Partners (the "Indemnified
Partners"), upon request, for the damages (including reasonable lawyer's fees)
which may result
<PAGE>
directly or indirectly to the Indemnified Partner from (i) gross negligence or
willful misconduct of any director, member of the Corporate Committe, syndic,
member of a fiscalization committee or manager of the Company or any Controlled
Company or Related Company appointed at the indication of the Indemnifying
Partner; (ii) any delay in the fulfillment or non- fulfillment by the
Indemnifying Partner of any of its obligations or undertakings contained in this
Agreement, (including but not limited to the undertakings assumed in Section
8.5); or (iii) untrue or misleading representations which each Partner warrants
to the others under Section 10.10.
SECTION X
MISCELLANEOUS PROVISIONS
------------------------
10.1 Other Companies. The provisions of this Agreement shall apply mutatis
---------------
mutandi to any other company in the Territory in which all the Partners
participate in the same proportions as they do in the Company. No Partner may
transfer shares of such companies without transferring at the same time and in
the same proportion Shares and vice versa, and any provision of this Agreement
by virtue of which any of the Partners must transfer Shares to any other Partner
will include the transfer of shares of such companies in the same proportion.
10.1.A Prevalence of the Agreement. As among the Partners, the provisions
----------------------------
of this Agreement shall have priority over the applicable law and the Bylaws.
10.2 Term. This Agreement shall become effective on the date hereof. This
-----
Agreement shall continue to be in effect during the whole term of the Company
and until its dissolution and liquidation are completed. Without prejudice to
the foregoing, this Agreement shall be terminated with regard to any Partner, on
the date in which such Partner or any of its Affiliates to which Shares have
been transferred pursuant to Section 7.3 ceases to be a shareholder of the
Company. The termination of this Agreement by virtue for this latter reason
will not affect the survival of the obligations of the Partners established in
Sections 3.3. and 8.4 as therein provided.
10.3 Notices. (a) Any notice or communication required by this Agreement
--------
or that this Agreement authorizes to be carried out, shall be made in writing
and may be carried out by delivery at the address of the Partner to be notified
indicated in paragraph (b) of this Section 10.3, by way of a certified letter
with acknowledgment of receipt paid in advance, or by cable, telex or fax, sent
to such address and any communication or notice delivered in this manner shall
be considered delivered on the date in which it is received by the addressee.
<PAGE>
(b) The domiciles of the representatives to which reference is made in
subsection (a) of this Section 10.3 are the following:
TINTA
- -----
Tele-Communications International, Inc.
5619 DTC Parkway
Englewood, Colorado 80111, USA
Att. President
Telephone: (1 303) 267 5740
Fax: (1 303) 488 3242
With copies to:
Tele-Communications International, Inc.
5619 DTC Parkway
Englewood, Colorado 80111, USA
Att. General Counsil
Telephone: (1 303) 267 4800
Fax: (1 303) 488 3245
M & M. BOMCHIL
At./ Dr. Marcelo E. Bombau
Suipacha 268, piso 12, 1355 Buenos Aires
Argentina
Telephone: 328-8400
Fax: 326-7217
Tele-Communications International, Inc.
c/o M.&M. BOMCHIL
At./ Dr. Marcelo E. Bombau
Suipacha 268, piso 12, 1355, Buenos Aires
CEI
- ---
CEI Citicorp Holdings Sociedad Anonima
Tucuman 1, piso 19
1049 Buenos Aires
<PAGE>
Telephone : (541) 310-6924
Fax : (541) 310 6971
TISA
- ----
T.I. Telefonica Internacional de Espana, S.A.
Jorge Manrique 12
Madrid, Espana
Telephone : (341) 362 6600
Fax : (341) 362 6654
With copy to:
Estudio de los Dres. O'Farrell
Attention: Dr. Pablo H. Miguens
Avda. De Mayo 651, 4th floor
Buenos Aires
Telephone: (541) 346 1091
Fax: (541) 346 1000 extension 4999
Eurnekian
- ---------
Eduardo Eurnekian
Honduras 5663
(1414) Buenos Aires, Argentina
Telephone : (541) 778 6796
Fax : (541) 778 6764
With copy to
Dr. Mariano Ibanez
Honduras 5663
(1414) Capital Federal
Telephone: (541) 778 6585
Fax: (541) 778 6765
10.4 Assignment: With the exception of all that is provided for in
----------
subsection (b) of Section 5.4 and Section 7.4, none of the rights that this
Agreement grants to TINTA, CEI, TISA and Eurnekian mentioning them in an
individual manner, may be
<PAGE>
assigned by them to any purchaser of Shares, without the previous written
consent of the other Partners.
