EXECUTION COPY
CONTRIBUTION AND SUBSCRIPTION AGREEMENT
This Contribution and Subscription Agreement dated as of August 10,
2001 (this "Agreement") is hereby made by and among:
United Pan-Europe Communications N.V., a corporation organized under
the laws of The Netherlands, having its principal executive office at Boeing
Avenue 53, 1119 PE Schiphol Rijk, The Netherlands ("UPC");
Groupe Canal+ S.A., a corporation organized under the laws of France,
having its principal executive office at 85/89 Quai Andre Citroen, 75711 Paris
Cedex 15, France ("Canal+");
UPC Polska Inc., a corporation organized under the laws of the State of
Delaware, having its principal executive office at 4643 South Ulster Street,
Suite 1300, Denver, CO 80237 USA ("UPC Polska");
Polska Telewizja Cyfrowa TV Sp. z o.o., a limited liability organized
under the laws of the Republic of Poland, having its principal executive office
at ul. Szturmowa 2A 02-678 Warsaw, Poland ("PTC"); and
Telewizyjna Korporacja Partycypacyjna S.A., a joint stock company
organized under the laws of the Republic of Poland, having its registered office
at Kawalerii No. 5, 00-460 Warsaw, Poland ("TKP," and together with Canal+, UPC,
UPC Polska and PTC, each a "Party" and together the "Parties").
RECITALS
WHEREAS, Canal+ owns an interest in the share capital of TKP, a
pay-television company which through wholly-owned subsidiaries, among other
things, creates, produces, develops and acquires programming to produce and
operate a premium pay-television channel and a satellite direct-to-home ("DTH")
broadcasting service targeted to audiences in Poland;
WHEREAS, UPC owns 100% of the share capital of UPC Polska, a company
that, directly or indirectly through subsidiaries or minority holdings in Polish
companies, among other things, operates cable networks and a satellite DTH
broadcasting service targeted to, and creates, produces, develops and acquires
programming for, audiences in Poland;
WHEREAS, the Parties have decided to combine the operations of TKP and
the DTH operations of UPC Polska in order to create a common DTH broadcasting
platform for the distribution of programming and services targeted to audiences
in Poland;
NOW, THEREFORE, the Parties have agreed as follows:
ARTICLE I
Certain Definitions
In addition to the terms defined elsewhere herein, for purposes of this
Agreement the following terms shall have the meanings specified below.
References in this Agreement to numbered Articles, Exhibits and Schedules are,
unless otherwise specified, references to Articles, Exhibits and Schedules of
this Agreement.
"Affiliate" means, with respect to any Person, any entity, directly or
indirectly, Controlling, Controlled by, or under common Control with, such
Person.
"Broadcasting Law" means the Polish Radio and Television Act of 1992
(Journal of Laws, 1993, no. 7, item 34), as amended from time to time, or any
law replacing such Act and covering the same subject matter.
"Claim" has the meaning set forth in Article 9.2.
"Closing Date" has the meaning set forth in Article 3.3.
"Consent" means any consent, waiver, approval, authorization,
exemption, or license.
"Contracts" means any contracts, agreements, commitments, undertakings,
leases, licenses, mortgages, bonds, notes or other instruments under which there
are existing or future rights or liabilities.
"Control" means, in any tense, the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
such entity, whether through the ownership of voting securities, by contract or
otherwise.
"Contributed Companies" has the meaning set forth in Article 8.1(a).
"DTH" has the meaning set forth in the recitals to this Agreement.
"DTH Business" means the ownership, management or operation of any
Pay-Television Service by DTH satellite for which a fee is received from viewers
in Poland, either directly, or indirectly through a carrier, together with all
activities related thereto.
"Group Company," with respect to a Party, means any other Person in
which any Person that Controls such party holds, directly or indirectly, a
majority of the voting rights.
"HBO Carriage Agreement" means the Agreement among Polska Programming
BV, HBO Poland Partners, @Entertainment Inc., Sereke Holding BV and certain
studios (Buena Vista International, CPT Holdings and Warner Bros.), dated July
21, 1998.
"Indemnifying Party" has the meaning set forth in Article 9.1.
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"Judgments" means any judgments, orders, rulings or awards of any
court, arbitrator or other judicial authority or any governmental,
administrative or regulatory authority, which are legally binding on the
relevant Person.
"Laws" means any laws, rules or regulations of any governmental,
administrative or regulatory authority of a legally binding nature.
"Liability" means any liability or obligation of any nature, whether
known or unknown, accrued, absolute, contingent or otherwise, and whether due or
to become due.
"Loss" has the meaning set forth in Article 9.1.
"Net Asset Value" means tangible fixed assets, intangible assets
(excluding goodwill), working capital (i.e. inventory, plus trade receivables
plus other current receivables minus trade payables and other current
liabilities) minus provisions relating to decoders and subscriber receivables of
such Person determined in accordance with the relevant generally accepted
accounting principles of the country of incorporation of such Person and in a
manner consistent with the policies and principles used by such person in
connection with the preparation of its financial statements.
"Pay-Television Service" means any television channel or other
television-based service for which a fee is received from viewers in Poland,
either directly, or indirectly through a carrier.
"Permits" means any permits, authorizations, approvals, registrations
and licenses granted by or obtained from any governmental, administrative or
regulatory authority to the extent legally required to be obtained by the
relevant Party.
"Person" means an individual, sole proprietorship, corporation,
partnership, limited partnership, joint venture, trust, unincorporated
organization, mutual company, joint stock company, estate, union, employee
organization, bank, trust company, land trust, business trust or other
organization, or a governmental body, or their equivalent under the applicable
legal system.
"Plan" means any compensation, bonus, profit-sharing, pension,
retirement, severance pay, life, health, medical, disability or accident
insurance, vacation or other employee benefit plan, program or arrangement of
general applicability (other than stock option plans).
"Polish Persons" shall mean individuals of Polish nationality resident
in Poland or legal entities incorporated or organized in Poland which do not
constitute foreign persons or persons controlled by foreign persons for the
purposes of the Broadcasting Law.
"Premium Pay-Television Business" means the ownership, management or
operation in Poland of any Premium Pay-Television Channel but, for the avoidance
of doubt, does not include the mere carriage or distribution of the same.
"Premium Pay-Television Channel" means any Pay-Television Service
available for a monthly subscription fee and employing a programming concept
based primarily on first-run movies or premium sports or a combination of both.
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"Proceeding" means any action, suit, claim or legal, administrative,
arbitration or other alternative dispute resolution proceeding or investigation.
"Steering Committee" has the meaning set forth in Article 4.2.
"Subsidiary" means, with respect to any Party, any entity, in which
such Party holds directly or indirectly more than fifty percent (50%) of the
voting rights.
"Subscriber" means, at the relevant date, with respect to a company,
all those natural persons or legal entities (hereinafter, for the purposes of
this definition, referred to as "persons") who are at such date authorized by
the relevant company to view all or any of the channels transmitted or managed
by such company as part of its DTH Business or Premium Pay-Television Business,
in accordance with a valid and existing contract providing for payment of a
monthly subscription fee to the company in excess of the equivalent of *,
inclusive of tax, per person and
1) excluding persons who, as of the determination date, are
overdue in whole on their subscriptions by more than ninety
days from the due date;
2) excluding VIP's and persons employed or engaged by the company
authorized to view any of the channels for free or by way of
dealer demonstration or technical subscription or on a trial
basis;
3) including, without limitation, the following customer
categories: hotels and other places of multiple occupation;
provided, that:
a) where any of the channels or platform are received at a
place of multiple occupation (including hotels, motels,
bungalows, institutions, apartment blocks), the number of
subscribers at that place of multiple occupation shall be
deemed to be equal to the monthly revenues received for such
channels or platform from such place divided by the average
revenue per individual subscriber per month for such channel
or platform; and
b) where, in relation to any channels, any person's
subscription is managed by a third party, absent a showing by
the other party of a material variance (in which case such
party shall at its own cost conduct an audit to confirm the
number of subscribers in accordance with the method set forth
above), the number of subscribers shall be deemed to be equal
to the number which such third party reported to the company.
"Tax" or "Taxes" means (i) all taxes, assessments, levies, imposts,
duties, fees, withholdings, or other similar governmental charges in the nature
of taxation, including, without limitation, income taxes, franchise taxes,
transfer taxes or fees, sales taxes, excise taxes, ad valorem taxes, withholding
taxes, minimum taxes and social security taxes, and (ii) any interest, penalties
or additions to tax imposed on a Tax described in clause (i) hereof,
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* Information omitted pursuant to a request for confidential treatment. The
omitted information has been filed separately with the Secretary of the
Securities and Exchange Commission.
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properly imposed by any national, regional, local or foreign government or
subdivision or agency of any of the foregoing.
"TKP Companies" has the meaning set forth in Article 7.1(a).
"TKP Financial Statements" has the meaning set forth in Article 7.5(a).
"TKP Material Adverse Effect" has the meaning set forth in Article 7.4.
"Transition Period" means the period of time following the Closing
necessary to complete the operational combination of the Parties' DTH Business,
such period to extend not longer than nine (9) months following the Closing
Date.
"UPC Material Adverse Effect" has the meaning set forth in Article 8.4.
"Vivendi Universal" shall mean Vivendi Universal S.A., a corporation
organized under the laws of France, with its principal executive office at 42,
avenue de Friedland, 75008 Paris, France.
ARTICLE II
The Combination
The purpose of the transactions contemplated herein is to combine the
existing DTH Business of UPC Polska with the existing DTH Business and Premium
Pay-Television Business of TKP in order to operate a common DTH broadcasting
platform for the distribution of programming and services targeted to audiences
in Poland.
ARTICLE III
The Closing
3.1 Closing. On the Closing Date, the Parties undertake to carry out
the following transactions. Notwithstanding the sequence and order of their
completion, each of the transactions described in this Article 3.1 shall be
conditioned upon the others, all such transactions shall be deemed to occur
simultaneously, and the failure to complete any one of such transactions shall
render the completion of the others null and void, without prejudice to the
rights and liabilities of the Parties arising out of or caused by such failure:
(a) Contribution by PTC and Issuance of Shares by TKP to PTC. (i) Two
days prior to the Closing Date, UPC shall have caused PTC to contribute to TKP
100% of the share capital of Wizja TV Sp. z.oo and 100% of the share capital of
UPC Broadcast Centre Limited, in each case free and clear of all liens,
mortgages, charges, security interests, burdens, encumbrances or other
restrictions or limitations of any nature whatsoever ("Liens"), together with
all rights then and thereafter attaching thereto. Each of Wizja TV Sp.z.oo and
UPC Broadcast Centre Limited shall be contributed on a cash-free and (except to
the extent provided in Article 3.1(c)) debt-free basis.
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(ii) Issuance of Shares by TKP to PTC. In consideration for the
contribution referred to in Article 3.1(a)(i), two days prior to the Closing
Date, PTC shall have subscribed for, and on the Closing Date TKP shall issue to
PTC, in each case at a price of 2,149.61 Polish zlotys per share, 258,973 shares
of TKP (and shall deliver certificates evidencing such shares), representing 25%
of the outstanding share capital of TKP immediately following such issuance,
free and clear of all Liens, together with all rights then and thereafter
attaching thereto and which shall be duly authorized, validly issued and fully
paid. PTC and Polcom shall be Polish Persons both immediately before and
immediately after such subscription.
