-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Bl07bl+GqN2tFG5tD8mf9OpOGpC9VQayU79XsO63c6RMw2g39YwaLnzKfJo9LD0R fyCDqSnlcKrZmee9qaPw1Q== 0001047469-97-007349.txt : 19971211 0001047469-97-007349.hdr.sgml : 19971211 ACCESSION NUMBER: 0001047469-97-007349 CONFORMED SUBMISSION TYPE: SC 14D9 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19971210 SROS: NASD SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: TESCORP INC CENTRAL INDEX KEY: 0000865457 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 742129403 STATE OF INCORPORATION: TX FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: SC 14D9 SEC ACT: SEC FILE NUMBER: 005-41166 FILM NUMBER: 97735949 BUSINESS ADDRESS: STREET 1: 327 CONGRESS AVENUE CITY: AUSTIN STATE: TX ZIP: 78701 BUSINESS PHONE: 5124762995 MAIL ADDRESS: STREET 1: 327 CONGRESS AVE SUITE 200 STREET 2: 327 CONGRESS AVE SUITE 200 CITY: AUSTIN STATE: TX ZIP: 78701 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: TESCORP INC CENTRAL INDEX KEY: 0000865457 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 742129403 STATE OF INCORPORATION: TX FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: SC 14D9 BUSINESS ADDRESS: STREET 1: 327 CONGRESS AVENUE CITY: AUSTIN STATE: TX ZIP: 78701 BUSINESS PHONE: 5124762995 MAIL ADDRESS: STREET 1: 327 CONGRESS AVE SUITE 200 STREET 2: 327 CONGRESS AVE SUITE 200 CITY: AUSTIN STATE: TX ZIP: 78701 SC 14D9 1 SCHEDULE 14D-9 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 14D-9 SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ) Tescorp, Inc. - -------------------------------------------------------------------------------- (Name of Subject Company) Tescorp, Inc. - -------------------------------------------------------------------------------- (Name of Person(s) Filing Statement) Common Stock, par value $.02 per share - -------------------------------------------------------------------------------- (Title of Class of Securities) 881584106 - -------------------------------------------------------------------------------- ((CUSIP) Number of Class of Securities) Jack S. Gray, Jr. President and Chief Operating Officer Tescorp, Inc. 327 Congress Avenue, Suite 200 Austin, Texas 78701 (512) 476-2995 - -------------------------------------------------------------------------------- (Name, address and telephone number of person authorized to receive notice and communications on behalf of the person(s) filing statement) Copies to: Stephen T. Burdumy, Esq. Klehr, Harrison, Harvey, Branzburg & Ellers LLP 1401 Walnut Street Philadelphia, PA 19102 (215) 569-4646 INTRODUCTION This Solicitation/Recommendation Statement on Schedule 14D-9 (this "Statement") relates to an offer by Tescorp Acquisition Corporation, a Delaware corporation ("Acquisition") and a wholly-owned subsidiary of Supercanal Holding S.A., an Argentine corporation ("Supercanal"), to purchase all outstanding shares of common stock, par value $.02 per share (the "Common Stock" or "Common Shares") of Tescorp, Inc., a Texas corporation (the "Company"). ITEM 1. SECURITY AND SUBJECT COMPANY. The name of the Subject Company and location of its principal executive offices are Tescorp, Inc., 327 Congress Avenue, Suite 200, Austin, Texas 78701. The title of the class of equity securities to which this statement relates is the Company's Common Stock. ITEM 2. TENDER OFFER OF THE BIDDER. This Statement relates to the tender offer made by Acquisition, disclosed in a Tender Offer Statement on Schedule 14D-1 dated December 8, 1997 and filed by Acquisition (the "Acquisition Schedule 14D-1"), to purchase (i) all outstanding Common Shares for an amount per Share of $4.50 (the "Common Stock Tender Offer") and (ii) all outstanding shares of the Company's Series 1995 8% Convertible Preferred Stock (the "8% Preferred Stock" or "8% Preferred Shares") for an amount per Share equal to $144 plus accrued and unpaid dividends (the "Preferred Stock Tender Offer" and, together with the Common Stock Tender Offer, the "Tender Offers"), upon the terms and subject to the conditions set forth in Acquisition's Offer to Purchase dated December 8, 1997 (the "Offer to Purchase") and the related Transmittal Letter (the Acquisition Schedule 14D-1, the Offer to Purchase, Transmittal Letter and related documents, together with any amendments or supplements thereto, are sometimes collectively referred to herein as the "Offer Documents"). A copy of the Offer to Purchase is filed as Exhibit 1 hereto. The Acquisition Schedule 14D-1 states that the principal executive offices of both Acquisition and Supercanal are Godoy Cruz 316, Mendoza, Province of Mendoza, Argentina 5500. The Tender Offers are being made pursuant to the Amended Stock Purchase and Merger Agreement, dated as of November 26, 1997, between Acquisition and the Company, (the "Merger Agreement"). All holders of any of the Company's equity securities ("Stockholders") are encouraged to read the Merger Agreement, a copy of which is filed as Exhibit 2 to this Statement. ITEM 3. IDENTITY AND BACKGROUND. (a) The name and business address of the Company, which is the person filing this Statement, are set forth in Item 1 above. (b) As of the date hereof, except as described below, there exists no material contract, agreement, arrangement or understanding and no actual or potential conflict of interest between the Company or its affiliates and (i) the Company's executive officers, directors or affiliates, or (ii) Acquisition or Supercanal, their executive officers, directors or affiliates. THE MERGER AGREEMENT. Acquisition and the Company entered into an Amended Stock Purchase and Merger Agreement dated as of November 26, 1997. The Merger Agreement provides that (i) on December 5, 1997, Acquisition shall purchase a total of 6,006,006 shares of the Company's Common Stock for $20,000,000 ($3.33 per share), of which $15,000,000 would be paid in cash and the balance would be paid by permitting the Company to retain a $5,000,000 deposit which Acquisition had given to the Company when the Original Merger Agreement (as defined in Section 4(b) hereof) was executed, (ii) the Tender Offers shall be announced not later than December 5, 1997 and materials relating to the Tender Offers shall be sent to the Company's stockholders not later than five business days after the date of announcement, and (iii) if, pursuant to the Tender Offers, Acquisition obtains at least two-thirds of the 2 outstanding Common Stock and two-thirds of the outstanding 8% Preferred Stock (the "Minimum Condition"), or if the Minimum Condition is waived, the Merger shall occur. In such a case, Acquisition will be merged with and into the Company, thus forming surviving corporation (the "Surviving Corporation"). STOCK OF THE COMPANY. At the effective time of the Merger (the "Effective Time"), each Common Share which is outstanding immediately before the Effective Time, other than Common Shares owned by Acquisition, will be converted into and become the right to receive $4.50 in cash, or any higher price per share paid with regard to Common Shares tendered in response to the Tender Offers. At the Effective Time, each 8% Preferred Share which is outstanding immediately before the Effective Time will be converted into and become the right to receive in cash $144 plus accrued dividends per 8% Preferred Share. At the Effective Time, each Common Share or 8% Preferred Share held by Acquisition or by any direct or indirect subsidiary of the Company, immediately before the Effective Time will be canceled and no payment will be made with respect to those shares. STOCK OF ACQUISITION. At the Effective Time, each share of common stock of Acquisition which is outstanding immediately before the Effective Time will be converted into and become one share of common stock of the Surviving Corporation. STOCKHOLDER VOTE REQUIRED TO APPROVE MERGER. Under the Texas Business Corporation Act (the "TBCA"), the affirmative vote of holders of two-thirds of the outstanding shares entitled to vote on such a matter (including any shares owned by the Purchaser) is required to approve the Merger. If the Minimum Condition is satisfied, Acquisition will have sufficient voting power to effect the Merger without the vote of any other stockholder of the Company. If Acquisition acquires more than 90% of such voting shares outstanding, stockholder approval will not be required under Article 5.16 of the TBCA. STOCKHOLDERS MEETING. Pursuant to the terms of the Merger Agreement, if the Minimum Condition is satisfied and approval by the Company's stockholders is required in order to consummate the Merger, the Company will hold a special meeting of its stockholders as soon as practicable after the Expiration Date (as defined in the Merger Agreement) for the purpose of adopting this Agreement and approving the Merger. CONDITIONS TO THE MERGER. Neither the Company nor Acquisition is contractually obligated to complete the Merger unless Acquisition acquires the Shares tendered in response to the Tender Offers and the Minimum Condition is satisfied. If that occurs (i) Acquisition will own a sufficient number of Shares to he able to approve the Merger even if no other stockholders of the Company vote in favor of it and (ii) Acquisition will be contractually obligated to vote in favor of the Merger. The obligations of the Company to carry out the Merger will be conditioned on the Merger being approved by the holders of two-thirds of the outstanding Common Shares and two-thirds of the outstanding 8% Preferred Shares (which will occur if the Minimum Condition is satisfied and Acquisition votes in favor of the Merger). Additionally, the obligations of the Company and of Acquisition to complete the Merger are subject to the following conditions: (i) no order will have been entered by any court or governmental authority and be in force which invalidates the Merger Agreement or restricts the Company from completing the transactions contemplated by the Merger Agreement; (ii) the Effective Time shall have occurred on or before March 31, 1998; (iii) the number of Shares held by stockholders of the Company who have filed written objections to the approval of the Merger sufficient to preserve their rights to demand the fair value of their Shares pursuant to Articles 5.11 through 5.13 of the TBCA does not exceed 5% of the total number of outstanding Common Shares and 8 % Preferred Shares combined (treating each share of 8% Preferred Shares as being equal to 32 shares of Common Shares). 3 TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be terminated at any time prior to the Effective Time, whether before or after approval of the terms of the Merger Agreement by the stockholders of the Company: (1) by mutual consent of the Company and Acquisition; (2) by the Company, if without fault of the Company, the Expiration Date (as defined in the Merger Agreement) of the Tender Offers is not on or before January 31, 1998; (3) by the Company or Acquisition if, without fault of Acquisition, the Effective Time is not on or before March 31, 1998; (4) by the Company if (i) any of the representations and warranties of Acquisition contained in the Merger Agreement was not complete and accurate in all material respects on the date of the Merger Agreement, or (ii) any of the conditions to the Company's obligations to complete the Merger is not satisfied or waived by the Company prior to or on the date of the Merger, and the Company has paid Acquisition $5,000,000, if applicable; (5) by Acquisition if (i) any of the representations or warranties of the Company contained in the Merger Agreement was not complete and accurate in all material respects on the date of the Merger Agreement, or (ii) any of the conditions to Acquisition's obligations to complete the Merger are not satisfied or waived by Acquisition prior to or on the date of the Merger; or (6) by the Company if (i) a tender or exchange offer is commenced by a potential acquiror for all the outstanding Common Shares and 8% Preferred Shares for a consideration having a value of at least $5 per Common Share and $160 per 8% Preferred Share, (ii) the Company's Board of Directors determines in good faith and after consultation with an independent financial advisor that the offer constitutes a Superior Proposal (as defined below) and resolves to accept the Superior Proposal or to recommend to the Company's stockholders that they tender their shares in response to the tender or exchange offer, (iii) the Company has given Acquisition at least 10 business days' prior notice of its intention to terminate pursuant to this provision and (iv) the Company has paid Acquisition $5,000,000. A "Superior Proposal" is an unsolicited proposal to the Company which (x) would result in the Company's stockholders receiving consideration with a fair value determined in good faith by the Company's Board of Directors and after consultation with the Company's independent financial advisor to be more than $5 per share of Common Stock and more than $160 per share of 8% Preferred Stock and (y) is determined in good faith by the Company's Board of Directors to be more favorable both to the holders of Common Shares and to the holders of the 8% Preferred Shares than the transactions contemplated by the Merger Agreement. EFFECT OF TERMINATION OF THE MERGER AGREEMENT. If the Merger Agreement is terminated, neither the Company nor Acquisition will be required to complete the Merger. If the Merger Agreement is terminated after Acquisition has accepted Shares tendered in response to the Tender Offers, the termination will not affect Acquisition's purchase of the Shares it has accepted or its obligation to pay for those shares. If the Merger Agreement is terminated by the Company because Acquisition fails to fulfill its obligations related to the Tender Offers or the Merger, Acquisition will be obligated to pay the Company $5,000,000. ACQUISITION PROPOSALS. The Merger Agreement contains (i) prohibitions against the Company soliciting or authorizing its officers, directors, employees or agents to solicit acquisition proposals and (ii) prohibitions regarding permitted actions of the Company if it receives unsolicited acquisition proposals. OTHER PROVISIONS. The Merger Agreement also contains provisions (i) requiring the Company to operate its business in the ordinary course, including maintaining the goodwill of its business and maintaining its assets in good condition , limiting the Company's borrowings and commitments for capital expenditures, and precluding the Company from paying dividends (other than required dividends with regard to its preferred stock) or taking other steps regarding its stock, until the Effective Time, 4 (ii) requiring the Purchaser (and the Corporation which survives the Merger) to indemnify directors, officers, employees, fiduciaries and agents of the Company and its subsidiaries against liability arising out of their service as directors, officers, employees or agents of the Company or its subsidiaries, or of companies with regard to which they served as directors, officers, employees or agents at the request of the Company or its subsidiaries. REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various customary representations and warranties. APPRAISAL RIGHTS. If the Merger is consummated, holders of Shares at the Effective Time will have rights pursuant to the provisions of Article 5.12 of the TBCA ("Article 5.12") to dissent and demand appraisal of their Shares. Under Article 5.12, dissenting stockholders who comply with the applicable statutory procedures will be entitled to receive a judicial determination of the fair value of their Shares (exclusive of any element of value arising from the accomplishment or exception of the Merger) and to receive payment of that fair value in cash, together with a fair rate of interest, if any. The statutory procedures require a dissenting stockholder to notify the Company prior to the meeting at which the Company's stockholders vote on the Merger (i) that he or she intends to exercise his or her dissenter's rights and (ii) of his or her address. Any judicial determination of the fair value of Shares could be more or less than the price per Share to be paid in the Merger. Holders of Shares will not have appraisal rights in connection with the Tender Offers. The foregoing summary of Article 5.12 does not purport to be complete and is qualified in its entirety by reference to Article 5.12. Failure to follow the steps required by Article 5.12 for perfecting appraisal rights may result in the loss of those rights. Acquisition will not be required to complete the Merger if holders of more than 5% of the outstanding Common Shares and 8 % Preferred Shares combined (treating each 8 % Preferred Share as equal to 32 Common Shares) file objections sufficient to preserve their right to demand appraisal of their Shares. REPURCHASE OF OPTIONS AND WARRANTS. The Merger Agreement provides that the Company will use its best efforts to provide that, immediately prior to the acceptance of Shares in response to the Tender Offers, each holder of an Option (as defined below) will become fully vested and, if certain conditions are met, each Option will be canceled and the holder of each Option will receive, not later than ten days after the Tender Offers expire, a cash payment equal to the excess of the price per Common Share to be paid in the Merger over the exercise price of the Option multiplied by the number of shares subject to the Option when it is canceled. The Merger Agreement further provides that, if certain conditions are satisfied or waived, that five days after all of the Company's 10% Preferred Stock has either been converted into Common Shares or redeemed, certain holders of warrants to purchase Common Shares, holders may tender such warrants in exchange for payment equal to the excess of the price per Common Share to be paid in the Merger over the exercise price of such warrants multiplied by the number of Common Shares subject to the warrants when they are canceled. BORROWINGS BY THE COMPANY. Pursuant to Paragraph 7.1(d) of the Merger Agreement, the Company may not make any borrowings other than (i) borrowings in the ordinary course of business under working capital lines which are disclosed in the notes to the Company's consolidated balance sheet at March 31, 1997 or June 30, 1997 included in the Company's filings with the Securities and Exchange Commission, and (ii) up to a total of $1,000,000 under revolving credits from the Jack R. Crosby Inter Vivos Trust and the Sharpe Irrevocable Inter Vivos Trust. BONUS PAYMENTS. Paragraph 7.1(m) of the Merger Agreement permits the Company to make bonus payments aggregating $300,000 to Jack R. Crosby, Chairman of the Board and Chief Executive Officer of 5 the Company, and Jack S. Gray, Jr., the Company's Chief Operating Officer. Such bonus payments are expected to be paid prior to the consummation of the Merger. BOARD REPRESENTATION. In accordance with Section 7.6 of the Merger Agreement, Daniel E. Vila, a designee of Acquisition, was elected to the Board of Directors of the Company (the "Board") on December 5, 1997 and the Company is to use its best efforts to cause Mr. Vila, or another of Acquisition's designees in place of Mr. Vila, to be re-elected at all subsequent meetings of the Company's stockholders at which directors are elected. Pursuant to Section 3.5 of the Merger Agreement, after the Merger, Jose Maria Saenz Valiente, Jr. and Alberto L. Vila will also be elected to the Board. The Board will consist entirely of these three individuals. Each of these individuals is currently a director of Supercanal. The foregoing summary of the Merger Agreement is qualified by reference to the Merger Agreement which should be read in its entirety for a more complete description of the terms and provisions of the Merger Agreement. AMENDED AND RESTATED 1991 INCENTIVE PLAN. As of the date hereof, there are 8 holders (each an "Optionholder") of options to purchase Common Shares (each an "Option") under the Company's Amended and Restated 1991 Incentive Plan (the "1991 Incentive Plan"), a copy of which is filed as Exhibit 3 hereto, at various exercise prices. The aggregate number of Common Shares underlying such Options is 1,850,000. There are an additional 83,333 Common Shares underlying Options granted pursuant to the 1993 Non-Employee Directors Stock Option Plan (described below), which makes the total number of Common Shares underlying outstanding Options 1,933,333. Pursuant to Section 9 of the 1991 Incentive Plan, at and after the Effective Time (as defined below), each holder of an Option thereunder shall be entitled to purchase under such Option, in lieu of the number of Common Shares that would have been received, the number and class of shares of stock and other securities to which such holder would have been entitled pursuant to the terms of the Merger if, immediately prior thereto, the Optionholder had been the holder of record of the number of shares of the Company's Common Stock. The "Effective Time" is 11:59 P.M. on the day when a Certificate of Merger has been filed with the Secretary of State of Texas and a Certificate of Merger has been filed with the Secretary of State of Delaware. In accordance with Section 8 of the 1991 Incentive Plan, certain of the Optionholders have Limited Stock Appreciation Rights ("LSARs") pursuant to which such Optionholders have the right, with respect to each Option to which an LSAR relates (a "Related Option"), to receive in cash a dollar amount equal to the product computed by multiplying (i) the excess of (A) the Merger Price Per Share over (B) the Exercise Price Per Share (as defined in each respective Related Option Agreement) of Common Stock at which the Related Option is exercisable, by (ii) the number of shares of Common Stock with respect to which such LSAR is being exercised. Each LSAR may be exercised only during the period of seven months immediately following the date on which the Tender Offers were first made. Pursuant to Section 7.7 of the Merger Agreement, the Company is obligated to use its best efforts to provide that, immediately prior to the acceptance of Shares in response to the Tender Offers, each Optionholder will become fully vested and, if certain conditions to the Merger Agreement are fulfilled, each Option will be canceled and each Optionholder will receive the excess of the Merger Price for the Common Stock (as defined in the Merger Agreement) over the per share exercise price of the Option multiplied by the number of shares subject to the Option at the time such Option is canceled. Pursuant to Section 3.13 of the Merger Agreement, Supercanal shall fulfill, after the Effective Time, all of the Company's obligations under all Options which are outstanding at the Effective Time, taking account of all changes in the Options resulting from the Merger. 6 1993 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN. As of the date hereof, there are four Directors, J. Kelly Elliott, Lee A. Lahourcade, Winston J. Churchill and Daniel Vila, who hold Options under the Company's 1993 Non-Employee Directors Stock Option Plan (the "1993 Option Plan"), a copy of which is attached as Exhibit 4 hereto. Pursuant to Section 11 of the 1993 Option Plan, the Merger will cause all Options issued thereunder and outstanding to terminate, and in this event, each of these holders shall have a right, exercisable within a period of 30 days immediately prior to the closing of the Merger, to exercise the Option without regard to any limitation on exercise prior to the date contained in a related Option Agreement, unless such Option has expired or been terminated pursuant to its terms. PROGRAMMING PURCHASE AGREEMENT. On or about December 5, 1997, the Company and Supercanal entered into a Programming Purchase Agreement (the "Programming Agreement"), a copy of which is attached as Exhibit 7 hereto. Pursuant to the Programming Agreement, the Company has the nonexclusive right, but not the obligation, to purchase from Supercanal any television programming which Supercanal has the right to sell to the Company and the Company desires to purchase. As stated in Section 1(b) of the Programming Agreement, in exchange for the rights granted to the Company thereunder, the Company agreed to execute the Merger Agreement. As additional consideration, the Company agreed to convey to Supercanal (i) an amount equal to Supercanal's actual cost of the programming (not including overhead or similar costs), an estimate of which is listed on a per subscriber basis in Exhibit A to Programming Agreement, and (ii) the right for Supercanal to include the total number of the Company's subscribers in Supercanal's subscription base for the purpose of negotiating contracts with individual programmers. The term of the Programming Agreement is ten years, from December 5, 1997 through December 5, 2007; provided, however, either party may extend the Programming Agreement for successive one year terms by providing the other party with written notice not later than one month prior to the termination thereof. INDEMNIFICATION OF OFFICERS AND DIRECTORS. The Company's Certificate of Incorporation provides that no director of the Company shall be personally liable to the Company or its stockholders for monetary damages for any at or omission in his capacity as a director, except to the extent otherwise expressly provided by a statute of the State of Texas. In addition, the Merger Agreement provides that the Company (and Surviving Corporation after the Effective Time) will indemnify and hold harmless, to the fullest extent permitted by applicable law, any director, officer, employee, fiduciary or agent of the Company or any of its subsidiaries against any losses, claims, damages, liabilities, costs, expenses (including attorneys' fees and expenses), judgments, fines and amounts paid in settlement in connection with any threatened or actual claim, action, suit, proceeding or investigation. Following the Effective Time, Surviving Corporation will cause the Company's current directors' and officers' liability insurance policies to remain in effect for at least three years after the Effective Time or will substitute policies of at least the same coverage with terms and conditions which are not less advantageous to the insureds than those presently maintained by the Company. ITEM 4. THE SOLICITATION OR RECOMMENDATION. (a) Recommendation. The Board of Directors of the Company (the "Board") unanimously recommends that each holder of either Common Shares or 8% Preferred Shares (a "Stockholder") tender all such Shares pursuant to the Tender Offers. The Board has (i) determined that the Merger Agreement and the transactions contemplated therein (the "Merger Transactions"), including, without limitation, the Tender Offers and tenders made pursuant thereto, are fair to and in the best interests of the Company and its stockholders and (ii) approved the Merger Agreement and the Merger Transactions. 7 This recommendation is based upon a thorough analysis of numerous factors including but not limited to (i) the tender price proposed by Acquisition relative to the trading price of the Common Shares immediately prior to the announcement of the Tender Offers, (ii) an examination of prices paid for similar companies prior to and at the time of the Tender Offers, (iii) the estimated financial benefits to stockholders of alternative financial strategies, (iv) changes in industry conditions and (v) third party opinions regarding the fairness of the transaction proposed by Acquisition. (b) Background and Reasons for the Recommendation. The initial discussions of a possible combination involving Supercanal and the Company took place at a meeting in October 1996 between senior officers of the Company and representatives of Integra Financial Services LLC ("Integra"), an advisor to Supercanal. These initial discussions, and additional discussions through March 1997, focused on the high degree of consolidation in the Argentine cable television industry which was taking place, and the advisability of combining the operations of Supercanal and the Company in view of that consolidation. In April 1997, there were discussions about merging the Company into Supercanal. Pursuant to the proposed terms, the Company's stockholders would receive shares of stock in Supercanal. Extensive discussions were held and draft agreements were prepared. However, the Merger would have required approval of the stockholders of both companies. A stockholder of Supercanal, which had the ability to preclude Supercanal from carrying out the Merger, stated it would not approve a Merger. Accordingly, discussions of a Merger were dropped. Early in August 1997, discussions of a combination involving Supercanal and the Company were revived. Supercanal was represented in these discussions by Integra, Smith Barney & Co., Inc. ("Smith Barney") and ING Baring (U.S.) Securities, Inc. ("ING Securities"). The Company was represented in these discussions by its senior officers and by Arnhold and S. Bleichroeder & Co. ("Bleichroeder"). By mid-August, each of Supercanal and the Company was represented by counsel who began preparing draft agreements. From mid-August to mid-September, there were nearly daily discussions of such a combination. Initially, the discussions focused on a purchase by Supercanal from the Company of what would be approximately 45% of its outstanding Common Stock and 30% of its outstanding Series 1995 8% Preferred Stock for approximately $39 million, followed by a Merger of the Company into a Supercanal subsidiary pursuant to which the Company's stockholders were to receive $4.53 per Common Share and $144.96 per 8% Preferred Share. However, at Supercanal's suggestion, it was decided the transaction would take place in three steps, with the Tender Offers taking place between the initial stock purchase and the Merger. A principal issue during these discussions was the Company's desire to receive assurance that Supercanal would not become unable to complete such transactions either (i) because it would not have adequate funds or (ii) because its stockholders would not permit the transactions to proceed. Regarding the first concern, ING Baring (US) Capital Corporation ("ING Capital") delivered a letter to the Company stating that ING Capital had obtained internal credit approval for a senior secured credit facility in an aggregate principal amount sufficient to conclude the transactions contemplated by the Stock Purchase and Merger Agreement (the "Original Merger Agreement"), dated as of September 16, 1997, between Acquisition and the Company, but that disbursement of the facility is subject to the negotiation, execution and delivery of definitive documentation satisfactory to ING Capital and its counsel, which would contain, among other things, customary covenants, conditions precedent and security arrangements (including financial covenants on a pro forma basis concerning the combined operations of Supercanal and the Company). With regard to the second concern, the stockholders of Supercanal all stated they approved of the transaction. On September 16, 1997, Supercanal and the Company signed the Original Merger Agreement in which they agreed that (i) a subsidiary of Supercanal (Acquisition) would purchase 10,790,000 shares of the 8 Company Common Stock (which would be approximately 45% of the outstanding Common Stock) for $35,930,700 ($3.33 per share) and would purchase 6,750,000 shares of 8% Preferred Stock (which would be 30% of the outstanding 8% Preferred Stock) for $6,075,000 ($100 per share), (ii) shortly after completion of that stock purchase, Acquisition would make Tender Offers for all the outstanding Common Stock and 8% Preferred Stock for $4.50 per share and $144 per share plus an amount equal to accrued dividends, respectively, and (iii) if the Tender Offers resulted in Acquisition owning at least two-thirds of the outstanding Common Stock and two-thirds of the outstanding 8% Preferred Stock (which would enable the Supercanal subsidiary to approve the Merger between the Company and itself even if no other Stockholders voted in favor of the Merger), the Company and Acquisition would be merged in a transaction in which Supercanal would become the sole stockholder of the merged company and each holder who had not tendered his or her Shares would receive $4.50 per Common Share and $144, plus accrued dividends, per 8% Preferred Share, unless he or she sought to obtain appraisal of such Shares in accordance with Articles 5.11 through 5.13 of the TBCA. On September 15, 1997, the day prior to the date of execution of the Original Merger Agreement, the closing price for the Company's Common Stock, as reported on the NASDAQ SmallCap Market, was $3.375 per share. The 8% Preferred Stock is not publicly traded. Accordingly, the prices to be paid in the Tender Offers represented a premium of 33.3% and 44.0% in excess of the closing price of the Common Stock and the redemption price of the 8% Preferred Stock, respectively. The Company's Board of Directors deemed the premiums to be significant and concluded that the Tender Offers would enable the Company's stockholders to realize a price per Share significantly higher than the price per Share such stockholders would be likely to realize through an open market sale of Shares in the absence of the Tender Offers. After the Original Merger Agreement was signed, required filings were made under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the waiting periods required by the HSR Act were terminated. Also, agreements between Supercanal and various financial institutions, including an agreement with ING Bank N.V., pursuant to which Supercanal received the financing required for the Tender Offers and the Merger contemplated by the Original Merger Agreement, were drafted. However, before those financing agreements were signed, it was realized that the purchase by Acquisition of 45% of the Company's Common Stock and 30% of its 8% Preferred Stock would not result in the Company's financial statements being included in Supercanal's consolidated financial statements. Consequently, the Merger would cause Supercanal to be in violation of financial ratio covenants which were required in the loan agreements. On November 5, 1997, representatives of Supercanal informed the Company's principal executive officers that Supercanal would not be able to carry out the transactions contemplated by the Original Merger Agreement due to the reasons mentioned above. Discussions ensued, and on December 5, 1997, Acquisition and the Company entered into the Amended Stock Purchase and Merger Agreement. The Merger Agreement provides that (i) on December 5, 1997, Acquisition shall purchase a total of 6,006,006 shares of the Company's Common Stock for $20,000,000 ($3.33 per share), of which $15,000,000 would be paid in cash and the balance would be paid by permitting the Company to keep a $5,000,000 deposit which the Acquisition had given to the Company when the Original Merger Agreement was executed, (ii) the Tender Offers shall be announced not later than December 12, 1997 and materials relating to the Tender Offers shall be sent to the Company's stockholders not later than December 12, 1997, and (iii) if, pursuant to the Tender Offers, Acquisition obtains at least two-thirds of the outstanding Common Stock and two-thirds of the outstanding 8% Preferred Stock (the "Minimum Condition"), the Merger shall occur. In such a case, Acquisition will be merged with and into the Company, thus forming Surviving Corporation. The Merger Agreement is described in Item 3(b) under the caption "The Merger Agreement." In the past two years, the Board has explored in detail numerous proposals for maximizing stockholder value. These opportunities included the merger of the business activities of the Company into other entities engaged in similar activities and the outright sale of the Company to independent companies. During this period of time, detailed discussions were conducted regarding the value of the Company's 9 properties relative to those of potential merger candidates. Additionally, the Board considered the prices being paid for properties that were similar to those owned by the Company. Based upon these analyses, the Board concluded that the prices per Share offered by Acquisition pursuant to the Tender Offers was among the highest prices paid in the equity market for properties similar to that owned by the Company. Such conclusion was reached after an analysis of the per share tender prices relative to per subscriber values, trailing estimated cash flow multiples, discounted cash flow analyses and certain other criteria. Subsequent to the execution of the Original Merger Agreement, the Argentine cable television market experienced significant changes. Several acquisitions have been announced which suggest that the Argentine cable television market will be consolidated by three companies: Multicanal S.A. ("Multicanal"), which holds a minority interest in Supercanal, Cablevision S.A. ("Cablevision"), which is controlled by CEI and Supercanal. Additionally, an affiliate of Supercanal acquired the Argentine cable television assets of United International Holdings, Inc., and as a result of this acquisition, the Company and Supercanal operate competitive cable television systems in the Argentine cities of Comodoro Rivadavia, Trelew and Rawson. The Board has concluded that Tender Offers represent an excellent opportunity for the Company's stockholders to capitalize on the competitive re-alignment underway in the Argentine market. Additionally, prior to executing the Original Merger Agreement, the Company obtained a verbal opinion (the "Fairness Opinion") from Arnhold & S. Bleichroeder, Inc. ("Bleichroeder"), an independent, third party investment banker, regarding the fairness of the Tender Offers proposed by Acquisition. Bleichroeder has provided financial and advisory services to the Company since the commencement of its operations in Argentina including, but not limited to, investment banking services pertaining to prospective mergers, capital-raising activities and financial negotiations. Bleichroeder provided to the Board an unqualified Fairness Opinion which concluded that the Tender Offers were fair and equitable to the Company's stockholders from a financial point of view. Bleichroeder re-issued its Fairness Opinion in written form at the time of execution of the Merger Agreement, a copy of which is filed as Exhibit 6 hereto. ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. Each party to the Merger Agreement represents in Article 10.1 thereof that nobody acted as a broker, a finder or in any similar capacity in connection with the transactions which are the subject of this Agreement, except that Bleichroeder and Prudential Securities, Inc. ("Prudential") acted as financial advisors to the Company and ING Securities, Smith Barney and Integra acted as financial advisors to Acquisition and Supercanal. The fees of Bleichroeder and Prudential, which together will total the lesser of (i) 2% of the total amount paid by Acquisition for shares it acquires through the Stock Purchase and the Tender Offers plus the total Merger consideration, or (ii) $2 million will be paid by the Company, except that if (i) the Tender Offers are commenced and all the conditions on the Exhibit 2.1-C to the Merger Agreement are fulfilled, or (ii) the Tender Offers are not commenced because Acquisition breaches its obligations under the Merger Agreement, Acquisition will pay those fees. The fees of ING Securities, Smith Barney and Integra, which together will total the lesser of (x) 2% of the total amount paid by Acquisition for the shares it acquires through the Stock Purchase (as defined in the Merger Agreement) and the Tender Offers plus the Merger Consideration (as defined in the Merger Agreement) or (y) $2 million, will be paid by Acquisition. Except as described herein, neither the Company nor any person acting on its behalf currently intends to employ, retain or compensate any other person to make solicitations or recommendations to security holders on its behalf concerning the Merger. ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES. (a) Except as set forth in Items 3 and 4 herein, neither the Company nor any subsidiary of the Company nor, to the best of the Company's knowledge, any executive officer, director or affiliate of the Company has effected a transaction in the Shares during the past 60 days. 10 (b) To the best of the Company's knowledge, (i) each of its executive officers and directors intends to tender his or her Shares in response to the Tender Offers or (in the case of directors and executive officers who might as a result of their tenders incur liability under Section 16(b) of the Securities Exchange Act of 1934, as amended, and who do not tender their Shares) to vote such Shares in favor of the Merger and (ii) none of its executive officers, directors or other affiliates presently intends to otherwise sell any Shares that are owned beneficially or held of record thereby. ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY. (a) Except as described in Item 3(b) and Item 4(b), the Company has not undertaken, and there is not underway, any response to the Tender Offers which relates to or would result in (i) an extraordinary transaction such as a Merger or reorganization, involving the Company or any subsidiary of the Company; (ii) a purchase, sale or transfer of a material amount of assets by the Company or any subsidiary of the Company; (iii) a tender offer for or other acquisition of securities by or of the Company; or (iv) any material change in the present capitalization or dividend policy of the Company. (b) Except as described in Items 3 and 4, there are no transactions, board resolutions, agreements in principle or signed contracts in response to the Tender Offers which relate to or would result in one or more of the events referred to in Item 7(a) above. ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED. The Company is incorporated under the laws of Texas. Effective September 1, 1997, a new Part Thirteen of the TBCA prohibits a public corporation organized under Texas law, or its majority owned subsidiaries, from engaging in a transaction with a person who holds or acquires 20% or more of the corporation's outstanding voting stock or its affiliates, for three years after the person acquires that 20% or greater interest, share exchange, sale of significant assets, issuance of shares, liquidation of the corporation pursuant to an agreement with the 20% or greater stockholder, reclassification of the securities of the corporation which increases the portion of the stock of any class or series owned by the 20% or greater stockholder or the receipt by the 20% or greater stockholder of loans or similar financial assistance. The three year ban does not apply, however, if the proposed transaction with the 20% or greater stockholder, or the transaction by which the person became a 20% or greater stockholder, is approved by the board of directors of the corporation before the person becomes a 20% or greater stockholder. Because the Board of the Company approved the Stock Purchase (the transaction by which Acquisition, and indirectly Parent, became a 20% or greater stockholder of the Company) before it took place, the TBCA will not apply to Acquisition or Supercanal. ITEM 9. MATERIAL TO BE FILED AS EXHIBITS. (a) Exhibit 1. Offer to Purchase (b) Exhibit 2. Merger Agreement (c) Exhibit 3. 1991 Incentive Plan (d) Exhibit 4. 1993 Non Employee Directors Plan (e) Exhibit 5. Programming Agreement (f) Exhibit 6. Fairness Opinion (g) Exhibit 7. Letter to Shareholder 11 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. December 8, 1997 /s/ Jack R. Crosby -------------------------------------- Jack R. Crosby CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER 12 SCHEDULE I TESCORP, INC. 327 CONGRESS AVENUE, SUITE 200 AUSTIN, TEXAS 78701 INFORMATION STATEMENT PURSUANT TO SECTION 14(F) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER This Information Statement is being mailed on or about December 8, 1997 as a part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") of Tescorp, Inc. (the "Company") to the holders of record of (i) the Company's Common Stock, par value $.02 per share (the "Common Stock"), and (ii) the Company's Series 1995 8% Convertible Preferred Stock (the "8% Preferred Stock") at the close of business on or about December 8, 1997. You are receiving this Information Statement in connection with the election of persons designated by Acquisition (as defined below) to all of the seats on the Board of Directors of the Company (the "Board"). On November 26, 1997, the Company and Tescorp Acquisition Corporation ("Acquisition"), a Delaware corporation and wholly-owned subsidiary of Supercanal Holding S.A. ("Supercanal"), entered into an Amended Stock Purchase and Merger Agreement (the "Merger Agreement") in accordance with the terms and subject to the conditions of which Supercanal has caused Acquisition to commence tender offers (the "Tender Offers") to purchase (i) all outstanding shares of Common Stock for $4.50 per share and (ii) all outstanding shares of 8% Preferred Stock for $144 plus accrued and unpaid dividends per share (a share of any class of the Company's stock is a "Share"). Under the Merger Agreement, the Tender Offers will be followed by a merger (the "Merger") in which (i) any remaining Shares of Common Stock not tendered pursuant to the Tender Offers will be converted into the right to receive a cash amount of $4.50 per Share, without interest and (ii) any remaining Shares of 8% Preferred Stock will be converted into the right to receive a cash amount of $144 plus accrued and unpaid dividends per Share, without interest (except any Shares as to which the holder has properly exercised dissenters' rights of appraisal). As a result of the Tender Offers and Merger, the Company will become a wholly-owned subsidiary of Supercanal. In accordance with the terms of the Merger Agreement, Daniel E. Vila, a designee of Acquisition, was elected to the Board on December 5, 1997. Additionally, after the Merger, Supercanal will cause the Board to consist entirely of three members, all of whom will be designees of Supercanal. The current designees are, in addition to Mr. Vila, Jose Maria Saenz Valiente and Alfredo L. Vila, each of whom is currently a director of Supercanal. You are urged to read this Information Statement carefully. You are not, however, required to take any action. Capitalized terms used herein and not otherwise defined herein shall have the meaning set forth in the Schedule 14D-9. Pursuant to the Merger Agreement, Acquisition commenced the Tender Offers on December 8, 1997. The Tender Offers are scheduled to expire at 12:00 midnight, New York City time, on January 9, 1998 unless the Tender Offers are extended. The information contained in this Information Statement concerning Acquisition has been furnished to the Company by Acquisition, and the Company assumes no responsibility for the accuracy or completeness of such information. VOTING RIGHTS OF EACH STOCK CLASS TO WHICH THE TENDER OFFERS RELATE As of November 12, 1997, there are 13,217,450 outstanding Shares of Common Stock and 139,250 outstanding Shares of 8% Preferred Stock. Each Share of Common Stock is entitled to one vote.Pursuant to Section 2 of the Company's Bylaws, dated June 7, 1990, at an election for directors, each holder of Common Stock entitled to vote at such election shall have the right to vote the number of Shares owned by him or her for as many persons as there are to be elected and for whose election he or she has a right to vote. Each Share of 8% Preferred Stock is convertible into Shares of Common Stock by dividing $100.00 by a conversion price of $3.125 per Share, subject to certain adjustments. Holders of the 8% Preferred Stock are entitled to vote as if they had converted into Common Stock. However, the 8% Preferred Stock votes are counted as a class (separate from the Common Stock votes). RIGHT TO DESIGNATE DIRECTORS; ACQUISITION DESIGNEES In accordance with Section 7.6 of the Merger Agreement, Daniel E. Vila, a designee of Acquisition, was elected to the Board on December 5, 1997 and the Company is to use its best efforts to cause Mr. Vila, or another of Acquisition's designees in place of Mr. Vila, to be re-elected at all subsequent meetings of the Company's stockholders at which directors are elected. Pursuant to Section 3.5 of the Merger Agreement, after the Merger, Jose Maria Saenz Valiente, Jr., Alberto L. Vila and Daniel E. Vila (collectively, "Supercanal's Designees"), will constitute the entire Board of Directors of the Company. Each of Supercanal's Designees is currently a director of Supercanal. Certain information regarding Supercanal's Designees and the other directors and executive officers of Supercanal is listed on Schedule I to the Offer to Purchase, a copy of which is being mailed to the Company's stockholders together with this Information Statement. The information on such Schedule I is incorporated herein by reference. None of the directors or executive officers of Supercanal (i) is currently a director of, or holds any position with, the Company, (ii) has a familial relationship with any directors or executive officers of the Company or (iii) to the best knowledge of Supercanal, beneficially owns any securities (or rights to acquire such securities) of the Company. The Company has been advised by Supercanal that, to the best of Supercanal's knowledge, none of its directors or executive officers has been involved in any transactions with the Company or any of its directors, executive officers or affiliates which are required to be disclosed pursuant to the rules and regulations of the Commission, except as may be disclosed herein or in the Schedule 14D-9. Biographical information concerning each of the Company's current directors and executive officers is presented on the following pages. 2 INFORMATION CONCERNING MEMBERS OF THE BOARD The following is a list of the Company's executive officers and directors as of August 18, 1997.