10.5 Nullity. (a) If any provision of this Agreement were rendered null in
--------
compliance with any applicable law, it shall be considered that this Agreement
is divisible with regard to such a provision and such a provision shall be
rendered null, but the rest of this Agreement shall be valid and binding and
shall produce the same effect as if such a provision were not included in this
Agreement.
(b) Notwithstanding the provisions stated in subsection (a) of this
Section 10.5, the Partners shall make their best efforts to establish a
practical and business effective solution to the problems stemming from such
nullity and accord and determine by way of a supplementary agreement a
substitute provision that reflects, to the maximum extent possible, the null
provision, but that is not null in itself.
10.6 Entire Agreement. This Agreement is the entire agreement among the
-----------------
Partners in relation to the purpose of this agreement and wholly replaces the
(i) Proposed Term Sheet dated July 1, 1997 between TINTA and CEI, (ii) the
Amended and Restated Stockholders Agreement dated April 25, 1995 between TCI
International Holdings, Inc. and Eduardo Eurnekian, Basilia Jaliquias, Alberto
Antranik Eurnekian, Sebastian Arias Duval, Lorenzo Luis Marchese and Tomas
Daniel Kolakovic, and (iii) the Memorandum of Understanding dated July 14, 1997
between CEI and Eduardo Eurnekian acting on his own and on behalf of third
parties.
10.7 Modifications and waivers. No supplement, or modification or reform of
--------------------------
this Agreement shall be binding unless it is in writing and signed by all the
Partners. No waiver shall be binding unless it is granted in writing by the
Partner(s) against which the waiver must be effective. No waiver to any of the
provisions of this Agreement shall be considered or shall constitute, a waiver
to any other provision, be it or not similar, and no waiver shall constitute a
continuos or permanent waiver. The omission or delay of any of the Partners in
the exercise of any of their rights, powers or privileges arising from this
Agreement shall not operate as a waiver to such a right, power or privilege and
neither shall any singular or partial exercise of it prevent any other exercise
or future exercise of it or the exercise of any other right, power or privilege.
10.8 Cumulative Remedies. The remedies provided for in this Agreement are
--------------------
cumulative and shall not prevent any of the Partners from exercising other
rights or pursuing other legal or contractual remedies against the same Partner
or against a different one.
<PAGE>
10.9 Additional Guarantees. The Partners shall immediately take the
----------------------
necessary steps, shall sign the additional documents and other documents and
shall exercise all the voting rights conferred to them by the Shares, be they
those owned at present or those to be acquired by them in the future, in such a
way as to guarantee that the provisions, objectives and spirit of the Agreement
are fulfilled and are made fully effective.
10.10 Authorization. Each of the Partners warrants to the others that the
--------------
execution of this Agreement (i) has been duly authorized and is in accordance
with the powers conferred to them by law or by their Articles of Incorporation
and bylaws or equivalent documents; and (ii) is not in violation of any
contractual provision which may be binding upon the same.
10.11 Applicable Law. This Agreement shall be ruled by the laws of the
---------------
Republic of Argentina and construed according to them.
10.12 Solution of Disputes All disputes which may arise among the Partners
--------------------
with regard to this Agreement and that cannot be amicably solved, shall be
definitely settled through arbitration in accordance with the Conciliation and
Arbitration Rules of the International Chamber of Commerce by three arbitrators
designated according to such rules. In order to appoint the arbitrators all the
plaintiffs or defendants shall be considered as one single party. The
arbitration shall take place in the City of Geneva, Switzerland and the
arbitration language shall be Spanish, with simultaneous translation into
English in case TINTA was part of the arbitration and so requested it.
<PAGE>
IN WITNESS WHEREOF, the parties hereto subscribe this Agreement in the
place and on the date stated in the heading with as many copies as signing
parties.
Tele-Communications International, Inc.
By:
Martin Eurnekian
By: Eduardo Eurnekian
CEI Citicorp Holdings S.A.
