Exhibit 10.3
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STOCKHOLDERS AGREEMENT
among
TEVECAP S.A.,
MR. ROBERT CIVITA,
ABRILCAP COMERCIO E PARTICIPACOES LTDA.,
HARPIA HOLDINGS LIMITED,
CURUPIRA HOLDINGS LIMITED,
FALCON INTERNATIONAL COMMUNICATIONS LTD.,
HEARST/ABC VIDEO SERVICES II
and
TVA PARTICIPACOES LTDA.
DATED DECEMBER 6, 1995
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TABLE OF CONTENTS
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Clause 1. DEFINITIONS........................................................2
Clause 2. SHARES SUBJECT TO THIS AGREEMENT..................................10
Clause 3. SUBSCRIPTION AND PAYMENT FOR THE COMPANY'S
CAPITAL STOCK.....................................................10
Clause 4. TRANSFER OF SHARES................................................11
Clause 5. NEW ISSUANCES OF SHARES...........................................18
Clause 6. HARPIA AND CURUPIRA PUT OPTION....................................20
Clause 7. FALCON'S PUT OPTIONS..............................................26
Clause 7A. THE INVESTOR ENTITIES' PUT OPTION.................................31
Clause 8. PUT COORDINATION..................................................35
Clause 9. PUT POSTPONEMENT..................................................36
Clause 10. CALL OPTIONS......................................................43
Clause 11. THE COMPANY'S BOARD OF DIRECTORS..................................51
Clause 12. RESOLUTIONS OF THE BOARD OF DIRECTORS AND
STOCKHOLDERS......................................................53
Clause 13. GENERAL MEETING RESOLUTIONS.......................................59
Clause 14. RIGHT TO ATTENDANCE, TO INFORMATION AND TO
INSPECTION........................................................61
Clause 15. ADVISORY BOARD....................................................63
Clause 16. STOCKHOLDERS' AND THE COMPANY'S OTHER
COVENANTS.........................................................64
Clause 17. TAG ALONG RIGHTS..................................................66
Clause 18. REGISTRATION RIGHTS...............................................68
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Clause 19. NON-COMPETE PROVISIONS............................................77
Clause 20. CONFIDENTIALITY...................................................82
Clause 21. DURATION OF THE AGREEMENT.........................................83
Clause 22. MISCELLANEOUS PROVISIONS..........................................83
STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT (this "Agreement") is made and entered into as
of the 6th day of December, 1995, by and among:
(1) TEVECAP S.A., a corporation organized under the laws of the Federative
Republic of Brazil, with its principal place of business in Sao Paulo, SP,
Brazil, at Rua do Rocio 313, Cj. 101 (parte) CGCMF Nr. 57.574.170/0001-05
(the "Company");
(2) Mr. ROBERT CIVITA, a Brazilian citizen, married, editor, bearer of the ID
Card Nr. 1.666.785 and CPF Nr. 006.890.178-04, domiciled in Sao Paulo, SP,
Brazil, at Rua Escocia, 253, apt. 11, Brazil ("Mr. Civita");
(3) ABRILCAP COMERCIO PARTICIPACOES LTDA., a limited liability company
organized under the laws of the Federative Republic of Brazil, with its
principal place of business in Sao Paulo, SP, Brazil, at Rua do Rocio,
313, Cj. 101 (parte), CGCMF Nr. 00.156.494/0001-06 (part) ("Abrilcap");
(4) HARPIA HOLDINGS LIMITED, a company duly organized and validity existing in
accordance with the laws of the Cayman Islands, having its registered
office at c/o Maples & Calder, Attorneys-at-Law, P.O. Box 309, George
Town, Grand Cayman, Cayman Islands, British West Indies ("Harpia");
(5) CURUPIRA HOLDINGS LIMITED, a company duly organized and validly existing
in accordance with the laws of the Cayman Islands, having its registered
office at c/o Maples & Calder, Attorneys-at-Law, P.O. Box 309, George
Town, Grand Cayman, Cayman Islands, British West Indies ("Curupira");
(6) FALCON INTERNATIONAL COMMUNICATIONS LTD., a company limited by shares duly
organized and validly existing in accordance with the laws of Bermuda,
having its registered office in Bermuda ("Falcon");
(7) HEARST/ABC VIDEO SERVICES II, a general partnership organized under the
laws of Delaware, with its principal place of business at 959 Eighth
Avenue, New York, NY 10019 ("Hearst/ABC Video"); and
(8) TVA PARTICIPACOES LTDA., a limited liability company organized under the
laws of the Federative Republic of Brazil, with its principal place of
business in Sao Paulo, SP, Brazil, at Rua do Rocio 313, CGCMF Nr.
00921404/0001-18 ("Hearst/ABC Limitada" and, collectively with Hearst/ABC
Video, the "Investor Entities" and individually an "Investor Entity").
WHEREAS, prior to July 22, 1994, Mr. Civita and Abrilcap were the only
holders of the Company's equity;
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WHEREAS, pursuant to a Stock Subscription Agreement dated July 22, 1994
(the "Subscription Agreement"), Harpia and Curupira subscribed for certain
Shares (as defined herein);
WHEREAS, on August 24, 1995, pursuant to a Stock Purchase Agreement among
the Company, Mr. Civita, Abrilcap, Harpia, Curupira and Falcon Parent (as
defined below) (the "Old Stock Purchase Agreement"), Falcon Parent agreed to
subscribe for certain Shares directly or through an affiliate;
WHEREAS, simultaneously with the execution hereof, the Company is issuing
and Hearst/ABC Video is subscribing for and purchasing certain Shares pursuant
to the terms of the Stock Purchase Agreement (as defined below);
WHEREAS, simultaneously with the execution hereof, Harpia is agreeing to
sell and Hearst/ABC Limitada is agreeing to purchase certain Shares pursuant to
the terms of the HC Stock Purchase Agreement (as defined below); and
WHEREAS, upon such subscription, Mr. Civita, Abrilcap, Harpia, Curupira,
Falcon and the Investor Entities (collectively, together with holders of Shares
that from to time become parties hereto, referred to as "Stockholders" and
individually as a "Stockholder") are the holders of all of the outstanding
shares of capital stock of the Company (except as set forth in Clause 11.5
below),
NOW, THEREFORE, the Stockholders having resolved to execute this
Stockholders Agreement in accordance with the requirements of Article 118 of Law
No. 6.404, of December 15, 1976, other applicable legislation and the following
terms and conditions, do agree as follows:
Clause 1. DEFINITIONS
In this Agreement, any reference to:
"Abril Agreement" means the letter agreement dated of even date herewith
between Abril S.A. and the parties hereto regarding the assumption by
Abril S.A. of certain put obligations of the Company;
"Abril Credit Agreement" means the credit agreement dated of even date
herewith between Abril S.A. and the Company;
"Advisory Services Agreement" means the Advisory Services Agreement dated
the date hereof among the Company, Hearst and CCABC;
"Affiliates" bears the meaning ascribed to it in Clause 4.8;
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the "Board" means the Company's Board of Directors as duly elected from
time to time;
"Brazilian GAAP" bears the meaning ascribed to it in Clause 14.2;
the "Business" means (i) pay television distribution activities
(including, but not limited to, MMDS, LMDS, DTH, direct wire transmission
(including but not limited to coaxial or fiber optic cable), VHF, UHF or
other over-the-air transmission or broadcasting), (ii) all activities
(whether creation, development, production, purchase, sale, licensing,
distribution or otherwise) relating to programming susceptible to any
means of television distribution, (iii) all activities authorized by the
Permits (including activities relating to pay television or not) belonging
to or required hereby to be transferred to the Company, its Subsidiaries,
and the License Holders, including any extensions or modifications of such
Permits, and (iv) telephony, in each case as transacted by the Company or
its Subsidiaries now or at any time in the future, provided that the
Business shall expressly exclude MTV Brasil unless and until MTV Brasil is
incorporated into the Company in accordance with the terms of the MTV
Option set forth in the Stock Purchase Agreement or otherwise;
"Business Day" means any day on which banks in New York City and Sao Paulo
are not authorized or required to be closed;
"Business Plan" means a business plan approved by the Board, for the
Company and its Subsidiaries collectively, and shall include the annual
operating and capital budget for the Company for the fiscal year in
question;
"Call Notice" bears the meaning ascribed to it in Clause 10.2;
"Call Option" bears the meaning ascribed to it in Clause 10.1;
"Call Price" bears the meaning ascribed to it in Clause 10.4;
"Call Purchaser" bears the meaning ascribed to it in Clause 10.1;
"Call Seller" bears the meaning ascribed to it in Clause 10.1;
"CCABC" means Capital Cities/ABC, Inc., a Delaware corporation having an
office at 77 West 66th Street, New York, New York 10023;
"CCABC Partner" means Brazil Cable Investments, Inc., a Delaware
corporation having an office at 77 West 66th Street, New York, New York
10023 and an indirect wholly-owned subsidiary of CCABC;
"Chase" bears the meaning ascribed to it in Clause 19.1;
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"Commission" bears the meaning ascribed to it in Clause 18.1(ii);
"Controlling Stockholder" means, with respect to any entity at any
particular time, any other person that directly, or indirectly through one
or more subsidiaries, controls or has the power to control the affairs and
policies of such entity, whether by ownership of share capital, contract,
ability to appoint a controlling number of board members or otherwise
(which shall not include, in itself, an individual acting as an officer or
director or, in the case of a limited liability company, a manager of such
entity, unless such individual otherwise exercises control, whether
through ownership of share capital, contract, ability to appoint a
controlling number of board members or otherwise, and does not simply
manage, such entity).
"Cumulative Dividends" bears the meaning ascribed to it in Clause 9.3;
"Date of the Event Put Payment" bears the meaning ascribed to it in Clause
9.1;
"Date of the Falcon Put Payment" bears the meaning ascribed to it in
Clause 7.3(i);
"Date of the HC Put Payment" bears the meaning ascribed to it in Clause
6.9;
"Date of the Investor Put Payment" bears the meaning ascribed to it in
Clause 7A.3;
"Date of Transfer" bears the meaning ascribed to it in Clause 10.3;
"Demand Registration Statement" bears the meaning ascribed to it in Clause
18.1(ii);
"Disney" bears the meaning ascribed to it in Clause 19.7;
"Earnings" bears the meaning ascribed to it in Clause 6.3;
"ESPN Brazil Agreements" bears the meaning ascribed to it in Clause 19.7;
"Event Put" bears the meaning ascribed to it in Clause 9.1;
"Event Put Party" bears the meaning ascribed to it in Clause 9.1;
"Event Put Price" bears the meaning ascribed to in Clause 6.3;
"Excluded Agreements" bears the meaning ascribed to it in Clause 19.7;
"Falcon Call Option" bears the meaning ascribed to it in Clause 10.1;
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"Falcon Event Put Option" bears the meaning ascribed to it in Clause
7.1(i)(B);
"Falcon Parent" bears the meaning ascribed to in Clause 7.1;
"Falcon Parent Investors" bears the meaning ascribed to it in Clause
7.1(i).
"Falcon Put Notice" bears the meaning ascribed to it in Clause 7.3;
"Falcon Put Party" bears the meaning ascribed to it in Clause 7.1;
"Falcon Put Shares" bears the meaning ascribed to it in Clause 7.1(i)(A);
"Falcon Time Put Option" bears the meaning ascribed to it in Clause
7.1(i)(A);
"Falcon Triggering Event" bears the meaning ascribed to it in Clause 7.2;
"Fixed Assets" means, as to any person, any assets owned by such person
other than (a) cash, (b) cash equivalents, and (c) readily marketable
securities (other than securities of issuers for which a public offering
has occurred after the time that such person acquired such securities);
"Foreign Stockholder" means Falcon, the Investor Entities or an Affiliate
or a transferee of any of them;
"Funding Date" bears the meaning ascribed to it in Clause 10.10(ii);
"HC Call Option" bears the meaning ascribed to it in Clause 10.1;
"HC Entities" shall mean Harpia and Curupira or an Affiliate of either;
"HC Put Notice" bears the meaning ascribed to it in Clause 6.4;
"HC Put Option" bears the meaning ascribed to it in Clause 6.1;
"HC Put Party" bears the meaning ascribed to it in Clause 6.1;
"HC Put Shares" bears the meaning ascribed to it in Clause 6.1;
"HC Stock Purchase Agreement" bears the meaning ascribed to it in Clause
7A.1;
"HC Triggering Event" bears the meaning ascribed to it in Clause 6.2;
"Hearst" means The Hearst Corporation, a Delaware corporation having an
office at 959 Eighth Avenue, third floor, New York, New York 10019;
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"Hearst Partner" means Hearst Brazil, Inc., a Delaware corporation having
an office at 959 Eighth Avenue, third floor, New York, New York 10019 and
a wholly-owned subsidiary of Hearst;
"Institutional Investor" means an institutional or financial investor
(such as a venture capital firm or fund, pension plan, financial or
governmental institution or the like) which purchases or holds equity
interests in Falcon or Falcon Parent (or any Affiliate of Falcon that is
then a Stockholder) principally for investment purposes;
"Investor Programming Agreement" means the Programming Agreement dated as
of the date hereof among Hearst, CCABC and the Company;
"Investor Put Notice" bears the meaning ascribed to it in Clause 7A.3;
"Investor Put Option" bears the meaning ascribed to it in Clause 7A.1;
"Investor Put Party" bears the meaning ascribed to it in Clause 7A.1;
"Investor Put Shares" bears the meaning ascribed to it in Clause 7A.3;
"Investor Triggering Event" bears the meaning ascribed to it in Clause
7A.2;
"License Holders" means Televisao Showtime Ltda., TVA Brasil Radioenlaces
Ltda. and Abril S.A. (for so long as Abril S.A. shall hold any of the
Permits or assets listed in Schedules 3.12(i) and 4.11 of the Stock
Purchase Agreement, respectively, or any Permit acquired by Abril S.A.
pursuant to the terms of Clause 6.1(b) of the Stock Purchase Agreement);
"Mandatory Dividend" bears the meaning ascribed to it in Clause 9.5;
"MMDS", "DTH" "VHF", "LMDS" AND "UHF" mean the following technologies
respectively: (i) Multi-Channel Multi-Point Distribution System; (ii)
Direct-to-Home satellite program delivery (whether by C-band, Ku-band or
other frequency); (iii) Very High Frequency transmission, (iv) Local
Multipoint Distribution System; and (v) Ultra High Frequency transmission;
"MTV Brasil" means from time to time all of the combined interest of Mr.
Civita and Abrilcap and their Affiliates in Music Television Network
business operated under a license or licenses granted by MTV Networks, a
division of Viacom International, Inc., whether distributed by UHF or
otherwise, and all assets (including transmission and broadcasting
equipment) and rights used or held in connection therewith that are not
otherwise used or held in part in connection with the Business and all
duties and liabilities pertaining to such business (including those that
also pertain to the Business), but excludes any permit or license issued
by the Government
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of Brazil (or any subdivision or ministry thereof) for public broadcasting
(radio difusao);
"Old Stock Purchase Agreement" bears the meaning ascribed to it in the
preamble first above;
"Option Agreement" bears the meaning ascribed to it in Clause 4.11;
"Participant Purchase Price" means the product of (A) the Event Put Price
times (B) a fraction the numerator of which is that number of Put Shares
that the Participating Stockholder purchases and the denominator of which
is the total number of Put Shares;
"Participating Stockholder" means a Stockholder which acquires HC Put
Shares pursuant to Clause 6.11, Falcon Put Shares pursuant to Clause 7.5
or Investor Put Shares pursuant to Clause 7A.4;
"Permits" means licenses, permits, consents, authorizations, franchises,
ordinances, registrations, certificates, agreements or other rights or
applications filed with, granted by or entered into by any governmental or
regulatory authority;
"Permitted Disclosee" bears the meaning ascribed to it in Clause 20;
"person" means any natural person, partnership, association, trust,
corporation or other entity whatsoever;
"Potential Purchasers" bears the meaning ascribed to it in Clause 4.2;
"Potential Subscription Purchasers" bears the meaning ascribed to it in
Clause 5.2;
"Preferred Voting Shares" bears the meaning ascribed to it in Clause 9.3;
"Proposed Price" bears the meaning ascribed to it in Clause 4.2;
"Proposed Subscription Price" bears the meaning ascribed to in Clause 5.2;
"Pro Rata Share" bears the meaning ascribed to it in Clause 4.4(ii);
"Public Offering" means a bona fide offering of securities to the public
in connection with which such securities are registered under the U.S.
Securities Act of 1933, as amended.
"Put Postponement" bears the meaning ascribed to it in Clause 9.1;
8
"Put Shares" means HC Put Shares, Falcon Put Shares or Investor Put
Shares, as the context requires;
"Real" or "Reais" means, from time to time, the official currency of
Brazil;
"Reais Equivalent" means the amount in Brazilian currency equivalent to
U.S. Dollars as determined by the application of the selling rate divulged
by the Central Bank of Brazil under the SISBACEN Data System, Transaction
PTAX-800, Option 5, Currency 220, or any successor to such rate divulged
by the Central Bank of Brazil;
"Securities Act" bears the meaning ascribed to it in Clause 18.1(v)(b);
"Service Agreement" means the agreement entered into on July 22, 1994, as
amended on August 24, 1995 and the date hereof, between the License
Holders and the Company providing for the irrevocable transfer to the
Company and its Subsidiaries of all rights, powers and monopolies granted
by or inherent to the Permits, including those described in Schedule
3.12(i) to the Stock Purchase Agreement and the unrestricted right to use
the assets listed in Schedule 4.11 to the Stock Purchase Agreement, in
each case free of charge, such Service Agreement having been filed with
the 3rd Public Registry of Titles and Documents in the City of Sao Paulo;
"Share Equivalents" means securities of any kind issued by an entity which
are convertible into or exchangeable for any shares of any class of such
entity's securities or options, warrants or other rights granted by such
entity to purchase or subscribe for any shares of any class of such
entity's securities or securities convertible into or exchangeable for
shares of any class of such entity's securities and shall also include any
contractual or other interest providing for an equity-like payment,
irrespective of whether such contractual or other interest constitutes an
ownership interest;
"Shareholder Group" bears the meaning ascribed to it in Clause 12.3(ii);
"Shares" bears the meaning ascribed to it in Clause 2;
"Special Preferred Shares" bears the meaning ascribed to it in Clause 9.3;
"Stock Purchase Agreement" means the Stock Purchase Agreement dated
concurrently herewith among the Company, Mr. Civita, Abrilcap, Hearst/ABC
Video, Harpia, Curupira, Falcon and Falcon Parent;
"Stockholder" or "Stockholders" bears the meaning ascribed to it in the
preamble first above;
9
"Stockholder Parent Company" means, with respect to a Stockholder, any
person (a) which directly, or indirectly through one or more subsidiaries,
owns or controls the majority of the voting capital stock or equivalent
ownership of such Stockholder or otherwise has the right to control the
management of such Stockholder and (b) 50% or more of the fair market
value of the Fixed Assets of such person consist of, either directly or
through one or more subsidiaries, Shares owned by such Stockholder or any
other Stockholder of which such person is a Stockholder Parent Company;
provided that (i) Falcon Parent shall not be deemed to be a Stockholder
Parent Company of Falcon after the Funding Date if, on the Funding Date,
U.S.$50,000,000 is less than one-half of the total capital commitments
(including previously made contributions) made by Falcon Parent Investors
in Falcon Parent and (ii) in no event shall any Falcon Parent Investor or
other holder of equity in Falcon Parent (or, with respect to such Falcon
Parent Investor or other holder of equity, any person described in clause
(a) of this definition) be or be deemed to be a Stockholder Parent
Company.
"Subject Shares" bears the meaning ascribed to it in Clause 18.1(i)(a);
"Subscription Rights" bears the meaning ascribed to it in Clause 5.1;
"Subscription Transfer Notice" bears the meaning ascribed to it in Clause
5.2;
"Subsidiary" means, with respect to any person at any particular time, any
other person whose affairs and policies such person, directly or
indirectly, controls or has the power to control, whether by ownership of
share capital, contract, ability to appoint board members or otherwise;
"Target Effective Date" bears the meaning ascribed to it in Clause
18.1(ii)(a);
"Target Effective Period" bears the meaning ascribed to it in Clause
18.1(ii)(a);
"Target Filing Date" bears the meaning ascribed to it in Clause
18.1(ii)(a);
"Terms of Offer" bears the meaning ascribed to it in Clause 4.2;
"Third Appraiser" bears the meaning ascribed to it in Clause 6.5;
"Time Put Decision Period" shall have the meaning ascribed to it in Clause
9.7(i);
"Time Put Price" bears the meaning ascribed to it in Clause 7.3(i);
"Total Time Put Shares" bears the meaning ascribed to it in Clause 9.8(i);
"Transfer Notice" bears the meaning ascribed to it in Clause 4.2;
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"U.S. Dollars" or "Dollars" or "US$" means from time to time the official
currency of the United States of America; and
"U.S. GAAP" bears the meaning ascribed to it in Clause 6.3(b).
Clause 2. SHARES SUBJECT TO THIS AGREEMENT
All shares of the Company's capital stock (the "Shares") owned by the
Stockholders on the date hereof or which may be owned by the Stockholders
in the future, including, without limitation, by means of subscription,
acquisition, bonus, distribution, split or reverse split shall be subject
to this Agreement, unless otherwise expressly excluded in the context.
Shares held by directors of the Company and their alternates in accordance
with Clause 11.5 shall be considered Shares held by the respective
Stockholder that appointed each director or alternate. In addition, as
provided in Clause 18.1(i)(b) below, Subject Shares that are registered
and publicly sold shall not be entitled to the benefits of, or subject to
the obligations in, this Agreement.
Clause 3. SUBSCRIPTION AND PAYMENT FOR THE COMPANY'S CAPITAL STOCK
3.1 The capital stock of the Company, in the amount of R$______________, is
divided into and represented by 196,712,853 Shares, all of them comprising
registered common stock, without par value and with equal voting rights;
each Share is entitled to one vote.
3.2 As of the date hereof:
Mr. Robert Civita holds 1 Share;
Abrilcap holds 111,075,321 Shares representing 56.47% (rounded to
the second decimal) of the voting capital stock of the Company;
Harpia holds 11,496,328 Shares representing 5.84% (rounded to the
second decimal) of the voting capital stock of the Company and, upon
consummation of the closing under the HC Stock Purchase Agreement,
Harpia will hold 6,867,792 Shares representing 3.49% (rounded to the
second decimal) of the voting capital stock of the Company;
Curupira holds 11,496,328 Shares representing 5.84% (rounded to the
second decimal) of the voting capital stock of the Company;
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Falcon holds 27,930,827 Shares representing 14.20% (rounded to the
second decimal) of the voting capital stock of the Company;
Hearst/ABC Video holds 34,714,029 Shares representing 17.65%
(rounded to the second decimal) of the voting capital stock of the
Company;
Hearst/ABC Limitada holds no Shares and, upon consummation of the
closing under the HC Stock Purchase Agreement, Hearst/ABC Limitada
will hold 4,628,538 Shares representing 2.35% (rounded to the second
decimal) of the voting capital stock of the Company; and
each of the following persons holds one Share in accordance with
Clause 11.5:
Victor Civita;
Jose Augusto Pinto Moreira;
Valter Pasquini;
Robert Hefley Blocker;
Peter John Trevor Grant Anderson;
John Peter Harper;
Francisco S.C. Pinheiro;
Giancarlo Francesco Civita;
Sergio Vladimirschi, Jr.;
Viviane Vladimirschi;
Jose L.S. Freire;
Nina Farina;
Fatima Ahmad Ali;
Jorge Fernando Koury Lopes;
Naum Rotenberg;
Altamira Boscali; and
Rogerio Cruz Themudo Lessa.
3.3 For purposes of this Agreement, Hearst/ABC Limitada shall not be a
Stockholder, and shall not have the benefit of any of the rights granted
by, or be subject to any of the obligations imposed by, this Agreement
until it purchases Shares pursuant to the HC Stock Purchase Agreement or
otherwise. Until such time as Hearst/ABC Limitada becomes a Stockholder,
all references to the Investor Entities throughout this Agreement shall
refer solely to Hearst/ABC Video.
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Clause 4. TRANSFER OF SHARES
4.1 (i) No Stockholder may sell or in any way transfer to third parties or
to other Stockholders, whether signatories or not to this Agreement,
any Shares held by such Stockholder, in whole or in part, (a) unless
permitted by applicable law and (b) except as specifically provided
in Clauses 4.8 and 4.11 hereof, without first offering them to the
Company and to all other Stockholders (other than Stockholders that
are Affiliates of the offering Stockholder), who shall have the
right to accept such offer for the acquisition thereof. Such offer
shall be effected in compliance with the procedure set forth in this
Clause 4.
(ii) No Stockholder, other than Falcon or any Affiliate of Falcon that is
then a Stockholder (to which this restriction shall not apply),
shall permit any holder of an equity interest in such Stockholder or
any holder of an equity interest in any Stockholder Parent Company
of such Stockholder to sell directly or indirectly or in any way
transfer to third parties or to other Stockholders, whether
signatories or not to this Agreement, any equity interest in such
Stockholder or Stockholder Parent Company, (a) unless permitted by
applicable law and (b) except as specifically provided in Clauses
4.8 and 4.11 hereof, without first offering such equity interest to
the Company and to all other Stockholders (other than Stockholders
that are Affiliates of the offering Stockholder), who shall have the
right to accept such offer for the acquisition thereof. Such offer
shall be effected in compliance with the procedure set forth in this
Clause 4. For purposes of this Clause 4 only, any such equity
interest shall be referred to as Shares.
(iii) Neither HC Entity nor any Affiliate of them that is a Stockholder
shall permit any person who is a Controlling Stockholder of either
HC Entity or such Affiliate to sell or in any way transfer any
equity interest (the "Controlling Transfer") in any other
Controlling Stockholder of either HC Entity or such Affiliate if
such transfer would result in The Chase Manhattan Corporation or any
successor thereto no longer being a Controlling Stockholder of such
other person unless (a) such other person is a Stockholder Parent
Company with respect to either HC Entity or such Affiliate, or (b)
the selling person first offers to the Company and all other
Stockholders (other than the HC Entities and such Affiliates), all
of either, at the discretion of the selling person, (1) the Shares
held by the HC Entities or such Affiliates or (2) the equity
interests (the "Offered Interests") in (x) any entity (or entities)
that is (or are) controlled by such other person and is (or are)
then a Stockholder or (y) any entity that is a Stockholder Parent
Company with respect to such Stockholder(s). For purposes of this
Clause 4.1(iii) only, the Proposed Price shall equal 100% of the
Event Put Price of such Shares or, if Offered Interests are offered,
of all Shares held
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by any Stockholder of which such person referred to in sub-clause
(x) or (y) is a Controlling Stockholder, such Event Put Price being
determined according to the procedures set forth in Clause 6,
mutatis mutandis, except as modified in this Clause 4.1(iii). Such
offer shall be effected in compliance with the procedures set forth
in this Clause 4, except that for purposes of this Clause 4 only,
(a) if Offered Interests are offered, the Offered Interests shall be
treated as if they were Shares for all purposes other than the
calculation of the Proposed Price therefor, (b) the Transfer Notice
shall, in lieu of the Terms of Offer, describe the Shares or the
Offered Interests, as the case may be, and include the name of the
appraiser for purposes of item (a) in Clause 6.3 and provide the
Event Put Price calculated according to the method contemplated in
item (b) of Clause 6.3, (c) the time period in Clauses 4.3 to 4.5
shall run from the date the Event Put Price calculated according to
the method contemplated in item (a) of Clause 6.3 is finally
determined, and (d) replacing Clause 4.5 with the following: If
after the 21 (twenty-one) Business Day period referred to in Clause
4.3 above has elapsed, none of the Company or the other Stockholders
has exercised its right to accept the Terms of Offer to purchase all
of the Shares or the Offered Interests, as the case may be, then the
selling person may effect the Controlling Transfer to any person
during the six subsequent months, at the price and other terms of
such selling person's choice.
(iv) If a sale or transfer of an equity interest in an HC Entity or any
of their Affiliates that are then Stockholders (or in any
Stockholder Parent Company of an HC Entity or any such Affiliates)
results in The Chase Manhattan Corporation, or any successor
thereto, no longer being a Controlling Stockholder of the HC
Entities or such Affiliates thereof (or such Stockholder Parent
Company thereof), then the HC Entities and such Affiliates (1) shall
forfeit immediately all rights granted under this Agreement to the
HC Entities and such Affiliates that would not be transferable with
the Shares owned by the HC Entities or such Affiliates, and shall
immediately cease to be bound by all of their obligations under this
Agreement that would not be transferred with the Shares owned by
them (including the obligations in connection with the HC Call
Option), in each case as if a transfer of such Shares had occurred
by the HC Entities or such Affiliates, and (2) shall forfeit
immediately all rights to indemnification under Clauses 7.3(a) and
(b) of the Old Stock Purchase Agreement and Clause 6.3 of the Stock
Purchase Agreement other than in respect of claims for
indemnification that are then pending.
4.2 The offer referred to in this Clause shall be effected by means of written
notices (each, a "Transfer Notice") to be delivered to the Chairman of the
Board and to each other Stockholder (not including Stockholders that are
Affiliates of the offering
14
Stockholder) containing the following information: (i) the number of
Shares offered for sale, (ii) their type and class, (iii) a proposed price
(the "Proposed Price") in cash expressed in U.S. Dollars, and, if
applicable and known to the offering Stockholder, any non-cash
consideration and the value thereof in cash expressed in U.S. Dollars,
(iv) the other material conditions (other than the form of consideration
to be paid for such Shares) of the proposed sale or transfer, and (v) if
the offering Stockholder is Falcon, the Investor Entities, Abrilcap or an
Affiliate of any of them, a list of potential purchasers of such Shares
(the "Potential Purchasers") (collectively, the "Terms of Offer").
4.3 During the 21 (twenty-one) Business Days following the receipt of a
Transfer Notice, the Company or such other Stockholders, as the case may
be, shall inform the offering Stockholder in writing of its or their
decision(s) as to whether to exercise the right to accept the Terms of
Offer.
(i) At any time during such 21 (twenty-one) Business Day period, such
other Stockholders (acting unanimously) shall be entitled to make a
counter-offer for all such offered Shares which the offering
Stockholder may, but shall not be required to, accept.
(ii) Any exercise of the right to accept the Terms of Offer by the
Company and/or any of the Stockholders, as applicable, shall be for
the acquisition of the entire amount of the offered Shares.
(iii) Once the Terms of Offer are accepted by the Company and/or the
Stockholders, as applicable, or such counter-offer is accepted by
the offering Stockholder, the offered Shares shall be acquired in
accordance with Clause 4.7 hereof and/or such counter-offer, as
applicable, and transferred to the Company and/or to the other
Stockholders no more than 40 Business Days from the date of the
receipt by the offering Stockholder of notice from the Company
and/or the other Stockholders informing of its or their decision to
exercise their right to accept the Terms of Offer or the date of
receipt of the offering Stockholder's notice of acceptance of such
counter-offer, as the case may be.