NAME AGE POSITION - ------------------------------------ ----- -------------------------------------------------------------------- Jack R. Crosby 71 Chairman of the Board and Chief Executive Officer Jack S. Gray, Jr. 40 President, Chief Operating Officer and Director Neil R. Austrian, Jr. 32 Senior Vice President and Chief Financial Officer David Justice 48 Chief Financial Officer of Latin America John D. Becker 33 Controller Osvaldo Rossi 43 Chief Executive Officer of Cabledifusion S.A.* Carlos Saba 42 Chief Operating Officer of Cabledifusion S.A.* Winston J. Churchill 56 Director J. Kelly Elliott 66 Director Lee A. Lahourcade 40 Director
- ------------------------ * Cabledifusion S.A. is a subsidiary of the Company that manages its cable operations in Argentina. All directors hold office until the next annual meeting of shareholders and until their successors have been duly elected and qualified. Executive officers are elected by and serve at the discretion of the Board. Jack R. Crosby has been Chairman of the Board since the Company's inception in 1980, and became Chief Executive Officer in 1991. Mr. Crosby is the General Partner of Rust Group, L.P., a Texas limited partnership holding certain of Mr. Crosby's business assets, and he is the President of Rust Capital, Ltd. ("Rust Capital"), a small business investment corporation with its headquarters in Austin, Texas. Mr. Crosby has been involved in the cable television industry since its infancy, and he was in the first group of cable television executives recognized by the National Cable Television Association as a pioneer of the industry. Mr. Crosby has been involved in the development of cable television systems in the United States, Mexico and Switzerland. Mr. Crosby presently serves as a director of Prime Cable, Inc. ("Prime Cable") of Austin, Texas. Prime Cable and its affiliates own and operate cable television systems in Chicago, Illinois, Las Vegas, Nevada, Anchorage, Alaska and other markets. A former director and Chairman of the National Cable Television Association, Mr. Crosby has provided cable television consulting services to the governments of West Germany, Austria and Holland. Mr. Crosby also serves as a director of two other publicly traded companies: National Dentex Corporation, a manufacturer of dental appliances, and DSI Toys, Inc., a toy manufacturer and distributor. Jack S. Gray, Jr. has been a director of the Company since 1989. Since April 1992, Mr. Gray has been the President and Chief Operating Officer of the Company. From August 1991 until April 1992, Mr. Gray was President of J&J Mercantile, an investment firm in Austin, Texas. From April 1991 until August 1991, Mr. Gray was Deputy Director of Appointments in the Office of the Governor, State of Texas. From 1985 to 1991, he was the Chief Financial Officer of the "Rust Group" (which collectively refers to the business activities of Mr. Crosby), and in this capacity, he served as an officer or director of numerous entities in which Mr. Crosby held direct and indirect ownership interests. Prior to 1985, Mr. Gray was an investment banker with Duncan, Smith & Co., San Antonio, Texas. Neil R. Austrian, Jr. has been Vice President of the Company since 1994 and was named Senior Vice President and Chief Financial Officer in July 1997. Mr. Austrian has worked in association with Mr. Crosby 3 for the past seven years and, prior to joining the Company, was an Associate with Rust Capital. Mr. Austrian serves on the Board of Directors of Software Publishing Corporation. David Justice has been Chief Financial Officer--Latin America since joining the Company in September 1995. Mr. Justice is a ten year veteran of the cable television industry. Prior to joining the Company, Mr. Justice was employed by Prime Cable, which he joined in 1981 as Controller, and then served as Treasurer. During his tenure, Prime Cable grew from approximately 25,000 subscribers to 600,000 subscribers and provided cable television service to customers in Alaska, New York, Georgia, Texas, Maryland, Nevada, North Carolina, Indiana and Wyoming. Mr. Justice worked for Seidman & Seidman and Coopers & Lybrand as a Certified Public Accountant before joining Prime Cable. John D. Becker has been the Controller of the Company since 1990. Mr. Becker is a Certified Public Accountant and a member of the American Institute of Certified Public Accountants and the Texas Society of Certified Public Accountants. Osvaldo Rossi has acted as Chief Executive Officer of Cabledifusion S.A. since 1995. Mr. Rossi is a native of Argentina who resides in Buenos Aires. Mr. Rossi is the former Engineering and Technology Advisor to the AVC, the Argentine cable television trade association, and is the author of Cable and Satellite TV, which was published in Argentina in 1990. He has also authored approximately 60 articles regarding cable television and telecommunications that have been published in various Latin American newspapers and trade publications. Mr. Rossi is a founder of Proyectos de Comunicaciones, S.A. ("Proyectos"), a company that provides engineering and operational consulting services to cable television and telecommunications companies. Proyectos has had as clients such Argentine firms as Clarin/Canal 13, Cablevision, Video Cable Comunicaciones, S.A., and Telintar. Prior to forming Proyectos, Mr. Rossi served at Video Cable Comunicacion, S.A., one of the largest cable television operators in Argentina, in several capacities including Vice President of Engineering and Technology. Mr. Rossi earned an Electronics Engineer certification from the National University of Technology (Argentina) in 1979. Carlos Saba has acted as Chief Operating Officer of Cabledifusion S.A. since 1995. Mr. Saba is a native of Argentina who resides in Buenos Aires. Mr. Saba is also a founder of Proyectos. Mr. Saba was a founder of Cabtec, S.A. and Cabtec Industria Eletronica L.T.D.A., companies which designed and manufactured cable television equipment in Argentina and Brazil under license from C-Cor Electronics, Inc. Mr. Saba is the founder of several cable television systems in Argentina and Brazil and from 1981 to 1988 Mr. Saba worked in various capacities, including Chief Engineer, with Video Cable Comunicaciones, S.A. Mr. Saba earned a Masters of Business Administration degree from Belgrano University (Argentina) in 1988 and an Electronics Engineer certification from the National University of Technology (Argentina) in 1980. Winston J. Churchill has been a director of the Company since July 1995. Mr. Churchill formed Churchill Investment Partners, Inc. in 1989 and CIP Capital, Inc. in 1990, each an investment and venture capital fund, and continues to be a principal of each. From 1989 to 1993 he served as Chairman of the Finance Committee of the $24 billion Pennsylvania Public School Employees' Retirement System. J. Kelly Elliott has served as a director of the Company since 1983. Since 1990, Mr. Elliott has been Chairman of the Board and Chief Executive Officer of Sigma Electronics, a manufacturer and distributor of electrical transformers. Mr. Elliott has also served since 1992 as Chairman and Chief Executive Officer of Omnicomp Graphics, Inc., a computer graphics company, and Seaboard-Avval, Inc., an oil field equipment manufacturer. From 1983 through 1989, Mr. Elliott was President and Chief Executive Officer of the Company. From 1976 to 1983, Mr. Elliott served as President and Chief Executive Officer of several wholly-owned subsidiaries of Hughes Tool Company, including Brown Oil Tools and BJ-Hughes, each of which was engaged in oil field services. In June 1993, Mr. Elliott was elected Chairman of the Board of Grant Tensor Geophysical Corporation, a publicly traded oil field service company, and he served in that capacity through November 1995. 4 Lee A. Lahourcade has been a director of the Company since March 1992. Mr. Lahourcade was president of Rust Capital from June 1988 to June 1992. Since then, Mr. Lahourcade has served as a principal at Vaughn, Nelson, Scarborough, McConnell, L.P., a money management firm. Prior to joining Rust Capital, Mr. Lahourcade was Vice President of Merrill Lynch & Co. in the investment banking area. COMMITTEES AND MEETINGS The Board met four times in the twelve months ended March 31, 1997. During such twelve month period, each incumbent director of the Company attended 75 percent or more of the aggregate number of (a) meetings of the Board held during his tenure and (b) meetings held by committees of the Board on which he served. EXECUTIVE COMMITTEE. The Executive Committee is currently comprised of Mr. Crosby and Mr. Gray, and possesses all of the powers of the Board between meetings of the Board, except for certain matters that may not be delegated under the Company's Bylaws. The Executive Committee did not meet during the fiscal year 1997. COMPENSATION COMMITTEE. The Board created a Compensation Committee on February 20, 1991. The duties of the Compensation Committee include the approval of officers' salaries and administration of the Company's 1991 Incentive Plan. The Compensation Committee is comprised of "disinterested" directors, as defined under Section 16 of the Exchange Act of 1934 (the "Exchange Act"), and currently consists of Messrs. Elliott and Lahourcade. The Compensation Committee met 2 times during the fiscal year 1997. NOMINATIONS. The Board does not have a Nominating Committee. Nominations for candidates for election may be made by the Board or by any shareholder entitled to vote at a meeting of shareholders called for the election of directors. Nominations made by the Board are made at the same time at which the date is set for a meeting of shareholders called for the election of directors. Nominations made by a shareholder must be made by giving notice of such in writing to the Secretary of the Company before the later of (i) 60 days prior to the date of the meeting of shareholders called for the election of directors or (ii) ten days after the Board first publishes the date of such meeting. Such notice shall include all information concerning each nominee as would be required to be included in a proxy statement soliciting proxies for the election of such nominee under the Exchange Act. Such notice shall also include a signed consent of each nominee to hold office until the next annual meeting of shareholders or until his successor is elected or appointed. AUDIT COMMITTEE. In March 1992, the Board created an Audit Committee. Messrs. Elliott, Lahourcade and Churchill currently serve on this committee. The Audit Committee met one time during the fiscal year 1997. 5 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table shows the number of Shares of the Company's Common Stock, 8% Preferred Stock and Series 1990 10% Convertible Preferred Stock (the "10% Preferred Stock" and, together with the 8% Preferred Stock, the "Preferred Stock") that may be deemed beneficially owned on March 31, 1997 by each person known to the Company to be the beneficial owner of more than 5% of the Company's outstanding voting securities, along with information with respect to each of the nominees for director and all directors and officers as a group as of March 31, 1997.
COMMON STOCK 1990 10% PREFERRED STOCK 1995 8% PREFERRED STOCK ------------------------------------- ---------------------------- -------------------------- AMOUNT AND AMOUNT AND AMOUNT AND NATURE OF PERCENT PERCENT NATURE OF PERCENT NATURE OF PERCENT BENEFICIAL OF OF BENEFICIAL OF BENEFICIAL OF BENEFICIAL OWNER OWNERSHIP CLASS(1) CLASS(2) OWNERSHIP CLASS(3) OWNERSHIP CLASS(4) - ----------------------------------- ----------- ----------- ----------- ------------- ------------- ------------- ----------- BEA Associates..................... 2,250,000(5) 15.5 12.1 -- -- 40,000 28.7 153 East 53rd Street One Citicorp Center New York, NY 10022 Argentina Equity Investment 1,855,000(6) 13.1 10.0 -- -- 30,000 21.5 Partnership...................... c/o BEA Associates 153 East 53rd Street One Citicorp Center New York, NY 10022 K-G, L.P........................... 1,265,192(7) 9.6 6.8 -- -- 1,250 * Winston J. Churchill Frederick M. Danziger John Fletcher W&M Management Company, Inc. 641 Lexington Avenue, 29th Floor New York, NY 10022 Fred Lieberman..................... 1,163,060(8) 8.8 6.3 -- -- -- -- 6251 B Park of Commerce Blvd. Boca Raton, FL 33487 Arnhold and S. Bleichroeder, Inc... 1,133,850(9) 8.0 6.0 -- -- 16,750 12.0 1345 Avenue of the Americas New York, NY 10022. Harvey Sandler..................... 928,200(10) 7.0 5.0 -- -- -- -- c/o Sandler Capital 767 Fifth Avenue, 45th Floor New York, NY 10153 Banque Nationale de Paris.......... 691,673(11) 5.0 3.7 -- -- 20,000 14.4 (Switzerland) Ltd. c/o Arnhold and S. Bleichroeder 1345 Avenue of the Americas New York, NY 10022
6
COMMON STOCK 1990 10% PREFERRED STOCK 1995 8% PREFERRED STOCK ------------------------------------- ---------------------------- -------------------------- AMOUNT AND AMOUNT AND AMOUNT AND NATURE OF PERCENT PERCENT NATURE OF PERCENT NATURE OF PERCENT BENEFICIAL OF OF BENEFICIAL OF BENEFICIAL OF BENEFICIAL OWNER OWNERSHIP CLASS(1) CLASS(2) OWNERSHIP CLASS(3) OWNERSHIP CLASS(4) - ----------------------------------- ----------- ----------- ----------- ------------- ------------- ------------- ----------- SC Fundamental, Inc................ 640,000(12) 4.6 3.5 -- -- 20,000 14.4 Gary N. Siegler Peter M. Collery 712 Fifth Avenue, 19th Floor New York, NY 10019 The SC Fundamental Value Fund, 416,000(12) 3.1 2.2 -- -- 13,000 9.3 L.P.............................. 712 Fifth Avenue, 19th Floor New York, NY 10022. The South America Fund N.V......... 395,000(13) 2.9 2.1 -- -- 10,000 7.2 c/o BEA Associates 153 East 53rd Street New York, NY 10022 Clarex Limited..................... 337,500(14) 2.5 1.8 -- -- 10,000 7.2 Scotiabank Bldg., 3rd Floor Rawson Square Nassau, N.P., Bahamas First Eagle Fund N.V............... 320,000(15) 2.4 1.7 -- -- 10,000 7.2 c/o Arnhold and S. Bleichroeder, Inc. 1345 Avenue of the Americas New York, NY 10022. Mervyn L. Lapin.................... 311,475(16) 2.4 1.7 46,534 6.7 -- -- 232 W. Meadow Drive Vail, CO 81657 Kenneth Pasternak.................. 305,125(17) 2.3 1.6 40,000 5.8 -- -- 525 Washington Blvd., Suite 2401 Jersey City, NJ 07310 SC Fundamental Value BVI, Inc...... 224,000(12) 1.7 1.2 -- -- -- -- 712 Fifth Avenue, 19th Floor New York, NY 10022 Special Situation Fund, L. P. 72,055 * * 57,500 8.3 -- -- III.............................. 153 East 53rd Street New York, NY 10022 Jack R. Crosby..................... 463,544(18) 3.4 2.5 -- -- -- -- 327 Congress Avenue, Suite 200 Austin, Texas 78701 J. Kelly Elliott................... 58,664(19) * * -- -- -- -- 327 Congress Avenue, Suite 200 Austin, Texas 78701
7
COMMON STOCK 1990 10% PREFERRED STOCK 1995 8% PREFERRED STOCK ------------------------------------- ---------------------------- -------------------------- AMOUNT AND AMOUNT AND AMOUNT AND NATURE OF PERCENT PERCENT NATURE OF PERCENT NATURE OF PERCENT BENEFICIAL OF OF BENEFICIAL OF BENEFICIAL OF BENEFICIAL OWNER OWNERSHIP CLASS(1) CLASS(2) OWNERSHIP CLASS(3) OWNERSHIP CLASS(4) - ----------------------------------- ----------- ----------- ----------- ------------- ------------- ------------- ----------- Jack S. Gray, Jr................... 557,056(20) 4.1 3.0 9,850 1.4 -- -- 327 Congress Avenue, Suite 200 Austin, Texas 78701 Lee A. Lahourcade.................. 26,880(21) * * 1,500 * -- -- 327 Congress Avenue, Suite 200 Austin, Texas 78701 All directors and officers as a 1,517,986 10.9 7.9 11,350 1.6 1,250 * group (five persons).............
- ------------------------ * Less than one percent (1) Calculated as the fraction of which the numerator is the total number of Common Stock Shares or Common Stock equivalent Shares owned by the director, officer or holder of 5% or more of the Company's Shares (the "Beneficial Owner") which is calculated as the sum of the number of Shares of Common Stock owned, the number of Shares of Common Stock into which the Preferred Stock owned could be converted, and the number of Shares of Common Stock which could be acquired within 60 days by the exercise of warrants or options, and the denominator of which is the sum of the total number of Shares of Common Stock outstanding, the number of Shares of Common Stock into which the Preferred Stock owned by the Beneficial Owner could be converted, and the number of Shares of Common Stock which could be acquired by the Beneficial Owner within 60 days by the exercise of warrants and options. (2) Calculated as the fraction of which the numerator is the total number of Common Stock Shares or Common Stock equivalent Shares owned by the Beneficial Owner which is calculated as the sum of the number of Shares of Common Stock owned, the number of Shares of Common Stock into which the Preferred Stock owned could be converted, and the number of Shares of Common Stock which could be acquired within 60 days by the exercise of warrants or options, and the denominator of which is the sum of the total number of Shares of Common Stock outstanding, the total number of Shares of Common Stock into which the aggregate outstanding Preferred Stock could be converted, and the number of Shares of Common Stock which could be acquired by the Beneficial Owner within 60 days by the exercise of warrants or options. (3) Based on 693,864 Shares outstanding. (4) Based on 139,250 Shares outstanding. (5) BEA Associates filed a Schedule 13G dated January 15, 1996, as an Investment Adviser registered under Section 208 of the Investment Advisers Act of 1940 pursuant to Rules 13d-1(b) or 13d-2(b). This filing reported the beneficial ownership of the Shares owned by Argentina Equity Investment Partnership. Additionally, in its filing it stated that CS Holding indirectly owns 80% of the partnership units in BEA Associates. CS Holding and its direct and indirect subsidiaries, in addition to BEA Associates, may beneficially own Shares of the Company and such Shares were not reported on the Schedule 13G filing. However, the Company believes that under certain conditions, Shares owned by The South America Fund, N.V. may be deemed to be beneficially owned by BEA, and are included in the Shares beneficially owned by BEA Associates. 8 (6) Includes 895,000 Shares of Common Stock held directly and 960,000 Shares issuable upon conversion of the 8% Preferred Stock held directly. (7) K-G, L.P., John Fletcher, W&M Management Company, Inc., Frederick M. Danziger and Winston J. Churchill, Jr. filed an amended Schedule 13D on July 1, 1995 in which they indicated they were members of a "group" for the purposes of Section 13(d) of the Securities Exchange Act and the regulations promulgated thereunder. Includes 1,215,414 Shares held directly, 9,778 Shares subject to currently exercisable options held by Winston J. Churchill, and 40,000 Shares issuable upon conversion of the 8% Preferred Stock (which is held directly by Winston J. and Barbara G. Churchill), 299,342 of such Shares are held by Mr. Churchill and his wife, Barbara G. Churchill, 62,500 Shares are held by the Winston J. Churchill Retirement Plan of which Mr. Churchill is a beneficiary. The Sharpe Irrevocable Inter Vivos Trust, of which Jack R. Crosby's wife is the sole beneficiary, holds a limited partnership interest in 853,572 of such Shares (see note 18). (8) Mr. Lieberman filed a Schedule 13D dated March 17, 1992 in which he stated that he has no current definitive plan to gain control of the Company or to cause the Company to change its current Board or management, capitalization, dividend policy, business or corporate structure. (9) Arnhold and S. Bleichroeder, Inc. ("Bleichroeder") filed a Schedule 13G on February 13, 1997, in which they indicated that they disclaimed beneficial ownership of 621,700 Shares of Common Stock reflected in the table. Includes 486,150 Shares subject to warrants, 536,000 Shares issuable upon conversion of the 8% Preferred Stock and 111,700 Shares held in discretionary accounts as to which Bleichroeder acts as investment advisor. (10) Mr. Sandler, 21st Century Communications Partners, L.P., 21st Century Communications T-E Partners, L.P., 21st Century Communications Foreign Partners, L.P., Sandler Investment Partners, L.P., Sandler Capital Management and ARH Media Corp. filed a Schedule 13D, dated May 5, 1995, in which they indicated that they were members of a "group" for the purposes of Section 13(d) of the Securities Exchange Act and the regulations promulgated thereunder. (11) Consists of 34,173 Shares of Common Stock held directly, 640,000 Shares issuable upon conversion of the 8% Preferred Stock held directly and 17,500 Shares subject to warrants. (12) The SC Fundamental Value Fund, L.P., S.C. Fundamental Value BVI, Inc., S.C. Fundamental, Inc., Gary N. Siegler and Peter M. Collery filed a Schedule 13D, dated May 2, 1995, in which they indicated that The SC Fundamental Value Fund, L.P. and S.C. Fundamental, Inc. were members of a "group," and that Mr. Siegler and Mr. Collery may, without so admitting, be members of a "group," in each case, for the purposes of Section 13(d) of the Securities Exchange Act and the regulations promulgated thereunder. (13) Includes 40,000 Shares of Common Stock held directly, 320,000 Shares issuable upon conversion of the 8% Preferred Stock held directly and 35,000 Shares subject to currently exercisable warrants. (14) All such Shares are held directly in a discretionary account over which Inter Vivos, Inc. exercises voting and investment control. Inter Vivos, Inc. disclaims beneficial ownership of such Shares, all of which are reflected in their holdings. See note (9) above. (15) Consists of Shares issuable upon conversion of the 8% Preferred Stock held directly. (16) Includes 253,162 Shares of Common Stock held directly and 46,534 Shares of the 10% Preferred Stock which can be converted into 58,313 Shares of Common Stock. (17) Includes 255,000 Shares held directly and 50,125 Shares of Common Stock issuable upon the conversion of the Shares of 10% Preferred Stock held directly. (18) Excludes 172,043 Shares held by the Jack R. Crosby Inter Vivos Trust as to which members of Mr. Crosby's immediate family are the beneficiaries and as to which Mr. Crosby disclaims any voting or investment power. Excludes 853,752 Shares held through a limited partnership interest by a partnership in which the 9 Sharpe Irrevocable Inter Vivos Trust, in which Mr. Crosby's wife is the sole beneficiary and as to which Mr. Crosby disclaims any voting or investment power. See footnote (7) above. Includes 136,460 Shares held directly by Mr. Crosby and 327,084 Shares subject to currently exercisable options. (19) Includes 9,394 Shares held directly and 49,270 Shares subject to currently exercisable options. (20) Calculated as the sum of the number of Shares of Common Stock owned directly (242,628), plus the following number of Shares of Common Stock into which the Shares of Preferred Stock could be converted: 11,341 Shares held by Mr. Gray directly and 1,003 Shares held in trust for the benefit of Mr. Gray's child. Mr. Gray holds options to acquire 302,084 Shares which are currently exercisable. (21) Includes 1,880 Shares into which Shares of Preferred Stock held directly by Mr. Lahourcade may be converted and 16,666 Shares subject to options granted to Mr. Lahourcade on October 4, 1994, and 8,334 Shares subject to options granted March 1994, pursuant to the 1993 Option Plan. 10 EXECUTIVE COMPENSATION The following table sets forth certain information for the fiscal years ended March 31, 1997, 1996 and 1995, with respect to the Chief Executive Officer (Jack R. Crosby) and the President and Chief Operating Officer (Jack S. Gray, Jr.) at March 31, 1997. There were no other executive officers of the Company who earned annual compensation that exceeded $100,000 during fiscal 1997. SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION ANNUAL COMPENSATION (SECURITIES FISCAL PRINCIPAL ------------------------------------ UNDERLYING YEAR NAME POSITION SALARY BONUS OTHER OPTIONS)* - ----------- -------------------------- -------------------------- ---------- ----------- ----------- ------------- 1997 Jack R. Crosby Chairman and CEO $ 150,000 -- -- 275,000 Jack S. Gray, Jr. President and COO $ 125,000 -- -- 225,000 1996 Jack R. Crosby Chairman and CEO $ 112,500 -- -- 250,000 Jack S. Gray, Jr. President and COO $ 125,000 -- -- 175,000 1995 Jack R. Crosby Chairman and CEO $ 100,000 -- -- (c) Jack S. Gray, Jr. President and COO $ 125,000 -- -- (c) FISCAL ALL OTHER YEAR COMPENSATION - ----------- ----------------- 1997 -- -- 1996 -- -- 1995 -- --
- ------------------------ * Options granted include a limited stock appreciation right ("LSAR") that becomes exercisable at the employee's option only if there is a change in control of the Company. See "Benefits" section herein for explanation of the intentions of the Company's LSAR holders. STOCK OPTION GRANTS IN 1997 The Company maintains the 1991 Incentive Plan, pursuant to which 2,000,000 Shares of Common Stock are issuable to employees of the Company. The following table shows information concerning individual grants of stock options during fiscal 1997 to the named executive officers.
NO. OF SECURITIES % OF TOTAL UNDERLYING OPTIONS OPTIONS GRANTED EXERCISE EXPIRATION NAME GRANTED TO EMPLOYEES PRICE DATE - ----------------------------------------------- -------------------- ----------------- ----------- ------------- Jack R. Crosby................................. 275,000 45.8 $ 3.5625 3/11/07 Jack S. Gray, Jr............................... 225,000 37.5 $ 3.5625 3/11/07
- ------------------------ * All options shown are exercisable in three equal annual installments beginning March 31, 1998. 11 STOCK OPTION EXERCISES AND HOLDINGS The following table shows information regarding stock option exercises and unexercised options held as of the end of fiscal 1997 by the named executive officers.
AT MARCH 31, 1997 -------------------------------------------------------- VALUE OF IN-THE-MONEY NUMBER OF EXERCISED OPTIONS OPTIONS --------------------------- --------------------------- NAME OPTIONS EXERCISED EXERCISABLE* UNEXERCISABLE* EXERCISABLE* UNEXERCISABLE* - ----------------------------------- ----------------------- ----------- -------------- ----------- -------------- Jack R. Crosby..................... 0 327,030 522,750 $ 590,188 $ 266,063 Jack S. Gray, Jr................... 0 302,200 432,800 $ 577,663 $ 241,088
- ------------------------ * Based on closing price of $3.50 on March 31, 1997. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Compensation decisions for executive officers are made by the Compensation Committee of the Board, which currently consists of Lee A. Lahourcade, J. Kelly Elliott and Winston J. Churchill. Mr. Elliott served as the President and Chief Executive Officer of the Company from 1983 through 1989. Neither Mr. Lahourcade nor Mr. Churchill has ever served as an officer of the Company. See "Certain Relationships and Related Transactions" section herein. BENEFIT PLANS The Company offers all of its employees and members of their immediate families, health, dental and life insurance coverage. Additionally, the Company has the following plans: AMENDED AND RESTATED 1991 INCENTIVE PLAN. As of the date hereof, there are 8 holders (each an "Optionholder") of options to purchase Shares of Common Stock (each an "Option") under the Company's Amended and Restated 1991 Incentive Plan (the "1991 Incentive Plan"), a copy of which is filed as Exhibit 3 to the 14D-9, at various exercise prices. The aggregate number of Shares of Common Stock underlying such Options is 1,850,000. There are an additional 83,333 Shares of Common Stock underlying Options granted pursuant to the 1993 Non-Employee Directors Stock Option Plan (described below), which makes the total number of shares of Common Stock underlying outstanding Options 1,933,333. Pursuant to Section 9 of the 1991 Incentive Plan, at and after the Effective Time (as defined below), each holder of an Option thereunder shall be entitled to purchase under such Option, in lieu of the number of shares of Common Stock that would have been received, the number and class of shares of stock and other securities to which such holder would have been entitled pursuant to the terms of the Merger if, immediately prior thereto, the Optionholder had been the holder of record of the number of Shares of the Company's Common Stock. The "Effective Time" is 11:59 P.M. on the day when a Certificate of Merger has been filed with the Secretary of State of Texas and a Certificate of Merger has been filed with the Secretary of State of Delaware. In accordance with Section 8 of the 1991 Incentive Plan, certain of the Optionholders hold LSARs pursuant to which they have the right, with respect to each Option to which an LSAR relates (a "Related Option"), to receive in cash a dollar amount equal to the product computed by multiplying (i) the excess of (A) the Merger Price per Share (as defined in the Merger Agreement) over (B) the exercise price per share (as defined in each respective Related Option Agreement) of Common Stock at which the Related Option is exercisable, by (ii) the number of Shares of Common Stock with respect to which such LSAR is being exercised. Each LSAR may be exercised only during the period of seven months immediately following the date on which the Tender Offers were first made. However, prior to the Tender Offers, each 12 LSAR holder entered into an agreement with the Company pursuant to which he or she agreed not to exercise such LSAR and to exercise in full the Related Option and tender the underlying Shares. Pursuant to Section 7.7 of the Merger Agreement, the Company is obligated to use its best efforts to provide that, immediately prior to the acceptance of Shares in response to the Tender Offers, each Optionholder will become fully vested and, if certain conditions to the Merger Agreement are fulfilled, each Option will be canceled and each Optionholder will receive the excess of the Merger Price for the Common Stock over the per share exercise price of the Option multiplied by the number of shares subject to the Option at the time such Option is canceled. Pursuant to Section 3.13 of the Merger Agreement, Supercanal shall fulfill, after the Effective Time, all of the Company's obligations under all Options which are outstanding at the Effective Time, taking account of all changes in the Options resulting from the Merger. 1993 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN. As of the date hereof, there are three Directors, J. Kelly Elliott, Lee A. Lahourcade and Winston J. Churchill, who hold Options under the Company's 1993 Non-Employee Directors Stock Option Plan (the "1993 Option Plan"), a copy of which is attached as Exhibit 4 to the 14D-9. Pursuant to Section 11 of the 1993 Option Plan, the Merger will cause all Options issued thereunder and outstanding to terminate, and in this event, each of these holders shall have a right, exercisable within a period of 30 days immediately prior to the closing of the Merger, to exercise the Option without regard to any limitation on exercise prior to the date contained in a related Option Agreement, unless such Option has expired or been terminated pursuant to its terms. The 1993 Option Plan is further described in the "Compensation of Directors" section of this Information Statement. COMPENSATION OF DIRECTORS Each of the Company's directors who is not an employee of the Company receives $1,000 for each board meeting attended, plus $500 for each committee meeting attended. Employees of the Company are not paid directors' fees. No member of the Board was paid any compensation in the Company's 1997 fiscal year for his service as a director of the Company other than pursuant to the standard compensation arrangement for directors. At the annual meeting of shareholders held in October 1993, the 1993 Option Plan, discussed above, was approved. Pursuant to the 1993 Option Plan, non-employee directors are entitled to receive one Option to purchase 8,333 Shares of Common Stock upon becoming a director, a second Option to purchase an additional 8,333 Shares at the completion of one year of service, and a third Option to purchase an additional 8,334 Shares at the completion of two years of service. The 1993 Option Plan was adopted to further the goal of attracting and retaining highly qualified non-employee directors of the Company and to motivate them to assert their best efforts for the Company. As a result of changes effected at last year's annual meeting, non-employee directors are eligible to participate in the Company's 1991 Incentive Plan. As employees, neither Mr. Gray nor Mr. Crosby is eligible to participate in the 1993 Option Plan. EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS Currently, no employment contract exists between the Company and any of its employees. Pursuant to Section 7.1(m) of the Merger Agreement, Jack S. Gray and Jack R. Crosby are to receive bonuses prior to the Merger totaling an aggregate of $300,000. 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During fiscal year 1996, J. Kelly Elliott, a director of the Company, was indebted to the Company in the amount of approximately $84,000, including accrued and unpaid interest by virtue of a loan that had been made in 1989. In March 1996, the Company agreed that Mr. Elliott could satisfy his obligation by assigning to the Company 21,567 shares of outstanding Common Stock, which was then trading at approximately $3.75 per Share, and cash of approximately $5,000. The note was satisfied on these terms during the first quarter of fiscal 1997 and the Company retired the Common Stock. Rust Management Services, Inc., a Texas corporation ("RMSI") of which Jack R. Crosby, Chairman and Chief Executive Officer of the Company, is the sole shareholder, has provided the part-time services of several of its employees to the Company. Pursuant to this arrangement, the Company's pro rata share of the expenses associated with RMSI's employment of these individuals is reimbursed by the Company at RMSI's cost. During the fiscal year ended March 31, 1997, payments to RMSI pursuant to this arrangement were approximately $174,000. The Company leases its executive offices in Austin, Texas in a six-story office building from a limited partnership that includes as a minority interest limited partner a trust for which Jack S. Gray, Jr., President and Chief Operating Officer of the Company, is the trustee. Mr. Gray is not a beneficiary of the trust and serves without compensation. The limited partnership purchased the building in June 1996. In February 1997 the Company entered into a Note Purchase and Warrant Agreement pursuant to which accredited investors obtained 13% Senior Notes in the aggregate amount of $6.0 million (the "Senior Notes"), and detachable warrants to purchase an aggregate of 210,000 shares of Common Stock for $4.00 per Share, to a group of investors that included a director and other beneficial holders of over 5% of the Company's capital stock. As a result of the placement: (i) Winston J. Churchill, a director of the Company and the beneficial owner of over 5% of the outstanding Common Stock, and his wife purchased $200,000 in principal amount of the Senior Notes and warrants to purchase 7,000 shares of Common Stock; (ii) The South America Fund N.V., the beneficial owner of over 5% of a class of the Company's voting securities, purchased $1,000,000 in principal amount of the Senior Notes and warrants to purchase 35,000 shares of Common Stock; (iii) Clarex Limited, the beneficial owner of over 5% of a class of the Company's voting securities, purchased $500,000 in principal amount of the Senior Notes and warrants to purchase 17,500 shares of Common Stock; and (iv) Banque Nationale de Paris (Paris), the beneficial owner of over 5% of a class of the Company's voting securities, purchased $500,000 in principal amount of the Senior Notes and warrants to purchase 17,500 Shares of Common Stock. The Senior Notes and warrants received by The South America Fund N.V. may be deemed to be owned by BEA Associates, the beneficial owner of over 5% of the outstanding Common Stock. In addition, in connection with the placement of the Senior Notes and warrants, Bleichroeder, which may be deemed to be the beneficial owner of over 5% of the outstanding Common Stock, received 22,500 Shares of Common Stock and warrants to purchase an additional 90,000 Shares of Common Stock for $4.00 per Share as a placement fee and for other professional services provided in connection with the placement. COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT The company believes that during its fiscal year ended March 31, 1997 its executive officers and directors have complied with all Section 16 filing requirements. 14 EX-1 2 EXHIBIT 1 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK AND SERIES 1995 8% CONVERTIBLE PREFERRED STOCK of TESCORP, INC. by TESCORP ACQUISITION CORPORATION A WHOLLY OWNED SUBSIDIARY of SUPERCANAL HOLDING S.A. for $4.50 PER SHARE OF COMMON STOCK and $144 PLUS ACCRUED DIVIDENDS FOR EACH SHARE OF SERIES 1995 8% CONVERTIBLE PREFERRED STOCK NET IN CASH THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, JANUARY 9, 1998, UNLESS THE OFFER IS EXTENDED. THE OFFER IS CONDITIONED UPON (1) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION TIME A NUMBER OF SHARES OF COMMON STOCK ("COMMON SHARES") OF TESCORP, INC. (THE "COMPANY"), WHICH, WHEN ADDED TO THE COMMON SHARES ALREADY OWNED BY TESCORP ACQUISITION CORPORATION (THE "PURCHASER"), CONSTITUTES MORE THAN TWO-THIRDS OF THE TOTAL NUMBER OF OUTSTANDING COMMON SHARES, (2) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION TIME A NUMBER OF SHARES OF SERIES 1995 8% CONVERTIBLE PREFERRED STOCK ("8% PREFERRED SHARES") WHICH, WHEN ADDED TO THE 8% PREFERRED SHARES ALREADY OWNED BY THE PURCHASER, CONSTITUTES MORE THAN TWO-THIRDS OF THE TOTAL NUMBER OF OUTSTANDING 8% PREFERRED SHARES ON A FULLY DILUTED BASIS, AND (3) SATISFACTION OF CERTAIN OTHER CONDITIONS. SEE SECTION 15. THIS OFFER IS BEING MADE IN ACCORDANCE WITH AN AMENDED STOCK PURCHASE AND MERGER AGREEMENT (THE "MERGER AGREEMENT"), DATED AS OF NOVEMBER 26, 1997, BETWEEN THE COMPANY AND THE PURCHASER. THE BOARD OF DIRECTORS OF THE COMPANY (1) HAS APPROVED THE MERGER AGREEMENT, THE OFFER AND A MERGER OF THE COMPANY AND THE PURCHASER (THE "MERGER"), IN WHICH SUPERCANAL HOLDING S.A., THE PARENT OF THE PURCHASER, WILL BECOME THE SOLE STOCKHOLDER OF THE MERGED COMPANY AND THE STOCKHOLDERS OF THE COMPANY WILL RECEIVE THE SAME AMOUNT OF CASH PER COMMON SHARE AND PER 8% PREFERRED SHARE AS IS PAID FOR SHARES PURCHASED THROUGH THE OFFER, (2) HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS AND (3) RECOMMENDS THAT HOLDERS OF THE COMMON SHARES AND 8% PREFERRED SHARES (COLLECTIVELY, "SHARES") TENDER THEIR SHARES IN RESPONSE TO THE OFFER. ------------------------ IMPORTANT Any stockholder who wishes to tender Shares should complete and sign a Letter of Transmittal (or a facsimile of one) in accordance with the instructions set forth in the Letter of Transmittal and (A) mail or deliver it, together with the certificate(s) representing the tendered Shares (the "Share Certificates") and any other required documents, to the Depositary named on the back cover of this Offer to Purchase or (B) tender the Shares using the procedures for book-entry transfer described in Section 3. A stockholder whose Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact the broker, dealer, commercial bank, trust company or other nominee if the stockholder wishes to tender Shares. A stockholder who wishes to tender Shares but whose certificates are not immediately available, or who cannot comply with the procedures for book-entry transfer described in this Offer to Purchase on a timely basis, may tender the Shares by following the procedures for guaranteed delivery described in Section 3. Questions and requests for assistance, or for additional copies of this Offer to Purchase, the Letter of Transmittal or other tender offer materials, may be directed to the Information Agent or the Dealer Managers (named on the back cover of this Offer to Purchase) at their respective addresses and telephone numbers set forth on the back cover. Holders of Shares may also contact brokers, dealers or banks for additional copies of this Offer to Purchase, the Letter of Transmittal or other tender offer materials. -------------------------- THE DEALER MANAGERS FOR THE OFFER ARE: ING BARINGS FURMAN SELZ December 8, 1997 TABLE OF CONTENTS
PAGE ----- INTRODUCTION............................................................................................... 1 THE TENDER OFFER........................................................................................... 3 1. Terms of the Offer............................................................................ 3 2. Acceptance for Payment and Payment for Shares................................................. 4 3. Procedures for Tendering Shares............................................................... 5 4. Withdrawal Rights............................................................................. 8 5. Conditions of the Offer....................................................................... 8 6. Certain Federal Income Tax Consequences....................................................... 10 7. Price Range of Shares......................................................................... 11 8. Certain Information Concerning the Company.................................................... 11 9. Certain Information Concerning The Purchaser and Parent....................................... 13 10. Source and Amount of Funds.................................................................... 14 11. Background of the Offer; Contacts with the Company............................................ 14 12. Purpose of the Offer and the Proposed Merger; Plans for the Company........................... 16 13. The Merger.................................................................................... 18 14. Certain Effects of the Transaction............................................................ 21 15. Dividends and Distributions................................................................... 21 16. Certain Legal Matters; Regulatory Approvals................................................... 22 17. Fees and Expenses............................................................................. 23 18. Miscellaneous................................................................................. 23 SCHEDULE I................................................................................................. I-1
i TO THE HOLDERS OF SHARES OF COMMON STOCK, PAR VALUE $.02 PER SHARE, AND THE HOLDERS OF SERIES 1995 8% CONVERTIBLE PREFERRED STOCK, OF TESCORP, INC.: INTRODUCTION Tescorp Acquisition Corporation (the "Purchaser"), a Delaware corporation and a wholly owned subsidiary of Supercanal Holding S.A. ("Parent"), an Argentine corporation, hereby offers to purchase (i) all the outstanding shares of common stock, par value $0.02 per share ("Common Shares"), of Tescorp, Inc. (the "Company"), a Texas corporation, for $4.50 per Common Share, net to the seller in cash, and (ii) all the outstanding shares of Series 1995 8% Convertible Preferred Stock ("8% Preferred Shares") of the Company for $144 per share plus accrued dividends from the last date on which dividends were paid to the Expiration Time (as defined below) (collectively the Common Shares and the 8% Preferred Shares are referred to as the "Shares" and the $4.50 per share price and the $144 per share price plus accrued dividends which the Purchaser is offering to pay are referred to as the "purchase prices"), upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letters of Transmittal (which together, as amended from time to time, constitute the "Offer"). The Offer is being made in accordance with an Amended Stock Purchase and Merger Agreement (the "Merger Agreement") dated as of November 26, 1997 between the Purchaser and the Company. The Merger Agreement contemplates that (i) the Purchaser would purchase from the Company 6,006,006 Common Shares for $3.33 per share (the "Stock Purchase"), (ii) not later than December 5, 1997, the Company would announce the Offer and (iii) if the Purchaser purchases at least a number of Common Shares and 8% Preferred Shares which, together with the shares already owned by the Purchaser (which will include the 6,006,006 Common Shares purchased by the Purchaser in the Stock Purchase), constitutes at least two thirds of the outstanding Common Shares and two-thirds of the outstanding 8% Preferred Shares, and the other conditions set forth in the Merger Agreement are satisfied or waived, the Purchaser will take all steps in its power to cause the Purchaser to be merged into the Company in a transaction in which Supercanal Holding S.A., the sole stockholder of the Purchaser, will become the sole stockholder of the corporation which survives the Merger and all the stockholders of the Company other than the Purchaser will receive cash in the same amount per Common Share and per 8% Preferred Share as is paid for Shares purchased through the Offer. Under the Merger Agreement, if a tender offer is commenced by someone other than the Purchaser for all the outstanding Common Shares and 8% Preferred Shares which the Company's Board of Directors determines to be superior to the Offer and which the Board of Directors resolves to accept or to recommend to the Company's stockholders, the Company may terminate the Merger Agreement by paying the Purchaser $5 million. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes as a result of the sale of shares to the Purchaser in response to the Offer. Any tendering stockholder who fails to complete and sign the Substitute Form W-9 included in the Letter of Transmittal may be subject to a required backup Federal income tax withholding of 31% of the gross proceeds payable to the stockholder or other payee pursuant to the Offer. See Section 3. The Purchaser will pay all charges and expenses of Furman Selz LLC and ING Baring (U.S.) Securities, Inc. as Dealer Managers (the "Dealer Managers"), The Bank of New York, as Depositary (the "Depositary"), and Morrow & Co., Inc., as Information Agent (the "Information Agent"), incurred in connection with the Offer. See Section 17. THE BOARD OF DIRECTORS OF THE COMPANY (1) HAS APPROVED THE OFFER AND THE MERGER WHICH WILL FOLLOW THE OFFER IF THE OFFER IS SUCCESSFULLY COMPLETED AND THE SHAREHOLDERS OF THE COMPANY APPROVE THE MERGER, (2) HAS DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER EACH IS FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS, AND (3) RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES IN RESPONSE TO THE OFFER. THE MINIMUM CONDITION. The Offer is subject to a number of conditions, including the Minimum Condition. See Section 15. The Minimum Condition requires that (i) the number of Common Shares tendered and not withdrawn before the Expiration Time, when added to the number of Common Shares already owned by the Purchaser, constitute more than two-thirds of the total number of outstanding Common Shares and (ii) the number of 8% Preferred Shares validly tendered and not withdrawn before the Expiration Time, when added to the number of 8% Preferred Shares already owned by the Purchaser, constitute more than two-thirds of the total number of outstanding 8% Preferred Shares. The Company has informed the Purchaser that as of December 5, 1997, there were 19,223,456 outstanding Common Shares and 139,250 outstanding 8% Preferred Shares. The Purchaser owned 6,006,006 (approximately 31%) of those Common Shares. On that date, there also were 3,060,470 Common Shares reserved for issuance on exercise of outstanding options and warrants. The Shares owned by the Purchaser were acquired from the Company in the Stock Purchase, which took place under the Merger Agreement on December 5, 1997. Assuming no additional Shares are issued before the Expiration Time, the Minimum Condition will be satisfied if at least 6,809,632 Common Shares and 92,834 8% Preferred Shares are properly tendered and not withdrawn before the Expiration Time. Other conditions to consummation of the Offer are described in Section 5. The Purchaser expressly reserves the right, in its sole discretion, to waive any of the conditions to the Offer. See Section 5. THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 2 THE TENDER OFFER 1. TERMS OF THE OFFER. On the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of the extension or amendment), the Purchaser will accept for payment and pay for all Shares validly tendered prior to the Expiration Time and not withdrawn in accordance with Section 4. The term "Expiration Time" means 12:00 midnight, New York City time, on Friday, January 9, 1998, unless the Purchaser extends the period during which the Offer is open, in which event the term "Expiration Time" will mean the time and date at which the Offer, as extended, will expire. In the Merger Agreement, the Purchaser has agreed that it will not extend the Offer to a date which is more than 60 days after the Offer is commenced, except that (a) if the Offer is modified during the period it is open to increase the price per share payable in the Offer or in any other manner permitted by the Merger Agreement, the Offer many be extended until not more than 10 business days after the day on which the modification is communicated to the Company's stockholders, (b) if anyone makes a tender offer for either the Common Shares or the 8% Preferred Shares before the Offer expires, the Offer may be extended until not more than 10 business days after the other tender offer expires, (c) if the Purchaser is prevented by an order of a court or other governmental agency from accepting Shares which are tendered, the Offer may be extended until 10 business days after the Purchaser is able to accept Shares without violating any order of any court or other governmental agency and (d) if the Minimum Condition is not satisfied by the scheduled Expiration Time, the Offer may be extended for up to an additional 60 days to enable the Minimum Condition to be satisfied (and if, although the Minimum Condition is not satisfied, at least 2,500,000 Common Shares and at least 35,000 8% Preferred Shares are properly tendered and not withdrawn, the Purchaser will extend the Offer for at least an additional 30 days to enable the Minimum Condition to be satisfied). The Purchaser also has agreed in the Merger Agreement that it will not (a) decrease the number of Shares being tendered for in the Offer, (b) reduce the Purchase Price either for the Common Shares or for the 8% Preferred Shares, (c) modify or add to the conditions described in Section 5, (d) change the form of consideration payable in the Offer, or (e) extend the Offer, except as required or permitted by the Merger Agreement (which is described above). The Purchaser reserves the right, at any time and from time to time, to extend the period during which the Offer is open, by giving oral or written notice of the extension to the Depositary and by making a public announcement of it as described below. During any extension, all Shares previously tendered and not withdrawn will remain tendered in response to the Offer, subject to the rights of a tendering stockholder to withdraw tendered Shares. See Section 4. Subject to the Merger Agreement and the applicable regulations of the Securities and Exchange Commission (the "Commission"), the Purchaser reserves the right, at any time and from time to time, to (i) delay acceptance for payment of, or, regardless of whether Shares were already accepted for payment, payment for, Shares pending receipt of any regulatory or third-party approval described in Section 16 or in order to comply in whole or in part with any other applicable law, (ii) terminate the Offer and not accept for payment any Shares if any of the conditions described in Section 5 have not been satisfied or upon the occurrence of any of the events described in Section 5 or (iii) waive any condition or otherwise amend the Offer in any respect, in each case, by giving oral or written notice of the delay, termination, waiver or amendment to the Depositary and by making a public announcement of it, as described below. The Purchaser acknowledges that (i) Rule 14e-1(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") requires the Purchaser to pay the consideration offered or return the tendered Shares promptly after the termination or withdrawal of the Offer and (ii) the Purchaser may not delay acceptance for payment of, or payment for (except as provided in clause (i) of the first sentence of the preceding paragraph), any Shares upon the occurrence of any of the events described in Section 5 without extending the period of time during which the Offer is open. 3 The Purchaser will make a public announcement of any extension, delay, termination, waiver or amendment as promptly as practicable after it takes place. In the case of an extension, a public announcement will be made no later than 9:00 a.m., New York City time, on the business day after the day of the previously scheduled Expiration Time. Subject to applicable law (including Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act, which require that material changes be promptly disseminated to stockholders in a manner reasonably designed to inform them of the changes), the Purchaser will have no obligation to publish, advertise or otherwise communicate any public announcement other than by issuing a press release. If the Purchaser makes a material change in the terms of the Offer or the information concerning the Offer or if it waives a material condition to the Offer, the Purchaser will extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. Consummation of the Offer is conditioned upon satisfaction of the Minimum Condition, and the other conditions set forth in Section 5. The Purchaser reserves the right (but will not be obligated) to waive any or all of those conditions. If, prior to the Expiration Time, the Purchaser should decide to increase the consideration being offered in the Offer, that increase will be applicable to all stockholders whose Shares are accepted for payment, including stockholders who tender their shares before the Purchaser increases the consideration. If, at the time notice of an increase in the consideration being offered is first published or otherwise given to holders of Shares, the Offer is scheduled to expire earlier than the tenth business day after (but including) the day the notice is first published or otherwise given, the Offer will be extended at least until the expiration of that ten-business-day period. The Purchaser does not expect to increase the consideration being offered. The Company has given the Purchaser a stockholder list and security position listings for the purpose of enabling the Purchaser to disseminate the Offer to holders of Shares. This Offer to Purchase and the related Letter of Transmittal and other relevant materials will be mailed to record holders of Shares and to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the Company's stockholder list, or who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. On the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of the extension or amendment), the Purchaser will purchase, by accepting for payment, and will pay for, all Shares which are validly tendered (and not properly withdrawn in accordance with Section 4) prior to the Expiration Time. Shares will be accepted as soon as practicable after the later to occur of (i) the Expiration Time and (ii) the satisfaction or waiver of the conditions set forth in Section 5. Any determination concerning the satisfaction of the terms and conditions of the Offer will be in the sole discretion of the Purchaser. See Section 5. The Purchaser expressly reserves the right, in its sole discretion, to delay acceptance for payment of, or, subject to the applicable rules of the Commission, payment for, Shares in order to comply in whole or in part with any applicable law. See Section 16. In all cases, payment for Shares which are tendered in response to the Offer and accepted for payment will be made only after timely receipt by the Depositary of (a) the certificate(s) representing the tendered Shares (the "Share Certificates"), or timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of the Shares (if that procedure is available) into the Depositary's account at The Depository Trust Company (the "Book-Entry Transfer Facility"), as described in Section 3, (b) a properly completed and duly executed Letter of Transmittal (or facsimile of one), or an Agent's Message in connection with a book-entry transfer, and (c) any other documents required by the Letter of Transmittal. An "Agent's Message" is a message, transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of the Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from a participant in the Book-Entry Transfer 4 Facility which tenders Shares that the participant has received, and agrees to be bound by the terms of, the Letter of Transmittal and that the Purchaser may enforce that agreement against the participant. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, tendered Shares when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance of the Shares for payment. Payment for Shares which are accepted will be made by deposit of the aggregate purchase price for all the Shares which are accepted for payment with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment from the Purchaser and transmitting payment to the tendering stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE OFFER PRICE BE PAID BY THE PURCHASER BY REASON OF ANY DELAY IN PAYING FOR SHARES. Upon the deposit of funds with the Depositary for the purpose of making payments to tendering stockholders, the Purchaser's obligation to pay for Shares will be satisfied and tendering stockholders must look solely to the Depositary for payment of amounts owed to them by reason of the acceptance of their Shares pursuant to the Offer. If, for any reason, acceptance for payment of or payment for any Shares tendered in response to the Offer is delayed, or the Purchaser is prevented from accepting for payment or paying for Shares which are tendered in response to the Offer, the Depositary may, nevertheless, retain tendered Shares on behalf of the Purchaser and those Shares may not be withdrawn, except to the extent the tendering stockholder exercises withdrawal rights as described in Section 4. The Purchaser will pay any stock transfer taxes incident to the transfer to it of validly tendered Shares, except as otherwise provided in Instruction 6 of the Letter of Transmittal, as well as any charges and expenses of the Depositary and the Information Agent. If any tendered Shares are not accepted for payment for any reason, or if certificates which are submitted evidence more Shares than are tendered, certificates representing unpurchased or untendered Shares will be returned or sent, without expense to the tendering stockholder (or, in the case of Shares tendered by book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility, Shares which are not purchased will be credited to an account at that Book-Entry Transfer Facility), as promptly as practicable following the expiration or termination of the Offer. IF, PRIOR TO THE EXPIRATION TIME, THE PURCHASER INCREASES THE CONSIDERATION OFFERED TO HOLDERS OF SHARES TENDERED IN RESPONSE TO THE OFFER, THE INCREASED CONSIDERATION WILL BE PAID TO ALL HOLDERS WHOSE SHARES ARE PURCHASED THROUGH THE OFFER, INCLUDING HOLDERS WHOSE SHARES ARE TENDERED BEFORE THE CONSIDERATION IS INCREASED. The Purchaser reserves the right to transfer or assign, in whole, or in part from time to time, to one or more of its affiliates the right to purchase all or any portion of the Shares which are tendered in response to the Offer, but such a transfer or assignment will not relieve the Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering stockholders to receive payment for Shares which are validly tendered in response to the Offer and accepted for payment. 3. PROCEDURES FOR TENDERING SHARES. VALID TENDER OF SHARES. Except as set forth below, in order for Shares to be validly tendered in response to the Offer, (a) a Letter of Transmittal or a facsimile of one, properly completed and duly executed, with any required signature guarantees, or an Agent's Message in connection with a book-entry delivery of Shares, and any other required documents, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Time and (b) either (i) the certificates representing the tendered Shares must be received by the Depositary along with the Letter of Transmittal, (ii) the Shares must be tendered using the procedure for book-entry transfer described below, and the Book-Entry Confirmation must be received by the Depositary prior to the Expiration Time, or (iii) the tendering stockholder must comply with the guaranteed delivery procedures described below. 5 THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. ITEMS WILL BE DEEMED DELIVERED ONLY WHEN THEY ARE ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect to the Shares at The Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of the Offer within two business days after the date of this Offer to Purchase, and any financial institution that is a participant in the Book-Entry Transfer Facility's system may make book-entry delivery of Shares by causing the Book-Entry Transfer Facility to transfer the Shares into the Depositary's account at the Book-Entry Transfer Facility. Although delivery of Shares may be effected through book-entry transfer at the Book-Entry Transfer Facility, a Letter of Transmittal or a facsimile of one, with any required signature guarantees, or an Agent's Message in connection with a book-entry delivery of Shares, and any other required documents, as well as the Book Entry Confirmation relating to the Shares, must be transmitted to and received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Time or the guaranteed delivery procedures described below must be followed. REQUIRED DOCUMENTS MUST BE TRANSMITTED TO AND RECEIVED BY THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH ON THE BACK COVER PAGE OF THIS OFFER TO PURCHASE. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. SIGNATURE GUARANTEES. Signatures on Letters of Transmittal need not be guaranteed, unless the Shares to which they relate are being tendered by a registered holder of Shares who has completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal. Signatures on Letters of Transmittal on which either of those boxes has been completed must be guaranteed by a firm which is a bank, broker, dealer, credit union, savings association or other entity that is a member in good standing of the Securities Transfer Agents Medallion Program (each an "Eligible Institution"). See Instruction 1 of the Letter of Transmittal. If a Share Certificate is registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made, or certificates representing shares which are not tendered or are not accepted for payment are to be returned, to a person other than the registered holder(s), then the Share Certificate must be endorsed or accompanied by appropriate stock powers, in either case, signed exactly as the name(s) of the registered holder(s) appear on the Share Certificate, with the signature(s) on the Share Certificate or stock powers guaranteed. See Instructions 1 and 5 of the Letter of Transmittal. If Share certificates are delivered to the Depositary at different times, a properly completed and duly executed Letter of Transmittal (or facsimile of one) must accompany each delivery. GUARANTEED DELIVERY. If a stockholder wishes to tender Shares in response to the Offer but the Share Certificates are not immediately available or time will not permit all required documents to reach the Depositary prior to the Expiration Time, or the procedure for book-entry transfer cannot be completed on a timely basis, the Shares may nevertheless be tendered as follows: (i) the tender must be made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided with this Offer to Purchase, must be received by the Depositary before the Expiration Time; and 6 (iii) the Share Certificates representing all tendered Shares, in proper form for transfer, or the Book-Entry Confirmation, together with a properly completed and duly executed Letter of Transmittal (or facsimile of one), with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message) and any other documents required by the Letter of Transmittal are received by the Depositary within three (3) New York Stock Exchange trading days after the date of execution of the Notice of Guaranteed Delivery. A Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, facsimile transmission or mail to the Depositary, but must include a guarantee by an Eligible Institution in the form set forth in the Notice of Guaranteed Delivery distributed with this Offer to Purchase. Payment for Shares which are accepted for payment will be made only after timely (i) receipt by the Depositary of Share Certificates for, or of Book-Entry Confirmation with respect to, the Shares, (ii) a properly completed and duly executed Letter of Transmittal (or facsimile of one), together with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message) and (iii) any other documents required by the Letter of Transmittal. Accordingly, it is possible that payment will not be made to all tendering stockholders at the same time. BACKUP UNITED STATES FEDERAL WITHHOLDING TAX. Under the United States Federal income tax laws, the Depositary may be required to withhold 31% of the amount of any payments made to certain stockholders. To prevent backup Federal income tax withholding, each tendering stockholder must provide the Depositary with the stockholder's correct taxpayer identification number, or certify that the stockholder is exempt from backup Federal income tax withholding, by completing the Substitute Form W-9 included in the Letter of Transmittal. See Instruction 10 of the Letter of Transmittal. APPOINTMENT AS PROXY. By executing a Letter of Transmittal, a tendering stockholder irrevocably appoints designees of the Purchaser as the tendering stockholder's attorneys-in-fact and proxies, in the manner set forth in the Letter of Transmittal, each with full power of substitution, to the full extent of the stockholder's rights with respect to the Shares tendered by the stockholder and accepted for payment by the Purchaser (and with respect to any other securities issued in respect of those Shares on or after the date of this Offer to Purchase). That proxy is considered coupled with an interest in the tendered Shares. This appointment will be effective if, when and to the extent that the Purchaser accepts the tendered Shares for payment pursuant to the Offer. When tendered Shares are accepted for payment, all prior proxies given by the stockholder with respect to the tendered Shares and any other securities issued in respect of them will, without further action, be revoked, and no subsequent proxies may be given. The designees of the Purchaser will, with respect to the tendered Shares and any other securities for which the appointment is effective, be empowered to exercise all voting and other rights of the tendering stockholder as they, in their sole discretion, deem proper at any annual, special, adjourned or postponed meeting of the Company's stockholders, and the Purchaser reserves the right to require that in order for Shares or other securities to be deemed validly tendered, immediately upon the Purchaser's acceptance for payment of the Shares, the Purchaser will be able to exercise full voting rights with respect to the Shares. Proxies are effective only as to Shares accepted for payment pursuant to the Offer. The Offer does not constitute a solicitation of proxies, absent a purchase of Shares, for any meeting of the Company's stockholders. Any solicitation of proxies will be made only pursuant to separate proxy solicitation materials complying with the Exchange Act. DETERMINATIONS REGARDING TENDERS. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any Shares using any of the procedures described above will be determined by the Purchaser, in its sole discretion, and the Purchaser's determination will be final and binding on all parties. The Purchaser reserves the absolute right to reject any or all tenders of Shares determined by it not to be in proper form or if the acceptance for payment of, or payment for, the Shares may, in the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute right, 7 in its sole discretion, to waive any of the conditions of the Offer or any defect or irregularity in any tender with respect to Shares of any particular stockholder, whether or not similar defects or irregularities are waived in the case of other stockholders. No tender of Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived. The Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions to it) will be final and binding. None of Parent, the Purchaser, either Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or will incur any liability for failure to give any such notification. BINDING AGREEMENT. The Purchaser's acceptance for payment of Shares tendered in response to the Offer will constitute a binding agreement by the tendering stockholder to sell, and by the Purchaser to purchase, the tendered Shares on the terms and subject to the conditions of the Offer. 4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4, tenders of Shares made in response to the Offer are irrevocable. Shares tendered in response to the Offer may be withdrawn at any time prior to the Expiration Time and, unless they have been accepted for payment by the Purchaser, may also be withdrawn at any time after February 9, 1998. If the Purchaser extends the Offer, is delayed in its acceptance of Shares for payment or is unable to accept Shares for payment for any reason, then, without prejudice to the Purchaser's rights under the Offer, the Depositary may, nevertheless, retain tendered Shares on behalf of the Purchaser, and those Shares may not be withdrawn except to the extent that tendering stockholders are entitled to withdraw them as described in this Section 4. Any such delay will be accompanied by an extension of the Offer to the extent required by law. For a withdrawal to be effective, a written or facsimile transmission of a notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. A notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and (if Share Certificates have been tendered) the name of the registered holder, if different from that of the person who tendered the Shares. If Share Certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then prior to the release of those Share Certificates, the serial numbers shown on the particular Share Certificates to be withdrawn must be submitted to the Depositary, and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution, unless the Shares have been tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer, any notice of withdrawal must also specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares. Withdrawals of Shares may not be rescinded. After Shares are properly withdrawn, they will be deemed not to have been validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered at any time prior to the Expiration Time using one of the procedures described in Section 3. All questions as to the form and validity (including, without limitation, time of receipt) of notices of withdrawal will be determined by the Purchaser, in its sole discretion, and its determination will be final and binding. None of Parent, the Purchaser, either Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or will incur any liability for failure to give any such notification. 5. CONDITIONS OF THE OFFER. The Purchaser will not be required to accept for payment or, subject to any applicable rules and regulations of the Commission, including Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), pay for, the Shares which are tendered in response to the Offer if: 8 (a) The number of Shares properly tendered in response to the Offer and not withdrawn, together with the Common Shares and any 8% Preferred Shares already owned by the Purchaser does not total more than two-thirds of the outstanding Common Shares and two-thirds of the outstanding 8% Preferred Shares; (b) There are any 10% Preferred Shares outstanding after the day which is 65 days after the Stock Purchase (if that day is before the Expiration Date); (c) Any statute, rule, regulation, order or injunction has been enacted, promulgated, entered or enforced by any national or state government or governmental authority or by any United States or Argentine court of competent jurisdiction, that would make the acquisition of the Shares by the Purchaser illegal or otherwise prohibit consummation of the Offer or the Merger; or (d) There has been (i) a general suspension of trading in, or limitation on prices for, securities on the New York Stock Exchange which continued for at least three business days, (ii) the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or Argentina (whether or not mandatory) which continued for at least three business days, (iii) the commencement of a war or armed hostilities or any other international or national calamity directly or indirectly involving the United States or Argentina, which has a significant adverse effect on the functioning of financial markets in the United States or Argentina, (iv) any limitation (whether or not mandatory) by any United States or Argentine governmental authority or agency on the extension of credit by banks or other financial institutions which would have a material adverse effect on Parent's or the Purchaser's ability to borrow sufficient funds under its bank facilities to purchase and pay for all the Shares which are tendered in response to the Offer and to carry out the Merger on the terms contemplated by the Merger Agreement or (v) there is a material acceleration or worsening of any of the conditions described in clauses (i) through (iv) which exists at the date of the commencement of the Offer. (e) Any of the representations and warranties of the Company set forth in the Merger Agreement is not true and correct as of the date of the Merger Agreement except failures to be true and correct which would not, in the aggregate, have a material adverse effect upon the Company; (f) Since the date of the Merger Agreement, there has been an occurrence or group of occurrences (whether or not related) which have had a material adverse effect upon the Company (other than (i) occurrences which affected generally the cable television industry worldwide or in Argentina, including actual or proposed changes in laws or regulations, or (ii) the transactions contemplated by the Merger Agreement, including the change in control contemplated by it); (g) the Company has not performed all the obligations it is required to have performed under the Merger Agreement, except failures which (i) would, in the aggregate, not materially impair or delay the ability of the Purchaser to consummate the purchase of the Shares which are tendered in response to the Offer or the ability of the Purchaser and the Company to effect the Merger, (ii) have been caused by or result from a breach of the Merger Agreement by the Purchaser; or (iii) do not, and are not reasonably expected to, have a material adverse effect on the Company; (h) The Merger Agreement has been terminated in accordance with its terms; or (i) The Board of Directors of the Company withdraws or modifies in a manner adverse to the Purchaser the Board's approval or recommendation of the Offer or the Merger. The conditions set forth above are for the sole benefit of the Purchaser, and may be waived by the Purchaser, in whole or in part. Any delay by the Purchaser in exercising the right to terminate the Offer because any of the conditions are not fulfilled will not be deemed a waiver of its right to do so. 9 6. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following summary is a general discussion of certain of the expected Federal income tax consequences of the Offer. The summary is based on the Internal Revenue Code of 1986, as amended (the "Code"), and published regulations, rulings and judicial decisions in effect at the date of this Offer to Purchase, all of which are subject to change. The summary does not discuss all aspects of Federal income taxation that may be relevant to a particular holder in light of his or her personal circumstances or to certain types of holders subject to special treatment under the Federal income tax laws, such as life insurance companies, financial institutions, tax-exempt organizations and non-U.S. persons. The following summary may not be applicable with respect to Shares acquired through exercise of employee stock options or otherwise as compensation. It also does not discuss any aspects of state or local tax laws or of tax laws of jurisdictions outside the United States of America. THE DESCRIPTION OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW IS FOR GENERAL INFORMATION ONLY. HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE SALE OF THEIR SHARES, INCLUDING THE APPLICATION OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS AND POSSIBLE CHANGES IN TAX LAWS. Sales of Shares in response to the Offer will be taxable transactions for Federal income tax purposes, and may also be taxable transactions under applicable state, local, foreign and other tax laws. For Federal income tax purposes, a tendering stockholder will generally recognize gain or loss equal to the difference between the amount of cash received by the stockholder upon sale of the Shares and the aggregate tax basis in the Shares which are sold. Under present law, gain or loss will be calculated separately for each block of Shares tendered and purchased pursuant to the Offer. If tendered Shares are held by a tendering stockholder as capital assets, gain or loss recognized by the tendering stockholder will be capital gain or loss, which will be long-term capital gain or loss if the tendering stockholder's holding period for the Shares exceeds one year. Long-term capital gains recognized by a tendering individual stockholder will generally be taxed at a maximum Federal marginal tax rate of 28% as to Shares held between 12 and 18 months and 20% as to shares held more than 18 months. Long-term capital gains recognized by a tendering corporate stockholder will be taxed at a maximum Federal marginal tax rate of 35%. A stockholder (other than certain exempt stockholders, including all corporations and certain foreign individuals) who tenders Shares may be subject to 31% backup withholding unless the stockholder provides its taxpayer identification number ("TIN") and certifies that the TIN is correct or properly certifies that it is awaiting a TIN. This should be done by completing and signing the substitute Form W-9 included as part of the Letter of Transmittal. A stockholder that does not furnish its TIN also may be subject to a penalty imposed by the IRS. If backup withholding applies to a stockholder, the Depositary is required to withhold 31% from each payment to that stockholder. Backup withholding is not an additional tax. Rather, the amount of the backup withholding can be credited against the Federal income tax liability of the person subject to the backup withholding, provided that the required information is given to the IRS. If backup withholding results in an overpayment of tax, a refund can be obtained by the stockholder upon filing an income tax return. 10 7. PRICE RANGE OF SHARES. The Common Shares trade on the NASDAQ Small-Cap Market under the symbol "TESC." The following table sets forth, for the periods indicated, the high and low sales prices per Common Share on the NASDAQ Small-Cap Market. COMMON SHARES
HIGH LOW ------- ------- Year Ended December 31, 1995: First Quarter.......... $ 2.88 $ 1.88 Second Quarter......... 4.000 1.875 Third Quarter.......... 3.563 2.750 Fourth Quarter......... 3.875 2.750 Year Ended December 31, 1996 First Quarter.......... 4.375 2.500 Second Quarter......... 4.500 3.2500 Third Quarter.......... 4.1250 2.8750 Fourth Quarter......... 4.6250 2.8750 Year Ended December 31, 1997 First Quarter.......... 4.3125 3.2500 Second Quarter......... 4.000 3.0625 Third Quarter.......... 4.1875 3.0625 Fourth Quarter (through December 4, 1997).... 4.1250 3.5000
Insofar as the Purchaser is aware, there is no trading market for the 8% Preferred Shares. On September 15, 1997, the last full day of trading prior to the public announcement of the execution of the Merger Agreement, the last sales price of the Common Shares reported on NASDAQ was $3.375. On December 5, 1997, the last full day of trading prior to the commencement of the Offer, the last sales price reported on NASDAQ was $4 per Common Share. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. 8. CERTAIN INFORMATION CONCERNING THE COMPANY. The information concerning the Company contained in this Offer to Purchase, including financial information, has been taken from or is based upon publicly available documents and records on file with the Commission and other public sources. None of Parent, the Purchaser or either Dealer Manager assumes any responsibility for the accuracy or completeness of the information concerning the Company contained in those documents and records or for any failure by the Company to disclose events which may have occurred or may affect the significance or accuracy of any such information but which are not known to Parent, the Purchaser or either Dealer Manager. The Company is a Texas corporation and its principal executive offices are located at 327 Congress Avenue, Suite 200, Austin, Texas 78701. The following description of the Company's business has been taken from the Company's 1997 Form 10-KSB/A: The Company acquires, develops and operates cable television and communications systems in the Republic of Argentina, with concentrations in the Patagonia and Tierra del Fuego regions. At March 31, 1997, the Company provided cable television service to approximately 69,000 subscribers. In addition, the Company holds a license to provide data services to its customers under the name "Patagonia On-Line (TM)." Set forth below is certain consolidated financial information with respect to the Company, excerpted or derived from the summary financial information of the Company contained in the Company's 1997 10-KSB/A and the Company's Form 10-Q for the period ended September 30, 1997. More comprehensive 11 financial information is included in those reports and other documents filed with the Commission, and the following summary is qualified in its entirety by reference to those reports and other documents, including the financial information and related notes contained in them. The reports and other documents may be inspected and copies of them may be obtained in the manner set forth below. TESCORP, INC. AND SUBSIDIARIES SELECTED CONSOLIDATED FINANCIAL INFORMATION
QUARTERS ENDED SEPTEMBER 30, YEARS ENDED MARCH 31, ---------------------- ------------------------------------ 1997 1996 1997 1996 1995 ---------- ---------- ----------- ----------- ---------- STATEMENT OF OPERATIONS DATA Revenues.................... $7,208,487 $5,527,433 $22,580,466 $16,009,116 $ * Operating income (loss)..... (1,142,651) (676,419) (2,391,448) (1,470,291) (1,480,039) Net income (loss)........... (1,754,501) (779,974) (3,382,059) (1,495,297) 229,046 Net Earnings (loss) per share applicable to Common Shares.................... (0.16) (0.9) (0.38) (0.19) (0.2)
- ------------------------ * The Company had disposed of its oil and gas field service company operating units in fiscal 1994, and accordingly, for the fiscal years ended March 31, 1995, the Company recorded no net sales. The Company began consolidating the earnings from its Latin America operations beginning with the first quarter of fiscal 1996.
AS OF SEPTEMBER 30 ---------------------- 1997 1996 ---------- ---------- (UNAUDITED) (UNAUDITED) BALANCE SHEET DATA: Total assets..................................................... $50,831,707 $43,058,722 Debt............................................................. 7,193,613 1,059,287 Total liabilities................................................ 19,916,392 6,245,423 Total Stockholders' equity....................................... 30,102,837 35,818,068
The Company is subject to the informational and reporting requirements of the Exchange Act and is required to file reports and other information with the Commission relating to its business, financial condition and other matters. Information, as of particular dates, concerning the Company's directors and officers, their remuneration, stock options granted to them, the principal holders of the Company's securities, any material interests of those persons in transactions with the Company and other matters is required to be disclosed in proxy statements distributed to the Company's stockholders and filed with the Commission. These reports, proxy statements and other information can be inspected and copied at the public reference facilities of the Commission located at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following regional offices of the Commission: Seven World Trade Center, New York, New York 10048; and Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of this material may be obtained by mail, upon payment of the Commission's customary fees, from the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains an Internet site on the world wide web at http://www.sec.gov that contains reports, proxy statements and other information. Reports, proxy statements and other information concerning the Company should also be available for inspection at the offices of NASDAQ, 1735 K Street, N.W., Washington, D.C. 20006. All of the information with respect to the Company and its affiliates set forth in this Offer to Purchase has been derived from publicly available information. 12 9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT. THE PURCHASER. The Purchaser is a Delaware corporation organized in order to enter into the transactions which are the subject of the Merger Agreement (including the Offer). The principal executive offices of the Purchaser are located at Godoy Cruz 316, Mendoza, Province of Mendoza, Argentina 5500. The Purchaser is a wholly owned subsidiary of Parent. Until immediately prior to the Stock Purchase, the Purchaser did not have any significant assets or liabilities and had not engaged in activities other than those incidental to its formation and capitalization and preparation for the Stock Purchase, the Offer and the Merger. Due to the fact that the Purchaser is newly formed and, until the Stock Purchase, had minimal assets and capitalization, no meaningful financial information regarding the Purchaser is available. In the Stock Purchase, the Purchaser purchased 6,006,006 Common Shares Preferred Shares for $3.33 per Common Share (a total of $20,000,000). That price is lower than the price to be paid in the Offer and the Merger. However, the terms of the Stock Purchase were agreed upon (a) to provide funds to the Company at prices Parent and the Purchaser were willing to pay even if they did not acquire the remaining shares of the Company, and (b) with knowledge that if the Offer and the Merger were completed, Parent would own all the stock of the Company, and therefore Parent would, in effect, become the owner of the proceeds of the Stock Purchase (or of the benefits of application of those proceeds). The Agreement provides that unless the Purchaser purchases all the Shares tendered in response to the Offer (even if the Minimum Condition or other conditions are not fulfilled), the Company will have an option, which will expire one year after the date of the Stock Purchase, to repurchase the shares it sold in the Stock Purchase for the price the Purchaser paid for those shares. See "Description of the Agreement." PARENT. Parent, a corporation organized under the laws of Argentina, is the third largest multi-channel television system operator in Argentina, providing multi-channel television services via cable and wireless technology. The principal executive offices of Parent are located at Godoy Cruz 316, Mendoza, Province of Mendoza, Argentina 5500. During the last 5 years none of Parent's or Purchaser's officers or directors was (1) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (2) party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of the proceeding was or is subject to a judgment, decree or final order enjoining future violations of or prohibiting activities subject to, Federal or state securities laws or finding any violation of such laws. Parent is not subject to the informational and reporting requirements of the Exchange Act and Parent is not required to file reports and other information with the Commission relating to its businesses, financial condition or other matters. The name, citizenship, business address, principal occupation or employment and five-year employment history for each of the directors and executive officers of the Purchaser and Parent are set forth in Schedule I. Except for the 6,006,006 Common Shares acquired by the Purchaser on December 5, 1997 through the Stock Purchase described in this Offer to Purchase, none of Parent, the Purchaser or, to the best knowledge of Parent or the Purchaser, any of the persons listed on Schedule I or any associate or majority owned subsidiary of any of those persons beneficially owns any equity security of the Company, and none of Parent or the Purchaser or, to the best knowledge of Parent or the Purchaser, any of the other persons referred to above, or any of their respective directors, executive officers or subsidiaries, has effected any transaction in any equity security of the Company during the past 60 days. Except as described in this Offer to Purchase, none of Parent or the Purchaser or, to the best knowledge of Parent or the Purchaser, any of the persons listed on Schedule I has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the 13 Company, including, without limitation, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any securities of the Company, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or the giving or withholding of proxies. Except as set forth in this Offer to Purchase, none of Parent or the Purchaser or, to the best knowledge of Parent or the Purchaser, any of the persons listed on Schedule I has had any transactions with the Company or any of its executive officers, directors or affiliates that would require reporting under the rules of the Commission. Except as described in this Offer to Purchase, since January 1, 1994, there have been no contacts, negotiations or transactions between Parent or the Purchaser, or their respective subsidiaries, or, to the best knowledge of Parent or the Purchaser, any of the persons listed in Schedule I, on the one hand, and the Company or its executive officers, directors or affiliates, on the other hand, concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, election of directors or a sale or other transfer of a material amount of assets. 10. SOURCE AND AMOUNT OF FUNDS. If all the outstanding Shares not owned by the Purchaser were tendered in response to the Offer, the Purchaser would be required to pay a total of approximately $86 million to purchase the tendered Shares and pay the fees and other expenses related to the Offer. See Section 17. The Purchaser expects to obtain the funds required to consummate the Offer through capital contributions or advances made by Parent. Parent has guaranteed the Purchaser's obligations under the Merger Agreement, including obligations with respect to the Offer. On November 12, 1997, Parent entered into a $300,000,000 Note Purchase Agreement (the "Loan Agreement") among Parent, and the other issuers named or referred to therein, as issuers, the financial institutions party thereto, as purchasers, ING Baring (U.S.) Securities, Inc. as Arranger, ING Baring (U.S.) Capital Corporation, (the "Bank"), as Administrative Agent and Collateral Agent, and The Bank of New York, as Registrar. One of the reasons Parent entered into the Loan Agreement was to obtain the funds it would require for the transactions which are the subject of the Merger Agreement. Parent expects to obtain substantially all the funds which will be used to pay for tendered Shares and to pay the fees and expenses related to the Offer through borrowings under the Loan Agreement. It is permitted to use up to $135 million of borrowings (including the $20 million paid in the Stock Purchase) for the transactions under the Merger Agreement and to pay costs of those transactions. ING Baring (U.S.) Securities, Inc., an affiliate of the Bank, acted as a financial advisor to Parent in connection with the transactions which are the subject of the Merger Agreement and is one of the Deal Managers with regard to the Offer. Borrowings under the Loan Agreement bear interest at LIBOR plus 4.5% per annum and must be repaid by November 12, 2002. Parent anticipates that the indebtedness under the Loan Agreement, including indebtedness incurred by Parent in connection with the Stock Purchase, the Offer and the Merger, will be repaid from funds generated internally by Parent and its subsidiaries (including, after the Merger, if consummated, dividends paid by the surviving corporation and its subsidiaries), through additional borrowings, through application of proceeds of dispositions of assets or through a combination of two or more of those sources. No final decisions have been made, however, concerning the method Parent will employ to repay that indebtedness. Those decisions, when made, will be based on Parent's review from time to time of the advisability of particular actions, as well as on prevailing interest rates and financial and other economic conditions. 11. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. The initial discussions of a possible transaction between Parent and the Company took place at a meeting in October 1996 between senior officers of the Company and representatives of Integra Financial Services L.L.C ("Integra"), an advisor to Parent. These initial discussions, and additional discussions through March 1997, focused on the high degree of consolidation in the Argentine CATV industry which 14 was taking place, and the advisability of combining the operations of Parent and the Company in view of that consolidation. In April 1997, there were discussions about a merger of the Company and Parent, in which shareholders of the Company would receive shares of Parent. Extensive discussions were held, and draft agreements were prepared. However, the merger would have required approval of the shareholders of both companies. A shareholder of Parent, which had the ability to preclude Parent from carrying out the merger, stated it would not approve a merger. Because of that, discussions of a merger were dropped. Early in August 1997, discussions of a transaction between Parent and the Company were revived. Parent was represented in these discussions by Integra, ING Baring (U.S.) Securities, Inc. ("ING Baring Securities") and Smith Barney & Co., Inc. ("Smith Barney"). The Company was represented in these discussions by its senior officers and by Arnhold and S. Bleicholder & Co. ("Bleicholder"). By mid-August, Parent and the Company each brought attorneys into the discussions, and agreements began to be drafted. From mid-August to mid-September, there were nearly daily discussions of a transaction between Parent and the Company. Initially, the discussions related to a purchase by Parent from the Company of what would have been approximately 45% of the outstanding Common Shares and 30% of the outstanding 8% Preferred Shares for approximately $39 million, followed by a merger of the Company into a subsidiary of Parent in which the stockholders of the Company would have received $4.53 per Common Share and $144.96 per 8% Preferred Share. However, at Parent's suggestion, it was decided that the transaction would take place in three steps, with a tender offer for the Common Shares and 8% Preferred Shares between the initial stock purchase and the merger. A principal issue during the discussions was a desire of the Company to be sure Parent would not become unable to complete a transaction either (i) because it did not have adequate funds or (ii) because its shareholders would not permit the transaction to proceed. With regard to the first concern, ING Baring (US) Capital Corporation ("ING Baring Capital") delivered a letter to the Company stating that ING Baring Capital had obtained internal credit approval for a senior secured credit facility in an aggregate principal amount sufficient to conclude the transactions being discussed, but the disbursement of that facility was subject to the negotiation, execution and delivery of definitive documentation satisfactory to ING Baring Capital and its counsel, which would contain, among other things, customary covenants, conditions precedent and security arrangements (including financial covenants on a pro forma basis concerning the combined operations of Parent and the Company). With regard to the second concern, the stockholders of Parent all stated they approved of the transaction. On September 16, 1997, the Purchaser (a wholly-owned subsidiary of Parent) and the Company signed a Stock Purchase and Merger Agreement (the "Original Merger Agreement") in which they agreed that (i) the Purchaser would purchase 10,790,000 Common Shares (which would be approximately 45% of the outstanding Common Shares) for $35,930,700 ($3.33 per share) and would purchase 60,750 8% Preferred Shares (which would be 30% of the outstanding 8% Preferred Shares) for $6,075,000 ($100 per share), (ii) shortly after completion of that stock purchase, the Purchaser would make a tender offer for all the outstanding Common Shares and 8% Preferred Shares for $4.50 per Common Share and $144 per 8% Preferred Share (plus an amount equal to accrued dividends on the 8% Preferred Shares), and (iii) if the tender offer resulted in the Purchaser's owning at least two-thirds of the outstanding Common Shares and two-thirds of the outstanding 8% Preferred Shares (which would enable the Purchaser to approve a merger between the Company and itself even if no other Tescorp shareholders voted in favor of the merger), the Company and the Purchaser would be merged in a transaction in which Parent would become the sole shareholder of the merged company and the former Tescorp shareholders who had not tendered their shares would receive $4.50 per Common Share and $144 per 8% Preferred Share plus accrued dividends, unless they sought to obtain appraisal of their shares in accordance with Articles 5.11 through 5.13 of the Texas Business Corporation Act. The Original Merger Agreement required that before the Purchaser purchased the 10,790,000 Common Shares and the 60,750 8% Preferred Shares, three designees of the 15 Purchaser would be elected to the Company's Board of Directors. When the Original Merger Agreement was signed, the Purchaser gave the Company a $5,000,000 deposit, to be applied against the purchase price of the 10,790,000 Common Shares and the 60,750 8% Preferred Shares. After the Original Merger Agreement was signed, required filings were made under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the waiting periods required by that Act were terminated. Also, agreements between Parent and various financial institutions, including ING Bank N.V., which included the financing required for the transaction contemplated by the Original Merger Agreement were drafted. However, before those financing agreements were signed, it was realized that the purchase by the Purchaser of 45% of the Common Shares and 30% of the 8% Preferred Shares would not result in the Company's financial statements being included in Parent's consolidated financial statements, and therefore, that step of the transaction would cause Parent to be in violation of financial ratio covenants which would be in the financing agreements. On November 5, 1997, representatives of Parent informed the principal executive officers of the Company that, because of requirements of Parent's expected lending agreements, Parent and the Purchaser would not be able to carry out the transaction as contemplated by the Original Merger Agreement. Discussions ensued, and on December 5, 1997 the Purchaser and the Company entered into an Amended Stock Purchase and Merger Agreement (the "Merger Agreement"). The principal difference between the Merger Agreement and the Original Merger Agreement is that under the Merger Agreement, the initial step was the purchase by the Purchaser of 6,006,006 Common Shares for $20,000,000 (including $5,000,000 paid through application of the deposit given when the Original Merger Agreement was signed), rather than the purchase of 10,790,000 Common Shares and 60,750 8% Preferred Shares for $42,005,700 which had been contemplated by the Original Merger Agreement. Because this initial transaction would be smaller than had been contemplated in the Original Merger Agreement, provisions were added to the Merger Agreement which were intended to insure that the proceeds of the initial transaction would give the Company the cash it needed for specified transactions (including a debt repayment due in February 1998) and the number of directors of the Company the Purchaser could designate was reduced from three to one. In accordance with the Merger Agreement, on December 5, 1997, (i) the Purchaser purchased a total of 6,006,006 Common Shares for $20,000,000 ($3.33 per share), of which $15 million was paid in cash and the balance was paid by permitting the Company to keep the $5 million deposit which the Purchaser had given to the Company when the Original Merger Agreement was signed, and (ii) the Offer was announced. The Merger Agreement required that materials relating to the Offer be sent to the Company's stockholders, and requires that if the Purchaser increases its ownership to at least two-thirds of the outstanding Common Shares and obtains at least two-thirds of the outstanding 8% Preferred Shares through the Offer (i.e., the Minimum Condition is satisfied), the merger contemplated by the Merger Agreement will take place. The Merger Agreement is described under the caption "The Merger Agreement." 12. PURPOSE OF THE OFFER AND THE PROPOSED MERGER; PLANS FOR THE COMPANY. PURPOSE. The purpose of the Stock Purchase, the Offer and the Merger is to enable Parent to acquire all the outstanding stock of the Company. The Offer is the second step in this effort. In the Stock Purchase, Parent, through the Purchaser, acquired approximately 31% of the outstanding Common Shares. If the Purchaser accepts Shares tendered in response to the Offer, the Purchaser's (and indirectly Parent's) ownership of Common Shares and 8% Preferred Shares will increase by the number of Shares purchased through the Offer. The purpose of the Merger will be to enable Parent to become the owner of all the outstanding stock of the Company. If the Purchaser purchases through the offer at least the minimum number of Common Shares and 8% Preferred Shares required to satisfy the Minimum Condition, Parent will be required by the Merger Agreement to carry out the Merger. If Purchaser purchases the shares which are properly tendered in response to the Offer, but those shares do not increase the Purchaser's holdings sufficiently to satisfy the 16 Minimum Condition, neither Parent nor the Company will be contractually obligated to carry out the Merger. However, unless the Loan Agreement is modified, the Purchaser will not be permitted to waive the Minimum Condition (or any other condition to its obligation to accept and pay for the Shares which are tendered in response to the Offer). If, because one or more of the conditions to the Purchaser's obligation to accept Shares which are tendered in response to the Offer is not fulfilled, the Purchaser does not purchase the Shares which are tendered in response to the Offer, the Company will have the option, which it may exercise at any time on or before December 5, 1998 (the first anniversary of the date on which the Stock Purchase was completed), to repurchase all the stock the Purchaser acquired through the Stock Purchase for the price the Purchaser paid for it. If, however, the Purchaser purchases all the Shares which are tendered in response to the Tender Offer, even though it is not required to do so, the Company will not have the option to repurchase the stock the Purchaser acquired through the Stock Purchase. The Purchaser is also required to purchase, at or before the Effective Time of the Merger, the minority interests in some cable television systems of which the Company is the majority owner, except to the extent the current owners of the minority interests will not sell them for prices specified in the Merger Agreement. The Purchaser also is required to purchase two local cable systems which were the subject of options held by the Company, if the owners of these systems will sell them on the terms provided in the options. There is no provision of the Merger Agreement giving the Company the right, or the obligation, to purchase the minority interests or the two cable systems from the Purchaser if the Purchaser purchases them but the Merger does not take place. If Parent acquires all the stock of the Company, Parent will include the Company's cable systems in Parent's network of Argentine cable systems. If that occurs, Parent may make changes in the way those cable systems are operated, in the corporate structure of those cable systems or in their personnel. Parent also may liquidate the Company so Parent or another subsidiary of Parent will be the sole owner of the Argentine cable systems currently owned or operated by the Company. Except as described, neither the Purchaser nor Parent has any current plans or proposals that would relate to, or result in, any extraordinary corporate transaction involving the Company, such as a merger, reorganization or liquidation involving the Company or any of its subsidiaries, a sale or transfer of a material amount of assets of the Company or any of its subsidiaries, any changes in the Company's capitalization or dividend policy or any other material change in the Company's business, corporate structure or personnel. In accordance with the Merger Agreement, effective December 5, 1997, Daniel Vila, was elected to the Company's Board of Directors. The Company is required to use its best efforts to cause Daniel Vila, or if he becomes unable to serve, another designee of the Purchaser reasonably acceptable to the Company, to be elected at all subsequent meetings of the Company's stockholders at which directors are elected. If (i) at any time the Purchaser and its affiliates (including Parent) cease to own at least 15% of the outstanding Common Shares, or (ii) the Purchaser breaches or fails to fulfill in a material respect any of its obligations under the Merger Agreement within 10 days after written notice of the failure from the Company, the Purchaser must cause Daniel Vila or whoever else may be its designee to resign. ACQUISITION PROPOSALS. The Company may not, and may not authorize its officers, directors, employees or agents to, enter into any discussions or take any other steps, a likely result of which might be to cause someone other than the Purchaser or Parent to (i) solicit tenders of stock of the Company or otherwise seek to acquire 5% or more of either the Common Shares or the 8% Preferred Shares, other than with a view to tendering those Shares in response to the Offer, (ii) acquire all or a substantial portion of the assets of the Company and its subsidiaries (whether through acquisitions of assets, acquisitions of stock of subsidiaries or both), or (iii) otherwise acquire the Company or a substantial portion of its assets if the Minimum Condition is not met or if the Company's stockholders do not approve the Merger. The Company is required to notify the Purchaser if the Company learns that anyone is contemplating soliciting tenders of its stock, acquiring 5% or more of its outstanding stock, acquiring all or a substantial portion of 17 its assets and those of its subsidiaries or otherwise offering to acquire the Company or its assets if the Minimum Condition is not met or if its stockholders do not approve the Merger, and to provide the Purchaser with any additional information it obtains regarding the contemplated solicitation of tenders, acquisition of stock or assets or other acquisition offer. If there is an unsolicited tender offer from someone other than the Purchaser which the Company's Board of Directors determines, in good faith and after consultation with the Company's independent financial advisor, (i) would result in the holders of the Common Shares receiving consideration with a fair value of more than $5.00 per share and the holders of the 8% Preferred shares receiving consideration with a fair value of more than $160 per share, and (ii) is more favorable both to the holders of the Common Shares than the transactions under the Merger Agreement and to the holders of the 8% Preferred Shares the Company may terminate the Merger Agreement by paying the Purchaser $5 million. See Section 13. 13. THE MERGER. THE MERGER AGREEMENT. The Merger Agreement provides that if the Purchaser acquires enough Shares through the Offer to satisfy the Minimum Condition, following the satisfaction or waiver of the conditions described below under "Conditions to the Merger", the Purchaser will be merged with and into the Company, which will be the surviving corporation of the Merger (the "Surviving Corporation"). When the Merger becomes effective, the separate existence of the Purchaser will terminate, the Purchaser's real and personal property, other assets, rights, privileges, immunities, powers, purposes and franchises will be merged into the Surviving Corporation, and the Merger will have the other effects specified in Section 259 of the Delaware General Corporate Law and Article 5.06 of the Texas Business Corporation Act (the "TBCA"). STOCK OF THE COMPANY. (a) At the Effective Time of the Merger, each Common Share which is outstanding immediately before the Effective Time, other than shares owned by the Purchaser, will be converted into and become the right to receive $4.50 in cash, or any higher price per share paid with regard to Common Shares tendered in response to the Offer (the "Common Shares Merger Price"). (b) At the Effective Time each 8% Preferred Share which is outstanding immediately before the Effective Time will be converted into and become the right to receive in cash $144 per share plus accrued dividends to the Expiration Date of the Offer (except that if a dividend is paid with regard to the 8% Preferred Shares between the Expiration Time and the Effective Time, each 8% Preferred Share will be converted into and become the right to receive $144.00 in cash without regard to any accrued but unpaid dividends). (c) At the Effective Time, each Common Share or 8% Preferred Share held by the Purchaser or by any direct or indirect subsidiary of the Company immediately before the Effective Time will be cancelled and no payment will be made with respect to those shares. STOCK OF THE PURCHASER. At the Effective Time, each share of stock of the Purchaser which is outstanding immediately before the Effective Time will be converted into and become one share of common stock of the Surviving Corporation ("Surviving Corporation Common Stock"). STOCKHOLDER VOTE REQUIRED TO APPROVE MERGER. Under the TBCA, the affirmative vote of holders of two-thirds of the outstanding Shares (including any Shares owned by the Purchaser) is required to approve the Merger. If the Minimum Condition is satisfied and the Purchaser purchases the Shares tendered in response to the Offer, the Purchaser will it have sufficient voting power to approve the Merger without the vote of any other stockholder of the Company. If the Purchaser acquires more than 90% of the outstanding shares, stockholder approval will not be required under TBCA Article 5.16. 18 STOCKHOLDERS MEETING. If the Minimum Condition is satisfied and the Purchaser purchases the Shares tendered in response to the Offer, and if approval by the Company's stockholders is required in order to consummate the Merger, the Company will hold a special meeting of its stockholders as soon as practicable after the Expiration Time for the purpose of adopting the Merger Agreement and approving the Merger. CONDITIONS TO THE MERGER. Neither the Company nor the Purchaser is contractually obligated to complete the Merger unless the Purchaser acquires the Shares tendered in response to the Offer and the Minimum Condition is satisfied. If that occurs (i) the Purchaser will own sufficient shares to be able to approve the Merger even if no other stockholders of the Company vote in favor of it and (ii) the Purchaser will be contractually obligated to vote in favor of the Merger. The obligations of the Company to carry out the Merger will be conditioned on the Merger's being approved by the holders of two-thirds of the outstanding Common Shares and two-thirds of the outstanding 8% Preferred Shares (which will occur if the Minimum Condition is satisfied and the Purchaser votes in favor of the Merger). In addition, the obligations of the Company and of the Purchaser complete the Merger are subject to the following conditions: (a) no order will have been entered by any court or governmental authority and be in force which invalidates the Merger Agreement or restrains the Company from completing the transactions contemplated by the Merger Agreement; (b) the Effective Time will occur on or before April 30, 1998; (c) the number of shares held by shareholders of the Company who have filed written objections to approval of the Merger sufficient to preserve their rights to demand the fair value of the shares pursuant to Articles 5.11 through 5.13 of the TBCA will not exceed 5% of the total number of outstanding Common Shares and 8% Preferred Shares combined (treating each 8% Preferred Share as being equal to 32 Common Shares). TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be terminated at any time prior to the Effective Time of the Merger (as defined below), whether before or after approval of the terms of the Merger Agreement by the stockholders of the Company: (1) by mutual consent of the Company and the Purchaser; (2) by the Company, if without fault of the Company, the Expiration Time of the Offer is not on or before January 31, 1998; (3) by the Company or the Purchaser if, without fault of the Purchaser, the Effective Time of the Merger is not on or before April 30, 1998; (4) by the Company if (i) if any of the representations and warranties of the Purchaser contained in the Merger Agreement was not complete and accurate in all material respects on the date of the Merger Agreement or (ii) any of the conditions to the Company's obligations to complete the Merger are not satisfied or waived by the Company prior to or on the date of the Merger; (5) by the Purchaser if (i) any of the representations or warranties of the Company contained in the Merger Agreement was not complete and accurate in all material respects on the date of the Merger Agreement, or (ii) any of the conditions to the Purchaser's obligations to complete the Merger are not satisfied or waived by the Purchaser prior to or on the date of the Merger; or (6) by the Company if (A) a tender or exchange offer is commenced by a potential acquiror for all the outstanding Common Shares and 8% Preferred Shares for a consideration having a value of at least $5 per Common Share and $160 per 8% Preferred Share, (B) the Company's Board of Directors determines in good faith and after consultation with an independent financial advisor that the offer constitutes a Superior Proposal (as defined below) and resolves to accept the Superior Proposal or to recommend to the Company's stockholders that they tender their shares in response to the tender or exchange offer (C) the Company has given the Purchaser at least 10 business days' prior notice of its intention to terminate pursuant to this provision and (D) the Company has paid the Purchaser $5 million. A "Superior Proposal" is an unsolicited proposal to the Company which (x) would result in the Company's stockholders receiving consideration with a fair value determined in good faith by the 19 Company's Board of Directors and after consultation with the Company's independent financial advisor to be more than $5 per share of Common Stock and more than $160 per share of 8% Preferred Stock and (y) is determined in good faith by the Company's Board of Directors to be more favorable both to the holders of Common Shares and to the holders of the 8% Preferred Shares than the Offer and the Merger. EFFECT OF TERMINATION OF THE MERGER AGREEMENT. If the Merger Agreement is terminated, neither the Company nor the Purchaser will be required to complete the Merger. If the Merger Agreement is terminated after the Purchaser has accepted Shares tendered in response to the Offer, the termination will not affect the Purchaser's purchase of the Shares it has accepted or its obligation to pay for those shares. If the Purchaser waives the Minimum Condition and votes in favor of the Merger, but the Merger is not approved by the Company's stockholders, the Company will have to pay the Purchaser $5 million. ACQUISITION PROPOSALS. The Merger Agreement contains prohibitions against the Company's soliciting, or authorizing its officers, directors, employees or agents to solicit acquisition proposals, and regarding what the Company may do, if it receives unsolicited acquisition proposals. OTHER PROVISIONS. The Merger Agreement also contains provisions (i) requiring the Company to operate its business in the ordinary course, including maintaining the goodwill of its business and maintaining its assets in good condition, limiting the Company's borrowings and commitments for capital expenditures, and precluding the Company from paying dividends (other than required dividends with regard to its preferred stock) or taking other steps regarding its stock, until the Effective Time, (ii) requiring the Purchaser (and the corporation which survives the Merger) to indemnify directors, officers, employees, fiduciaries and agents of the Company and its subsidiaries against liability rising out of their service as directors, officers, employees or agents of the Company or its subsidiaries, or of companies with regard to which they served as directors, officers, employees or agents at the request of the Company or its subsidiaries. BOARD OF DIRECTORS. The Merger Agreement provides that if the Merger is consummated, Daniel E. Vila, Alfredo L. Vila and Jose Maria Saenz Valiente will be the directors of the Surviving Corporation. REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various customary representations and warranties. APPRAISAL RIGHTS. If the Merger is consummated, holders of Shares at the Effective Time of the Merger will have rights pursuant to the provisions of Article 5.12 of the TBCA ("Article 5.12") to dissent and demand appraisal of their Shares. Under Article 5.12, dissenting stockholders who comply with the applicable statutory procedures will be entitled to receive a judicial determination of the fair value of their Shares (exclusive of any element of value arising from the accomplishment or exception of the Merger) and to receive payment of that fair value in cash, together with a fair rate of interest, if any. The statutory procedures include notifying the Company prior to the meeting at which the Company's stockholders vote on the Merger that the particular stockholder intends to exercise, dissenter's rights and giving that stockholder's address. Any judicial determination of the fair value of Shares could be more or less than the price per Share to be paid in the Merger. The foregoing summary of Article 5.12 does not purport to be complete and is qualified in its entirety by reference to Article 5.12. FAILURE TO FOLLOW THE STEPS REQUIRED BY ARTICLE 5.12 FOR PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF THOSE RIGHTS. The Purchaser will not be required to complete the Merger if holders of more than 5% of the outstanding Common Shares and 8% Preferred Shares combined (treating each 8% Preferred Share as equal to 32 Common Shares) file objections sufficient to preserve their right to demand appraisal of their Shares. 20 14. CERTAIN EFFECTS OF THE TRANSACTION. NASDAQ. The purchase of the Shares tendered in response to the Offer will reduce the number of Common Shares that might otherwise trade publicly and could reduce the number of holders of Common Shares, which could adversely affect the liquidity and market value of the remaining Common Shares held by the public. Depending upon the number of Common Shares purchased pursuant to the Offer, the Common Shares may no longer meet the standards for continued inclusion in the NASDAQ Small-Cap Market, which require that an issuer have at least 200,000 publicly held shares with a market value of at least $1,000,000, held by at least 400 shareholders or 300 shareholders of round lots. If these standards are not met, the Common Shares might nevertheless continue to be quoted in the over-the-counter "additional list" or in one of the "local lists," but if the number of holders of the Common Shares falls below 300, or if the number of publicly held Common Shares falls below 100,000 or there are not at least two registered and active market makers for the Common Shares, the Common Shares would no longer be "qualified" for NASDAQ reporting and NASDAQ would cease to provide any quotations. Shares held directly or indirectly by directors, officers or beneficial owners of more than 10% of the Common Shares (which would include the Purchaser) are not considered as being publicly held for this purpose. If the Common Shares are no longer eligible for NASDAQ quotation, quotations might still be available from other sources. The extent of the public market for the Shares and the availability of quotations would, however, depend on the remaining number of holders of Common Shares, the interest of securities firms in maintaining a market in the Common Shares, the possible termination of registration under the Exchange Act, as described below, and other factors. According to the Company, as of November 14, 1997, there were approximately 336 holders of record of Common Shares and approximately 1,460 beneficial owners of Common Shares and as of December 5, 1997, there were 19,223,456 Common Shares outstanding, of which 6,006,006 were owned by the Purchaser. EXCHANGE ACT REGISTRATION. The Common Shares are currently registered under the Exchange Act. That registration may be terminated upon application of the Company to the Securities and Exchange Commission if the Common Shares are not listed on a national securities exchange or quoted on NASDAQ and there are fewer than 300 record holders of the Common Shares. The termination of registration of the Common Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to holders of Common Shares and to the Commission and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the requirement of furnishing a proxy statement in connection with stockholders' meetings pursuant to Section 14(a) of the Exchange Act, and the requirements of Rule 13e-3 under the Exchange Act with respect to "going-private" transactions, no longer applicable to the Company. See Section 16. In addition, "affiliates" of the Company and persons holding "restricted securities" of the Company may be deprived of the ability to dispose of those securities pursuant to Rule 144 under the Securities Act. If registration of the Common Shares under the Exchange Act were terminated, the Common Shares would no longer be eligible for quotation on NASDAQ. The Purchaser intends to seek to cause the Company to make an application for termination of registration of the Common Shares under the Exchange Act as soon after consummation of the Offer as the requirements for termination of the registration of the Common Shares are met. As a result, the Purchaser may be able to give the required stockholder approval of the Merger (if stockholder approval is required) without the Company's sending a proxy statement or an information statement to its stockholders. 15. DIVIDENDS AND DISTRIBUTIONS. The Merger Agreement prohibits the Company from paying any dividends or making other distributions with regard to its Common Shares or its 8% Preferred Shares (other than regularly scheduled dividends with regard to the 8% Preferred Shares), or from issuing any shares, until the Effective Time of the Merger. 21 16. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS. GENERAL. Except as otherwise disclosed in this Offer to Purchase, based on the Company's representations and warranties in the Merger Agreement and a review of publicly available filings by the Company with the Commission, the Purchaser is not aware of (i) any license or regulatory permit that appears to be material to the business of the Company and its subsidiaries, taken as a whole, that might be adversely affected by the acquisition of Shares by the Purchaser pursuant to the Offer or the Merger or (ii) any approval or other action by any governmental, administrative or regulatory agency or authority, domestic or foreign, that would be required for the acquisition or ownership of Shares by the Purchaser, other than approvals by an Argentine governmental authority which, although required as a pre-requisite to changes of control of Argentine cable system operators, customarily are not given until after the changes of control have taken place (and are not a condition to the Offer or the Merger). Should any such approval or other action be required, the Purchaser currently contemplates that the approval or action would be sought. It is possible that any such approval or action, if needed, would not be obtained. GOING PRIVATE TRANSACTIONS. The Commission has adopted Rule 13e-3 under the Exchange Act, which is applicable to certain "going private" transactions. The Offeror does not believe that Rule 13e-3 will be applicable to the Merger unless the Merger is consummated more than one year after the termination of the Offer. If applicable, Rule 13e-3 requires, among other things, that certain financial information concerning the fairness of the Merger and the consideration offered to minority stockholders in the Merger be filed with the Commission and disclosed to stockholders prior to the consummation of the Merger. ANTITRUST COMPLIANCE. Prior to the Stock Purchase, the Company and Parent made a filing with the United States Federal Trade Commission (the "FTC") under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"). The HSR Act requires that, before an acquisition involving companies which exceed specified sizes can take place, information must be provided to the FTC and to the Antitrust Division of the United States Department of Justice, and specified waiting periods must expire or be terminated by the FTC or the Antitrust Division. The required notification under the HSR Act was filed, and the waiting period was terminated, before the Stock Purchase. That filing contemplated a possible acquisition by Parent of all the stock of the Company. Therefore, no further filing or waiting period will be required with regard to the Offer or the Merger. STATE TAKEOVER STATUTES. The Company is incorporated under the laws of Texas. Effective September 1, 1997, a new Part Thirteen of the Texas Business Corporation Act (the "Texas Business Combination Law") prohibits a public corporation organized under Texas law, or its majority owned subsidiaries, from engaging in a transaction with a person who acquires 20% or more of the corporation's outstanding voting stock or its affiliates, for three years after the person acquires that 20% or greater interest, share exchange, sale of significant assets, issuance of shares, liquidation of the Corporation pursuant to an agreement with the 20% or greater shareholder, reclassification of the securities of the Corporation which increases the portion of the stock of any class or series owned by the 20% or greater stockholder or the receipt by the 20% or greater stockholder of loans or similar financial assistance. The three year ban does not apply, however, if the proposed transaction with the 20% or greater stockholder, or the transaction by which the person became a 20% or greater stockholder, is approved by the board of directors of the corporation before the person becomes a 20% or greater stockholder. Because the Board of the Company approved the Stock Purchase (the transaction by which the Purchaser, and indirectly Parent, became a 20% or greater stockholder of the Company) before it took place, the Texas Business Combination Law will not apply to the Purchaser or Parent. A number of other states have adopted laws and regulations applicable to attempts to acquire securities of corporations which are incorporated, or have substantial assets, stockholders, principal 22 executive offices or principal places of business, or whose business operations otherwise have substantial economic effects, in such states. In 1982, in EDGAR V. MITE CORP., the Supreme Court of the United States invalidated on constitutional grounds the Illinois Business Takeover Statute, which, as a matter of state securities law, made takeovers of corporations meeting certain requirements more difficult. However, in 1987, in CTS CORP. V. DYNAMICS CORP. OF AMERICA, the Supreme Court held that the State of Indiana may, as a matter of corporate law, and, in particular, with respect to those aspects of corporate law concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without the prior approval of the remaining stockholders. The state law before the Supreme Court was by its terms applicable only to corporations that had a substantial number of stockholders in the state and were incorporated there. 17. FEES AND EXPENSES. Except as set forth below, neither Parent nor the Purchaser will pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Shares pursuant to the Offer. The Purchaser has retained Furman Selz LLC and ING Baring (U.S.) Securities, Inc. to act as Dealer Managers in connection with the Offer. Furman Selz LLC and ING Baring (U.S.) Securities, Inc. each will receive a fee of $125,000 for their services as Dealer Managers in connection with the Offer. The Purchaser has also agreed to reimburse Furman Selz LLC and ING Baring (U.S.) Securities, Inc. for certain out-of pocket expenses incurred in connection with the Offer (excluding certain fees and disbursements of their legal counsel) and to indemnify Furman Selz LLC and ING Baring (U.S.) Securities, Inc. against certain liabilities in connection with the Offer, including liabilities under the federal securities laws. The Purchaser has retained Morrow & Co., Inc. to act as the Information Agent in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, facsimile, telegraph and personal interviews and may request brokers, dealers and other nominee stockholders to forward materials relating to the Offer to beneficial owners of Shares. The Information Agent will receive reasonable and customary compensation together with reimbursement for its reasonable out-of-pocket expenses and will be indemnified against certain liabilities and expenses, including certain liabilities under the federal securities laws. In addition, The Bank of New York has been retained as the Depositary. The Depositary has not been retained to make solicitations or recommendations in its role as Depositary. The Depositary will receive reasonable and customary compensation for its services, will be reimbursed for certain reasonable out-of- pocket expenses and will be indemnified against certain liabilities and expenses. Brokers, dealers, commercial banks and trust companies will be reimbursed by the Purchaser for customary mailing and handling expenses incurred by them in forwarding offering material to their customers. 18. MISCELLANEOUS. The Purchaser is not aware of any jurisdiction where the making of the Offer is prohibited by any administrative or judicial action or pursuant to any state statute. If the Purchaser becomes aware of any state statute prohibiting the making of the Offer or the acceptance of the Shares which are tendered in response to the Offer, the Purchaser will make a good faith effort to comply with that state statute. If, after a good faith effort the Purchaser cannot comply with any such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. In any jurisdiction where the securities, Blue Sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer will be deemed to be made on behalf of the Purchaser by the Dealer Managers or one or more registered brokers or dealers which are licensed under the laws of that jurisdiction. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF THE PURCHASER NOT CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE, THAT INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. 23 Parent and the Purchaser have filed with the Commission a Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1"), together with exhibits, pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange Act, containing additional information with respect to the Offer, and Parent or the Purchaser may file amendments to the Schedule 14D-1. The Schedule 14D-1 and any amendments to it, including exhibits, may be inspected at, and copies may be obtained from, the places described in Section 8 (except that they will not be available at the regional offices of the Commission). TESCORP ACQUISITION CORPORATION December 8, 1997 24 SCHEDULE I CERTAIN INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER 1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. Set forth below is the name, current business address, citizenship and the present principal occupation or employment and material occupations, positions, offices or employments for the past five years of each director and executive officer of Parent. The principal address of Parent and, unless otherwise indicated below, the current business address for each individual listed below is Godoy Cruz 316, Mendoza, Province of Mendoza Argentina 5500. Unless otherwise indicated, each such person is a citizen of the Republic of Argentina.
PRINCIPAL OCCUPATION OR EMPLOYMENT DURING PAST NAME FIVE YEARS, POSITIONS WITH PARENT AND CERTAIN DIRECTORSHIPS - --------------------------------------------- ------------------------------------------------------------------- Daniel Eduardo Vila.......................... Chairman of the Board of Directors of Parent since 1996; Chief Executive Officer of Parent since March 1997; Vice Chairman of the Board of Directors of Supercanal S.A. since 1984; Chairman of the Board of Mendoza 21 S.A.; Director of Purchaser since September, 1997; publisher of DIARIO UNO, a daily newspaper in Mendoza; Radio Nihuil S.A. a radio broadcaster, operating in the Province of Mendoza and surrounding areas; publisher of PRIMERA FILA, a monthly magazine; Vice Chairman of Radio Red Celeste y Blanca S.A., the operator of an AM radio station in Buenos Aires; Director of Dalvian S.A., a real estate development company; alternate director of Banco de Mendoza S.A. and Banco Prevision Social S.A.; Alfredo Luis Vila Santander.................. Vice Chairman of the Board of Directors of Parent since 1996; Chairman and Chief Executive Officer of Supercanal S.A. from 1993 to 1996; Director and President of Purchaser since September, 1997; Director of Radio Nihuil S.A., Mendoza 21 S.A. and of Dalvian S.A.; Chairman and Chief Executive Officer of Supercanal Internacional S.A. Jorge Mas.................................... Director of Parent since July 1997; Alternate Director of Parent from June 1996 through April 1997; Alternate Director of Supercanal S.A. since 1996; President, Chief Executive Officer and Director of MasTec, Inc., a U.S. publicly-held company, since March 1994; during the past five years, President and Chief Executive Officer of Church & Tower, Inc., a principal operating subsidiary of MasTec, Inc.; Chairman of the Board of Directors of Neff Corporation, a company which sells and leases construction and industrial equipment, Atlantic Real Estate Holding Corp., a real estate holding company, U.S. Development Corp. a real estate company, and Santos Capital, Inc., a merchant banking firm, all companies controlled by Mr. Mas.; during all or a portion of the past five years, President and Chief Executive Officer of these corporations. Jose Maria Saenz Valiente, Jr................ Director of Parent since July 1996; Chairman of the Board of Multicanal from 1993 until 1994; Director, Secretary and President of Purchaser since September, 1997; since 1996
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PRINCIPAL OCCUPATION OR EMPLOYMENT DURING PAST NAME FIVE YEARS, POSITIONS WITH PARENT AND CERTAIN DIRECTORSHIPS - --------------------------------------------- ------------------------------------------------------------------- Director of various companies in the multi-channel television industry that were acquired by Multicanal; partner of the Saenz Valiente & Padilla law firm. Alberto Luis Vila............................ Director of Parent since 1996; Director of Supercanal S.A. since 1993; Director of Primera Fila A.A.; legal counsel to various multinational corporations in Mendoza; partner of the Vila law firm. Sergio Ceroi................................. Alternate Director of Parent since July, 1996; Chief Financial Officer of Mendoza 21 S.A. since February 1996; prior to that, Chief Financial Officer of Radio Nihuil S.A.; from January 1985 to December 1987, Chief Auditor for Profim Cia Financiera S.A., a money manager in the Province of Mendoza. Juan Maria de la Vega........................ Alternate Director of Parent since July, 1996; Member of the Saenz Valiente & Padilla law firm; and serving on the Board of Directors of various companies in the multi-channel television industry acquired by Multicanal since 1993; alternate Director of Multicanal. Kevin P. Fitzgerald.......................... Alternate Director of Parent since July 1997; prior to that, Director of Supercanal Holding from 1996 until April 1997; Director of Supercanal S.A. since April 1996; since July 1995, President and Co-Chairman of Santos Capital, Inc., and President and Chief Executive Officer of Neff Corporation and its subsidiaries, Neff Rental, Inc. and Neff Machinery, Inc.; From 1991 to 1995, Senior Vice President in the investment banking department of Houlihan Lokey Howard & Zukin, a private investment bank; prior to that, in the corporate finance department of Deloitte, Haskins & Sells, a public accounting firm; Director of Primera Fila S.A., Neff Corp. and Santos Capital, Inc. Guillermo Vila............................... Alternate Director of Parent since July 1996; Director of Supercanal S.A.; a partner of the Vila law firm. Omar R. Alvarez.............................. Alternate Director of Parent since July, 1997; holds (i) 35% of the capital stock and is President of San Rafael/Pehuenche, a multi-channel television system controlled by the Company, (ii) 70% of the capital stock and is President of Inversora C.T.C.S.R.L., an investment company which holds interests in banks, medical providers and real estate, (iii) 80% of the capital stock and is a director of L.V. 23 Radio Rio Atuel S.R.L., an AM and FM radio station, (iv) 33% of the CUOTAS and is partner of Lomas del Nihuil S.R.L., a tourist resort in Nihuil, (v) 100% of the capital stock of El Faro S.R.L., a tourist resort in Nihuil, (vi) 100% of the capital stock of and a director of Cementerio Parque S.A. which holds property for cemetery parks, and (vii) 100% of the CUOTAS and President of
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PRINCIPAL OCCUPATION OR EMPLOYMENT DURING PAST NAME FIVE YEARS, POSITIONS WITH PARENT AND CERTAIN DIRECTORSHIPS - --------------------------------------------- ------------------------------------------------------------------- Parque Turistico Sierra Pintada S.R.L., a 14,000 hectare reserve and tourist park in the province of Mendoza. Fernando Julio Barbeira...................... Chief Financial Officer of Parent since August, 1996; from 1993 to August 1996, held various general management positions in subsidiaries of Multicanal, including Red Argentina S.A. ("Red Argentina"), Multicanal's MSO management company, Intercable S.A. and Lanus Video Cable S.A., operating subsidiaries of Multicanal, companies controlled by Multicanal, and Aconcagua (Multicanal's subsidiary in Mendoza); was responsible for the accounting and financial statements of the Aerolineas Argentinas privatization at Henry Martin y Asociados, a public accounting firm from 1991 to 1993; served in several positions at Neumaticos Goodyear S.A. from 1970 to 1990. Omar Jorge Saez.............................. Chief Operating Officer of Parent since December 1996; from 1993 to 1996, served as General Manager of several different companies acquired by Multicanal; from 1989 to 1993, was General Manager of Cormasa S.A., a metal mechanic company. Guillermo Horacio Panelli.................... Chief Administrative Officer of Parent since November 1996; from November 1993 until September 1996, was Administrative and Financial Manager of Concecuyo S.A., a licensee of YPF S.A. operating service stations in the provinces of Mendoza, San Luis, San Juan, La Rioja and Catamarca; From 1987 to 1993, was Administrative and Financial Manager of Bodega Quiros S.A., a beverages and winery concern. Eduardo Elbio Carbini........................ Marketing Manager of Parent since January 1997; was Marketing Manager of Supercanal S.A. between 1987 and 1996; served as Marketing Manager of PRIMERA FILA from 1990 to 1996; from 1995 to 1996, was Director of Radio F.M. Brava S.A., the operator of a local radio station, and Marketing Manager at DIARIO UNO.
2. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. Set forth below is the name, current business address, citizenship and the present principal occupation or employment and material occupations, positions, offices or employments for the past five years of each director and executive officer of Purchaser. The principal address of Purchaser and, unless otherwise indicated below, the current business address for each individual listed below is Godoy Cruz 316, Mendoza, Province of Mendoza Argentina 5500. Unless otherwise indicated, each such person is a citizen of the Republic of Argentina. Daniel Eduardo Vila................. Director of Purchaser since September, 1997; Chairman of the Board of Directors of Parent since 1996; Chief Executive Officer of Parent since March 1997; Vice Chairman of the Board of Directors of Supercanal S.A. since 1984; Chairman of the Board of Mendoza 21 S.A.; publisher of DIARIO UNO, a daily newspaper in Mendoza; Radio Nihuil S.A. a radio
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PRINCIPAL OCCUPATION OR EMPLOYMENT DURING PAST FIVE YEARS, POSITIONS WITH PARENT AND CERTAIN NAME DIRECTORSHIPS - ------------------------------------ ------------------------------------------------------ broadcaster, operating in the Province of Mendoza and surrounding areas; publisher of PRIMERA FILA, a monthly magazine; Vice Chairman of Radio Red Celeste y Blanca S.A., the operator of an AM radio station in Buenos Aires; Director of Dalvian S.A., a real estate development company; alternate director of Banco de Mendoza S.A. and Banco Prevision Social S.A.; Alfredo Luis Vila Santander.................. Director and President of Purchaser since September, 1997; Vice Chairman of the Board of Directors of Parent since 1996; Chairman and Chief Executive Officer of Supercanal S.A. from 1993 to 1996; Director of Radio Nihuil S.A., Mendoza 21 S.A. and of Dalvian S.A.; Chairman and Chief Executive Officer of Supercanal Internacional S.A. Jose Maria Saenz Valiente, Jr................ Director, Secretary and Treasurer of Purchaser since September, 1997; Director of Parent since July 1996; Chairman of the Board of Multicanal from 1993 until 1994; since 1996 Director of various companies in the multi-channel television industry that were acquired by Multicanal; partner of the Saenz Valiente & Padilla law firm.
I-4 Facsimile copies of the Letter of Transmittal, properly completed and duly signed, will be accepted. The Letter of Transmittal, certificates for Shares and any other required documents should be sent by each stockholder of the Company or the stockholder's broker, dealer, commercial bank, trust company or other nominee to the Depositary as follows: THE DEPOSITARY FOR THE OFFER IS: THE BANK OF NEW YORK BY MAIL: FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER: Tender & Exchange Department (for Eligible Institutions Tender & Exchange Department P.O. Box 11248 Only) 101 Barclay Street Church Street Station (212) 815-6213 Receive and Deliver Window New York, New York 10286-1248 New York, New York 10286 FOR CONFIRMATION TELEPHONE: (800) 507-9357
Any questions or requests for assistance or additional copies of the Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery may be directed to the Information Agent or the Dealer Managers at their respective telephone numbers and locations listed below. You may also contact your broker, dealer, commercial bank or trust company or other nominee for assistance concerning the Offer. THE INFORMATION AGENT FOR THE OFFER IS: [LOGO] 909 Third Avenue 20th Floor New York, New York 10022 (212) 754-8000 Toll Free: (800) 566-9061 Banks and Brokerage Firms please call: (800) 662-5200 THE DEALER MANAGERS FOR THE OFFER ARE: ING BARINGS FURMAN SELZ 667 Madison Avenue 230 Park Avenue New York, New York 10021 New York, New York 10169 1-888-584-4166 (Toll Free) 1-888-584-4166 (Toll Free)
EX-2 3 EXHIBIT 2 Exhibit C AMENDED STOCK PURCHASE AND MERGER AGREEMENT DATED AS OF NOVEMBER 26, 1997 BETWEEN TESCORP ACQUISITION CORPORATION, A WHOLLY OWNED SUBSIDIARY OF SUPERCANAL HOLDING S.A., AND TESCORP, INC. TABLE OF CONTENTS Page ARTICLE I STOCK PURCHASE 1.1 Purchase of Stock. . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Deposit. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 Stock Purchase Closing . . . . . . . . . . . . . . . . . . . . 2 ARTICLE II THE TENDER OFFERS 2.1 The Offers . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.2 Company Action . . . . . . . . . . . . . . . . . . . . . . . . 6 ARTICLE III THE MERGER 3.1 Agreement to Effect Merger . . . . . . . . . . . . . . . . . . 8 3.2 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 8 3.3 Certificate of Incorporation . . . . . . . . . . . . . . . . . 8 3.4 By-Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.5 Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.6 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 3.7 Stock of the Company . . . . . . . . . . . . . . . . . . . . . 9 3.8 Stock of Acquisition . . . . . . . . . . . . . . . . . . . . . 10 3.9 Stockholders Meeting . . . . . . . . . . . . . . . . . . . . . 10 3.10 Voting by Acquisition. . . . . . . . . . . . . . . . . . . . . 11 3.11 Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . 11 3.12 Payment for Shares . . . . . . . . . . . . . . . . . . . . . . 12 3.13 Options and Warrants . . . . . . . . . . . . . . . . . . . . . 14 ARTICLE IV EFFECTIVE TIME OF MERGER 4.1 Date of the Merger . . . . . . . . . . . . . . . . . . . . . . 14 4.2 Execution of Certificates of Merger. . . . . . . . . . . . . . 14 4.3 Effective Time of the Merger . . . . . . . . . . . . . . . . . 15 ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY 5.1 Organization and Qualification; Subsidiaries . . . . . . . . . 15 5.2 Certificate of Incorporation and By-Laws . . . . . . . . . . . 16 5.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . 16 5.4 Authority Relative to this Agreement . . . . . . . . . . . . . 18 5.5 No Conflict; Required Filings and Consents . . . . . . . . . . 19 5.6 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . 20 i 5.7 SEC Reports; Financial Statements. . . . . . . . . . . . . . . 20 5.8 Absence of Certain Changes . . . . . . . . . . . . . . . . . . 21 5.9 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . 22 5.10 Absence of Litigation. . . . . . . . . . . . . . . . . . . . . 22 5.11 Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . 23 5.12 Transactions with Certain Persons. . . . . . . . . . . . . . . 24 5.13 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . 25 5.14 Proxy Statement/Prospectus . . . . . . . . . . . . . . . . . . 25 5.15 Restrictions on Business Activities. . . . . . . . . . . . . . 26 5.16 Title to Property. . . . . . . . . . . . . . . . . . . . . . . 26 5.17 CATV Systems, Subscribers. . . . . . . . . . . . . . . . . . . 26 5.18 Franchises, Licenses, Permits, etc.. . . . . . . . . . . . . . 27 5.19 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 5.20 Environmental Matters. . . . . . . . . . . . . . . . . . . . . 32 5.21 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . 34 5.22 Intellectual Property. . . . . . . . . . . . . . . . . . . . . 34 5.23 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 36 5.24 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . 36 5.25 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . 36 5.26 Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . 36 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF ACQUISITION 6.1 Organization and Qualification; Subsidiaries . . . . . . . . . 37 6.2 Constituent Documents. . . . . . . . . . . . . . . . . . . . . 37 6.3 Authority Relative to this Agreement and the Guarantee . . . . 37 6.4 No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . 38 6.5 Ownership of Acquisition; No Prior Activities. . . . . . . . . 39 6.6 Accuracy of Materials. . . . . . . . . . . . . . . . . . . . . 40 6.7 Availability of Funds. . . . . . . . . . . . . . . . . . . . . 41 6.8 No Supercanal Shareholder Suits. . . . . . . . . . . . . . . . 41 ARTICLE VII ACTIONS PRIOR TO THE MERGER 7.1 Activities Until Effective Time. . . . . . . . . . . . . . . . 42 7.2 Redemption of 10% Preferred Stock. . . . . . . . . . . . . . . 44 7.3 No Solicitation of Offers; Notice of Indications of Interest . 44 7.4 Efforts to Fulfill Conditions. . . . . . . . . . . . . . . . . 46 7.5 Indemnification and Insurance. . . . . . . . . . . . . . . . . 46 7.6 Board Representation . . . . . . . . . . . . . . . . . . . . . 48 7.7 Options and Warrants . . . . . . . . . . . . . . . . . . . . . 49 7.8 Use of Proceeds of Sale of Purchased Common Stock. . . . . . . 50 7.9 Purchase of KTV. . . . . . . . . . . . . . . . . . . . . . . . 50 7.10 Satisfaction of Subsidiary Debt. . . . . . . . . . . . . . . . 50 7.11 Ownership of Subsidiaries. . . . . . . . . . . . . . . . . . . 51 8.1 Conditions to the Company's Obligations. . . . . . . . . . . . 51 8.2 Conditions to Acquisition's Obligations. . . . . . . . . . . . 52 ARTICLE IX ii TERMINATION 9.1 Right to Terminate . . . . . . . . . . . . . . . . . . . . . . 54 9.2 Manner of Terminating Agreement. . . . . . . . . . . . . . . . 54 9.3 Termination due to Superior Proposal.. . . . . . . . . . . . . 54 9.4 Effect of Termination. . . . . . . . . . . . . . . . . . . . . 56 ARTICLE X ABSENCE OF BROKERS 10.1 Representations and Warranties Regarding Brokers and Others. . 57 ARTICLE XI GENERAL 11.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 11.2 Company Option to Repurchase Stock . . . . . . . . . . . . . . 58 11.3 Purchase of Minority Interests . . . . . . . . . . . . . . . . 59 11.4 Payment to Company . . . . . . . . . . . . . . . . . . . . . . 59 11.5 Retention Payments . . . . . . . . . . . . . . . . . . . . . . 59 11.6 Access to Properties, Books and Records. . . . . . . . . . . . 60 11.7 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . 60 11.8 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 61 11.9 Effect of Disclosures. . . . . . . . . . . . . . . . . . . . . 62 11.10 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 11.11 Prohibition Against Assignment . . . . . . . . . . . . . . . . 62 11.12 Third Party Beneficiaries. . . . . . . . . . . . . . . . . . . 62 11.13 Notices and Other Communications . . . . . . . . . . . . . . . 62 11.14 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 64 11.15 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . 64 11.16 Consent to Jurisdiction and Service of Process . . . . . . . . 64 11.17 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 64 iii AMENDED STOCK PURCHASE AND MERGER AGREEMENT This is an Agreement dated as of November 26, 1997 between TESCORP ACQUISITION CORPORATION ("Acquisition"), a Delaware corporation and a wholly owned subsidiary of Supercanal Holding, S.A., ("Supercanal"), an Argentine corporation, and TESCORP, INC. (the "Company"), a Texas corporation, which, subject to the provisions of Paragraph 11.8(b), amends and restates a Stock Purchase and Merger Agreement (the "Original Agreement') dated as of September 16, 1997, between Acquisition and the Company. ARTICLE I STOCK PURCHASE 1.1 Purchase of Stock. At the Initial Purchase Closing described in Paragraph 1.3, Acquisition will purchase from the Company, and the Company will sell to Acquisition, 6,006,006 shares (the "Purchased Common Stock") of common stock, par value $.02 per share, of the Company ("Common Stock") for a total of $20,000,000 (the "Common Stock Purchase Price"). 1.2 Deposit. (a) Simultaneously with the execution of the Original Agreement, Acquisition delivered $5 million (the "Deposit") to the Company. If the Purchase Closing takes place, the Company will retain the Deposit as part of the payment of the Common Stock Purchase Price. If the Purchase Closing does not take place, other than because one or more of the conditions specified in Paragraph 8.2 is not fulfilled (other than because the condition in Paragraph 8.2(d) is not fulfilled due to an order entered by a court in a suit or proceeding instituted by a shareholder of Supercanal or an affiliate of a shareholder of Supercanal (a "Supercanal Shareholder Suit"), or because this Agreement is terminated under Paragraph 9.1 or 9.2 (other than Paragraph 9.1(d), and other than clause (ii) of Paragraph 9.1(e) due to an order entered by a court in a Supercanal Shareholder Suit), on the Stock Purchase Closing Date described in Paragraph 1.3, the Company will return the Deposit to Acquisition. If the Purchase Closing does not take place (i) because of a default by Acquisition, (ii) because a condition specified in Paragraph 8.1 is not fulfilled (unless that condition is also a condition specified in Paragraph 8.2 and is not due to an order of a court entered in a Supercanal Shareholder Suit) or (iii) because this Agreement is terminated under Paragraph 9.1(d) or under clause (ii) of Paragraph 9.1(e) due to an order entered by a court in a Supercanal Shareholder Suit, the Deposit will be retained by the Company. 1.3 Stock Purchase Closing. (a) The closing of the Purchase of the Purchased Stock, (the "Purchase Closing") will take place at the offices of Rogers & Wells, 200 Park Avenue, New York, New York, at 10:00 a.m. New York City time on December 5, 1997 (the "Stock Purchase Closing Date"). (b) At the Purchase Closing, Acquisition will deliver to the Company the following: (i) Evidence of a wire transfer to an account specified by the Company at least 24 hours before the Purchase Closing of $15,000,000. (ii) A letter in which Acquisition acknowledges that it will be acquiring the Purchased Common Stock for investment, and not with a view to its resale or distribution. (iii) A copy, executed by Supercanal, of a Programming Purchase Agreement (the "Programming Agreement") substantially in the form of Exhibit 1.3-B(4). (c) At the Purchase Closing, the Company will deliver to Acquisition the following: (i) Certificates, registered in the name of Acquisition (or, at Acquisition's election, registered in the name of Supercanal or another wholly owned subsidiary of Supercanal which agrees to be bound by Paragraphs 3.1 and 3.10) representing all the Purchased Common Stock. (ii) Evidence that the actions described in Paragraph 7.6 have been taken and that the persons designated by Acquisition have been elected to serve as directors of Acquisition from and after the Purchase Closing. (iii) A copy, executed by the Company, of the Programming Agreement. (iv) A document, executed by the Company, stating that the Deposit has been applied to pay a portion of the purchase price for the Purchased Common Stock, and that the purchase price of the Purchased Common Stock has been paid in full. (v) A copy, executed by the Company, of a Registration Agreement (the "Registration Agreement") substantially in the form of Exhibit 1.3-C(5). (d) The certificates representing the Purchased Common Stock may bear legends to the effect that the shares represented by those certificates have not been registered under the Securities Act of 1933, as amended, and may not be sold or transferred other than in transactions registered under that Act or which are exempt from the registration requirements of that Act. ARTICLE II THE TENDER OFFERS 2.1 The Offers. (a) Not later than December 5, 1997, Acquisition will make a public announcement of (i) an offer (the 2 "Common Stock Tender Offer") to purchase all the outstanding Common Stock for $4.50 per share in cash and (ii) an offer (the "Preferred Stock Tender Offer" and, together with the Common Stock Tender Offer, the "Tender Offers") to purchase all the outstanding Series 1995 8% Preferred Stock of Tescorp ("8% Preferred Stock") for a per share amount in cash equal to (x) $144, plus (y) an amount equal to accrued dividends on a share of 8% Preferred Stock from the last date on which dividends were paid to the Expiration Date (defined below). (b) The Tender Offers will not expire until at least 20 business days, and (except as provided in subparagraph (c)) the Tender Offers will expire not more than 60 days, after the day on which a Schedule 14D-1 relating to the Tender Offers (the "Schedule 14D-1") is filed with the Securities and Exchange Commission ("SEC"). (c) Subject to the conditions to the Tender Offers set forth on Exhibit 2.1-C, and the other conditions set forth in this Agreement, Acquisition will, not later than five days after the date on which the Tender Offers expire (the "Expiration Date") accept for payment and pay for all the shares of Common Stock and 8% Preferred Stock which are properly tendered in response to the Tender Officers and not withdrawn. The obligation of Acquisition to accept for payment and pay for shares which are properly tendered and not withdrawn prior to the Expiration Date will not be subject to any conditions other than those set forth on Exhibit 2.1-C. Acquisition will not (i) decrease the price per share of Common Stock or per share of 8% Preferred Stock offered in the Tender Offers below that described in subparagraph (a), (ii) decrease the number of shares being tendered for in the Tender Offers, (iii) change the form of consideration payable in the Tender Offers, (iv) modify or add to the conditions set forth on Exhibit 2.1-C or (v) extend the Tender Offers to a date which is more than 60 days after the Tender Offers are commenced, except that (w) if the Tender Offers are modified during the 60 day period to increase the price per share payable in the Tender Offers or in any other manner permitted by this Agreement, the Tender Offers may be extended until 10 business days after the day on which the modification is communicated to the Company's stockholders, (x) if anyone makes a tender offer for either the Common Stock or the 8% Preferred Stock before the Tender Offers expire, the Tender Offers may be extended until not more than 10 business days after the other tender offer expires, (y) if Acquisition is prevented by an order of a court or other governmental agency from accepting shares which are tendered, the Tender Offers may be extended until 10 business days after Acquisition is able to accept shares without violating any order of any court or other governmental agency and (z) if the Minimum Condition described on Exhibit 2.1-C is not satisfied during the 60 day period, the Tender Offers may be extended for up to an additional 60 days to enable the Minimum Condition to be satisfied (and if, although the Minimum Condition is not satisfied, at least 2,500,000 shares of Common Stock and at least 35,000 shares of 8% Preferred Stock are properly tendered and not withdrawn, Acquisition will extend the Tender Offers for at least an additional 30 days to enable the Minimum Condition to be satisfied). Acquisition reserves the right to increase the price per share of Common Stock or per share of 8% Preferred Stock offered in the Tender Offers. If, when the Tender Offers are scheduled to expire, the Minimum Condition has been satisfied (assuming no subsequent withdrawals of shares 3 which have been tendered), but the condition in paragraph (c) of Exhibit 2.1-C has not been satisfied because of a non-final injunction, Acquisition will extend the Tender Offers at least until the earliest of (A) the time all the conditions on Exhibit 2.1-C are satisfied, (B) the time the injunction becomes final and not appealable or (C) 90 days after the Schedule 14D-1 is filed with the SEC. Subject to the terms and conditions of the Tender Offers, Acquisition will accept all shares which are validly tendered in response to the Tender Offers and not withdrawn and will pay for those shares as soon as practicable after the Expiration Date. (d) Within five business days after the public announcement of the Tender Offers, Acquisition will file with the SEC a Tender Offer Statement on Schedule 14D-1 with respect to the Tender Offers (together with any amendments or supplements, the "Schedule 14D-1") including forms of an offer to purchase, a letter of transmittal and a summary advertisement (the Schedule 14D-1 and the documents included in it by which the Tender Offers will be made, as they may be supplemented or amended, being the "Offer Documents"). Each of Acquisition and the Company agrees promptly to correct any information provided by it for use in the Offer Documents if and to the extent that information becomes incomplete or inaccurate in any material respect, and Acquisition will supplement or amend the Offer Documents to the extent required by applicable securities laws, file the amended or supplemented Offer Documents with the SEC and, if required, disseminate the amended Offer Documents to the Company's stockholders. The Company and its counsel will be given a reasonable opportunity to review the Offer Documents and all amendments and supplements to them before they are filed with the SEC or disseminated to the Company's stockholders. 2.2 Company Action. (a) The Company hereby approves of and consents to the Tender Offers and represents and warrants that its Board of Directors (the "Board") has (i) determined that this Agreement and the transactions contemplated by it are fair to and in the best interests of the Company and its stockholders, (ii) approved this Agreement and the transactions contemplated by it, including the sales of the Purchased Common Stock, the Tender Offers and the Merger (described in Paragraph 3.1), and (iii) resolved to recommend that the Company's stockholders accept the Tender Offers, tender their shares in response to the Tender Offers, and approve and adopt this Agreement and the Merger. Simultaneously with the execution of the Original Agreement, each of the directors and executive officers of the Company agreed to tender his or her shares of Common Stock and 8% Preferred Stock in response to the Tender Offers or (in the case of directors and executive officers who might as a result of their tenders incur liability under Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and who do not tender their shares) to vote their shares in favor of the Merger. Those agreements remain in effect notwithstanding the changes to the Original Agreement reflected in this Agreement. Notwithstanding anything contained in this subparagraph (a) or elsewhere in this Agreement, if the Board, after receiving advice from its counsel, determines, in good faith, to withdraw, modify or amend the recommendation, because the failure to do so could reasonably be expected to be a breach of the directors' fiduciary duties under applicable law, that withdrawal, modification or amendment will not constitute a breach of this Agreement. 4 (b) The Company will file with the SEC, promptly after Acquisition files the Schedule 14D-1, a Solicitation/Recommendation Statement on Schedule 14D-9 (together with any amendments or supplements, the "Schedule 14D-9") containing the recommendations described in subparagraph (a) and will disseminate the Schedule 14D-9 as required by Rule 14d-9 under the Exchange Act promptly after the commencement of the Tender Offers and the filing by Acquisition of the Schedule 14D-1. The Company and Acquisition each agrees to correct promptly any information provided by it for use in the Schedule 14D-9 if and to the extent that information becomes incomplete or inaccurate in any material respect and the Company will file any corrected Schedule 14D-9 with the SEC and disseminate the corrected Schedule 14D-1 to the Company's stockholders to the extent required by applicable federal securities laws. (c) In connection with the Tender Offers, the Company will promptly furnish Acquisition with mailing labels, security position listings and any other available listing or computer files containing the names and addresses of the record holders or beneficial owners of shares of Common Stock or 8% Preferred Stock (together, "Shares") as of a recent date and the Company will furnish Acquisition with such additional information and assistance (including, without limitation, updated lists of stockholders, mailing labels and lists of securities positions) as Acquisition or its agents may reasonably request in order to communicate the Tender Offers to the record holders and beneficial owners of the Common Stock and the 8% Preferred Stock. Subject to the requirements of applicable law, Acquisition will hold in confidence the information contained in any such labels, listings or files, and will use that information only in connection with the Tender Offers and the Merger. If this Agreement is terminated, Acquisition will return to the Company the originals and all copies of that information in Acquisition's possession. ARTICLE III THE MERGER 3.1 Agreement to Effect Merger. If (a) Acquisition purchases pursuant to the Tender Offers at least the minimum number of shares of Common Stock and 8% Preferred Stock (the "Minimum Shares") required to satisfy the Minimum Condition described on Exhibit 2.1-C (the "Minimum Condition") and (b) the conditions to the Merger set forth in paragraphs 8.1 and 8.2 are satisfied or waived, Acquisition will take all steps in its power, including voting all Shares beneficially owned by it at a meeting of the Company's stockholders in favor of approval of this Agreement, to cause Acquisition to be merged into the Company (the "Merger") on the terms and with the effects set forth in Paragraphs 3.2 through 3.8. 3.2 The Merger. If Acquisition purchases at least the Minimum Shares pursuant to the Tender Offers and the conditions of the Merger set forth in paragraphs 8.1 and 8.2 are satisfied or waived, at the Effective Time described in Article IV, Acquisition will be merged into the Company, which will be the surviving corporation of the Merger (the "Surviving Corporation"). Except as specifically provided in this Agreement, the real and personal property, other assets, rights, privileges, immunities, powers, purposes and franchises of the Company will continue unaffected and 5 unimpaired by the Merger. When the Merger becomes effective, the separate existence of Acquisition will terminate, Acquisition's real and personal property, other assets, rights, privileges, immunities, powers, purposes and franchises will be merged into the Surviving Corporation, and the Merger will have the other effects specified in Section 259 of the Delaware General Corporation Law (the "DGCL") and Article 5.06 of the Texas Business Corporation Act (the "TBCA"). 3.3 Certificate of Incorporation. From the Effective Time until subsequently amended, the Articles of Incorporation of the Surviving Corporation will be in the form of Exhibit 3.3, and those Articles of Incorporation, separate and apart from this Agreement, may be certified as the Articles of Incorporation of the Surviving Corporation. 3.4 By-Laws. At the Effective Time, the By-Laws of the Surviving Corporation will be in the form of Exhibit 3.4, until they are altered, amended or repealed. 3.5 Directors. The persons listed on Exhibit 3.5 will be the directors of the Surviving Corporation after the Effective Time and will hold office in accordance with the By-Laws of the Surviving Corporation for the respective terms shown on Exhibit 3.5. 3.6 Officers. The persons listed on Exhibit 3.6 will be the officers of the Surviving Corporation after the Effective Time and will hold office at the pleasure of the Board of Directors of the Surviving Corporation. 3.7 Stock of the Company. (a) Except as provided in subparagraph (c), at the Effective Time each share of Common Stock which is outstanding immediately before the Effective Time will be converted into and become the right to receive $4.50 in cash, or any higher price per share paid with regard to shares of Common Stock tendered in response to the Common Stock Tender Offer (the "Common Stock Merger Price"). (b) Except as provided in subparagraph (c), at the Effective Time each share of 8% Preferred Stock which is outstanding immediately before the Effective Time will be converted into and become the right to receive in cash the per share amount paid with regard to shares of 8% Preferred Stock tendered in response to the Preferred Stock Tender Offer (except that if a dividend is paid with regard to the 8% Preferred Stock between the Expiration Date and the Effective Time, each share of Preferred Stock will be converted into and become the right to receive $144 in cash without regard to any accrued but unpaid dividends). (c) Each share of Common Stock or 8% Preferred Stock held in the treasury of the Company, and each share of Common Stock or 8% Preferred Stock held by Acquisition or by any direct or indirect subsidiary of the Company, immediately before the Effective Time will, at the Effective Time, be cancelled and cease to exist and no payment will be made with respect to any such shares. 3.8 Stock of Acquisition. At the Effective Time, each share of common stock, par value $.01 per share, of Acquisition ("Acquisition common stock") which is outstanding immediately before the Effective Time will be converted into and become one share of common stock 6 of the Surviving Corporation ("Surviving Corporation Common Stock"). At the Effective Time, a certificate which represented Acquisition common stock will automatically become and be a certificate representing the number of shares of Surviving Corporation Common Stock into which the Acquisition common stock represented by the certificate was converted. 3.9 Stockholders Meeting. If Acquisition purchases the Minimum Shares pursuant to the Tender Offers and if approval by the Company's stockholders is required by applicable law in order to consummate the Merger, the Company will: (a) hold a special meeting of its stockholders as soon as practicable following the Expiration Date for the purpose of adopting this Agreement and approving the Merger (the "Stockholders Meeting"); (b) as promptly as practicable after the Expiration Date, (i) file with the SEC a proxy statement (the "Proxy Statement") and other proxy soliciting materials relating to the Stockholders Meeting, (ii) respond promptly to any comments made by the SEC with respect to the Proxy Statement or other proxy soliciting materials, (iii) cause the Proxy Statement to be mailed to its stockholders at the earliest practicable time following the Expiration Date, and (iv) in all other respects, use its best efforts to cause its stockholders to adopt this Agreement and approve the Merger; (c) include in the Proxy Statement relating to the Stockholders Meeting the recommendation of the Board that the stockholders of the Company vote in favor of the adoption of this Agreement, unless the Board, after receiving advice from its counsel, determines in good faith, that the failure to amend or withdraw such recommendation could reasonably be expected to be a breach of the directors' fiduciary duties under applicable law. 3.10 Voting by Acquisition. If Acquisition Purchases at least the Minimum Shares pursuant to the Tender Offers, or waives the Minimum Condition and purchases the shares which are properly tendered in response to the Tender Offers and not withdrawn, (a) Acquisition will not dispose of any of stock of the Company until the earlier of the Effective Time or such time as this Agreement is terminated (except to Supercanal or a subsidiary of Supercanal which agrees to be bound by Paragraph 3.1 and this Paragraph) and (b) Acquisition will vote all shares of Common Stock and 8% Preferred Stock which Acquisition owns or otherwise has the power to vote in favor of the adoption of this Agreement and approval of the Merger. 3.11 Dissenting Shares.(a) Notwithstanding any provision of this Agreement to the contrary, Shares that are outstanding immediately prior to the Effective Time which are held by stockholders who have complied with Article 5.12 of the TBCA (including filing a written objection to approval of the Merger, not having voted in favor of the Merger or consented to it in writing and having properly demanded payment of the fair value of those shares) will not be converted into the right to receive the consideration described in Paragraph 3.2. Instead, if the Merger takes place, 7 the Surviving Corporation will pay the holders of those shares the fair value of the shares determined as provided in Article 5.12 of the TBCA. Shares held by stockholders who fail to perfect, or who otherwise withdraw or lose their rights to receive the fair value of their shares determined under Article 5.12 of the TBCA will, at the later of the Effective Time or the time they fail to perfect, withdraw or lose, their rights to receive the fair value of their shares, be deemed to have been converted into the right to receive the per share sum described in Paragraph 3.7 (the "Merger Price") without any interest. (b) The Company will promptly give Acquisition (i) notice of any demands for appraisal received by the Company, any withdrawals of any such demands, and any other instruments served pursuant to Article 5.12 of the TBCA which are received by the Company and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under the TBCA. The Company will not, except with the prior written consent of Acquisition, make any payment with respect to any demands for payment of the fair value of shares or offer to settle or settle any such demand. 3.12 Payment for Shares. (a) Prior to the Effective Time, Acquisition will designate a bank or trust company to act as Paying Agent in connection with the Merger (the "Paying Agent"). At, or immediately prior to, the Effective Time, Acquisition will provide the Paying Agent with the funds necessary to make the payments contemplated by Paragraph 3.7. Until used for that purpose, the funds will be invested by the Paying Agent, as directed by Acquisition, in obligations of or guaranteed by the United States of America or of any agency thereof and backed by the full faith and credit of the United States of America, in commercial paper obligations rated A-1 or P-1 or better by Moody's Investors Services Inc. or Standard & Poors' Corporation, respectively, or in deposit accounts, certificates of deposit or banker's acceptances of, repurchase or reverse repurchase agreements with, or Eurodollar time deposits purchased from, commercial banks with capital, surplus and undivided profits aggregating in excess of $200 million (based on the most recent financial statements of such bank which are then publicly available at the SEC or otherwise). (b) Promptly after the Effective Time, the Surviving Corporation will cause the Paying Agent to mail to each person who was a record holder of Common Stock or 8% Preferred Stock at the Effective Time, a form of letter of transmittal for use in effecting the surrender of stock certificates representing Common Stock or 8% Preferred Stock ("Certificates") in order to receive payment of the Merger Price. Upon surrender to the Paying Agent of a Certificate, together with a properly completed and executed letter of transmittal and any other required documents, the Paying Agent will pay to the holder of the Certificate the Merger Price with regard to the shares represented by the Certificate, and the Certificate will be cancelled. No interest will be paid or accrued on the cash payable upon the surrender of Certificates. If payment is to be made to a person other than the person in whose name a surrendered Certificate is registered, the surrendered Certificate must be properly endorsed or otherwise be in proper form for transfer, and the person who surrenders the Certificate must provide funds for payment of any transfer or other taxes required by reason of the 8 payment to a person other than the registered holder of the surrendered Certificate or establish to the satisfaction of the Surviving Corporation that the tax has been paid. After the Effective Time, a Certificate which has not been surrendered will represent only the right to receive the Merger Price, without any interest. (c) At any time which is more than six months after the Effective Time, the Surviving Corporation may require the Paying Agent to deliver to it any funds which had been made available to the Paying Agent and have not been disbursed to holders of Shares (including, without limitation, interest and other income received by the Paying Agent in respect of the funds made available to it), and after the funds have been delivered to the Surviving Corporation, former stockholders of the Company must look to the Surviving Corporation for the consideration to which they are entitled under Paragraph 3.7 upon surrender of the Certificates held by them. Neither the Surviving Corporation nor the Paying Agent will be liable to any former stockholder of the Company for any Merger consideration which is delivered to a public official pursuant to any abandoned property, escheat or similar law. (d) After the Effective Time, no transfers of shares of Common Stock or 8% Preferred Stock will be recorded on the stock transfer books of the Company or the Surviving Corporation, and the stock ledger of the Company will be closed. If, after the Effective Time, Certificates are presented for transfer, they will be cancelled and treated as having been surrendered for the Merger consideration. 3.13 Options and Warrants. To the extent that the Company has not fulfilled prior to the Effective Time all the Company's obligations under all options and warrants which are outstanding at the date of this Agreement, taking account of changes in the options and warrants described in Paragraph 7.7(a), the Surviving Corporation will fulfill those obligations. To the extent the Surviving Corporation is required to pay cash due to exercise of an option or warrant after the Effective Time, instead of requiring the exercising holder to pay the exercise price, upon receiving a notice of exercise, the Surviving Corporation will pay the holder the amount due on exercise minus the exercise price. ARTICLE IV EFFECTIVE TIME OF MERGER 4.1 Date of the Merger. The day on which the Merger is to take place (the "Merger Date") will be the third business day after the first day on which all the conditions in Paragraphs 8.1(d) and (e) and 8.2(d) have been satisfied or waived. The Merger Date may be changed with the consent of the Company and Acquisition. For the purposes of this Paragraph, a "business day" is a day on which certificates of merger may be filed with the Secretaries of State of both Texas and Delaware. 4.2 Execution of Certificates of Merger. Not later than 3:00 P.M. on the day before the Merger Date, (a) Acquisition 9 and the Company will each execute certificates of merger (the "Certificates of Merger") substantially in the form of Exhibits 4.2(1) and 4.2(2) and deliver them to Rogers & Wells for filing with the Secretaries of State of Texas and Delaware. Rogers & Wells will be instructed that, if it is notified on the Merger Date that all the conditions in Article VIII have been fulfilled or waived, it is to cause the applicable Certificate of Merger to be filed with the Secretary of State of Texas and to cause the applicable Certificate of Merger to be filed with the Secretary of State of Delaware on the Merger Date or as soon after that date as is practicable. 4.3 Effective Time of the Merger. The Merger will become effective at 11:59 P.M. on the day when a Certificate of Merger has been filed with the Secretary of State of Texas and a Certificate of Merger has been filed with the Secretary of State of Delaware (that being the "Effective Time"). ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Acquisition and to Supercanal (to induce Supercanal to execute the Guaranty attached to this Agreement) that, except as set forth in the written disclosure schedule delivered by the Company to Acquisition (the "Company Disclosure Schedule"): 5.1 Organization and Qualification; Subsidiaries. Each of the Company and each of its subsidiaries is a corporation, partnership, sociedad anonima, limited liability company or sociedad de responsabilidad limitada duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the requisite power and authority and is in possession of, and in compliance with, all franchises, grants, authorizations, licenses, permits, easements, variances, consents, certificates, approvals, exemptions and orders ("Approvals") necessary to enable it to own, lease and operate the properties it purports to own, lease or operate and to carry on its business as it is now being conducted and as proposed to be conducted, except where the failure to have such Approvals could not reasonably be expected to have a Material Adverse Effect on the Company. Each of the Company and each of its subsidiaries is duly qualified or licensed as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except for such failures to be so duly qualified or licensed and in good standing that could not reasonably be expected to have a Material Adverse Effect on the Company. A true and complete list of all of the Company's subsidiaries, together with the jurisdiction of incorporation of each subsidiary and the percentage of each subsidiary's outstanding capital stock owned by the Company or another subsidiary is set forth in the Company Disclosure Schedule. Except as set forth in the Company Disclosure Schedule and except for interests in subsidiaries of the Company, neither the Company nor any of its subsidiaries owns, directly or indirectly, any interest or investment (whether equity or debt) in any corporation, partnership, 10 limited liability company, joint venture, business, trust or entity. For the purposes of this Agreement, a "Material Adverse Effect" upon a company is a material adverse change in the financial condition, operating results, business or prospects of that company and its subsidiaries taken together. 5.2 Certificate of Incorporation and By-Laws. The Company has heretofore furnished to Acquisition or Supercanal a complete and correct copy of its Articles of Incorporation and By-Laws, and has furnished or made available to Acquisition or Supercanal the Articles of Incorporation and By-Laws (or equivalent organizational documents) of each of its subsidiaries (the "Subsidiary Documents"). Those Articles of Incorporation, By-Laws and Subsidiary Documents are listed on the Company Disclosure Schedule, are in full force and effect and have not been amended. Except as disclosed in the Company Disclosure Schedule, neither the Company nor any of its subsidiaries is in violation of any of the provisions of its Articles of Incorporation or By-Laws or Subsidiary Documents. 5.3 Capitalization. The authorized capital stock of the Company consists of 50,000,000 shares of Common Stock and 5,000,000 shares of Preferred stock, of which 704,684 shares have been designated 1990 10% Preferred Stock ("10% Preferred Stock") and 200,000 shares have been designated 8% Preferred Stock. As of August 15, 1997, 13,189,785 shares of Company Common Stock, 693,864 shares of 10% Preferred Stock, and 139,250 shares of 8% Preferred Stock were issued and outstanding, all of which were duly authorized, validly issued, fully paid and non-assessable, and no shares of capital stock were held in treasury or held by subsidiaries of the Company. The Company Disclosure Schedule sets forth each beneficial owner (as that term is defined for purposes of the Exchange Act) of 5% or more of any class of capital stock of the Company known to the Company and Section 5.3 of the Company Disclosure Schedule contains a true and complete list of all affiliates of the Company (as defined in Rule 405 under the Securities Act). Except as set forth in the Company Disclosure Schedule, there are no options, warrants or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of the Company or any of its subsidiaries or obligating the Company or any of its subsidiaries to issue, sell or transfer (currently or upon the passage of time, the payment of money or the occurrence of any other event) any shares of capital stock of, or other equity interests in, the Company or any of its subsidiaries. All shares of Common Stock which the Company is or may become obligated to issue (including, but not limited to, the Purchased Common Stock will be, when they are issued, duly authorized, validly issued, fully paid and nonassessable. The Company Disclosure Schedule sets forth an accurate and complete list of (a) each optionee under the Employee Options and the number of shares of Common Stock issuable upon exercise of those Employee Options and (b) each holder of record of warrants to purchase stock of the Company ("Company Warrants"), and the number of shares of Common Stock issuable upon exercise of the Company Warrants held by each holder. Other than the Employee Options and Company Warrants there are no obligations contingent or otherwise, of the Company or any of its subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of the Company or any of its subsidiaries or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any subsidiary or any other entity. Except as set forth in the 11 Company Disclosure Schedule, all of the outstanding shares of capital stock of each of the Company's subsidiaries are duly authorized, validly issued, fully paid and nonassessable, and all those shares are owned by the Company or another subsidiary free and clear of all security interests, liens, claims, pledges, agreements, limitations on the Company's voting rights, charges or other encumbrances of any nature whatsoever. There are no preemptive rights with respect to any capital stock of the Company or any capital stock of any of its subsidiaries or any agreements, arrangements or understandings to grant preemptive rights with respect thereto. When issued and sold as provided in this Agreement, the Purchased Common Stock will be duly authorized, validly issued, fully paid and nonassessable and free from any claims (including claims to preemptive rights) of any persons. 5.4 Authority Relative to this Agreement. The Company has all necessary corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action (including approval by the Company's Board of Directors which satisfies the requirement of Article 13.03(1) of the TBCA), and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions so contemplated (other than approval of the Merger Agreement by the Company's stockholders). This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery of this Agreement by Acquisition and due authorization, execution and delivery of the Guaranty by Supercanal, constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other laws relating to the enforcement of creditors' rights generally and by general principles of equity. 5.5 No Conflict; Required Filings and Consents. (a) Except as set forth in the Company Disclosure Schedule, the execution and delivery of this Agreement by the Company does not, and the performance of this Agreement by the Company will not, (i) conflict with or violate the Certificate of Incorporation or By-Laws of the Company or any of the Subsidiary Documents, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Company or any of its subsidiaries or by which its or any of their respective properties is bound or affected, or (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or impair the Company's or any of its subsidiaries' rights or alter the rights or obligations of any third party under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance on any of the properties or assets of the Company or any of its subsidiaries pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or its or any of their respective properties is bound or affected. 12 (b) Except as disclosed in the Company Disclosure Schedule, the execution and delivery of this Agreement by the Company does not, and the performance of this Agreement by the Company will not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority in the United States, the Republic of Argentina ("Argentina") or elsewhere (a "Governmental Entity"), except for (i) applicable requirements with respect to the Proxy Statement under the Exchange Act, and the rules and regulations thereunder, (ii) the filing and recordation of appropriate merger or other documents, including, without limitation, the filing of a final franchise tax return with the Texas State Comptroller's Office, as required by the DGCL and the TBCA, (iii) applicable filing and waiting period requirements under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and (iv) such filings, authorizations, orders and approvals (the "Comfer Approvals") as may be required under Argentine Law No. 22,285 passed on September 15, 1980, as amended by Decree 286, passed on February 18, 1991 (the "Broadcasting Law") from the Comite Federal de Radiodifusion ("Comfer"), the Argentine Governmental Entity responsible for administering the Broadcasting Law, and with and of provincial and local governmental authorities, including provincial and local Governmental Entities granting franchises to operate cable systems (the "Local Approvals"). The filing required to have been made by the Company under the HSR Act has been made and the waiting periods under the HSR Act have been terminated. 5.6 Compliance. Except as disclosed in the Company Disclosure Schedule, neither the Company nor any of its subsidiaries is in conflict with, or in default or violation of, (i) any law, rule, regulation, order, judgment or decree applicable to the Company or any of its subsidiaries or by which its or any of their respective properties is bound or affected, or (ii) any agreement or other obligation to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or its or any of their respective properties is bound or affected, except in the case of both clauses (i) and (ii) for any conflicts, defaults or violations which could not reasonably be expected to have individually or in the aggregate a Material Adverse Effect on the Company. 5.7 SEC Reports; Financial Statements. (a) The Company has filed all reports and documents required to be filed with the SEC and has heretofore delivered to Acquisition or Supercanal, in the form filed with the SEC, (i) its Annual Report on Form 10-KSB for the fiscal year ended March 31, 1997, (ii) its Quarterly Reports on Form 10-Q for the period ended September 30, 1997, (iii) all other reports or registration statements filed by the Company with the SEC since March 31, 1997, and (iv) all amendments and supplements to all such reports and registration statements filed by the Company with the SEC (the documents described in clauses (i)-(iv) being collectively, the "SEC Reports"). Each of the SEC Reports (i) was prepared in accordance with the requirements of the Exchange Act, and (ii) did not at the time it was filed (or if it was amended or superseded by a subsequent filing, then on the date of such subsequent filing) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 13 (b) Each of the financial statements (including, in each case, any related notes thereto) contained in the SEC Reports has been prepared in accordance with generally accepted accounting principles in the United States ("US GAAP") applied on a consistent basis throughout the periods involved (except as may be indicated in the notes to the financial statements) and each of them fairly presents in all material respects the consolidated financial position of the Company and its subsidiaries as at the respective dates of the financial statements and the consolidated results of its operations and cash flows for the periods indicated, except that the unaudited interim financial statements were or are subject to normal, recurring year-end adjustments. 5.8 Absence of Certain Changes or Events. Except as set forth in the Company Disclosure Schedule or as expressly contemplated by this Agreement, since June 30, 1997 each of the Company and its subsidiaries has conducted its business in the ordinary course and there has not occurred: (a) any events or occurrences which, individually or in the aggregate, have had a Material Adverse Effect on the Company; (b) any material damage to, destruction or loss of any material asset of the Company or any of its subsidiaries (whether or not covered by insurance); (c) any change by the Company or any of its subsidiaries in its accounting policies, practices or methods; (d) any material revaluation by the Company or any of its subsidiaries of any of its assets, including without limitation, writing down the value of inventory or writing off notes or accounts receivable other than in the ordinary course of business in amounts consistent with prior periods; (e) any sale of a material amount of property or assets; (f) any declaration, setting aside or, except as required by the terms of the 8% Preferred Stock or the 10% Preferred Stock as in effect on the date hereof, payment of any dividend or distribution in respect of any stock of the Company or any redemption, purchase or other acquisition of its securities by the Company or an of its Subsidiaries; or (g) any entering into, establishment or amendment of, any Plan (as hereinafter defined), any granting of stock options, stock appreciation rights, performance awards or restricted awards, or any other increase (other than ordinary course increases) in compensation payable or to become payable to any officers or key employees of the Company or any of its subsidiaries. 5.9 No Undisclosed Liabilities. Except as set forth in the Company Disclosure Schedule, neither the Company nor any of its subsidiaries has any material liabilities (absolute, accrued, contingent or otherwise) except liabilities (a) in the aggregate adequately provided for in the Company's audited balance sheet (including any related notes thereto) as of March 31, 1997 (the "1997 Balance Sheet") or the Company's unaudited interim balance sheet (including any related notes thereto) as of September 30, 1997 (the "Interim Balance Sheet"), included in the SEC Reports, (b) incurred in the ordinary course of business and not required under US GAAP to be reflected on the 1997 Balance Sheet, (c) incurred since September 30, 1997 in the ordinary course of business and not in violation of any provision of this Agreement, or (d) incurred in connection with this Agreement. 5.10 Absence of Litigation. Except as set forth in the Company Disclosure Schedule, there are no claims, actions, suits, proceedings or investigations pending or, to the knowledge of the Company, threatened against the Company or any of its subsidiaries, or any properties 14 or rights of the Company or any of its subsidiaries, before any court, arbitrator or administrative, governmental or regulatory authority or body, domestic or foreign, that could reasonably be expected to have a Material Adverse Effect on the Company. 5.11 Benefit Plans. All Company Benefit Plans are listed in the Company Disclosure Schedule, and copies of all documentation relating to such Company Benefit Plans have been delivered or made available to Parent. Except as disclosed in the Company Disclosure Schedule: (a) each Company Benefit Plan and the administration thereof complies, and has at all times complied in all material respects with the requirements of all applicable law, including ERISA and the Code; (b) no Company Benefit Plan is intended to qualify under Section 401(a) of the Code; (c) neither the Company nor any of its subsidiaries is now, nor at any time has been, a member of a controlled group, as defined in Section 412(n)(6)(B) of the Code, with any other enterprise; (d) neither the Company nor any of its subsidiaries presently maintains or contributes to, nor at any time has maintained or contributed to, any single-employer plan (within the meaning of Section 3(41) of ERISA) or any multi-employer plan (within the meaning of Section 3(37) of ERISA) subject to Title IV of ERISA, and there are no circumstances pursuant to which the Company or any of its subsidiaries could have liability to any party under Title IV of ERISA; (e) neither the Company nor any of its subsidiaries has incurred any liability for any tax imposed under Sections 4971 through 4980B of the Code or civil liability under Section 502(i) or (1) of ERISA; (f) no Company Benefit Plan provides health or death benefit coverage beyond the termination of an employee's employment, except as required by Part 6-of Subtitle B of Title I of ERISA or Section 4980B of the Code; (g) no suits, actions or other litigation (excluding claims for benefits incurred in the ordinary course of plan activities) have been brought against or with respect to any Company Benefit Plan; and (h) all contributions to Company Benefit Plans required to be made under such Company Benefit Plans have been made, and all benefits accrued under any unfunded Company Benefit Plan have been paid, accrued or otherwise adequately reserved in accordance with US GAAP as of such date and the Company and each of its subsidiaries has performed all material obligations required to be performed by it under all Company Benefit Plans. As used in this Agreement: "Code" means the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. "Company Benefit Plan" means any Plan established by the Company, any subsidiary of the Company or any predecessor or affiliate of the Company or of any subsidiary of the Company, existing on the date hereof or prior thereto, to which the Company or any subsidiary of the Company contributes or has contributed, or under which any employee, former employee or director of the Company or any subsidiary of the Company or any beneficiary thereof is covered, is eligible for coverage or has benefit rights. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder. 15 "Plan" means any bonus, incentive compensation, deferred compensation, pension, profit sharing, retirement, stock purchase, stock option, stock ownership, stock appreciation rights, phantom stock, leave of absence, layoff, vacation, day or dependent care, legal services, cafeteria, life, health, accident, disability, workmen's compensation or other insurance, severance, separation or other employee benefit plan, practice, policy or arrangement of any kind, whether written or oral, whether for the benefit of a single individual or more than one individual, including, but not limited to, any "employee benefit plan" within the meaning of Section 3(3) of ERISA. 5.12 Transactions with Certain Persons. Except as set forth in the Company Disclosure Schedule or disclosed in a SEC Report, no officer, director or employee of the Company or any of its subsidiaries nor any member of any such person's immediate family is presently, or within the past two years has been, a party to any transaction with the Company or any of its subsidiaries where the fair market value of the amount involved in such transaction exceeded US$60,000, including without limitation, any contract, agreement, loan or other arrangement (a) providing for the furnishing of services by, (b) providing for the rental of real or personal property from, or (c) otherwise requiring payments to (other than for services as officers, directors or employees of the Company or any of its subsidiaries) any such person or corporation, partnership, trust or other entity in which any such person has a material interest as a stockholder, or as an officer, director, trustee or partner. 5.13 Labor Matters. Except as set forth in the Company Disclosure Schedule, (a) there are no controversies pending or, to the knowledge of the Company or any of its subsidiaries, threatened, between the Company or any of its subsidiaries and any of their respective employees, which controversies have or could reasonably be expected to have a Material Adverse Effect on the Company; (b) neither the Company nor any of its subsidiaries is a party to any collective bargaining agreement or other labor union contract applicable to persons employed by the Company or its subsidiaries, nor does the Company or any of its subsidiaries know of any activities or proceedings of any labor union to organize any such employees; and (c) neither the Company nor any of its subsidiaries has during the past five years been subject to any strikes, slowdowns, work stoppages, lockouts, or threats thereof, by or with respect to any employees of the Company or any of its subsidiaries, and to the knowledge of the Company none are threatened; which strikes, slowdowns, work stoppages or lockouts have had or could reasonably be expected to have a Material Adverse Effect on the Company. 5.14 Proxy Statement/Prospectus. If prior to the Effective Time, the Company supplies any information for inclusion in a Registration Statement of Supercanal on Form F-1 (a "Registration Statement"), that information will not at the time the Registration Statement (including amendments thereof or supplements thereto) is declared effective by the SEC contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 16 5.15 Restrictions on Business Activities. Except for this Agreement or as set forth in the Company Disclosure Schedule, there is no agreement, judgment, injunction, order or decree binding upon the Company or any of its subsidiaries which has or could reasonably be expected to have the effect of prohibiting or impairing any business practice of the Company or any of its subsidiaries, any material acquisition of property by the Company or any of its subsidiaries or the conduct of business by the Company or any of its subsidiaries as currently conducted or as proposed to be conducted by the Company. 5.16 Title to Property. Except as set forth in the Company Disclosure Schedule, the Company and each of its subsidiaries have good and marketable title to all of their material properties and assets, free and clear of all liens, charges and encumbrances, except liens for taxes not yet due and payable and such liens or other imperfections of title, if any, as do not materially detract from the value of or materially interfere with the present or currently contemplated use of the property affected thereby; and all leases pursuant to which the Company or any of its subsidiaries lease from others material real or personal property are valid and enforceable in accordance with their respective terms, and there is no material default or event of default by the Company or a subsidiary of the Company, nor to the knowledge of the Company, by any other party thereto, under any of such leases, (or event which with notice or lapse of time, or both, would constitute a default). 5.17 CATV Systems, Subscribers. Set forth in the Company Disclosure Schedule, is a complete list of the cable television ("CATV") systems owned and/or operated by the Company or any subsidiary thereof ("Company CATV Systems") as of the date hereof and the number of equity subscribers and total subscribers in each of such Company CATV Systems as of June 30, 1997, as well as the following information for each Company CATV System as of June 30, 1997, (i) the approximate number of route kilometers of cable plant which are fully completed and operational; (ii) the estimated number of households passed; (iii) the capacity of cable plant; (iv) a description of all services provided; and (v) the rates charged for such services. 5.18 Franchises, Licenses, Permits, etc.. Set forth in the Company Disclosure Schedule, is a complete list and brief description of all authorizations, approvals, certifications, licenses and permits issued by Comfer (the "Company Comfer Authorizations") to the Company or any subsidiary thereof as of the date hereof and all applications by the Company or any subsidiary thereof for any Company Comfer Authorizations which are pending on the date hereof. The Company and its subsidiaries (A) have all Company Comfer Authorizations and other authorizations, approvals, franchises, licenses and permits of Argentine provincial Governmental Entities (the "Company Other Authorizations") required for the operation of the Company CATV Systems being operated on the date hereof, (B) have duly and currently filed all reports and other information required by Comfer or any other Governmental Entity to be filed in connection with such Company Comfer Authorizations and Company Other Authorizations and (C) are not in violation of any Company Comfer Authorization or Company Other Authorization, other than the lack of Company Comfer Authorizations or Company 17 Other Authorizations, delays in filing reports or violations which, insofar as can reasonably be foreseen, would not have a material adverse effect on the CATV business conducted by the Company and its subsidiaries taken as a whole. 5.19 Taxes. (a) For purposes of this Agreement, "Tax" or "Taxes" shall mean taxes, fees, levies, duties, tariffs, imposts and governmental impositions or charges of any kind in the nature of (or similar to) taxes, payable to any federal, state, local or foreign taxing authority, including (without limitation) income, franchise, profits, gross receipts, ad valorem, net worth, value added, sales, use, service, real or personal property, special assessments, capital stock, license, payroll, withholding social security, workers' compensation, unemployment compensation, utility, severance, production, excise, stamp, occupation, premiums, windfall profits, transfer and gains taxes, and other taxes, duties or assessments of any nature whatsoever, and interest, penalties, additional taxes and additions to tax imposed with respect thereto; and "Tax Returns" shall mean returns, reports and information statements with respect to Taxes required to be filed with the Internal Revenue Service (the "IRS") or any other Taxing Authority, domestic or foreign, including, without limitation, consolidated, combined and unitary tax returns; and "Taxing Authority" means any governmental agency, board, bureau, body, department or authority of any United States federal, state or local jurisdiction or any foreign jurisdiction, having or purporting to exercise jurisdiction with respect to any Tax. (b) Except as set forth in the Company Disclosure Schedule: (i) All Tax Returns required to have been filed by or with respect to the Company or any of its subsidiaries or any affiliated, combined, consolidated, unitary or similar group of which the Company or any subsidiary is or was a member (a "Relevant Group") with any Taxing Authority have been duly filed, and each such Tax Return filed by the Company correctly and completely reflects the income, franchise or other Tax liability and all other information required to be reported thereon. All Taxes owed by the Company or any of its subsidiaries or any member of a Relevant Group (whether or not shown on any Tax Return) have been paid or, in the case of Taxes attributable to the Company and its subsidiaries, are duly provided for in the financial statements included in the SEC Reports. (ii) The provisions for Taxes due by the Company and its subsidiaries (as opposed to any reserve for deferred Taxes established to reflect timing differences between book and Tax income) in the financial statements included in the SEC Reports, are sufficient for all unpaid Taxes, whether or not disputed, of the Company and its subsidiaries. As of the Effective Time, such provisions as adjusted for the passage of time through the Effective Time, will be sufficient for the then-unpaid Taxes of the Company and its subsidiaries. (iii) Neither the Company nor any of its subsidiaries is a party to any current agreement extending the time within which to file any Tax Return. No claim has ever been made by any taxing authority in a jurisdiction in which the Company or its subsidiaries does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. 18 (iv) The Company and each of its subsidiaries has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, creditor, independent contractor or other third party. (v) The Company does not expect any Taxing Authority to assess any additional Taxes against or in respect of it or any of its subsidiaries for any past period. There is no dispute or claim concerning any Tax liability of the Company or any of its subsidiaries either (i) claimed or raised by any Taxing Authority or (ii) otherwise known to the Company or any of its subsidiaries. No issues have been raised in any examination by any Taxing Authority with respect to the Company or any of its subsidiaries which, by application of similar principles, reasonably could be expected to result in a proposed deficiency for any other period not so examined. The Company Disclosure Schedule lists all federal, state, local and foreign income Tax Returns filed by or with respect to the Company or any of its subsidiaries for all taxable periods ended on or after March 31, 1992, indicates those Tax Returns, if any, that have been audited, and indicates those Tax Returns that currently are the subject of audit. The Company has delivered to Parent complete and correct copies of all federal, state, local and foreign income Tax Returns filed by, and all Tax examination reports and statements of deficiencies assessed against or agreed to by, the Company or any of its subsidiaries since 1992. (vi) Neither the Company nor any of its subsidiaries has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to any Tax assessment or deficiency. (vii) Neither the Company nor any of its subsidiaries has made any payments, is obligated to make any payments, or is a party to any agreement that under certain circumstances could require it to make any payments, that are not deductible under Section 28OG of the Code. (viii) Neither the Company nor any of its subsidiaries is a party to any Tax allocation or sharing agreement. (ix) Neither the Company nor any of its subsidiaries is, or at any time has been, a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code. (x) None of the assets of the Company or any of its subsidiaries constitutes tax-exempt bond financed property or tax-exempt use property, within the meaning of Section 168 of the Code. Neither the Company nor any of its subsidiaries is a party to any "safe harbor lease" that is subject to the provisions of Section 168(f)(8) of the Internal Revenue Code as in effect prior to the Tax Reform Act of 1986, or to any "long-term contract" within the meaning of Section 460 of the Code. (xi) Neither the Company nor any of its subsidiaries is a "consenting corporation" within the meaning of Section 341(f)(1) of the Code, or comparable provisions of any state statutes, and none of the assets of the Company or any of its subsidiaries is subject to an election under Section 341 (f) of the Code or comparable provisions of any state statutes. 19 (xii) Neither the Company nor any of its subsidiaries is a party to any joint venture, partnership or other arrangement that is treated as a partnership for federal income Tax purposes. (xiii) There are no accounting method changes, or proposed or threatened accounting method changes, of the Company or any of its subsidiaries that could give rise to an adjustment under Section 481 of the Code for periods after the Closing Date. (xiv) Neither the Company nor any of its subsidiaries has received any written ruling of a Taxing Authority related to Taxes or entered into any written and legally binding agreement with a Taxing Authority relating to Taxes. (xv) Each of the Company and its subsidiaries has disclosed (in accordance with Section 6662(d)(2)(B)(ii) of the Code) on its federal income Tax Returns all positions taken on those Tax Returns for which there was no substantial authority within the meaning of Section 6662(d)(2)(B)(i) of the Code and that could give rise to a substantial understatement of federal income tax within the meaning of Section 6662(d) of the Code. (xvi) Neither the Company nor any of its subsidiaries has any liability for Taxes of any Person other than the Company or its subsidiaries (w) under Section 1.1502-6 of the Treasury regulations (or any similar provision of state, local or foreign law), (x) as a transferee or successor, (y) by contract or (z) otherwise. (xvii) Neither the Company nor any of its subsidiaries has participated in or cooperated with an international boycott within the meaning of Section 999 of the Code. (xviii) No foreign subsidiary of the Company has, or at any time has had, an investment in "United States property" within the meaning of Section 956(b) of the Code. (xix) No foreign subsidiary of the Company has, or at any time has had, a material amount that is includible in the income of a United States person under Section 951 of the Code. (xx) No foreign subsidiary of the Company is, or at any time has been, a passive foreign investment company within the meaning of Section 1296 of the Code, and neither the company nor any of its subsidiaries is a shareholder, directly or indirectly, in a passive foreign investment company. (xxi) No foreign subsidiary of the Company is, or at any time has been, engaged in the conduct of a trade or business within the United States within the meaning of Section 864(b) and Section 882(a) of the Code, or treated as or considered to be so engaged under Section 882(d) or Section 897 of the Code or otherwise. (xxii) No foreign subsidiary of the Company holds, or at any time has held, a United States real property interest 20 within the meaning of Section 897(c)(1) of the Code. (xxiii) Neither the Company nor any of its subsidiaries is, or at any time has been, subject to (x) the dual consolidated loss provisions of Section 1503(d) of the Code, (y) the overall foreign loss provisions of Section 904(f) of the Code or (z) the recharacterization provisions of Section 952(c)(2) of the Code. (xxiv) There currently are no limitations on the utilization of the net operating losses, built-in losses, capital losses, tax credits or other similar items of the Company or any subsidiary of the Company (collectively, the "Losses") under (t) Section 382 of the Code, (u) Section 383 of the Code, (v) Section 384 of the Code, (w) Section 269 of the Code, (x) Section 1.1502-21T and Section 1.1502-15A of the Treasury regulations, (y) Section 1.1502-21T and Section 1.1 502-21A of the Treasury regulations or (z) Section 1.1502-91T through 1.1502-99T of the Treasury regulations. (xxv) At March 31, 1997, the Company and its subsidiaries had the aggregate Tax Losses for federal income Tax purposes as set forth in Section 5.19(b)(xxv) of the Company Disclosure Statement. 5.20 Environmental Matters. Except as set forth in the Company Disclosure Schedule, the Company and each of its subsidiaries (a) have obtained all applicable permits, licenses and other authorizations which are required to be obtained under all applicable laws or any regulation, code, plan, order, decree, judgment, notice or determination letter issued, entered, promulgated or approved thereunder relating to pollution or protection of the environment, including laws relating to emissions, discharges, releases or threatened releases of pollutants, contaminants, or hazardous or toxic wastes into ambient air, surface water, ground water, or land or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants or hazardous or toxic materials or wastes ("Environmental Laws") by the Company or its subsidiaries (or their respective agents); (b) are in compliance with all terms and conditions of such required permits, licenses and authorizations, and also are in compliance with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in applicable Environmental Laws; (c) are not aware of and have not received notice of any past or present violations of Environmental Laws or any event, condition, circumstance, activity, practice, incident, action or plan which is reasonably likely to interfere with or prevent continued compliance with or which could give rise to any common law or statutory liability, or otherwise form the basis of any claim, action, suit or proceeding, against the Company or any of its subsidiaries based on or resulting from the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling, or the emission, discharge or release into the environment, of any pollutant, contaminant or hazardous or toxic material or waste; and (d) have taken all actions necessary under applicable Environmental Laws to register any products or materials required to be registered by the Company or its subsidiaries (or any of their respective agents) thereunder; except where the failure to obtain such permit, license or other authorization, or any such 21 non-compliance, or violations, liabilities, claim, action, suit, proceeding, or failure to register any such product or material, individually or in the aggregate, does not have and could not reasonably be expected to have a Material Adverse Effect on the Company. 5.21 Contracts. The Company Disclosure Schedule contains an accurate and complete listing of all contracts, leases, agreements or understandings, whether written or oral, material to the business, properties, operations or financial condition of the Company and its subsidiaries, taken as a whole, including, without limitation, all contracts, agreements or understandings with providers of programming (true and complete copies or, if none, reasonably complete and accurate written descriptions of which, together with all amendments and supplements thereto and all waivers of any material terms thereof, have been delivered or made available to Acquisition or Supercanal prior to the execution of this Agreement). Each of such contracts, leases, agreements and understandings is in full force and effect and (a) none of the Company or any of its subsidiaries or, to the knowledge of the Company, any other party thereto, has breached or is in default thereunder, (b) no event has occurred which, with the passage of time or the giving of notice would constitute such a breach or default, (c) no claim of default thereunder has been asserted or, to the knowledge of the Company, threatened and (d) none of the Company or its subsidiaries or, to the knowledge of the Company, any other party thereto is seeking a renegotiation thereof or substitute performance thereunder, except where such breach or default, or attempted renegotiation or substitute performance, individually or in the aggregate, does not have and could not reasonably be expected to have a Material Adverse Effect on the Company. 5.22 Intellectual Property. (a) The Company and/or each of its subsidiaries owns, or is licensed or otherwise possesses legally enforceable rights to use, all patents, trademarks, trade names, service marks, copyrights, and any applications therefor, technology, know-how, computer software programs or applications, and tangible or intangible proprietary information or material that are used in the business of the Company and its subsidiaries as currently conducted and as proposed to be conducted. (b) Except as disclosed in the Company Disclosure Schedule, or as could not reasonably be expected to have a Material Adverse Effect on the Company: (i) the Company is not, nor will it be as a result of the execution and delivery of this Agreement or the performance of its obligations hereunder, in violation of any licenses, sublicenses and other agreements as to which the Company is a party and pursuant to which the Company is authorized to use any third-party patents, trademarks, service marks and copyrights ("Third Party Intellectual Property Rights"); (ii) no claims with respect to the patents, registered and material unregistered trademarks and service marks, registered copyrights, trade names and any applications therefor owned by the Company or any of its subsidiaries (the "Company Intellectual Property Rights") are currently pending or, to the knowledge of the Company, are overtly threatened by any person; (iii) the Company does not know of any valid grounds for any bona fide claims (a) to the effect that the sale, licensing or use of any product as now used, sold or licensed or proposed for use, sale or license by the any or any of its subsidiaries, infringes on any copyright, patent, trademark, service mark or trade secret, (b) against the use by the Company or any of its subsidiaries of any trademarks, trade 22 names, trade secrets, copyrights, patents, technology, know-how or computer software programs and applications used in the business of the Company or any of its subsidiaries as currently conducted or as proposed to be conducted, (c) challenging the ownership, validity or effectiveness of any of the Company Intellectual Property Rights or other trade secret material to the Company, or (d) challenging the license or legally enforceable right to use of the Third Party Intellectual Rights by the Company or any of its subsidiaries. (c) All material patents, registered trademarks, service marks and copyrights held by the Company are valid and subsisting. Except as set forth in the Company Disclosure Schedule, to the Company's knowledge, there is no material unauthorized use, infringement or misappropriation of any of the Company Intellectual Property Rights by any third party, including any employee or former employee of the Company or any of its subsidiaries. 5.23 Insurance. All casualty, general liability, business interruption, and other insurance policies maintained by the Company or any of its subsidiaries are in character and amount substantially equivalent to that carried by persons engaged in similar businesses and subject to the same or similar perils or hazards, except as could not reasonably be expected to have a Material Adverse Effect on the Company. 5.24 Accounts Receivable. The accounts receivable of the Company and its subsidiaries as reflected on the Interim Balance Sheet, to the extent uncollected on the date hereof, and the accounts receivable reflected on the books of its subsidiaries are valid and existing and represent monies due, and the Company has made reserves reasonably considered adequate for receivables not collectible in the ordinary course of business, and (subject to the aforesaid reserves) are subject to no refunds or other adjustments and to no defenses, rights of setoff, assignments, restrictions, encumbrances or conditions enforceable by third parties on or affecting any thereof. 5.25 Full Disclosure. No statement contained in any certificate or schedule furnished or to be furnished by the Company or its subsidiaries to Acquisition in, or pursuant to the provisions of, this Agreement contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact necessary, in the light of the circumstances under which it was made, in order to make statements herein or therein not misleading. The Company has provided, or made available, to Acquisition or Supercanal complete and correct copies of all agreements and other documents (including amendments, supplements or modifications thereto) referred to on the Company Disclosure Schedule. 5.26 Fairness Opinion. The Company has received the fairness opinion of Arnhold and S. Bleichroeder, Inc. relating to the transactions which are the subject of this Agreement (which fairness opinion supplements the fairness opinion of Arnhold and S. Bleichroeder relating to the transactions which were the subject of the Original Agreement) and a copy thereof will be delivered to Acquisition. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF ACQUISITION 23 Acquisition hereby represents and warrants to the Company that, except as set forth in the written disclosure schedule delivered by Acquisition to the Company (the "Acquisition Disclosure Schedule"): 6.1 Organization and Qualification; Subsidiaries. Acquisition is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware, and Supercanal is a corporation (sociedad anonima) duly organized, validly existing and in good standing under the laws of Argentina. 6.2 Constituent Documents. Acquisition has heretofore furnished to the Company complete and correct copies of its certificate of incorporation and by-laws and Supercanal has heretofore furnished to the Company a complete and correct copy of its estatutos sociales and has furnished or made available to the Company the estatutos sociales or other organizational documents of each of its subsidiaries (the "Constituent Documents"). Such Constituent Documents are in full force and effect. 6.3 Authority Relative to this Agreement and the Guarantee. Acquisition has all necessary corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby. Supercanal has all necessary corporate power and authority to execute and deliver the guaranty attached to this Agreement (the "Guaranty") and the Programming Agreement and to perform its obligations thereunder. The execution and delivery of this Agreement by Acquisition and the consummation by Acquisition of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of Acquisition, and no other corporate proceedings on the part of Acquisition are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. The execution and delivery of the Guaranty and the Programming Agreement by Supercanal and fulfillment by Supercanal of its obligations under the Guaranty and the Programming Agreement have been duly and validly authorized by all necessary corporate action on the part of Supercanal, and no other proceedings on the part of Supercanal are necessary to authorize the Guaranty and the Programming Agreement or for Supercanal to fulfill any obligations under the Guaranty and the Programming Agreement which it may be required to fulfill. This Agreement has been duly and validly executed and delivered by Acquisition and the Guaranty has been duly and validly executed by Supercanal. Assuming the due authorization, execution and delivery of this Agreement by the Company, this Agreement constitutes a legal, valid and binding obligation of Acquisition, and the Guaranty constitutes, and when executed the Programming Agreement will constitute, a valid and binding obligation of Supercanal, enforceable against Acquisition (as to this Agreement) or Supercanal (as to the Guaranty and the Programming Agreement) in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other such laws relating to the enforcement of creditors' rights generally and by general principles of equity. 6.4 No Conflict. (a) Required Filings and Consents. Except as set forth in the Acquisition Disclosure Schedule, the 24 execution and delivery of this Agreement by Acquisition, and the execution and delivery of the Guaranty by Supercanal, do not, and the performance of this Agreement by Acquisition or of the Guarantee by Supercanal will not, (i) conflict with or violate the Constituent Documents of Acquisition or Supercanal, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to Acquisition or Supercanal or any of their subsidiaries or by which its or their respective properties are bound or affected, or (iii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or impair Acquisition's, Supercanal's or any of their subsidiaries' rights or alter the rights or obligations of any third party under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance on any of the properties or assets of Acquisition or Supercanal or any of their subsidiaries pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Acquisition or Supercanal or any of their subsidiaries is a party or by which Acquisition or Supercanal or any of their subsidiaries or its or any of their respective properties are bound or affected. (b) Except as disclosed in the Acquisition Disclosure Schedule, the execution and delivery of this Agreement by Acquisition and of the Guaranty by Supercanal does not, and the performance of this Agreement by Acquisition and of the Guaranty by Supercanal will not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign, except for (i) the filing and recordation of appropriate merger or other documents as required by the DGCL and the TBCA (ii) applicable filing and waiting period requirements under the HSR Act and (iii) applicable requirements, if any, under Argentine Law No. 22,285 or other required filings with, or approvals by Comfer. The filing required to have been made by Acquisition under the HSR Act has been made and the waiting periods under the HSR Act have been terminated. (c) The execution and delivery of this Agreement by Acquisition and of the Guaranty by Supercanal does not require the consent of any person, including any shareholder of Acquisition or Supercanal, other than approval of the Board of Directors of Acquisition and of the Directorio (i.e., Board of Directors) of Supercanal, each of which has been obtained. 6.5 Ownership of Acquisition; No Prior Activities. (a) Acquisition was formed solely for the purpose of engaging in the transaction contemplated by this Agreement. (b) As of the date hereof and the Effective Time, except for obligations or liabilities incurred in connection with the transactions contemplated by this Agreement and except for this Agreement and any other agreement or arrangements contemplated by this Agreement, Acquisition has not and will not have incurred, directly or indirectly, through any subsidiary or affiliate, any obligations or liabilities or engaged in any business activities of any type or kind whatsoever or entered into any agreements or arrangements with any persons. 25 6.6 Accuracy of Materials. Neither the Offer Documents nor any information supplied by Acquisition in writing for inclusion in the Schedule 14D-9 will, at the respective times the Schedule 14D-9 and the Offer Documents are filed with the SEC and first published, sent or given to the Company's stockholders, contain a false or misleading statement with respect to any material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. On the date the Proxy Statement is mailed to the Company's stockholders and on the date of the Stockholders Meeting, none of the information supplied in writing by Acquisition for inclusion in the Proxy Statement will be false or misleading with respect to any material fact or will omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading or necessary to correct any statement in any earlier communication with respect to the Stockholders Meeting or the solicitation of proxies therefor which has become false or misleading. The Offer Documents will comply as to form in all material respects with the Exchange Act and the rules and regulations under it. Notwithstanding the foregoing, Acquisition does not make any representation or warranty with respect to information supplied by the Company or any of its affiliates or representatives in writing for inclusion in the Offer Documents, the Schedule 14D-9 or the Proxy Statement. 6.7 Availability of Funds. Supercanal (i) has arranged loan facilities which, either alone or with cash presently on hand, will provide sufficient funds to enable Acquisition to purchase and pay for the Purchased Common Stock (and the Option Preferred Stock, of Acquisition exercises the Preferred Stock Purchase Option), the Shares which are tendered in response to the Tender Offers and the Merger as contemplated by this Agreement and to consummate the other transactions contemplated by this Agreement and (ii) will have on the Stock Purchase Closing Date, the Expiration Date and the Effective Date sufficient funds to enable Acquisition to fulfill the respective obligations under this Agreement which it will be required to fulfill on each of those dates, including but not limited to its obligations to purchase and pay for the Purchased Common Stock, the Shares which are tendered in response to the Tender Offers and the Merger, respectively, as contemplated by this Agreement. Supercanal's loan facilities permit money borrowed under the facilities to be used to purchase and pay for Common Stock and 8% Preferred Stock purchased at the Initial Purchase Closing, under Paragraph 1.4 or through the Tender Offers and to carry out the Merger. The Note Purchase Agreement dated as of November 12, 1997 among Supercanal Holding S.A. and various subsidiaries, various financial institutions, as Purchasers, ING Baring (U.S.) Securities, Inc., as Arranger, ING Baring (U.S.) Capital Corporation, as Administrative and Collateral Agent, and The Bank of New York, as Registrar, as modified by a letter agreement dated as of November 26, 1997, (the "Note Purchase Agreement"), a copy of which was given to the Company, has not been terminated or further modified. 6.8 No Supercanal Shareholder Suits. At the date of this Agreement, no shareholder of Supercanal or affiliate of a 26 shareholder of Supercanal has filed or threatened to file a suit seeking to enjoin Supercanal or Acquisition from completing the transactions which are the subject of this Agreement. 6.9 Not Affiliated Shareholders. None of Acquisition, Supercanal or any "affiliates" or "associates" of Acquisition or Supercanal are "affiliated shareholders" of the Company, as those terms are defined in Articles 13.01 - 13.08 of the TBCA. ARTICLE VII ACTIONS PRIOR TO THE MERGER 7.1 Activities Until Effective Time. From the date of this Agreement to the Effective Time, the Company will, and will cause each of its subsidiaries to, except with the written consent of Acquisition: (a) Operate its business in the ordinary course and in a manner consistent with the manner in which it is being operated at the date of this Agreement. (b) Take all reasonable steps available to it to maintain the goodwill of the Company's business and the continued employment of the executives and other employees engaged in that business. (c) At its expense, maintain all its assets in good repair and condition, except to the extent of reasonable wear and use and damage by fire or other unavoidable casualty. (d) Not make any borrowings other than (i) borrowings in the ordinary course of business under working capital lines which are disclosed in the notes to the consolidated balance sheet at March 31, 1997 or September 30, 1997 included in the Company SEC Reports, and (ii) up to a total of $1,000,000 under revolving credits from Jack R. Crosby Inter Vivos Trust and Sharpe Irrevocable Inter Vivos Trust. (e) Except as permitted in Paragraph 7.1(f) not enter into any contractual commitments involving capital expenditures, loans or advances, and not voluntarily incur any contingent liabilities, except in each case in the ordinary course of business. (f) Not make any expenditure which reduces its net working capital (i.e., current assets minus current liabilities) by more than $2.5 million, and not make capital expenditures whether or not in the ordinary course of business (excluding capitalized costs of new subscriber connections and costs of acquiring new television systems, other than KTV) totalling more than $2.5 million, if Acquisition's designee on the Company's Board of Directors objects in writing to the expenditures within three business days in Argentina after the Acquisition designee is notified in writing that the Company wants to make the expenditure or expenditures and is given written materials describing in reasonable detail the reasons the Company 27 wants to make the expenditure or expenditures and, if applicable, the return the Company expects to realize from the expenditure or expenditures, provided that Acquisition's designee will not be permitted to object to a reduction of net working capital which is necessary to enable the Company to pay its outstanding obligations as they become due and payable in the ordinary course of business or to make expenditures or payments specifically permitted in subparagraph (d) or (g). (g) Not declare or pay any dividends, or make any other distributions or repayments of debt to its stockholders, other than (i) required payments of dividends, if any, with regard to the 10% Preferred Stock and the 8% Preferred Stock, (ii) payments by subsidiaries of the Company to the Company or other wholly owned subsidiaries of the Company, (iii) repayments of borrowings under a $500,000 revolving credit from each of Jack R. Crosby Inter Vivos Trust and the Sharpe Irrevocable Inter Vivos Trust and (iv) repayment of 1998 Notes. (h) Not make any loans or advances (other than advances for travel and other normal business expenses) to stockholders, directors, officers or employees. (i) Maintain its books of account and records in the usual manner, in accordance with US GAAP applied on a consistent basis, subject to normal year-end adjustments and accruals. (j) Comply in all material respects with all applicable laws and regulations of governmental agencies. (k) Not sell, dispose of or encumber any property or assets, or engage in any activities or transactions, except in each case in the ordinary course of business. (l) Not increase the salaries of any officers or directors. (m) Not adopt, or become an employer with regard to, any employee compensation, employee benefit or post-employment benefit plan, except bonuses totalling not more than $300,000 to Jack Gray and Jack Crosby. (n) Not issue any stock of any class, other than (i) the issuance of Common Stock upon exercise of options or warrants which are outstanding on the date of this Agreement and are disclosed on the Company Disclosure Schedule, (ii) the issuance of Common Stock on conversion of 8% Preferred Stock or 10% Preferred Stock, (iii) the issuance of 8% Preferred Stock as dividends to the extent required by the 8% Preferred Stock and the 10% Preferred Stock, (iv) the issuance of 8% Preferred Stock as dividends to the extent required by outstanding shares of 8% Preferred Stock and (v) the issuance of shares upon conversion of subsidiaries from sociedad de responsabilidad limitada (SRL) form to sociedad anonima (SA) form, or issue any options, warrants or rights, or enter into any other agreements, by reason of which the Company may become obligated to issue any stock of any class. 7.2 Redemption of 10% Preferred Stock. Not later than three Austin, Texas business days after the Initial Stock 28 Purchase Closing Date the Company will give notice of redemption of all the outstanding shares of 10% Preferred Stock for the redemption price of $5.00 per share plus dividends specified in the Statement of Resolution Establishing and Designating the Series 1990 10% Convertible Preferred Stock, which was filed on July 11, 1990. 7.3 No Solicitation of Offers; Notice of Indications of Interest. (a) Except as provided in subparagraph (b), the Company will not, and will not authorize any of its officers, directors, employees or agents to, enter into any discussions or take any other steps, a likely result of which might be to cause someone other than Acquisition or Supercanal to (i) solicit tenders of stock of the Company or otherwise seek to acquire 5% or more of either the Common Stock or the 8% Preferred Stock of the Company, other than with a view to tendering that stock in response to the Tender Offers, (ii) acquire all or a substantial portion of the assets of the Company and its subsidiaries (whether through acquisitions of assets, acquisitions of stock of subsidiaries or both), or (iii) otherwise to acquire the Company or a substantial portion of its assets if the Minimum Shares are not validly tendered in response to the Tender Offers and not withdrawn or if the Company's stockholders do not approve the Merger. If the Company learns that anyone is contemplating soliciting tenders of its stock, acquiring 5% or more of its outstanding stock, acquiring all or a substantial portion of its assets and those of its subsidiaries or otherwise offering to acquire the Company or its assets if the Minimum Shares are not validly tendered in response to the Tender Offers and not withdrawn or if its stockholders do not approve the Merger, the Company will promptly notify Acquisition of that fact and provide Acquisition with all information in the Company's possession regarding the contemplated solicitation of tenders, acquisition of stock or assets or other acquisition offer, and the Company will promptly, from time to time, provide Acquisition with any additional information it obtains regarding the contemplated solicitation of tenders, acquisition of stock or assets or other acquisition offer. (b) Notwithstanding subparagraph (a), the Company may, without breaching this Agreement, in response to an unsolicited proposal to the Company (an "Acquisition Proposal") which the Company's Board of Directors determines, in good faith and after consultation with the Company's independent financial advisor, would result (if consummated pursuant to its terms) in a transaction (an "Acquisition Transaction") which is more favorable both to the holders of the Common Stock and to the holders of the 8% Preferred Stock than the Tender Offers and the Merger, furnish confidential or non-public information to the person, entity or group (a "Potential Acquiror") making that Acquisition Proposal and enter into discussions and negotiations with that Potential Acquiror. 7.4 Efforts to Fulfill Conditions. The Company will use its best efforts to cause all the conditions set forth in Paragraph 8.1 to be fulfilled prior to or on the Initial Stock Purchase Closing Date and Acquisition will use its best efforts to cause all the conditions set forth in Paragraph 8.2 to be fulfilled prior to or on the Initial Stock Purchase Closing Date. 7.5 Indemnification and Insurance. (a) In the event of any threatened or actual claim, action, suit, proceeding or 29 investigation, whether civil, criminal or administrative, (each an "Action") including, without limitation, any Action in which any person who is now, or has been at any time prior to the date of this Agreement, or who becomes prior to the Effective Time, a director, officer, employee, fiduciary or agent of the Company or any of its subsidiaries (the "Indemnified Parties") is, or is threatened to be, made a party based in whole or in part on, or arising in whole or in part out of, or pertaining to (i) the fact that he is or was a director, officer, employee or agent of the Company or any of its subsidiaries, or is or was serving at the request of the Company or any of its subsidiaries as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (ii) this Agreement or any of the transactions contemplated by it, whether asserted or arising before or after the Effective Time, the Company and Acquisition (prior to the Merger) and the Surviving Corporation (after the Merger) will cooperate and use its reasonable best efforts to defend against the Action. The Company will indemnify and hold harmless, and after the Effective Time the Surviving Corporation will indemnify and hold harmless, to the fullest extent permitted by applicable law, each Indemnified Party against any losses, claims, damages, liabilities, costs, expenses (including attorneys' fees and expenses), judgments, fines and amounts paid in settlement in connection with any such threatened or actual claim, action, suit, proceeding or investigation, and in the event of any such threatened or actual Action. Without limiting what is said in the preceding sentence, (i) the Company, and the Surviving Corporation after the Effective Time, will promptly pay expenses incurred by an Indemnified Party in advance of the final disposition of any Action to the fullest extent permitted by law, (ii) the Indemnified Parties may retain counsel satisfactory to them, and the Company, and the Surviving Corporation after the Effective Time, will pay all fees and expenses of one counsel for the Indemnified Parties promptly after statements are received. However, neither the Company nor the Surviving Corporation will be liable for any settlement effected without its prior written consent (which consent will not be unreasonably withheld), and the Surviving Corporation will have no obligation to any Indemnified Party when and if a court of competent jurisdiction determines, in a determination which becomes final and non-appealable, that indemnification of such Indemnified Party in the manner contemplated by this Paragraph is prohibited by applicable law. Any Indemnified Party wishing to claim indemnification with regard to an actual or threatened Action under this Paragraph 7.6, upon learning of the Action or the threat of the Action, must notify the Company and, after the Effective Time, the Surviving Corporation, of the Action; provided that the failure to give notice will not effect the obligations of the Company or the Surviving Corporation except to the extent the failure to give notice materially prejudices such party. (b) Acquisition agrees that all rights to indemnification existing in favor, and all limitations on the personal liability, of the Indemnified Parties in the Company's Certificate of Incorporation or by-laws or the charter or by-laws or similar organizational documents of any of its subsidiaries as in effect as of the date Agreement with respect to matters occurring prior to the Effective Time will survive the Merger and will continue in full force and effect for a period of not less than six after years the Effective Time; provided, however, that all rights to indemnification in respect of any claim asserted or made within such period shall continue until the disposition of such claim. The Surviving Corporation will cause the current policies 30 of the directors' and officers' liability insurance to remain in effect for at least three years after the Effective Time or will substitute policies of at least the same coverage with terms and conditions which are not less advantageous to the insureds than those presently maintained by the Company, with respect to matters occurring prior to the Effective Time; provided that in no event will the Surviving Corporation be required to expend in any one year an amount in excess of 150% of the annual premiums currently paid by the Company for that insurance. If the annual premiums exceed that amount, the Surviving Corporation will only be obligated to obtain a policy with the greatest dollar amount of coverage available for a cost not exceeding that amount. (c) This Paragraph 7.5 is intended for the benefit of the Indemnified Parties and will be binding on all successors and assigns of Acquisition, the Company and the Surviving Corporation. Each of the Indemnified Parties will be entitled to enforce this in Paragraph 7.5. (d) If the Surviving Corporation or any of its successors or assigns (i) consolidates with or merges into any other person or entity and is not the entity which continues or survives after the consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any person or entity, then, and in each such case, provision will be made so the successors of the Surviving Corporation assume the obligations set forth in this Paragraph 7.5. 7.6 Board Representation. Not later than the Stock Purchase Closing Date, Daniel Vila, will be elected by the Board, effective upon completion of Acquisition's purchase of the Purchased Common Stock, to one of the positions (of which there will not be more than seven) on the Company's Board of Directors and the Company will use its best efforts to cause Daniel Vila, or if he becomes unable to serve, another designee of Acquisition reasonably acceptable to the Company, to be elected at all subsequent meetings of the Company's stockholders at which directors are elected (except that, (i) at any time when Acquisition and its affiliates (including Supercanal) cease to own at least 15% of the outstanding shares of Common Stock, or (ii) if Acquisition breaches or fails to fulfill in a material respect any of its obligations under this Agreement within 10 days after written notice of the failure from the Company (which states that it is a notice being given for the purposes of this Paragraph 7.6), Acquisition will cause Daniel Vila or whoever else may be its designee to resign. 7.7 Options and Warrants. (a) The Company will use its best efforts (including, without limitation, by amending the provisions of the Company's Employee Stock Option Plan and its Non-Employee Director Stock Option Plan and the option agreements which have been issued under those Plans) to provide that, (i) immediately prior to the acceptance of Shares in response to the Tender Offers, each holder of an outstanding option granted under either Plan (an "Option") will become fully vested and (ii) if all the conditions on Exhibit 2.1-C are fulfilled, (x) each Option will be cancelled and (y) the holder of each Option will receive, not later than 10 days after the Tender Offers expire, a cash payment from the Company equal to (I) the excess of the Merger Price for the Common Stock over the per share exercise price of the Option times (II) the number of shares subject to the Option when it is cancelled. Any such cash payments will be treated as compensation and will be net of any applicable federal or state 31 withholding tax. (b) If (i) all the conditions on Exhibit 2.1-C are fulfilled, or (ii) even though those conditions are not fulfilled, Acquisition purchases all the Common Stock and 8% Preferred Stock which is properly tendered in response to the Tender Offers and not withdrawn and (iii) at least 5 days after all the 10% Preferred Stock has either been converted into Common Stock or redeemed, any holder of warrants listed in Section 5.3 of the Company Disclosure Schedule tenders the warrants to the Company to be cancelled in exchange for payment of (A) the excess of $4.50 per share of Common Stock over the per share exercise price of the warrants times (B) the number of shares of Common Stock subject to the warrants when they are cancelled, within five business days after the warrants are tendered for cancellation, the Company will cancel the warrants and pay the holder cash in the amount described in clauses (A) and (B). 7.8 Use of Proceeds of Sale of Purchased Common Stock. The Company will use the proceeds of the sale of the Purchased Common Stock solely (a) to pay the redemption price of the 10% Preferred Stock, (b) to repay up to $6,780,000 of the Company's 13% Notes due February 1998, (c) to make payments to holders of Options or warrants as contemplated by Paragraph 7.7 and (d) to make other payments which are listed on Exhibit 7.8. Until it uses proceeds of the sale of the Purchased Common Stock for one or more of those purposes, the Company will invest them in (i) securities issued by the United States Treasury which mature not later than March 31, 1998, (ii) certificates of deposit issued by ING Bank N.V. or an affiliate which mature no later than March 31, 1998, or (iii) other short term debt securities to which Acquisition consents in writing in advance. 7.9 Purchase of KTV. Not later than 10 days after the Stock Purchase is competed, the Company will assign to Acquisition all the rights, if any, the Company may have under the option to purchase the entities which operate cable systems and in Monte Caseras and Federacion (together, the "KTV Entities") which is described in Items 8(a) and (b) of Section 5.20 of the Company Disclosure Schedule (the "KTV Option"). If the KTV Option has not expired, Acquisition will exercise the KTV Option before its expiration date and will purchase, or cause a designee to purchase, the KTV Entities on the terms provided in the KTV Option. If the KTV Option has expired but the owners of the KTV Entities are willing to sell the KTV Entities to Acquisition for the purchase price, and on the other terms, provided in the KTV Option, as promptly as practicable after the Stock Purchase is completed, Acquisition or a designee will purchase the KTV Entities for that purchase price and on those other terms. 7.10 Satisfaction of Subsidiary Debt. Not later than 15 days after (i) the day on which Acquisition accepts the shares which are properly tendered in response to the Tender Offers and not withdrawn, or (ii) such earlier time as Acquisition acquires a majority of the outstanding Common Stock, the Company will cause each of its subsidiaries listed on Exhibit 7.10 to repay in full all its indebtedness for borrowed money and all its indebtedness incurred in connection with acquisitions of businesses or other assets (other than trade accounts payable incurred in the 32 ordinary course of business). 7.11 Ownership of Subsidiaries. Not later than 20 days after the date of this Agreement, the Company will enter into binding written agreements with the registered owners of shares or other interests in SIR TV S.R.L., Cable Viedma S.R.L. and Televiedma S.R.L., (together the "Tescorp S.R.L.'s") in form reasonably satisfactory to Acquisition, in which those registered owners agree that at any time the Company asks them to do so, they will (a) execute any documents the Company requests that they execute in order to ensure that at the Effective Time, the lenders under the Note Purchase Agreement will have valid and enforceable liens on all the shares or other ownership interests in the Tescorp S.R.L.'s, and (b) providing for the transfer of ownership of the Tescorp S.R.L.'s to such entity or entities as Supercanal may designate. ARTICLE VIII CONDITIONS PRECEDENT TO TRANSACTIONS 8.1 Conditions to the Company's Obligations. The obligations of the Company to sell the Purchased Common Stock (the "Stock Purchase") and to complete the Merger are subject to satisfaction of the following conditions (any or all of which may be waived by the Company with regard to either the Stock Purchases or the Merger): (a) The representations and warranties of Acquisition contained in this Agreement and the representations and warranties of Supercanal contained in the Guaranty will, except as contemplated by this Agreement, be true and correct in all material respects on the date of the Stock Purchase Closing (as to the Stock Purchase) and on the Merger Date (as to the Merger) with the same effect as though made on that date, and Acquisition will have delivered to the Company on the date of the Stock Purchase Closing (as to the Stock Purchase) and on the Merger Date (as to the Merger) a certificate dated that date and signed by the President of Acquisition to that effect. (b) Acquisition will have fulfilled in all material respects all its obligations under this Agreement required to have been fulfilled prior to or on the applicable one of the Stock Purchase Closing Date or the Merger Date. (c) No order will have been entered by any court or governmental authority and be in force which invalidates this Agreement or restrains the Company from completing any of the transactions which are the subject of this Agreement. (d) As to the Merger (but not as to the Stock Purchase), unless the Merger can be consummated under both the TBCA and the DGCL without a vote of the Company's stockholders, the Merger will have been approved by the holders of two-thirds of the outstanding shares of Common Stock and two-thirds of the outstanding shares of 8% Preferred Stock. (e) As to the Merger, the Effective Time will occur on or before April 30, 1998. 8.2 Conditions to Acquisition's Obligations. The obligations of Acquisition to complete the Stock Purchase and to 33 complete the Merger are subject to the following conditions (any or all of which may be waived by Acquisition with regard to the Stock Purchase or the Merger): (a) As to the Stock Purchase, the representations and warranties of the Company contained in this Agreement will, except as contemplated by this Agreement, be true and correct in all material respects on the Stock Purchase Closing Date with the same effect as though made on that date, and the Company will have delivered to Acquisition on the Stock Purchase Closing Date a certificate dated that date and signed by the President or a Vice President of the Company to that effect. (b) As to the Merger, the representations and warranties of the Company in Paragraph 5.8 will, except as contemplated by this Agreement, be true and correct in all material respects on the Merger Date with the same effect as though made on that date, and the Company will have delivered to Acquisition on the Merger Date a certificate dated that date and signed by the President or a Vice President of the Company to that effect. (c) The Company will have fulfilled in all material respects all of its obligations under this Agreement required to have been fulfilled prior to or on the applicable one of the Stock Purchase Closing Date or, the Merger Date. (d) No order will have been entered by any court or governmental authority and be in force which invalidates this Agreement or restrains Acquisition from completing any of the transactions which are the subject of this Agreement. (e) On or before the Stock Purchase Closing Date, Daniel Vila will have been elected to the Company's Board of Directors,effective upon completion of Acquisition's purchase of the Purchased Common Stock, as contemplated by Paragraph 7.6, and, except under circumstances described in Paragraph 7.6 in which Acquisition no longer is entitled to designate a member of that Board of Directors, that election will not have been rescinded. (f) As to the Merger, the number of shares held by shareholders of the Company who have filed written objections to approval of the Merger sufficient to preserve their rights to demand the fair value of the shares pursuant to Articles 5.11 through 5.13 of the TBCA will not exceed 5% of the total number of outstanding shares of Common Stock and 8% Preferred Stock combined (treating each share of 8% Preferred Stock as being equal to 32 shares of Common Stock). (g) As to the Merger, the Effective Time will occur on or before April 30, 1998. ARTICLE IX TERMINATION 9.1 Right to Terminate. This Agreement may be terminated at any time prior to the Effective Time (whether or not 34 the stockholders of the Company have approved the Merger): (a) By mutual consent of the Company and Acquisition. (b) By the Company if, without fault of the Company, the Expiration Date is not on or before January 31, 1998. (c) By the Company or Acquisition if, without fault of Acquisition, the Effective Time is not on or before April 30, 1998. (d) By the Company if (i) any of the representations or warranties of Acquisition contained in this Agreement was not complete and accurate in all material respects on the date of this Agreement, or (ii) any of the conditions in Paragraph 8.1 is not satisfied or waived by the Company prior to or on the Merger Date. (e) By Acquisition if (i) any of the representations or warranties of the Company contained in this Agreement was not complete and accurate in all material respects on the date of this Agreement or (ii) any of the conditions in Paragraph 8.2 is not satisfied or waived by Acquisition prior to or on the Merger Date. 9.2 Manner of Terminating Agreement. If at any time Acquisition or the Company has the right under Paragraph 9.1 to terminate this Agreement, it can terminate this Agreement by a notice to the other of them that it is terminating this Agreement. 9.3 Termination due to Superior Proposal. (a) This Agreement may be terminated by the Company at any time prior to the Stock Purchase Closing Date, if (i) it receives a Superior Proposal, (ii) its Board of Directors resolves to accept the Superior Proposal, (iii) the Company has given Acquisition at least ten business days' prior notice of its intention to terminate this Agreement pursuant to this provision and (iv) the Company has paid Acquisition $5 million (it being understood that only one such payment will be required even if the Company is entitled to terminate this Agreement both under this subparagraph (a) and under subparagraph (b)). A "Superior Proposal" is an Acquisition Proposal which would result in the Company's stockholders receiving consideration with a fair value determined in good faith by the Company's Board of Directors and after consultation with the Company's independent financial advisor to be more favorable both to the holders of the Common Stock and to the holders of the 8% Preferred Stock than the Tender Offers and the Merger. A notice of intention to terminate given pursuant to this subparagraph will be irrevocable (unless Acquisition consents in writing to its being withdrawn by the Company) and will result in this Agreement's being terminated on the date specified in the notice of intention, which will be not earlier than the day after the expiration of the ten business day period. When the Company delivers a notice of intention to terminate pursuant to this Paragraph, Acquisition's obligations under Articles I, II, III and IV and Paragraphs 7.2 and 7.5 will terminate. (b) This Agreement may be terminated by the Company, if (A) a tender or exchange offer is commenced by a Potential Acquiror for all the outstanding shares of Common Stock and 8% Preferred Stock, (B) the Company's Board of Directors determines in good faith and 35 after consultation with an independent financial advisor, that the offer constitutes a Superior Proposal and resolves to accept the Superior Proposal or recommend to the Company's stockholders that they tender their shares in response to the tender or exchange offer, (C) the Company has given Acquisition at least ten business days' prior notice of its intention to terminate pursuant to this provision, and (D) the Company has paid Acquisition $5 million (it being understood that only one such payment will be required even if the Company is entitled to terminate this Agreement both under this subparagraph (b) and under subparagraph (a)). A notice of intention to terminate given pursuant to this subparagraph will be irrevocable (unless Acquisition consents in writing to its being withdrawn by the Company) and will result in this Agreement's being terminated on the date specified in the notice of intention, which will be not earlier than day after the expiration of the ten business day period. When the Company delivers a notice of intention to terminate pursuant to this Paragraph, Acquisition's obligations under Articles I, II, III and IV and Paragraphs 7.2 and 7.5 will terminate. 9.4 Effect of Termination. (a) If this Agreement is terminated pursuant to Paragraph 9.1 or 9.3, after this Agreement is terminated, neither party will have any further rights or obligations under this Agreement, other than the parties' respective rights and obligations under Paragraphs 7.6, 11.1, 11.2, 11.3, and 11.7. Nothing in this Paragraph will, however, (i) affect the rights of the Company and Acquisition with respect to the Deposit as set forth in Paragraph 1.2 or (ii) relieve either party of liability for any breach of this Agreement which occurs before this Agreement is terminated. (b) If this Agreement is terminated after the Stock Purchase Closing Date, the termination will not affect the validity of the Stock Purchase. If this Agreement is terminated after Acquisition has accepted Shares which are tendered in response to the Tender Offers, the termination will not affect Acquisition's purchase of the Shares it has accepted or its obligation to pay for those shares. Either Acquisition or the Company will, however, be entitled to seek recourse for any damages it suffers as a result of, or otherwise in connection with, the Stock Purchases or the purchase by Acquisition of Shares which are tendered in response to the Tender Offers because representations and warranties in this Agreement are not accurate or because of breaches of this Agreement which occur after those events have taken place. ARTICLE X ABSENCE OF BROKERS 10.1 Representations and Warranties Regarding Brokers and Others. The Company and Acquisition each represents and warrants to the other of them that nobody acted as a broker, a finder or in any similar capacity in connection with the transactions which are the subject of this Agreement, except that Arnhold and S. Bleichroeder, Inc. and Prudential Securities, Inc. acted as financial advisors to the Company and ING Baring (U.S.) Securities, Inc., Smith Barney Inc. and Integra Financial Services LLC acted as financial advisors to Acquisition and Supercanal. The fees of Arnhold and S. Bleichroeder, Inc. and Prudential Securities, Inc., which together will total the lesser of (i) 2% of the total amount paid by Acquisition for 36 shares it acquires through the Stock Purchase and the Tender Offers plus the total Merger consideration, or (ii) $2 million will be paid by the Company, except that if (i) the Tender Offers are commenced and all the conditions on Exhibit 2.1-C are fulfilled or waived, or (ii) the Tender Offers are not commenced because Acquisition breaches its obligations under this Agreement, Acquisition will pay those fees promptly after request by the Company. The fees of ING Baring (U.S. Securities, Inc.), Smith Barney, Inc. and Integra Financial Services LLC, which together will total the lesser of (x) 2% of the total amount paid by Acquisition for the shares it acquires through the Stock Purchase and the Tender Offers plus the Merger Consideration or (y) $2 million, will be paid by Acquisition. The Company and Acquisition each indemnifies the other of them against, and agrees to hold the other of them harmless from, all losses, liabilities and expenses (including, but not limited to, reasonable fees and expenses of counsel and costs of investigation) incurred because of any claim by anyone other than the five firms named in the first sentence of this Paragraph for compensation as a broker, a finder or in any similar capacity by reason of services allegedly rendered to the indemnifying party in connection with the transactions which are the subject of this Agreement. ARTICLE XI GENERAL 11.1 Expenses. If (i) the Tender Offers are commenced and all the conditions on Exhibit 2.1-C are fulfilled or waived or (ii) the Tender Offers are not commenced because Acquisition breaches its obligations under this Agreement, Acquisition will pay (i) its own expenses and (ii) promptly after demand by the Company, all the expenses of the Company in connection with this Agreement and the transactions which are the subject of this Agreement, including the fees of the firms described in Paragraph 10.1 and including legal and accounting fees and expenses. Otherwise, the Company and Acquisition (together with Supercanal) each will pay its own expenses, including fees of financial advisors and legal and accounting fees and expenses, in connection with this Agreement and the transactions which are the subject of this Agreement. 11.2 Company Option to Repurchase Stock. If the Stock Purchase Closing takes place but Acquisition fails (i) to make the Tender Offers or (ii) whether or not it is required to do so, to accept and pay for the Shares which are properly tendered in response to the Tender Offers and not withdrawn, or if this Agreement is terminated because of failure of the condition in Paragraph 8.2(d) due to a Supercanal Shareholder Suit, the Company will have the option, exercisable by a notice to Acquisition given not later than 5:00 P.M. New York City time on the first anniversary of the Initial Stock Purchase Closing Date, to repurchase all (but not less than all) the Initial Purchased Common Stock, if any, Acquisition has purchased for the price Acquisition paid for it (including the amount of the Deposit which was applied in payment of a portion of the purchase price of the Purchased Common Stock), payable on a date specified by the Company in the notice of exercise of the option which is not more than 20 days after the day on which the notice of exercise is given, by a wire transfer to an account in New York City specified by Acquisition in funds which are immediately available 37 in New York City. Upon confirmation that the funds were received, Acquisition will surrender to the Company the certificates representing the Purchased Common Stock. 11.3 Purchase of Minority Interests. At or before the Effective Time, Acquisition will purchase (or will cause an affiliate to purchase) the minority interests in cable television interests listed on Exhibit 11.3 for a total of $2,745,330, except to the extent Acquisition (or an affiliate) does not purchase specific minority interests because the current owners of those minority interests would not sell them for the prices shown on Exhibit 11.3. 11.4 Payment to Company. If after the Stock Purchase Closing Date but before the Effective Time, this Agreement is terminated (i) by the Company because Acquisition fails to fulfill its obligations under Article II or Article III, or (ii) by Acquisition because the condition in Paragraph 8.2(d) is not fulfilled due to a Supercanal Shareholder Suit, within 5 days after the day on which this Agreement is terminated, Acquisition will pay the Company, by wire transfer to the account specified in accordance with Paragraph 1.4(b)(i), the sum of $5 million. 11.5 Retention Payments. The Surviving Corporation will pay each employee of the Company listed on Exhibit 11.5 who either (i) continues to be employed by the Surviving Corporation or a subsidiary for at least three months after the Expiration Date, or (ii) is terminated as an employee of the Company and its subsidiaries between the Expiration Date and the day which is three months after the Expiration Date other than for Cause, an amount equal to the employee's annual salary, but in no event will the Surviving Corporation be obligated to pay those employees a total of more than $350,000 (and the amounts payable to various employees will be reduced pro rata to the extent, if any, necessary to reduce the total payments to $350,000). As used in this Agreement the term "Cause" means gross negligence, fraud, wilful misconduct or the failure to perform material duties after notice of such failure has been given to the applicable employee. 11.6 Access to Properties, Books and Records. (a) From the date of this Agreement until the Merger Date or such earlier date as this Agreement is terminated, the Company will, and will cause each of its subsidiaries to, give representatives of Acquisition full access during normal business hours to all of their respective properties, books and records. Until the Effective Time or, if the Merger does not take place, until the second anniversary of the date of this Agreement, Acquisition will, and will cause its representatives to, hold all information its representatives receive as a result of their access to the properties, books and records of the Company or its subsidiaries in confidence, and not use any of that information for any purpose except in connection with the transactions which are the subject of this Agreement (including confirming the accuracy of representations and warranties of the Company and other information about the Company contained in this Agreement), except to the extent that information (i) is or becomes available to the public (other than through a breach of this Agreement), (ii) becomes available to Acquisition from a third party which, insofar as Acquisition is aware, is not under an obligation to the Company, or to a subsidiary of the Company, to keep the information confidential, (iii) was known 38 to Acquisition before it was made available to Acquisition or its representative by the Company or a subsidiary, or (iv) otherwise is independently developed by Acquisition or an affiliate of, or advisor to, Acquisition. If this Agreement is terminated prior to the Effective Time, Acquisition will, at the request of the Company, deliver to the Company all documents and other material obtained by Acquisition from the Company or a subsidiary in connection with the transactions which are the subject of this Agreement or evidence that material has been destroyed by Acquisition. 11.7 Press Releases. The Company and Acquisition will consult with each other before issuing any press releases or otherwise making any public statements with respect to this Agreement or the transactions contemplated by it, except that nothing in this Paragraph will prevent either party from making any statement when and as required by law or by the rules of any securities exchange or securities quotation or trading system on which securities of that party or an affiliate are listed, quoted or traded. 11.8 Entire Agreement. (a) This Agreement and the documents to be delivered in accordance with this Agreement contain the entire agreement between the Company and Acquisition relating to the transactions which are the subject of this Agreement and those other documents, and, except as provided in subparagraph (b), all prior negotiations, understandings and agreements between the Company and Acquisition or Supercanal, or any affiliate or representative of either of them, including, but not limited to, the Original Merger Agreement, are superseded by this Agreement and those other documents, and there are no representations, warranties, understandings or agreements concerning the transactions which are the subject of this Agreement or those other documents other than those expressly set forth in this Agreement or those other documents. (b) If Acquisition is obligated under this Agreement to complete, but fails to complete, any of the Stock Purchase, the Tender Offers or the Merger, the Company, at its option, may (i) sue for damages or seek other recourse for breach of this Agreement, or (ii) sue for damages or seek other recourse for breach of the Original Agreement as though this Agreement had never been entered into, provided that in computing damages under the Original Agreement all transactions completed under this Agreement will be taken into account. Under either option, the Company may seek declaratory, injunctive or other non-monetary relief in connection with any breach of this Agreement. (c) Acquisition acknowledges that neither it nor Supercanal, nor any of their officers, directors or agents, has any claim against the Company or any of its officers, directors or employees, based upon a failure of the Company to fulfill any of its obligations, or otherwise arising, under or relating to the Original Agreement, and Acquisition waives any such claims for itself and for Supercanal to the extent Acquisition or Supercanal may have any such claims. 11.9 Effect of Disclosures. Any information disclosed by a party in connection with any representation or warranty contained in this Agreement (including Disclosure Statements and including exhibits to this Agreement) will be treated as having been disclosed in connection with each representation and warranty made by that party in this Agreement. 39 11.10 Captions. The captions of the articles and paragraphs of this Agreement are for reference only, and do not affect the meaning or interpretation of this Agreement. 11.11 Prohibition Against Assignment. Neither this Agreement nor any right of any party under it may be assigned, except that Acquisition may assign its rights under this agreement to Supercanal or any majority owned subsidiary of Supercanal. 11.12 Third Party Beneficiaries. Agreement will be solely for the benefit of the Company and Acquisition, except that (a) Paragraphs 3.13 and 7.7 are for the benefit of, and may be enforced by, each person who is a holder of an Option or of a warrant listed in Section 5.3 of the Company Disclosure Schedule, (b)Paragraph 7.1(m) is for the benefit of and may be enforced by, Jack Gray and Jack Crosby,(c) Paragraph 7.6 is for the benefit of, and may be enforced by, each person who is entitled to indemnification under that Paragraph,(d) Paragraphs 10.1 and 11.1 are for the benefit of, and may be enforced by, the persons entitled to have their fees and expenses paid as described in those Paragraphs,(e) Paragraph 11.3 is for the benefit of, and may be enforced by, the owners of the minority interests listed on Exhibit 11.3,(f) Paragraph 11.5 is for the benefit of, and may be enforced by, the respective persons listed on Exhibit 11.5, and (g) this Agreement is for the benefit of, and may be enforced by, Supercanal to the same extent it is for the benefit of, and may be enforced by, Acquisition. 11.13 Notices and Other Communications. Any notice or other communication under this Agreement (including, but not limited to, a notice under Paragraph 7.1(f)) must be in writing and will be deemed given when delivered in person or sent by facsimile (with proof of receipt at the number to which it is required to be sent), or on the tenth business day after the day on which mailed by first class mail from within the United States of America or Argentina, to the following addresses (or such other address as may be specified after the date of this Agreement by the party to which the notice or communication is sent): If to Acquisition: Tescorp Acquisition Corporation c/o Supercanal Holding S.A. [at the address and facsimile number for Supercanal Holding S.A.] with copies to: Supercanal Holding S.A. Godoy Cruz 316 Mendoza, Province of Mendoza Argentina 5500 Attention: Daniel Eduardo Vila, Chairman Facsimile No.: 546-129-8855 and Rogers & Wells 40 200 Park Avenue New York, New York 10166 Attention: David W. Bernstein Facsimile No.: 1-212-878-8375 If to the Company: Tescorp, Inc. 327 Congress Avenue, Suite 200 Austin, Texas 78701 Attention: Jack S. Gray, Jr. Facsimile No.: 1-512-474-1610 with a copy to: Klehr, Harrison, Harvey, Branzburg & Ellers 1401 Walnut Street Philadelphia, Pennsylvania 19102 Attention: Barry Siegel Facsimile: 1-215-568-6603 11.14 Governing Law. This Agreement will be governed by, and construed under, the laws of the State of New York relating to contracts made and to be performed in that state. 11.15 Amendments. This Agreement may be amended only by a document in writing signed by both the Company and Acquisition. 11.16 Consent to Jurisdiction and Service of Process. Each of the parties to this Agreement (a) consents to the jurisdiction of any Federal or state court sitting in the Borough of Manhattan, State of New York, in the United States of America with regard to any action or proceeding under or relating to this Agreement or any of the transactions contemplated by this Agreement, (b) agrees not to attempt to move any such action or proceeding from any such court to any other court, whether on the ground of inconvenience of the forum or otherwise (but nothing will prevent a party from removing an action or proceeding from a state court sitting in the Borough of Manhattan to a Federal court sitting in that Borough), and (c) consents that process in any such action or proceeding may be served by registered mail or in any other manner permitted by the rules of the court in which the action or proceeding is brought. 11.17 Counterparts. This Agreement may be executed in two or more counterparts, some of which may contain the signatures of some, but not all, the parties. Each of those counterparts will be deemed an original, but all of them together will constitute one and the same agreement. 41 IN WITNESS WHEREOF, the Company and Acquisition have executed this Agreement, intending to be legally bound by it, on the day shown on the first page of this Agreement. TESCORP ACQUISITION CORPORATION By: -------------------- Title: TESCORP, INC. By: -------------------- Title: 42 Exhibit 2.1-C Conditions to Tender Offers The capitalized terms used in this Annex A have the meanings set forth in the attached Agreement, except that the term "Agreement" refers to the attached Agreement together with this Annex A. Acquisition will not be required to accept for payment or pay for any Shares tendered in response to the Tender Offers if: (i) The number of shares properly tendered in response to the Tender Offers and not withdrawn, together with the shares of Common Stock and any shares of 8% Preferred Stock already owned by Acquisition, does not total more than two-thirds of the outstanding shares of Common Stock and two-thirds of the outstanding shares of 8% Preferred Stock (this condition being referred to as the "Minimum Condition"); (ii) There is any 10% Preferred Stock outstanding after the day which is 65 days after the Initial Stock Purchase Closing Date (if that day is before the Expiration Date); (iii) Any statute, rule, regulation, order or injunction has been enacted, promulgated, entered or enforced by any national or state government or governmental authority or by any United States or Argentine court of competent jurisdiction, that would make the acquisition of the Shares by Acquisition illegal or otherwise prohibit consummation of the Tender Offers or the Merger; or (iv) There has been (i) a general suspension of trading in, or limitation on prices for, securities on the New York Stock Exchange which continued for at least three business days, (ii) the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or Argentina (whether or not mandatory) which continued for at least three business days, (iii) the commencement of a war or armed hostilities or any other international or national calamity directly or indirectly involving the United States or Argentina, which has a significant adverse effect on the functioning of financial markets in the United States or Argentina, (iv) any limitation (whether or not mandatory) by any United States or Argentine governmental authority or agency on the extension of credit by banks or other financial institutions which would have a material adverse effect on Supercanal's or Acquisition's ability to borrow sufficient funds under its bank facilities to purchase and pay for all the Shares which are tendered in response to the Tender Offers and to carry out the Merger on the terms contemplated by the Agreement or (v) there is a material acceleration or worsening of any of the conditions described in clauses (i) through (iv) which exists at the date of the commencement of the Tender Offers. (v) Any of the representations and warranties of the Company set forth in the Agreement is not true and correct as of the date of the Agreement, except failures to be true and correct which would not, in the aggregate, have a Material Adverse Effect upon the Company; (vi) Since the date of the Agreement, there has been an occurrence or group of occurrences (whether or not related) which have had a Material Adverse Effect upon the Company (other than (i) occurrences which affected generally the cable television industry worldwide or in Argentina, including actual or proposed changes in laws or regulations, or (ii) the transactions contemplated by the Agreement, including the change in control contemplated by it); or (vii) the Company has not performed all the obligations it is required to have performed under the Agreement, except failures which (i) would, in the aggregate, not materially impair or delay the ability of Acquisition to consummate the purchase of the Shares which are tendered in response to the Tender Offers or the ability of Acquisition and the Company to effect the Merger, (ii) have been caused by or result from a breach of the Agreement by Acquisition; or (iii) do not, and are not reasonably expected to, have a Material Adverse Effect on the Company. (viii) The Agreement has been terminated in accordance with its terms; or (ix) The Board withdraws or modifies in a manner adverse to Acquisition the Board's approval or recommendation of the Tender Offers or the Merger. The conditions set forth above are for the sole benefit of Acquisition, and may be waived by Acquisition, in whole or in part. Any delay by 43 Acquisition in exercising the right to terminate the Tender Offers because any of the conditions are not fulfilled will not be deemed a waiver of its right to do so. 44 EX-3 4 EXHIBIT 3 EXHIBIT 3 TESCORP, INC. AMENDED AND RESTATED 1991 INCENTIVE PLAN 1. Purpose ------- The purpose of the Tescorp, Inc. 1991 Incentive Plan (the "Plan") is to advance the interests of Tescorp, Inc. (the "Company") and its Subsidiaries (as defined below) by providing incentive awards and stock ownership opportunities to certain key employees (including officers and directors), consultants and other individuals who contribute significantly to the performance of the Company and its Subsidiaries. In addition, the Plan is intended to enhance the ability of the Company and its Subsidiaries to attract and retain individuals of superior managerial ability and to motivate such key employees to exert their best efforts towards future progress and profitability of the Company and its Subsidiaries. Accordingly, the Company may make awards ("Awards") to key employees, consultants and other individuals in the form of (i) options ("Options") to purchase shares of the Company's common stock, par value $.02 per share ("Common Stock"), (ii) shares of Common Stock which are restricted as provided in Section 7 ("Restricted Stock") and (iii) limited stock appreciation rights ("LSARs"). Options may be either incentive stock options ("ISOs") which are qualified under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or nonqualified stock options ("Nonqualified Options"). For purposes of the Plan, a "Subsidiary" shall be any corporation in which the Company has a direct or indirect ownership interest of 50% or more of the total combined voting power of all classes of stock in such corporation. 2. Approval of Awards ------------------ Each Award may be approved in any of the following ways: A. Board/Committee Approval. The entire Board or the Committee (as defined below) may vote in advance to approve such Award. B. Shareholder Approval/Ratification. In compliance with Section 14 of the Securities Exchange Act of 1934 ("1934 Act"), a majority of the shareholders of the Company duly entitled to vote on such matters at meetings held in accordance with the laws of the State of Texas may, either in advance of the Award or no later than the next annual meeting of shareholders, affirmatively vote to approve such Award. 3. Administration and Interpretation --------------------------------- A. Administration. The Plan shall be administered by the Compensation Committee (the "Committee") of the Board of Directors (the "Board") of Tescorp, Inc. The Committee shall consist solely of two or more "Non-Employee Directors" within the meaning of Rule 16b-3 of the General Rules and Regulations of the 1934 Act. The Committee may be, amend and rescind rules and regulations for administration of the Plan and shall have full power and authority to construe and interpret the Plan. The Committee may correct any defect or any omission or reconcile any inconsistency in the Plan or, subject to the requirements of Section 2 herein, in any grant made under the Plan in the manner and to the extent it shall deem desirable. Committee members shall be appointed by and shall serve at the pleasure of the Board. If any members of the Committee possess an interest in any other transaction for which disclosure would be required pursuant to Rule 404(a) of Regulation S-K of the General Rules and Regulations of the 1934 Act or are engaged in a business relationship for which disclosure is required pursuant to Rule 404(b), then the Committee may not grant Awards under the Plan. The Board may from time to time appoint members of the Committee in substitution for or in addition to members previously appointed and may fill vacancies, however caused, in the Committee. A majority of the members of the Committee shall constitute a quorum, and the acts of a majority of the members present at a meeting, or the acts of a majority of the members evidenced in writing, shall be the acts of the Committee. Members of the Committee may, in the discretion of the Board, receive compensation for their services as members, and all expenses and liabilities they incur in connection with the administration of the Plan shall be borne by the Company. The day-to-day administration of the Plan may be carried out by such officers and employees of the Company or its Subsidiaries as shall be designated from time to time by the Committee. The Committee may employ attorneys, consultants, accountants, appraisers, brokers or other persons, and the Committee, the Company and the officers and employees of the Company shall be entitled to rely upon the advice, opinions or valuations of any such persons. The Board, the Committee or the shareholders, as the case may be, shall have concurrent authority to make all decisions concerning specific Awards granted under the Plan, including without limitation the selection of the persons to whom Awards are granted, the number of shares of Common Stock subject to each Award and the terms and conditions of each Award. The Committee shall construe the terms and provisions of the Plan and the Agreements and adopt, from time to time, such rules and regulations, not inconsistent with the terms of the Plan, as it may deem advisable to carry out the Plan. All decisions by the Committee shall be final. The effective date of an Award is referred to herein as the "Grant Date." B. Interpretation. The Interpretation and construction by the Committee of any provisions of the Plan or of any grant under the Plan and any determination by the Committee under any provision of the Plan or any such grant shall be final and conclusive for all purposes. C. Limitation on Liability. Neither the Committee nor any member thereof shall be liable for any act, omission, interpretation, construction or determination made in connection with the Plan in good faith, and the members of the Committee shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense including counsel fees) arising therefrom to the full extent permitted by law and the articles of incorporation of the Company. The members of the Committee, if appointed, shall be named as insureds under any directors and officers liability insurance coverage that may be in effect from time to time. 4. Shares Subject to Grants Under the Plan --------------------------------------- The aggregate number of shares which may be issued under Awards granted under the Plan shall not exceed 2,000,000 shares of Common Stock- provided however, that the number of Awards granted to any single executive officer of the Company during any fiscal year shall not exceed 1,000,000 shares of Common Stock under the Plan during such year. Such shares may consist of authorized but unissued shares of Common Stock or previously issued shares of Common Stock reacquired by the Company. Any of such shares which remain unissued and which are not subject to outstanding Awards at the termination of the Plan shall cease to be subject to the Plan, but until termination of the Plan, the Company shall at all times make available a sufficient number of shares to meet the requirements of the Plan and the outstanding Awards. The number of shares of Common Stock which are available for Awards under the Plan shall be decreased by each exercise of an Option or LSAR, and by each grant of Restricted Stock, and to the extent that such Award lapses the shares theretofore subject to such Award may again be subject to other Awards granted under the Plan. If any Award, in whole or in part, expires or terminates unexercised or is cancelled or forfeited, the shares 3 theretofore subject to such Award may be subject to another Award granted under the Plan. The aggregate number of shares which may be issued under Awards granted under the Plan shall be subject to adjustment as provided in Section 9 hereof. 5. Eligibility ----------- The individuals who shall be eligible to receive Awards under the Plan shall be such key employees, directors, independent consultants and other individuals as the Committee from time to time shall determine; provided, that only employees of the Company and Subsidiaries shall be eligible to receive grants of ISOs. In granting Awards, the Board, the Committee or the shareholders, as the case may be, shall take into consideration the contribution an individual has made or may make to the success of the Company or its Subsidiaries and such other factors as the Committee shall determine. The Board, the Committee or the shareholders, as the case may be, shall also have the authority to consult with and receive recommendations from officers and other employees of the Company and its Subsidiaries with regard to these matters. In no event shall any individual or his legal representatives, heirs, legatees, distributees or successors have any right to participate in the Plan except to such extent, if any, as the Committee shall determine. Awards may be granted under the Plan from time to time in substitution for stock options, restricted stock or other stock-based compensation awards granted by other corporations where, as a result of a merger or consolidation of such other corporation, or the acquisition by the Company or a Subsidiary of stock of, or other beneficial ownership interest in, such other corporation, the individuals who held such awards become eligible to receive Awards under the Plan. 6. Grants and Terms of Options --------------------------- A. Grants of Options. Grants of Options under the Plan shall be for such number of shares of Common Stock and shall be subject to such terms and conditions as the Board, the Committee or the shareholders, as the case may be, shall designate. Options may be granted by the Board, the Committee or the shareholders, as the case may be, to any eligible individual at any time and from time to time. B. Terms of Options. Each grant of an Option shall be evidenced by an Agreement executed by the recipient of the Option (the 4 "Optionee") and an authorized officer of the Company. Each Agreement shall be in a form approved by the Committee, shall comply with and be subject to the terms and conditions of the Plan and may contain such other provisions, consistent with the terms and conditions of the Plan and the specific Awards, as the Committee shall deem advisable. References herein to an Agreement shall include, to the extent applicable, any amendment to the Agreement and any interpretation or construction thereof by the Committee pursuant to this Plan. (1) Exercise of Options. Options shall not be exercisable prior to the date six months following the Grant Date. In the discretion of the Committee, each Agreement may state that the Option granted therein may not be exercised in whole or in part for a period or periods of time specified in such Agreement and may further limit the exercisability of the Option in such a manner as the Committee deems appropriate, consistent with the terms of the specific Award. In addition, the Committee may, by a resolution duly adopted, suspend the exercisability of all outstanding Options at any time and from time to time upon a determination, in its discretion that such suspension is in the best interests of the Company and its shareholders; provided, that the resolution effecting any such suspension shall also make provision for the exercise of all outstanding Options for a reasonable period of time following such suspension. Except as provided herein or as so specified in whole at any time or in part from time to time during its term. The Committee may, in its discretion, consistent with the terms of the specific Award, at any time and from time to time accelerate the exercisability of all or part of any Option. An Optionee may exercise an Option by providing written notice to the Company at any time or from time to time during the period such Option is exercisable and by satisfying such other conditions as set forth in the Agreement relating to the Option, including without limitation satisfying the requirements for tax withholding with respect to such exercise. (2) Payment of Option Exercise Price. Upon exercise of an Option, the full price per share (the "Exercise Price") for the shares with respect to which the Option is being exercised shall be payable to the Company (i) in cash or by check payable and acceptable to the Company or (ii) subject to the approval of the Committee, (a) by tendering to the Company shares of Common Stock owned by the Optionee having an aggregate Market Value Per Share (as defined below) as of the date of exercise and tender that is not greater than the 5 Exercise Price for the shares with respect to which the Option is being exercised and by paying any remaining amount of the Exercise Price as provided in (i) above; provided, the Committee may, upon confirming that the Optionee owns the number of additional shares being tendered, authorize the issuance of a new certificate for the number of shares being acquired pursuant tot he exercise of the Option less the number of shares being tendered upon the exercise and return to the Optionee (or not require surrender of) the certificate for the shares being tendered upon the exercise of (b) by the Optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the option exercise price; provided that in the event the Optionee chooses to pay the Option exercise as provided in (ii)(b) above, the Optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Committee shall prescribe as a condition of such payment procedure. Payment instruments will be received subject to collection. (3) Number of Shares. Each Agreement shall state the total number of shares of Common Stock that are subject to the Option, which number shall be subject to adjustment pursuant to Section 9. (4) Exercise Price. The Exercise Price for each Option shall be fixed on, or in case of ratification by the shareholders, as of the Grant Date. The Exercise Price may be greater or, other than with respect to an ISO, less than the Market Value Per Share on the Grant Date, but in no event less than the par value of the Common Stock. The Exercise Price shall be subject to adjustment pursuant to Section 9. (5) Term. The term of each Option shall be determined at the Grant Date; provided, however, that each Option shall expire no later than ten years from the Grant Date and in the event no determination is made to the contrary, shall expire ten years from the Grant Date, or in the case of an Incentive Stock Option granted to an employee who owns in excess of 10% of the outstanding voting stock of the Company, shall expire five years from the Grant Date (such date, as determined by the Committee or provided for herein, being referred to hereafter as the "Expiration Time"). (6) Market Value Per Share. "Market Value Per Share" shall be determined as of any particular date by any fair and reasonable means determined by the Board, the Committee or the Shareholders, as the case may be. 6 (7) Termination of Employment. In the event that an Optionee's employment with the Company shall terminate for reasons other than (i) retirement, with the consent of the Company or the Optionee's employing Subsidiary, as the case may be ("retirement"), (ii) permanent disability or (iii) death, the Optionee shall have the right, subject to subsections (1) and (5) above, to exercise any Option at any time during the period of three months following such termination to the extent the Option was exercisable on the termination date. In the event that an Optionee's employment with the Company shall terminate due to retirement or permanent disability, the Optionee shall have the right, subject to subsections (1) and (5) above, to exercise any Option at any time during the period of 12 months following such termination, to the extent the Option was exercisable on the termination date. Whether any termination of employment is due to retirement or permanent disability, and whether an authorized leave of absence or absence on military or government service or for other reasons shall constitute a termination of employment, for the purposes of the Plan shall be determined by the Committee. With respect to Options granted to an who is not an employee of the Company on the Grant Date, the Board, the Committee or the shareholders, as the case may be, may specify the terms and conditions upon which such Option shall terminate. If an Optionee shall die while entitled to exercise an Option, the Optionee's estate, personal representative or beneficiary, as the case may be, shall have the fight, subject to subsections (1) and (5) above, to exercise the Option at any time during the period of 12 months following the date of the Optionee's death to the extent that the Option was exercisable on the date of the Optionee's death. The Committee may, in its discretion, consistent with the terms of the specific grant, (i) accelerate the exercisability of all or part of an Option that is not otherwise exercisable or (ii) provide that an Option shall remain outstanding and be exercisable following termination of employment (or other specified events in the case of nonemployees) on such other terms and conditions as the Committee shall approve. (8) Incentive Stock Options. ISOs may be granted only to individuals who are key employees (including officers who are also key employees) of the Company at the time the ISO is granted. ISOs may be 7 granted to the same individual on more than one occasions, but in no event shall an ISO be granted after December 31, 2000. No employee shall be eligible to receive an ISO if, on the Grant Date, such employee owns (including ownership through the attribution provisions of Section 424 of the Code) in excess of 10% of the outstanding voting stock of the Company (or of its parent or subsidiary as defined in Section 424 of the Code) unless the following two conditions are met: (i) the option price for the shares of Common Stock subject to the ISO is at least 110% of the fair market value of the shares of Common Stock on the Grant Date, and (ii) the Agreement provides that the term of the ISO does not exceed five years. No employee shall be eligible to receive ISOs (under the Plan and all other option plans of the Company, its parent and subsidiary corporations) that are exercisable for the first time in any calendar year with respect to stock with an aggregate fair market value (determined at the Grant Date) in excess of $100,000. (9) Reload Options. In the event a person who is an active employee of the Company or a Subsidiary shall exercise an Option (the "Original Option") by paying all or a portion of the Exercise Price of the shares of Common Stock subject to the Original Option by tendering to the Company shares of Common Stock owned by such person, an Option to purchase the number of shares of Common Stock used for such purpose by the employee (the "Reload Option") shall be granted to the employee as of the exercise date, provided that a Reload Option has been granted to such Optionee with respect to such Option, as evidenced in his Agreement. The Exercise Price of the Common Stock subject to the Reload Option shall be 100% of Market Value Per Share of the Common Stock on such date, subject to adjustment as provided in Section 9. The Reload Option may be exercised at any time during the term of the Original Option, subject to such limitations, if any, as may be placed on such exercisability in the Agreement. 7. Restricted Stock ---------------- A. Awards of Restricted Stock. Restricted Stock may be awarded to any individual eligible to receive the same, at any time and from time to time. The issuance of Restricted Stock to an individual pursuant to an Award may be made subject to such restrictions and the future 8 satisfaction or occurrence of terms, conditions or contingencies (collectively, "Conditions") set when the Award is made, such that failure of any Condition shall cause all or part of such shares to be forfeited. B. Description of Restricted Stock. Shares of Restricted Stock may not be sold, exchanged, pledged, transferred, assigned or otherwise encumbered or disposed of until the Conditions set at the time of the Award have been satisfied. A share of Restricted Stock shall be subject to such restrictions and Conditions as may be established at the time of the Award, which may include, without limitation, "lapse" and "non-lapse" restrictions (as such terms are defined in regulations promulgated under Section 83 of the Code) and the achievement of specific goals. If an individual is granted shares of Restricted Stock (whether or not escrowed as provided below), the recipient shall be the record owner of such shares and shall have the rights of a shareholder with respect to such shares (unless the escrow agreement, if any, provides otherwise), including the right to vote and the right to receive dividends or other distributions made or paid with respect to such shares. Any certificate or certificates representing shares of Restricted Stock shall bear a legend similar to the following: The shares represented by this certificate have been issued pursuant to an Award made under the terms of the Tescorp, Inc. 1991 Incentive Plan and may not be sold, pledged, transferred, assigned or otherwise encumbered in any manner except as set forth in the terms of such Award dated 19. In order to enforce the restrictions and Conditions that may be applicable to a recipient's shares of Restricted Stock, the Committee may require the recipient, upon the receipt of a certificate or certificates representing such shares, or at any time thereafter, to deposit such certificate or certificates, together with stock powers and other instruments of transfer appropriate endorsed in blank, with the company or an escrow agent designated by the Company under an escrow agreement, in such form as shall be determined by the Committee. After the satisfaction or occurrence of the Conditions and the lapse of all restrictions, a certificate, without the legend set forth above, shall be delivered to the recipient for the number of shares that are no longer subject to restrictions and Conditions. The remaining shares of Restricted Stock issued with respect to such Award, if any, shall either be reacquired by the Company and forfeited by the recipient or, if appropriate under the terms of the Award applicable to such shares, shall continue to be subject to the restrictions and 9 Conditions. C. Payment of Restricted Stock. The satisfaction of the Conditions and the lapse of all restrictions, and the delivery of a certificate without the legend set forth above for the portion of such award that is no longer subject to restrictions and Conditions, is hereinafter referred to as the "payment" of such portion of the Award. Subject to the provisions above, each Award shall be paid at the time and in the manner specified at the time of the Award. D. Payment in the Event of Termination of Employment. In the event a recipient's employment with the Company shall terminate prior to the satisfaction or occurrence of a Condition applicable to all or a portion of an Award of Restricted Stock, then such portion of the Award shall be reacquired by the Company and forfeited by the recipient; provided, however, if the termination of employment is due to the employee's death, permanent disability or retirement, the Committee may, in its sole discretion, deem the Conditions to have been met for all or part of such portion of the Award. With respect to the shares of Restricted Stock granted to an individual who is not an employee of the Company on the Grant Date, the Committee may specify the circumstances upon which the shares of Restricted Stock shall be forfeitable prior to the satisfaction of applicable Conditions. If Restricted Stock shall be reacquired by the Company and forfeited as provided herein, the recipient, or in the event of his death or his personal representative, shall forthwith deliver to the Secretary of the Company the certificates for the Restricted Stock awarded pursuant to the Plan to the recipient, accompanied by such instrument of transfer, if any, as may reasonably be required by the Secretary of the Company. If a recipient dies after satisfaction of the Conditions for the payment of all or a portion of an Award of Restricted Stock but prior to the actual payment of all or such portion thereof, such payment shall be made to the recipient's beneficiary or beneficiaries at the time and in the same manner that such payment would have been made to the recipient. 8. LSARs ----- A. The Board, the Committee or the shareholders, as the case may be, shall have authority to grant a right (referred to in the Plan as an "LSAR") to the holder of any Option (such Option is referred to herein as a 10 "Related Option") with respect to all or some of the shares of Common Stock covered by such Related Option. An LSAR may be granted either at the time of the grant of the Related Option or at any time thereafter during its term; idea, no Award of an LSAR may be made after termination of the Plan. An LSAR shall prove to be evidenced by provisions in the Agreement covering the Related Option, or an amendment thereto. An LSAR may be exercised only during the period of seven months following a Change of Control Date (as defined in Section 8.D hereof). Unless otherwise provided in the respective Agreement, an LSAR shall be exercisable as to the entire number of shares covered by the Related Option, without regard to whether the Related Option is otherwise fully vested. B. Upon the exercise of an LSAR, the Related Option shall cease to be exercisable to the extent of the number of shares of Common Stock with respect to which such LSAR is exercised. Upon the exercise or termination of a Related Option, the LSAR with respect to such Related Option shall terminate to the extent of the shares of Common Stock with respect to which the Related Option was exercised or terminated. In the event that the term of the Related Option would otherwise expire prior to the end of the seven-month period specified in Section 8.A., then the term of the Related Option shall be automatically extended to the end of such period. C. Upon the exercise of an LSAR, the holder thereof shall receive in cash whichever of the following amounts is applicable. (1) in the case of an exercise of an LSAR by reason of the occurrence of an Offer (as defined in Section 8.D.(1) hereof), an amount equal to the Offer Spread (as defined in Section 8.F. hereof); (2) in the case of an exercise of an LSAR by reason of shareholder approval of an agreement described in Section 8.D.(2) hereof, an amount equal to the Merger Spread (as defined in Section 8.H. hereof); (3) in the case of an exercise of an LSAR by reason of shareholder approval of a plan of liquidation described in Section 8.D.(2) hereof, an amount equal to the Liquidation Spread (as defined in Section 8.J hereof); (4) in the case of an exercise of an LSAR by reason of an acquisition of Common Stock described in Section 8.D.(3) hereof, an amount equal to 11 the Acquisition Spread (as defined in Section 8.L. hereof); or (5) in the case of an exercise of an LSAR by reason of a change in the constituency of the Board described in Section 8.D.(4) hereof, an amount equal to the Other Spread (as defined in Section 8.N. hereof). D. For purposes of the Plan, the term "Change of Control" shall mean the occurrence of any one or more of the following events: (1) any corporation (other than the Company or a Subsidiary), person or group (within the meaning of Sections 13(d) or 14(d)(2) of the 1934 Act) makes a tender or exchange offer which, if consummated, would make such corporation, person or group the beneficial owner (within the meaning of Rule l3d-3 under the 1934 Act) of voting securities of the Company representing more than 25% of the total number of votes eligible to be cast at any election of directors of the Company and, pursuant to such offer, purchases are made (an "Offer"); (2) the shareholders of the Company approve an agreement to merge or consolidate the Company with or into another corporation or to sell, lease or otherwise dispose of all or substantially all of its assets, or adopt a plan of liquidation; (3) any corporation, person or group (within the meaning of Sections 13(d) and 14(d)(2) of the 1934 Act) becomes the beneficial owner (within the meaning of Rule l3d-3 under the 1934 Act) becomes the beneficial owner (within the meaning of Rule 13d-3 under the 1934 Act) of voting securities of the Company representing more than 25% of the total number of votes eligible to be cast at any election of directors of the Company; or (4) those persons who constitute the Directors at the beginning of any two-year period cease to constitute a majority of the Board at any time during such two-year period; however, that in no event shall a Change of Control or Change of Control Date (as provided defined below) be deemed to have occurred if the Board, by written action taken prior to, and with respect to, an event otherwise constituting a Change of Control, determines in its discretion that such event shall not constitute a Change of Control for purposes of the Plan and the Agreements relating to LSARs and Restricted Stock LSARs (defined below) entered into in connection with the Plan. As used herein, and subject to the proviso contained in the preceding sentence, the term "Change of Control Date" means the first purchase of voting securities of the Company pursuant to 12 an Offer, the date of any shareholder approval or adoption of an agreement or plan referred to in Section 8.D.(2), the date on which the event described in Section 8.D.(3) occurs, or the date on which the change in constituency of the Board, described in Section 8.D.(4) occurs, as the case may be. E. The term "Offer Price Per Share" as used in this Section 8 shall mean, with respect to the exercise of any LSAR which becomes execrable by reason of the occurrence of an Offer, the greater of (i) the highest price per share of Common Stock paid in the Offer or (ii) the highest Market Value Per Share of Common Stock during such sixty-day period. Any securities or property which are part or all of the consideration paid for shares of Common Stock in the Offer shall be valued in determining the Offer Price Per Share at the higher of (A) the valuation placed on such securities or property by the corporation, person or other entity making such Offer and (B) the valuation placed on such securities or property by the Committee. F. The term "Offer Spread" as used in this Section 8 shall mean an amount equal to the product computed by multiplying (i) the excess of (A) the Offer Price Per Share over (B) the Exercise Price per share of Common Stock at which the Related Option is exercisable, by (ii) the number of shares of Common Stock with respect to which such LSAR is being exercised. G. The term "Merger Price Per Share" as used in this Section 8 shall mean, with respect to the exercise of any LSAR which becomes exercisable by reason of shareholder approval of an agreement described in Section 8.D.(2), the greater of (i) the fixed or formula price for the acquisition or conversion of shares of Common Stock specified in such agreement if such fixed or formula price is determinable on the date on which such LSAR is exercised, and (ii) the highest Market Value Per Share of Common Stock during the sixty-day period ending on the date on which such LSAR is exercised. Any securities or property which are part or all of the consideration paid for shares of Common Stock pursuant to such agreement shall be valued in determining the Merger Price Per Share at the higher of (A) the valuation placed on such agreement and (B) the valuation placed on such securities or property by the Committee. H. The term "Merger Spread" as used in this Section 8 shall mean an amount equal to the product computed by multiplying (i) the excess of (A) the Merger price Per Share over (B) the Exercise Price per share of Common Stock at which the Related Option is exercisable, by (ii) the number of shares of Common Stock with respect to which such LSAR is being exercised. I. The term "Liquidation Price Per Share" as used in this Section 8 shall 13 mean, with respect to the exercise of any LSAR which becomes exercisable by reason of shareholder approval of a plan of liquidation described in Section 8.D.(2), the greater of (i) the highest amount paid or to be paid per share of Common Stock pursuant to the plan of liquidation as determined by the Board and (ii) the highest Market Value Per Share of Common Stock during the sixty-day period ending on the date on which such LSAR is exercised. Any securities or property which (A) are part of all the consideration paid for shares of Common Stock pursuant to such plan of liquidation or (B) are to be sold and the proceeds distributed in liquidation shall be valued in determining the Liquidation Price Per Share at the higher of (i) the valuation placed on such securities or property by the Company upon the distribution of such securities or property in accordance with the plan of liquidation, if known at the time of the exercise of such LSAR, and (ii) the valuation placed on such securities or property by the Committee. J. The term "Liquidation Spread" as used in this Section 8 shall mean an amount equal to the product computed by multiplying (i) the excess of (A) the Liquidation Price Per Share over (B) the Exercise Price per share of Common Stock at which the Related Option is exercisable by (ii) the number of shares of Common Stock with respect to which such LSAR is being exercised. K. The term "Acquisition Price Per Share" as used in this Section 8 shall mean, with respect to the exercise of any LSAR which becomes exercisable by reason of an acquisition of voting securities described in Section 8.D.(3), the greater of (i) the highest price per share of Common Stock paid by such corporation, person or group during the ninety-day period ending on the Change of Control Date as stated on the Schedule 13D, 14D-I or similar schedule (or amendment thereto) filed by such corporation, person or group, and (ii) the highest Market Value Per Share of Common Stock during the sixty-day period ending on the date the LSAR is exercised. L. The term "Acquisition Spread" as used in this Section 8 shall mean an amount equal to the product computed by multiplying (i) the excess of (A) the Acquisition Price Per Share over (B) the purchase price per share of Common Stock at which the Related Option is exercisable, by (ii) the number of shares of Common Stock with respect to which such LSAR is being exercised. M. The term "Other Price Per Share" as used in this Section 8 shall mean, with respect to the exercise of any LSAR by reason of a change in the constituency of the Board described in Section 8.D.(4), the highest Market Value Per Share of Common Stock during the sixty day period ending on the date the LSAR is exercised. 14 N. The term "Other Spread" as used in this Section 8 shall mean an amount equal to the product computed by multiplying (i) the excess of (A) the Other Price Per Share over (B) the exercise Price per share of Common Stock at which the Related Option is exercisable, by (ii) the number of shares of Common Stock with respect to which such LSAR is being exercised. O. A fight (referred to in the Plan as a "Restricted Stock LSAR") may be granted to the holder of any shares of Restricted Stock with respect to all or some of such shares. A Restricted Stock LSAR may be granted either at the time of the Award of the Restricted Stock or at any time thereafter during the term of any applicable restrictions- provided, no Award of a Restricted Stock LSAR may be made after termination of the Plan. Restricted Stock LSARs shall be evidenced by provisions in the Agreements relating to the Restricted Stock or an amendment thereto. A Restricted Stock LSAR may be exercised only during the period of seven months following a Change of Control Date. Each Restricted Stock LSAR granted under the Plan shall specify the number of shares of Restricted Stock that are subject to such Restricted Stock LSAR. Unless provided otherwise in the respective Agreement, the Restricted Stock LSAR may be exercised with respect to all shares or Restricted Stock whether or not the restrictions applicable to such shares have lapsed or the Conditions applicable to such shares have occurred or been satisfied. P. Upon the exercise of a Restricted Stock LSAR, the holder of the Restricted Stock will tender to the Company all shares of Restricted Stock as to which the Restricted Stock LSAR is being exercised and will receive in cash whichever of the following amounts is applicable: (i) in the case of an exercise of a Restricted Stock LSAR by reason of the occurrence of an Offer (as defined in Section 8.D.(1) hereof), an amount equal to the Offer Price Per Share (as defined Section 8.E. hereof), (ii) in the case of an exercise of a Restricted Stock LSAR by reason of an agreement described in Section 8.D.(2) hereof, an amount equal to the Merger Price Per Share (as defined in Section 8.G. hereof); (iii) in the case of an exercise of a Restricted Stock LSAR by reason of shareholder approval of a plan of liquidation described in Section 8.D.(2) hereof, an amount equal to the Liquidation Price Per Share (as defined in Section 8.I. hereof); (iv) in the case of an exercise of a Restricted Stock LSAR by reason of 15 an acquisition of Common Stock described in Section 8.D.(3) hereof, an amount equal to the Acquisition Price Per Share (as defined in Section 8.K. hereof); or (v) in the case of an exercise of a Restricted Stock LSAR by reason of a change in the constituency of the Board described in Section 8.D.(4) hereof, an amount equal to the Other Price Per Share (as defined in Section 8.M. hereof). 9. Recapitalization or Reorganization ---------------------------------- A. The existence of the Plan and the Awards granted hereunder shall not affect in any way the night or power of the Board or the shareholders of the company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company's capital structure or its business, any merger or consolidation of the Company, any issue of bonds, debentures, preferred or prior preference stocks ahead of or affecting Common Stock or the rights thereof, the dissolution or liquidation of the Company or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding. B. The shares with respect to which awards may be granted are shares of Common Stock as presently constituted. If, and whenever, prior to the termination of the Plan or the expiration of an outstanding Option, the Company shall effect a subdivision of shares of Common Stock or the payment of a stock dividend on Common Stock without receipt of consideration by the Company, the remaining shares of Common Stock available under the Plan and the number of shares of Common Stock with respect to which outstanding Options may thereafter be exercised shall be proportionately increased, and the Exercise Price under outstanding Options shall be proportionately reduced. If, and whenever, prior to the termination of the Plan or the expiration of an outstanding Option, the Company shall effect a consolidation of shares of Common Stock, the remaining shares of Common Stock available under the Plan and the number of shares of Common Stock with respect to which any outstanding Option may thereafter be exercised shall be proportionately reduced, and the Exercise Price under the outstanding Options shall be proportionately increased. C. Except as may otherwise be expressly provided in the Plan, the issuance by the Company of shares of stock of any class or securities convertible into shares of stock of any class, for cash, property, labor or services, upon direct sale, upon the exercise of rights or warrants to 16 subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, and in any case whether or not for fair value, convertible shall not affect, and no adjustments by reason thereof shall be made with respect to, the number of shares of Common Stock available under the Plan or subject to Options theretofore granted or the Exercise Price per share. D. If the Company effects a recapitalization or otherwise materially changes its capital structure (both of the foregoing are herein referred to as a "Fundamental Change"), then thereafter upon any exercise of an Option theretofore granted, the holder shall be entitled to purchase under such Option, in lieu of the number of shares of Common Stock that would have been received, the number and class of shares of stock and securities to which the holder would have been entitled pursuant to the terms of the Fundamental Change if, immediately prior to such Fundamental Change, the Optionee had been the holder of record of the number of shares of Common Stock. E. Any adjustment provided for above shall be subject to any required shareholder action. 10. Recipient's Agreement --------------------- If, at the time of the exercise of any Option or award of Restricted Stock, in the opinion of counsel for the Company, it is necessary or desirable, in order to comply with any then applicable laws or regulations relating to the sale of securities, for the individual exercising the Option or receiving the Restricted Stock to agree to hold any shares issued to the individual for investment and without intention to resell or distribute the same and for the individual to agree to dispose of such shares only in compliance with such laws and regulations, the individual will, upon the request of the company, execute and deliver to the Company a further agreement to such effect. 11. Withholding for Taxes --------------------- Any cash payment under the Plan shall be reduced by any amounts required to be withheld or paid with respect thereto under all present or future federal, state and local tax and other laws and regulations that may be in effect as of the date of each such payment ("Tax Amounts"). Any issuance of Common Stock pursuant to the exercise of an Option or other distribution of Common Stock under the Plan shall not be made until appropriate arrangements have been made for the payment of any amounts that may be 17 required to be withheld or paid with respect thereto. Such arrangements may, at the discretion of the Committee, include allowing the participate to tender to the Company shares of Common Stock owned by the participant, or to request the Company to withhold a portion of the shares of Common Stock being acquired pursuant to the exercise or otherwise distributed to the participant, which have a Market Value Per Share as of the date of such exercise, tender or withholding that is not greater than the sum of all Tax Amounts, together with payment of any remaining portion of all Tax Amounts in cash or by check payable and acceptable to the Company. Payment instruments will be received subject to collection. 12. Designation of Beneficiary -------------------------- Each individual to whom an Award has been made under this Plan may designate a beneficiary or beneficiaries (which beneficiary may be an entity other than a natural person) to receive any payment that under the terms of such Award may become payable on or after the individual's death. At any time, and from time to time, any such designation may be changed or cancelled by the individual without the consent of any such beneficiary. Any such designation, change or cancellation must be on a form provided for that purpose by the Committee and shall not be effective until received by the Committee. If no beneficiary has been named by a deceased participant, or the designated beneficiaries have predeceased the individual, the beneficiary shall be the individual's estate. If an individual designates more than one beneficiary, any payments under this Plan to such beneficiaries shall be made in equal shares unless the individual has designated otherwise, in which case the payments shall be made in the shares designated by the individual. 13. Miscellaneous ------------- A. No Employment Contract. Nothing contained in the Plan shall be construed as conferring upon any employee the right to continue in the employ of the Company or any Subsidiary. B. Employment with Subsidiaries. Employment by the Company for the purpose of this Plan shall be deemed to include employment by, and to continue during any period in which an employee is in the employment of, any Subsidiary; provided, that for purposes of determining employment with respect to ISOs, employment by the Company shall be deemed to include employment by, and to continue during any period in which an employee is in the employment of any Subsidiary. 18 C. No Rights as a Shareholder. A participant shall have no rights as a shareholder with respect to shares covered by such participant's Option or Restricted Stock award until the date of the issuance of shares to the employee pursuant thereto. No adjustment will be made for dividends or other distributions or rights for which the record date is prior to the date of such issuance. D. No Right to Corporate Assets. Nothing contained in the Plan shall be construed as giving any participant, such participant's beneficiaries or any other person any equity or other interest of any kind in any assets of the Company or any Subsidiary or creating a trust of any kind or a fiduciary relationship of any kind between the Company or a Subsidiary and any such person, except to the extent such person is a holder of shares of Common Stock issued pursuant to the Plan. E. No Restriction on Corporate Action. Nothing contained in the Plan shall be construed to prevent the Company or any Subsidiary from taking any corporate action that is deemed by the Company or such Subsidiary to be appropriate or in its best interest, whether or not such action would have an adverse effect on the Plan or any award made under the Plan. No participant, beneficiary or other person shall have any claim against the Company or any Subsidiary as a result of any such action. F. Non-assignability. Neither a participant nor a participant's beneficiary shall have the power or right to sell, exchange, pledge, transfer, assign or otherwise encumber or dispose of such participant's or beneficiary's interest arising under the Plan or in any Restricted Stock or Award received under the Plan, nor shall such interest be subject to seizure for the payment of a participant's or beneficiary's debts, judgments, alimony, or separate maintenance or be transferable by operation of law in the event of a participant's or beneficiary's bankruptcy or insolvency and to the extent any such interest arising under the Plan or Restricted Stock or Award received under the Plan is awarded to a spouse pursuant to any divorce proceeding, such interest shall be deemed to be terminated and forfeited notwithstanding any vesting provisions or other terms herein or in the Agreement evidencing such Award. G. Application of Funds. The proceeds received by the Company from the sale of shares of Common Stock pursuant to the Plan will be used for general corporate purposes. 19 H. Governing Law; Construction. All rights and obligations under the Plan shall be governed by, and the Plan shall be construed in accordance with, the laws of the State of Texas without regard to the principles of conflicts of laws. Titles and headings to Sections herein are for purposes of reference only, and shall in no way limit, define or otherwise affect the meaning or interpretation of any provisions of the Plan. I. Amendment and Termination. The Committee may from time to time and at any time alter, amend suspend, discontinue or terminate this Plan and any Awards hereunder provided, however, that no such action of the Committee may, without the approval of the shareholders of the Company, alter the provisions of the Plan so as to increase the maximum number of shares of Common Stock that may be subject to Awards and distributed in the payment of Awards and exercises under the Plan (except as provided in Section 8). For the purposes of awarding ISOs, the Plan shall terminate on December 31, 2000, and no ISOs shall be awarded after such date. J. Preemption by Applicable Laws and Regulations. Anything in the Plan or any Agreement to the contrary notwithstanding, if, at any time specified herein or therein for the making of any determination, the issuance or other distribution of shares of Common Stock or the payment of consideration to an employee as a result of the exercise of any LSAR, as the case may be, any law, regulation or requirement of any governmental authority having jurisdiction in the premises shall require either the Company or the individual (or the individual's beneficiary), as the case may be, to take any action in connection with any such determination, the shares then to be issued or distributed or such payment, the issuance or distribution of such shares or the making of such determination or payment, as the case may be, shall be deferred until such action shall have been taken. As amended effective as of September __, 1996. 20 EX-4 5 EXHIBIT 4 Exhibit 4 TESCORP, INC. 1993 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN By resolution of its Board of Directors approved as of June 23, 1993, Tescorp, Inc., a Texas corporation (the 'Corporation"), adopts the following Non-Employee Director Stock Option Plan (the "Plan"). Capitalized words and phrases used in the Plan have the meanings stated in Section 17 below. 1. PURPOSE. This Plan is designed to attract and retain highly qualified NonEmployee Directors and to motivate them to exert their best efforts for the Corporation and its Affiliates. 2. PERSONS ELIGIBLE. Each person who is a Non-Employee Director as of the date of the adoption of this Plan, and each person who shall be first elected to the Board during the term of this Plan and who shall be, as of the date of such election, a Non-Employee Director, shall be eligible to receive an Option, except that a Substantial Shareholder may not receive an Option unless, at the time the Option is granted, the exercise price equals at least 110% of the fair market value of the Stock subject to the Option, and the Option is not exercisable after five (5) years from the date granted. 3. TOTAL SHARES SUBJECT TO PLAN. Options may be granted for a total of 150,000 shares of Stock. The Corporation shall reserve sufficient shares to meet the Plan's requirements. Shares issued upon an Option exercise may be authorized and unissued shares, or shares held in the Corporation's treasury. If an outstanding Option expires or terminates, shares allocable to the unexercised portion of the Option may be optioned again under the Plan. 4. PLAN ADMINISTRATION. The Committee shall administer the Plan. The Committee will interpret and construe the Plan and the terms of any Option and will make all other decisions necessary or advisable for administering the Plan. 5. OPTION GRANTS. (a) Each person eligible to receive an Option pursuant to the terms of Section 2 hereinabove shall, automatically and without the exercise of discretion on the part of any person, receive as of the date of the adoption of this Plan, or if such person shall first be elected to the Board during the term of this Plan and shall be, on the date of such election, a Non-Employee Director, as of the date of such election, a single Option for the purchase of 8,333 shares of Stock. On the date that each Non-Employee Director shall have completed one full year of service as a Non-Employee Director, or, if such person has completed such term of service previous to the date of adoption of this Plan, on the date of such adoption, each such person shall receive, automatically and without the exercise of discretion on the part of any person, a second option for the purchase of an additional 8,333 shares of Stock, and on the date that each such Non-Employee Director shall have completed two full years of service as a Non-Employee Director, or, such person has completed such term or service previous to the date of adoption of this Plan, on the date of such adoption, each such person shall receive, automatically and without the exercise of discretion on the part of any person, a third Option for the purchase of an additional 8,334 shares of Stock, and thereafter, such Non-Employee Director shall not be eligible to receive any further or additional grants or awards of Options under this Plan, regardless of whether such Non-Employee Director shall exercise in whole or in part the Option or Options representing the original grant. (b) The Option price must equal the fair market value of the Stock at the time the Option is granted, as determined by the average closing price of the Stock for the seven trading days preceding the date of the grant on any exchange or dealer market that serves as the primary trading market for the Stock at such time. (c) An Option may not be granted after 10 years from the Effective Date. An Option may not be exercised after 10 years from the date the Option is granted. (d) Except as provided below, the night of the Optionee to purchase shares of Stock under each Option shall accrue and vest in three equal annual installments beginning on the first anniversary of the date of the grant of such Option. 6. NON-TRANSFERABILITY OF OPTION. An Option may not be transferred except by will or by the laws of descent and distribution. During an Optionee's lifetime, only the Optionee or his guardian or legal representative may exercise his or her Option. 7. EXERCISE AND PAYMENT. An Option may be exercised from time to time during the term of the Option as to any or all full shares which have vested under the Option, subject to compliance with the terms of the 2 agreement evidencing the Option. Exercise of an Option will not be effective until the Corporation has received written notice of the exercise, specifying the whole number of shares to be purchased, accompanied by payment in full of the aggregate price of the Stock purchased. Fractional shares will not be issued or sold. The purchase price of Stock for which an Option is exercised must be paid to the Corporation in full at the time of exercise. Payment must be in the form of cash or a certified or cashier's check. Within a reasonable time after payment is received, the Corporation shall forward to Optionee a certificate representing the Stock purchased. 8. EXERCISE IN THE EVENT OF TERMINATION. (a) If an Optionee ceases to be a Director of the Corporation for any reason other than death or disability, the Optionee may exercise the outstanding portion of his or her Option at any time within three months after such termination to the extent Optionee's right to exercise has accrued. Notwithstanding the prior if Optionee is removed from his position as a Director for dishonesty or other acts detrimental to the interests of the Corporation or an Affiliate, all Options granted to Optionee will automatically be void and nonexercisable immediately upon the occurrence of such termination. (b) If an Optionee ceases to be a Director of the Corporation because of death or because of a disability, the outstanding portion of his or her Option may be exercised at any time within one year after the date of such termination, to the extent the Optionee's right to exercise has accrued under this Plan. In the case of death, the executor or administrator of the Optionee's estate or any person who acquired the Option by bequest or inheritance may exercise it. (c) The exercise periods in paragraphs (a) and (b) are subject to the 10-year limitation of Section 5(c) and may not extend such limitation. 9. NO SHAREHOLDER RIGHTS. An Optionee will not have any rights as a shareholder regarding any Option shares before the date when the Corporation issues Optionee a certificate for such shares. No adjustment will be made for dividends or distributions or other rights for which the record date occurs before the certificate is issued. 10. NO EMPLOYMENT RIGHTS. Neither the Plan nor any Option confer upon an Optionee any right to continue as a Director of the Corporation, nor do they limit any right of the shareholders of the Corporation to remove a Director at any time. 3 11. ADJUSTMENT UPON CHANGE IN CAPITALIZATION. (a) In the event that the Corporation shall hereafter at any time change as a whole, by split-up, subdivision or combination in any manner or by the making of a stock dividend, the number of shares of Stock into a different number of shares of Stock, (i) both (A) the aggregate number of shares of Stock subject to this Plan as specified in Paragraph 3 hereinabove and (B) the number of shares of Stock which immediately prior to such change the holders of options shall have been entitled to purchase, shall be increased or decreased in direct proportion to the increase or decrease, respectively, in the number of shares of Stock outstanding immediately prior to such change, and (11) the Option Price per share applicable to such Option shall be increased or decreased as the case may be, in inverse proportion to such increase or decrease in the number of shares of Stock outstanding immediately prior to such change. (b) A dissolution or liquidation of the Corporation, a merger or consolidation in which the Corporation is not the surviving corporation, or a transaction in which another corporation becomes the owner of 100% or more of the total combined voting power of all classes of stock of the Corporation will cause every Option then outstanding to terminate, and in such event, the Optionee holding each then outstanding Option will have a right, exercisable within a period of 30 days immediately prior to the closing of such dissolution, liquidation, merger, consolidation, or transaction, to exercise such Option without regard to any limitation on exercise prior to the date contained in an option agreement, unless such Option has expired or been terminated pursuant to its terms. 12. DUTY TO FURNISH INFORMATION. Each Optionee must furnish to the Corporation all information requested by the Corporation to enable it to comply with any reporting or other requirement imposed upon the Corporation under any applicable statute or regulation. 13. COMPLIANCE WITH FEDERAL AND STATE SECURITIES LAW. An Option may not be exercised in whole or in part unless (i) a registration statement under the Securities Act is filed and effective for shares subject to the Option, and exercise of the Option and issuance of shares thereunder are qualified under any applicable state securities or Blue Sky laws; or (ii) exercise of the Option and issuance of shares thereunder without Securities Act registration or state law qualification is otherwise permissible, and the Corporation receives an opinion of counsel acceptable to the Corporation to that effect. A certificate for shares issued upon exercise of an Option which have not been registered under the Securities Act or qualified under applicable state securities or Blue Sky laws must bear the following legend: 4 "The Securities represented by this instrument have been acquired for investment and have not been registered under the federal Securities Act of 1933, as amended, or the securities laws of any state. Without such registration, such securities may not be sold, pledged, hypothecated or otherwise transferred, except upon delivery to the Corporation of an opinion of counsel satisfactory to the Corporation that registration is not required for such transfer or the submission to the Corporation of such other evidence as may be satisfactory to the Corporation to the effect that any such transfer shall not be in violation of the Securities Act of 1933, as amended, or applicable state securities laws or any rule or regulation promulgated thereunder." 14. AMENDMENT AND DISCONTINUANCE. (a) Subject to the restrictions of (b) and (c) below, the Board or the shareholders of the Corporation may amend, suspend, or discontinue the Plan at any time. (b) The Board may not increase the total number of shares reserved for Options under Section 3. Neither the Board nor the shareholders may allow an Option to be granted for a price less than the amount determined under Section 2 or 5(b), or deprive an Optionee of any rights under an existing Option. Neither the Board nor the shareholders may amend the provisions of Section 5 more than once every six months, other than to comport with changes in the Internal Revenue Code, the Employee Retirement Income Security Act, or the rules thereunder. (c) The Corporation's shareholders must approve any amendment which materially increases benefits under the Plan, increases aggregate shares of Stock subject to the Plan, materially modifies the eligibility requirements for Plan participation, or gives any person discretion with respect to the issuance of Options. 15. APPROVAL. Options may be granted at any time on or after the Effective Date. No Option may be exercised until the Plan is approved by shareholders of the Corporation holding a majority of shares present and voting at the next meeting of shareholders following the Effective Date. The Plan will cease, and all Options will be invalid, if such Shareholder approval does not occur within 12 months of the Effective Date. 16. OPTION AGREEMENT. Each Option must be evidenced by a written agreement, substantially in the form attached hereto as Exhibit A, signed by the Optionee and by an authorized officer of the Corporation. Terms 5 of the agreement must conform to the Plan, state the Option price and specify the period for which the Option is granted. The agreement may contain such other terms consistent with the provisions of the Plan as the Committee may deem appropriate. 17. DEFINITIONS AND OPERATING RULES. As used in this Plan, the words and phrases below have the following meanings, and the following rules apply: (a) AFFILIATE - a Parent or Subsidiary. (b) BOARD - the Board of Directors of the Corporation. (c) COMMITTEE - The Committee appointed by the Board. At such time, if any, as the Corporation has registered any equity security under Section 12 of the Securities Exchange Act, all members of the committee must thereafter be Disinterested Persons. The board may fill vacancies on the Committee and from time to time may remove members from or add members to the committee. The committee will select one of its members as Chairman and will hold meetings when and where it determines. -A majority of the Committee members will constitute a quorum for a Committee meeting. A majority vote of the Committee at which a quorum is present, or decisions reduced to writing and signed by a majority of the committee membership, will be valid acts of the Committee. No Committee member will be liable for any action or decision made in good faith concerning the Plan or any Option. (d) CORPORATION - Tescorp, Inc., a Texas corporation. (e) DISINTERESTED PERSON - a person who is not eligible at the time he or she exercises discretion in administering the Plan, and has not at any time within the previous year been eligible to selection as a person who may receive Options under the Plan or under any other plan of the Corporation or Affiliate which entitles participants therein to acquire stock, stock options or stock appreciation rights of the Corporation or an Affiliate. This term will be construed in accordance with the definition of Disinterested Person stated in Rule l6b - 3(c)(3) issued by the Securities and Exchange Commission. (f) EFFECTIVE DATE - the date as of which the shareholders approve the Plan which shall be the date on which it takes full force and effect. (g) EMPLOYEE - any person employed by the Corporation or an Affiliate of the Corporation during a calendar year in which the Committee 6 grants Options. (h) NON-EMPLOYEE DIRECTOR - any member of the Board who is not also an Employee of the Corporation apart from such Board Membership. (i) OPTION - an Option granted under this Plan. (j) OPTIONEE - the holder of an unexpired Option which has not been exercised in full. This term includes the executor or administrator of the holder's estate, or any person who inherited all or part of the Option, and who may validly exercise the Option under Section 8(b) of the Plan. (k) PARENT - any corporation which qualifies at the time of an Option grant as a parent in an unbroken chain of corporations ending with the Corporation, determined by using the definition of "parent corporation" contained in Section 425(e) of the Code or any substantially similar provision later enacted. (l) PLAN - the Tescorp, Inc. 1993 Non-Employee Directors Stock Option Plan, as stated in this document and including any subsequent amendments approved by the Board or, when required by law or under the terms of this Plan, by the shareholders of the Corporation. (m) SECURITIES ACT - the federal Securities Act of 1933, as amended. (n) SECURITIES EXCHANGE ACT - the federal Securities Exchange Act of 1934, as amended. (o) STOCK - shares of common stock, $0.02 par value per share, issued by the Corporation or any other class of common stock of the corporation hereafter issued in exchange or in substitution thereof which has dividend and voting rights no less favorable than the voting power and dividend rights or presently outstanding Common Stock of the Corporation, provided all shares reserved for sale under the Plan will be free of preemptive rights of shareholders of the Corporation. (p) SUBSIDIARY - any corporation which qualifies at the time of an Option grant as a subsidiary in an unbroken chain of corporations beginning with the Corporation, determined by using the definition of "subsidiary corporation" contained in Section 425(f) of the Code or any substantially similar provision later enacted. (q) SUBSTANTIAL SHAREHOLDER - a director who owns more than 7 10% of the total combined voting power of all classes of stock of the Corporation and Affiliates. APPROVED by the Board of Directors by duly adopted resolution as of June 23, 1993. RATIFIED AND APPROVED by the Shareholders of the Corporation by duly adopted resolution ____________, 1997. _________________________________ Secretary 8 THE SECURITIES REPRESENTED BY THIS DOCUMENT HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE. WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED, EXCEPT UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER OR THE SUBMISSION TO THE COMPANY OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED THEREUNDER. NON-TRANSFERABLE STOCK OPTION FOR THE PURCHASE OF COMMON STOCK OF TESCORP, INC. This is to certify that, for value received, ______________ ("Optionee") is entitled, subject to the terms and conditions hereinafter set forth, to purchase up to shares of the Common Stock, $0.02 par value ("Common Stock"), of Tescorp, Inc., a Texas corporation (the "Corporation"), from the Corporation at the purchase price of ______________ Dollars ($____) per share, and to receive a certificate or certificates for the shares of Common Stock so purchased, upon delivery for appropriate endorsement of this Option accompanied by (i) payment of purchase price the for each share purchased either in cash or by certified or cashier's check, payable to the order of the Corporation and (ii) an opinion of counsel acceptable to the Corporation, or such other evidence as may be satisfactory to the Company, to the effect that registration is not required under the Securities Act of 1933, as amended (the "1993 Act") or 9 applicable state securities laws or any rules or regulations promulgated thereunder. Except as otherwise provided below, the right to purchase shares under this Option shall be exercisable in whole or in part from the date hereof until [date 10 years from the date of grant], provided that any and all rights to purchase shares hereunder shall terminate on the date which is three (3) months following the date that the holder hereof ceases, for whatever reason (except as set forth hereinafter), to be a director of the Corporation, and provided further that any and all rights to purchase shares hereunder shall terminate on the date that the holder hereof is removed from his position as a director for dishonesty or other acts detrimental to the interests of the Corporation or an affiliate of the Corporation. The right of the Optionee to purchase shares hereunder shall accrue and vest in three equal annual installments beginning at the grant of such Option. During the lifetime of the Optionee, this Option shall be exercisable during its term and to the extent specified above, only by the Optionee. Provided, however, that in the event of the death of the holder hereof, this Option may be exercised in whole or in part by the executor of administrator of the Optionee's estate or by any person who acquires the option by bequest or inheritance within a period not to exceed one (1) year following such holder's death to the extent only of the number of such shares the holder was entitled 10 to purchase on the date of such holder's death. If the Corporation shall (i) merge or consolidate with another corporation, (ii) sell all, or substantially all of its assets, (iii) liquidate or dissolve, or (iv) register the transfer of one hundred percent (100%) of its outstanding Common Stock to persons who were not owners immediately before such transfer, then this Option shall terminate on the date and immediately prior to the time such merger, consolidation, sale or transfer becomes effective or is consummated, provided that in such event the holder of the Option shall have the right immediately prior to the effectiveness or consummation of such merger, consolidation, transfer or sale, to exercise in whole or in part such Option without regard to any limitation on exercise prior to such date contained in this Option, unless this Option has otherwise expired or been terminated pursuant to its terms. The exercise of this Option in part shall be indicated by endorsement hereon by the Corporation, showing the number of shares with respect to which it was exercised. This Option may not be transferred in whole or in part except by will or the operation of the laws of descent and distribution upon the death of the Optionee. During the Optionee's lifetime, only the Optionee or his guardian or legal representative may exercise the Option. The Corporation agrees at all times to reserve or hold available a 11 sufficient number of shares of Common Stock to cover the number of shares issuable upon the exercise of this Option. This Option shall not entitle the holder hereof to any voting rights as a shareholder of the Corporation, or to any rights whatsoever, except the rights herein expressed, and no dividends (other than share dividends as provided elsewhere herein) shall be payable or accrue in respect to this Option or the interest represented hereby or the shares purchasable hereunder until or unless, and except to the extent that this Option shall be exercised. Subject to any required action by the shareholders of the Corporation, the number of shares of Common Stock covered by this Option, and the price per share thereof, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock of the Corporation resulting from a stock split (whether by subdivision or consolidation of shares) or payment of a stock dividend on the Common Stock. This Option is granted on the condition that the purchases of shares hereunder shall be held for investment purposes without a view towards resale, and such stock may not be resold or distributed unless: (i) the stock issued pursuant to the exercise of this Option is registered under the Securities Act of 1933, as amended, and any applicable state securities or Blue Sky law; or (ii) a resale [of] such stock without such registration under the Securities Act of 1933 and any applicable state securities or Blue Sky laws would otherwise be 12 permissible, and the Corporation receives an opinion of counsel acceptable to the Corporation to the effect that registration is not required under the Securities Act of 1933 or any other applicable law, regulation or rule of any governmental agency. Any shares issues upon the exercise of this Option not registered under the Securities Act of 1933, as amended, shall bear the following legend: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES' LAWS OF ANY STATE. WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED, EXCEPT UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER OR THE SUBMISSION TO THE COMPANY OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY TO THE COMPANY TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED THEREUNDER. GRANTED on ____________, 199__. TESCORP, INC. By:______________________________ President 13 EX-5 6 EXHIBIT 5 EXHIBIT 5 This Programming Purchase Agreement (the "Agreement") is dated December 5, 1997, by and between Tescorp, Inc. (the "Purchaser") and Supercanal Holding S.A. (the "Seller"). Intending to be legally bound by the terms and conditions hereof, the parties agree as follows: 1. Rights. a. Right to Purchase Programming. Purchaser shall have the nonexclusive right, but not the obligation, to purchase from Seller any television programming which Seller has the right to sell to Purchaser and Purchaser desires to purchase. b. Consideration. Purchaser's right to enter into this Programming Agreement with Seller is given in exchange for Purchaser's agreement to execute that certain Stock Purchase and Merger Agreement by and between Purchaser and Tescorp Acquisition Corporation, a wholly owned subsidiary of Seller. In addition to such consideration, Purchaser shall convey to Seller the following consideration in exchange for the programming it purchases from Seller: i. An amount equal to Seller's actual cost of the programming (not including internal overhead or similar costs), an estimate of which shall be listed by Seller in Exhibit "A" hereto on a per subscriber basis. ii. The right for Seller to include the total number of Purchaser's subscribers in Seller's subscription base for the purpose of negotiating contracts with individual programmers. c. No Obligation to Purchase. Purchaser shall have no obligation to purchase any programming from Seller. Purchaser shall have no obligation to exclusively purchase its programming from Seller, but shall have the right to enter into and maintain contracts to purchase programming from suppliers other than Purchaser. Purchaser shall have the right, in its sole discretion, to terminate its obligation to purchase programming from Seller under this Agreement as follows: i. In the case of individual programs, if Purchaser is able to independently purchase comparable programming at a lower cost than Seller's, provided that Seller shall have the right, but not the obligation, to continue to sell such individual programs to Purchaser at such lower cost. ii.In the case of all programming, if the total of (a) Seller's cost; plus (b) Purchaser's continued programming costs from other sources; plus (c) Purchaser's cost for substitute programming for Seller's programs which Purchaser is not able to distribute to its subscribers exceeds Purchaser's existing cost of programming. 2. Delivery and Distribution of Seller's Services. Seller shall deliver all programming to Purchaser in a manner consistent with industry standards as they currently exist in Argentina, and on a best efforts basis such that the programming is ready for distribution when it is received by Purchaser. 3. Representations and Warranties; Indemnification. a. Seller hereby represents and warrants that it has the right, power and authority to enter into and perform this Agreement and has obtained the appropriate and necessary authorizations, licenses and permissions from any and all third parties and governmental agencies or authorities that may be required of Purchaser and/or Seller for the license, delivery and transmission of Seller's programming in Purchaser's transmission areas. b. Purchaser and Seller shall each indemnify and forever hold harmless the other, the other's affiliated companies and their respective officers, directors, employees and agents from all liabilities, claims, costs, damages and expenses (including, without limitation, reasonable counsel fees of counsel of the other party's choice) arising out of any breach or claimed breach of any representation or any of its obligations pursuant to this Agreement. c. Seller shall indemnify Purchaser against any and all claims, damages, liabilities, costs and expenses arising out of the distribution, pursuant to this Agreement, of Seller's programming to the extent that such claims, damages, liabilities, costs and expenses are (i) based upon alleged libel, slander, defamation, invasion of the right of privacy, or violation or infringement of copyright or literary or dramatic rights arising out of the content of Seller's programming (ii) based upon the distribution of the Seller's programming as furnished by Seller without deletions by Purchaser; and (iii) not based upon any material added by Purchaser to the Seller's programming. d. Each party shall so indemnify the other only if such other party gives the indemnifying party prompt notice of any claim or litigation to which its indemnity applies; it being agreed that the indemnifying party shall have the right to assume the defense of any or all claims or litigation to which its indemnity applies and that the indemnified party will cooperate fully with the indemnifying party in such defense and in the settlement of such claim or litigation. e. Except as herein provided to the contrary, neither Purchaser nor Seller shall have any rights against the other party hereto for claims by third persons or for the nonoperation of facilities or the nonfurnishing of Sellers programming services if such nonoperation or nonfurnishing is due to failure of equipment, action or claims by any third person, labor dispute or any cause beyond such party's reasonable control. 4. General. a. Term. This Programming Agreement shall commence as of the date hereof and shall be in effect for a period of ten years; provided, however, either party may extend this Agreement for successive one year terms by providing the other party with written notice not later than one (1) month prior to the termination hereof. b. Confidentiality. The terms and conditions, other than the existence and duration, of this Agreement shall be kept confidential by the parties hereto and shall not be disclosed by either party to any third party except as may be required by any applicable laws, regulations, court order or governmental agency of competent jurisdiction, and except to a party's accountants, auditors, and legal counsel, each of whom must first agree to be bound by this paragraph. c. Severability. The invalidity under applicable law of any provision of this Agreement shall not affect the validity of any other provision of this Agreement, and in the event that any provision hereof is determined to be invalid or otherwise illegal, this Agreement shall remain effective and shall be construed in accordance with its terms as if the invalid or illegal provision were not contained herein. d. Applicable Law. Regardless of the place of execution hereof, this Agreement, all amendments hereto, and any and all issues or controversies arising herefrom or related hereto, shall be governed by and construed exclusively in accordance with the laws and decisions of the State of New York, the United States, without giving effect to its conflict of laws principles. Seller hereby consents to personal jurisdiction in and service of process by any competent state or federal court in the State of New York. Additionally, the parties hereto agree that the State of New York shall be the exclusive forum and situs for the resolution of any and all disputes, controversies or matters arising herefrom or related hereto. Seller agrees that service of process by mail shall be effective service of same and such service shall have the same effect as personal service within the State of New York and result in jurisdiction over Seller in the appropriate forum in the State of New York. e. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the purchase of Seller's programming by Purchaser and supersedes all prior or contemporaneous written or oral agreements and representations between the parties with respect thereto. This Agreement may not be amended, modified or altered in any manner, unless such amendment, modification or alteration is in writing and is signed by duly authorized representatives of the parties. This Agreement is enforceable by its own terms. f. No Joint Venture or Agency Relationship. Nothing herein shall be deemed to create any joint venture, partnership or agency relationship between the parties, and neither party is authorized to or shall act toward third parties or the public in any manner which would indicate any such relationship with the other. g. Waiver. A waiver by either party of any of the terms or conditions of this Agreement in any instance shall not be deemed or construed to be a waiver of such term or condition for the future, or of any subsequent breach thereof. All remedies and rights contained in the Agreement shall be cumulative and none of them shall be in limitation of any other remedy or right of either party. IN WITNESS WHEREOF, the parties hereto have caused their duly authorized representatives to execute the Agreement. Supercanal Holding S.A. Tescorp, Inc. By: By: --------------------- --------------------- Title: Title: --------------------- ------------------------ EXHIBIT "A" EX-6 7 EXHIBIT 6 [Letterhead] December 8, 1997 Board of Directors Tescorp, Inc. 327 Congress Avenue, Suite 200 Austin, Texas 78701 Members of the Board: We understand that Tescorp Acquisition Corporation ("Acquisition"), a wholly owned subsidiary of Supercanal Holding S.A. and Tescorp, Inc. ("Tescorp" or the "Company") have entered into an Stock Purchase and Merger Agreement dated as of sEptember 16, 1997 (the "Agreement") and subsequently amended as of December 5, 1997 (the "Amended Agreement") regarding the proposed purchase of the Company in cash, by Acquisition (the "Proposed Acquisition"). The Amended Agreement provides that, following the purchase of 6,006,006 shares of Tescorp Common Stock for a total consideration of $20,000,000, Acquisition will offer to purchase all the outstanding Tescorp Common Stock for a per share amount equal to $144.00 in cash, plus an amount equal to accrued and unpaid dividends. The terms and conditions of the Proposed Acquisition are set forth in more detail in the Amended Agreement. We have acted as financial advisor to the company in connection with its review of the strategic alternatives for the Company and with the negotiation of the Proposed Acquisition, and have been requested by the Company to render our opinion with respect to the fairness, from a financial point of view to the Company's stockholders, of the consideration to be offered to such stockholders in the Proposed Acquisition. We have not been requested to opine as to, and our opinion does not in any manner address, the Company's underlying business decision to proceed with or effect the Proposed Acquisition. In arriving at its opinion, we reviewed and analyzed, among other things, the following: (i) the Agreement and the Amended Agreement; (ii) publicly available information concerning Tescorp which we believed to be relevant to its inquiry; (iii) financial and operating information with respect to the business, operations and prospects of Tescorp furnished to us by Tescorp; MEMBER OF THE NEW YORK STOCK EXCHANGE AND OTHER PRINCIPAL EXCHANGES Tescorp, Inc. Page Two (iv) trading history of Tescorp's Common Stock up to September 15, 1997 (the last trading day prior to the September 16, 1997 Agreement); (v) a comparison of the historical financial results and present financial condition of Tescorp with those of other publicly traded companies which we deemed relevant; and (vi) a comparison of the financial terms of the Proposed Acquisition with the terms of certain other recent transactions which we deemed relevant. In addition, we had discussions with the management of Tescorp concerning the Company's business, operations, assets, financial condition and prospects, and undertook such other studies, analyses and investigations as we deemed appropriate for the purposes of the opinion expressed herein. In connection with our review, we assumed and relied upon the accuracy and completeness of the financial and other information used by it in arriving at our opinion without independent verification and further relied upon the assurances of management of Tescorp that they were not aware of any facts that would make such information inaccurate. With respect to the financial and operating information relating to the business, operations and prospects of prepared on a basis reflecting the then best currently available estimates and judgments of the management of Tescorp. In arriving at our opinion, we did not make nor obtain any evaluations or appraisals of the assets or liabilities of Tescorp. Our opinion is necessarily based upon market, economic and other conditions as they existed on, and could be evaluated as of, the date of this letter. We have acted as financial advisor to the Company in connection with the Proposed Acquisition and will receive a fee for our services, a portion of which is contingent upon the consummation of the Proposed Acquisition. In addition, the Company has agreed to indemnify us for certain liabilities arising out of the rendering of this opinion. We have performed various investment banking services for Tescorp in the past and have received fees for such services. In the ordinary course of our business, we actively trade in the equity securities of the Company for our own account and for the accounts of our customers and, accordingly, may at any time hold a long or short position in such securities. In addition, certain of our affiliated funds under management hold long positions in the securities of the Company. Tescorp, Inc. Page Three Based upon and subject to the foregoing, we are of the opinion as of the date hereof that, from a financial point of view, the consideration to be offered to the Company's stockholders in the Proposed Acquisition is fair to such stockholders. This opinion is solely for the use and benefit of the Board of Directors of the Company and shall not be disclosed publicly or made available to, or relied upon by, any third party without our prior approval. This opinion is not intended to be and does not constitute a recommendation to any stockholder as to how such stockholder should vote with respect to the Proposed Acquisition. Very truly yours, Arnhold and S. Bleichroeder, Inc. EX-7 8 EXH. 7-DEAR SHAREHOLDER TESCORP, INC. December 10, 1997 Dear Shareholder: On behalf of the Board of Directors of Tescorp, Inc. (the "Company"), we are pleased to inform you that the Company has entered into an Amended Stock Purchase Agreement, dated as of November 26, 1997 (the "Merger Agreement"), with Tescorp Aquisition Corporation ("Acquisition"), a wholly-owned subsidiary of Supercanal Holding S.A. ("Supercanal"), pursuant to which, on December 8, 1997, Acquisition commenced a cash tender offer (the "Offer") to purchase (i) all outstanding shares of the Company's Common Stock (the "Common Stock") for $4.50 per share and (ii) all outstanding shares of the Company's Series 1995 8% Convertible Preferred Stock (the "8% Preferred Stock") for $144 plus accrued and unpaid dividends per share (a share of either class of stock is a "Share"). Under the Merger Agreement, assuming the Offer is successful, it will be followed by a merger (the "Merger") in which (i) any remaining shares of Common Stock not tendered pursuant to the Offer will be converted into the right to receive a cash amount of $4.50 per share, without interest and (ii) any remaining shares of 8% Preferred Stock will be converted into the right to receive a cash amount of $144 plus accrued and unpaid dividends per share, without interest (except any shares as to which the holder has properly exercised dissenters' rights of appraisal). YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE OFFER AND MERGER AND THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. In arriving at this recommendation, the Board of Directors gave careful consideration to the factors described in the attached Schedule 14D-9 (without the bulky exhibits), including, among other things, the opinion of Arnhold and S. Bleichroeder, Inc., the Company's financial advisor, that the consideration to be received by the holders of Shares in the Offer and Merger is fair to such holders from a financial point of view. We urge you to read the information contained in our Schedule 14D-9, as well as the materials provided to you by Aquisition and Supercanal, carefully in making your decision with respect to tendering your Shares pursuant to the Offer. On behalf of the Board of Directors, /s/ Jack S. Gray, Jr. Jack S. Gray, Jr. DIRECTOR, PRESIDENT AND CHIEF OPERATING OFFICER 327 Congress Avenue, Suite 200, Austin, Texas 78701, (512)476-2995, Fax (512)474-1610 -----END PRIVACY-ENHANCED MESSAGE-----