<PAGE> 1
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: April 20, 1995
Date of Earliest Event Reported: December 6, 1994
TELE-COMMUNICATIONS, INC.
AND
TCI COMMUNICATIONS, INC.
----------------------------------------------------------
(Exact name of Registrants as specified in their charters)
State of Delaware
----------------------------------------------
(State or other jurisdiction of incorporation)
0-20421 and 0-5550 84-1260157 and 84-0588868
- ------------------------- -------------------------------------
(Commission File Numbers) (I.R.S. Employer Identification Nos.)
5619 DTC Parkway
Englewood, Colorado 80111
- ---------------------------------------- ---------------------------
(Address of principal executive offices) (Zip Code)
Registrants' telephone number, including area code: (303) 267-5500
<PAGE> 2
Item 5. Other Events.
On December 6, 1994, the Company entered into a Stock Purchase
Agreement (the "Cablevision Purchase Agreement") with a shareholder group
headed by Eduardo Eurnekian (the "Shareholders") to acquire controlling
interests in Cablevision S.A., Televisora Belgrano S.A., Construred S.A. and
Univent's S.A., four affiliated companies owned by the Shareholders and engaged
in the cable television business in the Greater Buenos Aires area (collectively
"Cablevision"). Upon execution of the Cablevision Purchase Agreement, the
Company paid the Shareholders $20 million and the Shareholders placed 51% of
the outstanding stock of Cablevision S.A. into an escrow account. Upon
consummation of the transaction, the $20 million will be applied toward the
ultimate purchase price and the escrowed stock will be transferred to the
Company. If the transaction is not consummated for certain enumerated reasons,
the Shareholders are contractually obligated to return the $20 million to the
Company and the Cablevision S.A. stock will be released from escrow.
On March 28, 1995, the Cablevision Purchase Agreement was amended to
provide for the acquisition of a 51% ownership interest in Cablevision for an
estimated purchase price of approximately $315 million. The purchase price
will be paid with cash consideration of approximately $216 million (including
the initial $20 million) and the Company's issuance of approximately $99
million in secured, negotiable promissory notes payable to the Shareholders
(the "Notes"). The purchase price is subject to adjustment based on the actual
number of Cablevision equivalent basic subscribers and Cablevision liabilities
as of the month-end prior to closing. The Notes will be secured by the
Company's pledge of the stock representing its 51% interest in Cablevision.
The Notes will bear interest at variable rates and are scheduled to be repaid
in 20 monthly installments beginning in the fourth month following the month of
acquisition.
In addition, the Company has an option during the two-year period
following the acquisition date to increase its ownership interest to 80% at a
cost per subscriber similar to the initial purchase price adjusted for certain
fluctuations in applicable foreign currency exchange rates.
Consummation of the Cablevision acquisition is subject to regulatory
approvals and other conditions. Accordingly, there is no assurance that such
acquisition will be consummated.
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements
Cablevision (A Combination of Certain Cable Television Assets of
Cablevision S.A., Televisora Belgrano S.A., Construred S.A. and
Univent's S.A., as defined):
Independent Auditors' Report
Combined Balance Sheets,
December 31, 1994 and 1993
Combined Statements of Operations and Deficit,
Years ended December 31, 1994, 1993 and 1992
Combined Statements of Cash Flows,
Years ended December 31, 1994, 1993 and 1992
Notes to Combined Financial Statements,
December 31, 1994 and 1993
(b) Pro Forma Financial Information
TCI Communications, Inc. and Subsidiaries:
Condensed Pro Forma Combined Balance Sheet,
December 31, 1994 (unaudited)
Condensed Pro Forma Combined Statement of Operations,
Year ended December 31, 1994 (unaudited)
Notes to Condensed Pro Forma Combined Financial Statements,
December 31, 1994 (unaudited)
Tele-Communications, Inc. and Subsidiaries:
Condensed Pro Forma Combined Balance Sheet,
December 31, 1994 (unaudited)
Condensed Pro Forma Combined Statement of Operation,
Year ended December 31, 1994 (unaudited)
Notes to Condensed Pro Forma Combined Financial Statements,
December 31, 1994 (unaudited)
(c) Exhibits
(2.1) Stock Purchase Agreement, dated as of December 6, 1994, by and
among Eduardo Eurnekian, stockholders of shares of the Common
Stock of Cablevision S.A., Televisora Belgrano S.A.,
Construred S.A., Univent's S.A., and TCI International
Holdings, Inc.
(2.2) Amendment to Stock Purchase Agreement executed on December 6,
1994.
(10) Stockholders Agreement, dated December 6, 1994, between
Eduardo Eurnekian and TCI International Holdings, Inc.
_________________________
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on their behalf by the
undersigned hereunto duly authorized.
Date: April 20, 1995
TELE-COMMUNICATIONS, INC.
(Registrant)
By:/s/ STEPHEN M. BRETT
--------------------------------
Stephen M. Brett
Executive Vice President and
Secretary
TCI COMMUNICATIONS, INC.
(Registrant)
By:/s/ STEPHEN M. BRETT
--------------------------------
Stephen M. Brett
Senior Vice President and
General Counsel
<PAGE> 5
--------------------------------------
CABLEVISION (A COMBINATION OF CERTAIN
CABLE TELEVISION ASSETS OF CABLEVISION
S.A., TELEVISORA BELGRANO S.A.,
CONSTRURED S.A. AND UNIVENT'S S.A.
AS DEFINED IN NOTE 1)
COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
<PAGE> 6
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
TCI INTERNATIONAL HOLDINGS, INC.:
We have audited the accompanying combined balance sheets of Cablevision (A
Combination of certain cable television assets of Cablevision S.A., Televisora
Belgrano S.A., Construred S.A. and Univent's S.A., as defined in Note 1) as of
December 31, 1994 and 1993, and the related combined statements of operations
and deficit and cash flows for each of the years in the three-year period ended
December 31, 1994. These combined financial statements are the responsibility
of the Companies' management. Our responsibility is to express an opinion on
these combined financial statements based on our audits.
We conducted our audits in accordance with United States generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements present fairly, in all
material respects, the financial position of Cablevision as of December 31,
1994 and 1993, and the results of their operations and their cash flows for
each of the years in the three-year period ended December 31, 1994 in
conformity with United States generally accepted accounting principles.
KPMG Finsterbusch Pickenhavn Sibille
Jose Alberto Schuster
Partner
March 24, 1995
Buenos Aires, Argentina
<PAGE> 7
CABLEVISION (A COMBINATION OF CERTAIN CABLE
TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA
BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A.
AS DEFINED IN NOTE 1)
COMBINED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
IN THOUSANDS OF ARGENTINE PESOS
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
ASSETS
------
Cash $ 6,650 316
Accounts receivable (note 4) 3,217 2,175
Property and equipment (note 5):
Cable distribution systems 35,029 16,684
Support equipment and buildings 8,731 5,561
Other 427 379
------ ------
44,187 22,624
Less accumulated depreciation (14,321) (8,075)
------ ------
29,866 14,549
Other assets 310 57
------ ------
$ 40,043 17,097
====== ======
LIABILITIES AND COMBINED DEFICIT
--------------------------------
Cash overdraft $ 16 485
Accounts payable (note 6) 15,534 12,379
Other accrued liabilities (note 7) 16,255 12,786
Bank debt (note 8) 44,179 500
Capital lease obligations (note 5) 1,634 -
Deferred income taxes (note 10) 6,482 1,505
------ ------
Total liabilities 84,100 27,655
------ ------
Combined deficit (44,057) (10,558)
------ ------
Commitments and contingencies (note 11 ) $ 40,043 17,097
====== ======
</TABLE>
See accompanying notes to combined financial statements.
<PAGE> 8
CABLEVISION (A COMBINATION OF CERTAIN CABLE
TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA
BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A.
AS DEFINED IN NOTE 1)
COMBINED STATEMENTS OF OPERATIONS AND DEFICIT
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
IN THOUSANDS OF ARGENTINE PESOS
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ -----
<S> <C> <C> <C>
Revenue $ 138,685 68,695 39,492
Operating costs and expenses:
Operating:
Charges from affiliate (note 9) 17,117 11,922 7,086
Other 41,758 21,434 13,509
Selling, general and administrative (note 9) 27,709 17,247 7,149
Provision for doubtful accounts 2,949 2,439 463
Depreciation and amortization 6,246 2,957 963
------ ------ -----
Operating income 42,906 12,696 10,322
Interest expense 197 - -
Other expense, net 317 106 9
------ ------ -----
Earnings before income taxes 42,392 12,590 10,313
Income taxes (note 10) 15,415 4,490 3,120
------ ------ -----
Net earnings 26,977 8,100 7,193
Combined equity (deficit):
Beginning of year (10,558) (11,471) 1,187
Distributions (60,476) (7,187) (19,851)
------ ------ -----
End of year $ (44,057) (10,558) (11,471)
====== ====== =====
</TABLE>
See accompanying notes to combined financial statements.
<PAGE> 9
CABLEVISION (A COMBINATION OF CERTAIN CABLE
TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA
BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A.
AS DEFINED IN NOTE 1)
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
IN THOUSANDS OF ARGENTINE PESOS
<TABLE>
<CAPTION>
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 26,977 8,100 7,193
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 6,246 2,957 963
Deferred income tax expense 4,977 1,114 501
Provision for doubtful accounts 2,949 2,439 463
Decrease (increase) in accounts receivable,
and other assets (4,244) (4,057) 519
Increase in accounts payable and accrued
liabilities 6,624 7,632 14,567
------ ------ ------
Net cash provided by operating activities 43,529 18,185 24,206
------ ------ ------
Cash flows from investing activities:
Capital expended for property and equipment (19,464) (11,778) (4,960)
------ ------ ------
Net cash used in investing activities (19,464) (11,778) (4,960)
------ ------ ------
Cash flows from financing activities:
Increase (decrease) in cash overdraft (469) 485 -
Bank borrowings 43,679 - 500
Capital lease payments (465) - -
Distributions (60,476) (7,187) (19,851)
------ ------ ------
Net cash used in financing activities (17,731) (6,702) (19,351)
------ ------ ------
Net change in cash 6,334 (295) (105)
Cash at beginning of year 316 611 716
------ ------ ------
Cash at end of year $ 6,650 316 611
====== ====== ======
</TABLE>
See accompanying notes to combined financial statements.
<PAGE> 10
CABLEVISION (A COMBINATION OF CERTAIN CABLE
TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA
BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A.
AS DEFINED IN NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
IN THOUSANDS OF ARGENTINE PESOS
(1) PURPOSE OF THE COMBINED FINANCIAL STATEMENTS
The accompanying combined financial statements were prepared to
comply with Rule 3-05 of Regulation S-X of the Securities
Exchange Commission in connection with the acquisition by TCI
International Holdings, Inc. ("TCI International") of 51% of the
shares of Cablevision, S.A., Televisora Belgrano, S.A.,
Construred, S.A. and Univent's, S.A. (referred to hereinafter
collectively as the "Company" or "Cablevision") from an
unaffiliated shareholder group ("the selling shareholders"). In
addition, TCI International has the option to increase its
investment to 80% for a period of two years at a cost per
subscriber comparable to the initial purchase. Cablevision is
engaged principally in the business of cable television
broadcasting in the City of Buenos Aires and Greater Buenos
Aires, Argentina.
The combined financial statements present the combined financial
position, results of operations and cash flows as of and for each
of the years in the three-year period ended December 31, 1994 of
the cable television broadcasting business of Cablevision as if
such business had existed as a stand-alone business throughout
the periods presented.
Under the terms of the purchase agreement, TCI International will
acquire 51% of Cablevision's cable television broadcasting
business and the legal entities within which such business
currently operates. Assets related to Cablevision's cable
programming and other businesses ("the Other Businesses") will
not be purchased. In connection with the acquisition of 51% of the
Company by TCI International, it is anticipated that the assets
related to the Other Businesses will be transferred to the
selling shareholders at book value.
Accordingly, the accompanying combined financial statements
exclude the assets and operating results of the Other Businesses.
All liabilities of the legal entities acquired will be the
responsibility of Cablevision and are thus included in the
combined balance sheets.
Revenue represents amounts earned during the periods from
providing cable television services to cable subscribers. Costs
of programming comprise two elements: purchased programming,
which is stated at the actual costs paid to third parties and
programming produced by the Other Businesses, which has been
allocated to the cable business based on the amount which
management estimates would have been incurred to purchase such
programming during each period presented.
Salaries, occupancy, and depreciation and amortization have been
specifically attributed to the cable television broadcasting
business based on the personnel involved, assets employed and the
ratio of square footage occupied, adjusted where appropriate to
reflect the costs that would have been incurred had the business
operated on a stand-alone basis throughout the periods presented.
Operating costs and selling, general and administrative expenses
not directly attributable to a specific line of business were
allocated on the basis of the relative amounts of sales for each
business.
<PAGE> 11
2
CABLEVISION (A COMBINATION OF CERTAIN CABLE
TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA
BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A.
AS DEFINED IN NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS
IN THOUSANDS OF ARGENTINE PESOS
The provision for income taxes has been calculated on a separate
return basis for the business acquired. The current liability for
income taxes in the accompanying balance sheets is presented on a
legal entity basis and has been reduced for the income tax effects of
operating losses in the Other Businesses.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies adopted in the preparation of the
combined financial statements are set out below.
BASIS OF PRESENTATION
The combined financial statements are presented in Argentine
pesos, in accordance with United States generally accepted accounting
principles. All amounts for periods prior to January 1, 1993 are
expressed in constant pesos of December 31, 1992 purchasing power. The
combined financial statements through December 31, 1992 have been
price-level restated in accordance with Accounting Principles Board
Statement No. 3 in order to reflect the effects of the changes in the
purchasing power of the Argentine currency as measured by the Argentine
Wholesale Price Index. Argentina ceased to be classified as a highly
inflationary economy as of January 1, 1993. Consequently, there is no
adjustment for changes in general purchasing power for periods
subsequent to December 31, 1992.
COMBINATION PRINCIPLES
The combined financial statements include the assets,
liabilities and operating results and cash flows of the cable
television businesses of the companies mentioned in note 1. All
inter-entity transactions have been eliminated in the combined
financial statements.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost, adjusted for changes
in general price levels through December 31, 1992 as noted above.
Construction and initial subscriber installation costs, including
material, labor and applicable overhead, are capitalized.
Depreciation is computed on a straight-line basis using
estimated useful lives of 5 to 10 years for distribution systems and
support equipment.
Repairs and maintenance are charged to operations and renewals
and additions are capitalized. At the time of ordinary retirements,
sales or other dispositions of part of a cable television system, the
depreciated cost and cost of removal of such property are charged to
accumulated depreciation, and salvage value, if any, is credited
thereto. Gains or losses are recognized only on sales of properties in
their entirety.
LEASING AGREEMENTS
The Company's leasing activities consist principally of the
leasing of data processing equipment and office equipment. Such leases
are classified as direct financing leases. The leases expire over the
next four years.
<PAGE> 12
3
CABLEVISION (A COMBINATION OF CERTAIN CABLE
TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA
BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A.
AS DEFINED IN NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS
IN THOUSANDS OF ARGENTINE PESOS
INCOME TAX
Income tax is computed according to the guidelines established by the
Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes.
Statement 109 requires the asset and liability method of accounting
for income taxes. Under the asset and liability method of Statement
109, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amount of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled.
FOREIGN CURRENCY TRANSACTIONS
Foreign currency transactions are recorded at the rates of exchange
prevailing on the date of their execution or liquidation. Foreign
currency assets and liabilities are translated into Argentine pesos at
current rates in effect at the balance sheet date.
(3) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
No cash payments were made for income taxes during the periods
presented. Payments of interest associated with the cable broadcasting
business during the periods were immaterial.
In 1994 the Company acquired fixed assets amounting to $2,099 through
capital lease agreements.
(4) ACCOUNTS RECEIVABLE
Accounts receivable are summarized as follows:
<TABLE>
<CAPTION>
1994 1993
----- ----
<S> <C> <C>
Subscribers $ 3,189 3,503
Magazine advertising 1,057 307
----- -----
4,246 3,810
Less allowance for doubtful
accounts (1,029) (1,635)
----- -----
$ 3,217 2,175
===== =====
</TABLE>
<PAGE> 13
4
CABLEVISION (A COMBINATION OF CERTAIN CABLE
TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA
BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A.
AS DEFINED IN NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS
IN THOUSANDS OF ARGENTINE PESOS
5) CAPITAL LEASES
At December 31, 1994, property and equipment includes $1,566 of data
processing equipment under capital leases, net of accumulated
depreciation of $533.
The following is a schedule by year of future minimum lease payments
under capital leases together with the present value of the net
minimum lease payments as of December 31, 1994:
<TABLE>
<S> <C>
Year ending December 31:
1995 $ 564
1996 564
1997 731
-----
Total minimum lease payments 1,859
Less: amount representing interest (225)
-----
Present value of net minimum lease payments $ 1,634
=====
</TABLE>
(6) ACCOUNTS PAYABLE
Accounts payable are comprised as follows:
<TABLE>
<CAPTION>
1994 1993
------- ------
<S> <C> <C>
Local currency:
Films and signals $ 459 -
Purchases of fixed assets 1,812 959
Advertising and promotion 878 45
Insurance 119 34
Related parties 478 1,175
Advances from customers 362 336
Other services suppliers 737 158
------- ------
4,845 2,707
------- ------
In U.S. dollars:
Films and signals 9,442 9,672
Purchases of fixed assets 1,247 -
------- ------
10.689 9,672
------- ------
$ 15,534 12,379
------- ------
</TABLE>
Annual maturities of accounts payable are as follows:
<TABLE>
<S> <C>
Year ended December 31, 1995 $ 14,995
Year ended December 31, 1996 539
</TABLE>
<PAGE> 14
5
CABLEVISION (A COMBINATION OF CERTAIN CABLE
TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA
BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A.
AS DEFINED IN NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS
IN THOUSANDS OF ARGENTINE PESOS
(7) OTHER ACCRUED LIABILITIES
Other accrued liabilities are comprised as follows:
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Income tax $ 5,359 3,953
Taxes on revenue 5,819 5,085
Social charges 4,558 3,168
Other 519 580
------- ------
$ 16,255 12,786
======= ======
</TABLE>
Social charges represent the employer portion of mandatory
contributions to national health and welfare schemes as well as
corresponding amounts withheld on behalf of employees.
(8) BANK DEBT
Bank debt as of December 31, 1994, all denominated in U.S. dollars,
totaled $44,179 at an average fixed interest rate of 14.42% as compared
with $500 at an average fixed interest rate of 19.5% at December 31,
1993. Loans of approximately $9,000 at December 31, 1994 were secured
by credit card collections of subscriber fees.
Of the debt outstanding at December 31, 1994, $34,684 matures in 1995.
The remaining balance is payable in 1996.
(9) TRANSACTIONS WITH RELATED PARTIES
Cablevision purchased advertising from related parties amounting to
$1,304 and $1,178 in 1994 and 1993, respectively. During the year ended
December 31, 1994, the Company placed significant additional amounts of
advertising with related entities in print and open channel television.
The related costs are not reflected in the accompanying financial
statements as they were not billed to the Company nor were material
amounts of services provided by the Company in exchange. Based on the
rates then in effect for the respective media, the estimated cost of
these services would have been $7,370. Accordingly the Company's
advertising expenses are not necessarily representative of the expenses
that Cablevision would have incurred had it been operated as a
stand-alone business.
Cablevision has been allocated certain internally produced programming
costs from a related programming business calculated at amounts which
management estimates would have been incurred to purchase such
programming during each period presented. Such charges, which are not
necessarily indicative of the costs that Cablevision would have
incurred had it been operated as a stand-alone business, amounted to
$16,915, $11,722 and $6,886 in 1994, 1993 and 1992, respectively.
<PAGE> 15
6
CABLEVISION (A COMBINATION OF CERTAIN CABLE
TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA
BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A.
AS DEFINED IN NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS
IN THOUSANDS OF ARGENTINE PESOS
Cablevision leases certain business offices from a related party.
Management has allocated rent expense based upon the estimated market
rate for comparable rentals, assigned to the estimated area used by the
cable television operations. Such charges amounted to $202, $200 and
$200 in 1994, 1993 and 1992, respectively.
(10) INCOME TAXES
Income tax expense attributable to earnings for the years ended
December 31, 1994, 1993 and 1992 consists of:
<TABLE>
<CAPTION>
Current Deferred Total
--------- -------- ------
<S> <C> <C> <C>
Year ended December 31,
1994 $ 10,438 4,977 15,415
======= ====== =======
Year ended December 31,
1993 $ 3,376 1,114 4,490
======= ====== =======
Year ended December 31,
1992 $ 2,619 501 3,120
======= ====== =======
</TABLE>
Income tax expense attributable to earnings differs from the amounts
computed by applying the statutory Argentine income tax rate of 30% as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------ ------
<S> <C> <C> <C>
Expected income taxes $ 12,718 3,777 3,094
Effects of:
Non-deductible expenses 117 6 26
Separate return limitations on
deductions of initial subscriber
installation cost 2,580 707 -
------- ------ ------
Actual tax expense $ 15,415 4,490 3,120
======= ====== ======
</TABLE>
The components of the deferred tax liabilities at December 31, 1994
and 1993 are shown as follows:
<TABLE>
<CAPTION>
1994 1993
---- -----
<S> <C> <C>
Capitalization for book purposes of
construction and initial subscriber
installation costs written off as
incurred for tax purposes $ 6,790 1,996
Differences in the timing of the
deduction of the allowance for
doubtful accounts (308) (491)
----- ------
Total $ 6,482 1,505
===== ======
</TABLE>
<PAGE> 16
7
CABLEVISION (A COMBINATION OF CERTAIN CABLE
TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA
BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A.