(b) Transfer by PolCom to Canal+. Immediately following the
registration of the capital increase referred to in Article 3.1(a)(ii), PolCom
shall Transfer sufficient shares of TKP to Canal+ such that Canal+ holds 49% of
TKP.
(c) Repayment of UPC Shareholder Loan. At the time of the contribution
referred to in Article 3.1(a)(i), the Contributed Companies shall have total
outstanding debt consisting of only (i) one shareholder loan from either UPC or
one of its Subsidiaries which shall be an amount of (euro) 150 million including
interest (the "UPC Shareholder Loan") and (ii) trade payables to trade creditors
incurred in the ordinary course of business. At the Closing, the Contributed
Companies shall repay the UPC Shareholder Loan in full with the proceeds from a
shareholder loan to the Contributed Companies from TKP, which shareholder loan
shall be funded by a shareholder loan to TKP from Canal+ or one of its
Affiliates. The terms of the shareholder loan from Canal+ or one of its
Affiliates to TKP shall be as set forth in the term sheet attached hereto as
Exhibit 3.1(c).
(d) TKP Funding. On the Closing Date, immediately following the capital
increase and subscription described in Article 3.1(a)(ii), each of Canal+ and
PTC shall extend a shareholder loan to TKP ranking pari passu with the loan
described in Article 3.1(c) in the amount of its pro rata share of (euro) 120
million, in order to fund the development of TKP. In the event that additional
capital contributions are required to maintain minimum capital requirements
under Polish law, each Shareholder undertakes to convert the necessary pro rata
portion of the shareholder loan provided for in this Article 3.1(d) to equity,
unless TKP's minimum capital requirements may be satisfied by letters of support
from the Shareholders pro rata to their shareholding or by the issuance of an
appropriate statement by the TKP Supervisory Board to the effect that TKP has
the ability to meet its future obligations with future profits.
(e) Guarantees. On the Closing Date, TKP shall assume, either through a
direct agreement with the beneficiary of the guarantee or through a series of
back-to-back arrangements with the other Party, the obligations in the
guarantees identified in Schedule 8.11(a).
(f) TKP Statute. No later than the Closing Date, the amended TKP
Statute substantially in the form set forth in Exhibit 3.1(f) shall have been
approved and adopted by the shareholders of TKP.
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(g) Assets.
(i) Attached as Exhibit 3.1(g) is an indicative list of the
assets to be spun out of the Contributed Companies (as defined
herein) prior to the Closing Date in accordance with Article
4.1(b).
(ii) To the extent that the Parties identify other DTH assets
of UPC Polska after the Closing Date (as defined below) that
should have been transferred to the Contributed Companies
prior to the contribution referred to in Article 3.1(a)(i),
UPC Polska undertakes to transfer such assets to TKP for a
nominal consideration as soon as practicable.
(iii) To the extent that the Parties identify after the
Closing Date any assets transferred to TKP that should have
been carved out of the Contributed Companies prior to the
contribution referred to in Article 3.1(a)(i) because they
were not part of the UPC Polska DTH Business, TKP undertakes
to retransfer such assets to UPC Polska for a nominal
consideration as soon as practicable.
(h) Programming Agreements.
(i) On the Closing Date, UPC Polska shall cause Wizja T.V.
B.V. to transfer to TKP, to the extent possible, the
programming agreements listed in Exhibit 3.1(h) that are
directly and solely related to the UPC Polska DTH Business.
(ii) With respect to programming agreements listed in Exhibit
3.1(h) that (x) are not transferable, (y) do not relate
directly and solely to the UPC Polska DTH Business or (z) are
not terminated by Wizja T.V. B.V. with TKP's consent prior to
the Closing, UPC Polska shall cause Wizja T.V. B.V. to enter
into an agreement with TKP on the Closing Date pursuant to
which Wizja T.V. B.V. shall provide TKP with the benefits,
subject to the assumption by TKP of the obligations and
liabilities of Wizja T.V. B.V., under any such agreements, in
each case to the extent they directly relate to the UPC Polska
DTH Business including obligations to provide uplink services
and deliver broadcast signals to network head-ends on behalf
of certain third parties; provided, that:
(A) with respect to the agreement numbered 11 in such Exhibit,
UPC shall use its best efforts (including leveraging its
shareholding in such channel) to negotiate a reduction in the
current economic effect of such agreement between the date
hereof and the Closing Date,
(B) with respect to the agreements numbered 5, 6, 7, 8, and 19
in such Exhibit, the terms of such agreements shall have been
renegotiated between the date hereof and the Closing Date, so
that such terms are arms-length, fair and reasonable
commercial terms, and consistent with other similar contracts
in the Polish market; and
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(C) with respect to the agreement numbered 19 in such Exhibit,
the agreement shall have been renegotiated between the date
hereof and the Closing Date to provide that TKP may terminate
such agreement without cost in the event that TKP ceases to
carry Alekino.
(iii) With respect to the programming agreements listed on
Exhibit 3.1(h), to the extent that minimum guarantees apply to
both the DTH Business and the cable business, any costs
resulting from those minimum guarantees after the Closing Date
shall be borne 30% by TKP and 70% by UPC Polska.
3.2 Post-Closing Structure. (i) Immediately following the Closing, the
shareholding structure of TKP and each of its subsidiaries shall be as set forth
in the organization chart attached hereto as Exhibit 3.2.
(ii) At or immediately following the Closing, the shareholders of TKP
shall appoint their respective members to the TKP Supervisory Board as provided
in Article 2.3(b) of the TKP Shareholders Agreement entered into on the date
hereof.
3.3 The Closing Date. The closing of the transactions provided for in
this Agreement (the "Closing") shall be held on the second business day after
the last of the conditions set forth in Article V of this Agreement shall have
been fulfilled or waived in accordance herewith or at such other time and date
as the Parties may designate in writing by mutual consent. The date on which the
Closing occurs is hereinafter referred to as the "Closing Date".
3.4 Shareholders Resolutions and Other Corporate Formalities. As soon
as practicable following the execution hereof, the TKP General Meeting of
Shareholders shall adopt resolutions approving the contribution and capital
increase contemplated in Article 3.1, subject only to the regulatory approvals
referred to in Article V hereof and take all the steps necessary under Polish
company law to effect the Closing as soon as possible.
3.5 Further Assurances. Each of the Parties shall co-operate and use
their respective reasonable best efforts to take, or permit to be taken, all
appropriate actions so that the Parties' transactions leading up to the
combination mentioned in Article II are effected in the most tax efficient
manner and consistent with all applicable legislation.
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ARTICLE IV
Interim Period Undertakings
During the period from the date of this Agreement to the Closing Date
(the "Interim Period"), the Parties shall implement the following provisions.
4.1 Pre-Closing Restructuring.
As soon as possible following the date of execution of this Agreement
and prior to the Closing Date:
(a) Canal+ shall take the steps necessary to achieve the shareholding
structure of TKP summarized in Exhibit 4.1.
(b) UPC Polska shall cause the activities related to UPC Polska's call
center and the assets identified in Exhibit 3.1(g) to be spun-off from the
Contributed Companies and shall cause each of (i) Polska Telewizja Cyfrowa Wizja
TV Programming Sp. z.oo, (ii) At Entertainment Services Limited and (iii) Antel
Sp. z.oo to be either liquidated or spun-off.
(c) UPC Polska shall take the steps necessary to ensure that PTC holds
all of the outstanding shares of the Contributed Companies at the time of the
contribution of the shares of the Contributed Companies pursuant to Article
3.1(a)(i);
(d) All rights and obligations of Canal+ with regard to Eutelsat
transponders 4, 15, 110, and 119 shall be formally transferred to TKP; and
(e) UPC Polska shall cause the Trademarks listed on Exhibit 4.1(e) to
be owned by the Contributed Companies at the time of the contribution of the
shares of the Contributed Companies pursuant to Article 3.1(a)(i).
4.2 Steering Committee. (a) During the Interim Period, subject to
applicable law, in order to implement the terms of this Agreement and facilitate
the Closing, the Parties shall establish a steering committee (the "Steering
Committee") consisting of eight (8) members, an equal number of which shall be
appointed by each of Canal+ and UPC. The Steering Committee shall hold meetings
at least once every four (4) weeks during the Interim Period or more often, as
appropriate.
(b) Within eight weeks of the date of this Agreement, the Chief
Executive Officers of TKP and UPC Polska shall submit to the Steering Committee
(i) a detailed budget for 2002 based on the ten-year business plan for TKP
attached hereto as Exhibit 4.2(b), (ii) a program to reduce decoder piracy,
(iii) a detailed transition plan for the operational merger of the two platforms
(the "Transition Plan"), and (iv) drafts of all of the agreements needed to
implement such transition plan including, without limitation, the agreements
referred to in Article 4.3 below.
(c) The operations of Wizja Sport shall be terminated in accordance
with a schedule to be set forth in the Transition Plan. The Parties will use
reasonable efforts to minimize the resulting costs, and TKP shall bear the first
(euro) 9.33 million of the resulting restructuring costs and the remainder shall
be borne by Wizja TV B.V.
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4.3 Accompanying Agreements.
(a) Agreements to be entered into at or prior to the Closing. Without
prejudice to the foregoing, the Parties undertake to negotiate in good faith
during the Interim Period towards the execution, on or prior to the Closing Date
(as the latest effective date of such agreements), of the following agreements:
(i) a long-form channel carriage agreement for the carriage of TKP's
Premium Pay-Television Channel on UPC Polska's cable networks, embodying the
terms set forth in the term sheet attached as Exhibit 4.3(a)(i); In the event
that such long-form agreement is not executed on or prior to the Closing Date
and until such execution, UPC Polska hereby undertakes to carry TKP's Premium
Pay Television Channel on its cable network after the Closing Date on the basis
of such term sheet. UPC shall cause its Subsidiaries which are party to such
term sheet and/or long-form agreement to comply with their obligations
thereunder.
(ii) the agreements referred to in Article 3.1(h);
(iii) an agreement pursuant to which TKP shall assume the rights and
obligations of UPC Broadcast Centre Limited under the Cryptoworks license to the
extent such rights and obligations relate to the DTH Business;
(iv) an agreement for the use by TKP of UPC Polska's call center and
subscriber management services during the Transition Period, on a cost plus
basis with a maximum spread of 5%;
(v) at UPC's request, an agreement under which TKP shall provide UPC's
Central European DTH businesses after the Closing with uplink facilities and
services in accordance with operational and service level agreements consistent
with industry standards on a cost-plus basis with a maximum spread of 5%; these
shall include agreements which seek to avoid negative synergies and to promote
the use of a common region-wide satellite platform.
(b) Other Undertakings.
(i) Following the date hereof, UPC Polska and TKP shall negotiate in
good faith a long-term, arms-length agreement for the use by TKP of UPC Polska's
call center and subscriber management system. If no agreement is reached by the
Closing Date, TKP shall bear the costs associated with the downsizing of the
call center to reflect the resulting reduction in call center activity; and
(ii) Within six (6) months following the date hereof, TKP shall
determine whether it wishes to continue to use the space currently used by Wizja
TV Sp. z.oo as its headquarters. If TKP determines that it does not wish to
continue to use such space, TKP shall bear the portion of the resulting
termination costs that relates to space at such location used at the date hereof
by UPC Polska's DTH Business, and UPC shall bear the remainder of such
termination costs.
(iii) TKP shall operate its DTH business after the Transition Period
using one satellite platform.
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(c) Central Europe.