By:
Southtel Equity Corporation
By:
T.I. Telefonica Internacional de Espana S.A.
By:
<PAGE>
EXHIBIT I
List of Exempted Businesses
TINTA
- -----
Current: DTH Platform -Sky Latin America
Foreseen: Free to air television through UHF
CEI
- ---
Current: Multicanal S.A. and Companies in which the same owns an equity interest
Foreseen: Plataforma Digital S.A. /Galaxy Entertainment S.A./ Free to air
television through UHF
TISA
- ----
Current: Multicanal S.A. and Companies in which the same owns an equity interest
Foreseen: Plataforma Digital S.A. /Galaxy Entertainment S.A./ Free to air
television through UHF
Eurnekian
- ---------
Current: Free to air television through UHF
Foreseen: Free to air television through UHF
<PAGE>
Exhibit 10.3
MANAGEMENT AGREEMENT
--------------------
THIS MANAGEMENT AGREEMENT (the "Agreement") is made as of the 9th day of
October, 1997 by and between Cablevision S.A., an Argentine company duly
incorporated in Argentina, with its legal domicile at Bonpland 1773, Buenos
Aires, Argentina (hereinafter defined in Section 1 as the "Company"), and TINTA
Cable Management, Inc., a Colorado corporation and wholly owned subsidiary of
Tele-Communications International, Inc. ("TINTA") a Delaware corporation with
its legal domicile at 5619 DTC Parkway, Englewood, Colorado 80111 (USA) (the
"Managing Agent").
WITNESSETH:
-----------
WHEREAS, the Company's stockholders desire Managing Agent to manage the
Company as described below; and
WHEREAS, the Managing Agent has the experience and ability to manage the
Company and is willing to do so; and
WHEREAS, the Company desires to enter into a Management Agreement with the
Managing Agent providing for the management of the Company;
NOW, THEREFORE, in consideration of the premises, the mutual covenants, and
the mutual benefits to be derived therefrom, the parties hereto agree as
follows:
I. Appointment of Managing Agent. The Company hereby designates the
-----------------------------
Managing Agent, and the Managing Agent hereby accepts the designation of
exclusive managing agent of the Company, upon the conditions and for the term
and compensation herein set forth. As used herein, "Company" shall mean
Cablevision S.A. and all its property and employees, contracts and other assets
including its distribution systems (fiber optic and coaxial cable, MMDS and UHF
but excluding DTH and free-to-air television) now owned or acquired in the
future (in whole or in part) and all its subsidiaries, successors and assigns
now owned or acquired in the future.
I. Term of Appointment and Ownership. This Agreement shall become
---------------------------------
effective on the date hereof and shall continue in full force and effect from
its effective date until 30 September 2002 (the "Initial Term"), unless extended
or terminated sooner in accordance with the provisions of Paragraph 15 hereof.
While it serves as Managing Agent, Managing Agent will remain a wholly-owned
subsidiary of TINTA.
<PAGE>
I. Duties and Responsibilities of Managing Agent. Except as prohibited or
---------------------------------------------
limited by this Agreement, the Managing Agent shall:
(1) perform all services necessary for the management of the Company;
(1) manage in all respects and at the Company's expense all the Company's
sales and marketing efforts;
(1) manage in all respects and at the Company's expense all matters related
to programming, including program selection, pricing, promotion, packaging,
channel line up and the like;
(1) take any action not specifically prohibited or limited by this Agreement
or the Company's By-laws (the "Company's By-Laws"), or by law or administrative
enactment, which may be necessary or desirable in the judgement of the Managing
Agent in order to manage the Company;
(1) have exclusive control of the physical plant and equipment of the
Company, including all phases of installation and operation thereof;
(1) have the responsibility for the supervisory management of the day-to-day
operation of the Company and shall devote thereto such time as may be necessary
for the proper and efficient supervisory management of the Company;
(1) make available to the Company its experience and knowledge as to
operating methods for distribution systems, and will advise the Company
regarding all phases of the operation of the Company;
(1) as permitted by law and by contract, make available to the Company at
the Company's expense all new ideas and technology relevant to the Company's
business presented to Managing Agent by third parties or that become available
in the market;
(1) keep or cause to be kept (at the Company's expense, as herein provided)
all necessary books and records of the Company's affairs, in which shall be
entered the transactions of the Company; such books and records shall be open to
the inspection and examination of the Company or its representatives at any
reasonable time and shall be kept in accordance with generally accepted
accounting principles in Argentina and the United States of America ("USA") and
procedures consistently applied, except when the Company instructs the Managing
Agent otherwise;
(1) manage in all respects and at the Company's expense all aspects of the
Company's assets and liabilities (both long and short term) and to provide for
the
<PAGE>
adequate financing of the Company on terms and conditions available in the
market for companies of similar credit quality.