AS DEFINED IN NOTE 1)
NOTES TO COMBINED FINANCIAL STATEMENTS
IN THOUSANDS OF ARGENTINE PESOS
(11) COMMITMENTS AND CONTINGENCIES
a. Cablevision leases business offices, has entered into pole rental
agreements, and uses certain other equipment under lease
arrangements. Lease expense under such arrangements aggregated
approximately $822, $676 and $386 for 1994, 1993 and 1992,
respectively, including $400, $200 and $186 paid under pole rental
agreements which are terminable on short notice by either party.
It is expected that in the normal course of business, leases that
expire will be renewed or replaced by other leases. Accordingly,
annual commitments are not expected to decrease in comparison to
the 1994 amounts.
b. The Company is involved in several lawsuits and claims arising in
the normal course of business. In the opinion of management and
legal counsel, the final outcome of these matters will have no
significant adverse effects on the combined financial statements of
the Company.
c. Under the terms of the purchase agreement between TCI International
and the shareholders of Cablevision, the sellers retain the
obligation to reimburse the buyer for any losses subsequent to the
purchase date arising from loss contingencies or unrecorded
liabilities attributable to circumstances existing prior to that
date.
<PAGE> 17
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly Tele-Communications, Inc.)
Condensed Pro Forma Combined Financial Statements
December 31, 1994
(unaudited)
The following unaudited condensed pro forma combined balance sheet of TCI
Communications, Inc. ("TCIC"), dated as of December 31, 1994, assumes that the
merger with TeleCable Corporation ("TeleCable") (the "TeleCable Merger") had
occurred as of such date. See note (1).
In addition, the following unaudited condensed pro forma combined
statement of operations of TCIC for the year ended December 31, 1994 assumes
that (i) the TeleCable Merger, (ii) the combination of TCIC and Liberty Media
Corporation ("Liberty"), whereby TCIC and Liberty each became a wholly-owned
subsidiary of TCI (the "TCI/Liberty Combination") (see note 3) and (iii) the
transfer of United Artists International, Inc. from TCIC to TCI International
Holdings, Inc. (the "International Transfer") (see note 2) had occurred as of
January 1, 1994.
The unaudited pro forma results do not purport to be indicative of the
results of operations that would have been obtained if the TeleCable Merger,
the TCI/Liberty Combination and the International Transfer had occurred as of
January 1, 1994. These condensed pro forma combined financial statements of
TCIC should be read in conjunction with the condensed pro forma financial
statements and the related notes thereto of TCI included elsewhere herein and
the respective historical financial statements and the related notes thereto of
TCIC and TCI. The accompanying condensed pro forma financial statements no
longer reflect the assumed investment in Intermedia Partners IV, L.P., as such
transaction under its current terms can no longer be deemed probable.
1
<PAGE> 18
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Balance Sheet
(unaudited)
<TABLE>
<CAPTION>
December 31, 1994
----------------------------------------------------------
Pro forma
TCIC TeleCable Adjustments TCI
Historical Historical(1) (1) Pro forma
---------- ------------- ----------- ---------
amounts in millions
<S> <C> <C> <C> <C>
Assets
------
Cash and receivables $ 204 19 -- 223
Investment in affiliates
and Turner Broadcasting System,
Inc., and related receivables 347 18 -- 365
Property and equipment, net of
accumulated depreciation 5,579 258 320 (4) 6,157
Franchise costs and other assets,
net of amortization 9,750 21 1,023 (4) 11,571
777 (5)
---------- ------- ------- --------
$ 15,880 316 2,120 18,316
========== ======= ======= ========
Liabilities and Stockholder's Equity
------------------------------------
Payables and accruals $ 856 31 -- 887
Debt 10,712 274 -- 10,986
Deferred income taxes 3,299 46 777 (5) 4,122
Other liabilities 96 5 -- 101
---------- ------- ------- --------
Total liabilities 14,963 356 777 16,096
---------- ------- ------- --------
Minority interests 271 3 -- 274
Common stockholder's equity:
Class A common stock 1 -- -- 1
Class B common stock -- 7 (7)(6) --
Additional paid-in capital (deficit) 2,842 (262) 262 (6) 4,142
1,300 (7)
Unrealized holding gains for
available-for-sale securities 2 3 (3)(6) 2
Accumulated earnings (deficit) (256) 209 (209)(6) (256)
Investment in TCI (1,096) -- -- (1,096)
Due from TCI (847) -- -- (847)
---------- ------- ------- --------
646 (43) 1,343 1,946
---------- ------- ------- --------
$ 15,880 316 2,120 18,316
========== ======= ======= ========
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
2
<PAGE> 19
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Year ended December 31, 1994
----------------------------------------------------------------------
International Pro forma
TCIC TeleCable Transfer Adjustments TCI
Historical Historical(1) Historical(2) (1)(2)(3) Pro forma
---------- ------------- ------------- ----------- ---------
amounts in millions
<S> <C> <C> <C> <C> <C>
Revenue $ 4,318 302 (24) -- 4,596
Operating, selling, general and
administrative expenses and
compensation relating to stock
appreciation rights (2,512) (171) 43 -- (2,640)
Depreciation and amortization (988) (46) 3 (46)(8) (1,077)
---------- ------ ---- ----- -------
Operating income 818 85 22 (46) 879
Interest expense (777) (23) -- -- (800)
Interest and dividend income 35 1 (2) -- 34
Share of earnings of Liberty 125 -- -- (125)(9) --
Share of losses of other
affiliates, net (114) -- 67 -- (47)
Gain (loss) on dispositions 156 -- (169) -- (13)
Other expense, net (20) (4) (7) -- (31)
---------- ------ ---- ----- -------
Earnings before income taxes 223 59 (89) (171) 22
Income tax expense (131) (23) 37 70 (10) (47)
---------- ------ ---- ----- -------
Net earnings (loss) $ 92 36 (52) (101) (25)
========== ====== ==== ===== =======
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
3
<PAGE> 20
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Financial Statements
December 31, 1994
(unaudited)
(1) As of August 8, 1994, TCI, TCIC and TeleCable entered into a
definitive merger agreement (the "TeleCable Merger Agreement") whereby
TeleCable was merged into TCIC on January 26, 1995. The aggregate
$1.6 billion purchase price was satisfied by TCIC's assumption of
approximately $300 million of TeleCable's net liabilities and the
issuance to TeleCable's shareholders of shares of TCI Class A common
stock (approximately 42 million shares) and 1 million shares of a new
series of preferred stock to be designated "Convertible Preferred
Stock" ("Series D Preferred Stock") with an aggregate initial
liquidation value of $300 million. The Series D Preferred Stock,
which accrues dividends at a rate of 5.5% per annum, are convertible
into 10 million shares of TCI Class A common stock. The Series D
Preferred Stock is redeemable at the option of TCI after five years
and at the option of either TCI or the holder after ten years. The
amount of net liabilities assumed by TCIC and the number of shares of
TCI Class A common stock issued to TeleCable's shareholders are
subject to closing adjustments.
(2) During 1994, TCI was reorganized based upon four lines of business:
Domestic Cable and Communications; Programming; International Cable
and Programming; and Technology/Venture Capital. In connection with
this reorganization, in November of 1994, TCIC transferred its
ownership of United Artists International, Inc. to TCI International
Holdings, Inc. in exchange for 79,903 shares of a newly created class
of TCI preferred stock, Redeemable Convertible Preferred Stock, Series
E (the "Series E Preferred Stock"). Such transaction has been
reflected at historical cost. Series E Preferred Stock accrues
dividends at the rate of 5.0% per annum and is convertible into TCI
Class A common stock at the initial conversion rate of 1,000 shares of
TCI Class A common stock for one share of the Series E Preferred
Stock.
(3) The TCI/Liberty Combination, which were consummated on August 4, 1994,
were structured as a tax free exchange whereby the common stock of
TCIC and Liberty and the preferred stock of Liberty were exchanged for
like shares of TCI. The merger agreement provided that each share of
TCIC's and Liberty's common stock (including shares held by TCIC's or
Liberty's subsidiaries) would be converted into one share and 0.975 of
a share, respectively, of the corresponding class of TCI's common
stock. Shares of Liberty Class E Preferred Stock were converted into
shares of a preferred stock of TCI having designations, preferences,
rights and qualifications, limitations and restrictions substantially
identical to the shares of preferred stock being converted. Shares of
the remaining Liberty preferred stock held by subsidiaries of TCIC
were converted into shares of a class of TCI preferred stock having an
equivalent fair value to that which was given up. The TCI/Liberty
Combination has been accounted for as a purchase of Liberty by TCI
utilizing Liberty's historical predecessor cost.
(continued)
4
<PAGE> 21
TCI COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Financial Statements
(4) Represents an allocation of the purchase price of TeleCable to its
tangible and intangible assets. The cost allocations were estimated
using information available at the date of preparation of these
condensed pro forma combined financial statements and will be adjusted
upon final appraisal of the assets acquired. Therefore, the actual
allocations may differ from those allocations reflected herein.
(5) Represents the estimated incremental deferred income tax liability
associated with the TeleCable purchase price allocations, as described
in note (4) above. The adjustment assumes a combined federal and
state income tax rate of 41%.
(6) Represents the elimination of TeleCable's historical stockholders'
deficit.
(7) Represents TCI's capital contribution to TCIC resulting from the
issuance by TCI to TeleCable shareholders of shares of TCI Class A
common stock (approximately 42 million shares) and 1 million shares of
Series D Preferred Stock with an aggregate liquidation value of $300
million. See note (1) above.
(8) Represents depreciation and amortization of TeleCable's allocated
excess purchase price, based upon weighted average lives of 12-1/2
years for property and equipment and 40 years for franchise costs.
See note (1) above.
(9) Reflects the elimination of TCIC's share of Liberty's historical
earnings. See note (3) above.
(10) Reflects the estimated income tax effect of the pro forma adjustments.
5
<PAGE> 22
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Financial Statements
December 31, 1994
(unaudited)
The following unaudited condensed pro forma combined balance sheet of
TCI, dated as of December 31, 1994, assumes that (i) the TeleCable Merger, (ii)
the Cablevision acquisition and (iii) the transactions whereby QVC, Inc.
("QVC") became 43% owned by the Company and 57% owned by Comcast (the "QVC
Transactions") had occurred as of such date. See notes (2), (3) and (4).
The following unaudited condensed pro forma combined statement of
operations of TCI for the year ended December 31, 1994 assumes that the
TeleCable Merger, the Cablevision acquisition, the TCI/Liberty Combination (see
note 1) and the QVC Transactions had occurred as of January 1, 1994.
The unaudited pro forma results do not purport to be indicative of the
results of operations that would have been obtained if the TeleCable Merger,
the Cablevision acquisition, the TCI/Liberty Combination and the QVC
Transactions had occurred as of January 1, 1994. These condensed pro forma
combined financial statements of TCI should be read in conjunction with the
historical financial statements and the related notes thereto of TCI. The
accompanying condensed pro forma combined financial statements no longer
reflect the assumed investment in Intermedia Partners IV, L.P., as such
transaction under its current terms can no longer be deemed probable.
6
<PAGE> 23
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Balance Sheet
(unaudited)
<TABLE>
<CAPTION>
December 31, 1994
-------------------------------------------------
QVC
TCI TeleCable Cablevision Pro forma Transactions TCI
Historical Historical(2) Historical(3) adjustments(2)(3) Pro forma(4) Pro forma
---------- -------------- -------------- ----------------- ------------ ---------
amounts in millions
<S> <C> <C> <C> <C> <C> <C>
Assets
------
Cash, receivables and other
current assets $ 496 19 10 -- -- 525
Investment in affiliates and Turner
Broadcasting System, Inc., and
related receivables 2,156 18 -- -- 7 (12) 1,965
(216)(13)
Property and equipment, net of
accumulated depreciation 5,876 258 30 334 (5) -- 6,498
Franchise costs, intangibles and
other assets, net of amortization 11,000 21 -- 1,348 (5) -- 13,342
973 (6)
-------- ---- ------ -------- ----- -------
$ 19,528 316 40 2,655 (209) 22,330
======== ==== ====== ======== ===== =======
Liabilities and Stockholders' Equity
------------------------------------
Payables and accruals $ 1,193 31 32 -- -- 1,256
Debt 11,162 274 46 99 (7) 7 (12) 11,695
196 (8) (89)(13)
Deferred income taxes 3,613 46 6 973 (6) -- 4,638
Other liabilities 160 5 -- -- -- 165
-------- ---- ------ -------- ----- -------
Total liabilities 16,128 356 84 1,268 (82) 17,754
-------- ---- ------ -------- ----- -------
Minority interests 429 3 -- -- -- 432
Series D Preferred Stock -- -- -- 300 (10) -- 300
Stockholders' equity:
Preferred Stock -- -- -- -- -- --
Combined deficit -- -- (44) 44 (11) -- --
Class A common stock 577 -- -- 42 (10) -- 619
Class B common stock 89 7 -- (7)(9) -- 89
Additional paid-in capital 2,959 (262) -- 958 (10) -- 3,917
262 (9)
Cumulative foreign currency
translation adjustment (4) -- -- -- -- (4)
Unrealized holding gains for
available-for sale securities 253 3 -- (3)(9) (127)(13) 126
Retained earnings (deficit) (293) 209 -- (209)(9) -- (293)
Treasury stock (610) -- -- -- -- (610)
-------- ---- ------ -------- ----- -------
2,971 (43) (44) 1,087 (127) 3,844
-------- ---- ------ -------- ----- -------
$ 19,528 316 40 2,655 (209) 22,330
======== ==== ====== ======== ===== =======
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
7
<PAGE> 24
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Pro Forma Combined Statement of Operations
(unaudited)
<TABLE>
<CAPTION>
Year ended December 31, 1994
-------------------------------
TCI Liberty TeleCable Cablevision
Historical Historical(1) Historical(2) Historical(3)
---------- ------------- ------------- -------------
amounts in millions, except per share amounts
<S> <C> <C> <C> <C>
Revenue $ 4,936 790 302 139
Operating, cost of sales, selling,
general and administrative expenses
and compensation relating to stock
appreciation rights (3,130) (726) (171) (90)
Depreciation and amortization (1,018) (32) (46) (6)
-------- ----- ----- ----
Operating income (loss) 788 32 85 43
Interest expense (785) (22) (23) --
Interest and dividend income 36 15 1 --
Share of earnings of Liberty 125 -- -- --
Share of earnings (losses) of
affiliates, net (120) 23 -- --
Gain on dispositions 151 183 -- --
Loss on early extinguishment of debt (9) -- -- --
Other expense, net (15) (11) (4) (1)
-------- ----- ----- ----
Earnings (loss) before income taxes 171 220 59 42
Income tax expense (116) (95) (23) (15)
-------- ----- ----- ----
Net earnings (loss) 55 125 36 27
Dividend requirement on redeemable
preferred stocks (8) (14) -- --
-------- ----- ----- ----
Net loss attributable to
common shareholders $ 47 111 36 27
======== ===== ===== ====
Primary earnings per common and
common equivalent share $ .09
========
</TABLE>
<TABLE>
<CAPTION>
Year ended
December 31, 1994
--------------------
QVC
Pro forma Transactions TCI
adjustments(1)(2)(3) Pro forma (4) Pro forma
-------------------- ------------- ------------
amounts in millions, except per share amounts
<S> <C> <C> <C>
Revenue (36)(14) -- 6,131
Operating, cost of sales, selling,
general and administrative expenses
and compensation relating to stock
appreciation rights 36 (14) -- (4,081)
Depreciation and amortization (73)(15) -- (1,175)
----- ----- -------
Operating income (loss) (73) -- 875
Interest expense 12 (16) -- (847)
(7) (17)
(16)(18)
(6)(19)
Interest and dividend income (12)(16) -- 40
Share of earnings of Liberty (125)(20) -- --
Share of earnings (losses) of
affiliates, net -- 26 (24) (98)
(27)(25)
Gain on dispositions -- -- 334
Loss on early extinguishment of
debt -- -- (9)
Other expense, net -- -- (31)
----- ----- -------
Earnings (loss) before income
taxes (227) (1) 264
Income tax expense 87 (21) -- (162)
----- ----- -------
Net earnings (loss) (140) (1) 102
Dividend requirement on redeemable
preferred stocks (17)(22) -- (31)
8 (23)
----- ----- -------
Net loss attributable to
common shareholders (149) (1) 71
===== ===== =======
Primary earnings per common and
common equivalent share $ .11 (26)
=======
</TABLE>
See accompanying notes to unaudited condensed pro forma combined financial
statements.
8
<PAGE> 25
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Financial Statements
December 31, 1994
(unaudited)
(1) The TCI/Liberty Combination, which were consummated on August 4, 1994,
were structured as a tax free exchange whereby the common stock of
TCIC and Liberty and the preferred stock of Liberty were exchanged for
like shares of TCI. The merger agreement provided that each share of
TCIC's and Liberty's common stock (including shares held by TCIC's or
Liberty's subsidiaries) would be converted into one share and 0.975 of
a share, respectively, of the corresponding class of TCI's common
stock. Shares of Liberty Class E Preferred Stock were converted into
shares of a preferred stock of TCI having designations, preferences,
rights and qualifications, limitations and restrictions substantially
identical to the shares of preferred stock being converted. Shares of
the remaining Liberty preferred stock held by subsidiaries of TCIC
were converted into shares of a class of TCI preferred stock having an
equivalent fair value to that which was given up. All preferred stock
of TCI held by TCIC or its subsidiaries has been eliminated in
consolidation. The TCI/Liberty Combination has been accounted for as
a purchase of Liberty by TCI utilizing Liberty's historical
predecessor cost.
(2) As of August 8, 1994, TCI, TCIC and TeleCable entered into the
TeleCable Merger Agreement whereby TeleCable was merged into TCIC on
January 26, 1995. The aggregate $1.6 billion purchase price was
satisfied by TCIC's assumption of approximately $300 million of
TeleCable's net liabilities and the issuance to TeleCable's
shareholders of shares of TCI Class A common stock (approximately 42
million shares) and 1 million shares of Series D Preferred Stock with
an aggregate initial liquidation value of $300 million. The Series D
Preferred Stock, which accrues dividends at a rate of 5.5% per annum,
are convertible into 10 million shares of TCI Class A common stock.
The Series D Preferred Stock is redeemable at the option of TCI after
five years and at the option of either TCI or the holder after ten
years. The amount of net liabilities assumed by TCIC and the number
of shares of TCI Class A common stock issued to TeleCable's
shareholders are subject to closing adjustments.
(3) On December 6, 1994, the Company entered into the Cablevision Purchase
Agreement with the Shareholders to acquire controlling interests in
Cablevision. Upon execution of the Cablevision Purchase Agreement,
the Company paid the Shareholders $20 million and the Shareholders
placed 51% of the outstanding stock of Cablevision S.A. into an escrow
account. Upon consummation of the transaction, the $20 million will
be applied toward the ultimate purchase price and the escrowed stock
will be transferred to the Company. If the transaction is not
consummated for certain enumerated reasons, the Shareholders are
contractually obligated to return the $20 million to the Company and
the Cablevision S.A. stock will be released from escrow.
(continued)
9
<PAGE> 26
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Financial Statements
On March 28, 1995, the Cablevision Purchase Agreement was amended to
provide for the acquisition of a 51% ownership interest in Cablevision
for an estimated purchase price of approximately $315 million. The
purchase price will be paid with cash consideration of approximately
$216 million (including the initial $20 million) and the Company's
issuance of approximately $99 million in Notes. The purchase price is
subject to adjustment based on the actual number of Cablevision
equivalent basic subscribers and Cablevision liabilities as of the
month-end prior to closing. The Notes will be secured by the
Company's pledge of the stock representing its 51% interest in
Cablevision. The Notes will bear interest at variable rates and are
scheduled to be repaid in 20 monthly installments beginning in the
fourth month following the month of acquisition.
In addition, the Company has an option during the two-year period
following the acquisition date to increase its ownership interest to
80% at a cost per subscriber similar to the initial purchase price
adjusted, however, for certain fluctuations in applicable foreign
currency exchange rates.
Consummation of the Cablevision acquisition is subject to regulatory
approvals and other conditions. Accordingly, there is no assurance
that such acquisition will be consummated.