UPC Broadcast Centre Limited currently provides services to UPC's DTH
Businesses in Poland and UPC's DTH business in Central Europe. In recognition of
this fact:
(i) Following the Closing, for so long as UPC Broadcast Centre Limited
shall continue to operate its Maidstone facility, UPC and TKP shall split the
operating costs of UPC Broadcast Centre Limited based on the relative usage of
UPC Broadcast Centre Limited's services by UPC's Central European DTH business
and TKP's DTH Business, respectively.
(ii) The Parties acknowledge that TKP plans (A) to terminate the
operations of UPC Broadcast Centre Limited's Maidstone facility and (B) to
transfer such operations to TKP's facilities in Poland in accordance with the
Transition Plan.
(iii) Any restructuring costs resulting from the actions referred to in
Article 4.3(c)(ii)(A) shall be split between TKP and UPC based on the respective
usage of Maidstone by TKP and UPC's Central European DTH businesses.
(iv) The split of costs between TKP and UPC pursuant to Article
4.3(c)(i) and (iii) shall be decided between the management of TKP and UPC; any
disagreement among them shall be subject to resolution thereof by the Steering
Committee.
(v) To the extent that following the transfer of services contemplated
in Article 4.3(c)(ii), TKP decides to retain and continue to use any tangible
fixed assets formerly used by both UPC's DTH Business in Poland and UPC's
Central European DTH business, any amounts due to TKP under Article 4.3(a)(v)
shall be reduced by an amount equal to a percentage of the net book value of the
tangible fixed assets so used based on the relative usage of such assets by
UPC's DTH Business in Poland and the UPC Central European DTH businesses,
respectively. For the avoidance of doubt, this provision is intended only as a
possible reduction in amounts due to TKP from UPC under Article 4.3(a)(v) and
shall not give rise to any cash payment by TKP.
(vi) UPC shall bear 25% of the restructuring costs related to the four
Astra transponders listed on Schedule 8.11(a) and TKP shall bear the remainder
of such restructuring costs.
4.4 Coordination and Information. During the Interim Period, subject to
applicable law, the Parties shall consult with each other regarding the
activities of TKP and UPC Polska's DTH Business. In furtherance of the
foregoing, during the Interim Period:
(a) TKP shall provide UPC with copies of the information (including
management reports) provided during such period to the members of the
Supervisory Board or Management Board or shareholders of TKP. In addition,
during the Interim Period, TKP shall promptly advise UPC in writing of any
change in the condition (financial or otherwise), properties, Liabilities,
operations or prospects of any TKP Company which is or may reasonably be
expected to be materially adverse to the TKP Companies taken as a whole.
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(b) UPC Polska shall provide Canal+ with copies of the information
(including management reports) provided during such period to UPC or the Board
of Directors or shareholders of UPC Polska regarding the Contributed Companies
or UPC Polska's DTH Business. In addition, during the Interim Period, UPC Polska
shall promptly advise Canal+ in writing of any change in the condition
(financial or otherwise), properties, Liabilities, operations or prospects of
any Contributed Company which is or may reasonably be expected to be materially
adverse to the Contributed Companies or UPC Polska's DTH Business taken as a
whole.
4.5 Standstill.
(a) During the Interim Period, except as contemplated by this
Agreement, or in the ordinary and usual course of business of the Parties or as
otherwise consented to in writing by each of the Parties, none of the TKP
Companies and none of the Contributed Companies shall:
(i) amend its certificate of incorporation or by-laws or other
constituent or governing document or governing agreement;
(ii) alter its outstanding capital stock or declare, set aside,
make or pay any dividend or other distribution in respect
of its capital stock (in cash or otherwise), or purchase
or redeem any shares of its capital stock (or agree to do
any of the same);
(iii) issue or sell (or agree to issue or sell) any of its
capital stock or any options, warrants or other rights to
purchase any such shares or any securities convertible
into or exchangeable for such shares;
(iv) acquire, by merger, consolidation, purchase of stock or
assets or otherwise, any corporation, partnership,
association or other business organization or division
thereof or create any joint venture with any third party;
(v) incur any indebtedness to parties other than Affiliates
for borrowed money (including through the issuance of debt
securities) or vary the terms of any existing indebtedness
other than in the ordinary course of business;
(vi) incur any Liability in an amount in excess
of(euro)500,000;
(vii) mortgage, pledge or subject to any Lien, any of its
properties;
(viii) discharge or satisfy any material Lien or pay or satisfy
any material Liability (fixed or contingent) or
compromise, settle or otherwise adjust any material claim
or litigation, other than satisfying any Liabilities as
they become due and payable in accordance with the terms
thereof;
(ix) acquire or dispose of any substantial assets or rights,
other than in the ordinary course of business; or
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(x) make any change in its accounting procedures or practices
unless mandated by generally accepted accounting
principles in the relevant jurisdiction.
(b) During the Interim Period, except as contemplated by this Agreement
or as otherwise consented to in writing by each of the Parties, none of UPC
Polska or its Subsidiaries involved in UPC Polska's DTH Business, and none of
the TKP Companies, shall:
(i) other than in the ordinary and usual course of business
of the Parties, grant to any officer, director or
employee any increase or modification of compensation or
benefits, or any severance or termination pay, other than
in accordance with existing employment or collective
bargaining agreements or in an amount with respect to any
employee of more than(euro) 10,000 or in an aggregate
amount of more than(euro)50,000, or make any loan to any
such person or enter into any employment agreement or
arrangement with any such person (other than on a
temporary or provisional basis which shall not be longer
than six months);
(ii) other than in the ordinary and usual course of business
of the Parties, adopt, enter into, amend in any material
respect, announce any intention to adopt or terminate,
any Plan or stock option plan;
(iii) other than in the ordinary and usual course of business
of the Parties, adopt, enter into, amend in any material
respect, or announce any intention to adopt or terminate
any agreement of a type described in Article 7.11 or
Article 8.11 relating to the DTH Business (each such
agreement, a "Material Agreement");
(iv) adopt or announce any intention to adopt any changes to
its current DTH programming line-up;
(v) adopt or announce any intention to adopt any material
changes in its DTH commercial offer; or
(vi) other than in the ordinary and usual course of business
of the Parties, amend any Contract with any of its
Affiliates that is currently in effect or enter into any
new Contract with its Affiliates other than in the
ordinary course of business and on arms length terms.
(c) It is understood that the provisions of this Agreement shall not
limit the ability of UPC Polska and its Affiliates to take any action they may
deem necessary or appropriate in connection with the high yield bond indentures
of UPC Polska and/or Poland Communications Inc. and the trustees, bondholders or
bonds issued thereunder, provided that if such actions result in a material
adverse effect on, or create any material ongoing obligations for (i) the UPC
Polska DTH Business or (ii) the TKP Companies and the
13
Contributed Companies, taken together. Canal+ shall have the right to either
terminate this Agreement pursuant to Article 5.1(c) or (d) or to reduce the
purchase price by an amount equal to the resulting Loss.
(d) By the way of exception to this Article 4.5, UPC Polska shall not
be required to obtain the consent of the other Parties in order to terminate its
carriage of Romantica, E! and Travel.
4.6 Interim Management.
Canal+ undertakes to UPC that each TKP Company shall carry out its
activities, and UPC undertakes to Canal+ that each Contributed Company shall
carry out its activities, in each case during the Interim Period, solely within
the normal course of its business, with due care so as to preserve the value of
the business, its reputation and its relations with customers, suppliers, the
public authorities and any other parties with which it does business.
ARTICLE V
Conditions Precedent
5.1 Conditions Precedent. The obligation of the Parties to implement
the transactions set forth in Article 3.1 shall be subject to the satisfaction
at or prior to the Closing Date of each of the following conditions (unless
satisfaction of any such condition is expressly waived in a writing delivered to
the other Parties); provided, that the matters set forth in Articles 5.1(c)(i)
and 5.1(d)(i) shall not be a condition precedent to the obligations of UPC
Polska, PTC or UPC and the matters set forth in Articles 5.1(c)(ii) and
5.1(d)(ii) shall not be a condition precedent to the obligations of Canal+ or
TKP:
(a) Polish antimonopoly regulatory approval shall have been obtained or
the Polish antimonopoly authorities shall not have objected during the relevant
period, in respect of the transactions contemplated hereby and such approval (or
absence of objection) shall not be subject to conditions which would have a
material adverse effect on the business of any Party or the combined DTH
Business;
(b) any necessary Polish broadcasting regulatory approvals shall have
been obtained in respect of the transactions contemplated hereby and such
approval shall not be subject to conditions which would have a material adverse
effect on the business of any Party or the combined DTH Business;
(c) there shall not have occurred any material adverse change in the
financial condition, business, assets, prospects or results of operations of (i)
the DTH Business of UPC Polska, taken as a whole, or (ii) the business of TKP,
taken as a whole; provided, however, that (x) any effects in either business
occurring as a result of the transactions contemplated herein shall not
constitute a material adverse change in the financial condition, business,
assets, prospects or results of operations and (y) any difference between the
actual Net Asset Value at Closing of the Contributed Companies and the TKP
Companies, as the case may be, and the Net Asset Values set forth in Article
10.2 hereof shall not constitute a material adverse change in the financial
condition, business, assets, prospects or results of operations, but shall be
indemnified pursuant to the provisions of Article 10.4 hereof;
14
(d) (i) the representations and warranties of UPC shall be true and
accurate in all respects on the Closing Date except for such failures to be true
and correct that individually or in the aggregate would not reasonably be
expected to have a material adverse effect on the financial condition, business,
assets, prospects or results of operations of the DTH Business of UPC Polska,
taken as a whole; and (ii) the representations and warranties of Canal+ shall be
true and accurate in all respects on the Closing Date except for such failures
to be true and correct that individually or in the aggregate would not
reasonably be expected to have a material adverse effect on the financial
condition, business, assets, prospects or results of operations of TKP, taken as
a whole; and
(e) the registration of the TKP shareholder resolutions authorizing the
share capital increase referred to in Article 3.1 with the commercial court
having jurisdiction shall have become effective.
5.2 Best Efforts.
(a) Each of the Parties shall use its best efforts to cause the
conditions precedent to its obligations stipulated in Articles 5.1 (a) and (b)
to be satisfied as soon as possible prior to December 31, 2001 (without
prejudice to Article 11.3), it being understood that no Party shall be required
to take actions to meet conditions to the approvals set forth in such Articles
which would have a material adverse effect on its business or the combined DTH
Business.
(b) In furtherance of the provisions of Articles 5.2(a), the Parties
shall cooperate in making all the necessary filings in order to obtain such
approvals, including in the preparation of any filings and other written
communications (which shall be agreed in advance by the Parties) and the Parties
shall be entitled jointly to attend any relevant meetings with the relevant
regulatory authorities and the Parties shall keep each other informed on a
timely basis of all developments or discussions with such authorities.
(c) At all times prior to the Closing Date, each Party shall promptly
notify the other Parties in writing of the satisfaction of each of the
conditions contained in this Article V and of the occurrence of any event which
shall or may result in the failure of any of the conditions contained in this
Article V to be satisfied.
ARTICLE VI
Post-Closing Transactions and Undertakings
6.1 The Parties agree that TKP's Alekino and Minimax theme channels
will not be part of the Parties' combined business. As soon as possible
following the Closing, these channels shall be spun-off from TKP on terms to be
determined at the sole discretion of Canal+. The spin-off shall not be completed
prior to the completion of the merger of Cyfra+ and Polska Korporacja
Telewizyjna S.A.