4.4 The Chairman of the Board shall promptly call a meeting of the Board for a
date not more than 14 Business Days after receipt of a Transfer Notice for
the purpose of considering whether the Company should, (i) in the event
that the offering Stockholder is Falcon, the Investor Entities, Abrilcap
or an Affiliate of any of them, approve any or all of the Potential
Purchasers listed in such Terms of Offer, and (ii) in any case, exercise
its right to accept the Terms of Offer. In the event that the offering
Stockholder is Falcon, the Investor Entities, Abrilcap or an Affiliate of
any of them, the decision identified in sub-clause (i) above shall be
taken first and shall, subject to applicable quorum requirements, be by
majority vote of the Board
15
excluding the directors appointed by the offering Stockholder and its
Affiliates. Each Stockholder entitled, alone or with its Affiliates, to
appoint a member of the Board hereby agrees to cause such member (a) not
to vote against a Potential Purchaser unless the Potential Purchaser (1)
is of undesirable character, (2) lacks financial capacity, (3) competes
with the Company or its Subsidiaries in Brazil or (4) the nature of the
Potential Purchaser would provoke a change of the business practices of
the Company and (b) in any case to provide an explanation at such meeting
of any vote against a Potential Purchaser. Any disapproval by the Board of
a Potential Purchaser shall be considered a binding veto and the proposed
sale of Shares may not be made to such vetoed party. If the Board
disapproves of all of the Potential Purchasers, the offering Stockholder
may withdraw the Transfer Notice at any time prior to the transfer of the
offered Shares. The decision identified in sub-clause (ii) above shall be
taken by unanimous vote of all directors other than the directors
appointed by the offering Stockholder and its Affiliates and the
independent director.
(i) The Company shall have priority over the other Stockholders in the
acquisition of the offered Shares.
(ii) If the Company does not exercise its right to accept the Terms of
Offer, the offered Shares shall be apportioned to the other
Stockholders who wish to participate in the exercise of the right to
accept the Terms of Offer according to the ratios of their
respective equity interests in the Company on the date of such
acquisition (each participating Stockholder's share of such right,
as so determined, its "Pro Rata Share"). For purposes of
establishing such ratio, the equity held by the offering
Stockholder, its Affiliates and Stockholders who do not wish to
participate shall be excluded.
(iii) In the event that a Foreign Stockholder is not permitted to purchase
all or any portion of such Foreign Stockholder's Pro Rata Share of
such Shares being offered for purchase due to Brazilian legal
restrictions upon foreign ownership or other Brazilian legal
limitations, such Foreign Stockholder may designate a third party to
make such purchase, provided that such third party agrees to execute
this Agreement and to become bound by the terms hereof and that: (a)
such third party is identified in a notice given to each other
Stockholder (not including the offering Stockholder, its Affiliates,
the affected Foreign Stockholder and its Affiliates) within 5 (five)
Business Days after receipt of the related Transfer Notice, and (b)
each such Stockholder shall have approved such third party in
writing, such approval not to be unreasonably withheld.
4.5 If, after the 21 (twenty-one) Business Day period referred to in Clause
4.3 above has elapsed, none of the Company or the other Stockholders has
exercised its or their right to accept the Terms of Offer to purchase all
of the offered Shares, then the offering Stockholder may sell the offered
Shares to any person; provided, however,
16
that each of the following conditions is complied with: (i) all such
offered Shares must be sold simultaneously during the six subsequent
months; (ii) if the offering Stockholder is Falcon, the Investor Entities,
Abrilcap or an Affiliate of any of them, then such Shares must be sold to
a Potential Purchaser that has not been vetoed in accordance with Clause
4.4; (iii) the provisions of Clause 4.9 below must be complied with; (iv)
the consideration for the sale of such Shares must have an aggregate fair
value equal to at least ninety percent (90%) of the Proposed Price, and
the sale must be upon other conditions not substantially more favorable to
the purchaser than the conditions set forth in the Terms of Offer; and (v)
promptly after the consummation of such sale, the offering Stockholder
must provide all of the other Stockholders with a notice containing a
description of the sales price for such Shares, the form of consideration
paid and all other material terms of such sale.
4.6 After the six month term referred to in the previous Clause has elapsed
without a sale having taken place, if the offering Stockholder wishes
again to dispose of or transfer its Shares, it shall be subject to the
procedure set forth herein.
4.7 To exercise their right to accept the Terms of Offer provided for in this
Clause 4, the Company and/or the Stockholders, as the case may be, wishing
to exercise such right collectively must offer to purchase all the offered
Shares in accordance with the Terms of Offer and must consummate such
purchase within the time period set forth in Clause 4.3(iii), unless the
offering Stockholder has agreed to a counter-offer which contains other
terms and conditions. In the event that the acquiring Stockholder is
Harpia or Curupira or an Affiliate thereof, they may exercise such right
only for the maximum amount of Shares permitted by applicable laws, rules
and regulations then in force. If the right to accept the Terms of Offer
is sought to be exercised by other Stockholders, the number of Shares to
be purchased by Harpia, Curupira and their Affiliates shall be limited to
the lesser of such permitted amount and their Pro Rata Share.
4.8 (i) Neither the Company nor the other Stockholders shall be entitled to
the right provided in this Clause 4 in relation to (A) sales,
transfers and assignments of Shares effected by any Stockholder to:
(a) any entity, other than a partnership, in which the transferring
or assigning Stockholder directly or indirectly owns or controls a
majority of the voting capital or equivalent ownership interest, or
any partnership in which the transferring or assigning Stockholder
both (1) is, directly or through another Affiliate, a general
partner, and (2) owns, directly or indirectly, a majority of the
economic interest (any such entity or partnership, for purposes of
this Clause 4.8, a "subsidiary"); or (b) any entity that directly,
or indirectly through one or more subsidiaries, owns or controls the
majority of the voting capital stock or equivalent ownership
interest of the assigning Stockholder (any such entity, for purposes
of this Clause 4.8, a "holding company"); or (c) any entity that is
a subsidiary of any of such Stockholder's holding companies;
17
or (d) in the case of Mr. Civita, any of the following individuals:
Edgard de Silvio Faria, Angelo Silvio Rossi, Maria Ines Romana
Rossi, Giancarlo Francesco Civita, Victor Civita and Roberta
Anamaria Civita; or (e) in the case of the Investor Entities, Hearst
Parent or CCABC Parent, any of Hearst, CCABC or any subsidiary or
holding company of Hearst or CCABC (collectively, "Affiliates"), or
(B) sales, transfers and assignments of any equity interest in a
Stockholder, a Stockholder Parent Company or a Controlling
Stockholder of such Stockholder to any person that, immediately
prior to such sale, transfer or assignment, was an Affiliate of such
Stockholder or a Person that had as a Controlling Stockholder any of
such Stockholder's Controlling Stockholders.
(ii) In addition, any Stockholder may permit any of its Affiliates to
purchase any of the Shares such Stockholder would itself be
permitted to purchase upon its exercise of the right to accept the
Terms of Offer. Each Stockholder that transfers Shares to an
Affiliate and each Stockholder that causes an Affiliate to purchase
Shares in exercise of the right to accept the Terms of Offer under
this Clause 4.8 hereby agrees with each other Stockholder that such
transferred Shares shall at all times be held by an Affiliate of
such transferring Stockholder, unless transferred to another person
(other than an Affiliate of such transferring party) pursuant to the
provisions of this Clause 4. Each Stockholder hereby undertakes to
cause its Affiliates that are, from time to time, Stockholders, to
act in compliance with the terms of this Clause 4.8.
4.9 Notwithstanding any provision to the contrary herein, any transfer or
assignment of Shares (or any right to acquire Shares under Clause 4.8) by
any form to a person that is not a signatory of this Agreement (including
to an Affiliate), shall be valid and effective only if the transferee or
assignee or acquiror fully and without restrictions becomes a party to
this Agreement, all as if it had been an original party hereto, and each
Stockholder agrees not to transfer Shares by any means whatsoever unless
such transfer is permitted by applicable law; provided, however that this
Clause 4.9 shall not apply to a transfer described in Clauses 4.1(ii) or
(iii) above.
4.10 Except with the consent of all other Stockholders of the Company, no
Stockholder shall create any liens or encumbrances on the Shares or
otherwise enter into any agreement or arrangement which in any way limits
or imposes restrictions on the free ownership of the Shares. Transfers of
Shares or of securities convertible into Shares or, further, the creation
of any lien or encumbrance upon them in contravention of the provisions of
this Agreement shall not be valid, and the Company shall refrain from
registering them on its stock transfer books.
4.11 The provisions of this Clause 4 shall not apply to transfers of Shares
that are the subject of the HC Put Option (as defined in Clause 6.1
below), the Falcon Event Put
18
Option (as defined Clause 7.1 below), the Falcon Time Put Option (as
defined in Clause 7.1 below), the Investor Put Option (as defined in
Clause 7A.1 below), the Call Options, any of the put rights granted in the
Abril Agreement or the Option Agreement or to the Shares referred to in
Clause 11.5. Further, the provisions of this Clause 4 shall not apply to
any transfer that any Stockholder may be entitled to make pursuant to
Clause 4.8 or 17 hereof, to Shares which are sold in a public registration
pursuant to Clause 18 hereof, or to the Shares subject to the Put Option
granted under the Amended and Restated Option Agreement dated as of the
date hereof among Abril S.A., Harpia and Curupira (the "Option Agreement")
or to transfers of Shares pursuant to the Abril Agreement. The Company and
the Stockholders acknowledge that, pursuant to the terms of the Option
Agreement, Harpia, Curupira and their Affiliates that are from time to
time Stockholders may assign some or all of their option rights, subject
to some or all of their obligations, under the Option Agreement to any
other Stockholder or group of Stockholders that are Affiliates (other than
Mr. Civita, Abrilcap and any Affiliates thereof) which have received, by
transfer from Harpia, Curupira or any Affiliate thereof, at least five
percent (5%) of the Company's voting Shares.
Clause 5. NEW ISSUANCES OF SHARES
5.1 The Stockholders shall have preference over all other persons or entities
to subscribe for new issuances of capital stock by the Company in the
proportion which the Shares they hold bear to all Shares subject to this
Agreement (such preference rights in new capital increases being
hereinafter referred to as "Subscription Rights"). New issuances of
capital stock by the Company shall be effected in proportion to the
existing classes and series of the Company's outstanding capital stock,
and each Stockholder may exercise its Subscription Rights only with
respect to Shares identical to those already owned by it.
5.2 (i) The transfer by any Stockholder of its Subscription Rights shall be
subject (except for any transfer to an Affiliate of such
Stockholder), to the requirement that such Subscription Rights first
be offered to the other Stockholders (other than Stockholders that
are Affiliates of the offering Stockholder). Such a transfer must be
effected in accordance with the following terms: (a) within ten (10)
Business Days from the date on which the Stockholders authorize, by
resolution, the issuance of additional capital stock by the Company,
the offering Stockholder shall give notice (a "Subscription Transfer
Notice") to all such other Stockholders, containing the number of
Shares that are the subject of the Subscription Rights being
offered, a proposed price (the "Proposed Subscription Price") in
cash expressed in U.S. Dollars, the other material conditions of the
proposed sale and, if the offering Stockholder is Falcon, the
Investor Entities, Abrilcap or an Affiliate of any of them, a list
of potential purchasers of such
19
Subscription Rights (the "Potential Subscription Purchasers"); (b)
if the offering Stockholder is Falcon, the Investor Entities,
Abrilcap or an Affiliate of any of them, no more than five Business
Days after receipt of the Subscription Transfer Notice, the offeree
Stockholders representing a majority of the Company's voting capital
stock not held by the offering Stockholder and its Affiliates, by
notice to the offering Stockholder, may disapprove any of the
Potential Subscription Purchasers, which disapproval shall not be
unreasonable and shall be explained in such notice; (c) no more than
seven Business Days after receipt of the Subscription Transfer
Notice, the other Stockholders may exercise the right to acquire
such Subscription Rights, on the basis of the ratio of their
respective interest in the equity capital of the Company on the date
of such offer (excluding, for the purposes of verification of such
ratio, the equity held by the offering Stockholder and its
Affiliates), for the price and on the other material conditions
described in the Subscription Transfer Notice; and (d) no more than
three Business Days after the election is made by the offeree
Stockholders to acquire such Subscription Rights, the acquisition of
all offered Subscription Rights shall occur. Once the 7-day period
set forth in (c) has elapsed without the Stockholders who received
the offer having given notice that they will exercise their rights
to acquire such Subscription Rights, such rights may be assigned to
any person or entity up to and including the date on which the
exercise period for the Subscription Rights terminates; provided,
however, that each of the following conditions shall have been
complied with: (1) all of such Subscription Rights must be assigned
to the same person or entity; (2) if the offering Stockholder is
Falcon, the Investor Entities, Abrilcap or an Affiliate of any of
them, then such Subscription Rights must be sold to a Potential
Subscription Purchaser that has not been vetoed in accordance with
this paragraph; (3) the provisions of Clause 5.3 below shall have
been complied with; (4) the consideration for the sale of such
Subscription Rights must have an aggregate fair value equal to at
least the Proposed Subscription Price, and the assignment must be
consummated upon other conditions not substantially more favorable
to the assignee than the conditions set forth in the Subscription
Transfer Notice; and (5) promptly after the consummation of such
assignment, the offering Stockholder shall have provided all of the
other Stockholders with a notice containing a description of the
sale price for such Subscription Rights, the form of consideration
paid and all other material terms of such assignment.
(ii) Notwithstanding the foregoing, in the event that any Foreign
Stockholder is not permitted to purchase all or any portion of such
Foreign Stockholder's Pro Rata Share of such Subscription Rights
being offered for purchase due to Brazilian legal restrictions upon
foreign ownership or other Brazilian legal limitations, such Foreign
Stockholder may designate a third party to take
20
such purchase, provided that (a) such third party is identified in a
notice given to each other Stockholder within two Business Days
after receipt of the related Subscription Transfer Notice, and (b)
each such Stockholder shall have approved such third party in
writing, such approval not to be unreasonably withheld.
5.3 Notwithstanding any Provision to the contrary herein, any transfer or
assignment of Subscription Rights by any form to a person that is not a
signatory of this Agreement, including to an Affiliate, shall be valid and
effective only if the transferee or assignee fully and without
restrictions becomes a party to this Agreement, all as if it had been an
original party hereto.
5.4 After the date on which the exercise period of Subscription Rights
expires, the remaining Shares which have not been subscribed for in the
exercise of such Subscription Rights or by the third party assignees of
such Subscription Rights as provided for in Clauses 5.2 and 5.3 above,
shall be offered to the other Stockholders pro rata according to the
amounts subscribed for by them as of such date. In the event that the
other Stockholders do not wish to subscribe for the remaining Shares, they
may, irrespective of the vote or consent of the Stockholder who did not
exercise its Subscription Rights, elect to cancel the Shares which have
not been subscribed for.
5.5 Each Stockholder agrees not to transfer any Subscription Rights unless
such transfer is permitted by applicable law.
Clause 6. HARPIA AND CURUPIRA PUT OPTION
6.1 So long as the Shares owned by the HC Entities are not publicly
registered, listed or traded (other than pursuant to (x) a registration
initiated by the Company pursuant to Clause 13.1(ii) hereof to satisfy its
indemnification obligations as described therein, (y) a registration
initiated pursuant to Clause 18.1 hereof or (z) the exercise of its
piggyback registration rights pursuant to Clause 18.2 hereof) and Harpia
or Curupira and their Affiliates, considered together, at such time hold
at least five percent (5%) of the Company's voting Shares, or any other
Stockholder or group of Stockholders that are Affiliates, other than Mr.
Civita, Abrilcap and any Affiliates thereof) which have received, by
transfer from Harpia, Curupira or any Affiliate thereof, and at such time
hold, at least five percent (5%) of the Company's voting Shares, then upon
the occurrence of an HC Triggering Event (as defined in Clause 6.2 below),
and during the continuance thereof as described in the last paragraph of
Clause 6.2 below, Harpia, Curupira, and their Affiliates, or such other
Stockholder or Stockholders, as the case may be (the "HC Put Party"),
shall be entitled to demand that the Company buy, in whole or in part, the
Shares subscribed for by Harpia or Curupira pursuant to the Subscription
Agreement then held by the HC Put Party (the Shares designated as
21
being subject to such exercise of the HC Put Option are referred to as the
"HC Put Shares") at the Event Put Price (as defined below), on the terms
and conditions set forth in this Clause 6 (the "HC Put Option"). The
rights of any HC Put Party under this Clause 6 are in addition to any
other rights, remedies or actions which may be available to it hereunder,
under any other agreement or by operation of law, except that the HC Put
Option shall not be exercisable with respect to any HC Triggering Event
(as defined below) for which Harpia, Curupira and their Affiliates shall
have received indemnification in full for all amounts claimed and owing
under Clause 7.3(a) or (b) of the Old Stock Purchase Agreement and, to the
extent applicable, Sections 6.3(h) and (i) of the Stock Purchase
Agreement.
6.2 "HC Triggering Event" means any of the following events:
(i) Any date upon which either (a) Harpia's, Curupira's or their
Affiliates' investment in the Shares exceeds the amounts allowed
under legal restrictions to which it or any of its Affiliates is
subject, or otherwise Harpia, Curupira or their Affiliates are no
longer allowed to hold such Shares, under any law, rule or
regulation applicable to it or any of its Affiliates or (b) legal
restrictions are imposed on Harpia, Curupira or other Affiliates,
that may turn the title of such Shares or a portion thereof illegal
or unduly burdensome in the context of applicable banking law or
regulation;
(ii) Any breach or violation by Mr. Civita or Abrilcap, any of their
respective Affiliates or the Company of any representation,
warranty, covenant or duty made or owed (a) by the Company, Mr.
Civita or Abrilcap or any of their respective Affiliates to Harpia
or Curupira or any of their respective Affiliates pursuant to this
Agreement, the Old Stock Purchase Agreement or the Stock Purchase
Agreement, (b) by any party thereto, pursuant to the Service
Agreement (including the powers of attorney in connection therewith)
or (c) by Abril S.A., pursuant to the Abril Credit Agreement;
provided, that in the case of (1) breaches or defaults of Clause
14.2 hereof, no HC Triggering Event shall occur unless such breach
or default is not cured on or before the 30th (thirtieth) Business
Day following such breach or default; and (2) any breach or
violation of a representation or warranty contained in Clause 3 or 4
of the Old Stock Purchase Agreement that is curable, no HC
Triggering Event shall occur if such breach or violation is cured in
full within 60 days after it occurred;
(iii) Mr. Civita ceases, in a transaction not approved in writing by all
Stockholders who then are entitled to the veto rights set forth in
Clause 13.1 hereof, to: (a) directly or indirectly hold voting
Shares of the Company representing more than 31.258% of the voting
Shares of the Company, (b) directly or indirectly control the voting
of voting Shares of the Company
22
held by his Affiliates representing more than 50% (fifty percent) of
the Voting Shares of the Company, or (c) directly or indirectly hold
31.258% of the Company's total capital stock, whether voting or
nonvoting; provided that in the event of Mr. Civita's death, there
shall be no HC Triggering Event unless and until the individuals
listed in the definition of Affiliates herein (together with Mr.
Civita's estate) cease, directly or indirectly, to hold more than:
(1) 50% of the voting Shares of the Company and (2) 31.258% of the
Company's total capital stock, whether voting or nonvoting;
(iv) The Service Agreement ceases for any reason to be valid and
effective or its challenged as to its validity and effectiveness by
any of the parties thereto, Mr. Civita or Abrilcap or any Affiliate
of any of them;
(v) If (a) in the case of any of the License Holders other than Abril
S.A., at any time when it holds any license or permit which is the
subject of the Service Agreement or any license, permit or asset
that is part of the Business, or (b) in the case of Abril S.A., at
any time, such License Holder or Abril S.A. is liquidated or
dissolved or makes or files voluntarily, or has filed against it
involuntarily any petition in bankruptcy; or
(vi) The giving of a Falcon Put Notice or an Investor Put Notice
hereunder except with respect to the Falcon Triggering Event listed
in Clause 7.2(i) or (ii) or the Investor Triggering Event listed in
Clause 7A.2(i).
Any HC Triggering Event listed in sub-clauses (ii) through (vi) shall
continue until the earlier of (x) the first anniversary of receipt by each
HC Put Party of notice from the Company, Mr. Civita or Abrilcap, as the
case may be, stating that an HC Triggering Event has occurred and
providing a detailed description thereof or (y) to the extent curable, the
cure of the event which gave rise to the HC Triggering Event or, with
respect to clause (vi), the withdrawal of a Falcon Put Notice or an
Investor Put Notice (which withdrawal shall not prejudice any right of the
HC Put Parties to exercise an HC Put Option pursuant to clauses (ii)
through (v) above), provided that an HC Triggering Event may not be
terminated pursuant to clause (y) above more than twice, and once an HC
Put Party has given an HC Put Notice, the HC Triggering Event may not be
terminated pursuant to clause (y) above. The HC Triggering Event listed in
subclause (i) shall continue only for as long as the events described
therein continue.
6.3 The price of Shares (the "Event Put Price") subject to the HC Put Option
shall be equal to (i) the fraction represented by the number of HC Put
Shares divided by the total number of issued and outstanding Shares of the
Company, multiplied by (ii) the higher value of the business of the
Company and its Subsidiaries obtained with the application of the
following methods:
23
(a) Fair Market Method: The fair market value of the business of the
Company and its Subsidiaries shall be determined by an independent
recognized valuation expert paid for by the Company and/or the HC
Put Party in accordance with the procedure set out below in this
Clause 6. The valuation will be determined assuming that such
business is sold to an independent third party as a going concern
with no discount for minority ownership or non-liquidity of any
assets or interests held by the Company or its Subsidiaries and on
the assumption that the Company and its Subsidiaries have and will
continue to have unrestricted use of licenses, permits and other
rights which they hold directly or which are the subject of the
Services Agreement; provided that, to the extent that capital stock
of the Company is publicly traded on a national securities market
and if there is an active and viable trading market in such capital
stock, as reasonably determined by the appraiser, the appraiser may
consider the trading price of such capital stock as a reference
point in the methodology of its consideration of the fair market
value of the business of the Company and its Subsidiaries, but such
public market price shall not be determinative of said fair market
value, it being the intent of the parties that such valuation of the
Company and its Subsidiaries shall be made using the private market
value of the sale of the business of the Company and its
Subsidiaries determined as set forth above.
(b) Earnings Multiple Method: The earnings multiple method of valuing
the business of the Company and its Subsidiaries uses the sum of
Clause (1) and Clause (2), defined as follows: Clause 1 shall be
defined as the difference between (A) the product of twelve (12)
times Earnings (as defined below) for the most recently completed
quarter multiplied by four and (B) the sum of interest-bearing
senior debt and subordinated debt, including any accrued interest
thereon, and preferred stock, as reflected on the balance sheet of
the Company as of the end of the most recently completed quarter.
Clause 2 shall be defined as non-operating assets and excess cash as
reflected on the balance sheet of the Company as of the end of the
most recently completed quarter. The earnings multiple method shall
be calculated on the most recent quarterly report of the Company as
reviewed by its auditors and reconciled with U.S. generally accepted
accounting principles ("U.S. GAAP").
"Earnings", for this purpose, shall be defined as earnings before
interest, taxes, depreciation and amortization of the Company and
its Subsidiaries, determined in accordance with U.S. GAAP, adjusted
for non-cash gains and losses, and extraordinary items.
Each of the valuations referred to in this Clause 6.3 shall be
expressed in U.S. Dollars according to the foreign exchange
conversion rate from
24
Brazilian currency used in the Company's financial statements for
the most recently completed fiscal quarter.
6.4 At any time when an HC Triggering Event shall have occurred and be
continuing, any HC Put Party shall be entitled to deliver written notice
(each, an "HC Put Notice") to each of the Stockholders (except the HC Put
Party and its Affiliates) and the Chairman of the Board. Such notice shall
include the name of the appraiser the HC Put Party intends to propose for
the purposes of item (a) in Clause 6.3 above, the number of HC Put Shares
which are the subject of the HC Put Notice, as well as the HC Put Price
calculated according to the method contemplated in item (b) of the same
Clause 6.3 above. In the event the HC Put Notice is given at a time when
there is more than one potential HC Put Party, such other HC Put Party
shall have five (5) Business Days to join the potential exercise of the HC
Put Option by giving written notice to each person that was required to
receive the related HC Put Notice, in which case the term HC Put Party
shall be deemed to include such other HC Put Party, which shall be deemed
to accept selection of an appraiser by the HC Put Party that gave the HC
Put Notice. Thereafter, such parties shall be required to act unanimously
except in exercising the HC Put Option pursuant to Clause 6.9 below.
Neither the election of a potential HC Put Party under this Clause 6.4 not
to join an HC Put Party that gave an HC Put Notice nor the election by any
HC Put Party not to exercise the HC Put Option after an HC Put Notice has
been given shall waive any rights to give an HC Put Notice or exercise the
HC Put option at any later time in accordance with this Clause 6.
6.5 No longer than five (5) Business Days from the receipt by the Chairman of
the HC Put Notice, the Board shall inform, in writing, the HC Put Party
and the other Stockholders whether it accepts the appraiser proposed by
the HC Put Party in such notice. If the Board rejects the appraiser
proposed by the HC Put Party it shall, in the same notice, propose an
appraiser acceptable to it. The HC Put Party shall have five (5) Business
Days to inform, in writing, the Board and the other Stockholders whether
it accepts the appraiser proposed by the Board. If the HC Put Party
accepts the appraiser proposed by the Board, such appraiser shall be
promptly retained by the Company to proceed with the appraisal provided
for in item (a) of Clause 6.3. In the event the HC Put Party does not
accept the appraiser proposed by the Board, the appraiser originally
proposed by the HC Put Party and the appraiser proposed by the Board shall
have ten (10) Business Days from the rejection informed by the HC Put
Party to jointly and irrespective of acceptance by the HC Put Party or the
Board, suggest a third appraiser (the "Third Appraiser") who will be
promptly retained by the Company to proceed with the appraisal under
reference. Subject to Clause 6.6 below, all costs and expenses incurred in
the performance of the appraisal shall be borne (i) by the HC Put Party if
such appraisal is performed by the appraiser proposed by it; (ii) by the
Company if performed by the appraiser proposed by its Board; and equally
borne by the HC Put Party and the Company if performed by the Third
Appraiser. All decisions of the Board regarding selection of an appraiser
for
25
purposes of computing the HC Put Price shall be taken by a majority of the
directors not appointed by any HC Put Party or its Affiliates.
6.6 If the Board or the appraiser proposed by it do not comply with the
procedure set forth in the previous Clause, the HC Put Party shall retain
the appraiser proposed in its HC Put Notice, and the Company shall
reimburse the HC Put Party for the costs and expenses incurred in the
performance of the appraisal promptly after required upon presentation of
the respective evidencing documents. In the event there shall be costs or
expenses of an appraiser retained under this Clause 6.6 and it is finally
determined or the HC Put Party concedes that no Triggering Event occurred,
then all costs and expenses shall be for the account of the HC Put Party.
6.7 The appraiser shall have no longer than 45 (forty-five) calendar days from
its appointment to notify the Board and the HC Put Party in writing of the
result of the appraisal accomplished based on the criteria set forth in
item (a) of Clause 6.3 above, as of the date on which the appraisal is
delivered and expressed in U.S. Dollars according to the conversion
criteria referred to in Clause 6.4 above, which result shall be considered
final and shall not be challenged by any party hereto.
6.8 The Company undertakes to, and the Stockholders agree to cause the Company
to, cooperate fully so that the appraisal provided for in Clause 6.3 above
or in the Option Agreement be effected within the term established therein
and the Company shall deliver all the information and documents requested
by the appraiser for the purposes of this Clause.
6.9 Any participating HC Put Party shall be entitled to exercise the HC Put
Option by giving written notice to the Board and each Stockholder within
10 days following receipt of the appraiser's notice referred to in Clause
6.7 above. If the HC Put Option is so exercised, by 11:30 a.m. on the 45th
day (the "Date of the HC Put Payment") from the date the result of the
appraisal mentioned in Clause 6.3 above is delivered, or if such day is
not a Business Day, on the next following Business Day, the Company shall
pay the Event Put Price for the HC Put Shares to the HC Put Party in Reais
Equivalent on the Date of the HC Put Payment, and the HC Put Party shall
transfer to the Company the HC Put Shares subject to the HC Put Option,
free and clear of all liens, claims, charges, restrictions and
encumbrances caused by or suffered to exist by any HC Put Party or its
Affiliates, other than as provided in this Agreement. Any election by an
HC Put Party not to exercise the HC Put Option shall not waive its right
to give any HC Put Notice or exercise the HC Put Option on the basis
thereof at any time (subject to the time limit in Clause 6.2 above)
thereafter.
6.10 Upon the occurrence of an HC Triggering Event under Clause 6.2(i) above,
related to any U.S. legal restrictions and if there shall occur a Put
Postponement (as defined in Clause 9 below), the HC Put Parties shall
consult with Mr. Civita and Abrilcap
26
concerning the exercise of their rights available under Clause 9.3 below
to convert their HC Put Shares to Special Preferred Shares (as defined in
Clause 9.3 below); provided, however, that any failure so to consult shall
not affect the HC Put Parties' rights hereunder or subject the HC Put
Parties to any claims for breach of contract or any other damages.
6.11 In the event that any HC Put Party exercises any HC Put Option
contemplated by this Clause 6, prior to the purchase by the Company of the
HC Put Shares as described below, the Stockholders, other than the HC Put
Parties and their Affiliates, shall be entitled, but not obligated, to
purchase such number of HC Put Shares at the Participant Purchase Price as
is designated by the Participating Stockholder(s) by delivering a written
notice to such effect to the Company and each of the Stockholders (except
the Participating Stockholder and its Affiliates) within 10 days following
receipt of such HC Put Notice; provided that if a Stockholder exercises
such option, then (i) subject to clause (iv) below, the Company shall only
be obligated to purchase those HC Put Shares not so purchased by the
Participating Stockholder(s) at a price equal to the Event Put Price minus
the aggregate of the Participant Purchase Price(s), (ii) if the
Participating Stockholder(s) in the aggregate elect to purchase more than
the total number of HC Put Shares being offered, then each Participating
Stockholder shall be entitled to purchase that number of HC Put Shares
equal to the product of (A) the total number of HC Put Shares times (B) a
fraction, the numerator of which is that number of HC Put Shares which
such Participating Stockholder elected to purchase and the denominator of
which is the total number of HC Put Shares which all Participating
Stockholders elected to purchase, (iii) the closing of the purchase of
such HC Put Shares by the Participating Stockholder(s) shall occur on the
Date of the HC Put Payment, at which time each Participating Stockholder
shall pay its Participant Purchase Price in Reais Equivalent, and the HC
Put Party shall transfer to each Participating Stockholder the HC Put
Shares that such Participating Stockholder is purchasing, free and clear
of all liens, claims, charges, restrictions and encumbrances caused by or
suffered to exist by the HC Put Party or its Affiliates, other than as
provided in this Agreement and (iv) if any Participating Stockholder does
not satisfy its obligation to acquire its portion of the HC Put Shares,
the Company shall be required to do so at such closing.