(4) Pursuant to an Agreement and Plan of Merger dated as of August 4,
1994, as amended (the "QVC Merger Agreement"), QVC Programming
Holdings, Inc. (the "Purchaser"), a corporation which is jointly owned
by Comcast and Liberty, commenced an offer (the "QVC Tender Offer") to
purchase all outstanding shares of common stock and preferred stock of
QVC, Inc. ("QVC"). The QVC Tender Offer expired at midnight, New York
City time, on February 9, 1995, at which time the Purchaser accepted
for payment all shares of QVC which had been tendered in the QVC
Tender Offer. Following consummation of the QVC Tender Offer, the
Purchaser was merged with and into QVC with QVC continuing as the
surviving corporation. The Company owns an approximate 43% interest
of the post-merger QVC. Upon consummation of the aforementioned QVC
transactions, the Company is deemed to exercise significant influence
over QVC and, as such, will account for its investment in QVC under
the equity method.
(5) Represents an allocation of the purchase prices of TeleCable and
Cablevision to their tangible and intangible assets. The cost
allocations were estimated using information available at the date of
preparation of these condensed pro forma combined financial statements
and will be adjusted upon final appraisal of the assets acquired.
Therefore, the actual allocations may differ from those allocations
reflected herein.
(6) Represents the estimated incremental deferred income tax liability
associated with the TeleCable and Cablevision purchase price
allocations, as described in note (5) above. The adjustment assumes a
combined federal and state income tax rate of 41%.
(7) Represents the assumed issuance of the Notes in the acquisition of
Cablevision (see note 3).
(8) Represents assumed borrowings by the Company to pay the remaining cash
consideration in the Cablevision acquisition.
(continued)
10
<PAGE> 27
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Condensed Pro Forma Combined Financial Statements
(9) Represents the elimination of TeleCable's historical stockholders'
deficit.
(10) Represents the issuance by TCI to TeleCable shareholders of shares of
TCI Class A common stock (approximately 42 million shares) and 1
million shares of Series D Preferred Stock with an aggregate
liquidation value of $300 million. See note (2) above.
(11) Represents the elimination of Cablevision's historical stockholders'
deficit.
(12) Represents the Company's cash contribution in the QVC Transactions.
(13) Represents the elimination of the unrealized gain attributable to QVC.
(14) Represents the elimination of intercompany revenue and operating
expenses between TCIC and Liberty arising from the sale of certain
cable television programming to their respective cable television
subscribers. See note (1) above.
(15) Represents depreciation and amortization of TeleCable's and
Cablevision's allocated excess purchase prices based upon weighted
average lives of 12-1/2 years for property and equipment and 40 years
for franchise costs for TeleCable and 20 years for franchise costs for
Cablevision.
(16) Represents the elimination of interest on intercompany indebtedness
between TCIC and Liberty. See note (1) above.
(17) Represents assumed interest expense incurred by the Company on the
Notes, calculated at an assumed rate of 7% per annum.
(18) Represents assumed interest expense incurred by the Company on the
assumed borrowings of $196 million to pay the remaining cash portion
of the Cablevision purchase price and the interest expense that would
have been incurred had the initial $20 million payment toward the
Cablevision purchase price been paid on January 1, 1994. Such
interest expense was calculated at the Company's weighted average
interest rate of 7.5% for the year ended December 31, 1994.
(19) Represents additional interest expense on assumed indebtedness of
Cablevision. Interest expense was not reflected in the historical
financial statements as such borrowings were not utilized to support
the assets to be acquired by the Company. Such interest was
calculated at the interest rate in effect at December 31, 1994 for
such indebtedness (14.4% per annum).
(20) Represents the elimination of TCIC's share of Liberty's historical
earnings.
(21) Reflects the estimated income tax effect of the pro forma adjustments.
(22) Represents the dividend requirements on TCI's Series D Preferred Stock
(issued in connection with the TeleCable Merger - see note 2).
(23) Represents the elimination of the preferred stock dividend
requirements on Liberty preferred stock held by TCIC converted into
preferred stock of TCI.
(continued)
11
<PAGE> 28
TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES
(formerly TCI/Liberty Holding Company)
Notes to Condensed Pro Forma Combined Financial Statements
(24) Reflects the incremental increase in TCI's share of QVC's historical
earnings resulting from the consummation of the QVC Transactions.
(25) Represents the adjustment to TCI's share of the pro forma loss of the
Purchaser after giving effect to the consummation of the QVC
Transactions. Such adjustment reflects the estimated incremental
interest, depreciation and amortization expense, net of income taxes,
incurred by the Purchaser following the consummation of the QVC
Transactions.
(26) Reflects primary and fully diluted earnings per common and common
equivalent share based upon 651,475,966 weighted average shares.
Such amount is calculated utilizing 540,837,355 weighted average
shares of TCI at December 31, 1994 (such amount representing TCI's
weighted average shares, as disclosed in its historical financial
statements), adjusted for the effect of shares issued in the
TCI/Liberty Combination as if such transaction had occurred on January
1 and adjusted for the issuance of 42 million shares of TCI Class A
common stock issued in connection with the TeleCable Merger. Shares
issuable upon conversion of the Series D Preferred Stock (see note 2)
have not been included in the computation of weighted average shares
outstanding for the year ended December 31, 1994 because their
inclusion would be anti-dilutive.
12
<PAGE> 29
EXHIBIT INDEX
The following exhibits are filed herewith or are incorporated by reference
herein (according to the number assigned to them in Item 601 of Regulation S-K)
as noted:
(2.1) Stock Purchase Agreement, dated as of December 6, 1994, by and among
Eduardo Eurnekian, stockholders of shares of the Common Stock of
Cablevision S.A., Televisora Belgrano S.A., Construred S.A.,
Univent's S.A., and TCI International Holdings, Inc.
(2.2) Amendment to Stock Purchase Agreement executed on December 6, 1994.
(10) Stockholders Agreement, dated December 6, 1994, between Eduardo
Eurnekian and TCI International Holdings, Inc.
<PAGE> 1
Exhibit 2.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement" as herein defined), is
entered into as of this 6th day of december of 1994 by and among Eduardo
Eurnekian, the undersigned owners (collectively, Eduardo Eurnekian and the
undersigned owners defined as the "Stockholders", and individually, a
"Stockholder" as herein defined) of shares of the Common Stock (the "Common
Stock"), of Cablevision S.A. (face value $ 1 per share), Televisora Belgrano
S.A. (face value $ 1 per share), Construred S.A. (face value $ 1 per share),
Univent's S.A. (face value $ 1 per share), all Argentine Corporations
(Sociedades Anonimas) (all referred to hereinafter as the "Company" as herein
defined), and TCI International Holdings, Inc., a Delaware (U.S.A.) corporation
("Buyer").
RECITALS
A. The Stockholders own all of the outstanding Shares which
represent one hundred per cent (100%) of the Common Stock and votes of the
Company.
B. The Stockholders desire to sell to Buyer, and Buyer desires
to purchase from the Stockholders, the Shares which represent eighty per cent
(80%) of the Common Stock of the Company ("the Shares" as herein defined), in
accordance with the terms of this Agreement.
C. The Stockholders and the Buyer also desire to enter into the
Stockholders Agreement attached hereto as Exhibit 1 of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties herein contained, the parties hereto agree as
follows:
DEFINITIONS
For purposes of this Agreement, the following terms shall have the following
meanings:
<PAGE> 2
-2-
"Agreement": this Stock Purchase Agreement and its exhibits and schedules;
applicable also to the purchase of cuotas of the S.R.L. (as defined herein)
resulting from the conversion of the Company.
"Assets": All properties, privileges, rights, interests and claims, real and
personal, tangible and intangible, of every type and description that are
owned, leased, held, used or useful in the Company Business in which
Stockholders or Company have any right, title or interest or in which
Stockholders or Company have acquired any right, title or interest on or before
the Closing Date, including Governmental Permits, Company Contracts, Equipment
and Real Property.
"Balance Sheet Date": shall mean the date of May 31st, 1995 or one month prior
to the Closing Date if this were not June 30th, 1995.
"Base Purchase Price": shall be that defined in Section 1.2.
"Basic Services": the transmission of cable television programming sold to
Company subscribers as a package, as part of the Company Business, for which a
subscribers pay a fixed monthly fee to Company, including the satellite
transmission related to Televisora Belgrano S.A., in the city of Chascomus,
Province of Buenos Aires.
"Closing": means the consummation of the transactions contemplated by this
Agreement, the date of which is referred to as the Closing Date.
"Closing Date": meaning the 30th day of June, 1995, or at the option of Buyer,
the 31st day of May 1995 or 30th of April 1995 provided that the Conditions
Precedent referred to in Articles IV and V are met or waived, or such other
date as the parties mutually agree.
"COMFER": meaning the Comite Federal de Radiodifusin 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": meaning Cablevision S.A., Televisora Belgrano S.A., Construred S.A.
and Univent's S.A., and the corpo-
<PAGE> 3
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rations resulting from the conversion of the Company into a "sociedad de
responsabilidad limitada" (S.R.L.).
"Company Contracts": All contracts and agreements, other than Governmental
Permits, pertaining to ownership, operation and maintenance of the Assets or
the Company Business.
"Company Business": meaning the operation of a complete cable television
reception and distribution System located in the city of Buenos Aires, Greater
Buenos Aires, and in the city of Chascomus, Province of Buenos Aires.
"EBS": For the purposes of determining the Basic Purchase Price and the
adjustments to the same, the Stockholders and the Buyer define EBS's as the
number derived by dividing (a) the total income in pesos received by the
Company for Basic Services and additional outlet charges during the full
calendar month corresponding to that of the Closing Date including all payments
for more than one period for such charges if paid in such month, by (b) 25
(twenty five) pesos. Notice is made that there is no V.A.T. applicable in
relation to the income in pesos and that the same will not be considered in
relation to the definition established herein and will therefore not be
included in the calculation of "total income in pesos".
"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.
<PAGE> 4
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"Environmental Laws": any Legal Requirement relating to pollution or protection
of public health, safety or welfare or the environment, including those
relating to emissions, discharges, releases or threatened releases of Hazardous
Substances into environment (including ambient air, surface water, ground water
or land), or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling or Hazardous
Substances.
"Financial Statements": meaning those defined in Section 2.10 of this
Agreement.
"GAAP": generally accepted accounting principals in force in the Argentine
Republic as from time to time.
"Governmental Authorities": (i) The Republic of Argentina, (ii) any state,
territory or possession of the Republic of Argentina and any political
subdivision thereof (including counties, municipalities and the like), (iii)
any foreign (as to the Republic of Argentina) sovereign entity and any
political subdivision thereof or (iv) 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.
"Hazardous Substances": any pollutant, contaminant, chemical, industrial,
toxic, hazardous or noxious substance or waste which is regulated by law 24.051
or any other Argentine legal body (Regulation) or any Governmental Authority,
including (a) any petroleum or petroleum compounds (refined or crude),
flammable substances, explosives, radioactive materials or any other materials
or pollutants which pose a hazard or potential hazard to the Real Property or
to Persons in or about the Real Property or cause the Real Property to be in
violation of any laws, regulations or ordinances of federal, state or
applicable local governments, (b) asbestos or any asbestos-containing material
of any kind or character, (c) polychlorinated biphenyls, (d) any materials or
substances designated as "hazardous substances" pursuant to Governmental
Authorities regulation (e) "chemical substance", "new chemical substance" or
"hazardous chemical substance or mixture" pursuant to Governmental Authorities
regula-
<PAGE> 5
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tion, (f) "hazardous substances" pursuant to Governmental Authorities
regulation, and (g) "hazardous waste" pursuant to Governmental Authorities
regulation.
"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 common or
civil law or interpreting any other Legal Requirement.
"Liabilities": those items classified as liabilities on the Company's balance
sheet or in the Financial Statements prepared in accordance with GAAP on the
Closing Date (or Balance Sheet Date), as the context requires).
"Persons": any natural person, corporation, partnership, trust, unincorporated
organization, association, limited liability company, Governmental Authority or
other entity.
"Programming Assets": those signals and/or television programmes currently
produced by the Company and listed on Exhibit 2 or other which may be added to
or replace the latter in the future.
"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 Company's 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 and control of the Company Business to Buyer, (b) Buyer
to conduct the Company Business and to own, lease, use and operate the Shares,
the Company Business and Assets at the places and in the manner in which the
Company Business is conducted as of the date of this Agreement and on the
Closing Date, and (c) the Company to assume and perform the Governmental
Permits and the Company Contracts after the Closing Date.
"Shares": meaning eighty percent (80%) of the Common Stock of the Company under
the form of a corporation, or of cuotas (interest) of the Company under the
form of an S.R.L. (as defined herein).
"Stockholders": means Mr. Eduardo Eurnekian and the record and beneficial
owners of the Shares.
<PAGE> 6
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"Stockholders Agreement": meaning the document which shall govern the
relationship of the Company's stockholders after the Closing and the management
of the Company, all as set forth in Exhibit 1 of the Agreement.
"SRL": means sociedad de responsabilidad limitada as that term is used in the
Argentine Act 19.550 and in Argentine Commercial Code.
"Subscriber": any Person who receives the company's Basic Services.
"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 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.
"TCI Stock": means the Class A Common Stock (par value U$S 1) of
Tele-Communications, Inc., a Delaware (U.S.A.) corporation and parent of Buyer.
Such TCI Stock will be "restricted" as that term is defined in Rule 144 under
the United States Securities Act of 1933, as amended (the "Securities Act").
ARTICLE I
PURCHASE AND SALE OF THE SHARES
SECTION 1.1. Purchase and Sale of the Shares. Upon the terms and
subject to the conditions set forth in this Agreement, at the Closing (as
defined herein and in Section 1.7 hereof), the Stockholders shall sell the
Shares to Buyer and Buyer shall purchase the Shares from the Stockholders. At
the Closing, provided that the Conditions Precedent indicated in Articles IV
and V have been met: a) the Stockholders shall deliver to Buyer such documents
representing the Shares, with duly executed stock powers attached, as may be
appropriate, in proper form for transfer, with appropriate transfer stamps, if
any, affixed and any other document or instrument which may be necessary in
order to vest Buyer with good and exclusive title to the Shares, and (b) Buyer
shall deliver cash and negotiable and endorsable promissory notes, in payment
of
<PAGE> 7
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the Base Purchase Price (as hereinafter defined) pursuant to Sections 1.2, 1.3
and 1.4.
SECTION 1.2 Base Purchase Price. In consideration of (i) the
covenants, representations and warranties made by Stockholders in this
Agreement, and (ii) the EBS's (as defined herein) which the Stockholders
represent that the Company will have at Closing (460,000), Buyer will pay to
Stockholders an amount equal to US $1,500 times eighty percent (80%) of the
number of EBS's at Closing, minus eighty percent (80%) of all Liabilities to be
deducted as provided in Section 1.4.1 (the "Base Purchase Price"), subject to
adjustment as provided in Sections 1.3, and 1.4. as follows, provided that
Stockholders comply with the duties assumed under this Agreement. Assuming an
EBS number of 460,000 and Liabilities of US $25 million, the parties
contemplate the Base Purchase Price to be US $532 million.
a) Twenty million U.S. dollars (US $20,000,000) will be paid upon
execution of this Agreement by wire transfer of readily available funds to the
account which the Stockholders may so indicate. The Stockholders will
simultaneously deliver to Buyer a letter from the notary Mr. Juan Bautista
Cubas in the form attached hereto as Exhibit 3. The Shares mentioned therein
will be referred to hereinafter as the Deposited Stock.
b) In case Base Purchase Price were US $532 million at the
Closing (as defined herein) and provided that the Conditions Precedent
indicated in Articles IV and V have been met, Buyer shall deliver to
Stockholders at Closing (i) US $191,140,016 by wire transfer of readily
available funds to the account which Stockholders shall indicate, and (ii) the
balance of US $320,859,984 (after substructing 80% of the assumed Liabilities
of US $25,000,000, i.e. US $20,000,000) will be paid in 48 consecutive monthly
installments maturing on the last day of each month, or the following working
day if the last day were not a working day, commencing on July 30th, 1995, or
on the last day following the month of Closing. The first twenty-four (24)
installments will provide for a payment of US $5,031,666 each, and the
remaining twenty-four (24) installments will provide for a payment of US
$8,337,500 (the "Promissory Notes"). Installments representing this debt will be
documented through eight negotiable and endorsable Promissory Notes issued by
Buyer: (1) four negotiable and endorsable Promissory Notes for equal
<PAGE> 8
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amounts will document the first 24 installments, and (2) the other four
negotiable and endorsable Promissory Notes for equal amounts will document the
remaining 24 installments. As an example as to the method with shall be used to
calculate the payment of the Base Purchase Price the parties agree to the
indicated under Exhibit 9. Amounts due under the said Promissory Notes will
accrue interest at the Bank of New York Prime Rate at Closing, plus an extra
one percent (1%) as from their date of issuance per annum. Said rate will be
adjusted on each yearly anniversary of the Closing Date to Bank of New York
Prime Rate which prevails on that date, plus one percent (1%) per annum. For
these purposes, the prime rate for the first year will be the Bank of New York
prime rate on Closing Date. Stockholders acknowledge that the Promissory Notes
may not be sold by Stockholders in a "public offering". These Promissory Notes
will be construed and interpreted under the laws of the state of New York,
United States of America. Stockholders undertake the duty of negotiating said
Promissory Notes only with a limited number (because they may not be sold in a
public offering) of top ranked international banking institutions. At Closing,
Stockholders will designate two bank accounts (one of which must be in the
United States of America) to which Buyer may remit payments under the
Promissory Notes. Buyer may remit scheduled payments to either account as it so
chooses, subject to further instructions from Stockholders. The Promissory
Notes will be issued in accordance with the terms of this Section as pertinent.
Stockholders will provide Buyer with written instructions, before Closing, in
relation to the Stockholders-beneficiaries in whose favour the Promissory Notes
must be issued, and the names of the Persons or banking institutions authorized
to receive payments. Buyer has the unrestricted rights to pre pay the
Promissory Notes without penalty, together with accrued interest through the
dates of pre-payments, anticipated payment to which the Stockholders
irrevocably agree.
Payment of these Promissory Notes are not subject to any condition and
any Liabilities of the Stockholders which may represent the obligation of
paying amounts of money to Buyer, will not authorize Buyer to carry out any act
tending to non-payment, or to restrict, delay, reduce or limit amounts which
are payable under the Promissory Notes. In case there were amounts due by the
Stockholders, and subject to the limitations foreseen in Section 8.4, the Buyer
may enforce the pledge provided for Section 2.12.
<PAGE> 9
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1.2.2 If COMFER Approval has not been obtained by the Closing Date, or
if the conditions in Article V have not been satisfied, the Buyer may -at its
exclusive choice- either (a) terminate the Agreement, leaving in favour of
Stockholders the monies indicated in 1.2 (a) above in full and final
compensation, and the notary indicated in Exhibit 3 will proceed with the
immediate returning of the Deposited Stock to Stockholders; or (b) extend for
up to an additional 180 days the term to obtain COMFER Approval and comply with
all conditions in Article V in which case if COMFER Approval is not obtained
and all conditions are not complied with by the end of the extended period,
Stockholders will immediately return monies received pursuant to 1.2 (a) above,
except if COMFER Approval is not obtained by reasons directly attributable to
Buyer in which case the notary will return the Deposited Stock to the
Stockholders. Upon Buyer's receipt of the US$ 20 million, as in the case
foreseen in the last part of Section 1.2.2 (b), the Deposited Stock will be
immediately released to Stockholders. If COMFER Approval is obtained and all
conditions in Article V are complied with prior to the end of such 180 day
extension, parties will proceed with this Agreement and payments pursuant to
Section 1.2 (b) will be made.
SECTION 1.3 Adjustments to Base Purchase Price. The Base Purchase
Price will be adjusted as follows:
1.3.1 Stockholders represent that on the Closing Date, the Company
shall have at least 460,000 EBS's. Should there be materially fewer EBS's on
the Closing Date, Buyer, in its sole discretion may elect to (i) consummate the
Closing, in which case the cash portion of the Base Purchase Price will be
reduced by an amount equal to U$S 1,500 multiplied by eighty percent (80%) of
the positive difference between (a) 460,000 and (b) the number of EBS's as of
the Closing Date and must be made in conformity with the method demonstrated
in Exhibit 9 or (ii) terminate this Agreement if there were less than 350,000
EBS in which case the Stockholders will immediately return to Buyer all monies
received under Section 1.2 a) and against said payment the Deposited Stock will
be released. If on the Closing Date, there are greater than 460,000 EBS's, the
Base Purchase Price will be increased in the same manner.
<PAGE> 10
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1.3.2 Stockholders represent that all Liabilities have been adequately
reported and accounted for and that there are no Liabilities, disclosed or
undisclosed, for which due provision have not been accounted if necessary.
SECTION 1.4 Determination of Adjustments. Preliminary and final
adjustments to the Base Purchase Price will be determined as follows:
1.4.1. At least five business days prior to the Closing, Stockholders
will deliver to Buyer a report (the "Preliminary Adjustments Report"),
certified as to completeness and accuracy by Stockholders, showing in detail
any adjustments which are calculated as of the Closing Date (or as of any other
date agreed by the parties) and any documents substantiating the adjustments
proposed in the Preliminary Adjustments Report. The Preliminary Adjustments
Report will include a complete list of Subscribers, a detailed calculation of
EBS and a balance sheet as of the Balance Sheet Date audited by a firm
reasonably acceptable to Buyer prepared in accordance with GAAP indicating,
inter alia, all Liabilities as of the Balance Sheet Date. Stockholders also
will furnish to Buyer a bring down letter stating that the Company has not
incurred in any additional liabilities or modified in any material respect the
Balance Sheet as of the Balance Sheet Date, other than in the ordinary course
of Business. The net adjustment shown in the Preliminary Adjustments Report
will be reflected as an adjustment to the Base Purchase Price payable at
Closing. Those Liabilities which arise from the Preliminary Adjustments Report
will be deducted equally (pro-rata) from the original principal amount of Notes
# 1 to # 4 during the first twenty-four (24) installments provided for in 1.2
(b).