6.2 Within nine (9) months of the date of this Agreement, TKP shall
replace, at its cost, the existing smart cards distributed to its Subscribers
with new smart cards as part of the anti-piracy program referred to in Article
4.2(b) hereof.
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6.3 Following the Closing, TKP and UPC Polska shall, at UPC Polska's
option, negotiate in good faith an agreement for the carriage on UPC Polska's
cable network in Poland of channels distributed by TKP. In such event, in
consideration of the size of UPC Polska's cable subscriber base in Poland, TKP
shall extend to UPC Polska commercial terms for any such carriage which are at
least as favorable as those granted by TKP to any other cable operator in Poland
with whom TKP has a carriage agreement with respect to the relevant channel.
6.4 The Parties shall cooperate by using their commercially reasonable
efforts during the Transition Period to retain any personnel necessary to ensure
a successful combination of the DTH Businesses of the Parties. Any costs in this
regard shall be borne by TKP.
6.5 TKP shall not pay license fees owed to Canal+ under the Canal+
trademark license agreement prior to the later of (i) the date on which Cyfra
+/TKP has sufficient operating cash flow to pay such fees and (ii) the
expiration of the exercise period for the option set forth in Article 4.9 of the
Shareholders Agreement.
ARTICLE VII
Representations and Warranties of Canal+
Canal+ represents and warrants to UPC that:
7.1 Organization.
(a) Attached hereto as Schedule 7.1(a) is an accurate and complete
list, as of the date of this Agreement, of each company, partnership or other
business entity in which TKP has a direct or indirect equity interest,
indicating the jurisdiction of incorporation, capital structure and the nature
and level of TKP's ownership in such entity. TKP and the entities listed on
Schedule 7.1(a) are hereinafter referred to collectively as the "TKP Companies".
(b) Except as set forth on Schedule 7.1(b), each of the TKP Companies
is duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and each of the TKP Companies has full power and
authority to own, lease and operate the assets held or used by it and to conduct
its business as currently conducted.
7.2 Authority; Enforceability.Each of TKP and Canal+ has the corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions provided for hereby have been duly authorized
by the board of directors of Canal+ and the required corporate bodies of TKP and
no other corporate proceeding on the part of Canal+ or TKP is necessary to
authorize the execution or delivery of this Agreement or the consummation of any
of the transactions contemplated hereby. This Agreement has been duly executed
and delivered by each of Canal+ and TKP and constitutes a legal, valid and
binding obligation of each of them, enforceable against each of them in
accordance with its terms.
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7.3 Ownership of Capital Stock.
(a) At the date hereof, there are 154,167 Class A shares of TKP
outstanding and 260,021Class B shares of TKP outstanding, all of which are duly
authorized, validly issued, fully paid and non-assessable.
(b) Immediately prior to the Closing, the shareholding structure of TKP
shall be as set forth in Exhibit 4.1. Immediately prior to the Closing, Canal+
shall own beneficially and of record the number of shares of the companies
listed in Exhibit 7.1(a) attributed to it therein, free and clear of all Liens
other than pursuant to this Agreement.
(c) All of the outstanding shares of capital stock of each of the TKP
Companies other than TKP which are owned by any of the TKP Companies are validly
issued, fully paid and nonassessable and all of such outstanding shares are
owned by TKP or another of the TKP Companies free and clear of all Liens.
(d) Except as listed on Schedule 7.3(d), there are not authorized or
outstanding any subscriptions, options, conversion rights, warrants or other
agreements, securities or commitments of any nature whatsoever (whether oral or
written and whether firm or conditional) obligating Canal+ or any of the TKP
Companies to issue, deliver or sell or cause to be issued, delivered or sold,
any authorized or outstanding shares of the capital stock, or any securities
convertible into or exchangeable for shares of capital stock, of any of the TKP
Companies or obligating any of such persons to grant, extend or enter into any
such agreement or commitment. None of the TKP Companies has any obligation to
repurchase, redeem or otherwise acquire any of its shares.
(e) The TKP shares issued to UPC Polska in accordance with Article 3.1
shall, when so issued and upon registration of the capital increase, be validly
issued, and fully paid and shall rank pari passu with, and have the same rights
as all other shares of the capital stock of TKP.
7.4 No Breach. Except as listed in Schedule 7.4, neither the execution
and delivery of this Agreement nor the performance by Canal+ or the TKP
Companies of their obligations hereunder nor the consummation of the
transactions provided for hereby does or shall:
(i) conflict with or violate any provision of the certificate
of incorporation, by-laws or any other document of
governance of Canal+ or any of the TKP Companies,
(ii) violate, conflict with or result in the breach or
termination of, or otherwise give any other person the
right to accelerate, renegotiate or terminate or receive
any payment, or constitute a default, an event of default,
or an event which with notice, lapse of time, or both,
would constitute a default or event of default under the
terms of any Contracts or any Permits to which Canal+ or
any of the TKP Companies is a party or by which any of
them or their respective securities, properties or
businesses are bound, or
17
(iii) constitute a violation by Canal+ or any of the TKP
Companies of any Laws or any Judgments;
except for such matters that either, individually or in the aggregate, would not
have a material adverse effect on the financial condition business, assets,
prospects or results of operations of the TKP Companies, taken as a whole (a
"TKP Material Adverse Effect") or on the ability of the TKP Companies or Canal+
to perform their respective obligations under this Agreement in all material
respects.
7.5 Financial Statements; Liabilities and Assets.
(a) Canal+ has delivered to UPC copies of the audited consolidated
financial statements of TKP as at and for the year ended December 31, 2000,
together with the related schedules and notes (the "TKP Financial Statements").
(b) The TKP Financial Statements have been prepared in conformity with
the relevant generally accepted accounting principles consistently applied
throughout the periods involved and present a true and fair view of the
consolidated financial condition, assets and liabilities of TKP at the date
thereof and the consolidated results of its operations and changes in financial
condition for the period then ended.
(c) Except as listed in Schedule 7.5(c), as of December 31, 2000, none
of the TKP Companies had any Liabilities which were individually or in the
aggregate material to the financial condition of the TKP Companies, taken as a
whole, that were not reflected or reserved against in the TKP Financial
Statements or specifically disclosed or provided for in the notes thereto to the
extent that such Liabilities were required by the relevant generally accepted
accounting principles to be reflected in such Financial Statements.
(d) Except as listed on Schedule 7.5(d), since January 1, 2001, none of
the TKP Companies has taken any of the actions described in Article 4.5 of this
Agreement other than actions referred to in Article 4.5(b)(iv) and (v), which
need not be listed.
(e) On the Closing Date, the TKP Companies shall have no outstanding
debt.
(f) Except as listed on Schedule 7.5(f), the TKP Companies have: (i)
good and marketable title to and ownership of all of their properties and assets
and valid leasehold interests in their leased properties and assets, in each
case subject to no mortgage, pledge, lien, encumbrance or charge, other than
possible minor liens or encumbrances which, when considered individually or
together, do not materially detract from the value of the property or asset to
which they relate or materially impair the operations of a TKP Company and which
have not arisen otherwise than in the ordinary course of business; and (ii) the
right to use all other property or assets currently used in the business of the
TKP Companies as now conducted, without any conflict with or infringement of the
rights of others.
7.6 Consents. Except as listed in Article V or as set forth on Schedule
7.6, no Consent of or by, or filing with, any other person is required to be
made or obtained by Canal+ or any of the TKP Companies, in connection with (i)
the execution, delivery or enforceability of this Agreement or (ii) the
consummation of any of the transactions provided for hereby.
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7.7 Actions and Proceedings. Except as set forth on Schedule 7.7, there
is no Proceeding (in each case, whether or not the defense thereof or Liability
in respect thereof is covered by policies of insurance) pending or to the best
knowledge of Canal+ or the TKP Companies, threatened, nor any Judgment (which
has not been discharged), that, if adversely determined, is reasonably likely to
have a TKP Material Adverse Effect. Except as set forth on Schedule 7.7, no
Proceeding is pending or, to the best knowledge of Canal+ and each of the TKP
Companies, threatened, before any court, arbitrator or administrative or
governmental authority to restrain or prohibit the completion of the
transactions contemplated herein, or to obtain damages, a discovery order or
other relief in connection with, the execution of this Agreement or the
completion of any of the transactions contemplated hereby that, if adversely
determined, would reasonably be expected to result in an obligation by the TKP
Companies to pay more than (euro)100,000 for any individual Proceeding or (euro)
500,000 for all such Proceedings taken together.
7.8 Taxes and Tax Returns.
(a) Except, in each case, as set forth on Schedule 7.8(a) or for any
matter that would not reasonably be expected to result in a liability to pay any
Tax, (i) all information provided in any Tax returns, reports, notices, accounts
and information was, when filed or given by any of the TKP Companies, complete
and accurate in all material respects; (ii) all Taxes required to be paid by any
of the TKP Companies that were due and payable prior to the date hereof have
been paid; and (iii) adequate provisions in accordance with the relevant
generally accepted accounting principles consistently applied have been made in
the TKP Financial Statements and the TKP Companies Financial Statements for the
payment of all Taxes for which the TKP Companies may be liable for the periods
covered thereby that were not yet due and payable as of the dates thereof.
(b) There are no audits or investigations pending or, to the best
knowledge of Canal+ and the TKP Companies, threatened relating to any Taxes for
which any of the TKP Companies may become (directly or indirectly) liable to pay
any Tax. No deficiencies for any Taxes have been proposed, asserted or assessed
against any of the TKP Companies. There are no agreements in effect to extend
the period of limitations for the assessment or collection of any Taxes for
which any of the TKP Companies may become liable and no requests for any such
agreements are pending.
(c) Except for amounts which in the aggregate do not exceed (euro)
500,000, each of the TKP Companies has withheld from its employees and timely
paid to the appropriate authority proper and accurate amounts for all periods
through the date hereof to the extent required to do so in compliance with all
Tax withholding provisions of all applicable Laws.
(d) There is no Contract or intercompany account system in existence
under which any of the TKP Companies has, or may at any time in the future have,
an obligation to contribute to the payment of any portion of a Tax determined on
a consolidated or unitary basis with respect to the affiliated group of
corporations of Canal+ is the parent.
7.9 Intellectual Property.
(a) The trademarks listed in Schedule 7.9(a) (the "TKP Trademarks") are
owned or licensed by the TKP Companies from a third party as set forth on such
Schedule. Schedule 7.9(a) also sets forth an accurate and complete list of all
patents
19
registered or applied for by any of the TKP Companies or licensed from a third
party, indicating for each whether such patent is owned or licensed from a third
party and whether such patent is licensed to any third party. The TKP Trademarks
and patents which are listed on Schedule 7.9(a) have been duly registered or
filed in each jurisdiction in which registration has been made with the
appropriate patent or trademark authority and such registrations have been
properly maintained and renewed in accordance with all legal requirements.
Except as set forth on Schedule 7.9(a), to the best knowledge of Canal+ and each
of the TKP Companies, there are no adverse claims or demands which have been
made by any person pertaining to any of the TKP Trademarks or patents listed on
Schedule 7.9(a) and, to the best knowledge of Canal+ and each of the TKP
Companies, there are no facts or circumstances which are reasonably likely to
result in any such adverse claim or demand. Except as set forth on Schedule
7.9(a), each of the TKP Companies has the right to use (whether as a result of
ownership or license of rights) the technology, know-how, processes and trade
secrets to the extent required for the conduct of its operations, as currently
conducted in the jurisdictions in which it conducts its business or where the
products of its business are distributed, and the consummation of the
transactions contemplated hereby shall not alter or impair any such rights in
any material respect.
(b) To the best knowledge of Canal+ and each of the TKP Companies,
except as listed in Schedule 7.9(b), the use or other exploitation of such TKP
Trademarks, patents, copyrights, applications therefor, technology, know-how,
processes and trade secrets by the TKP Companies does not infringe the rights of
any other person in a manner which would, either individually or in the
aggregate, have an adverse effect on the financial condition or results of
operations of the TKP Companies which exceeds (euro)500,000. To the best
knowledge of Canal+ and the TKP Companies, no other Person is infringing the
rights of any of the TKP Companies with respect to such patents, TKP Trademarks,
copyrights, applications therefor, technology, know-how, processes and trade
secrets in a manner which would, either individually or in the aggregate, have
an adverse effect on the financial condition or results of operations of the TKP
Companies which exceeds (euro)500,000.
7.10 Compliance with Legal Requirements.
(a) Except as set forth on Schedule 7.10(a) and except for instances of
non-compliance that, either individually or in the aggregate, would not have a
TKP Material Adverse Effect, the TKP Companies are currently conducting, and
since January 1, 2000 have conducted, their respective businesses in compliance
with all applicable Laws, Judgments and Permits.
(b) Except for any Permit of which the failure to possess would not
have a TKP Material Adverse Effect, the TKP Companies possess, and upon
consummation of the transactions contemplated hereby shall continue to possess,
all Permits necessary to conduct their respective operations as they are
currently being conducted and all such Permits are in full force and effect in
all material respects. No Proceeding to modify, suspend, terminate or otherwise
limit any such Permit is pending or, to the best knowledge of Canal+ and the TKP
Companies, threatened, which would have a TKP Material Adverse Effect.
(c) Except as set forth on Schedule 7.10(a) and except for instances of
non-compliance which would not have a TKP Material Adverse Effect, since January
1, 2000, none of the TKP Companies has received any notice in any form
(including any citations, notices of violations, complaints, consent orders or
inspection reports) which would
20
indicate that any of the TKP Companies was not at the time of such notice or is
not currently in compliance with all such applicable Laws, Judgments and
Permits.
(d) In the conduct of their business activities, the TKP Companies
have, except for instances of non-compliance which would not have a TKP Material
Adverse Effect, complied with all competition laws and regulations.
7.11 Outstanding Commitments.
(a) Schedule 7.11(a) contains an accurate and complete list of:
(i) all the programming rights Contracts to which any of the
TKP Companies is a party as at July 23, 2001 (other than
sports rights Contracts) which (1) are "output" Contracts
or (2) involve the obligation by any of the TKP Companies
to pay amounts in excess of (euro)100,000 per annum (based
on subscriber levels as of the date of this Agreement);
(ii) all the sports rights Contracts to which any of the TKP
Companies is a party as at July 23, 2001 which involve the
obligation by any of the TKP Companies to pay amounts in
excess of (euro) 100,000 per annum (based on subscriber
levels as of the date of this Agreement);
(iii) all of the transponder lease or sublease Contracts to
which any of the TKP Companies is a party;
(iv) all of the channel carriage Contracts to which any of the
TKP Companies is a party;
(v) all the Contracts having a value of greater than (euro)
100,000 relating to the acquisition, or the lease or
rental by any of the TKP Companies, of digital or analogue
decoders to which any of the TKP Companies is a party as
at July 23, 2001;
(vi) all of the Contracts with manufacturers of conditional
access or middleware suppliers to which any of the TKP
Companies is a party as at July 23, 2001;
(vii) all of the Contracts between any of the TKP Companies and
any of Canal+ or any Affiliate of Canal+ other than
another of the TKP Companies;
(viii) all outstanding guarantees of obligations of any of the
TKP Companies granted by Canal+ or Victory; and
(ix) all Contracts, not otherwise listed in Schedule 7.11(a),
to which any of the TKP Companies is a party having a
value greater than (euro)100,000, other than contracts
relating to Minimax or Alekino.
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(b) Except as set forth in Schedule 7.11(b), each of the Contracts
referred to in Article 7.11(a) is valid and enforceable and none of the TKP
Companies is in breach in any material respect under any of such Contracts. To
the best knowledge of Canal+ and the TKP Companies, no other party to any of
such Contracts is as at the date of this Agreement in breach in any material
respect thereunder.
7.12 Employment Matters. Except as listed in Schedule 7.12, no employee
of any of the TKP Companies is entitled to a contractual severance package with
a value in excess of (euro) 30,000 (except for severance payments required by
applicable Laws or customary decisions or practices of the relevant employment
tribunal or authority and except as a result of termination of any contract of
employment where the termination is in breach of the Contract and the
entitlement of the employee is by reference to the unexpired term of the
Contract which does not exceed twelve (12) months). No amount shall become due
from any of the TKP Companies to any employee of any of the TKP Companies solely
as a result of the consummation of the transactions contemplated by this
Agreement. The consummation of the transactions contemplated by this Agreement
shall not result in any increase in the amount of compensation due to any
employee or former employee of any of the TKP Companies.
7.13 Accuracy of Representations and Warranties at Closing. The
foregoing representations and warranties in this Article VII are hereby made by
Canal+ as of the date hereof and shall be accurate as of the Closing Date as
though restated on such date (except in the case of any representation or
warranty that by its terms is made as of a date specified therein, which shall
be accurate as of such date).
ARTICLE VIII
Representations and Warranties of UPC
UPC represents and warrants to Canal+ that:
8.1 Organization.
(a) Wizja TV Sp. z.oo and UPC Broadcast Centre Limited are hereinafter
referred to collectively as the "Contributed Companies".
(b) Except as set forth on Schedule 8.1(b), each of the Contributed
Companies is duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and each of the Contributed Companies
has full power and authority to own, lease and operate the assets held or used
by it and to conduct its business as currently conducted.
8.2 Authority; Enforceability.Each of UPC and PTC has the corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions provided for hereby have been duly authorized
by the board of directors of each of UPC and PTC and no other corporate
proceeding on the part of UPC or PTC is necessary to authorize the execution or
delivery of this Agreement or the consummation of any of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by each
of UPC
22
and PTC and constitutes a legal, valid and binding obligation of each of UPC and
PTC, enforceable against each in accordance with its terms.
8.3 Ownership of Capital Stock.
(a) At the date hereof, there are 35,344 shares of Wizja TV Sp. z.oo
outstanding and 5 million shares of UPC Broadcast Centre Limited outstanding.
All of such shares are duly authorized, validly issued, fully paid and
nonassessable. Immediately prior to the Closing, PTC shall own beneficially and
of record 100% of the shares of each of Wizja TV Sp. z.oo and UPC Broadcast
Centre Limited, in each case free and clear of all Liens other than pursuant to
this Agreement.
(b) Except as listed on Schedule 8.3(b), there are not authorized or
outstanding any subscriptions, options, conversion rights, warrants or other
agreements, securities or commitments of any nature whatsoever (whether oral or
written and whether firm or conditional) obligating UPC or any of the
Contributed Companies to issue, deliver or sell or cause to be issued, delivered
or sold, any authorized or outstanding shares of the capital stock, or any
securities convertible into or exchangeable for shares of capital stock, of any
of the Contributed Companies or obligating any of such persons to grant, extend
or enter into any such agreement or commitment. None of the Contributed
Companies has any obligation to repurchase, redeem or otherwise acquire any of
its shares.
8.4 No Breach. Except as listed in Schedule 8.4, neither the execution
and delivery of this Agreement nor the performance by PTC or the Contributed
Companies of their obligations hereunder nor the consummation of the
transactions provided for hereby does or shall:
(i) conflict with or violate any provision of the certificate
of incorporation, by-laws or any other document of
governance of PTC or any of the Contributed Companies,
(ii) violate, conflict with or result in the breach or
termination of, or otherwise give any other person the
right to accelerate, renegotiate or terminate or receive
any payment, or constitute a default, an event of default,
or an event which with notice, lapse of time, or both,
would constitute a default or event of default under the
terms of any Contracts or any Permits to which PTC or any
of the Contributed Companies is a party or by which any of
them or their respective securities, properties or
businesses are bound, or
(iii) constitute a violation by PTC or any of the Contributed
Companies of any Laws or any Judgments;
except for such matters that either, individually or in the aggregate, would not
have a material adverse effect on the financial condition business, assets,
prospects or results of operations of the Contributed Companies, taken as a
whole (a "UPC Material Adverse Effect") or on the ability of the Contributed
Companies, PTC or UPC to perform their respective obligations under this
Agreement in all material respects.
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8.5 Financial Statements; Liabilities. (a) UPC has delivered to Canal+
copies of the audited consolidated financial statements of Wizja TV Sp. z.oo and
unaudited consolidated financial statements of UPC Broadcast Centre Limited as
at and for the year ended December 31, 2000, in each case, together with the
related schedules and notes, and shall deliver to Canal+ audited financial
statements of UPC Broadcast Centre Limited that shall not contain any material
changes from the unaudited financial statements so delivered as soon as possible
after the date hereof but no later than the Closing Date (the audited
consolidated financial statements of Wizja TV Sp. z.oo and the unaudited and
audited consolidated financial statements of UPC Broadcast Centre Limited are
collectively referred to herein as the "Wizja TV Sp. z.oo and UPC Broadcast
Centre Limited Financial Statements").
(b) The Wizja TV Sp. z.oo and UPC Broadcast Centre Limited Financial
Statements have been prepared in conformity with the relevant generally accepted
accounting principles consistently applied throughout the periods involved and
present a true and fair view of the consolidated financial condition, assets and
liabilities of the company or companies to which such Financial Statements
relate at the date thereof and the consolidated results of its or their
operations and changes in financial condition for the period then ended.
(c) Except as listed in Schedule 8.5(c), as of December 31, 2000, none
of the Contributed Companies had any Liabilities which were individually or in
the aggregate material to the financial condition of the Contributed Companies,
taken as a whole, that were not reflected or reserved against in the audited
Wizja TV Sp. z.oo financial statements or the unaudited UPC Broadcast Centre
Limited Financial Statements or specifically disclosed or provided for in the
notes thereto to the extent that such Liabilities were required by the relevant
generally accepted accounting principles to be reflected in such Financial
Statements.
(d) Except as listed on Schedule 8.5(d), since January 1, 2001, none of
UPC Polska or any of its Subsidiaries involved in the DTH Business has taken any
of the actions described in Article 4.5 of this Agreement other than actions
referred to in Article 4.5(b)(iv) and (v), which need not be listed.
(e) On the Closing Date, the total outstanding debt of the Contributed
Companies (including any interest accrued at such date) shall consist only of
the UPC Shareholder Loan plus trade payables to trade creditors.
(f) Except as listed on Schedule 8.5(f), the Contributed Companies
have: (i) good and marketable title to and ownership of all of their properties
and assets and valid leasehold interests in their leased properties and assets,
in each case subject to no mortgage, pledge, lien, encumbrance or charge, other
than possible minor liens or encumbrances which, when considered individually or
together, do not materially detract from the value of the property or asset to
which they relate or materially impair the operations of a Contributed Company
and which have not arisen otherwise than in the ordinary course of business; and
(ii) the right to use all other property or assets currently used in the
business of the Contributed Companies as now conducted, without any conflict
with or infringement of the rights of others.
24
8.6 Consents. Except as listed in Article V or as set forth on Schedule
8.6, no Consent of or by, or filing with, any other person is required to be
made or obtained by UPC or any of the Contributed Companies, in connection with
(i) the execution, delivery or enforceability of this Agreement or (ii) the
consummation of any of the transactions provided for hereby.
8.7 Actions and Proceedings. Except as set forth on Schedule 8.7, there
is no Proceeding (in each case, whether or not the defense thereof or Liability
in respect thereof is covered by policies of insurance) pending or to the best
knowledge of UPC or the Contributed Companies, threatened, nor any Judgment
(which has not been discharged), that, if adversely determined, is reasonably
likely to have a UPC Material Adverse Effect. Except as set forth on Schedule
8.7, no Proceeding is pending or, to the best knowledge of UPC and each of the
Contributed Companies, threatened, before any court, arbitrator or
administrative or governmental authority to restrain or prohibit the completion
of the transactions contemplated herein, or to obtain damages, a discovery order
or other relief in connection with, the execution of this Agreement or the
completion of any of the transactions contemplated hereby that, if adversely
determined, would reasonably be expected to result in an obligation by the
Contributed Companies to pay more than (euro)100,000 for any individual
Proceeding or (euro)500,000 for all such Proceedings taken together.
8.8 Taxes and Tax Returns.
(a) Except, in each case, as set forth on Schedule 8.8(a) or for any
matter that would not reasonably be expected to result in a liability to pay any
Tax, (i) all information provided in any Tax returns, reports, notices, accounts
and information was, when filed or given by any of the Contributed Companies,
complete and accurate in all material respects; (ii) all Taxes required to be
paid by any of the Contributed Companies that were due and payable prior to the
date hereof have been paid; and (iii) adequate provisions in accordance with the
relevant generally accepted accounting principles consistently applied have been
made in the Wizja TV Sp. z.oo and UPC Broadcast Centre Limited Financial
Statements and the Contributed Companies Financial Statements for the payment of
all Taxes for which the Contributed Companies may be liable for the periods
covered thereby that were not yet due and payable as of the dates thereof.
(b) There are no audits or investigations pending or, to the best
knowledge of UPC and the Contributed Companies, threatened relating to any Taxes
for which any of the Contributed Companies may become (directly or indirectly)
liable to pay any Tax. No deficiencies for any Taxes have been proposed,
asserted or assessed against any of the Contributed Companies. There are no
agreements in effect to extend the period of limitations for the assessment or
collection of any Taxes for which any of the Contributed Companies may become
liable and no requests for any such agreements are pending.
(c) Except for amounts which in the aggregate do not exceed
(euro)500,000, each of the Contributed Companies has withheld from its employees
and timely paid to the appropriate authority proper and accurate amounts for all
periods through the date hereof to the extent required to do so in compliance
with all Tax withholding provisions of all applicable Laws.
25
(d) There is no Contract or intercompany account system in existence
under which any of the Contributed Companies has, or may at any time in the
future have, an obligation to contribute to the payment of any portion of a Tax
determined on a consolidated or unitary basis with respect to the affiliated
group of corporations of UPC is the parent.
8.9 Intellectual Property.
(a) The trademarks listed in Schedule 8.9(a) (the "Contributed
Trademarks") are owned or licensed by UPC Polska or its subsidiaries involved in
the DTH Business from a third party as set forth on such Schedule. Schedule
8.9(a) also sets forth an accurate and complete list of all patents registered
or applied for by any of the Contributed Companies or licensed from a third
party, indicating for each whether such patent is owned or licensed from a third
party and whether such patent is licensed to any third party. The Contributed
Trademarks and patents which are listed on Schedule 8.9(a) have been duly
registered or filed in each jurisdiction in which registration has been made
with the appropriate patent or trademark authority and such registrations have
been properly maintained and renewed in accordance with all legal requirements.
Except as set forth on Schedule 8.9(a), to the best knowledge of UPC and each of
the Contributed Companies, there are no adverse claims or demands which have
been made by any person pertaining to any of the Contributed Trademarks or
patents listed on Schedule 8.9(a) and, to the best knowledge of UPC and each of
the Contributed Companies, there are no facts or circumstances which are
reasonably likely to result in any such adverse claim or demand. Except as set
forth on Schedule 8.9(a), each of the Contributed Companies has the right to use
(whether as a result of ownership or license of rights) the technology,
know-how, processes and trade secrets to the extent required for the conduct of
its operations, as currently conducted in the jurisdictions in which it conducts
its business or where the products of its business are distributed, and the
consummation of the transactions contemplated hereby shall not alter or impair
any such rights in any material respect.
(b) To the best knowledge of UPC and each of the Contributed Companies,
except as listed in Schedule 8.9(b), the use or other exploitation of such
Contributed Trademarks, patents, copyrights, applications therefor, technology,
know-how, processes and trade secrets by the Contributed Companies does not
infringe the rights of any other person in a manner which would, either
individually or in the aggregate, have an adverse effect on the financial
condition or results of operations of the Contributed Companies which exceeds
(euro)500,000. To the best knowledge of UPC and the Contributed Companies, no
other Person is infringing the rights of any of the Contributed Companies with
respect to such patents, UPC Polska Trademarks, copyrights, applications
therefor, technology, know-how, processes and trade secrets in a manner which
would, either individually or in the aggregate, have an adverse effect on the
financial condition or results of operations of the Contributed Companies which
exceeds (euro)500,000.
8.10 Compliance with Legal Requirements.
(a) Except as set forth on Schedule 8.10(a) and except for instances of
non-compliance that, either individually or in the aggregate, would not have a
UPC Material Adverse Effect, the Contributed Companies are currently conducting,
and since January 1, 2000 have conducted, their respective businesses in
compliance with all applicable Laws, Judgments and Permits.
26
(b) Except for any Permit of which the failure to possess would not
have a UPC Material Adverse Effect, the Contributed Companies possess, and upon
consummation of the transactions contemplated hereby shall continue to possess,
all Permits necessary to conduct their respective operations as they are
currently being conducted and all such Permits are in full force and effect in
all material respects. No Proceeding to modify, suspend, terminate or otherwise
limit any such Permit is pending or, to the best knowledge of UPC and the
Contributed Companies, threatened, which would have a UPC Material Adverse
Effect.
(c) Except as set forth on Schedule 8.10(a) and except for instances of
non-compliance which would not have a UPC Material Adverse Effect, since January
1, 2000, none of the Contributed Companies has received any notice in any form
(including any citations, notices of violations, complaints, consent orders or
inspection reports) which would indicate that any of the Contributed Companies
was not at the time of such notice or is not currently in compliance with all
such applicable Laws, Judgments and Permits.
(d) In the conduct of their business Activities, UPC Polska and each of
the Contributed Companies have, except for instances of non-compliance which
would not have a UPC Material Adverse Effect, complied with all competition laws
and regulations.
8.11 Outstanding Commitments.
(a) Schedule 8.11(a) contains an accurate and complete list of:
(i) all of the transponder lease or sublease Contracts to
which UPC Polska or any of its Subsidiaries (the "UPC
Polska Companies") is a party;
(ii) all of the channel carriage Contracts used in the UPC
Polska DTH Business;
(iii) all the Contracts having a value greater than (euro)
100,000 relating to the acquisition, or the lease or
rental by any of the UPC Polska Companies involved in the
DTH Business, of digital or analogue decoders to which any
of the UPC Polska Companies is a party as at July 23,
2001;
(iv) all of the Contracts with manufacturers of conditional
access or middleware suppliers to which any of the UPC
Polska Companies involved in the DTH Business is a party
as at July 23, 2001;
(v) all of the Contracts between any of the Contributed
Companies and any of UPC or any Affiliate of UPC other
than another of the Contributed Companies;
(vi) all outstanding guarantees of obligations of Wizja TV B.V.
pursuant to the programming contracts identified in
Exhibit 3.1(h) or of any of the Contributed Companies, in
each case, granted by UPC Polska, UPC or UGC; and
27
(vii) all other Contracts, not otherwise listed in Schedule
8.11(a), to which any of the UPC Polska Companies involved
in the DTH Business is a party having a value greater than
(euro) 100,000,
in each case to which a Contributed Company is a party or which
relate to the UPC Polska DTH Business.
(b) Except as set forth in Schedule 8.11(b), each Contract referred to
in Article 8.11(a) is valid an enforceable and none of the UPC Polska Companies
is in breach in any material respect under any of such Contracts. To the best
knowledge of UPC and the UPC Polska Companies, no other party to any of such
Contracts is as at the date of this Agreement in breach in any material respect
thereunder.
8.12 Employment Matters.
(a) Except as listed in Schedule 8.12(a), no employee of any of the
Contributed Companies is entitled to a contractual severance package with a
value in excess of (euro) 30,000 (except for severance payments required by
applicable Laws or customary decisions or practices of the relevant employment
tribunal or authority and except as a result of termination of any contract of
employment where the termination is in breach of the Contract and the
entitlement of the employee is by reference to the unexpired term of the
Contract which does not exceed twelve (12) months). No amount shall become due
from any of the Contributed Companies to any employee of any of the Contributed
Companies solely as a result of the consummation of the transactions
contemplated by this Agreement. The consummation of the transactions
contemplated by this Agreement shall not result in any increase in the amount of
compensation due to any employee or former employee of any of the Contributed
Companies.
(b) Attached hereto as Schedule 8.12(b) is a list of all employees of
the Contributed Companies other than those employed by the call center.
8.13 Accuracy of Representations and Warranties on the Closing Date.
The foregoing representations and warranties are hereby made by UPC as of the
date hereof and shall be accurate as of the Closing Date as though restated on
such date (except in the case of any representation or warranty that by its
terms is made as of a date specified therein, which shall be accurate as of such
date).
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ARTICLE IX
Indemnification
9.1 Indemnification. Subject to the provisions of this Agreement, each
Party (the "Indemnifying Party") undertakes to indemnify:
(a) the TKP Companies or the Contributed Companies (the "TKP
Indemnified Parties"), for all damages, losses and reasonable expenses
(collectively, a "Loss") actually and directly suffered by the TKP Companies or
the Contributed Companies as a result of any inaccuracy or breach of the
representations and warranties made and given by such Party in Article VII or
VIII of this Agreement; and
(b) each of the other Parties (each, an "Other Indemnified Party," and,
together with the TKP Indemnified Parties, the "Indemnified Parties"), for any
Loss actually and directly suffered by such Other Indemnified Party as a result
of any breach of any covenant of the Indemnifying Party hereunder. For purposes
of this Article 9.1(b), if the Indemnifying Party is Canal+, the Other
Indemnified Parties shall be UPC, UPC Polska and PTC, and if the Indemnifying
Party is UPC, the Other Indemnified Party shall be Canal+.
9.2 Claims. In order to be valid, any claims made by the Indemnified
Party under the terms of this Article IX (a "Claim") shall be made in writing as
follows:
(a) each Claim shall state, with reasonable detail, the specific
grounds therefor and the amount claimed;
(b) each Claim shall include all evidence reasonably necessary to
demonstrate the soundness thereof, available at that time; and
(c) each Claim shall be delivered by the Indemnified Party to the
Indemnifying Party no later than thirty (30) days after the Indemnified Party
becomes aware of the circumstances giving rise to such Claim or, if the
circumstances so require (e.g., in the case of emergency proceedings or when the
answer to a notification must be given within a time period subject to
forfeiting its rights), the Indemnified Party shall send the written
notification to the Indemnifying Party with sufficient time, given the
circumstances, to permit the latter to take the actions referred to in Article
9.4.