(1) with the exception of fiscal year 1998 (which budget and business
plan will be produced cooperatively by Managing Agent and the Company's
stockholders and their directors), at least 60 days prior to the end of each
fiscal year, the Managing Agent shall deliver to the Board of Directors a draft
annual budget and business plan for the following year, setting forth the
Managing Agent's proposed expenditures by the Company for the repair,
maintenance and operation and financing and expansion and other capital
expenditures (the "Budget") of the Company for the next fiscal year of the
Company; and upon receipt of all required approvals thereof, the Managing Agent
shall be entitled to make disbursements of the Company's funds in accordance
with such Budget. Except as provided above, the Managing Agent shall also
deliver to the Board of Directors of the Company, together with the Budget and
the Business Plan, a strategic plan for the following five (5) years, of which
the first year will correspond to the year of the Budget and the Business Plan;
(1) furnish to the Company, at Company's expense (and to any other
persons requested by the Company): (i) within 15 days after the end of each
calendar month, an unaudited statement of the Company's income and expenses for
such month and quarter and for the period since the end of the preceding fiscal
year (which statement may be under whatever names are then employed for
statements containing the same financial information) and all statements
required by the SEC, CNV, Bolsa, COMFER, INPI, federal and provincial securities
commissioners and other relevant regulatory agencies, all prepared in accordance
with Argentine and USA generally accepted accounting principles and procedures
consistently applied, except when the Company instructs the Managing Agent
otherwise;
(ii) the annual financial statements of the Company as of December 31,
and the quarterly statements on the last day of every calendar quarter according
to accounting principles generally accepted in Argentina and the United States,
(iii) information, according to the requirements and systems of the
Company's shareholders, in a monthly, quarterly and annual basis, related to the
business of the Company.
Such reports shall at least contain the following:
1. operative, commercial and financial matters;
2. financial and sales prospects;
3. proposals on policies related to finance, commercialization, supplies,
investments, expenses, services, staff and compensations;
<PAGE>
4. insurance contracts;
5. any other matter that may be reasonably requested by any of the
Partners.
(1) at Company's expense, render a monthly statement showing all
connections to and disconnections from the Company's distribution systems;
(1) within 45 days after the end of each fiscal year and within 30
days after the end of each fiscal quarter, at Company's expense, cause the books
and records of the Company to be audited by Arthur Andersen, Price Waterhouse,
KPMG, Deloitte & Touche, Coopers & Lybrand or Ernst and Young, who shall prepare
and render its audit opinion on the year-end balance sheet, the profit and loss
statement, and on such related statements as it deems necessary and all
statements required by the SEC, CNV, Bolsa, COMFER, INPI, federal and provincial
securities commissioners and other relevant regulatory agencies, all prepared in
accordance with Argentine and USA generally accepted accounting principles and
procedures consistently applied, except when the Company instructs the Managing
Agent otherwise;
(1) at Company's expense, (i) timely file or cause to be filed all
federal, state and local returns and reports as may be required, including,
without limitation, tax reports, reports to federal and provincial securities
commissioners, income tax withholding reports, social security reports,
employment tax reports, unemployment compensation reports, information reports,
CNV reports, reports to entities franchising the Company and reports to local
and state regulatory agencies, and (ii) cause all payments required thereunder
to be made by the Company from the Company's funds;
(1) with the Company, select and engage, at Company's expense, and
individually supervise such contractors or other persons considered by the
Managing Agent and the Company to be necessary for the construction, improvement
or maintenance of the Company's distribution systems; except as provided in
Section 10, none of such persons shall be employees of the Managing Agent, and
the Managing Agent shall not be liable to the Company, the stockholders of the
Company, or to others for any act or omission on the part of any such persons;
(1) supervise, instruct, discharge, pay on behalf of the Company
solely from Company funds and otherwise manage all on-site managers, servants,
employees, agents or contractors considered by the Managing Agent to be
necessary for the efficient construction, development, maintenance or operation
of the Company; all of such persons shall be employees of (and paid by) the