1.4.2. Within 150 days after the Closing, Shareholders will deliver to
Buyer (i) a balance sheet as of the Closing Date audited by a firm reasonably
acceptable to Buyer prepared in accordance with GAAP indicating, inter alia,
all Liabilities as of Closing, and (ii) a report (the "Final Adjustments
Report"), similarly certified by Stockholders, showing in detail the final
determination of all adjustments which were not calculated as of the Closing
Date and containing any corrections to the Preliminary Adjustments Report,
together with any documents substantiating the adjustments proposed in the
Fi-
<PAGE> 11
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nal Adjustments Report. Buyer will provide Stockholders with reasonable access
to all records which Buyer has in its possession and which are necessary for
preparing the Final Adjustments Report. For the purposes of this Final
Adjustments Report, the parties agree to include in the calculation of the Base
Purchase Price only those subscribers whose Basic Services were installed
before Closing and who have paid their first regularly scheduled billing for
Basic Services after the Closing, and to exclude from the said calculation only
all those Subscribers who as of the Closing Date had paid their first Basic
Service billing and who had not paid their second Basic Service billing after
the Closing Date. For the purposes of payment of these adjustments the parties
agree to the EBS definition and calculation provided hereabove.
1.4.3. Within 30 days after receipt of the Final Adjustments Report
and of the balance sheet referred to in 1.4.2, Buyer will give Stockholders
written notice of Buyer's objections, if any, to the Final Adjustments Report
and with respect to Liabilities indicated in said balance sheet. If Buyer makes
any such objection, the parties will agree on the amount, if any, which is not
in dispute within 30 days after Stockholders' receipt of Buyer's notice of
objections to the Final Adjustments Report and with respect to Liabilities
indicated in said balance sheet. Any undisputed amount will be paid by the
Stockholders within ninety (90) days after the Final Adjustments Report. Should
the Final Adjustments Report show undisputed amount in favour of the
Stockholders, Buyer shall pay said amount within ninety (90) days after the
Final Adjustments Report. Any disputed amounts will be determined within 210
days after the Closing Date by a mutually agreed accounting firm whose
determination will be conclusive. Any Liability will be paid by the
Stockholders to third parties upon receiving a judicial claim in this sense.
Stockholders and Buyer will bear equally the fees and expenses payable to such
firm in connection with such determination unless the determination of such
firm results in a net decrease in the Base Purchase Price of more than 10%
thereof, in which case the fees and expenses payable to such firm will be paid
by Stockholders.
SECTION 1.5 Additional Agreements. On or before February 15, 1995,
Stockholders and/or Company will, and shall perform acts in order that
licensees and/or owners not related to Stockholders or the Company, enter into
the following agreements with Buyer and/or Company, as
<PAGE> 12
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the Buyer may determine in relation to the parties to the agreement:
(i) A mutually acceptable Irrevocable Right of First Refusal
("Right of First Refusal") granting Buyer or its designees a Right of First
Refusal to purchase all or part of the Programming Assets.
(ii) Programming supply agreements for the Programming Assets as
provided herein will be executed for a 5 year period with an option in favour
of Buyer to extend the same for another 5 year period. The extension of said
agreement must be informed by Buyer with notice 6 months prior to the original
date of termination. Said agreements will grant Buyer clause-by-clause "most
favored nations" rights including lowest market prices, except in those cases
where programming is provided for free.
(iii) A license agreement for the name "Cablevision" and
trademarks, service, marks, tradenames, dressings in every shape size and
colors related to the Company Business which are currently used in the Company
Business including, but not limited to, Cablevision, CV and CVN; and subject to
the programming supply agreement to be agreed upon above.
(iv) Agreement to supply to Company all those programs currently
provided to Company by third parties in the terms of a final agreement to be
executed.
(v) An agreement on the Assets which will be taken out of the
Company comprehensive of all ownership interests on Real Property, the shares
of Radiodifusora El Carmen S.A. (Canal 2), the assets related to the
Programming Assets and the production, transmittal and commercialization,
including without limitation, the assets and Persons related to the satellite
commercialization of the Programming Assets, and all those credits caused
before Closing. Those credits which should have been excluded under this
Section, but which were not excluded in due course, will be handed over to the
Stockholders insofar they have been credited within five (5) years following
the Closing Date. Buyer also acknowledges in favour of Stockholders the
eventual claims against COMFER. Those credits related to Subscribers'
obligations will not be excluded. The excluded receivables may be compensated
under Section 1.4.3.. The exclusion of receivables under
<PAGE> 13
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this agreement will not affect the normal development of the Company Business.
(vi) The Stockholders Agreement according to the wording contained
in Exhibit 1.
(vii) The form of the Promissory Notes and of the pledge agreements
forseen under this Agreement.
SECTION 1.6 Late Payment. Default. The delay in the payment of the
balance due pursuant to Section 1.2 b) 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 interests at a daily rate
equivalent to a rate of 15% per annum, during which payment is due and until
the date of payment. Default in paying two consecutive installments, or six
late payments, whether consecutive or not, will entitle the Stockholders to:
(i) demand fulfillment of the agreement in which case all granted financing
will be considered due and the Stockholders may enforce the total pending
balance considering it as due, together with the corresponding compensatory and
punitive interests, or (ii) rescind this Agreement, the Buyer having to return
the Shares, leaving in favour of the Stockholders all amounts handed over under
any concept and at any time according to this Agreement as full and final
indemnification. This rescission right will terminate when the Buyer has made
enough payments under the Promissory Notes so that Stockholders have received
51% percent of the Base Purchase Price in cash. In order to enforce any of the
rights provided for in (i) or (ii) above, the Stockholders must have previously
demanded that Buyer fully satisfy his uncomplied obligation, including payment
of capital and compensatory and punitive interests, within fifteen (15) days
and Buyer must not have satisfied his uncomplied obligation. The parties agree
that this benefit granted to Buyer prior demand for compliance will be one
and only during the whole lifetime of the Agreement. The Buyer can not assign
any rights as long as it is in default of payment.
SECTION 1.6.1 Guarantees. As guarantee of payment of balances due,
Buyer will execute a pledge agreement in favour of the Stockholders, affecting
all the Shares, along the following guidelines (i) the pledge will be
<PAGE> 14
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registered at the Inspeccion General de Personas Juridicas and other pertinent
registers, together with the registration of the transfer of the Shares in
favour of the Buyer; (ii) the guarantee will survive until the total
cancellation of the balance due, interests and/or eventual punitive interests
if applicable, (iii) all the provisions of the pledge agreement will be
according to the requirements established in the Argentine Broadcasting Law
and/or to those which the COMFER may suggest; (iv) the Company will duly
acknowledge and register the pledge in the pertinent corporate books; (v) every
capital increase decided by the Company will imply the obligation of the Buyer
or assignees to pledge in favour of the Stockholders 80% of the shares
subscribed for by Buyer or assignees as a result of the corresponding capital
increase; (vi) the parties agree that the procedure foreseen in article 3223 of
the Argentine Civil Code and/or in the Commercial Code of the Argentine
Republic can be indistinctly used at the option of the Stockholders; (vii) in
case of judicial enforcement, the Stockholders will appoint all the appraisers
and auctioneers which may be necessary, except in case they take the option of
the auctioning procedure under article 585 of the Commercial Code in which
case the parties will agree beforehand to the appointment of a mutually
agreeable appraiser among Price Waterhouse, Arthur Andersen, Deloitte Haskins &
Sells and Citibank (Buenos Aires branch) and, should an agreement not be
possible in this regard, the option among these firms/institutions will be
made by the Stockholders; (viii) use of other standard clauses which arise from
the form of the Registro Nacional de Creditos Prendarios (Act Nr 12.962); (ix)
all registration, deregistration and cancellation costs will be faced by Buyer,
same as all enforcement costs (unless otherwise determined by a court
resolution); and (x) the pledge will continue in force until full cancellation
of the balance due.
The parties will appoint the administrator of the pledge ("the
Agent") in the same way as provided in the preceding paragraph, to whom the
following irrevocable powers of attorney will be granted at the Closing: (i) by
the Buyer: a) so that the Agent may proceed with handing over of the Shares,
issuing receipts for monies received and, payment of the same in case the
Stockholders elect the procedure foreseen in article 3223 of the Argentine
Civil Code (in which case the Notes foreseen in Section 1.2 b) can be used for
payment) and, b) in case the Agreement is rescinded: in order that the Agent
transfer
<PAGE> 15
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the Shares to the Stockholders in accordance with legal provisions in force in
Argentina; (ii) the Stockholders: in order that the Agent proceeds with the
same empowerment for the case of enforcement of the pledge provided for herein
and in Section 2.12.
At Closing the Stockholders will execute a pledge agreement in favour
of the Buyer, affecting the Stockholders 20% of its interest in the Company
along the guidelines established in 1.6.1., in order to secure all Liabilities,
disclosed or undisclosed, caused before Closing, and subject to the limitation
provided in Section 8.4., enforceable to the extent of the amounts paid by the
Company.
SECTION 1.7 Closing. Unless this Agreement shall have been terminated
pursuant to Section 7.1 hereof, the closing of the purchase and sale of the
Shares (the "Closing") shall take place at the offices of M & M Bomchil,
Suipacha 268, 12th floor, Buenos Aires, at 10 a.m. local time on the Closing
Date or will be conducted by mail, or at any other place, time or date as the
Buyer and the Stockholders may mutually establish (such time and date being
referred to herein as the "Closing Date").
SECTION 1.8 Deliveries by Stockholders. Stockholders covenant and
agree to deliver items and documents to Buyer as follows:
1.8.1 Stockholders have previously furnished to Buyer or at least ten
(10) days prior to Closing Date, or such earlier date as provided herein, will
furnish, without further demand, accurate and complete copies of all documents
hereinafter specified:
(a) a certified copy of the Articles of Incorporation of the
Company, as amended, and of the Company's By-laws.
(b) minutes and written actions containing an accurate record of
proceedings of and actions by the shareholders, directors, and committees of
directors of the Company from its inception.
(c) copies of the shareholders book of the Company which
accurately reflect all issuances, reissuances, can-
<PAGE> 16
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cellations and transfers of Company stock, and when the Company has been
converted to an SRL- of all registrations carried out at the Public Registry of
Commerce which adequately reflect all ownership, cancellations, capital
increase and transfers of Company interest or cuotas.
(d) copies of all Governmental Permits for the ongoing Company
Business.
(e) copies of Company Contracts and Title Documents.
(f) copies of any title documents or Company Contracts
representing intangible property.
(g) copies of the insurance policies presently in force.
(h) copies of any employee incentive, bonus or benefit plans or
agreements.
(i) the Financial Statements and the Balance Sheet described in
Sections 1.4.1 and 2.10 of the Agreement.
(j) copies of all tax returns described in Section 2.14 of the
Agreement that have been filed with any Governmental Authority within the seven
(7) years preceding the date hereof and any additional tax returns for tax
years that have not been agreed as final by the applicable Governmental
Authority. Copies of any tax returns proposed to be filed by or on behalf of
the Company, with any Governmental Authority following the date hereof and on
or prior to the Closing shall be delivered to Buyer at least 5 days before the
filing thereof for Buyer's review.
(k) copies of such other documents and items as Buyer may
reasonably request.
1.8.2 AT LEAST THIRTY (30) DAYS PRIOR TO CLOSING, Stockholders shall
cause the Company to furnish to Buyer documents which accurately show the
boundaries of all Real Property as owned or leased by the Company together with
any and all improvements, rights of way, easements, roads and such other
features as Buyer shall reasonably specify.
<PAGE> 17
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1.8.3 AT LEAST FIFTEEN (15) DAYS PRIOR TO CLOSING, Stockholders shall
deliver to Buyer the Financial Statements.
1.8.4 WITHIN TEN (10) DAYS PRIOR TO CLOSING, Stockholders shall also
cause the Company to procure and provide to Buyer a report dated within ten
(10) days prior to the Closing Date, issued by Real Estate Registry or by a
notary or other agency satisfactory to Buyer, 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 have been
filed against the Company except for those indicated in the Balance Sheet as of
the Closing Date or in Exhibit 5 as may correspond.
1.8.5 AT THE CLOSING, provided that the Conditions Precedent indicated
in Articles IV and V have been met, Stockholders will, with duly and fully
executed instruments, certificates, documents and opinions, deliver to Buyer,
or cause Company to deliver to Buyer:
(a) The documents evidencing the Shares, duly endorsed, in blank
if appropriate, and/or all necessary documentary or transfer tax stamps affixed
thereto together with such other documents or instruments as Buyer may request,
in order that Buyer be vested with good and exclusive title to the Shares.
(b) To the extent not previously delivered, the minute books,
shareholders books of the Company -if applicable- and such other papers,
evidence of title or interest, books, records, files, correspondence, memoranda
and other documents of the Company, all as Buyer may request prior to the
Closing.
(c) A bring down letter from the Stockholders indicating that all
representations and warranties made under this Agreement are true and valid as
of the Closing Date.
(d) The written resignations, dated the Closing Date, of all of
the directors or managers of the Company, except for those mutually agreed by
the parties.
(e) Employment Agreements, dated the Closing Date, executed by the
Company and mutually agreed key employees.
<PAGE> 18
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(f) Duly certified copies of resolutions of the Board of Directors
or similar governing body of, and, if required by applicable law, the
Stockholders or other holders of ownership interest in each Stockholder that is
not a natural person, 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.
(g) Documentary proof and counsel opinion reasonably acceptable to
Buyer that: (i) The Company has timely obtained all authorizations needed to
carry all signals being carried and all authorizations needed to utilize the
frequencies on which these signals are carried; (ii) Except with respect to
general rulemakings and similar matters relating generally to the Company
activity, there is no legal action or governmental proceeding pending or, to
such counsel's best knowledge after due inquiry, any investigation pending or
proceeding threatened (nor any basis therefor) for the purpose of modifying,
revoking, terminating, suspending, canceling or reforming any of the Company's
certificates of compliance or licenses or which might have any other adverse
effect upon, or cause disruption to, the Company Business; (iii) that the
Company is in good standing with and has appropriate authority from the COMFER
in order to carry on the Company Business as conducted as of the date of this
Agreement and the Closing; (iv) that Stockholders have the power and capacity
to sell the Shares so as to vest good and marketable title to the same, and (v)
such other matters as Buyer may reasonably request.
(h) All blueprints, schematics, drawings, diagrams, maps, system
design bill of material, engineering and technical data, used by the Company in
connection with the Assets and the Company Business, unless Buyer shall direct
in writing that the same or part thereof be delivered to Buyer elsewhere.
(i) A certificate signed by the Secretary (or other person having
and exercising equivalent authority) of each Stockholder that is not a natural
person, certifying to Buyer the incumbency of such Stockholder officers (or
persons having and exercising equivalent authority) from the date hereof to the
Closing Date, and bearing the authentic signatures of all such officers (or
other persons) who shall have executed this Agreement, or any of the other
documents required or contemplated by this agreement, prior to or at the
Closing.
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(j) A long-form certificate of good standing for the Company dated
not more than five (5) days prior to the Closing Date, a certificate of tax
good standing for the Company dated not more than five (5) days prior to the
Closing Date and a "bring-down" tax good standing telegram for the Company
dated the Closing Date, in each case from the Company syndic or the Chairman of
the board of directors.
(k) And a bring down letter dated the Closing Date stating that
between the Balance Sheet Date and the Date of Closing, there have not been
modifications to the Financial Statements other than those attributable to the
evolution of the ordinary Company Business, nor have there been distribution or
payings of Company dividends other than those paid in kind or cash as provided
in Section 2.11 herein.
(l) Such documents and instruments as may be necessary or as Buyer
may request in order to change the authorized signatures for all bank accounts,
and the persons authorized to have access of the Company or otherwise in order
to vest in Buyer exclusive control over and possession of such accounts and
safety deposit boxes and the funds and other property deposited therein.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Stockholders and Company (where noted) represent and warrant to Buyer,
as of the date of this Agreement and as of the Closing, as follows:
SECTION 2.1. Organization and Qualification. Company is a corporation
duly organized, validly existing and in good standing under the laws of
Argentina and has 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 Company is duly qualified or
licensed to do business and is 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
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a material adverse effect on Company or on the validity, binding effect or
enforceability of this Agreement.
SECTION 2.2. Good title. Stockholders have good, valid, marketable and
exclusive title to the Shares free and clear of any liens, encumbrances, rights
of first refusal (except as agreed herein), pledges or claims, with full right
and lawful authority to transfer to Buyer the Shares. There are no outstanding
options, warrants or any other preemptive rights or commitments of any kind for
third parties to acquire or become beneficiary of the Shares 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. Should full payment of any Shares be pending, the same must be
canceled (either through the cancelling of that portion of the capital increase
not paid in, or through payment of the capital increase before Closing).
Spousal consent provided for in article 1277 of the Argentine Civil Code has
been granted by the spouse of each Stockholder when necessary.
SECTION 2.3. Authority and Validity. Company and Stockholders have
authority to execute and deliver, to perform its obligations under, and to
consummate the Stockholders transactions contemplated by this Agreement. The
execution and delivery by Stockholders and Company and the performance by
Stockholders and Company of their obligation hereunder, and the consummation by
Stockholders and Company of the transactions contemplated by this Agreement
have been duly authorized by all requisite corporate and other appropriate
action of Stockholders and Company. This Agreement has been duly executed and
delivered by Stockholders and Company and is the valid and binding obligation
of Stockholders and Company, enforceable against Stockholders and Company in
accordance with 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 the COMFER
Approval and other Required Consents, the execution, delivery and performance
of this Agreement by Stockholders and Company will not: (a) violate any
provision of the charter or bylaws of the Company;
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(b) constitute a material violation of any Legal Requirement; (c) require any
consent, approval or authorization of, or any filing with or notice to, any
Person; 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 Company is a party or by which Company, Company Business or
any of its 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, the Company Business
or the Company.
SECTION 2.5. Assets. Company 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 (a) restrictions stated in the
Governmental Permits and (b) Encumbrances disclosed in this Agreement. Except
as set forth on Exhibit 6, none of the Equipment is leased by Company from any
other Person. The Assets will remain in the Company and are all the assets
necessary to permit Buyer to conduct the Company Business substantially as it
is being conducted on the date of this Agreement in compliance with all Legal
Requirements. 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. No Stockholder or any affiliate of
Stockholder has been granted or has applied for a cable television franchise in
any area currently served by the Company Business, except for Saprotel S.R.L.,
corporation which in the course of this year has not increased its number of
subscribers, and will not in the future.
SECTION 2.6. Real Property.
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2.6.1. All the Assets consisting of Real Property interests are
described on Exhibit 4. Company has valid leasehold interests in Real Property
leased by Company and, with respect to other Real Property not owned or leased
by Company, Company 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 Company or Stockholders to Buyer as
evidence of each lease of Real Property constitute the entire agreement with
the landlord in question, except for the agreements indicated under Exhibit 4
as subject to renegotiation which will be renegotiated in order to have them
meet current practice and market prices for which purposes the parties may
request the appraisal of three respectable local real estate brokers. There are
no leases or other agreements, oral or written, granting to any Person other
than Company 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
Company's current use of, any Real Property are valid and in full force and
effect, and the Company 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 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. Environmental Matters.
2.7.1. The Real Property currently complies with and, to Stockholders'
best knowledge, has previously been operated in compliance with, all
Environmental Laws. Company has not generated, released, stored, used, treated,
handled, discharged or disposed of any Hazardous Substances at, on, under, in
or about, or in any other manner affecting any Real Property, transported any
Hazardous Substances to or from any Real Property or discharged any Hazardous
Substances from any Real Property into any body of water, directly or
indirectly, and Stockholders have no notice that any other present or previous
owner, tenant, occupant or user of any Real Property or any other Person has
committed or suffered any of the foregoing. To Stockholders' best knowledge,
no release of Hazardous Substances outside the Real Prop-
<PAGE> 23
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erty has entered or threatens to enter any Real Property, nor is there any
pending or threatened claim based on Environmental Laws which arises from any
condition of the land surrounding any Real Property. No claim or investigation
based on Environmental Laws which relates to any Real Property or any
operations on it (a) has been asserted or conducted in the past or is currently
pending against or with respect to Company or, to the Stockholders' best
knowledge, any other Person, or (b) to the Stockholders' best knowledge, is
threatened or contemplated.
2.7.2. To Stockholders' best knowledge, (a) no underground storage
tanks are currently or have been located on any Real Property, (b) no Real
Property has been used at any time as a gasoline service station or any other
facility for storing, pumping, dispensing or producing gasoline or any other
petroleum products or wastes and (c) no building or other structure on any Real
Property contains asbestos. There are no incinerators, septic tanks or
cesspools on the Real Property and all waste is discharged into a public
sanitary sewer system.