9.3 Deadlines for Claims. Any Claims may give rise to indemnification
only if notified by the Indemnified Party to the Indemnifying Party prior to the
expiration of an eighteen (18) month period from the Closing Date, or for Claims
related to tax, social security or custom matters, prior to the end of a thirty
(30) day period after the expiration of the relevant statute of limitations.
9.4 Third-Party Claims. In the event that a Claim is made on the basis
of a claim made by a third party against the Indemnified Party, with the consent
of the Indemnified Party, which consent shall not be unreasonably withheld, such
Indemnifying Party may retain counsel at its own expense to defend the interests
of the Indemnified Party. At the Indemnifying Party's request, the Indemnified
Party shall present all arguments, submit all pleadings, take all actions, file
all counter-claims and more generally cooperate with the Indemnifying Party and
the counsel appointed by the Indemnifying Party. The Indemnified Party shall
provide the Indemnifying Party with all information or documents in
29
relation to said third-party claim which the Indemnifying Party may reasonably
request. The Indemnified Party shall not settle, admit liability or withdraw any
claim in connection with said third-party claim without the prior written
consent of the Indemnifying Party which shall not be unreasonably withheld. In
the event the Indemnified Party does not consent to the Indemnifying Party's
conducting the defense in relation to said third-party claim, any Loss incurred
in connection with such third-party claim shall not be eligible for
indemnification by the Indemnifying Party under this Article IX.
9.5 Effective Nature of the Loss
(a) A Loss shall be eligible for indemnification by the Indemnifying
Party to the extent and only to the extent such Loss has effectively been
sustained by the Indemnified Party.
(b) Any indemnification due by the Indemnifying Party shall be
calculated taking into account the effect of any tax savings realized by the
Indemnified Party as a result of the tax deductibility of the relevant Loss.
(c) If the Indemnifying Party pays an indemnity in respect of a Loss
and the Indemnified Party subsequently recovers or may recover (even after
expiration of the relevant time limit set forth in Article 9.3) all or part of
the amount of such indemnity from a third party, the Indemnified Party shall
take all reasonable steps to recover such amount and, immediately upon recovery
thereof, shall pay to the Indemnifying Party the amount thereby recovered (and
in the event that such recovery shall result in the indemnification due in
connection with the net amount of the concerned Loss falling below the amount
specified in Article 9.6(b) or in the total indemnification due in connection
with the net amount of the concerned Loss and the other Losses, if any, which
are eligible for indemnification by the Indemnifying Party, falling below the
amount specified in Article 9.6(a), the Indemnified Party shall repay to the
Indemnifying Party the full amount paid by the latter in respect of all the
relevant Loss and/or Losses).
(d) Any indemnification due by the Indemnifying Party shall in all
cases be limited to the amount of the Loss, notwithstanding the fact that the
event giving rise to the Indemnifying Party's obligation may originate from an
inaccuracy of several of the representations made under Articles VII or VIII
hereof.
(e) If a Claim is based upon a liability which is contingent only, no
indemnification shall be due unless and until such liability becomes due and
payable.
(f) In the event that the Indemnified Party is required to make a
payment in connection with a third-party claim, the Indemnifying Party shall not
be required to make any indemnification payment in connection thereto before
such payment has actually been made by the Indemnified Party to such third
party.
9.6 Certain Limitations on Indemnification
In respect of any Claims arising under Article 9.1(a) other than Claims
relating to tax, social security or customs matters and Claims under Articles
7.3 and 8.3:
(a) No indemnification shall be due by the Indemnifying Party unless
the aggregate amount of the indemnification owed by the Indemnifying Party
exceeds (after all
30
deductions pursuant to this Article VII) (euro)5 million, and such
indemnification shall then become due for the portion exceeding such amount.
(b) In respect of individual Claims, the Indemnified Party shall not be
entitled to indemnification unless the amount of the indemnification exceeds
(euro)500,000 per such individual Claim and any indemnification which would be
owed by the Indemnifying Party but for this Article 9.6(b) (i.e., an individual
amount not exceeding (euro)500,000 shall not be counted towards the amount set
forth in subsection (a) above).
(c) The total indemnification that may be due by the Indemnifying Party
to the Indemnified Party shall not exceed in the aggregate (euro) 150 million
(the "Cap").
9.7 Exonerating and Mitigating factors
(a) In the event that a situation giving rise to a Claim is curable, in
whole or in part, the Indemnified Party shall give the Indemnifying Party a
reasonable opportunity to implement such a cure.
(b) An Indemnified Party shall not be entitled to make any Claim
against an Indemnifying Party in respect of any Liability reserved against
(whether specifically or generally) in the TKP Financial Statements or the Wizja
TV Sp. z.oo and UPC Broadcast Centre Limited Financial Statements, to the extent
of such reserve.
9.8 Exclusivity of Remedy.
The indemnification provided in Article 9.1(a) shall be the exclusive
remedy of the Indemnified Party against the Indemnifying Party in respect of any
breach of any representation or warranty made in Article VII or VIII of this
Agreement and the Indemnified Party hereby waives any rights to rescission it
may have relating thereto.
9.9 No Other Representations.
Neither Party makes any representation nor gives any warranty to the
other Party other than as specifically provided for in Articles VII, VIII and X
of this Agreement.
9.10 No Awareness of Mature Claims.
Each of Canal+ and UPC represents that it is not aware of any fact
involving the other Party which, as of the date hereof, gives rise to a claim
for indemnification under Article 9.1(a) hereof: provided, however, that the
foregoing representation shall not prevent either Party from bringing a claim
for indemnification under said Article 9.1(a) which is based on: (a) facts of
which such Party is not aware on the date hereof, or (b) facts of which such
Party is aware on the date hereof but in respect of which a claim for
indemnification under Article 9.1(a) hereof is triggered at any time in the
future.
9.11 Limitations Regarding Post-Closing Matters
An Indemnified Party shall not be entitled to make any Claim against
any of UPC, UPC Polska or PTC in connection with any Loss which arises as a
result of (a) actions taken by or on behalf of Canal+ or any TKP Company or
Contributed Company after the Closing Date (including but not limited to changes
in accounting methods or policies), (b)
31
changes in the insurance coverage of any TKP Company or Contributed Company, or
(c) the passing, or any change in, any law or administrative practice of any
governmental authority in any such case not actually in force on the date of
this Agreement (even if retroactive in effect), including but not limited to any
increase in the tax rates in effect on the date hereof or imposition of any tax
not in effect on the date hereof.
ARTICLE X
Post-Closing Adjustments and Specific Indemnity
10.1 Subscribers.
(a) UPC represents to Canal+ that the total number of DTH Subscribers
of Wizja TV Sp. z.oo on June 30, 2001 was no less than 320,000.
(b) Canal+ represents to UPC that the total number of DTH Subscribers
of the TKP Companies on June 30, 2001 was no less than 280,000.
10.2 Net Asset Value.
(a) UPC undertakes to contribute the Contributed Companies at Closing
with a Net Asset Value of no less than 119 million Polish zlotys.
(b) Canal+ undertakes that the Net Asset Value of the TKP Companies at
Closing will be no less than 150 million Polish zlotys.
10.3 Auditors' Report.
(a) No later than forty-five (45) days after the Closing Date, (i) TKP
shall cause each TKP Company and Contributed Company to prepare its financial
statements (balance sheet, profit and loss statement and notes on the accounts,
including off-balance sheet undertakings) as of the Closing Date (the "Closing
Individual Accounts") and shall prepare on the basis of the Closing Individual
Accounts its consolidated financial statements (balance sheet, profit and loss
statement and notes on the accounts, including off-balance sheet undertakings)
as of the Closing Date (such consolidated accounts together with the Closing
Individual Accounts, the "Closing Accounts"). The Closing Accounts shall be
prepared in accordance with (i) the accounting principles and methods generally
accepted in the country of incorporation of each respective Group Company and
(ii) those accounting rules implementing said principles and methods as
consistently applied by each Group Company for the preparation of its financial
statements (the "Accounting Principles").
The Closing Accounts and a copy of the Subscriber databases of TKP and
the Contributed Companies for the relevant period shall then be submitted to
Price Waterhouse Coopers or such other independent internationally-recognized
auditing firm as may be agreed by the Parties (the "Auditor") for examination
and for calculation of (i) the Net Asset Value of the Contributed Companies and
the TKP Companies at the Closing Date and (ii) the number of DTH Subscribers of
TKP and Wizja TV Sp. z.oo, respectively, in each case, as of June 30, 2001.
The Parties shall cause the Auditor to review the Closing Accounts and
the Subscribers numbers and to state its conclusions in a report to be
communicated to each
32
Party, together with its working papers, no later than thirty (30) days after
the delivery of the Closing Accounts to the Auditor (the "Auditor's Report").
(b) Immediately upon receipt of the Auditor's Report, each of Canal+
and UPC shall have a period of thirty (30) days from the date of receipt of the
Auditor's Report (the "Examination Period") to review the Auditor's Report and
working papers, to make enquiries of each TKP Company and Contributed Company
and their respective accountants regarding the Auditor's Report and to notify
any disagreement with (x) Net Asset Value and/or (y) the Subscriber numbers, as
the corresponding amounts are stated in the Auditor's Report.
In the event of such a disagreement, a Party shall send a notice of
objection (the "Notice of Objection") to the other Parties, no later than on the
last day of the Examination Period. Failing such Notice(s) of Objection, each
Party shall be deemed to have accepted the amount of the Net Asset Value, the
Subscriber numbers as stated in the Auditor's Report without reservation, and
all such amounts shall then become final and binding upon the Parties. Notice(s)
of Objection shall mention the corrections to be made to the amount of the Net
Asset Value and/or the subscriber numbers as stated in the Auditor's Report, and
shall state the reasons therefor.
(c) In the event that a Notice of Objection is sent, the Parties shall
attempt to reach an agreement on the principle and amounts of the corrections
proposed by UPC, and to determine the Net Asset Value and/or the Subscriber
numbers, by mutual agreement.
(d) In the event that no agreement has been reached between the Parties
twenty (20) days after the date of receipt by the Purchaser of the Notice of
Objection, those points on which there is a disagreement shall be submitted to a
mutually agreed independent internationally recognized auditing firm (the
"Expert"), at the request of either Party. The Expert shall issue a decision
only on those points on which UPC's and Canal+ have been unable to reach an
agreement, and shall define the amount of the Net Asset Value and/or the
subscriber numbers. In carrying out its duties, the Expert shall apply the
Accounting Principles. The Parties shall use their best efforts to cause the
Expert to render its decision within thirty (30) days after its appointment,
which decision shall be final and binding upon the Parties.
The Expert's fees and disbursements shall be borne equally by UPC, on
the one hand, and Canal+, on the other hand.
10.4 Adjustments.
If the audit referred to in Article 10.3 reveals a shortfall in the
Subscriber numbers or Net Asset Value figures set forth in Article 10.1 or 10.2,
then:
(a) UPC shall owe Canal+ * in cash per Subscriber for any
shortfall from the Subscriber figures set forth in Article
10.1(a); and
(b) Canal+ shall owe UPC * in cash per Subscriber for any
shortfall from the Subscriber figures set forth in Article
10.1(b).