Company or a particular distribution system and not of the Managing Agent; the
Managing Agent shall not be liable to the Company or to stockholders of the
Company or to third parties for any act or omission on the part of such
employees;
(1) take every step reasonably necessary in order that the Company
comply with all union contracts and all pension, insurance and other employee
benefit
<PAGE>
programs and other obligations relating to the Company's employees, the costs of
which shall be paid from the Company's funds;
(1) carry out all negotiations with unions, whether relating to
elections, contracts, grievances or other matters and assist the Company's
attorneys in the preparation of union contracts, if any are required;
(1) in conjunction with attorneys employed by and at the expense of the
Company, negotiate on behalf of the Company all contracts necessary for the
construction, operation, maintenance, servicing, protection, improvement and
expansion of the Company, issue purchase orders for all necessary materials and
supplies and supervise the work of all material contractors;
(1) at Company expense, cause the Company to be maintained and serviced
at all times in all manner consistent with well-managed cable TV companies but
giving due consideration to the quality, location, finances and other attributes
of the systems given to Managing Agent to manage. Any and all construction,
reconstruction and expansion of any distribution system, including that required
to comply with the requirements of this Section, shall be at the sole expense of
the Company;
(a) cause to be purchased and maintained in effect: such policies of
insurance as the Company may from time to time direct to be carried against fire
and extended coverage (and other such hazards as the Company may elect to insure
against), policies of insurance against liability for injury or death to persons
and damage to property and policies of insurance or other coverage for workers'
compensation, in such forms and in such amounts as the Managing Agent may from
time to time consider appropriate; each of such policies and coverages shall be
at the expense of the Company and, except with respect to fire and extended
coverage or other hazard insurance, shall name both the Company and the Managing
Agent as insured thereunder;
(1) perform all other supervisory management services as required to
result in the efficient operation of the Company;
(1) employ and maintain on its staff, at the Company's sole cost and
expense, an adequate and competent staff of experts and specialists required for
the operation and management of the Company, including among others, as
required, programmers, marketing and sales personnel, engineers, operations and
construction supervisors, accountants and attorneys;
I. Limitations on Rights and Powers of Managing Agent. The Managing
--------------------------------------------------
Agent shall not, without authorization from the Company (or the Executive
Committee of the Company's Board of Directors), for an on behalf of the Company:
(1) terminate any of the franchises or other governmental authorizations
relating to the Company;
<PAGE>
(1) make, cause to be made, contract for or agree to any expenditures
involving any aggregate variance in excess of five percent (5%) above the
relevant budget for any year or a variance in any major budget item in excess of
US$ 1 million not provided for in the Company's approved budgets;
(1) commence or institute any legal action or litigation in the name of
the Company, except that the Managing Agent may, in its discretion, institute
collection proceedings, including legal actions incident thereto, in the name
of, and at the expense of, the Company to enforce the collection of payments due
from customers of the Company;
(1) consent to unionization of the Company or of the employees of the
Company;
(1) make any payment on behalf of the Company or obligate the Company to
make any payment regarding or relating to any expenditure or obligation of the
Company outside the scope of this Agreement or outside the scope of the normal
operating expenditures contemplated by this Agreement and the Company's approved
budgets (the Managing Agent shall, upon receipt of any statement, invoice, bill
or other notification of any items clearly outside the scope of this Agreement,
immediately forward such notification to the Company);
(1) sell or hypothecate any of the assets of the Company, except worn
out or obsolete materials, supplies and equipment, any proceeds of which shall
be the property of the Company to the extent not expended for replacement of
such materials, supplies or equipment.
(1) directly or indirectly provide management services to companies
competing with the Company in Argentina and Uruguay, excluding companies in
which the Company has any equity interest.
(1) enter into any management agreement similar to this Management
Agreement while the Management Agreement is in effect.