6.12 Other than as set forth in Clause 6.11 above, nothing in this Clause 6
shall confer any rights upon any person other than the HC Put Parties and
nothing in this Clause 6 shall impose any obligations on any person other
than the HC Put Parties and the Company.
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Clause 7. FALCON'S PUT OPTIONS
7.1 (i) Unless (a) the Shares owned by Falcon or its Affiliates shall have
been publicly registered, listed or traded (other than pursuant to
(x) a registration initiated by the Company pursuant to Clause
13.1(ii) hereof to satisfy its indemnification obligations as
described therein, (y) (1) with respect to a Falcon Time Put Option,
a registration initiated by a Stockholder other than Falcon or its
Affiliates pursuant to Clause 18.1 hereof and (2) with respect to a
Falcon Event Put Option, a registration initiated pursuant to Clause
18.1 hereof or (z) the existence of its piggyback registration
rights pursuant to Clause 18.2 hereof), (b) at the time of the
exercise of the Falcon Put Option both (1) at least 50% of the
initial aggregate ownership interests of the initial equity holders
(the "Falcon Parent Investors") of Falcon International
Communications LLC ("Falcon Parent") (such initial ownership
interests and initial equity holders calculated after Falcon parent
shall have been fully organized and the initial issuance of
ownership interests to investors other than Hellman & Friedman
Capital Partners III, L.P. ("Hellman & Friedman") and/or entities
related thereto shall have been completed) shall then have become
publicly registered, listed or traded and shall be freely tradeable
without any restrictions imposed by applicable securities laws, and
(2) at least 50% of all of the ownership interests of Falcon Parent
shall then have become publicly traded or (c) Falcon together with
its Affiliates at such time collectively hold less than 5% (five
percent) of the Company's voting Shares, then upon the occurrence of
a Falcon Triggering Event (as defined below in Clause 7.2) and
during the continuance thereof as described in the last paragraph of
Clause 7.2 below, Falcon and its Affiliates shall be entitled to
demand that the Company buy:
(A) in the case of a Falcon Triggering Event referred to in Clause
7.2(i) below, all but not less than all of the Shares acquired
by Falcon pursuant to the Old Stock Purchase Agreement then
held by Falcon and its Affiliates (as used with respect to the
Falcon Time Put Option, the "Falcon Put Shares") at the Time
Put Price, on the terms and conditions set forth in this
Clause 7 (such option being hereinafter referred to as the
"Falcon Time Put Option"), or
(B) in the case of all other Falcon Triggering Events, all or a
portion of the Shares acquired by Falcon pursuant to the Old
Stock Purchase Agreement then held by Falcon and its
Affiliates or transferees described in Clause 7.1(ii) below
(as used with respect to the Falcon Event Put Option, the
number of Shares designated as being subject to such exercise
of the Falcon Event Put Option are referred to as the "Falcon
Put Shares") at the
28
Event Put Price, on the terms and conditions set forth in this
Clause 7 (such option hereinafter referred to as the "Falcon
Event Put Option"), except that the Falcon Event Put Option
shall not be exercisable with respect to any Falcon Triggering
Event for which Falcon and its Affiliates shall have received
indemnification in full for all amounts claimed and owing
under Section 7.3(a) or (b) of the Old Stock Purchase
Agreement and, to the extent applicable, Sections 6.3(h) and
(i) of the Stock Purchase Agreement.
Falcon hereby agrees, promptly after completion of the initial
issuance of ownership interests in Falcon Parent to investors other
than Hellman & Friedman and/or entities related thereto, to provide
the Board with a list of the Falcon Parent Investors.
(ii) No Stockholder other than Falcon or a Stockholder that is an
Affiliate of Falcon shall be entitled to exercise the Falcon Time
Put Option. Notwithstanding Clause 7.1(i)(b) or (c) above, any
Stockholder or group of Stockholders that are Affiliates (other than
Mr. Civita, Abrilcap and any Affiliates thereof) which have
received, by transfer from Falcon or any Affiliate thereof, and at
such time hold, at least 5% (five percent) of the Company's voting
Shares, shall be entitled to exercise the Falcon Event Put Option in
respect of their Falcon Put Shares. Any person entitled to exercise
a Falcon Time Put Option or a Falcon Event Put Option at a
particular time shall be a "Falcon Put Party" at such time with
respect to such option.
(iii) Except as stated in Clause 7.1(i)(B) above (where Falcon and its
Affiliates have received indemnification in full), the rights of any
Falcon Put Party under this Clause 7 are in addition to any other
rights, remedies or actions which may be available to them
hereunder, under any other agreement or by operation of law.
7.2 "Falcon Triggering Event" means any of the following events:
(i) Any date between September 22, 2002 and September 22, 2005;
(ii) Any date upon which either: (a) Falcon's or its Affiliates,
investment in the Shares exceeds the amounts allowed under legal
restrictions to which it or any of its Affiliates is subject, or
otherwise Falcon or any of its Affiliates is no longer allowed to
hold such Shares, under any law, rule or regulation applicable to it
or any of its Affiliates, or (b) legal restrictions are imposed on
Falcon or its Affiliates that may turn the title of such Shares or a
portion thereof illegal;
29
(iii) Any breach or violation by Mr. Civita or Abrilcap, any of their
respective Affiliates or the Company, of any representation,
warranty, covenant or duty made or owed (a) by the Company, Mr.
Civita or Abrilcap or any of their respective Affiliates to Falcon
or any of its Affiliates pursuant to this Agreement, the Old Stock
Purchase Agreement or the Stock Purchase Agreement, (b) by any party
thereto, pursuant to the Service Agreement (including the powers of
attorney in connection therewith) or (c) by Abril S.A., pursuant to
the Abril Credit Agreement; provided, that in the case of (1)
breaches or defaults of Clause 14.2 hereof, no Falcon Triggering
Event shall occur unless such breach or default is not cured on or
before the 30th (thirtieth) Business Day following such breach or
default, and (2) any breach or violation of a representation or
warranty contained in Article 3 or 4 of the Old Stock Purchase
Agreement that is curable, no Falcon Triggering Event shall occur if
such breach or violation is cured in full within 60 days after it
occurred;
(iv) Mr. Civita ceases, in a transaction not approved in writing by all
Stockholders who then are entitled to the veto rights set forth in
Clause 13.1 hereof, to: (a) directly or indirectly hold voting
Shares of the Company representing more than 31.258% of the voting
Shares of the Company, (b) directly or indirectly control the voting
of voting Shares of the Company held by his Affiliates representing
more than 50% (fifty percent) of the voting Shares of the Company,
or (c) directly or indirectly hold 31.258% of the Company's total
capital stock, whether voting or nonvoting; provided that in the
event of Mr. Civita's death, there shall be no Falcon Triggering
Event unless and until the individuals listed in the definition of
Affiliates herein (together with Mr. Civita's estate) cease,
directly or indirectly, to hold more than: (i) 50% of the voting
Shares of the Company and (2) 31.258% of the Company's total capital
stock, whether voting or nonvoting,
(v) The Service Agreement ceases for any reason to be valid and
effective or is challenged as to its validity and effectiveness by
any of the parties thereto, Mr. Civita or Abrilcap or any Affiliate
of any of them;
(vi) If (a) in the case of any of the License Holders other than Abril
S.A., at any time when it holds any license or permit which is the
subject of the Service Agreement or any license, permit or asset
that is part of the Business, or (b) in the case of Abril S.A., at
any time, such License Holder or Abril S.A. is liquidated or
dissolved or makes or files voluntarily, or has filed against it
involuntarily any petition in bankruptcy; or
(vii) The giving of an HC Put Notice or an Investor Put Notice hereunder
except with respect to the HC Triggering Event listed in Clause
6.2(i) or the Investor Triggering Event listed in Clause 7A.2(i).
30
Any Falcon Triggering Event listed in sub-clauses (iii) through (vii)
above shall continue until the earlier of (x) the first anniversary of
receipt by each Falcon Put Party of notice from the Company, Mr. Civita or
Abrilcap, as the case may be, stating that a Falcon Triggering Event has
occurred and providing a detailed description thereof or (y) to the extent
curable, the cure of the event which gave rise to the Falcon Triggering
Event or, with respect to clause (vii), the withdrawal of an HC Put Notice
or an Investor Put Notice (which withdrawal shall not prejudice any right
of the Falcon Put Parties to exercise a Falcon Put Option pursuant to
clauses (iii) through (vi) above), provided that a Falcon Triggering Event
may not be terminated pursuant to clause (y) above more than twice, and
once a Falcon Put Party has given a Falcon Put Notice, the Falcon
Triggering Event may not be terminated pursuant to clause (y) above. The
Falcon Triggering Event listed in (a) sub-clause (i) above shall continue
for the duration described therein and (b) sub-clause (ii) above shall
continue only for as long as the event described therein continues.
7.3 (i) The price of the Falcon Put Shares subject to the Falcon Time Put
Option (the "Time Put Price") shall correspond to the calculation of
the price of the Shares using the fair market value of the Company
and its Subsidiaries as determined according to Clause 6.3(a) above
only and including the last paragraph of Clause 6.3 (except that for
this purpose the term HC Put Party in such Clause shall mean Falcon
Put Party) and the Falcon Time Put option shall be triggered and
exercised according to Clauses 6.4 through 6.11 above (except that
for these purposes (a) the terms HC Put Option, HC Put Party, HC Put
Notice, Event Put Price, HC Put Shares, HC Triggering Event and Date
of the HC Put Payment shall mean, respectively, Falcon Time Put
option, Falcon Put Party, Falcon Put Notice, Time Put Price, Falcon
Put Shares, Falcon Triggering Event and Date of the Falcon Put
Payment, as appropriate; (b) the Falcon Put Notice shall not contain
any entry relating to Clause 6.3(b); and (c) payment as set forth in
Clause 6.9 above shall be subject to the provisions of Clause 9.7
below). For provisions regarding payment settlement (in lieu of the
payment and settlement provisions set forth in Clause 6.9 above but
not other provisions thereof) of the Falcon Time Put Option, see
Clauses 9.7 to 9.10 below. In addition, the related Falcon Put
Notice shall contain a certification that the Falcon Put Party is
eligible to trigger the Falcon Time Put Option because the
circumstances referred to in Clause 7.1(i)(b) above have not
occurred.
(ii) Notwithstanding the provisions of Clause 6.9 above to the effect
that election not to exercise put rights at a particular time does
not waive future rights of a put party to commence the put process
or ultimately exercise such rights, in the case of the Falcon Time
Put Option, (a) the Falcon Put Parties shall be limited to 4 (four)
Falcon Put Notices; (b) if the Falcon Time Put Option is not
exercised on the basis of the fourth such Falcon Put Notice in
respect of the Falcon Time Put Option, the Falcon Time Put
31
Option shall expire and (c) in the event two or more Falcon Put
Notices in respect of the Falcon Time Put Option are given within a
one-year period, the Falcon Put Parties shall be responsible to pay
all of the costs of the appraiser retained in connection with the
determination of the Time Put Price in respect of the second or more
of such Falcon Put Notices.
7.4 The price of the Falcon Put Shares subject to the Falcon Event Put Option
shall be the Event Put Price as determined according to Clause 6.3(a) or
(b) above and including the last paragraph of Clause 6.3 above (except
that for this purpose the term HC Put Party in such Clause shall mean
Falcon Put Party), and the Falcon Event Put Option shall be triggered and
exercised according to Clauses 6.4 through 6.11 above (except that for
these purposes the terms HC Put Option, HC Put Party, HC Put Notice, HC
Put Shares, HC Triggering Event and Date of the HC Put Payment shall mean,
respectively, Falcon Event Put Option, Falcon Put Party, Falcon Put
Notice, Falcon Put Shares, Falcon Triggering Event and Date of the Falcon
Put Payment, as appropriate). In addition, the related Falcon Put Notice
shall contain a certification that the Falcon Put Party (other than a
transferee pursuant to Clause 7.1(ii) above that is not an Affiliate of
Falcon, which shall not be required to provide such certification) is
eligible to trigger the Falcon Event Put Option because the circumstances
referred to in Clause 7.1(i)(b) above have not occurred.
7.5 In the event that any Falcon Put Party exercises any Falcon Event Put
Option contemplated by this Clause 7, prior to the purchase by the Company
of the Falcon Put Shares as described below, the Stockholders, other than
the Falcon Put Parties and their Affiliates, shall be entitled, but not
obligated, to purchase such number of Falcon Put Shares at the Participant
Purchase Price as is designated by the Participating Stockholder(s) by
delivering a written notice to such effect to the Company and each of the
Stockholders (except the Participating Stockholder and its Affiliates)
within 10 days following receipt of such Falcon Put Notice; provided that
if a Stockholder exercises such option, then (i) subject to clause (iv)
below, the Company shall only be obligated to purchase those Falcon Put
Shares not so purchased by the Participating Stockholder(s) at a price
equal to the Event Put Price minus the aggregate of the Participant
Purchase Price(s), (ii) if the Participating Stockholder(s) in the
aggregate elect to purchase more than the total number of Falcon Put
Shares being offered, then each Participating Stockholder shall be
entitled to purchase that number of Falcon Put Shares equal to the product
of (A) the total number of Falcon Put Shares times (B) a fraction, the
numerator of which is that number of Falcon Put Shares which such
Participating Stockholder elected to purchase and the denominator of which
is the total number of Falcon Put Shares which all Participating
Stockholders elected to purchase, (iii) the closing of the purchase of
such Falcon Put Shares by the Participating Stockholder(s) shall occur on
the Date of the Falcon Put Payment, at which time each Participating
Stockholder shall pay its Participant Purchase Price in Reais Equivalent,
and the Falcon Put Party shall transfer to each Participating Stockholder
the Falcon Put Shares that such
32
Participating Stockholder is purchasing, free and clear of all liens,
claims, charges, restrictions and encumbrances caused by or suffered to
exist by the Falcon Put Party or its Affiliates, other than as provided in
this Agreement and (iv) if any Participating Stockholder does not satisfy
its obligation to acquire its portion of the Falcon Put Shares, the
Company shall be required to do so at such closing.
Clause 7A. THE INVESTOR ENTITIES' PUT OPTION
7A.1 So long as the Shares owned by the Investor Entities are not publicly
registered, listed or traded (other than pursuant to (x) a registration
initiated by the Company pursuant to Clause 13.1(ii) hereof to satisfy its
indemnification obligations as described therein, (y) a registration
initiated pursuant to Clause 18.1 hereof or (z) the exercise of its
piggyback registration rights pursuant to Clause 18.2 hereof) and the
Investor Entities and their Affiliates, considered together, at such time
hold at least 5% (five percent) of the Company's voting shares, or any
other Stockholder or group of Stockholders that are Affiliates (other than
Mr. Civita, Abrilcap and any Affiliates thereof) which have received, by
transfer from the Investor Entities or any Affiliate thereof, and at such
time hold at least 5% (five percent) of the Company's voting Shares, then
upon the occurrence of an Investor Triggering Event (as defined in Clause
7A.2 below), and during the continuance thereof as described in the last
paragraph of Clause 7A.2 below, the Investor Entities and their
Affiliates, or such other Stockholder or Stockholders, as the case may be
(the "Investor Put Party"), shall be entitled to demand that the Company
buy, in whole or in part, the Shares purchased by the Investor Entities
pursuant to the Stock Purchase Agreement or the stock purchase agreement
among Hearst/ABC Limitada, Harpia and Curupira (the "HC Stock Purchase
Agreement") then held by the Investor Put Party (the number of Shares
designated as being subject to such exercise of the Investor Put Option
are referred to as the "Investor Put Shares"), at the Event Put Price, on
the terms and conditions set forth in this Clause 7A (the "Investor Put
Option"). The rights of any Investor Put Party under this Clause 7A are in
addition to any other rights, remedies or actions which may be available
to it hereunder, under any other agreement or by operation of law, except
that the Investor Put Option shall not be exercisable with respect to any
Investor Triggering Event for which the Investor Entities and their
Affiliates shall have received indemnification in full for all amounts
claimed and owing under Clause 6.3(a) or (b) of the Stock Purchase
Agreement.
7A.2 "Investor Triggering Event" means any of the following events:
(i) Any date upon which either: (a) the Investor Entities' or their
Affiliates' investment in the Shares exceeds the amounts allowed
under legal restrictions to which it or any of its Affiliates is
subject, or otherwise the Investor Entities or any of their
Affiliates is no longer allowed to hold such Shares, under any law,
rule or regulation applicable to it or any of its
33
Affiliates, or (b) legal restrictions are imposed on the Investor
Entities or their Affiliates that may turn the title of such Shares
or a portion thereof illegal;
(ii) Any breach or violation by Mr. Civita or Abrilcap, any of their
respective Affiliates or the Company, of any representation,
warranty, covenant or duty made or owed (a) by the Company, Mr.
Civita or Abrilcap or any of their respective Affiliates to the
Investor Entities or any of their Affiliates pursuant to this
Agreement or the Stock Purchase Agreement, (b) by any party thereto,
pursuant to the Service Agreement (including the powers of attorney
in connection therewith) or (c) by Abril S.A., pursuant to the Abril
Credit Agreement; provided, that in the case of (1) breaches or
defaults under Clause 14.2 hereof, no Investor Triggering Event
shall occur unless such breach or default is not cured on or before
the 30th (thirtieth) Business Day following such breach or default,
and (2) any breach or violation of a representation or warranty
contained in Clause 3 or 4 of the Stock Purchase Agreement that is
curable, no Investor Triggering Event shall occur if such breach or
violation is cured in full within 60 days after it occurred;
(iii) Mr. Civita ceases, in a transaction not approved in writing by all
Stockholders who then are entitled to the veto rights set forth in
Clause 13.1 hereof, to: (a) directly or indirectly hold voting
Shares of the Company representing more than 31.258% of the voting
Shares of the Company, (b) directly or indirectly control the voting
of voting Shares of the Company held by his Affiliates representing
more than 50% (fifty percent) of the voting Shares of the Company,
or (c) directly or indirectly hold 31.258% of the Company's total
capital stock, whether voting or nonvoting; provided that in the
event of Mr. Civita's death, there shall be no Investor Triggering
Event unless and until the individuals listed in the definition of
Affiliates herein (together with Mr. Civita's estate) cease,
directly or indirectly, to hold more than: (1) 50% of the voting
Shares of the Company and (2) 31.258% of the Company's total capital
stock, whether voting or nonvoting;
(iv) The Service Agreement ceases for any reason to be valid and
effective or is challenged as to its validity and effectiveness by
any of the parties thereto, Mr. Civita or Abrilcap or any Affiliate
of any of them;
(v) If (a) in the case of any of the License Holders other than Abril
S.A., at any time when it holds any license or permit which is the
subject of the Service Agreement or any license, permit or asset
that is part of the Business, or (b) in the case of Abril S.A., at
any time, such License Holder or Abril S.A. is liquidated or
dissolved or makes or files voluntarily, or has filed against it
involuntarily any petition in bankruptcy; or
34
(vi) The giving of an HC Put Notice or a Falcon Put Notice hereunder
except with respect to the HC Triggering Event listed in Clause
6.2(i) or the Falcon Triggering Event listed in Clause 7.2(i) or
(ii).
Any Investor Triggering Event listed in sub-clauses (ii) through (vi)
above shall continue until the earlier of (x) the first anniversary of
receipt by each Investor Put Party of notice from the Company, Mr. Civita
or Abrilcap, as the case may be, stating that an Investor Triggering Event
has occurred and providing a detailed description thereof or (y) to the
extent curable, the cure of the event which gave rise to the Investor
Triggering Event or, with respect to clause (vi), the withdrawal of an HC
Put Notice or a Falcon Put Notice (which withdrawal shall not prejudice
any right of the Investor Put Parties to exercise an Investor Put Option
pursuant to clauses (ii) through (v) above), provided that an Investor
Triggering Event may not be terminated pursuant to clause (y) above more
than twice, and once an Investor Put Party has given an Investor Put
Notice, the Investor Triggering Event may not be terminated pursuant to
clause (y) above. The Investor Triggering Event described in sub-clause
(i) above shall continue only for as long the event described therein
continues.
7A.3 The price of the Investor Put Shares subject to the Investor Put Option
shall be the Event Put Price as determined according to Clause 6.3 (a) or
(b) above and including the last paragraph of Clause 6.3 (except that for
this purpose the term HC Put Party in such Clause means Investor Put
Party), and the Investor Put Option shall be triggered and exercised,
according to Clauses 6.4 through 6.11 above (except that for these
purposes the terms HC Put Option, HC Put Party, HC Put Notice, HC Put
Shares, HC Triggering Event and Date of the HC Put Payment shall mean,
respectively, Investor Put Option, Investor Put Party, Investor Put
Notice, Investor Put Shares, Investor Triggering Event and Date of the
Investor Put Payment, as appropriate).
7A.4 In the event that any Investor Put Party exercises any Investor Put Option
contemplated by this Clause 7A, prior to the purchase by the Company of
the Investor Put Shares as described below, the Stockholders, other than
the Investor Put Parties and their Affiliates, shall be entitled, but not
obligated, to purchase such number of Investor Put Shares at the
Participant Purchase Price as is designated by the Participating
Stockholder(s) by delivering a written notice to such effect to the
Company and each of the Stockholders (except the Participating Stockholder
and its Affiliates) within 10 days following receipt of such Investor Put
Notice; provided that if a Stockholder exercises such option, then (i)
subject to clause (iv) below, the Company shall only be obligated to
purchase those Investor Put Shares not so purchased by the Participating
Stockholder(s) at a price equal to the Event Put Price minus the aggregate
of the Participant Purchase Price(s), (ii) if the Participating
Stockholder(s) in the aggregate elect to purchase more than the total
number of Investor Put Shares being offered, then each Participating
Stockholder shall be
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entitled to purchase that number of Investor Put Shares equal to the
product of (A) the total number of Investor Put Shares times (B) a
fraction, the numerator of which is that number of Investor Put Shares
which such Participating Stockholder elected to purchase and the
denominator of which is the total number of Investor Put Shares which all
Participating Stockholders elected to purchase, (iii) the closing of the
purchase of such Investor Put Shares by the Participating Stockholder(s)
shall occur on the Date of the Investor Put Payment, at which time each
Participating Stockholder shall pay its Participant Purchase Price in
Reais Equivalent, and the Investor Put Party shall transfer to each
Participating Stockholder the Investor Put Shares that such Participating
Stockholder is purchasing, free and clear of all liens, claims, charges,
restrictions and encumbrances caused by or suffered to exist by the
Investor Put Party or its Affiliates, other than as provided in this
Agreement and (iv) if any Participating Stockholder does not satisfy its
obligation to acquire its portion of the Investor Put Shares, the Company
shall be required to do so at such closing.
Clause 8. PUT COORDINATION
8.1 [HC TRIGGERS; EFFECT ON INVESTOR ENTITIES & FALCON] In the event that any
HC Put Notice is given, and either an Investor Triggering Event or a
Falcon Triggering Event, as appropriate, has also occurred and is
continuing, any Investor Put Party may (but shall not be required to)
trigger the Investor Put Option (but not the exercise thereof, which
exercise shall be subject to the applicable provisions hereof) and any
Falcon Put Party may (but shall not be required to) trigger the Falcon
Event Put Option (but not the exercise thereof, which exercise shall be
subject to the applicable provisions hereof) simultaneously with such
trigger of the HC Put Option by giving an Investor Put Notice or a Falcon
Put Notice, as the case may be, no later than 10 (ten) Business Days after
its receipt of such HC Put Notice, to all persons required to receive such
Investor Put Notice or Falcon Put Notice.
8.2 [FALCON TRIGGERS; EFFECT ON HC AND INVESTOR ENTITIES] In the event that
any Falcon Put Notice is given with respect to a Falcon Event Put Option
and either an HC Triggering Event or an Investor Triggering Event, as
appropriate, has occurred and is continuing, any HC Put Party may (but
shall not be required to) trigger the HC Put Option (but not the exercise
thereof, which exercise shall be subject to the applicable provisions
hereof) and any Investor Put Party may (but shall not be required to)
trigger the Investor Put Option (but not the exercise thereof, which
exercise shall be subject to the applicable provisions hereof)
simultaneously with such trigger of the Falcon Event Put Option by giving
an HC Put Notice or an Investor Put Notice, as the case may be, no later
than 10 (ten) Business Days after its receipt of such Falcon Put Notice,
to all persons required to receive such HC Put Notice or Investor Put
Notice.
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8.3 [INVESTOR ENTITIES TRIGGERS; EFFECT ON HC AND FALCON] In the event that
any Investor Put Notice is given with respect to the Investor Put Options
and an HC Triggering Event or a Falcon Triggering Event, as appropriate,
has occurred and is continuing, any HC Put Party may (but shall not be
required to) trigger the HC Put Option (but not the exercise thereof,
which exercise shall be subject to the applicable provisions hereof) and
any Falcon Put Party may (but shall not be required to) trigger the Falcon
Event Put Option (but not the exercise thereof, which exercise shall be
subject to the applicable provisions hereof) simultaneously with such
trigger of the Investor Put Option by giving an HC Put Notice or a Falcon
Put Notice, as the case may be, no later than 10 (ten) Business Days after
its receipt of such Investor Put Notice, to all persons required to
receive such HC Put Notice or Falcon Put Notice.
8.4 (A) [NON-EXERCISE NOT A WAIVER] Any election by an HC Put Party not to
trigger the HC Put Option simultaneously with the Falcon Event Put Option
or Investor Put Option, or not to exercise the HC Put Option for any
reason, shall not waive any right of any HC Put Party to trigger or
exercise the HC Put Option at a later date, in accordance with Clause 6
above. Any election by an Investor Put Party not to trigger the Investor
Put Option simultaneously with the HC Put Option or Falcon Event Put
Option, or not to exercise the Investor Put Option for any reason, shall
not waive any right of any Investor Put Party to trigger or exercise the
Investor Put Option at a later date, in accordance with Clause 7A above.
Any election by a Falcon Put Party not to trigger the Falcon Event Put
Option simultaneously with the HC Put Option or Investor Put Option, or
not to exercise the Falcon Event Put Option for any reason, shall not
waive any right of any Falcon Put Party to trigger or exercise the Falcon
Event Put Option at a later date, in accordance with Clause 7 above.
(B) [PRIORITY, POSS. PRORATION OF PUT RIGHTS] Unless the HC Put Option,
the Investor Put Option and/or the Falcon Event Put Option are triggered
simultaneously as contemplated by Clauses 8.1, 8.2 and/or 8.3 above, the
respective HC Put Parties, the Investor Put Parties and the Falcon Put
Parties shall have priority as against the Company in the order that the
HC Put Options, the Investor Put Options and/or the Falcon Event Put
Options are exercised. If such options are triggered simultaneously and
subsequently exercised, the HC Put Parties, the Investor Put Parties and
the Falcon Put Parties shall be entitled to payment pro rata, in the
proportion that the aggregate amount of each party's put price bears to
the aggregate put price for all such parties. To the extent that any HC
Put Party, Investor Put Party or Falcon Put Party receives a payment in
respect of its Put Shares which is disproportionately greater than the
payments received by other parties who have simultaneously triggered their
options, such party shall pay to such other parties an amount necessary to
cause all such parties to receive their proportionate share of the
aggregate payments made to all such parties.
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8.5 [APPRAISAL FEE SHARING] In the event the HC Put Option, the Investor Put
Option and/or the Falcon Event Put Option are exercised simultaneously as
contemplated by Clauses 8.1, 8.2 and/or 8.3 above, the put party that
first gives its put notice shall control all decisions of the HC Put
Parties, the Investor Put Parties and the Falcon Put Parties as to the
appraisers required to determine fair market value of the Shares, but the
HC Put Parties, the Investor Put Parties and the Falcon Put Parties shall
equally prorate any appraisal costs not borne by the Company.
Clause 9. PUT POSTPONEMENT
9.1 In the event that on the Date of the HC Put Payment, the Date of the
Investor Put Payment, or the Date of the Falcon Put Payment with respect
to any Falcon Event Put Option, as the case may be (the "Date of the Event
Put Payment"), by reason of inadequate retained earnings or reserves
pursuant to Article 30 of Law No. 6.404/76, the Company is unable to
purchase the Shares subject to the HC Put Option, the Investor Put Option
or the Falcon Event Put Option, as the case may be (the "Event Put"), in
whole or in part, and in the event that the HC Put Party, the Investor Put
Party or the Falcon Put Party, as the case may be (the "Event Put Party"),
does not expressly waive its Event Put (provided that any such waiver
shall be without prejudice to the right of the Event Put Party to
reinstate such Event Put Option in accordance with Clause 6, 7 or 7A
above, as applicable), the Company shall establish, in writing, the amount
in U.S. Dollars corresponding to the Event Put Price of Shares not
acquired on the Date of the Event Put Payment as verified pursuant to
Clause 6, 7 or 7A above, which shall not be subject to any variation
(except foreign exchange variation), irrespective of the Company's
operating results or the value of the Shares after the Date of the Event
Put Payment, and the closing date of the Event Put with respect to such
remaining Shares shall be extended pursuant to this Clause ("Put
Postponement"). This Clause 9.1 shall not limit or be interpreted as
limiting the Company's obligation under the Event Put to buy the maximum
possible amount of Shares, including on the Date of the Event Put Payment.
9.2 In the event of a Put Postponement, the Company shall continue to use its
best efforts to increase its ability to legally purchase the remaining
Shares subject to the Event Put, pursuant to its terms, including by
obtaining credit and/or the necessary consent of its creditors, if
applicable. The Event Put Price of each Share to be purchased shall be
paid to the Event Put Party in Reais Equivalent on the date of such
payment.
9.3 Any Shares not purchased by the Company on the Date of the Event Put
Payment may be converted by the Event Put Party, at its exclusive
discretion, into classes of the Company's Preferred Shares ("Special
Preferred Shares") entitled to a minimum fixed and cumulative dividend to
be determined on the basis of the aggregate Event
38
Put Price for such unpurchased Shares, multiplied by the one-year LIBOR
rate as quoted by the London branch of The Chase Manhattan Bank, N.A.
prevailing on the Date of the Event Put Payment, plus 4% per annum
("Cumulative Dividends"), payable semiannually from the Date of the Event
Put Payment through the date such Special Preferred Shares are purchased
by the Company pursuant to the Event Put. The Event Put Party shall be
entitled to elect, in its sole discretion, to receive shares of voting
(the "Preferred Voting Shares") or non-voting Special Preferred Shares, or
any combination thereof. For purposes of this Agreement and the Company's
By-Laws, the Preferred Voting Shares shall be deemed to be included in the
definition of "Shares" and all of the rights of the Stockholders hereunder
with respect to the Shares held by them shall continue so long as they
hold the Preferred Voting Shares.
9.4 The Stockholders undertake to exercise the voting rights of their Shares
in order to amend the Company's By-Laws so as to create the Special
Preferred Shares whenever so required according to provisions set forth
herein.
9.5 In addition to the Cumulative Dividends, the Special Preferred Shares
shall be entitled to any minimum dividend required by law to be paid by
the Company ("Mandatory Dividend").
9.6 After the payment of the Cumulative Dividend and of the Mandatory
Dividend, any remaining profit or reserve (other than mandatory legal
reserves) verified by the Company shall be used to buy the highest
possible amount of Shares (including the Special Preferred Shares) subject
to the Event Put Option. All dividend payments and all other distributions
to Stockholders and all redemptions or repurchases of any capital stock
from any holder of capital stock in the Company, with the exception of the
Cumulative Dividend on Special Preferred Shares then outstanding and of
the Mandatory Dividend, are and shall be expressly subject and subordinate
to the acquisition of all of the Shares subject to the Event Put in the
event they have not been purchased from the Event Put Party. All
Cumulative Dividends, and all repurchases of Shares (including the Special
Preferred Stock) subject to the Event Put Option, shall be made on a
pro-rata basis in favor of all Stockholders that exercised an Event Put
simultaneously under Clause 8.1 or 8.2 or 8.3 above; otherwise, the rights
of any Event Put Parties under this Clause 9 and under any Special
Preferred Shares issued hereunder shall be ranked according to the
respective Dates of the Event Put Payment on which such rights arose.
9.7 (i) In the event a Falcon Put Notice in respect of the Falcon Time Put
Option has been delivered, and, pursuant to Clauses 7.3 and 6.9
above, Falcon has decided to exercise the Falcon Time Put Option,
then, during the 30-day period immediately following receipt of the
appraiser's notice referred to in Clause 6.7 above (the "Time Put
Decision Period"), the Company shall, by action of a majority of the
members of its Board not appointed by any Falcon Put Party or its
Affiliates, make the following determinations in
39
sequence, promptly (but in any event within the Time Put Decision
Period) notify the Falcon Put Parties of such determinations and
take the following actions as determined thereby:
(a) If the Company, acting in good faith and in a commercially
reasonable manner, determines that it has cash available
which, together with borrowings available to the Company on
commercially reasonable terms, is sufficient to pay the entire
Time Put Price, then the Company shall pay the Time Put Price
to the Falcon Put Parties by 11:30 a.m. on the 90th day after
the end of the Time Put Decision Period, in cash in Reais
Equivalent on such day of payment, and the Falcon Put Parties
shall transfer to the Company all of the Falcon Put Shares
free and clear of all liens, claims, charges, restrictions and
encumbrances caused by or suffered to exist by any Falcon Put
Party or its Affiliates, other than as provided in this
Agreement; provided it is understood that the Company shall be
subject to an obligation to use its best efforts to obtain any
necessary borrowings on a commercially reasonable basis to
satisfy the Falcon Time Put Option in cash on the Date of the
Falcon Put Payment; provided, however, that if on such 90th
day, the Company is unable to satisfy the cash payment
required hereunder, the provisions of Clause 9.7(ii) shall be
applicable;
(b) if after use of the efforts described in (a) above the Company
determines that such cash and borrowings described in (a)
above are not available but instead determines, acting in good
faith and in a commercially reasonable manner, that it will
have cash available which, together with borrowings available
to the Company on commercially reasonable terms, will be
sufficient to pay the Time Put Price in three installments as
described in Clause 9.8 below, then the Company and the Falcon
Put Parties shall take the actions described in Clause 9.8
below, it being understood and agreed that the Company shall
be subject to an obligation to use its best efforts to obtain
any necessary borrowings on a commercially reasonable basis to
satisfy all such installments; and
(c) if the Company, acting in good faith and in a commercially
reasonable manner, determines that such cash and borrowings
described in (a) and (b) above are not available, then the
Company and the Falcon Put Parties shall take the actions
described in Clause 9.9 below.
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(ii) If, at the end of the 90-day period referred to in Clause 9.7(i)(a),
the Company, after having used its best efforts to obtain any necessary
borrowings on a commercially reasonable basis to satisfy the entire Time
Put Price, is unable to pay the entire Time Put Price, the Company shall,
on such 90th day, be entitled to and shall elect one of the alternatives
set forth in Clause 9.7(i)(b) or (c) above, and in such event the parties
shall be governed by the procedures set forth in Clause 9.8 or 9.9 below,
as the case may be, depending upon the alternative elected, and the other
applicable provisions of this Agreement.
9.8 (i) In case of a determination described in Clause 9.7(i)(b) above or
where such alternative is chosen pursuant to Clause 9.7(ii) above,
the Falcon Put Parties shall transfer to the Company their Falcon
Put Shares (the "Total Time Put Shares"), free and clear of all
liens, claims, charges, restrictions and encumbrances caused by or
suffered to exist by any Falcon Put Party or its Affiliates, other
than as provided in this Agreement, at the times and under the
circumstances as described in this Clause 9.8 and shall retain all
rights they may have, and continue to be subject to all obligations,
under this Agreement based on their stockholdings until such
transfers are completed in accordance with the terms hereof, subject
to the provisions of Clause 9.12 below. On the first anniversary of
the Company's receipt of the related Falcon Put Notice, the Company
shall pay 1/3 (one-third) of the Time Put Price, in Reais Equivalent
on such day and the Falcon Put Parties shall transfer to the Company
1/3 (one- third) of the Total Time Put Shares, free and clear of all
liens, claims, charges, restrictions, and encumbrances caused by or
suffered to exist by any Falcon Put Party or its Affiliates, other
than as provided in this Agreement. The Falcon Put Parties and the
Company shall cause the same appraiser that determined the Time Put
Price to make a second determination of the Time Put Price, but
recalculated and valued as of such first anniversary of the
Company's receipt of the related Falcon Put Notice and delivered to
the Board within 45 (forty-five) days thereof. On the second
anniversary of the Company's receipt of the related Falcon Put
Notice, the Company shall pay 1/3 (one-third) of such Time Put
Price, as recalculated as of the first anniversary thereof, in Reais
Equivalent on such second anniversary, and the Falcon Put Parties
shall transfer to the Company 1/3 (one-third) of the Total Time Put
Shares, free and clear of all liens, claims, charges, restrictions,
and encumbrances caused by or suffered to exist by any Falcon Put
Party or its Affiliates, other than as provided in this Agreement.
The Falcon Put Parties and the Company shall cause the same
appraiser that determined the first two Time Put Prices to make a
third determination of the Time Put Price, but recalculated and
valued as of such second anniversary of the Company's receipt of the
related Falcon Put Notice and delivered to the Board within 45
(forty-five) days thereof. On the third anniversary of the Company's
receipt of the related Falcon Put Notice, the Company shall pay 1/3
(one-third) of such Time Put Price, as
41
recalculated as of the second anniversary thereof, in Reais
Equivalent on such third anniversary, and the Falcon Put Parties
shall transfer to the Company 1/3 (one-third) of the Total Time Put
Shares, free and clear of all liens, claims, charges, restrictions,
and encumbrances caused by or suffered to exist by any Falcon Put
Party or its Affiliates, other than as provided in this Agreement.
(ii) In the event that after using its best efforts to obtain sufficient
cash and/or borrowings on commercially reasonable terms to satisfy
its payment obligations under paragraph (i) above on such first or
second anniversary, the Company shall not have available cash or
borrowings on commercially reasonable terms available to meet its
payment obligations under paragraph (i) above on such first or
second anniversary, then the Company shall, against transfer to it
of 1/3 (one-third) of the Total Time Put Shares, free and clear of
all liens, claims, charges, restrictions, and encumbrances caused by
or suffered to exist by any Falcon Put Party or its Affiliates,
other than as provided in this Agreement, issue on such date a
promissory note or promissory notes, denominated in U.S. Dollars, to
the Falcon Put Parties, in the aggregate principal amount equal to
its payment obligation on such anniversary prior to conversion to
Reais Equivalent and on the other terms described in Clause 9.10
below.
9.9 In case of a determination described in Clause 9.7 (i)(c) above, not later
than 11:30 a.m. on the 15th day after the end of the Time Put Decision
Period, each of the Falcon Put Parties shall transfer to the Company all
of their Falcon Put Shares, free and clear of all liens, claims, charges,
restrictions, and encumbrances caused by or suffered to exist by any
Falcon Put Party or its Affiliates, other than as provided in this
Agreement, against issuance by the Company on such date of a promissory
note or promissory notes, denominated in U.S. Dollars, to the Falcon Put
Parties, in the aggregate principal amount equal to the Time Put Price and
on the other terms described in Clause 9.10 below. In the case of a
determination described in Clause 9.7(ii) above to elect the alternative
described in Clause 9.7(i)(c) above, no later than 11:30 a.m. on the 90th
day after the end of the Time Put Decision Period, each of the Falcon Put
Parties shall transfer to the Company all of its Falcon Put Shares, free
and clear of all liens, claims, charges, restrictions, and encumbrances
caused by or suffered to exist by any Falcon Put Party or its Affiliates,
other than as provided in this Agreement, against issuance by the Company
on such date of a promissory note or promissory notes, denominated in U.S.
Dollars, to the Falcon Put Parties, in the aggregate principal amount
equal to the Time Put Price and on the other terms described in Clause
9.10 below.
9.10 All promissory notes referred to in Clauses 9.8 and 9.9 above shall have
the following terms and shall also be subject to the provisions of Clause
9.11 below: (i) all such promissory notes shall be notas promissorias and
shall be accompanied by an
42
agreement setting forth all terms relating thereto; (ii) all such
promissory notes shall mature on the third anniversary of the Company's
receipt of the related Falcon Put Notice; (iii) principal shall be payable
at maturity subject to optional prepayment and the mandatory prepayments
described below; (iv) interest from the date of issuance on the unpaid
principal amount shall be payable quarterly in arrears at a fixed rate of
interest equal at the time of issuance of such notes to the interest rate
on U.S. Treasury obligations of similar maturity, plus a spread taking
into account the type of obligor, the Company's creditworthiness and
Brazilian risk; provided that if the parties cannot agree on the above
rate it will be decided by such third party investment banker as may be
mutually agreed by both parties; (v) such notes shall be full recourse to
the Company and shall be secured by the pledge, in the case of notes
described in Clause 9.8 below, of the related 1/3 (one-third) of the Total
Time Put Shares, and in the case of those described in Clause 9.9 above,
of all the related Falcon Put Shares; (vi) while any notes described in
Clause 9.8 or 9.9 above remain outstanding, the Company shall not pay any
dividends or other distributions, or make any redemptions or repurchases
whatsoever on or relating to any of its capital stock, except for those
required by law, but shall continue to pay all Cumulative Dividends on
then outstanding Special Preferred Shares; (vii) while any notes described
in Clause 9.8 above only remain outstanding, the Company shall, subject to
the repurchases of Special Preferred Shares then outstanding provided for
in Clause 9.6 above, use all excess cash to prepay such notes in whole or
in part on a quarterly basis; (viii) in the case of notes described in
Clause 9.8 above issued on such first anniversary, to the extent the
Company has cash and borrowings available to meet its payment obligations
on such second anniversary, such cash and borrowings shall be applied
first to prepay such note to the fullest extent possible before meeting
such other payment obligations; (ix) the Company will be required to use
its best efforts on a continuing basis to obtain borrowings on a
commercially reasonable basis to satisfy to the fullest extent possible
and as soon as possible any promissory notes issued pursuant to Clauses
9.8 or 9.9 above; and (x) such other terms and conditions as are normal
and customary in international capital markets and transactions of this
nature, including, without limitation, defaults and acceleration for
failure to pay interest and restrictions on related party transactions
shall be included in such notes and/or the related agreements.
9.11 (i) Notwithstanding anything to the contrary contained herein, to the
extent the Company fails to perform any of its obligations under the
promissory notes referred to in Clause 9.8 or 9.9 above or the
related agreements, including payment of interest currently, the
Falcon Put Parties shall have ail rights and remedies available
hereunder, under the promissory notes or as provided by law or
equity.
(ii) If, at the end of the 90-day period referred to in Clause 9.7(i)(a)
above, the Company has not paid the entire Time Put Price in cash,
then, notwithstanding the Company's election of one of the
alternatives specified
43
in Clause 9.7(ii) above, and notwithstanding the provisions of
Clause 4 hereof, the Falcon Put Parties shall be free for a period
of six months after such date (but in any event not exceeding one
year from the date of the Falcon Put Notice), to sell all of the
Falcon Put Shares hereunder free of any of the right of first offer
restrictions set forth in Clause 4 hereof or any other provision
hereof, and the purchaser of such Shares shall be entitled to all of
the rights and obligations of the Falcon Put Parties hereunder;
provided, that the Falcon Put Parties may not sell the Falcon Put
Shares to any person included in the list of categories of
disqualified purchasers, which list shall be provided by the Company
within the 90-day period referred to in Clause 9.7(i)(a) above and
shall be reasonable and only include persons such as direct
competitors or undesirable persons. In the event of such sale, (a)
if any promissory notes have been issued, upon consummation of such
sale, the promissory notes shall be cancelled and neither the
Company nor the Falcon Put Parties shall have any claim against the
other for any deficiency between the amount of the sale price and
the amount of the Note; and (b) immediately prior to the
consummation of such sale, any Shares that the Falcon Put Parties
have transferred to the Company in connection with its exercise of
one of the alternatives shall be returned and/or re-issued, as
appropriate, to the Falcon Put Parties, and shall be duly and
validly issued and authorized, fully paid and non-assessable, and
shall be free of any pre-emptive rights or any liens, claims,
charges, restrictions or encumbrances caused by or suffered to exist
by the Company or its Affiliates, other than as provided in this
Agreement.
(iii) Without limiting the foregoing, and notwithstanding the provisions
of Clause 4 hereof or any other provision hereof, if the Company
defaults on any payment (whether of principal, interest or
otherwise) under any promissory note issued under Clause 9.8 or 9.9
above or any related agreement, and within six months of such
default such default has not been cured in full, then in either case
the Falcon Put Parties shall be free to sell all or any portion of
the Falcon Put Shares hereunder (or subject to the pledge), free of
any of the right of first offer restrictions set forth in Clause 4
hereof or any other provision hereof, and the purchaser of such
Shares shall be entitled to all of the rights and obligations of the
Falcon Put Parties hereunder; provided, that the Falcon Put Parties
may not sell the Falcon Put Shares to any person included in the
list of categories of disqualified purchasers, which list shall be
provided by the Company at the time of the issuance of the notes and
shall be reasonable and only include persons such as direct
competitors or undesirable persons.
9.12 In the event that any action by the Company for the purpose of permitting
the Company to meet any of its payment obligations to the Falcon Put
Parties under any of Clauses 9.7 through 9.9 above would otherwise require
a vote at a general meeting
44
of the Company or of the Board, notwithstanding anything herein to the
contrary, none of the Falcon Put Parties shall be entitled to a veto
through holdings of Shares or through any director they may have
appointed, and any such vote, for purposes of quorum and voting, shall be
taken exclusive of the Falcon Put Parties' holdings of Shares and the
participation of any director appointed by them, and the Falcon Put
Parties hereby agree to waive any preemptive rights they may have with
respect to any such action by the Company.
Clause 10. CALL OPTIONS
10.1 So long as the Shares owned by Harpia or Curupira or their Affiliates are
not publicly registered, listed or traded (other than pursuant to a
registration initiated by the HC Entities or their Affiliates) and in any
case not earlier than July 22, 2000, Harpia and Curupira grant and give
Mr. Civita, Abrilcap, and the Affiliates of each (other than the Company
and any Subsidiary thereof) that are then Stockholders (the "Call
Purchaser") an option to acquire (the "HC Call Option"), and so long as
the Shares owned by Falcon or its Affiliates are not publicly registered,
listed or traded (other than pursuant to a registration initiated by
Falcon or its Affiliates) and in any case not earlier than September 22,
2003, Falcon grants and gives the Call Purchaser an option to acquire (the
"Falcon Call Option" and, together with the HC Call Option, as the case
may be, the "Call Option"), in each case under the conditions set forth in
this Clause, all of the Shares (and not a portion thereof) held by Harpia
and Curupira and their Affiliates or Falcon and its Affiliates, as the
case may be (the "Call Seller"), on the date of the exercise of the Call
Option. Subject to Section 10.3(ii) below, the Call Options are personal
to Mr. Civita and Abrilcap and their Affiliates that are from time to time
Stockholders, and shall not be transferred in any case to third parties.
The only Shares subject to the Call Options are (i) Shares held by Harpia,
Curupira and their Affiliates at the time a Call Notice (as defined below)
is given to them with respect to the HC Call Option, and (ii) Shares held
by Falcon and its Affiliates at the time a Call Notice is given to them
with respect to the Falcon Call Option; no other Shares shall be subject
to any Call Option.
10.2 At any time permitted by Clause 10.1 above, the Call Purchaser shall be
entitled to deliver written notice (a "Call Notice") to each Call Seller
and, in the case of the HC Call Option, to Falcon and the Investor
Entities and each of their respective Affiliates that are then
Stockholders and in the case of a Falcon Call Notice, to the HC Entities
and the Investor Entities and their Affiliates that are then Stockholders.
Upon the delivery of the Call Notice, the Call Purchaser shall be entitled
to demand that the Call Seller transfer all its Shares, free and clear of
any liens, claims, charges, restrictions or encumbrances caused by or
suffered to exist by the Call Seller or its Affiliates, other than as
provided in this Agreement, to the Call Purchaser or as the Call Purchaser
may direct, as provided for herein, against payment of the Call Price, as
defined below.
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10.3 (i) The Call Purchaser shall be entitled to exercise the Call Option by
giving a Call Notice to each Call Seller (and to the other
Stockholders), within 10 (ten) days following the date on which the
Call Price has been ascertained. if the Call Option is so exercised,
on the third Business Day following such exercise (the "Date of
Transfer"), the Call Seller shall transfer, against the payment of
the Call Price, all Shares, free and clear of all liens, claims,
charges, restrictions and encumbrances caused by or suffered to
exist by the Call Seller or its Affiliates, other than as provided
in this Agreement, owned by it to Abrilcap, or such other person(s)
as Abrilcap shall have directed not less than 2 (two) Business Days
prior to the Date of Transfer, by means of the execution of the
proper entry of the Transfers of Nominative Shares Book of the
Company. Any election by the Call Purchaser not to exercise a Call
Option shall not waive its right to give any Call Notice or exercise
a Call Option at any time thereafter, except that in respect of the
Falcon Call Option, the Call Purchaser may not issue more than one
Call Notice in any given calendar year.
(ii) To determine the Call Price, the terms and conditions established in
Clause 6 above shall be applicable in the case of the HC Call Option
and the terms and conditions established in Clause 7.3 above shall
be applicable in the case of the Falcon Call Option, in each case
mutatis mutandis. For so long as (x) the Investor Entities, Falcon
or the Affiliates of any of them holding any voting Shares of the
Company, each such holder shall have the right, by notice to
Abrilcap within ten (10) Business Days after receipt of a Call
Notice with respect to an HC Call Option, to participate with the
Call Purchaser in the exercise of such HC Call Option in the
proportion that its Shares bear to the Shares then held by Mr.
Civita, Abrilcap and their Affiliates and (y) the Investor Entities
or their Affiliates holding any voting shares of the Company, each
such holder shall have the right, by notice to Abrilcap within ten
(10) Business Days after receipt of a Call Notice with respect to a
Falcon Call Option, to participate with the Call Purchaser in the
exercise of such Falcon Call Option in the proportion that its
Shares bear to the Shares then held by Mr. Civita, Abrilcap and
their Affiliates; provided, however, that (a) the Investor Entities,
Falcon and the Affiliates of any of them shall be bound by all
decisions of Mr. Civita, Abrilcap and their Affiliates with respect
to any appraiser involved in ascertaining the Call Price for such HC
Call Option or Falcon Call Option, as the case may be, (b) with
respect to any such appraiser's costs that would otherwise be borne
by Mr. Civita, Abrilcap or their Affiliates, the Investor Entities,
Falcon and the Affiliates of any of them shall bear their
aforementioned proportion, as applicable, (c) no election by the
Investor Entities, Falcon or the Affiliates of any of them to
participate in the exercise of such HC Call Option shall in any way
affect the rights of Harpia, Curupira or their Affiliates against
Mr. Civita, Abrilcap or their Affiliates with respect thereto and
(iv) no election
46
by the Investor Entities or their Affiliates to participate in the
exercise of such Falcon Call Option shall in any way affect the
rights of Falcon or its Affiliates against Mr. Civita, Abrilcap or
their Affiliates with respect thereto.
10.4 The purchase price of Shares acquired by the Call Purchasers as a result
of the exercise of the Call Option is herein referred to as the "Call
Price". The Call Price for the HC Call Option shall correspond to:
================================================================================
DATE OF EXERCISE OF THE CALL CALL PRICE
OPTION
- --------------------------------------------------------------------------------
From July 22, 2000 to July 21, 2001 110% of the HC Put Price
- --------------------------------------------------------------------------------
From July 22, 2001 to July 21, 2002 105% of the HC Put Price
- --------------------------------------------------------------------------------
On or after July 22, 2002 100% of the HC Put Price
================================================================================
The Call Price for the Falcon Call Option shall correspond to:
================================================================================
DATE OF EXERCISE OF THE CALL CALL PRICE
OPTION
- --------------------------------------------------------------------------------
From September 22, 2003 to September 21, 2004 110% of the Falcon Time Put Price
- --------------------------------------------------------------------------------
From September 22, 2004 to September 21, 2005 105% of the Falcon Time Put Price
- --------------------------------------------------------------------------------
On or after September 22, 2005 100% of the Falcon Time Put Price
================================================================================
10.5 The Call Price, calculated in U.S. Dollars pursuant to the preceding
Clause, shall be paid on the Date of Transfer concurrently with the
transfer of the applicable Call Seller's Shares, free and clear of all
liens, claims, charges, restrictions and encumbrances caused by or
suffered to exist by the Call Seller or its Affiliates, other than as
provided in this Agreement, to the Call Purchaser or as it may direct, in
Reais Equivalent on the Date of Transfer. The transfer of Shares and the
payment of the Call Price shall take place at the head office of the
Company, at 11:30 a.m., on the Date of Transfer.
10.6 In the event that within the 12-month period after payment of the Call
Price to a Call Seller, 5% (five percent) or more of the voting Shares of
the Company are sold, or any of the Company's Shares are placed in the
market by a public offering, such Call Seller shall receive an amount
equal to the excess, on a per-share basis, of the price that such Call
Seller would have received if its Shares had been included in such sale or
public offering at the price obtained in such sale or public offering over
the Call
47
Price. If the Investor Entities, Falcon or the Affiliates of any of them
have elected to participate in the HC Call Option pursuant to Clause 10.3
above, any such party shall reimburse the Call Purchaser for its
proportionate share of any such excess paid to the Call Seller.
10.7 For so long as CCABC Partner or any of its Affiliates is a Stockholder or
a holder of equity interests in any Investor Entity, in the event that (x)
unless and until Disney becomes a Controlling Stockholder of CCABC, CCABC,
or (y) from and after Disney becoming a Controlling Stockholder of CCABC,
at least one of CCABC or Disney, is not the Controlling Stockholder of (A)
CCABC Partner or (B) any Affiliate of CCABC Partner that is then a
Stockholder or a holder of an equity interest in any Investor Entity that
is then a Stockholder, then (i) unless all of the equity interests which
have been transferred and give rise to the Call Option set forth in this
Clause 10.7 have been offered according to the procedures set forth in
Clause 4 above, each of the Call Purchaser, the H/C Entities and Falcon
will have a Call Option with respect to all of the Shares held by the
Investor Entities, CCABC Partner, any of CCABC Partner's Affiliates or any
Stockholder in which CCABC Partner or any of its Affiliates holds any
equity, exercisable for six months following the discovery by the Call
Purchaser, the H/C Entities or Falcon of such event and otherwise in
accordance with the procedures set forth in this Clause 10 (except that
(a) the Call Price for purposes of this Clause 10.7 shall correspond to
the calculation of the price of the Shares using the fair market value of
the Company and its Subsidiaries as determined according to Clause 6.3(a)
only and including the last paragraph of Clause 6.3 and (b) any of the
Call Purchaser, the H/C Entities or Falcon may initiate such Call Option
by the delivery of a Call Notice), and (ii) whether or not such equity
interests have been offered in accordance with the procedures in Clause 4
hereof or such Call Option is exercised, the Investor Entities, CCABC
Partner, any of CCABC Partner's Affiliates and any Stockholder in which
CCABC Partner or any of its Affiliates holds any equity, upon such
cessation (1) shall immediately forfeit all rights granted under this
Agreement to the Investor Entities and such Affiliates that would not be
transferable with the Shares owned by the Investor Entities or such
Affiliates, and shall immediately cease to be bound by all of their
obligations under this Agreement that would not be transferred with the
Shares owned by them, in each case as if a transfer of such Shares had
occurred by the Investor Entities or such Affiliates and (2) shall
immediately forfeit all rights to indemnification under Clause 6.3 of the
Stock Purchase Agreement other than in respect of claims for
indemnification that are then pending. Notwithstanding the foregoing, the
provisions of this Clause 10.7 shall not apply to any transfer of any
equity interest in any Investor Entity, CCABC Partner, any of CCABC
Partner's Affiliates or any Stockholder in which CCABC Partner or any of
its Affiliates holds any equity, to any Affiliate.
10.8 For so long as Hearst Partner or any of its Affiliates is a Stockholder or
a holder of equity interests in any Investor Entity, in the event that
Hearst is not the Controlling
48
Stockholder of (A) Hearst Partner or (B) any Affiliate of Hearst Partner
that is then a Stockholder or a holder of an equity interest in any
Investor Entity that is then a Stockholder, then (i) unless all of the
equity interests which have been transferred and give rise to the Call
Option set forth in this Clause 10.8 have been offered according to the
procedures set forth in Clause 4 above, each of the Call Purchaser, the
H/C Entities and Falcon will have a Call Option with respect to all of the
Shares held by the Investor Entities, Hearst Partner, any of Hearst
Partner's Affiliates or any Stockholder in which Hearst Partner or any of
its Affiliates holds any equity, exercisable for six months following the
discovery by the Call Purchaser, the H/C Entities or Falcon of such event
and otherwise in accordance with the procedures set forth in this Clause
10 (except that (a) the Call Price for purposes of this Clause 10.8 shall
correspond to the calculation of the price of the Shares using the fair
market value of the Company and its Subsidiaries as determined according
to Clause 6.3(a) only and including the last paragraph of Clause 6.3 and
(b) any of the Call Purchaser, the H/C Entities or Falcon may initiate
such Call Option by the delivery of a Call Notice), and (ii) whether or
not such equity interests have been offered in accordance with the
procedures in Clause 4 hereof or such Call Option is exercised, the
Investor Entities, Hearst Partner, any of Hearst Partner's Affiliates and
any Stockholder in which Hearst Partner or any of its Affiliates holds any
equity, upon such cessation (1) shall immediately forfeit all rights
granted under this Agreement to the Investor Entities and such Affiliates
that would not be transferable with the Shares owned by the Investor
Entities or such Affiliates, and shall immediately cease to be bound by
all of their obligations under this Agreement that would not be
transferred with the Shares owned by them, in each case as if a transfer
of such Shares had occurred by the Investor Entities or such Affiliates
and (2) shall immediately forfeit all rights to indemnification under
Clause 6.3 of the Stock Purchase Agreement other than in respect of claims
for indemnification that are then pending. Notwithstanding the foregoing,
the provisions of this Clause 10.8 shall not apply to any transfer of any
equity interest in any Investor Entity, Hearst Partner, any of Hearst
Partner's Affiliates or any Stockholder in which Hearst Partner or any of
its Affiliates holds any equity, to any Affiliate.
10.9 For so long as Hearst Partner or any of its Affiliates or CCABC Partner or
any of its Affiliates hold equity interests in an Investor Entity or other
jointly held entity (whether between Hearst Partner or any of its
Affiliates and CCABC Partner or any of its Affiliates or with another
third party) that is then a Stockholder, in the event that (x) unless and
until Disney becomes a Controlling Stockholder of CCABC, CCABC, or (y)
from and after Disney becoming a Controlling Stockholder of CCABC, at
least one of CCABC or Disney, on the one hand, and Hearst on the other
hand, either individually or jointly is or are not the Controlling
Stockholder of such jointly held Investor Entity or other jointly held
entity, then (i) unless all of the equity interests which have been
transferred and give rise to the Call Option set forth in this Clause 10.9
have been offered according to the procedures set forth in Clause 4 above,
each of the Call Purchaser, the H/C Entities and Falcon will have a Call
49
Option with respect to all of the Shares held by such Investor Entity or
other jointly held entity, exercisable for six months following the
discovery by the Call Purchaser, the H/C Entities or Falcon of such event
and otherwise in accordance with the procedures set forth in this Clause
10 (except that (a) the Call Price for purposes of this Clause 10.9 shall
correspond to the calculation of the price of the Shares using the fair
market value of the Company and its Subsidiaries as determined according
to Clause 6.3(a) only and including the last paragraph of Clause 6.3 and
(b) any of the Call Purchaser, the H/C Entities or Falcon may initiate
such Call Option by the delivery of a Call Notice), and (ii) whether or
not such equity interests have been offered in accordance with the
procedures in Clause 4 hereof or such Call Option is exercised, upon such
cessation such Investor Entity or other jointly held entity (1) shall
immediately forfeit all rights granted under this Agreement to such
Investor Entity or other jointly held entity that would not be
transferable with the Shares owned by such Investor Entity or other
jointly held entity, and shall immediately cease to be bound by all of its
obligations under this Agreement that would not be transferred with the
Shares owned by it, in each case as if a transfer of such Shares had
occurred by such Investor Entity or other jointly held entity and (2)
shall immediately forfeit all rights to indemnification under Clause 6.3
of the Stock Purchase Agreement other than in respect of claims for
indemnification that are then pending. Notwithstanding the foregoing, the
provisions of this Clause 10.9 shall not apply to any transfer of any
equity interest in such Investor Entity or other jointly held entity to
any Affiliate.
10.10 (i) Subject to Clause 10.10(ii) below, for so long as Falcon or any of
its Affiliates is a Stockholder, in the event that (a) after the
Funding Date, at least one of Falcon Parent or an Affiliate thereof
is not the Controlling Stockholder of any of Falcon or any Affiliate
of Falcon or Falcon Parent that is then a Stockholder, or (b) equity
interests in Falcon or any Affiliate of Falcon or Falcon Parent that
is then a Stockholder (or in any Stockholder Parent Company of
Falcon or any such Affiliate) are sold or transferred to persons
other than Institutional Investors (or to individuals providing
services as employees and consultants to Falcon or Falcon Parent or
their Affiliates or to an employee plan for their benefit), then (i)
unless all of the equity interests which have been transferred and
give rise to the Call Option set forth in this Clause 10.10 have
been offered according to the procedures set forth in Clause 4 above
(although neither Falcon nor Falcon Parent is required to offer such
equity interests pursuant to such clause, they may elect to do so),
each of the Call Purchaser, the H/C Entities and the Investor
Entities will have a Call Option with respect to all of the Shares
held by Falcon or any Affiliates of Falcon exercisable for six
months following the discovery by the Call Purchaser, the H/C
Entities or the investor Entities of such event and otherwise
according to the procedures set forth in this Clause 10 (except that
(a) the Call Price for purposes of this Clause 10.10 shall
correspond to the calculation of the price of the Shares using the
fair market
50
value of the Company and its Subsidiaries determined according to
Clause 6.3(a) only and including the last paragraph of Clause 6.3
and (b) any of the Call Purchaser, the H/C Entities or the Investor
Entities may initiate such Call Option by the delivery of a Call
Notice), and (ii) whether or not such equity interests have been
offered in accordance with the procedures in Clause 4 hereof or such
Call Option is exercised, Falcon and any of its Affiliates (1) shall
immediately forfeit all rights granted under this Agreement to
Falcon and such Affiliates that would not be transferable with the
Shares owned by Falcon or such Affiliates, and shall immediately
cease to be bound by all of their obligations under this Agreement
that would not be transferred with the Shares owned by them
(including the obligations in connection with the Falcon Call
Option), in each case as if a transfer of such Shares had occurred
by Falcon or such Affiliates and (2) shall immediately forfeit all
rights to indemnification under Clauses 7.3(a) and (b) of the Old
Stock Purchase Agreement and Clause 6.3 of the Stock Purchase
Agreement other than in respect of claims for indemnification that
are then pending, and upon such a forfeiture, the Shares held by
Falcon and such Affiliates shall no longer be subject to the Falcon
Call Option.
(ii) Notwithstanding Clause 10.10(i) above, the other Stockholders
referred to in Clause 10.10(i) above shall not be entitled to the
right provided therein (and neither Falcon nor any of its Affiliates
that are then Stockholders shall forfeit any of the rights referred
to therein) in relation to any of the following sales, transfers or
assignments of equity interests (a) in Falcon or Falcon Parent made
on or before June 5, 1996 (or such earlier date as Falcon provides
the Board with a list of Falcon Parent Investors as provided in
Clause 7.1(i) above) (such date, the "Funding Date"), provided that
any such sale, transfer or assignment is made either to (x) an
Institutional Investor or individuals (or an employee plan for such
individuals) providing services, as employees or consultants, to
Falcon, Falcon Parent or their Affiliates, (y) Falcon Parent, or (z)
any other person, provided that on the Funding Date not more than
25% of the total equity interests in Falcon and in Falcon Parent are
held by persons other than Falcon Parent or Institutional Investors
or the individuals or plans referred to above, (b) in connection
with a Public Offering of interests in Falcon or Falcon Parent,
provided that any Falcon Parent Investor or combination thereof
remains in control of Falcon and/or Falcon Parent, as applicable,
following such Public Offering, (c) in Falcon Parent made after the
Funding Date, provided that on the Funding Date, no more than 25% of
the total equity interests in Falcon Parent are owned by persons
other than Institutional Investors or the individuals or plans
referred to above and on such date Falcon Parent is not a
Stockholder Parent Company of Falcon, (d) in Falcon or a Stockholder
Parent Company of Falcon provided that following such transfer or
assignment not more than 25% of the total equity interests in Falcon
or such
51
Stockholder Parent Company are held by persons other than Falcon
Parent (or an Affiliate thereof), Institutional Investors or the
individuals or plans referred to above, or (e) in any of Falcon, any
of Falcon's Affiliates or any Stockholder in which Falcon or any of
its Affiliates holds any equity, to any Affiliate.
10.11 In the event that any sale or transfer described in Clauses 4.1(ii) or
(iii) occurs in violation thereof, each of the Stockholders, other than
the Stockholder which violated such Clauses and its Affiliates which are
then Stockholders, will have a Call Option with respect to all of the
Shares held by the violating Stockholder and its Affiliates which are then
Stockholders, exercisable for six months following the discovery by the
other Stockholders of such event and otherwise in accordance with the
procedures set forth in this Clause 10 (except that (a) the Call Price for
purposes of this Clause 10.11 shall correspond to the calculation of the
price of the Shares using the fair market value of the Company and its
Subsidiaries as determined according to Clause 6.3(a) only and including
the last paragraph of Clause 6.3 and (b) any of the Stockholders who are
granted such Call Option may initiate such Call Option by the delivery of
a Call Notice), and (ii) whether or not such Call Option is exercised,
upon such violation the violating Stockholder and its Affiliates which are
then Stockholders (1) shall immediately forfeit all rights granted under
this Agreement to the violating Stockholder and such Affiliates that would
not be transferable with the Shares owned by the violating Stockholder or
such Affiliates, and shall immediately cease to be bound by all of their
obligations under this Agreement that would not be transferred with the
Shares owned by them, in each case as if a transfer of such Shares had
occurred by the violating Stockholder or such Affiliates and (2) shall
immediately forfeit all rights to indemnification under Clauses 7.3(a) and
(b) of the Old Stock Purchase Agreement and Clause 6.3 of the Stock
Purchase Agreement other than in respect of claims for indemnification
that are then pending.
10.12 In the event that Mr. Civita ceases to be the Controlling Stockholder of
any of his Affiliates which are then Abrilcap and such Affiliates shall
Stockholders, then immediately forfeit all rights granted under this
Agreement to Abrilcap and its Affiliates that would not be transferable
with the Shares owned by Abrilcap or such Affiliates if a transfer of such
Shares had occurred by Abrilcap or such Affiliates; provided that in the
event of Mr. Civita's death, there shall be no such forfeiture of rights
unless and until the individuals listed in the definition of Affiliates
herein (together with Mr. Civita's estate) cease, directly or indirectly,
to hold more than: (1) 50% of the voting Shares of the Company and (2)
31.258% of the Company's total capital stock, whether voting or nonvoting.
10.13 Notwithstanding the other provisions of this Clause 10, neither of the
Call Options may be exercised at any time after an HC Put Notice or a
Falcon Put Notice has been given until either (i) the corresponding HC Put
Option, Falcon Time Put Option or Falcon Event Put Option has been
exercised (and in the event of exercise, the Call
52
Option shall be terminated) or (ii) the exercise period for such option
terminates without such option being exercised.
Clause 11. THE COMPANY'S BOARD OF DIRECTORS
11.1 The Board shall be composed of 11 (eleven) effective members and 11
(eleven) alternate members.
(i) Harpia and Curupira acting together shall be entitled to appoint one
effective member and his respective alternate member of the Board so
long as Harpia, Curupira or any of their Affiliates, jointly hold at
least 5% (five percent) of the issued and outstanding voting Shares
of the Company.
(ii) Falcon shall be entitled to appoint two of the effective members and
two of the alternate members of the Board so long as it (considered
together with its Affiliates) holds at least 13% (thirteen percent)
of the issued and outstanding voting Shares of the Company, and (1)
one effective member and (1) one alternate member of the Board if
the percentage of such shares held by Falcon (considered together
with its Affiliates), is less than 13% (thirteen percent) but at
least 6% (six percent) of the issued and outstanding voting Shares.
(iii) Mr. Civita and Abrilcap acting together shall be entitled to appoint
five of the effective members and five of the alternate members of
the Board so long as they and their Affiliates jointly hold a
majority of the issued and outstanding voting Shares of the Company.
(iv) The Investor Entities acting together shall be entitled to appoint
two of the effective members and two of the alternate members of the
Board so long as they (considered together with their Affiliates)
jointly hold at least 13% (thirteen percent) of the issued and
outstanding voting Shares of the Company, and one effective member
and one alternate member of the Board if the percentage of such
shares jointly held by the Investor Entities (considered together
with their Affiliates) is less than 13% (thirteen percent) but at
least 6% (six percent) of the issued and outstanding voting Shares
of the Company.
(v) One of the effective members and one of the alternate members of the
Board shall at all times be independent of each of the Stockholders.
For so long as they and their Affiliates jointly hold a majority of
the voting Shares of the Company, Mr. Civita and Abrilcap acting
together shall be entitled to nominate such member(s), who shall be
subject to the approval of each of
53
the other Stockholders that then are entitled to appoint a director
in its own right.
(vi) In the event that Harpia and Curupira (considered together with
their Affiliates) lose their right to appoint an effective and an
alternate member of the Board due to a decrease in the percentage of
Shares they hold, or either Falcon (considered together with its
Affiliates) or the Investor Entities (considered together with their
Affiliates) loses the right to elect one or two effective and
alternate members of the Board due to a decrease in the percentage
of Shares held by either of them, or Mr. Civita and Abrilcap
(considered together with their Affiliates) lose their right to
appoint five effective and alternate members of the Board due to a
decrease in the percentage of Shares they (considered together with
their Affiliates) hold, then such members shall be required promptly
to resign and thereafter such member or members of the Board shall
be elected by the Stockholders at a general meeting.
(vii) The foregoing rights with respect to appointment, nomination and
approval of members of the Board are personal to Harpia and
Curupira, Falcon, the Investor Entities, Mr. Civita and Abrilcap and
their respective Affiliates that are from time to time Stockholders,
and may not be transferred under any circumstances to third parties.
11.2 The Stockholders undertake to exercise their voting rights so that such
effective members and alternates are elected in accordance with Clause
11.1 above.
11.3 The Stockholders hereby undertake to use their best efforts so that the
effective members appointed by them or their respective alternate members
are present at all meetings of the Board and the boards of directors of
any of its Subsidiaries. In the event of absence or impediment of any of
the effective members, such member shall be mandatorily substituted by his
alternate member who shall vote on behalf of the effective member as if he
was present at the meeting.
11.4 In the event of resignation or permanent impediment of any member during
the term of office to which he was elected, his substitute shall, subject
to Clause 11.1(vi) above, be appointed by the Stockholders that had
appointed the replaced member.
11.5 In accordance with the requirements of Brazilian law, each Stockholder
shall assign and transfer one Share of which it is the owner to each
effective and each alternate member appointed by it pursuant to this
Clause 11.5. The Shares assigned to the members of the Board shall be
considered, for the purposes hereof, as the property of the Stockholder
which had assigned them. Each Stockholder agrees to obtain or has obtained
from each Board member appointed by it the full power to exercise the
voting right attached to such assigned Shares, as well as the power to
transfer such
54
Shares to itself in the event that the assigned member ceases, for any
reason, to be a Board member.
11.6 The term of office of the members of the Board shall be 2 (two) years, and
the term of each director shall be automatically extended until his duly
elected successor takes office. Indefinite re-election of directors shall
be permitted subject to the provisions of the Company's By-Laws.
Clause 12. RESOLUTIONS OF THE BOARD OF DIRECTORS AND STOCKHOLDERS
12.1 All resolutions of the Board shall be taken by the quorums and majorities
required by Brazilian law, except for the additional requirements
specified herein. For so long as Harpia, Curupira and their Affiliates
(considered together) are entitled to appoint at least one member of the
Board in accordance with the provisions of Clause 11.1 above, the
following matters shall require, for their approval, the affirmative vote
of such member; for so long as Falcon and its Affiliates (considered
together) are entitled to appoint at least one member of the Board in
accordance with the provisions of Clause 11.1 above, the following matters
shall require, for their approval, the affirmative vote of such member;
and for so long as the Investor Entities and their Affiliates (considered
together) are entitled to appoint at least one member of the Board in
accordance with the provisions of Clause 11.1 above, the following matters
shall require, for their approval, the affirmative vote of such member; in
each case, such member by himself or represented pursuant to Article 14 of
the Company's By-Laws, except that, in each case, the matters set forth in
clause (vii) below shall require for their approval the vote set forth in
that clause:
(i) the acquisition or subscription by the Company or any Subsidiary
thereof of an ownership interest in other companies (except for
those acquired or subscribed in non-permanent character according to
ordinary cash management practices);
(ii) any acquisitions or dispositions of or liens, charges or
encumbrances on equity in other companies, and any acquisitions or
dispositions of, or liens, charges or encumbrances on, real
properties, equipment, trademarks, patents, licenses and franchises
or other similar assets and rights, except for: (a) acquisitions,
dispositions, liens, charges or encumbrances in the ordinary course
of business of the Company and its Subsidiaries, (b) acquisitions
outside the ordinary course of the business of the Company and its
Subsidiaries aggregating less than US$500,000 (or the Reais
Equivalent thereof) in any calendar year, (c) dispositions outside
the ordinary course of the business of the Company and its
Subsidiaries aggregating less than US$500,000 (or the Reais
Equivalent thereof) in any calendar year and (d)
55
liens, charges and encumbrances outside the ordinary course of the
business of the Company and its Subsidiaries aggregating less than
US$500,000 (or the Reais Equivalent thereof) in any calendar year;
(iii) the incurrence of any indebtedness of the Company or any Subsidiary
thereof, or the guarantee of any indebtedness of any other person or
entity, with a maturity of less than 365 days but in excess of the
Reais Equivalent to US$1,000,000 outstanding aggregate amount for
all such indebtedness;
(iv) the incurrence of any indebtedness of the Company or any Subsidiary
thereof or the guarantee of any indebtedness of any other person or
entity, with a maturity equal to or longer than 365 (three hundred
sixty-five) days, except trade indebtedness incurred in the ordinary
course of the business of the Company and its Subsidiaries in a
single transaction or series of related transactions with an
aggregate value of less than US$500,000;
(v) the making of loans or advance payments by the Company or any
Subsidiary thereof (but not including loans or advances made by the
Company to its Subsidiaries, by its Subsidiaries to the Company or
between Subsidiaries of the Company) except for loans or advances to
members of the Board, officers or employees in the ordinary course
of the business of the Company and its Subsidiaries;
(vi) the issuance by the Company or any Subsidiary thereof of
non-financial guarantees of any nature, except non-financial
guarantees totaling, singly or in the aggregate, the Reais
Equivalent to US$100,000 or less;
(vii) any transactions or agreements, or modifications or termination of,
or waivers of rights or defaults under existing agreements, between
the Company or any Subsidiary of the Company on the one hand, and
any Stockholder or Affiliate of such Stockholder on the other hand,
unless a majority of the members of the Company's Board of
Directors, exclusive of the independent director referred to in
Clause 11.1(v) (but only in the case of a transaction involving Mr.
Civita, Abrilcap or their Affiliates other than the Company and its
Subsidiaries) and any directors appointed by the Stockholder who has
a direct or indirect interest in such action, determines that such
action is on an arms-length basis and on terms that would be
obtained with an independent third party; and
(viii) any modification or termination of the Services Agreement and any
waiver of rights or waiver of any default thereunder.
12.2 The Stockholders, by a majority vote, subject to the voting rights of
Falcon and the Investor Entities or their Affiliates set forth below,
shall approve the annual Business
56
Plans for the Company and its Subsidiaries collectively no later than 30
(thirty) days prior to the end of each prior fiscal year; provided that
with respect to the Business Plan for the Company and its Subsidiaries for
1996, such Business Plan shall be presented to the Stockholders no later
than December 15, 1995 and approved no later than January 31, 1996.
Business Plans shall include the annual budget for the Company for the
fiscal year in question. The Company hereby agrees to conduct its business
at all times in accordance with its Business Plan then in effect. For so
long as the Investor Entities (together with their Affiliates) maintain no
less than 8% (eight percent) of the issued and outstanding voting Shares,
resolutions of the Stockholders approving Business Plans may be approved
by the Stockholders only with the affirmative vote of the Investor
Entities or their Affiliates who hold Shares from time to time. For so
long as Falcon (together with its Affiliates) maintains no less than 8%
(eight percent) of the issued and outstanding voting Shares, resolutions
of the Stockholders approving Business Plans may be approved by the
Stockholders only with the affirmative vote of Falcon or its Affiliates
who hold Shares from time to time.
(i) In the event that the Stockholders are unable to approve an annual
Business Plan for any fiscal year, for any reason whatsoever, the
Business Plan for such year shall be the same as the Business Plan
for the prior year, except that the budget for each operating
expense item in the Business Plan of such prior year shall be
increased by 10% (ten percent); provided, that (x) until such time
as the Stockholders approve the Business Plan for 1996, or (y) in
the event the Stockholders are unable to approve the Business Plan
for 1996, the Business Plan for 1996 shall be the same as the draft
Business Plan for 1996 as circulated to the Stockholders.
(ii) Amendments or modifications to Business Plans may be approved by the
Stockholders. For so long as the Investor Entities (together with
their Affiliates) maintain no less than 8% (eight percent) of the
issued and outstanding voting Shares, resolutions of the
Stockholders approving amendments or modifications to Business
Plans, including approval of unbudgeted capital expenditures, may be
approved by the Stockholders only with the affirmative vote of the
Investor Entities or their Affiliates who hold Shares from time to
time. For so long as Falcon (together with its Affiliates) maintains
no less than 8% (eight percent) of the issued and outstanding voting
Shares, resolutions of the Stockholders approving amendments or
modifications to Business Plans, including approval of unbudgeted
capital expenditures, may be approved by the Stockholders only with
the affirmative vote of Falcon or its Affiliates who hold Shares
from time to time.
(iii) The Business Plan of the Company for the calendar year 1995 in
effect at the Closing shall be considered approved by the Investor
Entities and Falcon
57
and may be amended only in accordance with the terms of sub-part
(ii) above.
(iv) Transferees of Shares of the Investor Entities and/or their
Affiliates shall, provided the transfers of Shares are accomplished
in compliance with the terms of this Agreement, acquire the rights
of the Investor Entities and their Affiliates as set out in this
Clause 12.2 provided such transferees (together with their
Affiliates) acquire, from time to time, no less than 8% (eight
percent) of the issued and outstanding voting Shares of the Company;
and such transferees shall maintain such rights under this Clause
12.2 for so long as such transferees maintain no less than 8% (eight
percent) of the issued and outstanding voting Shares of the Company.
Transferees of Shares of Falcon and/or its Affiliates shall not
acquire the rights of Falcon and its Affiliates as set out in this
Clause 12.2.
12.3 (i) [INVESTOR ENTITIES ALONE] For so long as the Investor Entities'
holdings (together with their Affiliates) aggregate at least 8% (eight
percent) of the issued and outstanding voting Shares:
(a) the Company and its Subsidiaries may enter into, modify or amend
contracts involving rights and/or obligations in excess of the Reais
Equivalent of US$1,000,000 only after such contract, amendment or
modification has been approved by the Investor Entities or their
Affiliates;
(b) Any purchaser of Shares or Subscription Rights proposed by Falcon,
the Investor Entities, Abrilcap or an Affiliate of any of them
pursuant to Clause 4.2(v) or 5.2(i) above shall only be approved if
such proposed purchaser has been approved by the Board with the
affirmative vote of at least one member appointed by the Investor
Entities or their Affiliates, by himself or represented pursuant to
Article 14 of the Company's By-Laws; provided that such approval by
a member appointed by the Investor Entities shall only be withheld
if the proposed purchaser (1) is of undesirable character, (2) lacks
financial capacity, (3) competes with the Company or its
Subsidiaries in Brazil or (4) the nature of the purchaser would
provoke a change of the business practices of the Company; and
(c) Neither the Company nor any of its Subsidiaries may introduce any
new programming service, or make any material decision concerning
relevant characteristics of an existing programming service,
particularly in its overall format or content without approval of
such introduction or decision by the Board with the affirmative vote
of at least one member appointed by the Investor Entities or their
Affiliates, by himself or represented Pursuant to Article 14 of the
Company's By-Laws; provided that the refusal of such a member to
vote affirmatively may not be and shall not be exercised to block
58
programming competitive to that of the Investor Entities, Hearst,
CCABC or their respective Subsidiaries or to require selection of
programming of the Investor Entities or any of their Affiliates, and
provided further that when such a member refuses to vote
affirmatively, a reason shall be given for such refusal.
Transferees of Shares of the Investor Entities and/or their Affiliates, shall,
provided the transfers of Shares are accomplished in compliance with the terms
of this Agreement, acquire the rights of the Investor Entities and their
Affiliates as set out in Clause 12.3(i)(a), provided such transferees (together
with their Affiliates) acquire, from time to time, no less than 8% (eight
percent) of the voting Shares of the Company, and such transferees shall
maintain such rights under Clause 12.3(i)(a) for so long as such transferees
maintain no less than 8% (eight percent) of the voting Shares of the Company.
Transferees of Shares of the Investor Entities and/or their Affiliates shall not
acquire the rights of the Investor Entities and their Affiliates as set out in
Clauses 12.3(i)(b) and (c).
(ii) [FALCON ALONE] For so long as Falcon's holdings (together with its
Affiliates) aggregate at least 8% (eight percent) of the issued and
outstanding voting stock of the Company:
(a) the Company and its Subsidiaries may enter into, modify or amend
contracts involving rights and/or obligations in excess of the Reais
Equivalent of US$1,000,000 only after such contract, amendment or
modification has been approved by Falcon or its Affiliates who hold
Shares from time to time; and
(b) Any purchaser of Shares or Subscription Rights proposed by Falcon,
the Investor Entities, Abrilcap or an Affiliate of any of them
pursuant to Clause 4.2(v) or 5.2(i) above shall only be approved if
such proposed purchaser has been approved by the Board with the
affirmative vote of at least one member appointed by Falcon or its
Affiliates who hold Shares from time to time, by himself or
represented pursuant to Article 14 of the Company's By-Laws;
provided that such approval shall only be withheld if the proposed
purchaser (1) is of undesirable character, (2) lacks financial
capacity, (3) competes with the Company or its Subsidiaries in
Brazil or (4) the nature of the purchaser would provoke a change of
the business practices of the Company.
Transferees of Shares of Falcon and/or its Affiliates shall not acquire
the rights of Falcon and its Affiliates as set out in this Clause
12.3(ii).
(iii) [INVESTOR ENTITIES/FALCON/HC ENTITIES] For so long as each of the
Investor Entities, considered together, Falcon, and the HC Entities,
considered together (and their respective Affiliates) (each referred
to as a "Shareholder Group") owns at least 8% of the issued and
outstanding
59
voting Shares of the Company, the following matters shall require
the affirmative vote of at least two of the Shareholder Groups, and
if there are two or fewer Shareholder Groups each owning at least 8%
of the issued and outstanding voting Shares of the Company, then
such matters shall require the affirmative vote of each such
Shareholder Group other than the HC Entities Shareholder Group:
(a) the settlement or initiation of any litigation or
administrative proceeding involving an amount in excess of the
Reais Equivalent of $500,000 (five hundred thousand dollars)
or where the result could have a material adverse affect on
the business and operation of the Company;
(b) the hiring, renewal, or termination of the Chief Executive
Officer, Chief Operating Officer and Chief Financial Officer
of the Company (including setting compensation for such
officers); and
(c) any amendment to or waiver of the dividend policy set forth in
Clause 16.4 hereof.
Transferees of Shares of a Shareholder Group shall, provided the transfers
of Shares are accomplished in compliance with the terms of this Agreement,
acquire the rights of such Shareholder Group as set out in Clause
12.3(iii)(c), provided such transferees (together with their Affiliates)
acquire, from time to time, no less than 8% (eight percent) of the voting
Shares of the Company, and such transferees shall maintain such rights
under Clause 12.3(iii)(c) for so long as such transferees maintain no less
than 8% (eight percent) of the voting Shares of the Company. Transferees
of Shares of a Shareholder Group shall not acquire the rights of such
Shareholder Group as set out in Clauses 12.3(iii)(a) and (b).
12.4 The Shareholder Group(s) which own at least 8% of the issued and
outstanding voting Shares of the Company, acting unanimously, may require
the Company to draw funds under the Abril Credit Agreement in the amount
so requested by such Shareholder Group(s), for purposes of funding
customary business operations of the Company and/or capital expenditures
of the Company as contemplated by the Business Plan, subject to the terms
of the Abril Credit Agreement.
60
Clause 13. GENERAL MEETING RESOLUTIONS
13.1 Resolutions of the Stockholders taken at General Meetings shall be taken
by the quorum and majorities required by Brazilian law, with the exception
of the following actions, which actions may not be taken by the Company
without the approval of (i) Harpia, Curupira and their Affiliates for so
long as their holdings aggregate at least 8% (eight percent) of the issued
and outstanding voting Shares; (ii) the Investor Entities and their
Affiliates, for so long as its or their holdings aggregate at least 8%
(eight percent) of the issued and outstanding voting Shares; and (iii)
Falcon and its Affiliates, for so long as its or their holdings aggregate
at least 8% (eight percent) of the issued and outstanding voting Shares:
(i) any restructuring, corporate reorganization, merger, consolidation,
amalgamation, spin-off, liquidation, dissolution, stock split,
division, combination or consolidation of assets of the Company or
its Subsidiaries;
(ii) the commencement of any public offering of Shares of the Company,
other than a public offering of Shares of the Company by one or more
Stockholders pursuant to Clause 18.1 below, or any issuance or
resale by the Company or its Subsidiaries of any Share Equivalents
or securities, including but without limitation, debentures,
warrants, founders' shares, options to buy or subscribe for shares
and other similar rights other than the Special Preferred Shares in
connection with a Put Postponement, provided that if the Company
proposes to effect any of the foregoing on commercially reasonable
terms for purposes of satisfying its indemnification obligations to
the Stockholders under the Old Stock Purchase Agreement or the Stock
Purchase Agreement after the Company has determined acting in a
commercially reasonable manner that it is not able to satisfy such
obligations through borrowings available to the Company on
commercially reasonable terms, and such registration would not
prejudice the Stockholders' rights under this Agreement or the
rights to indemnification under the Stock Purchase Agreement or the
Old Stock Purchase Agreement or the rights of Harpia, Curupira or
any of their Affiliates or transferees under the Option Agreement,
the Stockholders will not unreasonably withhold their consent
thereto;
(iii) any purchase or redemption by the Company or its Subsidiaries of
Shares except as provided by the HC Put Option, the Investor Put
Option, the Falcon Event Put Option or the Falcon Time Put Option;
(iv) any change in the business conducted by the Company or its
Subsidiaries from the Business;
61
(v) amendment of the By-Laws of the Company or its Subsidiaries as in
force on the date of this Agreement; and
(vi) establishment of any business or Subsidiary in the United States of
America.
13.2 Transferees of Shares of Harpia, Curupira and/or their Affiliates shall,
provided the transfers of Shares are accomplished in compliance with the
terms of this Agreement, acquire the rights of Harpia, Curupira and their
Affiliates as set out in Clause 13.1 above provided such transferees
(together with their Affiliates) acquire, from time to time, no less than
8% (eight percent) of the voting Shares of the Company; and such
transferees shall maintain such rights under Clause 13.1 above for so long
as such transferees maintain no less than 8% (eight percent) of the voting
Shares of the Company.
13.3 Transferees of Shares of the Investor Entities and/or their Affiliates
shall, provided the transfers of Shares are accomplished in compliance
with the terms of this Agreement, acquire the rights of the Investor
Entities and their Affiliates as set out in Clause 13.1 above provided
such transferees (together with their Affiliates) acquire, from time to
time, no less than 8% (eight percent) of the voting Shares of the Company;
and such transferees shall maintain such rights under Clause 13.1 above
for so long as such transferees maintain no less than 8% (eight percent)
of the voting Shares of the Company.
13.4 Transferees of Shares of Falcon and/or its Affiliates shall, provided the
transfers of Shares are accomplished in compliance with the terms of this
Agreement, acquire the rights of Falcon and its Affiliates as set out in
Clause 13.1 above provided such transferees (together with their
Affiliates) acquire, from time to time, no less than 8% (eight percent) of
the voting Shares of the Company; and such transferees shall maintain such
rights under Clause 13.1 above for so long as such transferees maintain no
less than 8% (eight percent) of the voting Shares of the Company.
Clause 14. RIGHT TO ATTENDANCE, TO INFORMATION AND TO INSPECTION
14.1 The Stockholders shall have attendance rights at meetings of the Board and
General Meetings of the Company and of its Subsidiaries. The Company
agrees promptly to review the constitutive documents of each of the
Subsidiaries and to cause them to be changed, as necessary, to conform to
the provisions of Clauses 12 and 13 above. Without prejudice to
formalities set forth by law and in the Company's By-Laws, the Company's
General Meetings and meetings of the Board shall be called upon written
notice (unless waived in writing) sent to each Stockholder at least 10
(ten) Business Days in advance, which shall (unless waived in writing)
include the matters to be discussed. Resolutions taken in connection with
matters not expressly referred to in the notice calling such meeting shall
not be valid. Regardless of the formalities
62
provided for in this Clause 14.1, the General Meeting and the meeting at
which all the Stockholders and Board members, respectively, are present
shall be considered regular.
14.2 The Company shall give and send the following information and documents
relating to the Company and its Subsidiaries to (i) Harpia, Curupira and
their Affiliates, so long as Harpia, Curupira and their Affiliates have,
collectively, 5% (five percent) of the issued and outstanding voting
Shares, (ii) the Investor Entities and their Affiliates, so long as the
Investor Entities and their Affiliates hold 6% (six percent) of the voting
Shares, and (iii) Falcon and its Affiliates, so long as Falcon and its
Affiliates hold 6% (six percent) of the issued and outstanding voting
Shares (provided that if either Harpia, Curupira or any Affiliate thereof,
the Investor Entities or any Affiliate thereof or Falcon or any Affiliates
thereof holds any Shares, the Company shall give and send items (i), (ii)
and (iii) below to such Stockholder):
(i) English and Portuguese versions of quarterly unaudited financial
statements prepared in accordance with (a) U.S. GAAP applied
consistently with the past practice of the Company and (b) generally
accepted accounting principles in Brazil ("Brazilian GAAP")
consistently applied with the past practice of the Company and
annual audited U.S. GAAP financial statements and audited Brazilian
GAAP financial statements, in each case consistently applied with
the past practice of the Company;
(ii) copies of all representations, applications and reports, if any,
filed with any stock exchange or securities and exchange commission;
(iii) copies of all financial statements, reports, vote representations
and other communications delivered to any Stockholder of the Company
and/or its Subsidiaries, other than those identified in clause (iv)
below;
(iv) monthly management reports comparing actual results to budget, which
shall include English and Portuguese versions of monthly unaudited
financial statements prepared in accordance with (a) U.S. GAAP
applied consistently with the past practice of the Company and (b)
Brazilian GAAP consistently applied with the past practice of the
Company;
(v) English and Portuguese versions of budgets, forecasts, segment or
product reports or other information reports prepared by or for
managers of the Company or of its Subsidiaries, including ten-year
projections to be delivered not later than January 31 of each year,
in each case expressed in U.S. Dollars;
(vi) copies of the minutes of all general meetings of Stockholders,
meetings of the Board and of the Board of Officers of the Company
and its Subsidiaries;
63
(vii) copies of all information relating to legal matters from which
potential liabilities outside the ordinary course of the business of
the Company and its Subsidiaries may result to the Company or to its
Subsidiaries;
(viii) copies of all information relating to regulatory matters which may
affect the licenses, permits, operations or Business of the Company
and its Subsidiaries;
(ix) copies of all information relating to technical and operational
matters that may have a material adverse effect on the business
condition (financial or otherwise), operations, prospects,
properties, assets or liabilities of the Company and its
Subsidiaries;
(x) copies of all information relating to the insurance coverage of the
Company and its Subsidiaries;
(xi) copies of all information relating to the Company's Subsidiaries and
which are sent to members of the Board of Directors of such
Subsidiaries; and
(xii) such other information as Harpia, Curupira, the Investor Entities or
Falcon may reasonably request.
Such information rights are personal to Harpia and Curupira, the Investor
Entities and Falcon, and their respective Affiliates that are from time to
time Stockholders, and shall not be transferred in any case to third
parties, except in the case of the right to receive items (i), (ii) and
(iii), which shall be transferable provided the transferees (together with
their Affiliates) (a) of Harpia and Curupira and their Affiliates acquire,
from time to time, and continue to hold, no less than 5% (five percent) of
the Company's voting Shares, or (b) of the Investor Entities or Falcon or
their Affiliates acquire, from time to time, and continue to hold, no less
than 6% (six percent) of the Company's voting Shares.
In the event Harpia or Curupira or any of Harpia's or Curupira's
Affiliates is or becomes a creditor to the Company or to the Company's
Affiliates, Harpia and Curupira and their respective Affiliates shall be
entitled to exchange information available to them as the Company's
Stockholder with the corresponding credit areas, notwithstanding any
contrary provision determining confidentiality obligations herein or in
other documents.
14.3 The Company shall, upon reasonable notice during normal business hours,
permit each Stockholder and its agents, including counsel, to inspect its
properties, examine its books and records and to discuss with management
the business and affairs of the Company and its Subsidiaries.
64
Clause 15. ADVISORY BOARD
15.1 In addition to the Board, the Company shall have an Advisory Board
(Conselho Consultivo). The Advisory Board shall advise the Stockholders
and the Board with respect to the business of the Company, in accordance
with applicable laws, the Company's By-laws and this Agreement.
15.2 The Advisory Board shall consist of 11 (eleven) members, who may, but need
not be, residents of Brazil, and who may, but need not be, Stockholders.
15.3 The Stockholders shall elect the members of the Advisory Board at a
general meeting of stockholders. The Stockholders undertake to exercise
their voting rights in favor of the effective members and alternates
nominated in accordance with the terms of Clause 11.1 above.
15.4 The term of office of the members of the Advisory Board shall be 2 (two)
years, and in respect of each member shall be automatically extended until
his duly elected successor takes office. Indefinite re-election of members
of the Advisory Board shall be permitted.
15.5 The Advisory Board shall maintain a Book of Minutes to record its
deliberations.
15.6 Each member of the Advisory Board may have an alternate, who shall be
elected in the same manner as the principal member. The alternates shall
substitute their respective principal members in the absence or incapacity
of the principal member. If there is a vacancy in the Advisory Board for
which no alternate has been elected, the Stockholders shall elect a new
member within 30 (thirty) days after the vacancy; and the Stockholder who
appointed and elected the member to be replaced shall appoint the new
member.
15.7 The Stockholders shall cause the Company to pay for or reimburse, as the
case may be, the members of the Advisory Board (or their respective
alternates) for all reasonable travel and accommodation expenses they
incur in order to convene.
15.8 The Advisory Board shall hold an ordinary meeting at the end of each
period of three months and a special meeting whenever called by any two
members of the Advisory Board by means of a fifteen day prior notice to
all Advisory Board members, which notice period may be waived by consent
of all Advisory Board members, or which consent shall be deemed
automatically waived if all Advisory Board members attend the meeting.
15.9 Any member of the Advisory Board may authorize another member, by letter,
facsimile, telegram or telex, to represent him or her at any meeting of
the Advisory Board, either to constitute a quorum or for the taking of a
vote. Similarly, members
65
may vote by letter, facsimile, telegram or telex received at the Company's
head office by the scheduled time for the meeting.
15.10 The presence of at least six members, either in person, by proxy, or by
submitting a vote in writing before the meeting shall constitute a quorum
for the holding of a valid meeting of the Advisory Board.
15.11 The Advisory Board shall be consulted on any such matters as the Board or
the Stockholders may refer to the Advisory Board. The Board may not
delegate to the Advisory Board any of the Board's authority to make any
decision on behalf of the Company.
15.12 Resolutions of the Advisory Board shall require the affirmative vote of at
least six of its Members.
Clause 16. STOCKHOLDERS' AND THE COMPANY'S OTHER COVENANTS
16.1 The Stockholders undertake to cause the Company and its Subsidiaries, and
the Company undertakes for itself and its Subsidiaries to:
(i) retain as their regular auditors an independent auditing company
which is internationally renowned for expertise in international
transactions and commercial/corporate relationships, is able to
render services both in Portuguese and English language, and is able
to reconcile Brazilian GAAP with U.S. GAAP;
(ii) retain as their regular legal counsel an independent law firm which
is internationally renowned for expertise in international
transactions and commercial/corporate relationships, and is able to
render services both in the Portuguese and English languages; and
(iii) hold stockholders meetings at least annually.
16.2 (i) In the event that the independent auditors of the Company are to be
changed and the new firm of auditors is not any of the firms listed
in the following sentence (or any successor to any of such firms),
then appointment of the new firm of auditors shall be subject to the
approval of the Investor Entities for so long as the Investor
Entities and their Affiliates collectively hold at least 8% (eight
percent) of the issued and outstanding voting Shares of the Company.
The pre-approved firms of independent auditors are: Coopers &
Lybrand, Price Waterhouse, KPMG-Peat Marwick, Deloitte Touche &
Ross, Arthur Andersen, Ernst & Young, or the respective Brazilian
associated branches thereof. Transferees of Shares of the Investor
Entities and/or their
66
Affiliates who hold at least 8% (eight percent) of the issued and
outstanding voting Shares, shall, provided the transfers of Shares
are accomplished in compliance with the terms of this Agreement,
acquire the rights of the Investor Entities and their Affiliates as
set out in this Clause 16.2(i).
(ii) In the event that the independent auditors of the Company are to be
changed and the new firm of auditors is not any of the firms listed
in the following sentence (or any successor to any of such firms),
then appointment of the new firm of auditors shall be subject to the
approval of Falcon for so long as Falcon and its Affiliates
collectively hold at least 8% (eight percent) of the issued and
outstanding voting Shares of the Company. The pre-approved firms of
independent auditors are: Coopers & Lybrand, Price Waterhouse,
KPMG-Peat Marwick, Deloitte Touche & Ross, Arthur Andersen, Ernst &
Young, or the respective Brazilian associated branches thereof.
16.3 The Stockholders shall use their best efforts, upon the request of Harpia,
Curupira, Falcon or the Investor Entities or any of their Affiliates, to
make such amendments to this Agreement and the By-Laws of the Company as
may be necessary to enable Harpia, Curupira, Falcon, the Investor Entities
or any of their Affiliates to comply with any legal restrictions on its
ownership of stock or rights under this Agreement, or to make such
restrictions less burdensome, provided that the rights of the other
Stockholders are not materially adversely affected by such amendments.
16.4 Unless amended or waived in accordance with Clause 12.3(iii)(c) hereof,
during each calendar year or within 3 (three) months thereafter, the
Company shall, with respect to its operations for such year, and to the
extent it has funds legally available therefor, pay dividends to holders
of its Shares, which dividends shall in the aggregate not be less than the
"net cash flow" of the Company and its Subsidiaries during such year,
provided that there shall first be made a provision for projected cash
requirements of the Company and its Subsidiaries as reflected in the
Business Plan for such fiscal year for the subsequent (12) twelve month
period. Notwithstanding the foregoing, the Stockholders agree that, except
as expressly provided in Clauses 9.3 or 9.5 above, the Company shall
distribute not less than 25% (twenty-five percent) of its net consolidated
profits as defined in the Brazilian corporation law.
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Clause 17. TAG ALONG RIGHTS
17.1 If Abrilcap or Mr. Civita or any Affiliate of either shall sell, exchange
or otherwise transfer any Shares to a person that is not one of their
Affiliates, by private sale (subject in each case to the provisions of
Clause 4 above), such selling, exchanging or transferring Stockholder
shall give at least 21 (twenty-one) Business Days' prior notice, setting
forth in such notice the same information as would be required in a
Transfer Notice as described in Clause 4.2 above, to Harpia, Curupira,
Falcon, the Investor Entities and the respective Affiliates of each that
are Stockholders, who shall be entitled simultaneously with any sale,
exchange or transfer by such selling, exchanging or transferring
Stockholder to sell, exchange or transfer a ratable portion of their
Shares and require that such third party purchaser acquire or require the
selling, exchanging or transferring Stockholder to acquire such Shares,
all at the same price and on the same other terms; provided, however, that
notwithstanding the foregoing, Stockholders other than the selling,
exchanging or transferring Stockholder and its Affiliates shall not be
required to accept joint and several liability with respect to
representations, warranties or covenants (including indemnification
obligations) of other Stockholders, it being agreed that any agreement
relating to such sale, exchange or transfer shall provide that the
liability of such other Stockholder in connection with such sale, exchange
or transfer shall be several only and shall not in any event exceed either
such Stockholder's pro rata share of any liability or such Stockholder's
proceeds from such sale. Any sale, exchange or transfer shall be made in a
manner that does not discriminate in any adverse manner against other
Stockholders as compared to the selling, exchanging or transferring
Stockholder. Compliance with the provisions of this Clause 17.1 shall be a
condition precedent to a sale of Shares by any Stockholder whose Shares
are subject to this Clause 17.1.
17.2 At any time until July 22, 1998, if the investor Entities or any Affiliate
thereof shall sell, exchange or otherwise transfer any Shares to a person
that is not one of their Affiliates by private sale (subject in each case
to the provisions of Clause 4 above), the Investor Entities and any such
Affiliate shall give at least 21 (twenty-one) Business Days' prior notice,
setting forth in such notice the same information as would be required in
a Transfer Notice as described in Clause 4.2 above, to Harpia and Curupira
and their Affiliates that are Stockholders who shall be entitled
simultaneously with any sale, exchange or transfer by the Investor
Entities or any such Affiliate to sell, exchange or transfer a ratable
portion of their collective Shares and require that such third party
purchaser acquire or require the Investor Entities and/or their Affiliate
to acquire such Shares, all at the same price and on the same other terms;
provided, however, that notwithstanding the foregoing, Harpia and Curupira
and their Affiliates shall not be required to accept joint and several
liability with the Investor Entities and their Affiliates with respect to
representations, warranties or covenants (including indemnification
obligations) of the Investor Entities and their Affiliates, it being
agreed that any agreement relating to such sale, exchange or transfer
shall provide that the liability of Harpia and Curupira and their
68
Affiliates in connection with such sale, exchange or transfer shall be
several only in relation to the Investor Entities and their Affiliates and
shall not in any event exceed either Harpia's, Curupira's or their
Affiliate's pro rata share of any liability or their proceeds from such
sale. Any sale, exchange or transfer shall be made in a manner that does
not discriminate in any adverse manner against Harpia, Curupira and/or
their Affiliates as compared to the Investor Entities and their
Affiliates. Compliance with the provisions of this Clause 17.2 shall be a
condition precedent to a sale of Shares by any Stockholder whose Shares
are subject to this Clause 17.2.
17.3 At any time until July 22, 1998, if Falcon or any Affiliate thereof shall
sell, exchange or otherwise transfer any Shares to a person that is not
one of their Affiliates by private sale (subject in each case to the
provisions of Clause 4 above), Falcon and any such Affiliate shall give at
least 21 (twenty-one) Business Days' prior notice, setting forth in such
notice the same information as would be required in a Transfer Notice as
described in Clause 4.2 above, to Harpia and Curupira and their affiliates
that are Stockholders who shall be entitled simultaneously with any sale,
exchange or transfer by Falcon or any such Affiliate to sell, exchange or
transfer a ratable portion of their collective Shares and require that
such third party purchaser acquire or require Falcon and/or its Affiliates
to acquire such Shares, all at the same price and on the same other terms;
provided, however, that notwithstanding the foregoing, Harpia and Curupira
and their Affiliates shall not be required to accept joint and several
liability with Falcon and its Affiliates with respect to representations,
warranties or covenants (including indemnification obligations) of Falcon
and its Affiliates, it being agreed that any agreement relating to such
sale, exchange or transfer shall provide that the liability of Harpia and
Curupira and their Affiliates in connection with such sale, exchange or
transfer shall be several only in relation to Falcon and its Affiliates
and shall not in any event exceed either Harpia's, Curupira's or their
Affiliate's pro rata share of any liability or their proceeds from such
sale. Any sale, exchange or transfer shall be made in a manner that does
not discriminate in any adverse manner against Harpia, Curupira and/or
their Affiliates as compared to Falcon and its Affiliates. Compliance with
the provisions of this Clause 17.3 shall be a condition precedent to a
sale of Shares by any Stockholder whose Shares are subject to Clause 17.3.
17.4 The rights set out in Clause 17.1 hereof shall be acquired by transferees
of any Sharesof Harpia, Curupira and their Affiliates provided such
transfers of Shares to such transferee are made in accordance with the
provisions of this Agreement. The rights of Harpia, Curupira and their
Affiliates set out in Clauses 17.2 and 17.3 above are personal and shall
not be transferable with such person's Shares. The rights set out in
Clause 17.1 above shall be acquired by transferees of Shares of the
Investor Entities, Falcon and the Affiliates of any of them provided such
transfers of Shares to such transferee are made in accordance with the
provisions of this Agreement and provided further that the transferee
acquires (together with its Affiliates) at least 4% (four percent) of the
Company's issued and outstanding voting Shares from time to
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time. No such third party transferee of Shares from the Investor Entities,
Falcon or the Affiliates of any of them will be subject to tag along
obligations under this Clause 17.
Clause 18. REGISTRATION RIGHTS
18.1 (i) [DEMAND] (a) Subject to the conditions set forth in this
Agreement, at any time after the second anniversary of this Agreement, the
Investor Entities, considered together, the HC Entities, considered
together, or Falcon may request that the Company effect the registration
of any or all of the Shares held by the requesting Stockholder or any of
its Affiliates (the "Subject Shares") in accordance with the terms hereof.
Notwithstanding the foregoing, the Company shall not effect (1) more than
one registration requested by a Stockholder or any of its Affiliates
pursuant to this Clause 18.1 in any 12 month period, (2) more than three
registrations requested by a Stockholder or any of its Affiliates pursuant
to this Clause 18.1 in total, or (3) a registration requested by a
Stockholder pursuant to this Clause 18.1 for less than 50% of the
aggregate Shares held by such Stockholder and its Affiliates with respect
to the initial effective demand registration for such Stockholder and its
Affiliates, or less than the lesser of 4,500,000 Shares or 100% of the
aggregate Shares held by such Stockholder and its Affiliates with respect
to a subsequent request for registration. Such request will specify (x)
the number of Subject Shares proposed to be sold, (y) the jurisdiction in
which the Subject Shares are to be distributed and (z) the intended method
of distribution.
(b) Notwithstanding clause (a) above but subject to clause (c)
below, it is the agreement of the parties that the exercise by a
Stockholder of its rights set forth in clause (a) above and the
registration and/or offering of its Subject Shares will not adversely
impair or invalidate this Stockholders Agreement or the Option Agreement
or any of the rights of the other Stockholders hereunder or thereunder
(other than with respect to the Subject Shares that are registered and
publicly sold, which Subject Shares shall not be entitled to any of the
benefits provided by, or be subject to the obligations imposed by, this
Stockholders Agreement) and, in any case, would not legally prohibit the
exercise of the put rights set forth in this Stockholders Agreement or the
Option Agreement. If any Stockholder asserts in writing to the Company and
the other Stockholders within forty-five (45) days of receipt of a request
pursuant to clause (a) above that the registration and/or offering of the
requesting Stockholder's Subject Shares would have such an effect, then
each of the Stockholders and the Company shall negotiate in good faith and
on an expedited basis to implement a structure and/or amendment to this
Agreement and the Company which would permit the requesting Stockholder to
effect such a registration and offering without adversely impairing or
invalidating this Stockholders Agreement or the Option Agreement or the
rights of the other Stockholders hereunder or thereunder and, in any case,
without legally prohibiting the exercise of the put rights set forth in
this Stockholders
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Agreement or the Option Agreement. During such good faith negotiations,
the Company and the Stockholders shall use commercially reasonable efforts
to amend the provisions of this Agreement in order to (i) preserve the put
rights of the Stockholders hereunder and under the Option Agreement
without adverse change and the other rights of the Stockholders hereunder
in substantially the form they exist on the date hereof and (ii) permit
the Company to effect the registration of the requesting Stockholder's
Subject Shares. Without limiting the foregoing, the parties hereto hereby
agree that any amendment to this Agreement to effect the following shall
not adversely impair or invalidate their rights hereunder, which
amendments may include (i) the expansion of the Board to accommodate any
director that the holder of any Subject Share may be entitled to elect
under Brazilian law, provided that (x) such expansion does not impair the
veto and supermajority voting rights granted to the Stockholders hereunder
and (y) after such expansion, if they have maintained their right to
appoint Board members as provided under Clause 11.1(iii) hereof, Mr.
Civita and Abrilcap shall be entitled to appoint such number of members of
the expanded Board such that such members, together with the independent
director nominated by Mr. Civita and Abrilcap, shall constitute a majority
of the members of the Board, and (ii) the elimination of any right of the
Company to purchase Shares pursuant to Clause 4 hereof to the extent such
purchase would not be permitted under Brazilian law for a company with
publicly registered and/or traded shares. If the parties are unable to
agree upon the implementation of such a structure and/or the adoption of
such an amendment pursuant to the standards set forth above, the
requesting Stockholder may conclusively resolve any such dispute in its
favor by (i) obtaining approval from the appropriate regulatory authority
that the existence of this Stockholders Agreement and the Option Agreement
and the rights of the other Stockholders hereunder and thereunder would be
valid and enforceable in all respects after the consummation of the
registration and offering pursuant to the restructuring and/or amendment
hereof agreed to above or (ii) the delivery to the Company and such other
Stockholders of an executed opinion from any of the law firms listed in
Exhibit A hereto, provided that such firm does not, and has not,
represented the requesting Stockholder in connection with its investment
in the Company, other than for purposes of obtaining the opinion
contemplated by this Clause 18.1(i)(b) (or such other law firm as shall be
reasonably acceptable to the parties), in substantially the form attached
hereto as Exhibit B, which opinion shall (x) pursuant to the Terms of
Demand attached thereto, at the time of the delivery of the opinion
accurately describe the proposed terms of the public offering, including
any proposed conversion of capital stock, and (y) be required to be
restated as of and at the time of the public offering of the requesting
Stockholder's Subject Shares on the basis of the offering documents, if
any, in lieu of the Terms of Demand, as a condition to the consummation of
the public offering; provided, however, that if a Stockholder is not able
to deliver such an opinion with respect to the registration and offering
of Shares, but would be able to deliver such opinion with respect to the
registration and offering of a different class of capital stock of the
Company, upon the request of the Stockholder exercising its rights
pursuant to clause (a) above, the Company (subject
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to applicable law) shall be required to convert, effective upon
consummation of the public offering, such number of Shares of such
Stockholder as such Stockholder shall request into an equivalent amount of
such other class of capital stock of the Company, provided that such
conversion may only take place if (A) it would not adversely impair or
invalidate this Stockholders Agreement or the Option Agreement or the
rights of the other Stockholders hereunder or thereunder and, in any case,
would not legally prohibit the exercise of the put rights set forth in
this Stockholders Agreement or the Option Agreement and (B) the rights of
such class would be substantially equivalent to and/or less favorable than
the rights associated with the Shares (such as voting or governance
rights, rights to distributions upon liquidation, preference as to
dividends or otherwise), such that they would simply represent a class
convertible for registration, the other Stockholders shall reasonably
cooperate with respect to such conversion, and for purposes of this Clause
18.1, the shares of such other class of capital stock of the Company held
by the Stockholder shall be deemed to be Subject Shares.
(c) If, pursuant to clause (b) above, a good faith dispute exists
and the requesting Stockholder is not able to obtain the regulatory
approval or opinion described above, the Company shall not effect the
requested registration. Notwithstanding the foregoing, if any of the
Investor Entities or their Affiliates is the requesting Stockholder and in
accordance with the terms of clause (b) above such requesting Stockholder
is able to conclusively resolve after the restructuring and/or amendment
agreed to above are effected (i.e., conclusively resolve by opinion or
ruling as provided in (b) above), that this Stockholders Agreement, the
Option Agreement and the rights of the other Stockholders would only be
impaired or invalidated with respect to the exercise of the HC Put Option,
the Falcon Time Put Option, the Falcon Event Put Option and/or the
Investor Put Option, then such requesting Stockholder shall provide the
Company, the other Stockholders and Abril S.A. with notice to such effect,
the Company shall effect the requested registration and the Company shall
be relieved from its obligations set forth in this Stockholders Agreement
with respect to the HC Put Option, the Falcon Time Put Option, the Falcon
Event Put Option and/or the Investor Put Option, as applicable, so long as
the Abril Agreement is at that time valid and enforceable.
(ii) [FILING; EFFECTIVENESS] (a) Upon receipt of a request as
contemplated in the preceding paragraph, the Company and the requesting
Stockholder shall consult with the other Stockholders for a period of 45
days regarding the proposed registration of the Subject Shares. Unless the
requesting Stockholder specifies in writing otherwise, upon the conclusion
of such consultation period, but subject to Clause 18.1(b) above, the
Company shall use its best efforts to effect such a registration as soon
as practicable and in any event shall file within 90 days of the
conclusion of such consultation period (the "Target Filing Date") a
registration statement (the "Demand Registration Statement") under the
securities laws of the jurisdiction(s) designated by the requesting
Stockholder and on the form
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designated by the requesting Stockholder covering the Subject Shares and
use its best efforts to (1) cause such Demand Registration Statement to be
declared effective by the U.S. Securities and Exchange Commission (the
"Commission") and under such other securities or blue sky laws of such
jurisdictions in the United States as the requesting Stockholder may
reasonably request (provided that the Company shall not be required to
qualify generally to do business in any such jurisdiction where it would
not otherwise be required to qualify, subject itself to taxation in any
such jurisdiction or consent to general service of process in any such
jurisdiction), if registration is sought in the United States, or the
analogous governmental agencies and/or securities market authorities of
the relevant jurisdiction, if registration is sought outside the United
States, for such Subject Shares as soon as practicable thereafter and in
any event within 60 days of filing such Demand Registration Statement (the
"Target Effective Date") and (2) keep the Demand Registration Statement
continuously effective until the date on which the requesting Stockholder
no longer holds any Shares registered under the Demand Registration
Statement (such period, the "Target Effective Period"). If a Stockholder
requests a registration to be made at the same time for the same number of
Subject Shares in more than one jurisdiction, such request shall be
treated as one registration for purposes of Clauses 18.1(i)(a)(1) and (2).
Notwithstanding the foregoing, (x) if the Company shall furnish to the
Stockholder a certificate signed by its Chairman or President stating that
in his good faith judgment it would be detrimental or otherwise
disadvantageous to the Company or its Stockholders for such a Demand
Registration Statement to be filed as expeditiously as practicable, the
Company shall have a period of not more than 90 days after delivery of
such a certificate within which to file such Demand Registration
Statement, and (y) the Company shall not be obligated to file a
registration statement pursuant to this Clause 18.1 during the 90 day
period following the effectiveness of any registration statement filed by
the Company in connection with an underwritten primary offering of its
securities. If the managing underwriter selected by the requesting
Stockholder (or by the Company in accordance with the terms of Clause
18.1(iv) below) determines (upon request of the Company or any
Stockholder) that any of the provisions of this Clause 18.1(ii) are not
customary in transactions of this nature (including the time periods set
forth in this Clause 18.1(ii)(a) being unreasonably long or short), then
such provisions shall be modified in accordance with the determination of
such managing underwriter.
(b) The Company agrees, if necessary, to supplement or amend the
Demand Registration Statement, as required by the registration form used
by the Company for such Demand Registration Statement or by applicable
securities laws and regulations or as requested (which request shall
result in the filing of a supplement or amendment) by the requesting
Stockholder (but only to the extent that such request relates to
information with respect to the requesting Stockholder), and the Company
agrees to furnish to the requesting Stockholder, its counsel and any
managing underwriter, such number of copies of the Demand Registration
Statement and any such supplement(s) or amendment(s) thereto (in each case
including all exhibits
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thereto and documents incorporated by reference therein) and the
prospectus included therein as the requesting Stockholder or its
underwriter(s) may reasonably request prior to the use or filing of the
same with the Commission or analogous governmental agency and/or
securities market authorities and during the period in which the Company
is required to cause the Demand Registration Statement to remain
effective. The requesting Stockholder shall be permitted to withdraw all
or any part of the Subject Shares from a Demand Registration Statement at
any time prior to the effective date of such Demand Registration Statement
(regardless of whether one or more Stockholders have elected to exercise
their "piggyback" registration rights pursuant to Clause 18.2 below, and
if all of the Subject Shares are so withdrawn, such registration shall be
terminated with respect to the Stockholders exercising their "piggyback"
registration rights unless one or more of such Stockholders elects to
exercise its "demand" registration rights with respect to such
registration). Notwithstanding such a withdrawal by a requesting
Stockholder, such request shall be treated as a registration for purposes
of Clauses 18.1(i)(a)(1) and (2) if the requesting Stockholder (x)
withdraws less than all of the Subject Shares, or (y) withdraws all of the
Subject Shares after the conclusion of the consultation period described
in Clause 18.1(ii)(a) above for any reason other than a material adverse
change in the Company or its Subsidiaries or in market conditions from the
time of the request made for registration.
(c) The Company will enter into customary agreements and take such
other actions as are reasonably required in order to expedite or
facilitate the sale of the Subject Shares. In connection therewith, the
Company will furnish to the requesting Stockholder and each of its
managing underwriter(s) a signed counterpart, addressed to the requesting
Stockholder and such underwriter(s), of (i) an opinion or opinions of
counsel to the Company and (ii) a comfort letter or comfort letters from
the Company's independent public accountants, each in customary form and
covering such matters of the type customarily covered by opinions or
comfort letters, as the case may be, as the requesting Stockholder or such
underwriter(s) reasonably requests.
(iii) [EFFECTIVE REGISTRATION] A registration will not be deemed to
have been effected as a Demand Registration unless the Demand Registration
Statement with respect thereto has been declared effective by the
Commission or analogous governmental agency and/or securities market
authorities and the Company has complied in all material respects with its
obligations under this Agreement with respect thereto; provided, however,
that if after it has been declared effective, the offering of the Subject
Shares pursuant to a Demand Registration Statement is interfered with by
any stop order, injunction or other order or requirement of the Commission
or any other governmental agency or court and/or securities market
authorities, such Demand Registration Statement will be deemed not to have
become effective during the period of such interference until the offering
of the Subject Shares pursuant to such Demand Registration Statement may
legally resume. If a
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registration requested pursuant to this Clause 18.1 is deemed not to have
been effected, then the Company shall continue to be obligated to effect a
registration pursuant to this Clause 18.1.
(iv) [SELECTION OF UNDERWRITER] If the requesting Stockholder so
elects, the offering of the Subject Shares pursuant to a Demand
Registration Statement shall be in the form of an underwritten offering.
If it so elects, the requesting Stockholder shall select one or more
nationally recognized firms of investment bankers to act as the managing
underwriter or underwriters in connection with such offering; provided
that such selection shall be subject to the consent of the Company, which
consent shall not be unreasonably withheld. If the requesting Stockholder
does not select a managing underwriter in connection with such offering,
the Company may select one or more nationally recognized firms of
investment bankers to act as the managing underwriter or underwriters in
connection with such offering; provided that such selection shall be
subject to the consent of the requesting Stockholder, which consent shall
not be unreasonably withheld.
(v) [INDEMNIFICATION]
(a) (BY THE COMPANY] The Company will indemnify and hold harmless each
participating Stockholder and each underwriter of the Subject Shares
being sold by such Stockholder, and each controlling person of such
Stockholder and underwriter, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material
fact contained or incorporated by reference in any registration
statement relating to such Subject Shares or any preliminary or
final prospectus included therein (or in any related registration
statement, notification or the like) or any omission (or alleged
omission) to state or incorporate by reference therein a material
fact required to be stated or incorporated by reference therein or
necessary to make the statements made or incorporated by reference
therein, in light of the circumstances under which they were made,
not misleading, or any violation by the Company of any rule or
regulation promulgated under the Securities Act applicable to the
Company and relating to action or inaction required of the Company
in connection with any such registration, qualification or
compliance, and the Company will reimburse each such Stockholder and
each such underwriter and controlling person for any legal or any
other expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability or action and
will enter into an indemnification agreement with each such
Stockholder and underwriter containing customary provisions,
including provisions for contribution, as any Stockholder or
underwriter shall reasonably request; provided, however, that the
Company will not be liable to such Stockholder or underwriter in any
such case to the extent that any such claim, loss,
75
damage or liability arises out of or is based on any untrue
statement or omission based upon written information furnished to
the Company by such Stockholder or underwriter, respectively, and
stated to be specifically for use therein.
(b) (BY THE STOCKHOLDERS] Each participating Stockholder shall indemnify
and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement and each person,
if any, who controls the Company within the meaning of Section 5 of
the U.S. Securities Act of 1933, as amended (the "Securities Act")
or any other applicable securities laws, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out
of or based on any untrue statement (or alleged untrue statement) of
a material fact contained or incorporated by reference in any
registration statement relating to such Stockholder's Shares or any
preliminary or final prospectus included therein (or in any related
registration statement, notification or the like) or any omission
(or alleged omission) to state or incorporate by reference therein a
material fact required to be stated or incorporated by reference
therein or necessary to make the statements made or incorporated by
reference therein, in light of the circumstances under which they
were made, not misleading, and such participating Stockholder will
reimburse the Company and each such director, officer or controlling
person for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss,
damage, liability or action and will enter into an indemnification
agreement with the Company and each participating Stockholder
containing customary provisions, including provisions for
contribution, as the Company or each such Stockholder shall
reasonably request; provided, however, that no Stockholder will be
liable in any such case except to the extent that any claim, loss,
damage or liability arises out of or is based on any untrue
statement or omission based upon written information furnished to
the Company by such Stockholder and stated to be specifically for
use therein; and provided, further, that no Stockholder will be
liable under this subsection for any losses, costs, damages or
expenses exceeding in the aggregate the proceeds to such Stockholder
in such offering.
(c) [OTHER INDEMNIFICATION] Indemnification similar to that specified in
the preceding paragraphs of this Clause 18.1 (with appropriate
modifications) shall be given by the Company and each participating
Stockholder with respect to any required registration or other
qualification of securities under any federal or state law or
regulation of governmental authority other than the Securities Act.
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(d) If any claim or proceeding (herein, the "Claim") is hereafter made
or instituted which might result in a right to indemnification
hereunder, the party seeking indemnification (the "Indemnified
Party") may make a demand for indemnification hereunder by giving
written notice to the party from whom indemnification is sought (the
"Indemnifying Party"), stating in reasonable detail the nature of
the Claim so far as known to it. Such notice shall be given within a
reasonable time after the Indemnified Party shall become aware of
the Claim. The Indemnified Party shall permit the Indemnifying Party
to assume the defense of any such Claim or any litigation resulting
therefrom (and to prosecute by way of counterclaim or complaint any
claim arising out of or relating to such Claim), provided that
counsel selected to conduct the defense of such Claim or litigation
shall be reasonably satisfactory to the Indemnified Party. After
such assumption of the defense by the Indemnifying Party, the
Indemnifying Party shall not be liable under this Clause 18.1 for
any legal or other expenses subsequently incurred by the Indemnified
Party in connection with such defense, other than reasonable costs
of investigation, but the Indemnified Party may participate in such
defense at its expense. The refusal so to permit the Indemnifying
Party to assume such defense by such counsel shall relieve the
Indemnifying Party of its indemnification obligations hereunder in
respect of such Claim. No settlement of any Claim or litigation
defended by the Indemnified Party shall be made without the express
written consent of the Indemnifying Party, which consent shall not
be unreasonably withheld. The Indemnifying Party shall not, except
with the written consent of the Indemnified Party, consent to entry
of any judgment or enter into any settlement which does not include
as an unconditional term thereof the giving by the claimant or
plaintiff to the Indemnified Party of an unconditional release from
all liability in respect of such Claim or litigation.
(e) If the indemnity and reimbursement obligation provided for in this
Clause 18.1 is unavailable or insufficient to hold harmless an
Indemnified Party in respect of any Claim referred to therein, then
(unless, and except to the extent that, such unavailability or
insufficiency results from defenses or limitations provided by this
Clause 18.1) the Indemnifying Party shall contribute to the amount
paid or payable by the Indemnified Party as a result of such Claim
in such proportion as is appropriate to reflect the relative fault
of the Indemnifying Party on the one hand and the Indemnified Party
on the other hand in connection with statements or omissions which
resulted in such Claim, as well as any other relevant equitable
considerations. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the
Indemnifying Party or the Indemnified Party and the parties'
relative intent, knowledge, access to information and opportunity to
correct
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or prevent such untrue statement or omission. The parties hereto
agree that it would not be just and equitable if contributions
pursuant to this paragraph were to be determined by pro rata
allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the first
sentence of this paragraph. The amount paid by an Indemnified Party
as a result of the Claims referred to in this Clause 18.1 shall be
deemed to include any legal and other expenses reasonably incurred
by such Indemnified Party in connection with investigating or
defending any Claim which is the subject of this Clause 18.1.
(vi) [SPECIFIC PERFORMANCE] The Company and each of the Stockholders
acknowledges that a breach of the Company's obligations relating to
registration rights requested pursuant to Clause 18.1(i) will cause
irreparable harm to the requesting Stockholder, and any Stockholder
which exercises its rights under Clause 18.2 above, that will be
difficult to quantify and for which money damages would be
inadequate. As a result, the Company agrees that, in the event of
such a breach or threat of such a breach, the requesting or
piggybacking Stockholder may, in addition to any other legal or
equitable remedies it may have, enforce its rights by an action for
specific performance (to the extent permitted by applicable law),
without the necessity of posting a bond.
18.2 [PIGGYBACK] If the Company at any time proposes for any reason to publicly
register or list any Shares under the securities laws of any jurisdiction,
it shall promptly give written notice to each Stockholder of its intention
so to register such shares, and by such notice shall offer to each such
Stockholder (other than Abrilcap and its Affiliates which are then
Stockholders) the opportunity to register or list such number of Shares as
each such Stockholder may request in writing within 20 (twenty) Business
Days after receipt of such notice from the Company, specifying the number
of Shares proposed to be included in such registration or listing. Upon
receipt of such written request, the Company shall cause all such Shares
to be included in such registration or listing on the same terms and
conditions as the Shares otherwise being sold pursuant to such
registration or listing, and such Stockholder shall be entitled to such
documents and information as is described in Clause 18.1(b) above.
Notwithstanding the foregoing, if the managing underwriter(s) of an
offering delivers a written opinion to the Company that the size of the
offering is such that the success of the offering would be materially and
adversely affected, then the amount of Subject Shares to be offered for
the account of any Stockholder pursuant to this Clause 18.2 shall be
reduced to the extent necessary to reduce the total amount of securities
to be included in such offering to the amount recommended by such managing
underwriter(s); provided that if securities are being offered for the
account of more than one Stockholder pursuant to this Clause 18.2, then
the proportion by which the amount of the securities intended to be
offered for the account of any Stockholder pursuant to this Clause 18.2 is
reduced shall not exceed
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the proportion by which the amount of securities intended to be offered
for the account of any other Stockholder pursuant to this Clause 18.2 is
reduced. For purposes of this Clause 18.2, if the Company proposes to
convert Shares to a different class of capital stock of the Company and to
publicly register or list such different class of capital stock, then
subject to Clause 18.1(b) above, each Stockholder shall have the right to
convert its Shares into an equivalent amount of such different class of
capital stock, and for purposes of this Clause 18.2, the shares of such
other class of capital stock of the Company held by the Stockholder shall
be deemed to be Shares.
18.3 [REGISTRATION EXPENSES] Any and all expenses whatsoever incident to the
Company's performance of or compliance with this Clause 18 shall be borne
by the Company whether or not the offering of Shares to which such
expenses relate is consummated; provided, however, that the Company shall
not be required to bear underwriting discounts and commissions or transfer
taxes, if any, relating to the sale or disposition of Shares, and the
Company shall only be obligated to pay for the fees and expenses of
counsel and independent certified public accountants for the Company.
18.4 Transferees of Shares from a Stockholder shall not acquire the rights of
the transferring Stockholder as set out in this Clause 18; provided that
all transferees of Shares from a Stockholder who are Affiliates of such
Stockholder shall acquire, if such transfers are accomplished in
compliance with the terms of this Agreement, the rights and obligations of
such Stockholder as set forth in this Clause 18.
Clause 19. NON-COMPETE PROVISIONS
19.1 (i) For the benefit of Abrilcap and Mr. Civita and their Affiliates
(other than the Company and its Subsidiaries) only, Harpia and
Curupira hereby agree on behalf of themselves, The Chase Manhattan
Corporation and its direct and other indirect majority-owned
subsidiaries (collectively, "Chase") that, for so long as Harpia and
Curupira, together with their Affiliates, hold at least 5% (five
percent) of the issued and outstanding voting Shares, none of
Harpia, Curupira, any Affiliate of either, or (to the extent Harpia,
Curupira or any Affiliate thereof that is a Stockholder remains an
Affiliate of Chase or any successor thereto) Chase shall, except
through the Company, hold more than 10% (ten percent) of the total
equity of any business organization that engages directly, nor more
than 50% (fifty percent) of the voting equity of any business
organization that engages indirectly through one or more
subsidiaries or other business organizations, in the Business in
Brazil; provided, however, that the covenants set forth in this
Clause 19.1 shall not apply (i) to any equity acquired by Chase or
any successor thereto, as a result of (a) the merger of Chase or any
such successor with Chemical
79
Banking Corporation or any other Person (a "Merger Party") who
directly or indirectly holds such equity at the time such merger is
consummated (the "Merger Date"), or (b) the statutory, contractual,
preemptive or other rights that such Merger Party or any Affiliate
thereof may have, as of the Merger Date, to acquire such equity or
to exchange securities for such equity, regardless of whether such
rights are contingent or vested or inchoate or fixed as of the
Merger Date, or (ii) from and after the Merger Date, to any Person
that engages primarily in venture capital or merchant banking
activities (including, to the extent such covenants might otherwise
apply, Chemical Venture Partners) or to any equity for which any
such Person (or its personnel) has functional management
responsibility, regardless of where such equity is booked.
(ii) The parties hereto recognize that Chase may provide various
financial services to individuals, corporations and other entities
that may be engaged or that may intend to engage, directly or
indirectly, in the Business, including but not limited to: (a)
conducting or participating in the sale, placement or underwriting
of securities for such individuals or entities, (b) providing loans
or other credit arrangements to such individuals or entities, which
loans or arrangements may be secured by, among other things, the
pledge to Chase of voting or other securities, and Chase may receive
fees in connection with such loans or arrangements which may include
stock, warrants or other equity securities, (c) engaging in
fiduciary or other relationships whereby Chase may control or
exercise voting power over securities of various entities and (d)
providing financial advice and other commercial and investment
banking services, and further recognize that none of these
activities shall constitute a violation of this Clause 19 nor shall
any equity securities acquired by Chase in connection with any of
these activities count towards the percentages set forth in the
first sentence of this Clause 19. In particular, nothing in this
Clause 19 shall prohibit Chase from exercising its rights with
respect to any securities pledged for its benefit or foreclosing on,
receiving in compromise of obligations, holding or otherwise dealing
with any such securities, or exercising its rights as a creditor of
any person, including without limitation by receiving equity
securities in compromise of obligations or in a bankruptcy,
insolvency, receivership or similar proceeding or as part of a
workout or other restructuring of debt, and in such case, such
equity securities shall not count towards the percentages set forth
in the first sentence of this Clause 19.
19.2 For the benefit of Harpia, Curupira and their Affiliates so long as they
collectively own 5% (five percent) or more of the issued and outstanding
voting Shares, Mr. Civita and Abrilcap agree on behalf of themselves and
their Affiliates that, except through the Company (and, to the extent
necessary to comply with the provisions hereof and of the Old Stock
Purchase Agreement and the Service
80
Agreement, the License Holders), neither of them nor any person directly
or indirectly controlled by either of them shall, in any geographic area,
directly or indirectly engage in any business, or be interested (whether
as a principal, stockholder, lender, employee, officer, director, partner,
venturer, advisor, consultant or otherwise) in any business organization
that engages in any business, substantially of the same type as the
Business or as any business the Company or any Subsidiary may conduct.
Without limiting the foregoing provisions hereof, except to the extent
expressly set forth herein, Mr. Civita and Abrilcap agree that they shall
not directly or indirectly through any Affiliate (except for the Company
and its Subsidiaries), engage in or be interested in (whether as a
principal, stockholder, lender, employee, officer, director, partner,
venturer, advisor, consultant or otherwise) in the telephony business.
Notwithstanding the foregoing sentence, however, so long as it does not
create or pose a conflict of interest with the business of the Company
and/or its Subsidiaries, Mr. Civita and Abrilcap may, directly or through
Affiliates, hold passive, minority, or noncontrolling interests in persons
engaged in telephony; provided that in the event such interest does create
or pose a conflict of interest with the business of the Company and/or its
Subsidiaries, Mr. Civita and Abrilcap shall, as soon as practicable,
effect one of the following alternatives, at their option: (i) merge such
interest into the Business of the Company and its Subsidiaries (subject to
compliance with the provisions of Clauses 12 and 13 above); (ii) sell,
transfer, or otherwise dispose of such interest; or (iii) transfer such
interest to a "blind trust" or equivalent device under Brazilian law,
pursuant to which Mr. Civita shall have solely an economic interest, but
pursuant to which he will receive no information regarding such interest
and shall have no decision making role with respect thereto.
19.3 For so long as Falcon, together with its Affiliates, owns 2% (two percent)
or more of the issued and outstanding voting Shares, Falcon hereby agrees
for the benefit of Abrilcap and Mr. Civita and their Affiliates (other
than the Company and its Subsidiaries) only that, except through the
Company, neither it nor any of its Affiliates shall within the territory
of the Federative Republic of Brazil (i) directly or indirectly engage in
the Business, or (ii) be interested (whether as a principal, stockholder,
lender, employee, officer, director, partner, venturer, advisor,
consultant or otherwise) in any business organization that engages
primarily in the Business within the territory of the Federative Republic
of Brazil or any business conducted primarily within the Federative
Republic of Brazil that is either substantially of the same type as the
Business or any other business the Company or any Subsidiary may conduct
or that is otherwise competitive with any business that the Company or any
Subsidiary may conduct; provided, however, that nothing in this Clause
19.3 shall prohibit Falcon or any Affiliate thereof from owning less than
5% (five percent) of the voting capital or total capital stock or other
ownership interest of any public company which it does not control.
19.4 For so long as Falcon, together with its Affiliates, owns 2% (two percent)
or more of the issued and outstanding voting Shares, Falcon hereby agrees
for the benefit of
81
Abrilcap and Mr. Civita and their Affiliates (other than the Company and
its Subsidiaries) that neither it nor any of its Affiliates shall directly
or indirectly own or control a majority of the voting equity of any
business organization other than a partnership, or directly or indirectly
act as a general partner of any partnership, that engages primarily in any
business relating to pay television delivered by KU-band satellite
distribution in any of the countries of South America, Central America, in
the Caribbean Sea, or the United States of Mexico (including countries
that become sovereign in the current territory of the aforesaid
countries).
19.5 For so long as Falcon, together with its Affiliates, owns 2% (two percent)
or more of the issued and outstanding voting Shares or the Investor
Entities, together with their Affiliates, owns 2% (two percent) or more of
the issued and outstanding voting Shares, Abrilcap and Mr. Civita hereby
agree for the benefit of Falcon or the Investor Entities, as the case may
be, in each case on behalf of themselves and their Affiliates, that,
except through the Company (and, to the extent necessary to comply with
the provisions hereof and of the Stock Purchase Agreement and the Services
Agreement, neither of them nor any person directly or indirectly
controlled by either of them or under common control with either of them
shall, within the territory of the Federative Republic of Brazil directly
or indirectly engage in the Business, or be interested (whether as a
principal, stockholder, lender, employee, officer, director, partner,
venturer, advisor, consultant or otherwise) in any business organization
that engages in any business that is either substantially of the same type
as the Business or any other business the Company or any Subsidiary
conducts or that is otherwise competitive with any business that the
Company or any Subsidiary may conduct. Without limiting the foregoing
provisions hereof, except to the extent expressly set forth herein, Mr.
Civita and Abrilcap agree that they shall not directly or indirectly
through any Affiliate (except for the Company and its Subsidiaries),
engage in or be interested in (whether as a principal, stockholder,
lender, employee, officer, director, partner, venturer, advisor,
consultant or otherwise) in the telephony business. Notwithstanding the
foregoing sentence, however, so long as it does not create or pose a
conflict of interest with the business of the Company and/or its
Subsidiaries, Mr. Civita and Abrilcap may, directly or through Affiliates,
hold passive, minority, or non-controlling interests in persons engaged in
telephony; provided that in the event such interest does create or pose a
conflict of interest with the business of the Company and/or its
Subsidiaries, Mr. Civita and Abrilcap shall, as soon as practicable,
effect one of the following alternatives, at their option: (i) merge such
interest into the Business of the Company and its Subsidiaries (subject to
compliance with the provisions of Clauses 12 and 13); (ii) sell, transfer,
or otherwise dispose of such interest; or (iii) transfer such interest to
a "blind trust" or equivalent device under Brazilian law, pursuant to
which Mr. Civita shall have solely an economic interest, but pursuant to
which he will receive no information regarding such interest and shall
have no decision making role with respect thereto.
82
19.6 Except through their respective investments in Tevecap, for so long as
Falcon, together with its Affiliates, owns 2% (two percent) or more of the
issued and outstanding voting Shares or the Investor Entities, together
with their Affiliates, owns 2% (two percent) or more of the issued and
outstanding voting Shares, Abrilcap and Mr. Civita hereby agree for the
benefit of Falcon or the Investor Entities, as the case may be, in each
case on behalf of themselves and their Affiliates that neither of them nor
any person directly or indirectly controlled by either of them shall, in
any of the countries of South America, Central America, in the Caribbean
Sea, or the United States of Mexico (including countries that become
sovereign in the current territory of the aforesaid countries), directly
or indirectly engage in any business, or be interested (whether as a
principal, stockholder, lender, employee, officer, director, partner,
venturer, advisor, consultant or otherwise) in any business organization
that engages in any business relating to pay television delivered by
KU-band satellite distribution.
19.7 The Investor Entities hereby agree on behalf of (a) themselves, (b) Hearst
and Hearst's Subsidiaries, but only for so long as Hearst, directly or
through the Investor Entities or Affiliates of the Investor Entities, owns
2% (two percent) or more of the issued and outstanding voting Shares and
(c) CCABC and CCABC's Subsidiaries, but only for so long as CCABC,
directly or through the Investor Entities or Affiliates of the Investor
Entities, owns 2% (two percent) or more of the issued and outstanding
voting Shares, for the benefit of Abrilcap and Mr. Civita and their
Affiliates, that none of the parties listed in clauses (a), (b), or (c)
above, to the extent applicable, shall own an interest in any entity
principally engaged in the business of non-standard television general
entertainment service and the ownership and operation of facilities
related thereto which competes with the Company in Brazil, except for
interests representing not more than 10% of the total equity of such an
entity, it being understood that nothing contained herein shall prohibit
the Investor Entities, Hearst, CCABC or any of their Subsidiaries from
engaging in any activity in which they are currently engaged or from
acquiring an interest in Galaxy Latin America. The parties hereto
expressly acknowledge and agree that nothing in this Agreement or any
other agreement entered into in connection with the Investor Entities'
purchase of Shares (this Agreement and such other agreements collectively,
"Excluded Agreements") shall be deemed to apply to any entity controlling
CCABC. In particular, but without limiting the foregoing, the parties
expressly acknowledge and agree that a transaction is pending between
CCABC and The Walt Disney Company ("Disney") and, should such transaction
be consummated, no provision of any Excluded Agreement shall apply to
Disney or any of its Subsidiaries, other than CCABC and its Subsidiaries.
However, if Disney or any of its Subsidiaries transfers any of its
business operations to a CCABC Subsidiary after the consummation of the
pending transaction, the provisions of the Excluded Agreements shall not
apply to any such CCABC Subsidiary. Similarly, the provisions of the
Excluded Agreements shall not apply to Disney and its Subsidiaries
notwithstanding any transfers of businesses from CCABC and its
Subsidiaries to Disney and its Subsidiaries. Further,
83
the parties expressly acknowledge and agree that ESPN, Inc. (and/or
affiliates thereof) are currently parties to various agreements with the
Company (and/or Affiliates thereof) relating to the establishment and
management of the ESPN Brazil programming service (the "ESPN Brazil
Agreements") and that the ESPN Brazil Agreements shall not be subject to,
or affected in any way by, any term of any Excluded Agreement and that, if
any conflict exists between any ESPN Brazil Agreement and any Excluded
Agreement, the terms of such ESPN Brazil Agreement shall govern. In
addition, the parties expressly acknowledge and agree that no provisions
of any Excluded Agreement shall apply to the activities of the following
persons, except for activities not within the ordinary course of business
of such persons as determined in good faith by the governing bodies of
such persons: The A&E Television Networks, Lifetime and ESPN, Inc.
19.8 Transferees of Shares of Falcon and its Affiliates shall acquire the
rights of Falcon and its Affiliates set out in Clauses 19.5 and 19.6
above, and shall become bound by the same obligations as Falcon and its
Affiliates set out in Clauses 19.3 and 19.4 above, provided such
transferees (together with their Affiliates) acquire, from time to time,
and continue to hold, no less than 5% (five percent) of the voting Shares
of the Company. Transferees of Shares of the Investor Entities and their
Affiliates shall acquire the rights of the Investor Entities and their
Affiliates set out in Clauses 19.5 and 19.6 above, and shall become bound
by the same obligations as the Investor Entities and their Affiliates set
out in Clause 19.7 above, provided such transferees (together with their
Affiliates) acquire, from time to time, and continue to hold, no less than
5% (five percent) of the issued and outstanding voting Shares of the
Company. No other rights or obligations of any other party under this
Clause 19 shall be transferable.
Clause 20. CONFIDENTIALITY
Each of the Stockholders and the Company agrees that it will not, without
the mutual agreement of all parties to this Agreement, disclose to any
third party any information reasonably designated by the Company as
confidential and obtained in connection with this Agreement, except to the
extent that: (i) such disclosure is required by applicable law, regulation
or legal process; (ii) such information becomes publicly known other than
as a result of any breach by any of the parties hereto of its obligations
set forth in this Clause 20; (iii) such disclosure is requested or
required by any bank or other regulatory authority having jurisdiction
over such party hereto; (iv) such disclosure is to such Stockholder's
Affiliates or to the officers, directors, employees, auditors and
professional advisors of such Stockholder and its Affiliates who, in each
case, have a need to know such information; or (v) such disclosure is to
such Stockholder's partners (or stockholders that are not Affiliates of
such Stockholder) or, if required to obtain credit or pursuant to an
executed credit agreement or similar document, to any financial
institution lender to such Stockholder
84
or its Affiliates or, in the case of Falcon, to the owners from time to
time of any equity interest in Falcon Parent (each such person to whom a
Stockholder is permitted to disclose such confidential information under
this subclause (vi) above being referred to as a "Permitted Disclosee");
provided, however, that to the extent a Stockholder discloses such
confidential information to a Permitted Disclosee and such Permitted
Disclosee discloses such confidential information otherwise than as
permitted by this Clause 20, such Stockholder shall be responsible for
such disclosure as if it had itself breached this Clause 20 and shall be
liable to the Company for any damage arising from such wrongful
disclosure.
Clause 21. DURATION OF THE AGREEMENT
21.1 This Agreement shall take effect as of the date hereof and shall remain in
effect for a period of 25 (twenty-five) years from such date.
21.2 In the event that no Stockholder informs to the others upon written notice
of its lack of interest in extending this Agreement beyond such initial
term of 25 (twenty-five) years or any subsequent term, at least 4 (four)
months in advance, this Agreement shall continually extend for successive
two year periods.
Clause 22. MISCELLANEOUS PROVISIONS
22.1 This Agreement is irrevocable and shall be binding on the Stockholders and
the Company and their heirs and successors and assigns for all purposes.
The Company, the Stockholders and their heirs or successors or assigns
shall fully comply with the obligations undertaken herein, including,
without limitation, voting their respective Shares in strict compliance
with provisions herein. The parties hereto are aware that their respective
obligations as set out herein are subject to specific enforcement,
pursuant to applicable law.
22.2 All notifications, communications and notices required or permitted
pursuant to this Agreement shall be effected in writing and delivered to
each party through facsimile, telex or registered letter, return receipt
requested, as follows:
If to Mr. Civita:
Av. Otaviano Alves de Lima, 4400
02901-000 (Freguesia do O) Sao Paulo, SP
Fax: (011) 875-9456
85
If to Abrilcap:
Av. Otaviano Alves de Lima, 4400
02901-000 (Freguesia do O) Sao Paulo, SP
Fax: (011) 875-9456
Attn: Mr. Jose Augusto Pinto Moreira
If to Harpia or Curupira:
c/o Chase Manhattan Overseas Banking Corporation
802 Delaware Avenue - 13th Floor
Wilmington, Delaware 19801 - U.S.A.
Fax: (302) 429-0456
Attn: Mr. Warren Leonard
with a copy to:
The Chase Manhattan Bank, N.A.
Media and Telecommunications
One Chase Manhattan Plaza, 4th Floor
New York, New York 10081 - U.S.A.
Fax: (212) 552-0259
Attn: Mr. Fernando J. Viana
If to Falcon:
c/o Hellman & Friedman Capital Partners III, L.P.
One Maritime Plaza, 12th Floor
San Francisco, California 94111 - U.S.A.
Fax: (415) 788-0176
Attn: Mr. Joseph Niehaus
86
with a copy to
Falcon International Communications LLC
10900 Wilshire Boulevard
Los Angeles, California 90024 - U.S.A.
Fax: (310) 824-4824
Attn: Mr. Stanley Iskowitch
If to the Company:
Av. Otaviano Alves de Lima, 4400
02901-000 (Freguesia do O) Sao Paulo, SP
Telex: (011) 22115
Fax: (011) 875-9456
Attn: Mr. Jose Augusto Pinto Moreira
If to the Investor Entities:
The Hearst Corporation
959 8th Avenue
New York, New York 10019
Attention: Victor F. Ganzi, Esq.
Fax: (212) 246-3630
Attn: Mr. Ray Joslin
Fax: (212) 245-2306
Capital Cities/ABC, Inc.
77 West 66th Street
New York, New York 10023
Attn: Larry M. Loeb, Esq.
Fax: (212) 456-6565
with copies to:
Capital Cities/ABC, Inc.
77 West 66th Street
New York, New York 10023
Attn: Jerry Sullivan
Fax: (212) 456-7570
87
22.3 Clause Headings and other headings herein contained are simply for
reference purposes, and shall not affect the meaning or construction
thereof.
22.4 Except for the Option Agreement, the Abril Agreement and the two letter
agreements dated of even date herewith among the parties hereto, this
Stockholders Agreement constitutes the entire agreement among the parties
hereto respecting the matters described herein and supersedes all prior
agreements and undertakings, oral or written, among the parties hereto
with respect to the subject matter hereof.
22.5 No amendment to this Agreement shall be valid unless it is made in writing
and signed by all parties hereto.
22.6 No term or toleration granted by any of the parties to the others, in
relation to the terms of this Agreement, shall affect in any way this
Agreement or any of the rights and obligations of the parties, except in
strict compliance with the terms of the granted toleration.
22.7 This Agreement shall be filed at the Company's head office pursuant to and
for the purposes of Article 118 of Law No. 6.404, of 12.15.76. the
Company's Registered Share Registrar, on the margin of the Share
registration, and the certificates representing the Shares, if issued,
shall bear the following text: "The voting and transfer rights inherent to
the shares of stock represented by this Certificate (or registry),
including the creation of any lien for any purpose, is bound and subject
to the Stockholders Agreement dated December 6, 1995."
22.8 This Agreement shall be governed and construed in accordance with the laws
of the Federative Republic of Brazil.
22.9 Each of the parties hereto irrevocably agrees that any action or
proceeding against it arising out of this Agreement may be brought (i) in
a New York State Court sitting in the City of New York, or the United
States District Court for the Southern District of New York (or, if such
courts do not have subject matter jurisdiction over such dispute, in any
other state or federal court located in the State of New York),
preserving, however, all rights of removal to a federal court under 28
U.S.C. Section 1441 or (ii) the Courts of the City of Sao Paulo, State of
Sao Paulo. The foregoing submission to jurisdiction shall be deemed
non-exclusive and shall not prevent any party from instituting any action
or proceeding in any other court of competent Jurisdiction.
Until this Agreement shall have terminated:
(i) each of the Company, Mr. Civita and Abrilcap does hereby irrevocably
designate, appoint and empower CT Corporation System, with offices
currently at 1633 Broadway, New York, NY 10019, as its lawful agent
to
88
receive for and on its behalf service of process in the State of New
York in any such proceedings;
(ii) each of Harpia and Curupira does hereby irrevocably designate,
appoint and empower The Chase Manhattan Bank, N.A., or any successor
thereto, with offices currently at 1 Chase Manhattan Plaza, New
York, NY 10081, Attention: Fernando Viana, 4th Floor, as its lawful
agent to receive for and on its behalf service of process in the
State of New York in any such proceedings;
(iii) Falcon does hereby irrevocably designate, appoint and empower CT
Corporation System, with offices currently at 1633 Broadway, New
York, NY 10019, as its lawful agent to receive for and on its behalf
service of process in the State of New York in any such proceedings;
(iii) Hearst/ABC Limitada does hereby irrevocably designate, appoint and
empower The Hearst Corporation, with offices currently at 959 Eighth
Avenue, New York, New York 10019, Attention: General Counsel, as its
lawful agent to receive for and on its behalf service of process in
the State of New York in any such proceedings,
(iii) any service made on such agent or its successor shall be effective
when delivered regardless of whether notice thereof is given to the
affected party hereto;
(iv) if any person designated as an agent under this Clause 22.9 shall
cease to be located in the State of New York or shall no longer
serve as agent of a party hereto to receive service of process in
the State of New York, the party so affected shall be obligated to
ensure that an agent or successor agent is appointed and each of the
other parties is notified of the same in writing, service upon the
last designated agent shall be good and effective;
(v) the foregoing provisions hereof shall not affect or limit the right
of any party to, or prevent any party from, serving process in any
other manner permitted by applicable law; and
(vi) the Company and those Stockholders who have designated, appointed
and empowered CT Corporation System to act as its agent as described
above shall promptly (but in no event later than sixty (60) days
from the date hereof) deliver to the other Stockholders written
confirmation from CT Corporation System accepting such designation,
appointment and empowerment.
89
IN WITNESS WHEREOF, the parties herein have executed this instrument in
five identical counterpart originals of equal content in the presence of the two
undersigned witnesses.
-----------------------------------
HARPIA HOLDINGS LIMITED
-----------------------------------
CURUPIRA HOLDINGS LIMITED
-----------------------------------
ROBERT CIVITA
-----------------------------------
ABRILCAP COMERCIO E PARTICIPACOES
LTDA.
-----------------------------------
TEVECAP S.A.
-----------------------------------
FALCON INTERNATIONAL
COMMUNICATIONS LTD.
HEARST/ABC VIDEO SERVICES II
By: Hearst Brazil, Inc., its partner
-----------------------------------
By: Brazil Cable Investments, Inc., its partner
-----------------------------------
TVA PARTICIPACOES LTDA.
By: Hearst Brazil, Inc., its partner
-----------------------------------
By: Brazil Cable Investments, Inc., its partner
90
-----------------------------------
91
WITNESSES:
1.____________________
2.____________________
AMENDMENT NO. 2
TO THE STOCKHOLDERS AGREEMENT
This Amendment No. 2, dated as of October 15, 1996 ("Amendment No. 2"), to
the Stockholders Agreement dated as of December 6, 1995, as amended by Amendment
No. 1 dated as of February 12, 1996 (as so amended, the "Stockholders
Agreement"), is made by and among:
1. TEVECAP S.A., a corporation organized under the laws of the Federative
Republic of Brazil, with its principal place of business in Sao Paulo, SP,
Brazil, at Rua do Rocio 313, Cj. 101 (parte) CGC MF Nr. 57.574.170/0001-05
(the "Company");
2. Mr. Robert Civita, a Brazilian citizen, married, editor, bearer of the ID
Card Nr. 1.666.785 and CPF Nr. 006.890.178-04, domiciled in Sao Paulo, SP,
Brazil, at Rua Escocia, 253, apt. 11, Brazil ("Mr. Civita");
3. ABRIL S.A., a corporation organized under the laws of the Federative
Republic of Brazil, with its principal place of business in Sao Paulo, SP,
Brazil, at Av. Otaviano Alves de Lima 4400, Sao Paulo, Brazil, CGC/MF Nr.
44.597.052/0001-62 ("Abril") (as successor in interest to Abrilcap
Comercio e Participacoes Ltda.);
4. HARPIA HOLDINGS LIMITED, a company duly organized and validly existing in
accordance with laws of the Cayman Islands, having its registered office
at c/o Maples & Calder, Attorneys-at-Law, P.O. Box 309, George Town, Grand
Cayman, Cayman Islands, British West Indies ("Harpia");
5. CURUPIRA HOLDINGS LIMITED, a company duly organized and validly existing
in accordance with the laws of the Cayman Islands, having its registered
office at c/o Maples & Calder, Attorneys-at-Law, P.O. Box 309, George
Town, Grand Cayman, Cayman Islands, British West Indies ("Curupira");
6. FALCON INTERNATIONAL COMMUNICATIONS (BERMUDA) L.P., a limited partnership
organized and validly existing in accordance with the laws of Bermuda,
having its registered office in Bermuda ("Falcon");
7. HEARST/ABC VIDEO SERVICES II, a general partnership organized under the
laws of Delaware, with its principal place of business at 959 Eighth
Avenue, New York, NY 10019 ("Hearst/ABC Video"); and
8. CABLE PARTICIPACOES LTDA. (formerly TVA PARTICIPACOES LTDA.), a limited
liability company organized under the laws of the Federative Republic of
Brazil, with its principal place of business in Sao Paulo, SP, Brazil Rua
do Rocio 313, CGC MF Nr. 00921404/0001-18 ("Hearst/ABC Limitada").
WHEREAS, the parties (including their respective nominees) are the holders
of 100% of the issued and outstanding capital stock of the Company;
WHEREAS, the parties entered into the Stockholders Agreement governing
certain of their respective rights and obligations in the Company;
WHEREAS, the Company plans to issue high yield senior notes in the United
States in the principal amount of $225,000,000 (the "Notes");
WHEREAS, the Notes will be issued under an indenture (the "Indenture")
among the Company, the Company's subsidiaries named therein, The Chase Manhattan
Bank, as trustee, and Chase Manhattan Trust & Banking Co. (Japan) Ltd., as
paying agent;
WHEREAS, the Indenture will contain certain covenants relating to the
actions and conduct of the Company and the Company's subsidiaries;
WHEREAS, to provide for the issuance of the Notes, the undersigned parties
have agreed to amend the Stockholders Agreement in accordance with the terms
hereof.
NOW THEREFORE, the Stockholders, having resolved to amend the Stockholders
Agreement in accordance with the requirements of Article 118 of Law No. 6.404,
of December 15, 1976, other applicable legislation and the following terms and
conditions, hereby agree to amend the Stockholders Agreement as follows:
1. The following definitions shall be added to Section 1 of the Stockholders
Agreement:
"Indenture" shall mean the Indenture among the Company, the
Company's subsidiaries named therein, The Chase Manhattan Bank, as
trustee, and Chase Manhattan Trust & Banking Co. (Japan) Ltd., as
paying agent, to be entered into in connection with the issuance of
the Notes.
"Notes" shall mean $225,000,000 aggregate principal amount of senior
notes due 2004 to be issued by the Company pursuant to the
Indenture.
2. Each of Sections 6.1, 7.1(i) and 7A.1 shall be deleted and replaced by the
following:
6.1 So long as the Shares owned by the HC Entities are not publicly
registered, listed or traded (other than pursuant to (x) a
registration initiated by the Company pursuant to Clause 13.1(ii)
hereof to satisfy its indemnification obligations as described
therein, (y) a registration initiated pursuant to Clause 18.1 hereof
or (z) the exercise of its piggyback registration rights pursuant to
Clause 18.2 hereof) and Harpia or Curupira and their Affiliates,
considered together, at such time hold at least five percent (5%) of
the Company's voting Shares, or any other Stockholder or group of
Stockholders that are Affiliates (other than Mr. Civita, Abril and
any Affiliates thereof) which have received, by transfer from
Harpia, Curupira or any Affiliate thereof, and at such time
-2-
hold, at least five percent (5%) of the Company's voting Shares,
then upon the occurrence of an HC Triggering Event (as defined in
Clause 6.2 below), and during the continuance thereof as described
in the last paragraph of Clause 6.2 below, Harpia, Curupira, and
their Affiliates, or such other Stockholder or Stockholders, as the
case may be (the "HC Put Party"), shall be entitled to demand that
the Company buy, in whole or in part, the Shares subscribed for by
Harpia or Curupira pursuant to the Subscription Agreement then held
by the HC Put Party (the Shares designated as being subject to such
exercise of the HC Put Option are referred to as the "HC Put
Shares") at the Event Put Price (as defined below), on the terms and
conditions set forth in this Clause 6 (the "HC Put Option");
provided, however, that if the terms of the Indenture set forth in
the Section entitled "Limitation on Restricted Payments," prohibit
the Company from purchasing the HC Put Shares, in whole or in part,
the Company shall not be obligated to purchase the HC Put Shares to
the extent it is so restricted, but the Company shall have the
obligation, if so elected by the HC Put Party as the Event Put Party
as provided for in Clause 9.3 hereof, to issue the Special Preferred
Shares pursuant to Clause 9.3 hereof; provided further, however,
that the Company shall purchase the HC Put Shares for cash: (i) if
such purchase is not restricted by the terms of the Indenture, (ii)
to the fullest extent permitted under the terms of the Indenture and
(iii) as soon as such purchase is not restricted by the terms of the
Indenture. The rights of any HC Put Party under this Clause 6 are in
addition to any other rights, remedies or actions which may be
available to it hereunder, under any other agreement or by operation
of law, except that the HC Put Option shall not be exercisable with
respect to any HC Triggering Event (as defined below) for which
Harpia, Curupira and their Affiliates shall have received
indemnification in full for all amounts claimed and owing under
Clause 7.3(a) or (b) of the Old Stock Agreement and, to the extent
applicable, Sections 6.3(h) and (i) of the Stock Purchase Agreement.
7.1(i) Unless
(a) the Shares owned by Falcon or its Affiliates shall have been
publicly registered, listed or traded (other than pursuant to:
(x) a registration initiated by the Company pursuant to Clause
13.1(ii) hereof to satisfy its indemnification obligations as
described therein, (y) (1) with respect to a Falcon Time Put
Option, a registration initiated by a Stockholder other than
Falcon or its Affiliates pursuant to Clause 18.1 hereof and
(2) with respect to a Falcon Event Put Option, a registration
initiated pursuant to Clause 18.1 hereof or (z) the exercise
of its piggyback registration rights pursuant to Clause 18.2
hereof),
(b) at the time of the exercise of the Falcon Put Option both (1)
at least 50% of the initial aggregate ownership interests of
the initial equity holders (the "Falcon Parent Investors") of
Falcon International Communications L.P. ("Falcon Parent")
(such initial ownership
-3-
interests and initial equity holders calculated after Falcon
Parent shall have been fully organized and the initial
issuance of ownership interests to investors other than
Hellman & Friedman Capital Partners III, L.P. ("Hellman &
Friedman") and/or entities related thereto shall have been
completed) shall then have become publicly registered, listed
or traded and shall be freely tradable without any
restrictions imposed by applicable securities laws, and (2) at
least 50% of all of the ownership interests of Falcon Parent
shall then have become publicly traded or
(c) Falcon together with its Affiliates at such time collectively
hold less than 5% (five percent) of the Company's voting
Shares,
then upon the occurrence of a Falcon Triggering Event (as defined
below in Clause 7.2) and during the continuance thereof as described
in the last paragraph of Clause 7.2 below, Falcon and its Affiliates
shall be entitled to demand that the Company buy:
(A) in the case of a Falcon Triggering Event referred to in Clause
7.2(i) below, all but not less than all of the Shares acquired
by Falcon pursuant to the Old Stock Purchase Agreement then
held by Falcon and its Affiliates (as used with respect to the
Falcon Time Put Option, the "Falcon Put Shares") at the Time
Put Price, on the terms and conditions set forth in this
Clause 7 and Clause 9 (such option being hereinafter referred
to as the "Falcon Time Put Option"), or
(B) in the case of all other Falcon Triggering Events, all or a
portion of the Shares acquired by Falcon pursuant to the Old
Stock Purchase Agreement then held by Falcon and its
Affiliates or transferees described in Clause 7.1(ii) below
(as used with respect to the Falcon Event Put Option, the
number of Shares designated as being subject to such exercise
of the Falcon Event Put Option are referred to as the "Falcon
Put Shares") at the Event Put Price, on the terms and
conditions (including the proviso set forth below) set forth
in this Clause 7 and Clause 9 (such option hereinafter
referred to as the "Falcon Event Put Option"), except that the
Falcon Event Put Option shall not be exercisable with respect
to any Falcon Triggering Event for which Falcon and its
Affiliates shall have received indemnification in full for all
amounts claimed and owing under Section 7.3(a) or (b) of the
Old Stock Purchase Agreement and, to the extent applicable,
Sections 6.3 (h) and (i) of the Stock Purchase Agreement;
provided, however, that if the terms of the Indenture set forth in
the Section entitled "Limitation of Restricted Payments," thereof
prohibit the Company from purchasing the Falcon Put Shares that are
subject to a Falcon Event Put Option, in whole or in part, the
Company shall not be obligated to purchase the Falcon Put Shares to
the extent it is so restricted, but the Company shall have
-4-
the obligation, if so elected by Falcon as the Event Put Party as
provided for in Clause 9.3 hereof, to issue the Special Preferred
Shares pursuant to Clause 9.3 hereof; provided further, however,
that the Company shall purchase the Falcon Put Shares for cash: (i)
if such purchase is not restricted by the terms of the Indenture,
(ii) to the fullest extent permitted under the terms of the
Indenture and (iii) as soon as such purchase is not restricted by
the terms of the Indenture.
Falcon hereby agrees, promptly after completion of the initial
issuance of ownership interests in Falcon Parent to investors other
than Hellman & Friedman and/or entities related thereto, to provide
the Board with a list of the Falcon Parent Investors.
7A.1 So long as the Shares owned by the Investor Entities are not
publicly registered, listed or traded (other than pursuant to: (x) a
registration initiated by the Company pursuant to Clause 13.1(ii)
hereof to satisfy its indemnification obligations as described
therein, (y) a registration initiated pursuant to Clause 18.1 hereof
or (z) the exercise of its piggyback registration rights pursuant to
Clause 18.2 hereof) and the Investor Entities and their Affiliates,
considered together, at such time hold at least 5% (five percent) of
the Company's voting shares, or any other Stockholder or group of
Stockholders that are Affiliates (other than Mr. Civita, Abril and
any Affiliates thereof) which have received, by transfer from the
Investor Entities or any Affiliate thereof, and at such time hold at
least 5% (five percent) of the Company's voting Shares, then upon
the occurrence of an Investor Triggering Event (as defined in Clause
7A.2 below), and during the continuance thereof as described in the
last paragraph of Clause 7A.2 below, the Investor Entities and their
Affiliates, or such other Stockholder or Stockholders, as the case
may be (the "Investor Put Party"), shall be entitled to demand that
the Company buy, in whole or in part, the Shares purchased by the
Investor Entities pursuant to the Stock Purchase Agreement or the
stock purchase agreement among Hearst Limitada, Harpia and Curupira
(the "HC Stock Purchase Agreement") then held by the Investor Put
Party (the number of Shares designated as being subject to such
exercise of Put Option are referred to as the "Investor Put
Shares"), at the Event Put Price, on the terms and conditions set
forth in this Clause 7A (the "Investor Put Option"); provided,
however that if the terms of the Indenture set forth in the Section
entitled "Limitation of Restricted Payments," thereof prohibit the
Company from purchasing the Investor Put Shares, in whole or in
part, the Company shall not be obligated to purchase the Investor
Put Shares to the extent it is so restricted, but the Company shall
have the obligation, if so elected by the Investor Entities as the
Event Put Party as provided for in Clause 9.3 hereof, to issue the
Special Preferred Shares pursuant to Clause 9.3 hereof; provided
further, however, that the Company shall purchase the Investor Put
Shares for cash: (i) if such purchase is not restricted by the terms
of the Indenture, (ii) to the fullest extent permitted under the
terms of the Indenture and (iii) as soon as such payment is not
restricted by
-5-
the terms of the Indenture. The rights of any Investor Put Party
under this Clause 7A are in addition to any other rights, remedies
or actions which may be available to it hereunder, under any other
agreement or by operation of law, except that the Investor Put
Option shall not be exercisable with respect to any Investor
Triggering Event for which the Investor Entities and their
Affiliates shall have received indemnification in full for all
amounts claimed and owing under Clause 6.3(a) or (b) of the Stock
Purchase Agreement.
3. Each of Sections 9.1, 9.2, 9.3, 9.5, 9.6 and 9.7 shall be deleted and
replaced by the following:
9.1 In the event that on the Date of the HC Put Payment, the Date of the
Investor Put Payment, or the Date of the Falcon Put Payment with
respect to any Falcon Event Put Option, as the case may be (the
"Date of the Event Put Payment"), by reason of inadequate retained
earnings or reserves pursuant to Article 30 of Law No. 6.404/76 or
by reason of a restriction set forth in the Indenture in the Section
entitled "Limitation on Restricted Payments", the Company is unable
to purchase the Shares subject to the HC Put Option, the Investor
Put Option or the Falcon Event Put Option, as the case may be (the
"Event Put"), in whole or in part, and in the event that the HC Put
Party, the Investor Put Party or the Falcon Put Party, as the case
may (the "Event Put Party"), does not expressly further waive its
Event Put (provided that any such waiver shall be without prejudice
to the right of the Event Put Party to reinstate such Event Put
Option in accordance with Clause 6, 7 or 7A above, as applicable),
the Company shall establish, in writing, the amount in U.S. Dollars
corresponding to the Event Put Price of Shares not acquired on the
Date of the Event Put Payment as verified pursuant to Clause 6, 7 or
7A above, which shall not be subject to any variation (except
foreign exchange variation), irrespective of the Company's operating
results or the value of the Shares after the Date of the Event Put
Payment, and the closing date of the Event Put with respect to such
remaining Shares shall be extended pursuant to this Clause ("Put
Postponement"). This Clause 9.1 shall not limit or be interpreted as
further limiting the Company's obligation (subject to the terms
hereof), under the Event Put to buy the maximum possible amount of
Shares, including on the Date of the Event Put Payment.
9.2 In the event of a Put Postponement, the Company shall continue to
use its best efforts to increase its ability, to legally purchase
the remaining Shares subject to the Event Put, pursuant to its
terms, and in each case subject to the restrictions set forth in the
Indenture in the Section entitled "Limitation on Restricted
Payments" and the Section entitled "Limitation on Indebtedness" for
so long as the Notes are outstanding, by obtaining credit and/or the
necessary consent of its creditors other than the holders of the
Notes or the trustee under the Indenture, if applicable. The Event
Put Price of each Share to be purchased shall be paid to the Event
Put Party in Reais Equivalent on the date of such payment.
-6-
9.3 Any Shares not purchased by the Company on the Date of the Event Put
Payment may be converted by the Event Put Party, at its exclusive
discretion, into classes of the Company's Preferred Shares ("Special
Preferred Shares") entitled to a minimum fixed and cumulative
dividend to be determined on the basis of the aggregate Event Put
Price for such unpurchased Shares, multiplied by the one-year LIBOR
rate as quoted by the London branch of The Chase Manhattan Bank
prevailing on the Date of the Event Put Payment, plus 4% per annum
("Cumulative Dividends"), payable semiannually from the Date of the
Event Put Payment through the date such Special Preferred Shares are
purchased by the Company pursuant to the Event Put; provided,
however, if due to restrictions set forth in the Indenture in the
Section entitled "Limitation on Restricted Payments," the Company
may not make payment of the Cumulative Dividends at any time, the
Company shall not be obligated to make payment of such Cumulative
Dividends to the extent restricted by the terms of the Indenture;
provided further however that in such event, (i) such dividends
shall continue to accumulate; and (ii) the Company shall make
payment of such dividends (including any accumulated and unpaid
dividends) as soon as permitted by applicable law and as soon as
such payment is not restricted by the terms of the Indenture. The
Event Put Party shall be entitled to elect, in its sole discretion,
to receive shares of voting (the "Preferred Voting Shares") or
non-voting Special Preferred Shares, or any combination thereof. For
purposes of this Agreement and the Company's ByLaws, the Preferred
Voting Shares shall be deemed to be included in the definition of
"Shares" and all of the rights of the Stockholders hereunder with
respect to the Shares held by them shall continue so long as they
hold the Preferred Voting Shares.
9.4 The Stockholders undertake to exercise the voting rights of their
Shares in order to amend the Company's By-Laws so as to create the
Special Preferred Shares whenever so required according to
provisions set forth herein.
9.5 In addition to the Cumulative Dividends, the Special Preferred
Shares shall be entitled to any minimum dividend required by law to
be paid by the Company ("Mandatory Dividend"), provided, however, if
due to restrictions set forth in the Indenture in the Section
entitled "Limitation on Restricted Payments," and in accordance with
the waiver set forth in Clause 16.4 hereof, the Company may not make
payment of the Mandatory Dividend in cash at any time, the Company
shall not be obligated to make payment of such Mandatory Dividend in
cash to the extent restricted by the terms of the Indenture;
provided further, however, that in such event, (i) such dividends
shall continue to accumulate; and (ii) the Company shall make
payment of such dividends (including any accumulated and unpaid
dividends) as soon as permitted by applicable law and as soon as
such payment is not restricted by the terms of the Indenture.
9.6 After the payment of the Cumulative Dividend and of the Mandatory
Dividend, any remaining profit or reserve (other than mandatory
legal reserves) verified by the Company shall be used to buy the
highest possible amount of Shares
-7-
(including the Special Preferred Shares) subject to the Event Put
Option, provided, however, if due to restrictions set forth in the
Indenture in the Section entitled "Limitation on Restricted
Payments," the Company may not purchase any shares pursuant to this
Clause 9.6 at any time, the Company shall not be obligated to make
such purchase, provided further, however, that in such event the
Company shall make such purchase as soon as permitted by applicable
law and as soon as not restricted by the terms of the Indenture. All
dividend payments and all other distributions to Stockholders and
all redemptions or repurchases of any capital stock from any holder
of capital stock in the Company, with the exception of the
Cumulative Dividend on Special Preferred Shares then outstanding and
of the Mandatory Dividend, are and shall be expressly subject and
subordinate to the acquisition of all of the Shares subject to the
Event Put in the event they have not been purchased from the Event
Put Party. All Cumulative Dividends, and all repurchases of Shares
(including the Special Preferred Shares) subject to the Event Put
Option, shall be made on a pro-rata basis in favor of all
Stockholders that exercised an Event Put simultaneously under Clause
8.1 or 8.2 or 8.3 above; otherwise, the rights of any Event Put
Parties under this Clause 9 and under any Special Preferred Shares
issued hereunder shall be ranked according to the respective Dates
of the Event Put Payment on which such rights arose.
9.7 (i) In the event a Falcon Put Notice in respect of the Falcon Time
Put Option has been delivered, and, pursuant to Clause 7.3 and 6.9
above, Falcon has decided to exercise the Falcon Time Put Option,
then, during the 30-day period immediately following receipt of the
appraiser's notice referred to in Clause 6.7 above (the "Time Put
Decision Period"), the Company shall, by action of a majority of the
members of its Board not appointed by any Falcon Put Party or its
Affiliates, make the following determinations in sequence, promptly
(but in any event within the Time Put Decision Period) notify the
Falcon Put Parties of such determinations and take the following
actions as determined thereby:
(a) If the Company, acting in good faith and in a commercially
reasonable manner, determines that it has, subject to the
restrictions set forth in the Indenture in Section entitled
"Limitation on Indebtedness", and subject to the restrictions
set forth in the Indenture in the Section entitled,
"Limitation on Restricted Payments," cash available which,
together with borrowings available to the Company on
commercially reasonable terms, is sufficient to pay the entire
Time Put Price, then the Company shall pay the Time Put Price
to the Falcon Put Parties by 11:30 a.m. on the 90th day after
the end of the Time Put Decision Period, in cash in Reais
Equivalent on such day of payment, and the Falcon Put Parties
shall transfer to the Company all of the Falcon Put Shares
free and clear of all liens, claims, charges, restrictions and
encumbrances caused by or suffered to exist by any Falcon Put
Party or its Affiliates, other than as provided in this
Agreement; provided it is understood that the Company shall be
subject to an obligation to use its best efforts, subject so
long as
-8-
the Notes are outstanding to the restrictions set forth in the
Indenture in the Section entitled "Limitation on
Indebtedness," to obtain any necessary borrowings on a
commercially reasonable basis to satisfy the Falcon Time Put
Option in cash on the Date of the Falcon Put Payment;
provided, however, that if on such 90th day, the Company is
unable to satisfy the cash payment required hereunder, the
provisions of Clause 9.7(ii) shall be applicable;
(b) If after use of the efforts described in (a) above the Company
determines that such cash and borrowings described in (a)
above are not available but instead determines, acting in good
faith, in a commercially reasonable manner and, for so long as
the Notes are outstanding, subject to the restrictions set
forth in the Indenture in the Section entitled "Limitation on
Restricted Payments," that it will have cash available which,
together with borrowings available to the Company on
commercially reasonable terms and, for so long as the Notes
are outstanding, in accordance with the restrictions set forth
in the Indenture in the Section entitled "Limitation on
Indebtedness" will be sufficient to pay the Time Put Price in
three installments as described in Clause 9.8 below, then the
Company and the Falcon Put Parties shall take the actions
described in Clause 9.8 below, it being understood and agreed
that the Company shall be subject to an obligation to use its
best efforts, subject for so long as the Notes are outstanding
to the restrictions set forth in the Indenture in the Section
entitled "Limitation on Indebtedness," to obtain any necessary
borrowings on a commercially reasonable basis to satisfy all
such installments; and
(c) if the Company, acting in good faith and in a commercially
reasonable manner, determines that such cash and borrowings
described in (a) and (b) above are not available, then the
Company and the Falcon Put Parties shall take the actions
described in Clause 9.9 below.
(ii) If, at the end of the 90-day period referred to in Clause 9.7(i)(a),
the Company, after having used its best efforts to obtain any
necessary borrowings on a commercially reasonable basis and for so
long as the Notes are outstanding in accordance with the
restrictions set forth in the Indenture in the Section entitled
"Limitation on Indebtedness," to satisfy the entire Time Put Price,
is unable to pay the entire Time Put Price, the Company shall, on
such 90th day, be entitled to and shall elect one of the
alternatives set forth in Clause 9.7(i)(b) or (c) above, and in such
event the parties shall be governed by the procedures set forth in
Clause 9.8 or 9.9 below, as the case may be, depending upon the
alternative elected, and the other applicable provisions of this
Agreement.
-9-
4. The following Clause 9.13 shall be added to the end of Clause 9:
9.13 Notwithstanding the provisions of Clauses 9.8 and 9.10 hereof, each
of the parties to the Stockholders Agreement agrees as follows:
(i) If as a result of the restrictions set forth in the Indenture
in the Section entitled "Limitation on Restricted Payments,"
the Company is not able to make a cash payment required under
Clause 9.8(i) on the first or second anniversary of the
Company's receipt of the related Falcon Put Notice, the
Company shall not be required to make such payment in cash on
such dates, but shall be required to deliver the promissory
note or promissory notes referred to in Clause 9.8(ii). The
payment required on the third anniversary shall not be subject
to any restrictions.
(ii) If as a result of the restrictions set forth in the Indenture
in the Section entitled "Limitation on Restricted Payments,"
the Company is not able to make a cash interest payment
required under any promissory note or notes issued hereunder,
the Company shall not be required to make such cash payment at
such time; provided, however, that: (i) any accrued and unpaid
interest shall accumulate (and if necessary under applicable
law, be added to principal) and interest on such unpaid amount
shall be compounded quarterly and shall be paid in accordance
with the other provisions of the promissory notes applicable
to payment of interest; (ii) the Company shall make such
payments of interest as soon as permitted under the terms of
the Indenture or as soon as such payment is no longer
restricted under the terms of the Indenture; and (iii) all
accrued and unpaid interest shall be due and payable on the
maturity of the promissory notes and interest shall continue
to accrue until payment in full.
(iii) Payment of the principal and interest (without restricting
interest payments permitted under the terms of the Indenture),
on the promissory notes shall be subordinated to the prior
payment in full of the Notes, pursuant to language customary
in transactions of this nature and consistent with the terms
hereof, provided that nothing herein nor in such subordination
language shall affect the relative rights against the Company
of Falcon and creditors of the Company other than holders of
the Notes, or prevent Falcon from exercising all remedies
under the notes issued to Falcon pursuant to Clauses 9.8 or
9.9, and otherwise permitted by applicable law, on default
under any such notes, subject to the rights, if any, of the
holders of the Notes to receive payment in full on the Notes
prior to the payment of such principal and interest on such
promissory notes issued to Falcon.
(iv) In determining the interest rate on the promissory notes under
Clause 9.10 (iv)), including without limitation, the spread
referred to in Clause
-10-
9.10(iv), the subordination of payment to the Notes and the
other restrictions imposed pursuant to the Indenture shall be
taken into account.
(v) Except as expressly limited by the terms of this Stockholders
Agreement, as amended, all rights and remedies of Falcon in
respect of the Falcon Time Put as set forth in the
Stockholders Agreement shall remain unimpaired and unaffected
by the Indenture. With respect to any amendment, change or
modification to the Indenture or the Notes which requires the
consent of the Company the Company shall not provide such
consent, unless (i) Falcon, if Falcon, or any Affiliate
thereof (other than Mr. Civita, Abril and any Affiliates
thereof) continues to own at least 5% (five percent) of the
Company's voting Shares, has given prior written consent to
such amendment, change or modification and (ii) the Investor
Entities, or any Affiliates thereof (other than Mr. Civita,
Abril and any Affiliate thereof), continues to own at least 5%
(five percent) of the Company's voting Shares have given prior
written consent to such amendment, change or modification. The
limitations agreed to herein by Falcon and the Investor
Entities shall apply only to the Indenture and Notes and no
other indebtedness of the Company, including any refinancing,
replacement or substitution of the Notes.
5. Section 16.4 of the Stockholders Agreement shall be replaced by the
following:
16.4 (A) Unless amended or waived in accordance with Clause 12.3(iii)(c)
hereof, during each calendar year or within 3 (three) months
thereafter, the Company shall (subject to the other provisions of
Section 16.4 below), with respect to its operations for such year,
and to the extent it has funds legally available therefor, pay
dividends to the holders of its Shares, which dividends shall in the
aggregate not be less than the "net cash flow" of the Company and
its Subsidiaries during such year, provided that there shall first
be made a provision for projected cash requirements of the Company
and its Subsidiaries as reflected in the Business Plan for such
fiscal year for the subsequent (12) twelve month period.
Notwithstanding the foregoing, the Stockholders agree that, except
as expressly provided in Clauses 9.3 or 9.5 above or the terms of
Clause 16.4(B), the Company shall distribute not less than 25%
(twenty-five percent) of its net consolidated profits as defined in
the Brazilian corporation law.
(B) Notwithstanding the foregoing paragraph, the Company and the
Stockholders agree that the Company will distribute dividends in
accordance with the foregoing paragraph only if permitted in
accordance with the restrictions set forth in the Indenture in the
Section entitled "Limitation on Restricted Payments".
-11-
(C) If distribution of such dividends as contemplated by the first
paragraph hereof is restricted by the section of the Indenture
entitled "Limitation on Restricted Payments", the Company shall make
payment of such dividends (including any accumulated and unpaid
dividends) as soon as permitted by applicable law and as soon as
such payment is not restricted by the terms of the Indenture.
(D) In addition, each Stockholder hereby agrees that it will not
exercise its voting rights or rights hereunder to receive dividends
required by Brazilian corporate law, provided, however that such
agreement shall cease to be effective on the earliest to occur of
(x) the date that shares of Stock of the Company are issued on a
Brazilian or United States securities exchange in connection with a
bona fide public offering of such shares or the date that any shares
of the capital stock of the Company are otherwise effectively listed
and traded on any Brazilian or United States securities exchange,
(y) the date that none of the Notes remain outstanding or (z) the
date that such agreement is no longer effective, enforceable or
legal under applicable Brazilian laws and regulations (including
without limitation any construction or interpretation thereof by
Comissao de Valores Mobiliarios, any court or any other governmental
authority); provided, further, that such agreement shall not affect
the Company's ability to pay, or the Stockholders, right to receive,
any other dividends to the extent such dividends are permitted by
the Indenture in the Section entitled "Limitation on Restricted
Payments."
(E) Further, the amount of any dividends required by applicable
Brazilian corporate law, which would otherwise have been paid but
for the agreement set forth herein shall accumulate and shall be
paid by the Company on the earliest to occur of the events described
in clauses (x), (y), and (z) above. For the avoidance of doubt, the
Stockholders hereby confirm that:
E POR ESTAREM ASSIM JUSTAS E CONTRATADAS, as partes, por seus respectivos
representantes devidamente autorizados, resolvem assinar este Aditamento na
primeira data acima escrita.
---------------------------------------
HARPIA HOLDINGS LIMITED
---------------------------------------
CURUPIRA HOLDINGS LIMITED
---------------------------------------
-12-
ROBERT CIVITA
---------------------------------------
ABRIL S.A.
-13-
---------------------------------------
TEVECAP S.A.
---------------------------------------
FALCON COMMUNICATIONS
(BERMUDA) L.P.
---------------------------------------
HEARST/ABC VIDEO SERVICES II
By: Hearst Brazil, Inc., its partner
---------------------------------------
By: Brazil Cable Investments, Inc., its
partner
---------------------------------------
CABLE PARTICIPACOES LTDA.
By: Hearst Brazil, Inc., its partner
---------------------------------------
By: Brazil Cable Investments, Inc., its
partner
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