(c) UPC shall indemnify TKP in cash on a euro for euro basis if
the Net Asset Value of the Contributed Companies is more than
5% less than
- --------------------
* Information omitted pursuant to a request for confidential treatment. The
omitted information has been filed separately with the Secretary of the
Securities and Exchange Commission.
33
the amount set forth in Article 10.2(a). No indemnity shall be
due in respect of a reduction in Net Asset Value under this
clause to the extent that such reduction is the direct result
of any increase in the provision for decoders above 122
million Polish zlotys.
(d) Canal+ shall indemnify TKP in cash on a euro for euro basis if
the Net Asset Value of the TKP Companies is more than 5% less
than the amount set forth in Article 10.2(b). No indemnity
shall be due in respect of a reduction in Net Asset Value
under this Clause to the extent that such reduction is the
direct result of any increase in the provision for decoders
above 155 million Polish zlotys
Within ten (10) days of the final determination of the Subscriber
numbers and Net Asset Value pursuant to Article 10.3, each of Canal+ and UPC
shall pay any amounts payable by it under this Article 10.4, reduced by any
amounts due to it under this Article 10.4. For the avoidance of doubt, payments
made pursuant to this Article 10.4 shall be made without regard to the limits
set forth in Article 9.6 hereof.
10.5 Specific Indemnity
UPC hereby undertakes to hold harmless and indemnify TKP from any Loss
suffered by TKP as a result of any increase in minimum monthly subscriber
guarantees pursuant to Clause 7 of the HBO Carriage Agreement, without regard to
the limits set forth in Article 9.6 hereof.
ARTICLE XI
Miscellaneous
11.1 Confidentiality.
(a) The Parties agree and acknowledge that the provisions of this
Agreement and all information relating hereto and thereto, including without
limitation any confidential information received by either Party in connection
with the implementation hereof, are confidential information; provided, however,
that confidential information shall not include information which (x) is already
otherwise known to the recipient, (y) is or becomes freely and generally
available to the public through no wrongful act of the recipient, or (z) is
rightfully received by the recipient from a third party legally entitled to
disclose such information, without breach by the recipient of this Agreement.
Each Party shall hold in confidence and shall not disclose any confidential
information without the prior written consent of the other Parties except to the
extent necessary:
(i) as part of its normal reporting or review procedures, to its
Group Companies or attorneys and auditors;
(ii) as required by law or court order or the regulations of any
recognized stock exchange of which any of its securities are
listed or in connection with any submissions to any regulatory
agencies; or
(iii) as required in order to enforce its rights and perform its
duties in connection with this Agreement.
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(b) Subject to the exceptions above, each Party agrees that it shall
not use any confidential information other than in connection with the
implementation of this Agreement and that it shall not make, nor allow any of
its Affiliates to make, any news release or other public disclosure with respect
to this Agreement or the transactions contemplated hereby without the prior
approval of each of the other Party. Each Party shall take appropriate steps to
ensure that its employees and agents are aware of the Party's obligations under
the foregoing sentence.
(c) On the date hereof, the Parties shall issue a joint press release
relating to the signature of this Agreement, the contents of which shall be in
the form of Exhibit 11.1(c).
(d) On the date hereof, the Parties shall issue a joint statement to be
sent to each of their respective customers and distributors, the contents of
which shall be in the form of Exhibit 11.1(d).
11.2 Governing Law; Disputes.
The mutual obligations of the Parties hereunder shall be governed by
Belgian law (excluding Belgian conflict of laws rules) and any other provision
of Belgian corporate law under which any provision hereof may be deemed
unenforceable. Accordingly, the Parties hereby irrevocably waive their right to
involve against each other any applicable mandatory provision of Polish law that
may conflict with the provisions of this Agreement.
Any dispute arising in connection with this Agreement shall be finally
settled under the Rules of Conciliation and Arbitration of the International
Chamber of Commerce (the "ICC") as existing as of the date of commencement of
the arbitration proceedings by an arbitral tribunal composed of three (3)
arbitrators designated by the ICC in accordance with said Rules. The arbitration
proceedings shall take place in Brussels, Belgium and shall be conducted in the
English language. The arbitral award shall be binding upon the parties to the
arbitration and judgment upon any award rendered may be entered in any court
having jurisdiction. The prevailing party in the arbitration shall be paid the
arbitration fees and reasonable attorneys fees and expenses incurred by it.
Notwithstanding the provisions of this Article 11.2, the Parties agree
that, prior to any Party submitting to arbitration of any claim, dispute or
disagreement (each, a "Disagreement") arising in connection with this Agreement,
such Party shall notify such Disagreement to the other Party, after which the
senior management of the Parties shall negotiate in good faith for a period of
thirty (30) days to resolve such Disagreement. If at the end of such thirty (30)
day period, the Disagreement persists, there shall be a fifteen (15) day
cooling-off period, after which there shall be a further period of thirty (30)
days of negotiations which shall include at least one face-to-face meeting of
the chief executive officer, chief operating officer and/or chief financial
officer of each of Canal+ and UPC.
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11.3 Effective Date; Term.
This Agreement shall be binding upon the Parties hereto and shall
become effective on the date of its execution by all the Parties. This Agreement
may be terminated (i) by the mutual written agreement of each of the Parties, or
(ii) by any Party if the Closing shall not have occurred prior to February 28,
2002, unless (i) such eventuality shall be due to the breach by the Party
seeking to terminate this Agreement of any of its obligations hereunder or (ii)
as otherwise agreed in writing by the Parties; provided, that in the event that
any one or more of the conditions set forth in Article V are not satisfied on or
prior to February 28, 2002 but, as of such date, there exists, in the reasonable
opinion of the Parties, no substantial obstacle to their satisfaction, the
Parties shall extend the deadline for the Closing set forth in this Article 11.3
by thirty (30) days. Notwithstanding the foregoing, the rights and obligations
of the Parties accrued to the date of termination and the obligations of each
Party pursuant to Articles 11.1 and 11.2 shall survive any termination of this
Agreement.
11.4 Liquidated Damages
In the event that the Closing does not occur on or before February 28,
2002 as a result of a material breach by UPC or any of its Group Companies or
Affiliates of any of its obligations under this Agreement, UPC shall pay to
Canal+ liquidated damages in the amount of (euro)20 million, in particular to
compensate Canal+ for the prejudice suffered by its agreement to the standstill
set forth in Article 4.5 and the time and expense invested in such negotiations.
Correspondingly, in the event that the Closing does not occur on or before
February 28, 2002 as a result of a material breach by Canal+, TKP or any of
their Group Companies of any of their obligations under this Agreement, Canal+
shall pay to UPC liquidated damages in the amount of (euro)20 million, in
particular to compensate UPC for the prejudice suffered by its agreement to the
standstill set forth in Article 4.5 and the time and expense invested in such
negotiations.
The liquidated damages stipulated above shall be available to, and
constitute the exclusive remedy of, the non-breaching Party against the
breaching Party in the event of a material breach by either Party of any of its
obligations hereunder that precludes the closing of the transactions herein
contemplated. If such breach does not preclude the closing of the transactions
herein contemplated, the liquidated damages stipulated above shall not be
available to the non-breaching Party, but such Party shall be entitled to seek
appropriate remedies for such breach in accordance with Article IX of this
Agreement and applicable law.
11.5 Severance
If any provisions of this Agreement or any part thereof are rendered
void, illegal or unenforceable in any respect, the Parties shall use their
reasonable efforts to substitute for such provisions valid provisions that in
their economic effect come so close to the original provisions that it can
reasonably be assumed that the Parties would have executed this Agreement
including the new provisions. In the event that such provisions cannot be found,
the invalidity, illegality or unenforceability of any provision of this
Agreement shall not affect the validity of the Agreement as a whole, unless the
invalid provisions are of such essential importance to this Agreement that it
can be reasonably assumed that the Parties would not have executed this
Agreement without the invalid provisions.
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11.6 Expenses
Except as otherwise specifically provided herein or as agreed in
writing by the Parties, each Party shall bear any expenses incurred by it prior
to the Closing Date in connection with the transactions contemplated by this
Agreement.
11.7 Further Assurances
Subject to the terms and conditions provided herein, each of the
Parties agrees to use its best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable under all applicable laws to consummate and make effective the
transactions contemplated by this Agreement.
11.8 Entire Agreement; Modifications.
This Agreement (including the Schedules and Exhibits hereto which
constitute an integral part hereof) constitutes the entire agreement among the
Parties and supersedes any prior agreement or understanding among the Parties
with respect to the subject matter hereof including the Memorandum of
Understanding among UPC, Canal+ and UPC Polska dated May 23, 2001.
This Agreement may not be modified or terminated except by an
instrument in writing signed by each of the Parties.
11.9 No Assignment; No Third Party Beneficiaries.
(a) Except with the written consent of the other Party, no Party shall
assign or otherwise transfer any or all of its rights or obligations under this
Agreement.
(b) This Agreement is solely for the benefit of the Parties and their
respective successors, and this Agreement shall not be deemed to confer upon any
third party any remedy, claim, liability, reimbursement, cause of action or
other right.
11.10 Headings.
The headings contained herein are for convenience only and shall not
control or affect the meaning or construction of any provision of this
Agreement.
11.11 Language.
As soon as possible following the execution hereof, the Parties shall
cause this Agreement to be translated into the Polish language, and undertake to
execute such Polish translation duly approved by them. It is expressly provided
that as between the Parties, the original English version of this Agreement
shall be the only binding document and that, in the event of any discrepancy
between the original English version and its Polish translation, the former
shall prevail.
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11.12 Notices.
All notices to be given by any Party to the others in connection with
this Agreement shall be given in writing in English. Such notices may be given
by personal delivery or by registered or certified air mail, telegram, cable,
telex or telefax addressed as follows:
to Canal+:
Groupe Canal+ S.A.
85/89 Quai Andre Citroen
75711 Paris CEDEX 15, France
Attention: Mr. Marc-Andre Feffer, Vice President /General Counsel
Fax: +33.1.40.60.70.50
To UPC, UPC Polska or PTC:
United Pan-Europe Communications N.V.
1 Knightsbridge
London, SW1X 7UP
United Kingdom
Attn: Shane O'Neill/Mike Moriarty
Fax: 44.207.661.3588
With a copy to:
United Pan-Europe Communications N.V.
Boeing Avenue 53
1119 PE Schiphol Rijk
The Netherlands
Attn: General Counsel
Fax: 31.20.778.9871
With a copy to:
White & Case
62 rue de la Loi
1040 Brussels
Belgium
To TKP:
Kawalerii No. 5
00-460 Warsaw
Poland
Attn: President
Fax: 48.22.625.2693
or to such other address as the Party to receive such notice shall have not less
than thirty (30) days previously designated by written notice to the other
Parties. The effective date of any notice shall be the date on which it is
actually received by the addressee.
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11.13 Counterparts. This Agreement may be executed in counterparts.
Each separate counterpart together with such other counterparts having the
signatures of all Parties shall form one original.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in
five (5) original counterparts as of the date first indicated hereof.
GROUPE CANAL+ S.A.
By:
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UNITED PAN-EUROPEAN COMMUNICATIONS N.V.
By:
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By:
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TELEWIZYJNA KORPORACJA PARTYCYPACYJNA S.A.
By:
----------------------------------------
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UPC POLSKA, INC.
By:
----------------------------------------
By:
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POLSKA TELEWIZJA CYFROWA WIZJA TV SP. Z O.O.
By:
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By:
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