I. Manager. The Managing Agent shall propose to the Board of Directors
-------
that the Company employ, a manager, as general manager ("gerente general") of
the Company (the "Manager") for all the Company. The Company's consent to such
proposal will not be withheld unreasonably. If two proposed candidates in a row
are rejected, managing Agent may appint the third. Each of Managing Agents
proposals must be made in good faith, and the proposed candidate must be a "buen
hombre de negocios" and have significant management experience in positions of
similar responsibility. Such Manager shall be in charge of, and have authority
over, the routine day-to-day operations of the Company subject to the general
supervision and control of the Managing Agent and its designated officers and
employees in Denver and/or Buenos
<PAGE>
Aires. In the event the size and requirements of any of the Company's
distribution systems are such that one or more other managers are required, in
the opinion of the Managing Agent, for the proper and efficient management of
such systems, then such other managers shall be employed by the Managing Agent
at the expense of the Company to serve under the supervision and authority of
the Manager and the Managing Agent. All on-site employees under the supervision
and authority of the Manager shall be considered employees of the Company at the
expense of the Company.
Managing Agent will provide all such support and assistance as it deems
necessary from the resources available in its Denver or Buenos Aires offices.
Such assistance will include general managerial assistance and programming,
sales and marketing, accounting, operations, construction, engineering and legal
support. Such support will be rendered both in person and by
telephone/facsimile throughout the term of this Agreement. Managing Agent
currently anticipates that such assistance will be regular and often quite
extensive often on a daily basis and, during periods of material development
and/or growth at the Company, will involve on-the-ground involvement of
personnel and time from Managing Agent's Denver or Buenos Aires offices.
I. Other Employees. General supervision, direction and control of the
---------------
Company by the Managing Agent shall be provided by officers, agents and
employees of the Company; all expenses incurred for supervisory and management
services performed by such persons or for periodic and routine visitations to,
and inspections of, the Company or for regular consultations with, and advice
to, the Manager and the cost of all on-site supervisory or management personnel,
shall be borne by the Company.
I. Allocation of Costs. Except as provided herein, all the costs incurred
-------------------
under this Agreement shall be borne by the Company.
I. Management Fee. The Managing Agent shall receive one and three tenths
--------------
percent (1.3%) of the Company's EBITDA, but in no event less than the "Minimum
Fee" as defined below per quarter, as a management fee for supervisory
management services rendered by the Managing Agent as provided for herein.
"EBITDA" shall mean earnings before interest, taxes, depreciation and
amortization as such terms are used in generally accepted accounting principals
in the USA. The amount to be paid pursuant to this section, will be paid prior
to any Argentine income tax, withholding tax, V.A.T. or any other tax or cost
which may be applicable. If the Company requires a controlling interest in VCC,
Mandeville or a company of comparable size, the Minimum fee will be US $450,000.
Otherwise, the Minimum Fee will be US $350,000. To the extent that the Managing
Agent can take advantage of the tax credits associated with the payment of the
Argentine income withholding tax in its domicile, the payment of the Management
Fee shall not be grossed-up by said taxes. Until these arrangements have been
formally agreed and confirmed between Managing Agent and Company, Company will
continue to pay the gross up for taxes.
<PAGE>
(a) Reimbursement for Expenses. Except for those expenses which are herein
--------------------------
specified to be the expenses of the Managing Agent, the Managing Agent shall be
entitled to reimbursement for salaries and other employment costs of its
employees, performing programming, sales and marketing, accounting, advertising,
legal, marketing, purchasing, secretarial, transfer, governmental reporting,
engineering, technical, on-site supervisory, manual and other services for the
Company and for travel and other direct out-of-pocket and indirect expenses
allocable to the operation or management of the Company pursuant to the Company
Agreement and this Management Agreement. The amounts so reimbursed shall not be
in excess of charges for similar services by similarly situated but unrelated
third parties.
I. Additional Charges. In the event it becomes necessary to temporarily
------------------
assign home office personnel or other employees of the Managing Agent to the
Company to perform work or services which would otherwise be performed by
employees of the Company employed at the Company's expense, and for other than
management and supervisory purposes of the type to be performed by the Managing
Agent (and in any event for periods in excess of three days), then an additional
charge not in excess of charges for similar services from similarly situated but
unrelated third parties may be made therefor. Unless approved by the Board of
Directors or Executive Committee or contained in an approved budget, any use of
employees of Managing Agent or of ex-patriots generally which results in an
annual expenditure of more than US $200,000 will be borne by Managing Agent.