2.7.3. Stockholders have caused the Company to provide Buyer with
complete and correct copies of (a) all studies, reports, surveys or other
materials in the Company's possession or to which the Company has access
relating to the presence or alleged presence of Hazardous Substances at, on or
affecting the Real Property, (b) all notices or other materials in the
Company's possession or to which the Company has access that were received from
any Governmental Authority having the power to administer or enforce any
Environmental Laws relating to current or past ownership, use or operation of
the Real Property or activities at the Real Property and (c) all materials in
the Company's possession or to which the Company has access relating to any
claim, allegation or action by any private third party under and Environmental
Law.
SECTION 2.8. Compliance with Law: Governmental Permits.
2.8.1. 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 vio-
<PAGE> 24
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lation, individually or in the aggregate, would have a material adverse effect
on the System, the Company Business or the Company. The Company has received no
notice claiming a violation by Company or the Company Business of any Legal
Requirement applicable to Company or the Company Business as it is currently
conducted and to Stockholder's and Company's best knowledge, there is no basis
for any claim that such a violation exists. Shareholders and Company have
complied fully with the laws of the Argentine Republic and United States of
America Foreign Corrupt Practices Act.
2.8.2. Complete and correct copies of the Governmental Permits have
been delivered by Company to Buyer. 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 Company is in 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.
2.8.3. Without limiting the generality of the foregoing: (a) the
operation of Company Business and each System has been, and is, in compliance
with the rules and regulations of the Argentine Republic, (b) Company has made
all filings required to be made with the Governmental Authorities; (c) Company
has provided all notices to subscribers and maintained all public files
required under Argentine Law; (d) each System is in compliance with all must
carry requirements and has received all necessary retransmission consents; and
(e) each System is in compliance with all signal leakage criteria prescribed by
the Argentine regulations.
SECTION 2.9. Patents. Trademarks and Copyrights. Company has timely and
accurately made all requisite filings and payments with the Register of
Copyrights and is otherwise in compliance with all applicable rules and
regulations of the Copyright Office. Company has delivered to Buyer complete
and correct copies of all current reports and filings, and all reports and
filings for the
<PAGE> 25
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past five years, made or filed pursuant to copyright rules and regulations with
respect to the Company Business. Company 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. Company does not
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.
SECTION 2.10. Financial Statements. Stockholders shall cause the
Company to deliver to Buyer combined financial statements of the Company for
the nine months ended September 30, 1994 and years ended December 31, 1994
(within 45 days of year's end) 1993 and 1992 and for each quarter after January
1995 (within 30 days of each quarter's end). Stockholders will cause the
Company to deliver to Buyer correct and complete copies of its audited balance
sheets and related statements of income, Stockholders' equity and cash flows
for the nine months ended September 30, 1994, the three years ended December 31
1994 (within 45 days of year end), 1993 and 1992, and for each quarter after
January 1995 (within 30 days of each quarter's end) all of which shall be
presented in timely manner to Buyer (collectively, the "Financial Statements").
The Financial Statements were and will be prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby and fairly
present Company's financial position, results of operations and changes in
financial position as of the dates and for the periods indicated. Except as
disclosed by, or reserved against in, its most recent balance sheet included in
the Financial Statements, Company did not have as of the date of such balance
sheet any liability or obligation, whether accrued, absolute, fixed or
contingent (including liabilities for taxes or unusual forward or long-term
commitments), which was or would be material to the Company Business, results
of operations or financial condition of Company, nor to Stockholders' or
Company's best knowledge does any aspect of the Company Business form a basis
for any claim by a third party which, if asserted, could result in a liability
not disclosed by or reserved against in such balance sheet, if pertinent.
Stockholders will and shall cause the Company to cooperate fully with Buyer in
the production of Finan-
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Statements, and with the production of all financial statements and related
information required in connection with Buyer's reporting obligations to the
SEC.
SECTION 2.11 Since the date of the most recent balance sheet included
in the Financial Statements (i) the Company Business has been operated only in
the ordinary course, (ii) Company has not sold or disposed of any Assets other
than in the ordinary course of business, except for payment of dividends
necessary to transfer the Programming Assets, Real Property, assets affected to
the programming and the shares of Radiodifusora El Carmen S.A. (Canal 2) and
the credits excluded under Section 1.5 (v), out of the Company, (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 the Company Business, other than changes affecting the cable
television industry generally.
SECTION 2.12 Stockholders represent that all Liabilities have been
adequately reported and accounted for and that there are no Liabilities,
disclosed or undisclosed, for which due provision have not been accounted, if
pertinent. Should there be materially greater Liabilities upon the Company on
the Closing Date, Buyer in its sole discretion may elect to terminate this
Agreement or to consummate the Closing. If Buyer elects to consummate the
Closing, the cash portion of the Base Purchase Price will be reduced in an
amount equal to 80% of said Liability with the agreement of the Stockholders,
or the Stockholders will otherwise guarantee said liability with a pledge over
20% of the shares of the Stockholders in the same manner as that provided for
in Section 1.6.1 as applicable.
SECTION 2.13. Legal Proceedings. Except as set forth on Exhibit 5
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 the Company Business or Company.
<PAGE> 27
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SECTION 2.14. Tax Returns: Other Reports. Company 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 Company have
been paid, except such amounts as are being contested diligently and in good
faith and are not in the aggregate material. 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 2.15. Employment Matters.
2.15.1. On or before 15 December 1994 Stockholders will cause Company
to deliver to Buyer a complete and correct list of names and positions of all
employees of Company engaged in the Company Business and their current hourly
wages or monthly salaries and other compensation. Company has complied in all
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.
2.15.2. Except as provided in Exhibit 8 Company is not bound by any
contract with any labor organization, and Company has not recognized or agreed
to recognize and is not required to recognize any union or other collective
bargaining unit. No union or other collective bargaining unit been certified as
representing any of its employees, nor has Company received any requests from
any party for recognition as a representative of employees for collective
bargaining purposes. To Company's best knowledge, its employees are not engaged
in organizing activity with respect to any labor organization. Company has no
employment agreement of any kind, oral or written, or implied, that would
require Buyer to employ any Person after the Closing Date.
<PAGE> 28
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SECTION 2.16. EBS Numbers. As of the Closing Date, the Company
Business will have no fewer than 350,000 EBS's.
SECTION 2.17. 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 Buyer could be
liable.
SECTION 2.18. Disclosure. No representation or warranty by
Stockholders in this Agreement or in any schedule or Exhibit to this Agreement,
or any statement, list or certificate furnished or to be furnished by
Stockholders or Company pursuant to this Agreement, contains or will contain
any untrue statement or 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 the Company Business is accurate and complete in all material
respects.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Stockholders that:
SECTION 3.1 Organization, Power and Authority.
Buyer is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, United States of America, and has the
sufficient legal power and authority to own or lease and to operate its
properties and to carry on its business as now being conducted.
SECTION 3.2 Authorization. Buyer has the corporate power and authority
to execute and deliver this Agreement, to consummate the transactions
contemplated
<PAGE> 29
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hereby and to perform its obligations under this Agreement, at its sole
discretion. This Agreement, upon its execution and delivery by Buyer (assuming
the due authorization, execution and delivery hereof by the Stockholders),
will constitute the legal, valid and binding obligation of Buyer, enforceable
against Buyer 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 8.14
hereunder.
SECTION 3.3 No Conflict or Violation. Neither the execution and
delivery of this Agreement by Buyer, nor the consummation of the transactions
contemplated hereby, will (a) violate any provision of the Articles of
Incorporation of Buyer, (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 Buyer is a party or by which Buyer or
any of its 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, Buyer or
upon the property or business of Buyer.
SECTION 3.4 Brokers' Fees. No broker, finder or similar agent has been
employed by or on behalf of Buyer in connection with this Agreement or the
transactions contemplated hereby, and no person or entity with which Buyer has
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.
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS
OF THE STOCKHOLDERS
The obligations of each of the Stockholders to consummate the
transactions contemplated by this Agreement are subject to the fulfillment, on
or before the Closing Date, of the following conditions, subject to the right
of the Majority Stockholders (as defined in Section 7.1 hereof) to waive any
such condition.
<PAGE> 30
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SECTION 4.1 Representations and Warranties True. All of the
Representations and Warranties of Buyer contained in this Agreement shall be
true and correct in all material respects on and as of the Closing Date as if
made on and as of the Closing Date.
SECTION 4.2 Agreements Performed. Buyer shall have performed, in all
material respects, all agreements required by this Agreement to be performed by
Buyer prior to or on the Closing Date.
SECTION 4.3 No Actions, Suits or Proceedings. No preliminary or
permanent injunction or other order issued by any federal or state court of
competent jurisdiction preventing consummation of the sale of any or all of the
Shares to Buyer shall be in effect.
ARTICLE V
CONDITIONS TO THE OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transactions contemplated
by this Agreement, are subject to the fulfillment, on or before the Closing
Date, of the following conditions (subject to the right of Buyer to waive any
and/or all such condition in full, or partially).
SECTION 5.1 Representations and Warranties True. All of the
representations and warranties of the Company and each Stockholder contained in
this Agreement shall be true and correct in all material respects on and as of
the Closing Date as if made on and as of the Closing Date.
SECTION 5.2 Agreement Performed. Each Stockholder and the Company
shall have performed, in all material respects, all agreements and covenants
required by this Agreement to be performed by such Stockholder and the Company
prior to or on the Closing Date.
SECTION 5.3 No Actions, Suits or Proceedings. No preliminary or
permanent injunction or other order issued by any Governmental Authority or any
federal or state court of competent jurisdiction preventing consummation
<PAGE> 31
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of the sale of any or all of the Shares to Buyer shall be in effect.
SECTION 5.4 Stockholders' and Officer's Certificates. (a) Buyer shall
have been furnished with certificates executed by each of the Stockholders,
dated the Closing Date, representing and certifying (i) with respect to such
Stockholder that the conditions set forth in this Article V have been fulfilled
at or prior to the Closing Date, and (ii) that such Stockholder is not in
material default under any provision of this Agreement.
(b) Buyer shall have been furnished with a certificate signed by
an appropriate officer of the Company, but without any personal liability
to such officer, regarding the Company's Business and financial condition.
SECTION 5.5 Required Consents. All Required Consents (including but
not limited to consents to change of control of the Company), have been
obtained on or before the Closing.
SECTION 5.6 Contracts. All Company Contracts are in full force and
effect and the Company has not incurred in any default under the same.
SECTION 5.7 Employment Agreements. Mutually acceptable employment
agreements will have been entered into between the Company and its key
employees.
SECTION 5.8 Assets and Employees. The parties will have agreed which
assets and which employees, managers and executives will remain in the Company
after Closing.
SECTION 5.9 Non-Competition and Agreement Not To Hire. Each of the
Stockholders will have entered into mutually acceptable agreements not to
compete with the Company (as provided herein) and not to hire employees of the
Company after Closing (as provided herein).
SECTION 5.10 "Cablevision" License and Programming Assets. Mutually
acceptable agreements will have been
<PAGE> 32
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reached with respect to: (i) Company's continued use of the name
"Cablevision", "CV", "CVN" and all associated names and trade and service
marks and (ii) the obligation of the Company to execute agreements regarding
the Programming Assets at cost or at the lowest existing price for third
parties with inclusion of "most favoured nation" provision, except when
programming is provided free of charge.
SECTION 5.11 COMFER Approvals: All necessary COMFER Approvals required
in connection with this Agreement, to the conditions precedent provided for in
this Article and to any other duty or obligation provided for herein have been
obtained. Such approvals will not impose any material change to the Company's
license nor will they impose conditions that do not permit the Company to
operate substantially as it did prior to Closing. Any COMFER Approval in favour
of Buyer prior to Closing Date will not grant any right nor may any right be
invoked on the basis of said approval, until the Buyer has complied with all
its obligations at Closing. In case COMFER Approval has been obtained prior to
Closing and this Agreement has been terminated, Buyer will carry out all acts,
and sign all documents, which may be necessary to cancel the COMFER Approval.
SECTION 5.12 Additional Agreements. Stockholders must have caused
Company and/or third parties to enter into the additional Agreements
established in Section 1.5, which include, but is not limited to, the Right of
First Refusal.
SECTION 5.13 Due diligence. All aspects related with a broad due
diligence of the Company must have been satisfactorily completed by the Buyer
or its representatives.
SECTION 5.14 Reports for SEC. Financial Statements be prepared by
Buyer, at its cost, in order that Buyer and its Affiliates may file the same to
satisfy (i) its undertaking under Section 512(a) of Regulation S-K to keep the
prospectuses contained in certain presently effective registration statements
current, (ii) the requirements of any forms for the registration of securities
under the Securities Act which Buyer may hereafter
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use to register any of its securities, and (iii) its obligation to file
periodic and current reports under the Exchange Act, (iv) the requirements of
any proxy statement under the Securities Act, and (v) such other rules of the
Securities and Exchange Commission of the United States of America which Buyer
may deem applicable. Stockholders shall fully cooperate with the preparation of
these reports which shall be made under generally accepted accounting
principals of the United States of America.
ARTICLE VI
COVENANTS
Buyer and the Stockholders hereby covenant and agree as follows:
SECTION 6.1 Access to Premises and Records. Between the date of
execution and delivery of this Agreement and the Closing Date, Stockholders
will give Buyer and its representatives full access at reasonable times to all
the premises and books and records of the Company Business and will furnish to
Buyer and its representatives all information regarding the Company Business as
Buyer may from time to time reasonably request. Buyer may immediately send its
agents and other personnel to the Company's offices to work closely on a day -
to - day basis with all top level and other staff of the Company, including
Stockholders. Stockholders will and will cause the Company's staff to work with
and cooperate with Buyer's assigned personnel. Notwithstanding any
investigation that Buyer may conduct of the Company Business, Buyer may fully
rely on Stockholders representations, warranties, covenants and indemnities,
which will not be waived or affected by or as a result of such investigation.
SECTION 6.2 Continuity and Maintenance of Operations. Financial
Statements. Except as Buyer may otherwise agree in writing, until the Closing:
6.2.1 Stockholders will continue to operate the Company Business in
the ordinary course consistent with past practices (including completing line
extensions, placing conduit or cable in new developments and fulfilling ins-
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tallation requests) and will use its best efforts to keep available the
services of its employees employed in connection with the Systems and to
preserve any beneficial business relationships with customers, suppliers and
others having business dealings relating to the Company Business. Without
limiting the generality of the foregoing, Company will maintain the Assets in
good conditions and repair, will maintain adequate inventories of spare
Equipment consistent with past practice, will maintain insurance as in effect
on the date of this Agreement and will keep all of its business books, records
and files in the ordinary course of business in accordance with past practices.
Company will not itself, and will not permit any of its officers, directors,
shareholders, agents or employees to, pay any of Company's subscriber accounts
receivable (other than for their own residences) prior to the Closing Date nor
will they hire any of the current employees officers or directors of the
Company except for those agreed herein. Company will continue to implement its
procedures for disconnection and/or discontinuance of service to subscribers
whose accounts are delinquent in accordance with those in effect on September
30, 1994.
6.2.2 Stockholders will cause the Company not to, without the prior
written consent of Buyer: (a) materially change the rate charged for Basic
Services and will not add or delete any program services; (b) engage in any new
promotions modifying the Basic Service charge or method of payments, or any
promotions which differ materially from usual prior practice, (c) sell,
transfer or assign any of the material Assets or permit the creation of any
Encumbrance on any material Asset or a material Encumbrance on the Assets as a
whole; (d) permit the amendment or cancellation of any of the Governmental
Permits, Company Contracts or any other contract or agreement which affects or
is applicable to the System or the Company Business which adversely affects the
Company or the Company Business; (e) enter into any contract or commitment or
incur indebtedness or other liability or obligation of any kind relating to any
System or the Company Business involving an expenditure in excess of Company's
past ordinary business practice; (f) take or omit to take any action that would
cause Company to be in breach of any of its representations or warranties in
this Agreement, or (g) pay any dividends except as provided in Section 2.11.
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6.2.3 Stockholders will timely cause Company to deliver to
Buyer correct and complete copies of monthly, quarterly and annual
financial statements and operating reports for the Company Business and any
reports with respect to the operations of the System prepared by or for Company
at any time between the date of this Agreement and the Closing. All
financial statements so delivered will be prepared in accordance with
GAAP on a basis consistent with the Financial Statements referred to in
Section 2.10.
SECTION 6.3 Employee Matters.
6.3.1 Stockholders will cause Company to pay to employees
employed in the Company Business all compensation, including salaries,
commissions, bonuses, deferred compensation, severance, insurance, pensions,
profit sharing, vacation, sick pay and other compensation or benefits to which
they are entitled for periods prior to the Closing. Stockholders will cause
Company not to, without the prior written consent of Buyer, change the
compensation or benefits of any employees of the Company Business, except for
normal prior practice in the labor relationship.
6.3.2 Stockholders will have paid or properly accrued for
maintenance and distribution of benefits accrued under any employee benefit
plan maintained by Company pursuant to the provisions of such plans. Buyer will
assume neither any liability for any such accrued benefits nor any fiduciary or
administrative responsibility to account for or dispose of any such accrued
benefits under any employee benefit plans maintained by Company.
6.3.3 All claims and obligations under, pursuant to or in
connection with any welfare, medical, insurance, disability or other employee
benefit plans of Company or arising under any Legal Requirement affecting
employees of Company incurred on or before the Closing Date or resulting or
arising from events or occurrences occurring or commencing on or prior to the
Closing Date will have been paid or properly accrued for, whether or not such
employees are hired after the Closing.
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SECTION 6.4 Required Consents, Estoppel Certificates and
Franchise Renewals.
Stockholders, Company and Buyer will obtain, as soon as possible,
all the Required Consents and COMFER Approvals, in form and substance
satisfactory to the parties. Buyer, Company and Stockholders will
cooperate in obtaining all Required Consents and COMFER Approvals, but
will not be required to agree to any changes in, or the imposition of
any condition to the transfer to Buyer which may imply a material
modification to the Company Business and/or to the conditions or
Sections of this Agreement. Such failure to agree will not constitute a
reason attributable to the same. Should there be changes in,
impositions or conditions which are acceptable to the Buyer but not to
the Stockholders, the latter - in case Closing is not executed - will
immediately return the U$S 20 million received under Section 1.2.a) and
the Deposited Stock will be immediately released. Stockholders will
cause the Company to require, at its expense, such estoppel
certificates or similar documents from lessors and other Persons who
are parties to Company Contracts as Buyer may request.
Stockholders will use their best efforts to obtain, and will
cooperate with Company to obtain, renewals or extensions of any COMFER
and Governmental Authority licenses and franchises which expire prior
to January 1, 2000 ("Extended Franchises"), for applicable legal terms.
SECTION 6.5 No Shopping. None of Stockholder, Company or any
agent or representative of any of them will, during the period
commencing on the date of this Agreement and ending with the earlier to
occur of the Closing or the termination of this Agreement, directly or
indirectly (a) solicit or initiate the submission of proposals or
offers from any Person for, (b) participate in any discussions
pertaining to or (c) furnish any information to any Person other than
Buyer relating to, any direct or indirect acquisition or purchase of
all or any portion of the Company Stock.
SECTION 6.6 Notification of Certain Matters. Stockholders will
promptly notify Buyer of any fact, event, circumstance or action (a)
which, if known on the date of this Agreement, would have been required
to be
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disclosed to Buyer pursuant to this Agreement and (b) the existence or
occurrence of which would cause any Stockholders' representations or
warranties under this Agreement not to be correct and complete.
SECTION 6.7 Risk of Loss. Condemnation.
Stockholders will bear the risk of any loss or damage to the
Company resulting from fire, theft or other casualty (except reasonable
wear and tear) at all times prior to the Closing. If any such loss or
damage is so substantial as to prevent normal operation of any material
portion of a System or the replacement or restoration of the lost or
damaged property within 20 days after the occurrence of the event
resulting in such loss or damage, Stockholders will immediately notify
Buyer of that fact and Buyer, at any time within 10 days after receipt
of such notice, may elect by written notice to Stockholders either (i)
to waive such defect and proceed toward consummation of this Agreement
or (ii) terminate this Agreement, losing monies paid to Stockholders.
If Buyer elects so to terminate this Agreement, Buyer and Stockholders
will be discharged of any and all obligations hereunder, and the
Deposited Shares will be released. If Buyer elects to consummate the
transactions contemplated by this Agreement notwithstanding such loss
or damage and does so, 80% of all insurance proceeds payable as a
result of the occurrence of the event resulting in such loss or damage
will be delivered by Stockholders or Company to Buyer, or 80% of the
rights to such proceeds will be assigned by Stockholders to Buyer if
not yet paid over to Stockholders, and Stockholders will pay to Buyer
(or Buyer may withhold from the Base Purchase Price) an amount equal to
the difference between the amount of such insurance proceeds and 80% of
the full replacement cost of the damaged or lost Assets. If loss or
damage were not covered by an insurance policy, and should Buyer wish
to consummate the transactions contemplated in this Agreement, the Base
Purchase Price payable to Stockholders will be reduced as per market
value of 80% of the said loss or damage.
SECTION 6.8 If, prior to the Closing, any part of or interest
in the Company is taken or condemned as a result of the exercise of the
power of eminent domain, or if a Governmental Authority having such
power informs Stockholders or Buyer that it intends to condemn all or
any part of the Company Business or Assets (such event being
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called, in either case, a "Taking"), then Buyer may terminate this
Agreement, and Buyer will order the Deposited Shares to be released. If
Buyer does not elect to terminate this Agreement, then (a) Buyer will
have the sole right, in the name of Stockholders and the Company, if
Buyer so elects, to negotiate for, claim, contest and receive 80% of
all damages with respect to the Taking, (b) Stockholders will be
relieved of its obligation to convey to Buyer the Assets or interests
that are the subject of the Taking, (c) at the Closing Stockholders
will assign to Buyer 80% of all of Stockholders' rights to all damages
payable with respect to such Taking and will pay to Buyer 80% of all
damages previously paid to Stockholders or Company with respect to the
Taking and (d) following the Closing, Stockholders will give Buyer such
further assurances of such rights and assignments with respect to the
taking as Buyer may from time to time reasonably request.
SECTION 6.9 Lien and Judgment Searches. Buyer may produce, at
its cost in the shortest possible time (a) results of a lien search
conducted by a professional search company of records in the office of
the secretaries of state in each state and county clerks in each county
where there exist tangible Assets, and in the state and county where
Company's principal offices are located, including copies of all
financing statements or similar notices or filings (and any
continuation statements) discovered by such search company and (b) the
results of a search of the dockets of the clerk of each federal and
state court sitting in the city, county or other applicable political
subdivision where the principal office or any material assets of
Company may be located, with respect to judgments, orders, writs or
decrees against or affecting Stockholders or any of the Assets. For
these purposes Stockholders will give full collaboration to the
representatives of Buyer.
SECTION 6.10 Transfer Taxes. Stockholders and Buyer will be
responsible to the extent determined by law for the payment of any
state or local sales, use, transfer, excise, documentary or license
taxes or fees or any other charge (including filing fees) imposed by
any Governmental Authority with respect to the transfer pursuant to
this Agreement, according to the rules provided by the pertinent
legislation. Buyer will pay costs for converting the Company into an
S.R.L. and Stockholders will timely comply with all legal requirements
to enable said
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conversion; and Shareholders will pay cost related to removal from the
Company of the assets to be excluded (Section 1.5 v). The removal will not
affect the Company Business.
SECTION 6.11 Use of Company Trade-name. For a period of 5 years
after the Closing Date, (with Buyers option to extend another 5 years
as long as the Programming Supply Agreement is in force Buyer may
continue to operate the Systems using the trademark/tradename
"Cablevision" and all derivations and abbreviations of such name and
related marks. Prior to Closing, Buyer and the owner of such rights
will enter into an agreement with respect to such rights, in accordance
with Section 5.10.
SECTION 6.12 Satisfaction of Conditions. Each party will use its
best efforts to satisfy, or to cause to be satisfied, the conditions to
the obligations of the other party to consummate the transactions
contemplated by this Agreement, provided that Buyer will not be
required to agree to any increase in the amount payable, or the method
of payment.
SECTION 6.13 Confidentiality. Neither party will issue any press
release or make any other public announcement regarding this Agreement
or the transactions contemplated hereby without the consent of the
other party. Each party will hold, and will cause its employees,
consultants, advisors and agents to hold, in confidence, the terms of
this Agreement and any non-public information concerning the other
party obtained pursuant to this Agreement. Notwithstanding the
preceding, a party may disclose such information to the extent required
by any Legal Requirement (including disclosure requirements under
Argentine and United States of America federal and state securities
laws), but the party proposing to disclose such information will first
notify and consult with the other party concerning the proposed
disclosure, to the extent reasonably feasible. Each party also may
disclose such information to employees, consultants, advisors, agents
and actual or potential lenders whose knowledge is necessary to
facilitate the consummation of the transactions contemplated by this
Agreement. Each party's obligation to hold information in confidence
will be satisfied if it exercises the same care with respect to such
information as it would exercise to preserve the confidentiality of its
own similar information. Stockholders
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authorize Buyer to use all the information which may be necessary for
presentations and filings before the Securities and Exchange
Commission, or applicable state securities commissions.
SECTION 6.14 Necessary Endorsements. Stockholders agree to
endorse, assign and otherwise facilitate the sale and/or assignment of
any TCI Stock used by Buyer to finance this transaction to an agreed
third-party. To this effect the Stockholders are obliged to follow the
written instructions given by the Buyer. Performance of these duties by
Stockholder will not cause any personal or economic liability deriving
from claims from Buyer or third parties. The Buyer will hold
Stockholders harmless against any claim derived from such endorsement
or assignment. Buyer acknowledges that this covenant in no way
obligates Stockholders to accept any consideration other than cash and
Notes in connection with this transaction foreseen in Section 1.2 b).
This obligation of the Stockholders will only be demandable at the
Closing Date.
ARTICLE VII
TERMINATION
SECTION 7.1 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 Buyer and the Majority Stockholders (as
hereinafter defined), (b) by Buyer if any of the conditions precedent
to Closing set forth in Article V of this Agreement have not been met
on the Closing Date and Buyer is not in default of its obligations
hereunder, or (c) by the Majority Stockholders 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 the Stockholders are not in default of
their obligations hereunder. Termination under clauses (b) and (c) of
the immediately preceding sentence shall be effective when a notice of
termination is deemed to have been given pursuant to Section 8.8 hereof
by the party or parties giving such notice to the other party or
parties to whom such notice is directed. For the purposes of this
Agreement, "Majority Stockholders" means Stockholders beneficially
owning at least 51% of the Shares being sold pursuant to this
Agreement.
<PAGE> 41
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SECTION 7.2 Effects of Termination. If this Agreement is
terminated and the transactions contemplated hereby are not consummated
as provided in Section 1, this Agreement shall have no further force
and effect. In case this Agreement is terminated on the grounds of
breach of the statements made under Exhibit 7 the US $20,000,000 will
be returned to the Buyer by the Stockholders, in which case the
Deposited Stock will be released. This general provisions does not
apply with regard to the provisions of Section 6.13 hereof relating to
the confidentiality obligations of the parties, Section 6.13 hereof
relating to publicity, and Sections 2.17 and 3.4 hereof relating to
expenses; and provided that nothing in this Article VII shall relieve
any party of liability if the failure to consummate the transactions
contemplated hereby is due to an intentional action or inaction by such
party which such party knew or reasonably should have known would cause
the Closing hereunder not to occur on the Closing Date.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 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
Stockholder pursuant to this Agreement will survive until the sixth
anniversary of the Closing Date, except that (a) all such
representations and warranties with respect to any federal, state or
local taxes, environmental matters, 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 Buyer in this Agreement and in the
documents and instruments to be delivered by Buyer pursuant to this
Agreement will survive until the sixth 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 Buyer in a written notice to Stockholders
before such expiration or about which Stockholders have given Buyer
written notice before such
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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 8.2 Indemnification by Stockholders. Stockholders
jointly and severally, agree to (and prior to the Closing and following
any rescission of the transactions consummated at the Closing, shall
cause the Company to) indemnify and/or defend and/or hold harmless
Buyer from and against:
(a) all losses, damages, liabilities, deficiencies or obligations
of or to the Company, Buyer or any such other indemnified person
resulting from or arising out of (i) any misrepresentation or breach of
warranty or any nonperformance or breach of any covenant or agreement
of Stockholders contained in this Agreement or any additional
agreements; (ii) the ownership of the Shares, the ownership or
operation of the Company Assets, or the control, management or
operations of the Company Business, prior to the Closing, whether known
or unknown, asserted or unasserted, now existing or arising at any time
prior to, at or after the Closing, including, without limitation, fines
or forfeitures imposed or threatened to be imposed by any authority for
any operation of the Company Business at or prior to the Closing which
was not in full compliance with applicable rules, or for any operation
at or prior to the Closing of any facility used in conjunction with the
operation of the Company Business which was not in full compliance with
said rules and any future, additional assessment imposed on Buyer or
Company after the Closing by the Copyright Tribunal, the liability for
which occurred prior to the Closing, but excluding any of such
liabilities that are reflected on the Balance Sheet to the extent
reflected thereon; and
(b) 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.
SECTION 8.3 Stockholders further indemnification. Each of the
Stockholders severally and jointly, agrees to indemnify and hold
harmless Buyer, and its assigns from and against any and all claims,
losses, damages and expenses (including, without limitation, settle-
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ment costs and reasonable legal or other expenses) incurred by the
Company, Buyer or assignee resulting from or arising out of any
misrepresentation or breach of any warranty relating to such
Stockholder or the Shares sold by such Stockholder or the
nonperformance or breach of any covenant, agreement or obligation of
such Stockholder.
SECTION 8.4 Limitation to Indemnification. The only limitation
on Stockholders' indemnity obligation in favor of Buyer, Company or
assignees will be in reference to liabilities for tax, environmental,
labour, employee benefits, social contributions, contract claims, tort
claims and Governmental Permits issues (except for COMFER licenses of
the Company for which this limitation will not apply). Stockholders
total obligation to indemnify Company, Buyer or assignees with respect
to all such claims will be limited in the aggregate to US $50 million.
SECTION 8.5 Indemnification by Buyer. Buyer agrees to
indemnify, defend and hold harmless each Stockholder, its successors
and assigns, from and against all losses, damages and expenses
(including, agreed to, settlement costs and reasonable legal or other
expenses) incurred by such Stockholder or any other indemnified person
in connection with any misrepresentation or breach of any warranty made
by Buyer in this Agreement or the nonperformance or breach of any
covenant, agreement or obligation of Buyer contained in this Agreement.
SECTION 8.6 Third Party Claims. Promptly after the receipt by
any party hereto of notice of any claim, action, suit or proceeding 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 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
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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 unless (i) the Indemnifying Party has agreed to pay
such fees and expenses, (ii) any relief other than the payment of money
damages is sought against the Indemnified Party or (iii) the
Indemnified Party shall have been advised by its counsel that there may
be one or more legal defenses available to it which are different from
or additional to those available to the Indemnifying Party, and in any
such case the fees and expenses of such separate counsel shall be borne
by 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 8.7 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 Buyer or the Majority Stockholder, as the
case may be, except for the Stockholders rights to assign their rights
and duties under this Agreement to an S.R.L. controlled by the
Stockholders, (in which case the Stockholders will assume joint several
liability), and Buyer's authorized assignment of its rights and
obligations hereunder in favour of subsidiaries of Buyer or Carlos Avila
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y Cia. S.R.L. (in which case Buyer will assume joint several
liability). Assignment can also be made in favour of Time Warner and/or
US WEST provided that these assignees may comply with the legal
requirements of COMFER. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Subject to the immediately preceding
sentence, this Agreement is not intended to benefit, and shall not run
to the benefit of or be enforceable by, any other person or entity
other than the parties hereto and their permitted successors and
assigns. Assignments of rights must be notified to the other party.
SECTION 8.8 Notices. All notices or other communications
required or permitted to be given hereunder shall be in writing and
shall be delivered by hand (acknowledgement 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 the Stockholders, addressed to:
Mr. Eduardo Eurnekian
Honduras 5663
1414 - Buenos Aires
Argentina
Telephone: (54 1) 777-1111 or (54 1) 777-1234
Fax: 777-1111
with a copy to:
Mr. Mariano Ibanez
Bonpland 1745
1414 - Capital Federal
Telephone: 777-1234
Telecopier: 777-1234 (extension 765)
If to Buyer, addressed to:
TCI International Holdings, Inc.
5619 DTC Parkway
Englewood, Colorado 80111, U.S.A.
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Attention: President
Telephone: (1 303) 267 5740
Telecopier: (1 303) 488 3242
with a copy to:
TCI International Holdings, Inc.
5619 DTC Parkway
Englewood, Colorado 80111, U.S.A.
Attention: General Counsel
Telephone: (1 303) 267 4800
Telecopier: (1 303) 488 3245
and to:
M & M BOMCHIL - Abogados
Suipacha 268, 12th floor
1355 - Buenos Aires, Argentina
Attention: Messrs. Marcelo Bombau/Nestor Belgrano
Telephone: 328 8400
Fax: 326 7217
or in any case to such other address or addresses as hereafter shall be
furnished as provided in this Section 8.8 by any of the parties hereto
to each of the other parties hereto.
SECTION 8.9 Waiver: Remedies. No delay on the part of Buyer, 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 Buyer 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 Buyer,
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on the one hand, or any of the Stockholders, on the other hand, the
Buyer 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 8.10 Entire Agreement. This Agreement, including the
schedules and 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, and all schedules referred to herein, are
hereby incorporated in and made a part of this Agreement as if set
forth in full herein.
SECTION 8.11 Amendments; Waivers; Control By Majority. This
Agreement may be modified or amended only by a written agreement signed
by Buyer and the Majority Stockholders. Provisions hereof may be
waived, and other actions permitted hereunder or contemplated hereby
may be taken, in the case of Buyer, by an instrument signed by Buyer,
and in the case of the Stockholders, by an instrument signed by the
Majority Stockholder.
SECTION 8.12 Further Assurances. Each Stockholder shall, at the
request of Buyer, at any time and from time to time following the
Closing hereunder, execute and deliver to Buyer 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 Buyer, or to perfect or record Buyer's title to
or interest in, the Shares sold by such Stockholder hereunder. Buyer
shall at any time and from time to time following the Closing hereunder
execute and deliver to the Stockholders, or any of them, 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
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efforts to consummate the transactions contemplated by this Agreement.
SECTION 8.13 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 8.14 Governing Law: Choice of Forum. This Agreement
shall be governed by and construed in accordance with the laws of the
Republic of Argentina, except for the Promissory Notes # 1 to 8 which
will be exclusively governed in accordance with the laws of the State
of New York, United States of America.
SECTION 8.15 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, and except for those cases related
to default in payment of moneys due and the enforcement of pledge
agreement indicated in Section 1.6.1. and Section 2.12, 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 Stockholders, 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). Should an
<PAGE> 49
-49-
issue related to default In payment of moneys due or enforcement of the
pledge agreement foreseen in Sections 1.6.1. arise, parties agree to
submit to the jurisdiction of the courts of the city of Buenos Aires,
or the city of New York as the Stockholders may decide, except for the
case of enforcement of the pledge provided for under Section 2.12 in
which case the option will be in favour of the Buyer.
SECTION 8.16 Noncompetition. Each Stockholder covenants and
agrees that, during the period in which his director or Stockholder of
the Company, and for five years thereafter neither he, nor it, nor any
of its officers, directors or affiliates, directly or indirectly, shall
manage, operate, join, control, participate, or become interested in,
or be connected with (as an employee, consultant, partner, officer,
director, stockholder or investor, other than through ownership of up
to a 5% equity interest in a publicly-traded entity) any cable
television company or System nor in any Direct Broadcast Satellite or
Direct to Home System which has Subscribers located within 40 (forty)
kilometers miles from the periphery of any portion of the Company
Business. This non-competition clause will terminate five (5) years as
from the date the Stockholders ceases in his capacity as Stockholder or
director of the Company.
SECTION 8.17 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 Common Stock or the Shares, which has not
been set forth in this Agreement.
SECTION 8.18 Captions. All section titles or captions contained
in this Agreement, in any Exhibits annexed hereto or in any Schedule
referred to herein, 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
references herein to numbered sections, except otherwise indicated, are
to sections of this Agreement.
<PAGE> 50
-50-
SECTION 8.19. This Agreement is executed in English and Spanish
versions, and in case of differences among them, the Spanish version
shall prevail.
SECTION 8.20. The Stockholders and Buyer will execute those
documents which may be necessary for the best implementation of the
agreements contained herein.
SECTION 8.21. All the provisions, rights and obligations
undertaken by the Buyer and Stockholders are subject to the suspensive
condition of the corresponding COMFER Approval.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the day and year first above written.
1) TCI International Holdings, Inc.
By: Mr. Fred A. Vierra
Chief Executive Officer
/s/ FRED A. VIERRA
2) THE STOCKHOLDERS
/s/ EDUARDO EURNEKIAN
3) COMPANY
Cablevision S.A.
By:
/s/ EDUARDO EURNEKIAN
Televisora Belgrano S.A.
By:
/s/ EDUARDO EURNEKIAN
Construred S.A.
By:
/s/ EDUARDO EURNEKIAN
<PAGE> 51
-51-
Univent's S.A.
By:
/s/ EDUARDO EURNEKIAN
4) Spouses of Stockholders
/s/ EDUARDO EURNEKIAN
<PAGE> 1
Exhibit 2.2
M. & M. BOMCHIL
ABOGADOS
AMENDMENT TO STOCK PURCHASE AGREEMENT EXECUTED ON
DECEMBER 6, 1994
In the city of Buenos Aires, on this 27th day of March 1995, the
parties to the Stock Purchase Agreement executed on December 6, 1994
(the "Contract"), Mr. Eduardo Eurnekian representing the Stockholders,
and Mr. Fred Vierra representing the Buyer (as said terms are defined
in the Contract), agree to partially amend the Contract as provided in
this Amendment to Stock Purchase Agreement ("Agreement"). Unless
otherwise indicated, all capitalized terms shall have the meaning given
them in the Contract.
1) Upon the terms and subject to the conditions set forth in the
Contract and this Agreement, at the Closing Stockholders shall sell to
Buyer good and exclusive title to fifty-one percent (51%) of the Common
Stock of the Company and Buyer shall deliver cash in the form of a bank
transfer of readily available monies and negotiable and endorsable
promissory notes in payment of the Base Purchase Price as provided
below.
2) The Closing Date will be April 30, 1995 or as otherwise agreed by
the parties and the Base Purchase Price will be calculated according to
the number of EBS's (as defined below) on March 31, 1995 (the "EBS
Date").
3) EBS. For the purpose of defining the Base Purchase Price and
adjustments to the same, EBS shall have the meaning set forth in
Exhibit 1 to this Agreement.
4) At Closing, Buyer will pay Stockholders an amount equal to U$S
1,500 times fifty-one percent (51%) of the number of EBS on the EBS
Date (U$S 321,428,520 as per the example which follows herein), minus
fifty-one percent (51%) of all Liabilities to be deducted according to
the Contract. Assuming a) revenues in pesos of 12,500,000, b) an EBS
number of 420,168 and c) Liabilities of U$S 85 million, the parties
contemplate the Base Purchase Price to be U$S 278,078,520. Buyer has
already transferred twenty million U.S. Dollars (U$S 20,000,000) of
such amount to Stockholders. The Base Purchase Price and the Exercise
Price (as defined below) will be paid sixty percent (60%) by a bank
transfer of immediately available funds, and forty percent
<PAGE> 2
M. & M. BOMCHIL -2-
ABOGADOS
(40%) in the form of promissory Notes payable in two years as provided
below. The 60%-40% calculation will be made prior to any applicable
deductions. Liabilities will be deducted from the 40% calculation.
5) Assuming a Base Purchase Price of U$S 278,078,520 at the Closing,
the same shall be paid as follows: Buyer shall deliver to Stockholders
(i) U$S 172,857,112 in cash (after subtracting the U$S 20 million
already transferred from Buyer to Stockholders) by bank transfer of
readily available funds to the account which Stockholders will indicate
and (ii) the balance of U$S 85,221,408 (after subtracting the 51% of
the assumed Liabilities of U$S 85 million i.e. U$S 43,350,000) in the
form of four (4) promissory notes of U$S 21,305,352 payable in twenty
(20) equal and consecutive monthly installments of U$S 4,261,070,
starting the last day of the fourth month after the closing. Each
promissory note will bear interest as provided in the Contract. On the
last day of the fourth month following the Closing, all interest
accrued during such four month period will be paid in full in addition
to the first of the twenty monthly installments.
6) Stockholders hereby grant Buyer an option (the "Option") with a
term which expires automatically two years after the Closing to
purchase up to an additional twenty-nine (29%) of the Common Stock of
the Company. The option may be exercised in full or in part from time
to time during its entire term.
7) (a) The exercise price of such option (the "Exercise Price") will
be calculated by multiplying U$S 1,500 times the number of EBS's on the
date of exercise of the Option and then multiplying that number by the
percentage amount of the Option which Buyer is exercising at that time
(the "Option Amount"). Finally, a percentage of Liabilities as of the
EBS Date (March 31, 1995) corresponding to the Option Amount will be
subtracted. For purposes of determining the Exercise Price, EBS will be
calculated as follows:
R x C = EBS
-------------
U$S 29,75
<PAGE> 3
M. & M. BOMCHIL -3-
ABOGADOS
Where:
R: Total income in Argentine pesos (Argentine currency) from cable
television operations for the month immediately prior to the relevant
exercise date. As used herein "total income in Argentine pesos from
cable television operations" shall have the meaning that "total income
in pesos" has in the definition of EBS attached hereto as Exhibit 1.
C: That number necessary to convert Argentine pesos into U.S. Dollars
at the average of the free market exchange rate in effect six months
before and six months after the relevant exercise date.
(b) if, on the relevant Option exercise date, the Company has any line
of business other than those in which it is currentely engaged,
including telephony operations, the Exercise Price for such lines of
the Company business will be calculated by multiplying the Option
Amount by the Company's capital expenditures and the unexpended capital
contributions from the shareholders from the Closing Date to the date
of exercise attributable solely to such line of business. The amount
resulting from this procedure will be added to the amount resulting
from the procedure foreseen in (a) above.
8) The parties agree that, if COMFER Approval is not received (as
provided in Section 5.11 of the Contract) within sixty (60) days of
Buyer's providing Stockholders with all COMFER application information
for which Buyer is responsible, this Agreement and the Contract will
terminate and Stockholders will immediately refund Buyer's US $20
million as provided in Section 7.2 of the Contract. Except for
paragraphs 1B, 1C, 1D, 1E and 4, all other conditions in Exhibit 7 of
the Contract which would entitle Buyer to return to its US $20 million
are hereby waived and without effect.
9) The parties will enter into programming agreements for all of the
Programming Assets with a term of two years and a most favored nation
clause applicable to each provision, except for provisions in which
programming is provided for free. Buyer will have a right of first
negotiation to extend such agreements. The parties will agree on the
best
<PAGE> 4
M. & M. BOMCHIL -4-
ABOGADOS
approach to negotiating extensions on all current Company Contracts
with third party programmers.
10) The parties will amend fully the Contract and its exhibits in
conformity with what is established in this Agreement (for instance,
51% of Liabilities upon the Stockholders and 49% upon the Company,
equal number of managers with deadlock voting to be decided by a
casting vote of one of the Buyer's directors, non-existance of the veto
rights by the Shareholders or their representatives in case of
non-agreement). The remaining provisions of the Contract, including but
not limited to those related to Representations and Warranties,
Conditions to the Obligations, Covenants, Termination and Miscellaneous
will remain in effect.
11) All the dates provided in Sections 1.4, 1.5 and 1,8 of the
Contract are no longer in effect. All deliveries required prior to
Closing will be made three (3) days prior to the Closing Date.
12) After Closing, the senior officers of the Company and their
offices will be as follows:
Eduardo Eurnekian Chairman
Fred Vierra Vice Chairman
Greg Bicker CEO
The parties will agree on Mr. Eurnekian's role after Closing at their
earliest possible convenience.
13) In the event that all or any portion of the Liabilities deducted
from the Base Purchase Price or the Exercise Price as provided herein
are not paid when due, Buyer will refund to Stockholders the relevant
unpaid portion of such deducted Liabilities (without interest) within
six (6) months after all applicable statues of limitation in connection
with the non-payment of such Liabilities have expired.
14) The parties agree that the non-competition provision established
in Section 8.16 of the Contract will not apply to the current
activities which the Shareholders have in Oeste Cable Color S.A.
<PAGE> 5
M. & M. BOMCHIL -5-
ABOGADOS
15) Mr. Eduardo Eurnekian is personally liable for all the Liabilities
which may arise or stem against the Company as a consequence of the
case named "Gomez, Jose Alberto and others versus Cablevision S.A."
claiming damages which is being heard by the First Instance National
Court in Civil Law Nr 54 of the city of Buenos Aires.
16) The parties may agree that the cash portion of the Base Purchase
Price which is payable at the Closing Date may be in Argentine pesos
(legal currency of the Argentine Republic).
17) This Agreement contains certain principal points on which the
parties have agreed. It does not contain all the amendments to the
Contract to which the parties have tentatively agreed and it does not
constitute the comprehensive, definitive agreement which the parties
will execute on or prior to the Closing Date.
<PAGE> 6
M. & M. BOMCHIL
ABOGADOS
EXHIBIT 1
"EBS": For the purposes of determining the Base Purchase Price and the
adjustments to the same, the Stockholders and the Buyer define EBS's as
the number derived by dividing (a) the total income in pesos received
by the Company for Basic Services and additional outlet charges during
the full calendar month immediately prior to that of the Closing Date
including all payments for more than one period for such charges if
paid in such month, by (b) US $29.75. Notice is made that there is no
V.A.T. applicable relation to the income in pesos and that the same
will not be considered in relation to the definition established herein
and will therefore not be included in the calculation of "total income
in pesos". Within 90 days as from Closing Date the amount of EBS will
be adjusted as of the EBS Date for the sole purpose of including in the
calculation of the Base Purchase Price only those subscribers whose
Basic Services were installed before Closing and who have paid their
first regularly scheduled billing for Basic Services after the Closing,
and excluding from the said calculation only all those Subscribers who
as of the Closing Date had paid their first Basic Service billing and
who had not paid their second Basic Service billing after the
Closing Date.
<PAGE> 7
M. & M. BOMCHIL -2-
ABOGADOS
MODIFICACION AL CONVENIO DE COMPRAVENTA DE ACCIONES
SUSCRIPTO EL 6 DE DICIEMBRE DE 1994
En la ciudad de Buenos Aires, a los 28 dias del mes de marzo de 1995,
las partes del Convenio de Compraventa de Acciones celebrado el 6 de
diciembre de 1994 (el "Convenio"), Sres. Eduardo Eurnekian en
representacion de los Accionistas, y el Sr. Fred Vierra en
representacion del Comprador (conforme se definen dichos terminos en el
Convenio), acuerdan en modificar parcialmente el Convenio conforme se
preve en este Acuerdo de modificacion al Convenio (el "El Acuerdo").
Salvo indicacion en sentido contrario, todos los terminos que comiencen
con mayusculas tendran el mismo significado que les fuera asignado en
el Convenio.
1) En los terminos y sujeto alas condiciones establecidas en el
Convenio y este Acuerdo, al Cierre los Accionistas venderan al
Comprador titulo suficiente y exclusivo al cincuenta y un por ciento
(51%) de las Acciones Ordinarias con derecho a voto de la Compania, y
el Comprador abonara el Precio Base de Compra mediante la transferencia
bancaria de importes en efectivo inmediatamente disponibles y entrega
de pagares negociables y endosables conforme se especifica mas abajo.
2) La Fecha de Cierre sera el dia 30 de abril de 1995, o aquel otro
que acuerden las partes, y el Precio Base de Compra sera calculado de
conformidad con la cantidad de EBS (conforme se define mas abajo) al
dia 31 de marzo de 1995 (la "Fecha EBS").
3) EBS. A los fines de definir el Precio Base de Compra y los ajustes
al mismo, el significado de EBS sera aquel establecido en el anexo I a
este Acuerdo.
4) Al Cierre, el Comprador abonara a los Accionistas un importe
equivalente a US $1.500 multiplicado por el cincuenta y un por ciento
(51%) de la cantidad de EBS a la Fecha EBS, (US $321.429.520,00
conforme el ejemplo que se desarrolla en el presente) menos el
cincuenta y un por ciento (51%) de todas las Responsabilidades a ser
deducidas conforme al Convenio. Suponiendo a) ingresos en pesos por
$12.500.000, b) una cantidad de 420.168 EBS y c) Res-
<PAGE> 8
M. & M. BOMCHIL -3-
ABOGADOS
tual de Responsabilidades existentes a la fecha EBS, (31.03.95)
correspondientes a la Cantidad de la Opcion sera restado. A los fines
de calcular el Precio de Opcion, los EBS Opcion calculados del modo que
sigue:
RxC = EBS
----------
U$S 29.75
En dicho ejemplo:
R: significa ingresos totales en Pesos (moneda de curso legal en la
Argentina) provenientes de la actividad de televisi6n por cable
durante el mes inmediato anterior a la fecha de ejercicio de la
Opcion. A los fines aqui indicados los "ingresos totales en Pesos
provenientes de la actividad de television por cable" tendran el
significado dado a "ingreso total en Pesos" en la definici6n de
EBS adjunta bajo el Anexo 1.
C: significa el numero necesario para convertir los Pesos (moneda de
curso legal en la Argentina) en Dolares Estadounidenses conforme
al promedio del tipo de cambio libre durante los seis meses
anteriores y posteriores a la fecha de ejercicio de la Opcion.
(b) Si a la fecha de ejercicio de la Opcion, la Compania tuviere
cualquier otra actividad distinta a la que actualmente desarrolla (vgr.
telefonia), el Precio de Opcion por dichas actividades adicionales de
la Compania se calculara multiplicando la Cantidad de Opcion por los
egresos realizados por la Compania, y por los aportes realizados por
los Accionistas que no sean traducidos en egresos por la Compania, desde
la Fecha de Cierre a la fecha de ejercicio de la Opcion exclusivamente
atribuible a tales actividades. El importe resultante de este
procedimiento se adicionara al que resultare al establecido en el
apartado (a).
8) Las partes acuerdan que si la Aprobacion del COMFER no se obtiene
(conforme se preve en el Articulo 5.11. del Convenio) dentro de los
sesenta (60) dias a contar desde que el Comprador provea a los
Accionistas con toda la informacion requerida por el COMFER por la cual
el Comprador
<PAGE> 9
M. & M. BOMCHIL -4-
ABOGADOS
es responsable, este Acuerdo y el Convenio concluiran y los Accionistas
devolveran inmediatamente al Comprador los U$S 20.000.000 de
conformidad con lo previsto en el Articulo 7.2 del Convenio.
Excepcion hecha de los parrafos 1B, 1C, 1D, 1E y 4 todas las demas
condiciones previstas en el Anexo 7 del Convenio que darian derecho al
Comprador a la restitucion de sus U$S 20.000.000 son renunciadas por la
presente y dejadas sin efecto.
9) Las partes celebraran acuerdos de programacion por todos los
Bienes de la Programacion con una extension de dos anos y una clausula
de nacion mas favorecida aplicable a cada articulo, salvo para las
clausulas en que se estipule la provision de programacion en forma
gratuita. El Comprador tendra un derecho de primera opcion de
negociacion para la prorroga de dichos convenios. Las partes acordaran
la mejor metodologia para negociar la prorroga de todos los Convenios
de la Compania actualmente vigentes con programadores terceras partes.
10) Las partes ajustaran todas las clausulas establecidas en el
Convenio y sus anexos a lo establecido en este Acuerdo (por ejemplo,
51% de las Responsabilidades sobre los Accionistas y 49% sobre la
Compania, igual numero de directores con voto de desempate en favor de
uno de los directores del Comprador en caso de empate, inexistencia de
derechos de veto por los accionistas o sus representantes en caso de
disidencia). Las restantes provisiones del Convenio, especialmente, y
sin que se entienda como una limitacion, aquellos relacionados con
Declaraciones y Garantias, Condiciones a las Obligaciones, Compromisos,
Terminacion, y Varios permaneceran en vigencia.
11) Todas las fechas previstas en los Articulos 1.4, 1.5 y 1.8 del
Convenio carecen de efectos. Todas las entregas requeridas con
anterioridad al Cierre seran efectuadas tres (3) dias antes de la Fecha
de Cierre.
12) Luego del Cierre los directivos de la Compania y sus posiciones
seran: Eduardo Eurnekian - Presidente; Fred Vierra -Vicepresidente;
Gregory Bicket -Chief Executive Officer. Las partes acordaran sobre el
rol del Sr. Eurnekian a la brevedad posible luego del Cierre.
<PAGE> 10
M. & M. BOMCHIL -5-
ABOGADOS
13) En el caso que todas o parte de las Responsabilidades deducidas
del Precio Base de Compra o el Precio de Opcion conforme se preve en el
presente no fueren abonadas a sus vencimientos, el Comprador devolvera
a los Accionistas los importes que no fueran afectados para
cancelar las Responsabilidades deducidas (sin intereses) dentro de los
seis (6) meses luego de vencido todo periodo de prescripcion relativo
al no pago de dicha Responsabilidad.
14) Las partes acuerdan que la clausula de no competencia prevista en
el Articulo 8.16 del Convenio, no es aplicables a las actividades que
desarrollen actualmente los Accionistas en Oeste Cable Color S.A.
15) El Sr. Eduardo Eurnekian, se hace responsables en forma personal
de todas las Responsabilidades que pueda devenir o sobrevenir a la
Compania a consecuencia de los autos caratulados "Gomez Jose Alberto y
otros C/ Cablevision S.A. S/ danos y perjuicios" que tramitan por ante
el Juzgado Nacional de Primera Instancia en lo Civil Nro. 54, de la
ciudad de Buenos Aires.
16) Las partes podran acordar que el pago en efectivo del Precio Base
de Compra a realizarse a la Fecha de Cierre sea en Pesos (moneda de
curso legal en la Republica Argentina).
13. Este convenio contiene ciertos puntos principales sobre los cuales
las partes han acordado. No contiene todas las modificaciones al
Convenio que las partes han tentativamente acordado y no constituye el
acuerdo comprensivo y definitivo que las partes celebraran en o antes
de la Fecha de Cierre.
<PAGE> 11
M. & M. BOMCHIL
ABOGADOS
ANEXO 1
"EBS": a Los fines de la determinacion del Precio Base de Compra y el
ajuste al mismo, los Accionistas y el Comprador definen como EBS el
numero resultante de dividir (a) el ingreso total en Pesos a la
Compania por los rubros de Servicios Basicos y bocas adicionales,
durante todo el mes calendario inmediato anterior al de la Fecha de
Cierre, incluyendo todo pago correspondiente a mas de un periodo por
iguales conceptos en caso de ser abonado en dicho mes, por b) U$S
29,75. Se deja constancia que no existe I.V.A. sobre el ingreso en
pesos y que el mismo no se considerara en cuanto a la definicion
establecida por las partes en este articulo, por lo tanto no se
incluira en el calculo del "ingreso total en pesos". Dentro de los
noventa (90) dias a contar desde la Fecha de Cierre, sera ajustada la
cantidad de EBS a la Fecha EBS al solo y unico efecto de incluir en el
calculo del Precio Base de Compra solamente a los Suscriptores alos que
se le hubiesen instalado el Servicio Basico antes del Cierre y que
paguen su primera factura regularmente programada por Servicios Basicos
con posterioridad al Cierre, y excluir solamente a todos aquellos
Suscriptores que a la Fecha de Cierre hubieren abonado su primer
facturacion por Servicios Basicos y no abonaren la segunda facturacion
por Servicios Basicos con posterioridad al Cierre.
<PAGE> 1
Exhibit 10
STOCKHOLDERS AGREEMENT
THIS AGREEMENT is made on December 6, 1994
BETWEEN:
(1) Eduardo Eurnekian, I.C. Nbr. 4.086.268, in his individual capacity and
on behalf of Basilia Jaliquias, I.C. Nbr. 3.304.838; Natalio Wende, I.C. Nbr.
4.203.286; Alberto Antranik Eurnekian, I.C. Nbr. 2.073.441; Enrique Kevorkyan,
I.C. Nbr. 16.821.610; Sebastian Arias Duval, I.C. Nbr. 20.987.869; Lorenzo Luis
Marchese, I.C. Nbr. 7.640.022 and Tomas Daniel Kolakovic, I.C. Nbr. 7.861.707,
("the Sellers"); and
(2) TCI International Holdings, Inc. ("TCI") a corporation organized under
the laws of the State of Delaware, USA, with its main offices at 5619 DTC
Parkway Englewood, Colorado, 80111, U.S.A.
WHEREAS:
(A) Cablevision S.A., Televisora Belgrano S.A., Construred S.A. Univent's
S.A. ("the Companies") are corporations organized under the laws of the
Republic of Argentina with their main offices within the City of Buenos Aires,
Argentina.
(B) The Sellers hold shares which represent 100% of the capital stock and
votes of the Companies.
(C) The Sellers and TCI executed as of the date hereof a stock purchase
agreement by which TCI agreed to acquire from the Sellers the shares or quotas
representing the 80% of the capital stock and votes of the Companies ("the
Purchase Agreement").
(D) The Sellers and TCI agree that the future relationship between them as
co-owners of the Companies as "sociedades anonimas" and/or after their
conversion into "sociedades de responsabilidad limitada" as foreseen in the
Purchase Agreement, shall be governed by the terms set out in this Agreement.
NOW IT IS HEREBY AGREED as follows:
1. DEFINITIONS
<PAGE> 2
-2-
In this Agreement, unless the context otherwise requires, the following
expressions have the following meanings:
All capitalized terms not defined herein will have the meaning given them in
the Purchase Agreement.
"Affiliate" one company or individual shall be deemed to be an affiliate of
another if one is Controlled by, under common Control with, or Controlling the
other;
"the Auditors" the firm of accountants referred to in Clause 4 or the firm of
accountants subsequently appointed pursuant to Clause 4;
"TCI's Directors or Managers" the directors or managers of the Companies
nominated from time to time by TCI in accordance with Clause 2.1.1 hereof;
"Sellers' Director or Manager" the director or manager of the Companies
nominated from time to time by the Sellers in accordance with Clause 2.1.1.
hereof;
"the Board or the Managers" the board of directors or managers of the
Companies;
"Control" a company or a person shall be deemed to have control over another
company if it (directly or indirectly) owns, or has the right to exercise more
than half the voting rights in such other company or otherwise exercises
(whether directly or indirectly) a legal right of decision making in such
company's affairs;
"Net Worth" share capital plus reserves and retained earnings of each of the
Companies;
"the Shares" ordinary nominative and non-endorsable shares issued in the
Companies at a par value of 1 peso each;
"the Quotas" the quotas in which the capital stock of the Companies will be
represented after the conversion of the Companies pursuant to the Purchase
Agreement;
"the Territory" the Republic of Argentina;
"the Partners" the partners or stockholders of the Companies.
1.2 Except where inconsistent with anything contained herein:
<PAGE> 3
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1.2.1 words in this Agreement denoting the masculine gender shall include
the feminine gender and the singular number shall include the plural and
vice versa;
1.2.2 the titles and headings herein are used for convenience of reference
only and shall not be deemed part of this Agreement for the purpose of
interpretation;
1.2.3 all schedules to this Agreement form an integral part hereof.
2. SHAREHOLDERS OR PARTNERS UNDERTAKINGS
2.1 Notwithstanding anything contained in the by-laws of the Companies,
the Partners respectively undertake that they shall at all times take all steps
necessary to ensure that the following provisions shall apply to each other and
to the Companies.
2.1.1 Unless otherwise agreed in writing between the Partners, the number of
directors or managers of each of the Companies shall be five (5), of which four
(4) shall be TCI' Directors or Managers and one (1) shall be Sellers' Director
or Manager; TCI and the Sellers may appoint the alternate Directors or
alternate Managers in the same proportion as they may appoint Directors or
Managers. Subject to any necessary approval being obtained from the "Comite
Federal de Radiodifusion" (COMFER) the Partners shall each be entitled at any
time to remove or substitute any of their respective nominated directors or
managers or alternate directors or managers.
2.1.2 To be quorate a meeting of the Board or of the Managers shall require
the presence of a majority of Directors or Managers then in office present in
person or by their alternates of whom one (1) at least shall be an TCI'
Director or Manager and one (1) at least shall be a Sellers' Director or
Manager. However, if at any meeting of the Board or of the Managers duly
convened in accordance with the by-laws of the Companies and this Agreement a
quorum is not present that meeting may be adjourned to a date not earlier than
ten (10) days thereafter. Such adjourned meeting shall be quorate if a majority
of the Directors or Managers then in office are present in person or by their
alternates and all business properly transacted at that adjourned meeting shall
be valid.
2.1.3 Meetings of the Board or Managers shall be held from time to time as
the parties may agree but in any
<PAGE> 4
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event at intervals of not more than six (6) months unless otherwise agreed by
the Partners or required by law.
2.1.4 No Director or Manager shall have a second or casting vote.
2.1.5 Unless otherwise agreed by all of the Directors or Managers, notice of
every meeting or adjourned meeting of the Board or of the Managers shall be
given to each Director or Manager at the address (in the Territory or
elsewhere) notified to the Companies by such Director or Manager from time to
time for this purpose at least ten (10) business days (or in the case of an
adjourned meeting at least five (5) days in advance thereof.
2.1.6 Every notice convening a meeting of the Board or of the Managers shall
set out the agenda of the business to be transacted thereat in full and
sufficient detail. No item of business not included in the agenda may be
discussed and voted upon or transacted at the meeting unless all of the
Directors or Managers of the corresponding Company are present and unanimously
consent.
2.1.7. Directors or Managers appointed by each party must comply with any
requirement under Argentine law, and must be persons of good reputation and
"buenos hombres de negocios" (good businessmen) as said expression is
understood in Argentina.
2.1.8. The supervisory committee shall have three (3) members, of which the
Sellers will have the right to appoint a member and TCI shall have the right to
appoint two members. TCI and Sellers may appoint alternate members in the same
proportion as they appoint members.
2.1.9. After the Closing Date (as defined in the Purchase Agreement), all
matters shall be decided by a vote of a simple majority (i.e. more than 50%) of
the Shares or Quotas. However, until the Stockholders have received in cash
seventy five percent (75%) of the Base Purchase Price, through the payment of
the Base Purchase Price foreseen in Section 1.2 a) of the Purchase Agreement
and the necessary payments to said effect under the Promissory Notes referred
to in Section 1.2.b) of the Purchase Agreement, the following matters must be
approved by the positive vote of not less than ninety percent (90%) of the
Shares or Quotas:
a) each year's annual operating budget;
b) each year's annual capital budget;
<PAGE> 5
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c) any variance from the operating or capital budgets of ten percent
(10%) or more;
d) a sale of the Company Business;
e) any fundamental change in the Company Business; or
f) capital increases.
If the Partners are unable to agree on the budgets referred to in items a) and
b) above, they will apply the budgets of the previous year automatically
adjusted in accordance with the Argentine Consumer Price Index for the previous
year.
2.1.10. Each Partner shall indemnify and keep harmless the other Partner for
any damage caused to it by any Manager or Director acting (in a wilful or
grossly negligent manner) in such capacity appointed by TCI or the Sellers, as
the case may be.
2.1.11. Capital Increase: The Sellers and TCI have reached the Base Purchase
Price under the Purchase Agreement on the basis of the number of EBS at
Closing. Accordingly, the Partners determine that, for purposes of calculating
any dilution as a result of capital increases, the corporate capital
- -notwithstanding anything to the contrary stemming from the corporate by-laws
or books- shall be the amount which results from multiplying the number of EBS
at Closing times U$S 1,500.
Such amount is currently believed to be approximately U$S 600 million.
Accordingly, the Partners agree that, only for the purposes of calculating any
dilution caused to any Partner as a result of its failure to participate or to
participate fully in capital increases, the corporate capital (notwithstanding
anything to the contrary in the corporate by-laws or books) will be deemed to
be derived from the Base Purchase Price paid to the Stockholders on the Closing
Date.
As an example, the parties illustrate on a U$S 120.000.000 capital increased
upon a capital of U$S 600.000.000, with corporate capital book value at U$S
10.000.000, which is not suscribed by the Sellers.
1) Situation before the capital increase.
TCI 8.000.000 = 80%
Sellers 2.000.000 = 20%
2) Situation after the capital increase.
<PAGE> 6
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TCI 10.000.000 = 83,33%
Sellers 2.000.000 = 16,67%
Capital Stock 12.000.000
-----------
Premium 118.000.000
-----------
2.1.12. No distribution of dividends may be made to any Partners until TCI has
paid enough of the principal amount of the Promissory Notes referred to in
Section 1.2 b) of the Purchase Agreement in order that 75% of the Base
Purchase Price has been paid in cash by TCI to the Stockholders.
3. GENERAL MEETINGS OR PARTNERS MEETINGS
3.1 No General Meeting or Partners Meeting of the Companies shall be
quorate unless representatives of the Partners representing more than 50% of
the voting shares or quotas of each of the Companies are present.
3.2 Written notice of a General Meeting or a Partners Meeting of the
Companies (or of an adjourned General Meeting or Partners Meeting of the
Companies) shall if not waived, notwithstanding any provisions of applicable
law which may provide for a shorter period, be given to each Partner at least
ten (10) business days in advance thereof.
3.3 Every notice convening a General Meeting or Partners Meeting of the
Companies shall set out the agenda of the business to be transacted thereat in
full and sufficient detail. No item of business not included in the agenda may
be discussed and voted upon or transacted at the meeting unless all of the
Partners of the Companies are represented at the meeting and unanimously
consent.
4. AUDITORS
The accounts and records of the Companies shall be audited by KPMG Finsterbusch
Pickenhayn Sibille or such other firm of independent accountants of
international repute as may be approved by the Board or the Managers from time
to time.
5. FINANCIAL AND GENERAL REPORTING
The Partners shall procure that:
<PAGE> 7
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5.1 the accounts of the Companies shall be made up to 31st December or
such other date as may be agreed in each year;
5.2 the Companies shall report to the parties in Argentine and US GAAP and
in accordance with the requirements and systems of TCI at monthly, quarterly
and yearly intervals. Such reports shall deal with at least the following:
5.2.1 financial, commercial and operating matters;
5.2.2 sales and financial forecasts;
5.2.3 proposed financial, marketing, procurement, capital expenditure,
services, personnel and remuneration policies;
5.2.4 insurance arrangements;
5.2.5 pension schemes and the funding thereof; and
5.2.6 such other matters as may be reasonably requested by any of the
Partners.
5.3 All quarterly and annual financial statements will comply fully with
the requirements of the United States of America's Securities and Exchange
Commission. Quarterly financial statements will be delivered to the Partners no
later than thirty (30) days after each quarter's end. Annual financial
statements will be delivered no later than forty five (45) days after each
year's end. The Partners will cooperate fully in the timely preparation of all
reports required hereunder.
5.4 The Companies shall prepare, in a manner and form to be specified by
the Partners, monthly management accounts and shall provide the Partners with
such monthly management accounting information in a form and at times
reasonably required by the Partners for their own management accounting
purposes and shall further provide the Partners with such other accounting
information as each may reasonably require for the purposes of the preparation
of their own statutory accounts.
6. SUBSCRIPTION FOR AND TRANSFER AND ASSIGNMENT OF SHARES OR QUOTAS
6 If at any time any of the Partners to this Agreement wishes to sell or
otherwise transfer or assign any of the
<PAGE> 8
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Shares or Quotas held by it, it shall so in accordance with the provisions
contained in this Agreement, including Schedule A.
6.2 Except as otherwise provided herein, all Partners agree not to
transfer, sell or in any way assign their respective participation in the
Companies for a term of two (2) years as from the Closing Date as defined in
the Purchase Agreement. At the end of said term, the Partners may sell,
transfer or assign their respective participations in the Companies, subject to
this Agreement, including Schedule A.
6.3 The Partners of the Companies shall have pre-emptive rights to acquire
any additional Shares or Quotas which the Companies may issue, such Shares or
Quotas to be offered to the Partners in proportion to their shareholdings in
the Companies at the time of the said issue.
6.4 Upon receiving the prior consent of a majority of the shares or
quotas, any Partner may transfer any or all of its Shares or Quotas to an
Affiliate, provided that, in all cases, the Affiliate agrees to join in this
Agreement and shall be bound by the terms of this Agreement as though it were
an original party hereto. Such consent shall not be unreasonably withheld.
6.5 The Partners acknowledge and agree that TCI may after the date hereof
and in accordance with Section 8.7 of the purchase Agreement assign a portion
of its interest in the Companies or in this Agreement to U.S. West, Time-Warner,
Torneos y Competencias S.A., Avila Cab or Carlos Avila y Cia. S.R.L. or their
Affiliates or all or a portion of its interest to an entity jointly Controlled
by or by any combination of TCI, US West and Time-Warner; and that the Sellers
may assign their interest in the Companies or this Agreement to an S.R.L.
controlled by the Sellers in accordance with Section 8.7 of the Purchase
Agreement, provided that the assignees, in all cases, agree to join in this
Agreement and shall be bound by the terms of this Agreement as though it were
an original party hereto.
6.6 In the event that any of the Partners sells, transfers or assigns all
or a portion of its Shares or Quotas in the Companies in violation of this
Agreement, including Schedule A:
<PAGE> 9
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6.6.1 the Partners will be able to exclude the proposed purchaser of such
Quotas pursuant to the law of Argentine commercial companies Nbr. 19.550,
Section 152.
6.7 All Partners agree that the procedure foreseen in Clause 6.6 shall
also be applicable in case of sales, assignments or transfers resulting from
the bankruptcy of any of Partner.
6.8 Save as provided in this Agreement neither this Agreement nor any
right under this Agreement shall be assignable or transferable by any Partner
hereto without the prior written consent of the others.
7. CONFIDENTIALITY
7.1 Neither party will issue any press release or make any other public
announcement regarding this Agreement or the transactions contemplated hereby
without the consent of the other party. Each party will hold, and will cause
its employees, consultants, advisors and agents to hold, in confidence, the
terms of this Agreement and any non-public information concerning the Companies
or the other party obtained pursuant to or as a result of this Agreement.
Notwithstanding the preceding, a party may disclose such information to the
extent required by any Legal Requirement (including disclosure requirements
under Argentine and United States of America ("USA") federal and state
securities laws), but the party proposing to disclose such information will
first notify and consult with the other party concerning the proposed
disclosure, to the extent reasonably feasible. Each party also may disclose
such information to employees, consultants, advisors, agents and actual or
potential lenders whose knowledge is necessary to facilitate the consummation
of the transactions contemplated by this Agreement. Each party's obligation to
hold information in confidence will be satisfied if it exercises the same care
with respect to such information as it would exercise to preserve the
confidentiality of its own similar information. The Sellers authorize TCI
and/or its transferees to use all information which may, in such persons'
estimation, be necessary for their and their Affiliates' presentations and
filings with the USA's Securities and Exchange Commission and the appropriate
state securities agencies. The obligations set forth in this Clause shall
survive termination of this Agreement.
7.2 The foregoing obligations shall not apply to any information which:
<PAGE> 10
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7.2.1 the recipient party can prove by documentary evidence to have been in
its possession or the possession of any of its Affiliates prior to receipt of
this information except such information as has been exchanged in confidence
between the parties prior to the entering into of this Agreement; or
7.2.2 the recipient party can prove by documentary evidence to have been
independently created by it or one of its Affiliates prior to or subsequent to
the receipt of the information; or
7.2.3 has entered the public domain otherwise than as the result of a breach
of this Clause 7 by the recipient party or by a third party to whom the
recipient party has disclosed the information; or
7.2.4 has been or is disclosed to the recipient party by a third party
otherwise than in breach of an obligation of confidentiality to the disclosing
party; or
7.2.5 is disclosed under compulsion of law or the regulations of any
relevant stock exchange.
8. UNDERTAKING
The parties agree to amend the by-laws of the Companies in order to reflect as
much as possible the agreements contained herein.
9. LANGUAGE OF CONTRACT
This Agreement shall be prepared in the English and the Spanish languages, and
shall be executed in two (2) copies one of each of which will be retained by
each party hereto. In case of differences between both versions, the Spanish
version will prevail.
10. WAIVER
No forbearance, indulgence or relaxation or inaction by any party at any time
to require performance of any provision of this Agreement shall in any way
affect, diminish or prejudice the right of such party to require performance of
that provision, and any waiver or acquiescence by any party of any breach of
any provision of this Agreement shall not be construed as a waiver or
acquiescence of any continuing or succeeding breach of such provision, a waiver
or an amendment of the provision itself, or a waiver of any right under or
arising out of this
<PAGE> 11
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Agreement or acquiescence to or recognition of rights and/or position other
than that expressly stipulated in this Agreement.
11. REMEDIES CUMULATIVE
All remedies of the parties under this Agreement whether provided herein or
conferred by law, custom or trade usages, are cumulative and not alternative
and may be enforced successively or concurrently.
12. INVALIDITY
12.1 If any provision of this Agreement is invalid under any applicable law
this Agreement shall be considered divisible as to such provision and such
provision shall be inoperative and shall not be part of the consideration
moving from any party hereto to the other parties and the remainder of this
Agreement shall be valid and binding and of like effect as though such
provision was not included herein.
12.2 Notwithstanding the provisions of Clause 12.1 hereof the parties shall
use their best endeavors to establish a practical and commercial solution to
problems arising out of such invalidity or enforceability and to agree and
embody in a supplementary agreement a substitute provision which as closely as
possible resembles the inoperative provision but which is itself not invalid or
unenforceable or prohibited by any applicable law.
13. NOTICES
13.1 Any notice or communication required or authorized to be given by this
Agreement shall be given in writing and may be served by delivery to the served
party's main office address as given in this Agreement by pre-paid, registered
recorded delivery letter, cable, telex or facsimile addressed to such office or
address and any notice or communication so given by airmail shall be deemed to
have been served fourteen (14) days after the same shall have been airmailed
and any notice or communication so given by cable, telex or facsimile shall be
deemed to have been served forty eight (48) hours after it shall have been
despatched. In addition each party may serve such notice by hand and such
notice shall be deemed to have been properly served if it is delivered by hand
to and receipted by the representative in the Territory of the served party at
the address specified in Clause 13-2
<PAGE> 12
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receipt of such notice alone to be sufficient for the purposes herein.
13.2 The addresses of the representatives referred to in Clause 13.1 are
as follows:
To the Sellers
Mr. Eduardo Eurnekian
Honduras 5663
(1414) Buenos Aires
Argentina
Telephone: (54 1) 777 1111
Fax: (54 1) 777 1111
With a copy to:
Mr. Mariano Ibanez
Bonpland 1745
(1414) Buenos Aires
Argentina
Telephone: (54 1) 777 1234
Fax: (54 1) 777 1234
To TCI
TCI International Holdings, Inc.
5619 DTC Parkway
Englewood, Colorado 80111, U.S.A.
Attention: President
Telephone:(1 303) 267 5740
Telecopier: (1 303) 488 3242
With a copy to:
TCI International Holdings, Inc.
5619 DTC Parkway
Englewood, Colorado 80111, U.S.A.
Attention: General Counsel
Telephone: (1 303) 267 4800
Telecopier: (1 303) 488 3207
M. & M. Bomchil
Suipacha 268, 12th Floor
Buenos Aires - 1355 - Argentina
Attention: Mr. Nestor J. Belgrano
Telephone: (54 1) 328 8400
Telecopier: (54 1) 326 7217
<PAGE> 13
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14. ENTIRE AGREEMENT
This Agreement together with the Purchase Agreement of even date, and their
exhibits and schedules and those agreements to be executed pursuant to this
Agreement and the Purchase Agreement are the entire agreement between the
parties as to the subject matter hereof and no amendments hereto shall be
effective unless in writing and signed by or on behalf of each of the parties.
15. AUTHORIZATION
Each party confirms to the others that the execution, delivery and performance
of this Agreement and the transactions contemplated hereby have been duly
authorized and that each is within the powers granted to it by law or its
Memorandum and Articles of Association, Statutes and By-Laws or equivalent
documents.
16. DURATION
16.1. Once converted to S.R.L.s, the Companies will have terms of thirty
(30) years. This Agreement shall be in effect as from Closing and shall remain
in effect as long as TCI and the Sellers or their permitted assignees hold
Shares or Quotas.
16.2. The Companies will dissolve if any of the Partners becomes bankrupt or
incompetent. However, the Partners will continue with the business of the
dissolved Companies, through the Companies reformed to said effect.
17. LAW - ARBITRATION
This Agreement shall be construed and shall take effect in accordance with the
laws of the Territory and any proceedings relating to any matters arising out
of the interpretation of this Agreement or to purported breaches of this
Agreement, irrespective of where the breach occurs, or to any matter arising
out of or incidental to the rights and liabilities of the parties hereto shall
be resolved by arbitration as provided in the Purchase Agreement.
18. INCONSISTENT PROVISIONS
<PAGE> 14
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In the event that any provision of this Agreement is inconsistent with the
provisions of any agreement ancillary hereto including the provisions of the
Companies' by-Laws the parties agree that the provisions of this Agreement
shall prevail to the extent of any such inconsistency, except in the case of
the Purchase Agreement.
AS WITNESS the parties have executed this Agreement the date first above
written, at ....
/s/ EDUARDO EURNEKIAN /s/ FRED A. VIERRA
EDUARDO EURNEKIAN TCI INTERNATIONAL HOLDINGS, INC.
<PAGE> 15
SCHEDULE A
TRANSFER OF SHARES OR QUOTAS AND PRE-EMPTION RIGHTS
Transfers of Shares or Quotas of the Companies shall be in
accordance with and subject to this Agreement, including the following
provisions:
1. If any Partner wishes to sell any of the Shares or Quotas held by it
in any or all of the Companies, ("the Selling Party") it shall give to each of
the other Partners ("the Option Parties") written notice thereof setting out
all the relevant terms including the price at which it wishes to sell the
Shares or Quotas ("the Option Price"). Each of the Option Parties shall have
the right and option for a period of sixty (60) days from receipt of such
notice ("the Option Period") to serve a notice (which notice may be served
jointly or by any of them) on the Selling Party stating their intention:
1.1 to purchase all of the Shares or Quotas offered at the Option Price
and in accordance with all the relevant terms.
2. If a notice is served pursuant to paragraph 1.1 above the shareholding
of the Selling Party shall be purchased by the Option Parties within a further
period of sixty (60) days in such proportions pro rata to their existing
shareholdings in the corresponding Company.
3. If none of the Option Parties elects to purchase the Shares or Quotas
(or in the event that the Shares or Quotas are not purchased in accordance with
provisions of this Agreement within the relevant stated time periods which
default is not attributable to any delay on the part of the Selling Party) then
the Selling Party shall have the right to sell the Shares or Quotas subject to
the notice in the corresponding Company to any third party within a further
period of sixty (60) days at a price not less than the Option Price and in
material accordance with all the relevant terms contained in the original
notice of sale, provided that the prior consent of the majority of the Partners
in the corresponding Company is obtained. The requirement of prior majority
consent will
<PAGE> 16
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terminate with respect to Sellers five (5) years after the Closing Date.
4. At TCI's sole option, notwithstanding any other provision of this
Agreement, Shares or Quotas originally issued to TCI equal to twenty-one
percent (21%) of the total Shares or Quotas of each of the Companies may not be
transferred without the prior unanimous consent of the Partners. All
transferees of TCI will assume pro-rata the above limitation on the
transferability of Shares or Quotas. TCI and its transferees agree that the
above limitation is reasonable and agree not to challenge it under Argentine
law.
5. Any time limits referred to in this Schedule shall be subject as
appropriate to any necessary delay caused by the attaining of any applicable
governmental and other regulatory consents which have been notified to the
other parties hereto by the party subject to such consents.
<PAGE> 17
EXHIBIT 7
The $ 20,000,000 (without interest) will be returned to Buyer within
five business days of notice from Buyer to Stockholders if the Agreement is
terminated for the following reasons by Buyer:
1. On the Closing Date, the representations and warranties of the
Company and each Stockholder set forth below are not true and correct in all
material respects in relation to the normal and ordinary Company Business, on
and as of the Closing Date:
A. Company is a corporation duly organized, validly existing and
in good standing under the laws of Argentina, and it and the Stockholders 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.
B. Stockholders have good, valid, marketable and exclusive title
to the Shares free and clear of any encumbrances, with full right and lawful
authority to transfer to Buyer the Shares. Should full payment of any Shares be
pending, the same shall be canceled (either through the cancelling of that
portion of the capital increase not paid in or through payment of the capital
increase before the Closing Date). Spousal consent provided for in Article 1277
of the Argentine Civil Code has been granted by the spouse of each Stockholders
when necessary.
C. Company and Stockholders have authority to execute and
deliver, to perform its obligations under, and to consummate the transactions
contemplated by the Agreement. The Agreement has been duly executed and
delivered by Stockholders and Company and is the valid and binding obligation
of Stockholders and Company.
D. The execution, delivery and performance of the Agreement by
Stockholders and Company will not, individually or in the aggregate, have a
material adverse effect on any System, the Company Business or the Company.
<PAGE> 18
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E. Company has exclusive, good and marketable title to the
Assets. The Assets will remain in the Company and are all the assets necessary
to permit Buyer to conduct the Company Business substantially as it is being
conducted on the date of the Agreement.
F. The Company has received no notice claiming a violation by
Company or the Company Business of any Legal Requirement applicable to Company
or the Company Business as it is currently conducted.
G. Stockholders shall cause the Company to deliver to Buyer
combined financial statements of the Company after giving effect to its
conversion to an S.R.L. for the nine months ended September 30, 1994, and years
ended December 31, 1994 (within 45 days of year end), 1993 and 1992 and for
each quarter thereafter (within 30 days of each quarter's end). Stockholders
will cause the Company to deliver to Buyer correct and complete copies of its
audited balance sheets and related statements of income, Stockholders' equity
and cash flows for the nine months ended September 30, 1994, the three years
ended December 31, 1994 (within 45 days of year end), 1993 and 1992, and for
each quarter thereafter (within 30 days after each quarter's end), all of which
shall be presented in timely manner to Buyer (collectively, the "Financial
Statements"). The Financial Statements were prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby and fairly
present Company's financial position, results of operations and changes in
financial position as of the dates and for the periods indicated.
H. Since the date of the most recent balance sheet included in
the Financial Statements, (i) the Company Business has been operated only in
the ordinary course, (ii) Company has not sold or disposed of any Assets other
than in the ordinary course of business, except for payment of the dividends
necessary to transfer the two buildings located at Fitz Roy and Gorriti, the
Programming Assets and the shares of Radiodifusora El Carmen S.A. (Canal 2) out
of the Company, and (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 (finan-
<PAGE> 19
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cial or otherwise) of the Company Business, other than changes affecting the
cable television industry generally.
I. Except as set forth on Exhibit 5 of the Agreement, 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, involving or affecting all or any
part of the Company Business or Company.
J. Company 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.
2. Company and Stockholders have not complied with the provisions
of this Exhibit 7.
3. The Parties have failed to execute the agreements referred to
in Section 1.5 of the Agreement by December 31, 1994, and the Buyer has given
notice to Stockholders by March 15, 1995, that it will terminate the Agreement
because of such failure.
4. If the Company conversion into an S.R.L. is not possible due
to reasons directly attributable to Stockholders or to legal impediments or
acts of third parties.
In case the Agreement is terminated by Buyer due to any of the reasons
provided in this Exhibit, with the returning of the U$S 20.000.000 to the
Buyer and the release of the Deposited Shares to the Stockholders, the parties
will have no further claim against the other.