I. Payment of Fees and Charges. The fees and charges provided for in this
---------------------------
Agreement shall be paid to the Managing Agent in USA Dollars on a quarterly
basis as follows. Based on EBITDA to date, the Managing Agent shall submit an
invoice to the Company for the management fee on a quarterly basis and shall
submit to the Company within 45 days after the close of each calendar quarter a
statement for such fees and all charges accrued to date. The Company shall pay
such estimated fee and other charges within ten days after receiving the
Managing Agent's quarterly invoice and statement.
I. Repayment of Advances. In addition to the foregoing fees and charges,
---------------------
the Managing Agent shall be entitled to reimbursement of any costs chargeable to
the Company, but advanced by the Managing Agent, but the Managing Agent has no
obligation to advance such funds. The Managing Agent shall render monthly
statements for any such additional reimbursement and such statements shall be
paid by the Company within ten days after receipt thereof.
I. Limitation of Liability. Notwithstanding anything to the contrary
-----------------------
contained in the Argentine Civil Code or elsewhere, termination of this
Agreement will be Company's sole and exclusive remedy for any event of default
or breach of this Agreement by Managing Agent or for any malfeasance (including
gross negligence and willful misconduct) by Managing Agent or its agents.
Termination will not extinguish any obligations that the parties may have to
each other under Paragraph 18.
<PAGE>
I. Default. A default by the Company or the Managing Agent shall occur
-------
hereunder if the Company or the Managing Agent shall breach any material
covenant or condition of this Agreement to be kept or performed by it.
I. Extension and Termination. On or before 45 days before the end of the
-------------------------
Initial Term, this Agreement may be extended by Managing Agent with the consent
of the Company's Board of Directors (such consent not unreasonably to be
withheld) for an additional term of five (5) years on terms identical to those
contained herein. This Agreement may be terminated:
(1) by either the Company or the Managing Agent on written notice to the
other in the event of any default by the other which continues uncured for 15
days (in the case of any failure to make a payment of money between the parties)
or for 60 days (in the case of any other non-monetary default) after written
notice from the nondefaulting party to the other party; or
(1) upon the termination, dissolution and winding up of the Company.
(1) by the Company if: (i) Managing Agent materially harms the Company as
a result of its gross negligence or willful misconduct, (ii) TINTA's equity
ownership in the Company declines below sixteen percent (16%) or (iii) Managing
Agent or TINTA loses access to technology or expertise of Tele-Communications,
Inc. to which it once had access.
I. Actions After Notice of Termination. After receipt of notice of
-----------------------------------
termination and before the date of termination provided by the notice of this
Agreement, the Managing Agent shall continue the management of the Company in
accordance with this Agreement. Unless instructed by the Company to the
contrary, Managing Agent shall take all actions necessary to deliver to the
Company possession or control of all property of the Company or its designee in
an orderly manner and without interruption of the Company's obligations to its
obligees; including, but not limited to, its subscribers, customers,
advertisers, servants, employees, agents, contractors, all governmental
authorities and creditors.
I. Relinquishing Control. Subject to any special instructions by the
---------------------
Company, upon termination of this Agreement, the Managing Agent shall
immediately relinquish to the Company, or its designee, possession and control
of all property of the Company, including, but not limited to, the physical
plant and equipment and all documents, records and data pertaining to the
Company.
I. Liabilities and Fees. In the event of termination of this Agreement
--------------------
pursuant to the terms hereof, the Managing Agent shall remain liable to the
Company for any required payment to the Company or other obligations hereunder
accrued prior to the date of termination; and the Managing Agent shall be
entitled to receive the amount of
<PAGE>
any accrued but unpaid management fees and the amount of any accrued but unpaid
claims for reimbursement or for services or work performed under the provisions
hereof.
I. Bankruptcy. If a petition in bankruptcy or insolvency is filed by
----------
either the Company or the Managing Agent or if either shall make an assignment
for the benefit of creditors, or if either shall file a petition for a
reorganization, or for the appointment of a receiver or trustee of all or a
substantial portion of its property, or if a petition in bankruptcy or other
above-described petition is filed against either which is not discharged within
60 days thereafter, then either party may terminate this Agreement by serving
written notice on the other party as herein provided.
I. Accounting Period. The annual accounting period of the Company shall
-----------------
be the calendar year and the Company's books of account shall be kept on the
accrual basis of accounting.
I. Notices. All communications permitted or required between the parties
-------
hereto shall be effective when sent by registered or certified mail, postage
prepaid, addressed to the following addresses or at such other addresses as may
be designated from time to time by written notice to the other party:
If to the Company: Cablevision S.A.
Bonpland 1773
Buenos Aires, Argentina
Attn:
Fax: (541)
With copies to: CEI CitiCorp Holdings S.A.
Tucuman 1
Piso 19
Buenos Aires, Argentina
Attn: Chief Operating Officer
Fax: (541) 310-6993
and
T. I. Telefonica Internacional de Espana S.A.
Atencion: Secretario General
Jorge Manrique 12
Madrid, Espana
Phone: (341) 362-6600
and
<PAGE>
Estudio de las Dres. O'Farell
Atencion Dr. Pablo H. Miguens
Avda. de Mayo 651, 40 Piso
Buenos Aires, Argentina
Telefono: (541) 346-1091
Facsimil: (541) 346-1000 int. 4999
If to the Managing Agent: TINTA Cable
Management, Inc.
5619 DTC Parkway
Englewood, Colorado
Attn: President
Fax: (303) 267-5651
With copies to: Tele-Communications International, Inc.
5619 DTC Parkway
Englewood, Colorado 80111
Attn: Chief Operating Officer
Fax: (303) 267-6499
and
Attn: General Counsel
Fax: (393) 488-3245
and
M. & M. Bomchil
Suipacha 268
Buenos Aires, Argentina
Attn: Marcelo E. Bombau
Fax: (541) 328-0222
I. Assignment. Neither party shall have the right to assign this
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Agreement without the written consent of the other party, nor shall this
Agreement or any of the rights or obligations of the parties hereunder be
transferable by operation of law or otherwise, except that the Managing Agent's
interest may be transferred to an entity which becomes a successor to TINTA, as
a result of a merger or consolidation or to a purchaser of all or a substantial
portion of the assets of TINTA, if such purchaser is approved as the Managing
Agent of the Systems by the Company. Upon any permitted assignment, this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns. Notwithstanding the above, Managing
Agent may assign this Agreement to a wholly owned subsidiary of TINTA.
<PAGE>
I. INPI. Parties agree that this Agreement will be filed for registration
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before the "Instituto Nacional de la Propiedad Industrial" ("INPI"). Costs for
said registration will be paid by the Company.
I. Entire Agreement. This Agreement constitutes the entire agreement
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between the parties with respect to the subject matter hereof and may not be
modified, altered, or amended in any manner except by agreement in writing duly
executed by the parties hereto.
I. Counterparts. This Agreement may be signed in any number of
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counterparts with the same effect as if the signatures to each counterpart were
upon the same instrument.
I. Governing Law. This Agreement shall be governed by and construed
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according to the laws of the Republic of Argentina. The parties will use their
best efforts to resolve amicably any disputes arising under this Agreement.
Except as otherwise expressly provided herein, all disputes arising between the
parties under this Agreement which cannot be resolved amicably shall be resolved
by submission to arbitration pursuant to the Rules of the "Tribunal de Arbitraje
de la Bolsa de Comercio de Buenos Aires". The arbitrations shall be held in
Buenos Aires, Argentina. There shall be three arbitrators, one selected by the
Company, one selected by the Managing Agent and the third selected by mutual
agreement of the parties, and failing their agreement, pursuant to the Rules of
the Court. None of the arbitrators shall be citizens of the U.S.A. or the
Republic of Argentina. The arbitrators shall decide the case on the basis of
Argentine law, and shall give written reasons for their award. The party in
whose favour an award is issued shall be entitled to recover its costs for the
arbitration, and any costs incurred in the enforcement of the award, including
reasonable attorney's fees. The award of the arbitrators may be enforced in any
jurisdiction where a party has assets or may be found, and the parties hereby
irrevocably waive, to the fullest extent permitted by law, any defenses to
recognition and enforcement of the award on the grounds of the invalidity of the
submission to arbitration, and improper constitution of the arbitral panel (if
constituted pursuant to this Section).
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Management Agreement as
of the day and year first above written.
THE MANAGING AGENT:
TINTA Cable Management, Inc.
By:
Name: Fred A. Vierra
Title:
THE COMPANY:
CABLEVISION S.A.
By:
Name:
Title:
