-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, e9CEvajfGwB+EUalt2vXpdZqKJDM8LhlrULa8AG/zhRaL+pvDJKXsYKhiT0PnPaD NwdFv5dvlqPOzN3d2ywtig== 0000950134-95-000781.txt : 19950421 0000950134-95-000781.hdr.sgml : 19950421 ACCESSION NUMBER: 0000950134-95-000781 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950419 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19950420 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TELE COMMUNICATIONS INC /CO/ CENTRAL INDEX KEY: 0000925692 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 841260157 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-20421 FILM NUMBER: 95529987 BUSINESS ADDRESS: STREET 1: 5619 DTC PARKWAY CITY: ENGLEWOOD STATE: CO ZIP: 80111 BUSINESS PHONE: 3032675500 MAIL ADDRESS: STREET 1: 5619 DTC PARKWAY CITY: ENGLEWOOD STATE: CO ZIP: 90111 FORMER COMPANY: FORMER CONFORMED NAME: TCI LIBERTY HOLDING CO DATE OF NAME CHANGE: 19940620 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TCI COMMUNICATIONS INC CENTRAL INDEX KEY: 0000096903 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 840588868 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-05550 FILM NUMBER: 95529988 BUSINESS ADDRESS: STREET 1: TERRACE TOWER II STREET 2: 5619 DTC PKWY CITY: ENGLEWOOD STATE: CO ZIP: 80111 BUSINESS PHONE: 3032675500 MAIL ADDRESS: STREET 1: TERRACE TOWER II STREET 2: 5619 DTC PKWY CITY: ENGLEWOOD STATE: CO ZIP: 80111 FORMER COMPANY: FORMER CONFORMED NAME: TELE COMMUNICATIONS INC DATE OF NAME CHANGE: 19920703 8-K 1 FORM 8-K DATED 4/20/95 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: April 20, 1995 Date of Earliest Event Reported: December 6, 1994 TELE-COMMUNICATIONS, INC. AND TCI COMMUNICATIONS, INC. ---------------------------------------------------------- (Exact name of Registrants as specified in their charters) State of Delaware ---------------------------------------------- (State or other jurisdiction of incorporation) 0-20421 and 0-5550 84-1260157 and 84-0588868 - ------------------------- ------------------------------------- (Commission File Numbers) (I.R.S. Employer Identification Nos.) 5619 DTC Parkway Englewood, Colorado 80111 - ---------------------------------------- --------------------------- (Address of principal executive offices) (Zip Code) Registrants' telephone number, including area code: (303) 267-5500 2 Item 5. Other Events. On December 6, 1994, the Company entered into a Stock Purchase Agreement (the "Cablevision Purchase Agreement") with a shareholder group headed by Eduardo Eurnekian (the "Shareholders") to acquire controlling interests in Cablevision S.A., Televisora Belgrano S.A., Construred S.A. and Univent's S.A., four affiliated companies owned by the Shareholders and engaged in the cable television business in the Greater Buenos Aires area (collectively "Cablevision"). Upon execution of the Cablevision Purchase Agreement, the Company paid the Shareholders $20 million and the Shareholders placed 51% of the outstanding stock of Cablevision S.A. into an escrow account. Upon consummation of the transaction, the $20 million will be applied toward the ultimate purchase price and the escrowed stock will be transferred to the Company. If the transaction is not consummated for certain enumerated reasons, the Shareholders are contractually obligated to return the $20 million to the Company and the Cablevision S.A. stock will be released from escrow. On March 28, 1995, the Cablevision Purchase Agreement was amended to provide for the acquisition of a 51% ownership interest in Cablevision for an estimated purchase price of approximately $315 million. The purchase price will be paid with cash consideration of approximately $216 million (including the initial $20 million) and the Company's issuance of approximately $99 million in secured, negotiable promissory notes payable to the Shareholders (the "Notes"). The purchase price is subject to adjustment based on the actual number of Cablevision equivalent basic subscribers and Cablevision liabilities as of the month-end prior to closing. The Notes will be secured by the Company's pledge of the stock representing its 51% interest in Cablevision. The Notes will bear interest at variable rates and are scheduled to be repaid in 20 monthly installments beginning in the fourth month following the month of acquisition. In addition, the Company has an option during the two-year period following the acquisition date to increase its ownership interest to 80% at a cost per subscriber similar to the initial purchase price adjusted for certain fluctuations in applicable foreign currency exchange rates. Consummation of the Cablevision acquisition is subject to regulatory approvals and other conditions. Accordingly, there is no assurance that such acquisition will be consummated. 3 ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial Statements Cablevision (A Combination of Certain Cable Television Assets of Cablevision S.A., Televisora Belgrano S.A., Construred S.A. and Univent's S.A., as defined): Independent Auditors' Report Combined Balance Sheets, December 31, 1994 and 1993 Combined Statements of Operations and Deficit, Years ended December 31, 1994, 1993 and 1992 Combined Statements of Cash Flows, Years ended December 31, 1994, 1993 and 1992 Notes to Combined Financial Statements, December 31, 1994 and 1993 (b) Pro Forma Financial Information TCI Communications, Inc. and Subsidiaries: Condensed Pro Forma Combined Balance Sheet, December 31, 1994 (unaudited) Condensed Pro Forma Combined Statement of Operations, Year ended December 31, 1994 (unaudited) Notes to Condensed Pro Forma Combined Financial Statements, December 31, 1994 (unaudited) Tele-Communications, Inc. and Subsidiaries: Condensed Pro Forma Combined Balance Sheet, December 31, 1994 (unaudited) Condensed Pro Forma Combined Statement of Operation, Year ended December 31, 1994 (unaudited) Notes to Condensed Pro Forma Combined Financial Statements, December 31, 1994 (unaudited) (c) Exhibits (2.1) Stock Purchase Agreement, dated as of December 6, 1994, by and among Eduardo Eurnekian, stockholders of shares of the Common Stock of Cablevision S.A., Televisora Belgrano S.A., Construred S.A., Univent's S.A., and TCI International Holdings, Inc. (2.2) Amendment to Stock Purchase Agreement executed on December 6, 1994. (10) Stockholders Agreement, dated December 6, 1994, between Eduardo Eurnekian and TCI International Holdings, Inc. _________________________ 4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned hereunto duly authorized. Date: April 20, 1995 TELE-COMMUNICATIONS, INC. (Registrant) By:/s/ STEPHEN M. BRETT -------------------------------- Stephen M. Brett Executive Vice President and Secretary TCI COMMUNICATIONS, INC. (Registrant) By:/s/ STEPHEN M. BRETT -------------------------------- Stephen M. Brett Senior Vice President and General Counsel 5 -------------------------------------- CABLEVISION (A COMBINATION OF CERTAIN CABLE TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A. AS DEFINED IN NOTE 1) COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1994 AND 1993 (WITH INDEPENDENT AUDITORS' REPORT THEREON) 6 INDEPENDENT AUDITORS' REPORT THE BOARD OF DIRECTORS AND SHAREHOLDERS OF TCI INTERNATIONAL HOLDINGS, INC.: We have audited the accompanying combined balance sheets of Cablevision (A Combination of certain cable television assets of Cablevision S.A., Televisora Belgrano S.A., Construred S.A. and Univent's S.A., as defined in Note 1) as of December 31, 1994 and 1993, and the related combined statements of operations and deficit and cash flows for each of the years in the three-year period ended December 31, 1994. These combined financial statements are the responsibility of the Companies' management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with United States generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements present fairly, in all material respects, the financial position of Cablevision as of December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1994 in conformity with United States generally accepted accounting principles. KPMG Finsterbusch Pickenhavn Sibille Jose Alberto Schuster Partner March 24, 1995 Buenos Aires, Argentina 7 CABLEVISION (A COMBINATION OF CERTAIN CABLE TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A. AS DEFINED IN NOTE 1) COMBINED BALANCE SHEETS DECEMBER 31, 1994 AND 1993 IN THOUSANDS OF ARGENTINE PESOS
1994 1993 ------ ------ ASSETS ------ Cash $ 6,650 316 Accounts receivable (note 4) 3,217 2,175 Property and equipment (note 5): Cable distribution systems 35,029 16,684 Support equipment and buildings 8,731 5,561 Other 427 379 ------ ------ 44,187 22,624 Less accumulated depreciation (14,321) (8,075) ------ ------ 29,866 14,549 Other assets 310 57 ------ ------ $ 40,043 17,097 ====== ====== LIABILITIES AND COMBINED DEFICIT -------------------------------- Cash overdraft $ 16 485 Accounts payable (note 6) 15,534 12,379 Other accrued liabilities (note 7) 16,255 12,786 Bank debt (note 8) 44,179 500 Capital lease obligations (note 5) 1,634 - Deferred income taxes (note 10) 6,482 1,505 ------ ------ Total liabilities 84,100 27,655 ------ ------ Combined deficit (44,057) (10,558) ------ ------ Commitments and contingencies (note 11 ) $ 40,043 17,097 ====== ======
See accompanying notes to combined financial statements. 8 CABLEVISION (A COMBINATION OF CERTAIN CABLE TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A. AS DEFINED IN NOTE 1) COMBINED STATEMENTS OF OPERATIONS AND DEFICIT YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 IN THOUSANDS OF ARGENTINE PESOS
1994 1993 1992 ------ ------ ----- Revenue $ 138,685 68,695 39,492 Operating costs and expenses: Operating: Charges from affiliate (note 9) 17,117 11,922 7,086 Other 41,758 21,434 13,509 Selling, general and administrative (note 9) 27,709 17,247 7,149 Provision for doubtful accounts 2,949 2,439 463 Depreciation and amortization 6,246 2,957 963 ------ ------ ----- Operating income 42,906 12,696 10,322 Interest expense 197 - - Other expense, net 317 106 9 ------ ------ ----- Earnings before income taxes 42,392 12,590 10,313 Income taxes (note 10) 15,415 4,490 3,120 ------ ------ ----- Net earnings 26,977 8,100 7,193 Combined equity (deficit): Beginning of year (10,558) (11,471) 1,187 Distributions (60,476) (7,187) (19,851) ------ ------ ----- End of year $ (44,057) (10,558) (11,471) ====== ====== =====
See accompanying notes to combined financial statements. 9 CABLEVISION (A COMBINATION OF CERTAIN CABLE TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A. AS DEFINED IN NOTE 1) COMBINED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 IN THOUSANDS OF ARGENTINE PESOS
1994 1993 1992 ------ ------ ------ Cash flows from operating activities: Net earnings $ 26,977 8,100 7,193 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 6,246 2,957 963 Deferred income tax expense 4,977 1,114 501 Provision for doubtful accounts 2,949 2,439 463 Decrease (increase) in accounts receivable, and other assets (4,244) (4,057) 519 Increase in accounts payable and accrued liabilities 6,624 7,632 14,567 ------ ------ ------ Net cash provided by operating activities 43,529 18,185 24,206 ------ ------ ------ Cash flows from investing activities: Capital expended for property and equipment (19,464) (11,778) (4,960) ------ ------ ------ Net cash used in investing activities (19,464) (11,778) (4,960) ------ ------ ------ Cash flows from financing activities: Increase (decrease) in cash overdraft (469) 485 - Bank borrowings 43,679 - 500 Capital lease payments (465) - - Distributions (60,476) (7,187) (19,851) ------ ------ ------ Net cash used in financing activities (17,731) (6,702) (19,351) ------ ------ ------ Net change in cash 6,334 (295) (105) Cash at beginning of year 316 611 716 ------ ------ ------ Cash at end of year $ 6,650 316 611 ====== ====== ======
See accompanying notes to combined financial statements. 10 CABLEVISION (A COMBINATION OF CERTAIN CABLE TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A. AS DEFINED IN NOTE 1) NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1994 AND 1993 IN THOUSANDS OF ARGENTINE PESOS (1) PURPOSE OF THE COMBINED FINANCIAL STATEMENTS The accompanying combined financial statements were prepared to comply with Rule 3-05 of Regulation S-X of the Securities Exchange Commission in connection with the acquisition by TCI International Holdings, Inc. ("TCI International") of 51% of the shares of Cablevision, S.A., Televisora Belgrano, S.A., Construred, S.A. and Univent's, S.A. (referred to hereinafter collectively as the "Company" or "Cablevision") from an unaffiliated shareholder group ("the selling shareholders"). In addition, TCI International has the option to increase its investment to 80% for a period of two years at a cost per subscriber comparable to the initial purchase. Cablevision is engaged principally in the business of cable television broadcasting in the City of Buenos Aires and Greater Buenos Aires, Argentina. The combined financial statements present the combined financial position, results of operations and cash flows as of and for each of the years in the three-year period ended December 31, 1994 of the cable television broadcasting business of Cablevision as if such business had existed as a stand-alone business throughout the periods presented. Under the terms of the purchase agreement, TCI International will acquire 51% of Cablevision's cable television broadcasting business and the legal entities within which such business currently operates. Assets related to Cablevision's cable programming and other businesses ("the Other Businesses") will not be purchased. In connection with the acquisition of 51% of the Company by TCI International, it is anticipated that the assets related to the Other Businesses will be transferred to the selling shareholders at book value. Accordingly, the accompanying combined financial statements exclude the assets and operating results of the Other Businesses. All liabilities of the legal entities acquired will be the responsibility of Cablevision and are thus included in the combined balance sheets. Revenue represents amounts earned during the periods from providing cable television services to cable subscribers. Costs of programming comprise two elements: purchased programming, which is stated at the actual costs paid to third parties and programming produced by the Other Businesses, which has been allocated to the cable business based on the amount which management estimates would have been incurred to purchase such programming during each period presented. Salaries, occupancy, and depreciation and amortization have been specifically attributed to the cable television broadcasting business based on the personnel involved, assets employed and the ratio of square footage occupied, adjusted where appropriate to reflect the costs that would have been incurred had the business operated on a stand-alone basis throughout the periods presented. Operating costs and selling, general and administrative expenses not directly attributable to a specific line of business were allocated on the basis of the relative amounts of sales for each business. 11 2 CABLEVISION (A COMBINATION OF CERTAIN CABLE TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A. AS DEFINED IN NOTE 1) NOTES TO COMBINED FINANCIAL STATEMENTS IN THOUSANDS OF ARGENTINE PESOS The provision for income taxes has been calculated on a separate return basis for the business acquired. The current liability for income taxes in the accompanying balance sheets is presented on a legal entity basis and has been reduced for the income tax effects of operating losses in the Other Businesses. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies adopted in the preparation of the combined financial statements are set out below. BASIS OF PRESENTATION The combined financial statements are presented in Argentine pesos, in accordance with United States generally accepted accounting principles. All amounts for periods prior to January 1, 1993 are expressed in constant pesos of December 31, 1992 purchasing power. The combined financial statements through December 31, 1992 have been price-level restated in accordance with Accounting Principles Board Statement No. 3 in order to reflect the effects of the changes in the purchasing power of the Argentine currency as measured by the Argentine Wholesale Price Index. Argentina ceased to be classified as a highly inflationary economy as of January 1, 1993. Consequently, there is no adjustment for changes in general purchasing power for periods subsequent to December 31, 1992. COMBINATION PRINCIPLES The combined financial statements include the assets, liabilities and operating results and cash flows of the cable television businesses of the companies mentioned in note 1. All inter-entity transactions have been eliminated in the combined financial statements. PROPERTY AND EQUIPMENT Property and equipment is stated at cost, adjusted for changes in general price levels through December 31, 1992 as noted above. Construction and initial subscriber installation costs, including material, labor and applicable overhead, are capitalized. Depreciation is computed on a straight-line basis using estimated useful lives of 5 to 10 years for distribution systems and support equipment. Repairs and maintenance are charged to operations and renewals and additions are capitalized. At the time of ordinary retirements, sales or other dispositions of part of a cable television system, the depreciated cost and cost of removal of such property are charged to accumulated depreciation, and salvage value, if any, is credited thereto. Gains or losses are recognized only on sales of properties in their entirety. LEASING AGREEMENTS The Company's leasing activities consist principally of the leasing of data processing equipment and office equipment. Such leases are classified as direct financing leases. The leases expire over the next four years. 12 3 CABLEVISION (A COMBINATION OF CERTAIN CABLE TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A. AS DEFINED IN NOTE 1) NOTES TO COMBINED FINANCIAL STATEMENTS IN THOUSANDS OF ARGENTINE PESOS INCOME TAX Income tax is computed according to the guidelines established by the Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. Statement 109 requires the asset and liability method of accounting for income taxes. Under the asset and liability method of Statement 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. FOREIGN CURRENCY TRANSACTIONS Foreign currency transactions are recorded at the rates of exchange prevailing on the date of their execution or liquidation. Foreign currency assets and liabilities are translated into Argentine pesos at current rates in effect at the balance sheet date. (3) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION No cash payments were made for income taxes during the periods presented. Payments of interest associated with the cable broadcasting business during the periods were immaterial. In 1994 the Company acquired fixed assets amounting to $2,099 through capital lease agreements. (4) ACCOUNTS RECEIVABLE Accounts receivable are summarized as follows:
1994 1993 ----- ---- Subscribers $ 3,189 3,503 Magazine advertising 1,057 307 ----- ----- 4,246 3,810 Less allowance for doubtful accounts (1,029) (1,635) ----- ----- $ 3,217 2,175 ===== =====
13 4 CABLEVISION (A COMBINATION OF CERTAIN CABLE TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A. AS DEFINED IN NOTE 1) NOTES TO COMBINED FINANCIAL STATEMENTS IN THOUSANDS OF ARGENTINE PESOS 5) CAPITAL LEASES At December 31, 1994, property and equipment includes $1,566 of data processing equipment under capital leases, net of accumulated depreciation of $533. The following is a schedule by year of future minimum lease payments under capital leases together with the present value of the net minimum lease payments as of December 31, 1994: Year ending December 31: 1995 $ 564 1996 564 1997 731 ----- Total minimum lease payments 1,859 Less: amount representing interest (225) ----- Present value of net minimum lease payments $ 1,634 =====
(6) ACCOUNTS PAYABLE Accounts payable are comprised as follows:
1994 1993 ------- ------ Local currency: Films and signals $ 459 - Purchases of fixed assets 1,812 959 Advertising and promotion 878 45 Insurance 119 34 Related parties 478 1,175 Advances from customers 362 336 Other services suppliers 737 158 ------- ------ 4,845 2,707 ------- ------ In U.S. dollars: Films and signals 9,442 9,672 Purchases of fixed assets 1,247 - ------- ------ 10.689 9,672 ------- ------ $ 15,534 12,379 ------- ------
Annual maturities of accounts payable are as follows: Year ended December 31, 1995 $ 14,995 Year ended December 31, 1996 539
14 5 CABLEVISION (A COMBINATION OF CERTAIN CABLE TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A. AS DEFINED IN NOTE 1) NOTES TO COMBINED FINANCIAL STATEMENTS IN THOUSANDS OF ARGENTINE PESOS (7) OTHER ACCRUED LIABILITIES Other accrued liabilities are comprised as follows:
1994 1993 ------ ------ Income tax $ 5,359 3,953 Taxes on revenue 5,819 5,085 Social charges 4,558 3,168 Other 519 580 ------- ------ $ 16,255 12,786 ======= ======
Social charges represent the employer portion of mandatory contributions to national health and welfare schemes as well as corresponding amounts withheld on behalf of employees. (8) BANK DEBT Bank debt as of December 31, 1994, all denominated in U.S. dollars, totaled $44,179 at an average fixed interest rate of 14.42% as compared with $500 at an average fixed interest rate of 19.5% at December 31, 1993. Loans of approximately $9,000 at December 31, 1994 were secured by credit card collections of subscriber fees. Of the debt outstanding at December 31, 1994, $34,684 matures in 1995. The remaining balance is payable in 1996. (9) TRANSACTIONS WITH RELATED PARTIES Cablevision purchased advertising from related parties amounting to $1,304 and $1,178 in 1994 and 1993, respectively. During the year ended December 31, 1994, the Company placed significant additional amounts of advertising with related entities in print and open channel television. The related costs are not reflected in the accompanying financial statements as they were not billed to the Company nor were material amounts of services provided by the Company in exchange. Based on the rates then in effect for the respective media, the estimated cost of these services would have been $7,370. Accordingly the Company's advertising expenses are not necessarily representative of the expenses that Cablevision would have incurred had it been operated as a stand-alone business. Cablevision has been allocated certain internally produced programming costs from a related programming business calculated at amounts which management estimates would have been incurred to purchase such programming during each period presented. Such charges, which are not necessarily indicative of the costs that Cablevision would have incurred had it been operated as a stand-alone business, amounted to $16,915, $11,722 and $6,886 in 1994, 1993 and 1992, respectively. 15 6 CABLEVISION (A COMBINATION OF CERTAIN CABLE TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A. AS DEFINED IN NOTE 1) NOTES TO COMBINED FINANCIAL STATEMENTS IN THOUSANDS OF ARGENTINE PESOS Cablevision leases certain business offices from a related party. Management has allocated rent expense based upon the estimated market rate for comparable rentals, assigned to the estimated area used by the cable television operations. Such charges amounted to $202, $200 and $200 in 1994, 1993 and 1992, respectively. (10) INCOME TAXES Income tax expense attributable to earnings for the years ended December 31, 1994, 1993 and 1992 consists of:
Current Deferred Total --------- -------- ------ Year ended December 31, 1994 $ 10,438 4,977 15,415 ======= ====== ======= Year ended December 31, 1993 $ 3,376 1,114 4,490 ======= ====== ======= Year ended December 31, 1992 $ 2,619 501 3,120 ======= ====== =======
Income tax expense attributable to earnings differs from the amounts computed by applying the statutory Argentine income tax rate of 30% as follows:
1994 1993 1992 ------- ------ ------ Expected income taxes $ 12,718 3,777 3,094 Effects of: Non-deductible expenses 117 6 26 Separate return limitations on deductions of initial subscriber installation cost 2,580 707 - ------- ------ ------ Actual tax expense $ 15,415 4,490 3,120 ======= ====== ======
The components of the deferred tax liabilities at December 31, 1994 and 1993 are shown as follows:
1994 1993 ---- ----- Capitalization for book purposes of construction and initial subscriber installation costs written off as incurred for tax purposes $ 6,790 1,996 Differences in the timing of the deduction of the allowance for doubtful accounts (308) (491) ----- ------ Total $ 6,482 1,505 ===== ======
16 7 CABLEVISION (A COMBINATION OF CERTAIN CABLE TELEVISION ASSETS OF CABLEVISION S.A., TELEVISORA BELGRANO S.A., CONSTRURED S.A. AND UNIVENT'S S.A. AS DEFINED IN NOTE 1) NOTES TO COMBINED FINANCIAL STATEMENTS IN THOUSANDS OF ARGENTINE PESOS (11) COMMITMENTS AND CONTINGENCIES a. Cablevision leases business offices, has entered into pole rental agreements, and uses certain other equipment under lease arrangements. Lease expense under such arrangements aggregated approximately $822, $676 and $386 for 1994, 1993 and 1992, respectively, including $400, $200 and $186 paid under pole rental agreements which are terminable on short notice by either party. It is expected that in the normal course of business, leases that expire will be renewed or replaced by other leases. Accordingly, annual commitments are not expected to decrease in comparison to the 1994 amounts. b. The Company is involved in several lawsuits and claims arising in the normal course of business. In the opinion of management and legal counsel, the final outcome of these matters will have no significant adverse effects on the combined financial statements of the Company. c. Under the terms of the purchase agreement between TCI International and the shareholders of Cablevision, the sellers retain the obligation to reimburse the buyer for any losses subsequent to the purchase date arising from loss contingencies or unrecorded liabilities attributable to circumstances existing prior to that date. 17 TCI COMMUNICATIONS, INC. AND SUBSIDIARIES (formerly Tele-Communications, Inc.) Condensed Pro Forma Combined Financial Statements December 31, 1994 (unaudited) The following unaudited condensed pro forma combined balance sheet of TCI Communications, Inc. ("TCIC"), dated as of December 31, 1994, assumes that the merger with TeleCable Corporation ("TeleCable") (the "TeleCable Merger") had occurred as of such date. See note (1). In addition, the following unaudited condensed pro forma combined statement of operations of TCIC for the year ended December 31, 1994 assumes that (i) the TeleCable Merger, (ii) the combination of TCIC and Liberty Media Corporation ("Liberty"), whereby TCIC and Liberty each became a wholly-owned subsidiary of TCI (the "TCI/Liberty Combination") (see note 3) and (iii) the transfer of United Artists International, Inc. from TCIC to TCI International Holdings, Inc. (the "International Transfer") (see note 2) had occurred as of January 1, 1994. The unaudited pro forma results do not purport to be indicative of the results of operations that would have been obtained if the TeleCable Merger, the TCI/Liberty Combination and the International Transfer had occurred as of January 1, 1994. These condensed pro forma combined financial statements of TCIC should be read in conjunction with the condensed pro forma financial statements and the related notes thereto of TCI included elsewhere herein and the respective historical financial statements and the related notes thereto of TCIC and TCI. The accompanying condensed pro forma financial statements no longer reflect the assumed investment in Intermedia Partners IV, L.P., as such transaction under its current terms can no longer be deemed probable. 1 18 TCI COMMUNICATIONS, INC. AND SUBSIDIARIES Condensed Pro Forma Combined Balance Sheet (unaudited)
December 31, 1994 ---------------------------------------------------------- Pro forma TCIC TeleCable Adjustments TCI Historical Historical(1) (1) Pro forma ---------- ------------- ----------- --------- amounts in millions Assets ------ Cash and receivables $ 204 19 -- 223 Investment in affiliates and Turner Broadcasting System, Inc., and related receivables 347 18 -- 365 Property and equipment, net of accumulated depreciation 5,579 258 320 (4) 6,157 Franchise costs and other assets, net of amortization 9,750 21 1,023 (4) 11,571 777 (5) ---------- ------- ------- -------- $ 15,880 316 2,120 18,316 ========== ======= ======= ======== Liabilities and Stockholder's Equity ------------------------------------ Payables and accruals $ 856 31 -- 887 Debt 10,712 274 -- 10,986 Deferred income taxes 3,299 46 777 (5) 4,122 Other liabilities 96 5 -- 101 ---------- ------- ------- -------- Total liabilities 14,963 356 777 16,096 ---------- ------- ------- -------- Minority interests 271 3 -- 274 Common stockholder's equity: Class A common stock 1 -- -- 1 Class B common stock -- 7 (7)(6) -- Additional paid-in capital (deficit) 2,842 (262) 262 (6) 4,142 1,300 (7) Unrealized holding gains for available-for-sale securities 2 3 (3)(6) 2 Accumulated earnings (deficit) (256) 209 (209)(6) (256) Investment in TCI (1,096) -- -- (1,096) Due from TCI (847) -- -- (847) ---------- ------- ------- -------- 646 (43) 1,343 1,946 ---------- ------- ------- -------- $ 15,880 316 2,120 18,316 ========== ======= ======= ========
See accompanying notes to unaudited condensed pro forma combined financial statements. 2 19 TCI COMMUNICATIONS, INC. AND SUBSIDIARIES Condensed Pro Forma Combined Statement of Operations (unaudited)
Year ended December 31, 1994 ---------------------------------------------------------------------- International Pro forma TCIC TeleCable Transfer Adjustments TCI Historical Historical(1) Historical(2) (1)(2)(3) Pro forma ---------- ------------- ------------- ----------- --------- amounts in millions Revenue $ 4,318 302 (24) -- 4,596 Operating, selling, general and administrative expenses and compensation relating to stock appreciation rights (2,512) (171) 43 -- (2,640) Depreciation and amortization (988) (46) 3 (46)(8) (1,077) ---------- ------ ---- ----- ------- Operating income 818 85 22 (46) 879 Interest expense (777) (23) -- -- (800) Interest and dividend income 35 1 (2) -- 34 Share of earnings of Liberty 125 -- -- (125)(9) -- Share of losses of other affiliates, net (114) -- 67 -- (47) Gain (loss) on dispositions 156 -- (169) -- (13) Other expense, net (20) (4) (7) -- (31) ---------- ------ ---- ----- ------- Earnings before income taxes 223 59 (89) (171) 22 Income tax expense (131) (23) 37 70 (10) (47) ---------- ------ ---- ----- ------- Net earnings (loss) $ 92 36 (52) (101) (25) ========== ====== ==== ===== =======
See accompanying notes to unaudited condensed pro forma combined financial statements. 3 20 TCI COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Condensed Pro Forma Combined Financial Statements December 31, 1994 (unaudited) (1) As of August 8, 1994, TCI, TCIC and TeleCable entered into a definitive merger agreement (the "TeleCable Merger Agreement") whereby TeleCable was merged into TCIC on January 26, 1995. The aggregate $1.6 billion purchase price was satisfied by TCIC's assumption of approximately $300 million of TeleCable's net liabilities and the issuance to TeleCable's shareholders of shares of TCI Class A common stock (approximately 42 million shares) and 1 million shares of a new series of preferred stock to be designated "Convertible Preferred Stock" ("Series D Preferred Stock") with an aggregate initial liquidation value of $300 million. The Series D Preferred Stock, which accrues dividends at a rate of 5.5% per annum, are convertible into 10 million shares of TCI Class A common stock. The Series D Preferred Stock is redeemable at the option of TCI after five years and at the option of either TCI or the holder after ten years. The amount of net liabilities assumed by TCIC and the number of shares of TCI Class A common stock issued to TeleCable's shareholders are subject to closing adjustments. (2) During 1994, TCI was reorganized based upon four lines of business: Domestic Cable and Communications; Programming; International Cable and Programming; and Technology/Venture Capital. In connection with this reorganization, in November of 1994, TCIC transferred its ownership of United Artists International, Inc. to TCI International Holdings, Inc. in exchange for 79,903 shares of a newly created class of TCI preferred stock, Redeemable Convertible Preferred Stock, Series E (the "Series E Preferred Stock"). Such transaction has been reflected at historical cost. Series E Preferred Stock accrues dividends at the rate of 5.0% per annum and is convertible into TCI Class A common stock at the initial conversion rate of 1,000 shares of TCI Class A common stock for one share of the Series E Preferred Stock. (3) The TCI/Liberty Combination, which were consummated on August 4, 1994, were structured as a tax free exchange whereby the common stock of TCIC and Liberty and the preferred stock of Liberty were exchanged for like shares of TCI. The merger agreement provided that each share of TCIC's and Liberty's common stock (including shares held by TCIC's or Liberty's subsidiaries) would be converted into one share and 0.975 of a share, respectively, of the corresponding class of TCI's common stock. Shares of Liberty Class E Preferred Stock were converted into shares of a preferred stock of TCI having designations, preferences, rights and qualifications, limitations and restrictions substantially identical to the shares of preferred stock being converted. Shares of the remaining Liberty preferred stock held by subsidiaries of TCIC were converted into shares of a class of TCI preferred stock having an equivalent fair value to that which was given up. The TCI/Liberty Combination has been accounted for as a purchase of Liberty by TCI utilizing Liberty's historical predecessor cost. (continued) 4 21 TCI COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Condensed Pro Forma Combined Financial Statements (4) Represents an allocation of the purchase price of TeleCable to its tangible and intangible assets. The cost allocations were estimated using information available at the date of preparation of these condensed pro forma combined financial statements and will be adjusted upon final appraisal of the assets acquired. Therefore, the actual allocations may differ from those allocations reflected herein. (5) Represents the estimated incremental deferred income tax liability associated with the TeleCable purchase price allocations, as described in note (4) above. The adjustment assumes a combined federal and state income tax rate of 41%. (6) Represents the elimination of TeleCable's historical stockholders' deficit. (7) Represents TCI's capital contribution to TCIC resulting from the issuance by TCI to TeleCable shareholders of shares of TCI Class A common stock (approximately 42 million shares) and 1 million shares of Series D Preferred Stock with an aggregate liquidation value of $300 million. See note (1) above. (8) Represents depreciation and amortization of TeleCable's allocated excess purchase price, based upon weighted average lives of 12-1/2 years for property and equipment and 40 years for franchise costs. See note (1) above. (9) Reflects the elimination of TCIC's share of Liberty's historical earnings. See note (3) above. (10) Reflects the estimated income tax effect of the pro forma adjustments. 5 22 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Condensed Pro Forma Combined Financial Statements December 31, 1994 (unaudited) The following unaudited condensed pro forma combined balance sheet of TCI, dated as of December 31, 1994, assumes that (i) the TeleCable Merger, (ii) the Cablevision acquisition and (iii) the transactions whereby QVC, Inc. ("QVC") became 43% owned by the Company and 57% owned by Comcast (the "QVC Transactions") had occurred as of such date. See notes (2), (3) and (4). The following unaudited condensed pro forma combined statement of operations of TCI for the year ended December 31, 1994 assumes that the TeleCable Merger, the Cablevision acquisition, the TCI/Liberty Combination (see note 1) and the QVC Transactions had occurred as of January 1, 1994. The unaudited pro forma results do not purport to be indicative of the results of operations that would have been obtained if the TeleCable Merger, the Cablevision acquisition, the TCI/Liberty Combination and the QVC Transactions had occurred as of January 1, 1994. These condensed pro forma combined financial statements of TCI should be read in conjunction with the historical financial statements and the related notes thereto of TCI. The accompanying condensed pro forma combined financial statements no longer reflect the assumed investment in Intermedia Partners IV, L.P., as such transaction under its current terms can no longer be deemed probable. 6 23 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Condensed Pro Forma Combined Balance Sheet (unaudited)
December 31, 1994 ------------------------------------------------- QVC TCI TeleCable Cablevision Pro forma Transactions TCI Historical Historical(2) Historical(3) adjustments(2)(3) Pro forma(4) Pro forma ---------- -------------- -------------- ----------------- ------------ --------- amounts in millions Assets ------ Cash, receivables and other current assets $ 496 19 10 -- -- 525 Investment in affiliates and Turner Broadcasting System, Inc., and related receivables 2,156 18 -- -- 7 (12) 1,965 (216)(13) Property and equipment, net of accumulated depreciation 5,876 258 30 334 (5) -- 6,498 Franchise costs, intangibles and other assets, net of amortization 11,000 21 -- 1,348 (5) -- 13,342 973 (6) -------- ---- ------ -------- ----- ------- $ 19,528 316 40 2,655 (209) 22,330 ======== ==== ====== ======== ===== ======= Liabilities and Stockholders' Equity ------------------------------------ Payables and accruals $ 1,193 31 32 -- -- 1,256 Debt 11,162 274 46 99 (7) 7 (12) 11,695 196 (8) (89)(13) Deferred income taxes 3,613 46 6 973 (6) -- 4,638 Other liabilities 160 5 -- -- -- 165 -------- ---- ------ -------- ----- ------- Total liabilities 16,128 356 84 1,268 (82) 17,754 -------- ---- ------ -------- ----- ------- Minority interests 429 3 -- -- -- 432 Series D Preferred Stock -- -- -- 300 (10) -- 300 Stockholders' equity: Preferred Stock -- -- -- -- -- -- Combined deficit -- -- (44) 44 (11) -- -- Class A common stock 577 -- -- 42 (10) -- 619 Class B common stock 89 7 -- (7)(9) -- 89 Additional paid-in capital 2,959 (262) -- 958 (10) -- 3,917 262 (9) Cumulative foreign currency translation adjustment (4) -- -- -- -- (4) Unrealized holding gains for available-for sale securities 253 3 -- (3)(9) (127)(13) 126 Retained earnings (deficit) (293) 209 -- (209)(9) -- (293) Treasury stock (610) -- -- -- -- (610) -------- ---- ------ -------- ----- ------- 2,971 (43) (44) 1,087 (127) 3,844 -------- ---- ------ -------- ----- ------- $ 19,528 316 40 2,655 (209) 22,330 ======== ==== ====== ======== ===== =======
See accompanying notes to unaudited condensed pro forma combined financial statements. 7 24 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Condensed Pro Forma Combined Statement of Operations (unaudited)
Year ended December 31, 1994 ------------------------------- TCI Liberty TeleCable Cablevision Historical Historical(1) Historical(2) Historical(3) ---------- ------------- ------------- ------------- amounts in millions, except per share amounts Revenue $ 4,936 790 302 139 Operating, cost of sales, selling, general and administrative expenses and compensation relating to stock appreciation rights (3,130) (726) (171) (90) Depreciation and amortization (1,018) (32) (46) (6) -------- ----- ----- ---- Operating income (loss) 788 32 85 43 Interest expense (785) (22) (23) -- Interest and dividend income 36 15 1 -- Share of earnings of Liberty 125 -- -- -- Share of earnings (losses) of affiliates, net (120) 23 -- -- Gain on dispositions 151 183 -- -- Loss on early extinguishment of debt (9) -- -- -- Other expense, net (15) (11) (4) (1) -------- ----- ----- ---- Earnings (loss) before income taxes 171 220 59 42 Income tax expense (116) (95) (23) (15) -------- ----- ----- ---- Net earnings (loss) 55 125 36 27 Dividend requirement on redeemable preferred stocks (8) (14) -- -- -------- ----- ----- ---- Net loss attributable to common shareholders $ 47 111 36 27 ======== ===== ===== ==== Primary earnings per common and common equivalent share $ .09 ========
Year ended December 31, 1994 -------------------- QVC Pro forma Transactions TCI adjustments(1)(2)(3) Pro forma (4) Pro forma -------------------- ------------- ------------ amounts in millions, except per share amounts Revenue (36)(14) -- 6,131 Operating, cost of sales, selling, general and administrative expenses and compensation relating to stock appreciation rights 36 (14) -- (4,081) Depreciation and amortization (73)(15) -- (1,175) ----- ----- ------- Operating income (loss) (73) -- 875 Interest expense 12 (16) -- (847) (7) (17) (16)(18) (6)(19) Interest and dividend income (12)(16) -- 40 Share of earnings of Liberty (125)(20) -- -- Share of earnings (losses) of affiliates, net -- 26 (24) (98) (27)(25) Gain on dispositions -- -- 334 Loss on early extinguishment of debt -- -- (9) Other expense, net -- -- (31) ----- ----- ------- Earnings (loss) before income taxes (227) (1) 264 Income tax expense 87 (21) -- (162) ----- ----- ------- Net earnings (loss) (140) (1) 102 Dividend requirement on redeemable preferred stocks (17)(22) -- (31) 8 (23) ----- ----- ------- Net loss attributable to common shareholders (149) (1) 71 ===== ===== ======= Primary earnings per common and common equivalent share $ .11 (26) =======
See accompanying notes to unaudited condensed pro forma combined financial statements. 8 25 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Condensed Pro Forma Combined Financial Statements December 31, 1994 (unaudited) (1) The TCI/Liberty Combination, which were consummated on August 4, 1994, were structured as a tax free exchange whereby the common stock of TCIC and Liberty and the preferred stock of Liberty were exchanged for like shares of TCI. The merger agreement provided that each share of TCIC's and Liberty's common stock (including shares held by TCIC's or Liberty's subsidiaries) would be converted into one share and 0.975 of a share, respectively, of the corresponding class of TCI's common stock. Shares of Liberty Class E Preferred Stock were converted into shares of a preferred stock of TCI having designations, preferences, rights and qualifications, limitations and restrictions substantially identical to the shares of preferred stock being converted. Shares of the remaining Liberty preferred stock held by subsidiaries of TCIC were converted into shares of a class of TCI preferred stock having an equivalent fair value to that which was given up. All preferred stock of TCI held by TCIC or its subsidiaries has been eliminated in consolidation. The TCI/Liberty Combination has been accounted for as a purchase of Liberty by TCI utilizing Liberty's historical predecessor cost. (2) As of August 8, 1994, TCI, TCIC and TeleCable entered into the TeleCable Merger Agreement whereby TeleCable was merged into TCIC on January 26, 1995. The aggregate $1.6 billion purchase price was satisfied by TCIC's assumption of approximately $300 million of TeleCable's net liabilities and the issuance to TeleCable's shareholders of shares of TCI Class A common stock (approximately 42 million shares) and 1 million shares of Series D Preferred Stock with an aggregate initial liquidation value of $300 million. The Series D Preferred Stock, which accrues dividends at a rate of 5.5% per annum, are convertible into 10 million shares of TCI Class A common stock. The Series D Preferred Stock is redeemable at the option of TCI after five years and at the option of either TCI or the holder after ten years. The amount of net liabilities assumed by TCIC and the number of shares of TCI Class A common stock issued to TeleCable's shareholders are subject to closing adjustments. (3) On December 6, 1994, the Company entered into the Cablevision Purchase Agreement with the Shareholders to acquire controlling interests in Cablevision. Upon execution of the Cablevision Purchase Agreement, the Company paid the Shareholders $20 million and the Shareholders placed 51% of the outstanding stock of Cablevision S.A. into an escrow account. Upon consummation of the transaction, the $20 million will be applied toward the ultimate purchase price and the escrowed stock will be transferred to the Company. If the transaction is not consummated for certain enumerated reasons, the Shareholders are contractually obligated to return the $20 million to the Company and the Cablevision S.A. stock will be released from escrow. (continued) 9 26 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Condensed Pro Forma Combined Financial Statements On March 28, 1995, the Cablevision Purchase Agreement was amended to provide for the acquisition of a 51% ownership interest in Cablevision for an estimated purchase price of approximately $315 million. The purchase price will be paid with cash consideration of approximately $216 million (including the initial $20 million) and the Company's issuance of approximately $99 million in Notes. The purchase price is subject to adjustment based on the actual number of Cablevision equivalent basic subscribers and Cablevision liabilities as of the month-end prior to closing. The Notes will be secured by the Company's pledge of the stock representing its 51% interest in Cablevision. The Notes will bear interest at variable rates and are scheduled to be repaid in 20 monthly installments beginning in the fourth month following the month of acquisition. In addition, the Company has an option during the two-year period following the acquisition date to increase its ownership interest to 80% at a cost per subscriber similar to the initial purchase price adjusted, however, for certain fluctuations in applicable foreign currency exchange rates. Consummation of the Cablevision acquisition is subject to regulatory approvals and other conditions. Accordingly, there is no assurance that such acquisition will be consummated. (4) Pursuant to an Agreement and Plan of Merger dated as of August 4, 1994, as amended (the "QVC Merger Agreement"), QVC Programming Holdings, Inc. (the "Purchaser"), a corporation which is jointly owned by Comcast and Liberty, commenced an offer (the "QVC Tender Offer") to purchase all outstanding shares of common stock and preferred stock of QVC, Inc. ("QVC"). The QVC Tender Offer expired at midnight, New York City time, on February 9, 1995, at which time the Purchaser accepted for payment all shares of QVC which had been tendered in the QVC Tender Offer. Following consummation of the QVC Tender Offer, the Purchaser was merged with and into QVC with QVC continuing as the surviving corporation. The Company owns an approximate 43% interest of the post-merger QVC. Upon consummation of the aforementioned QVC transactions, the Company is deemed to exercise significant influence over QVC and, as such, will account for its investment in QVC under the equity method. (5) Represents an allocation of the purchase prices of TeleCable and Cablevision to their tangible and intangible assets. The cost allocations were estimated using information available at the date of preparation of these condensed pro forma combined financial statements and will be adjusted upon final appraisal of the assets acquired. Therefore, the actual allocations may differ from those allocations reflected herein. (6) Represents the estimated incremental deferred income tax liability associated with the TeleCable and Cablevision purchase price allocations, as described in note (5) above. The adjustment assumes a combined federal and state income tax rate of 41%. (7) Represents the assumed issuance of the Notes in the acquisition of Cablevision (see note 3). (8) Represents assumed borrowings by the Company to pay the remaining cash consideration in the Cablevision acquisition. (continued) 10 27 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES Notes to Condensed Pro Forma Combined Financial Statements (9) Represents the elimination of TeleCable's historical stockholders' deficit. (10) Represents the issuance by TCI to TeleCable shareholders of shares of TCI Class A common stock (approximately 42 million shares) and 1 million shares of Series D Preferred Stock with an aggregate liquidation value of $300 million. See note (2) above. (11) Represents the elimination of Cablevision's historical stockholders' deficit. (12) Represents the Company's cash contribution in the QVC Transactions. (13) Represents the elimination of the unrealized gain attributable to QVC. (14) Represents the elimination of intercompany revenue and operating expenses between TCIC and Liberty arising from the sale of certain cable television programming to their respective cable television subscribers. See note (1) above. (15) Represents depreciation and amortization of TeleCable's and Cablevision's allocated excess purchase prices based upon weighted average lives of 12-1/2 years for property and equipment and 40 years for franchise costs for TeleCable and 20 years for franchise costs for Cablevision. (16) Represents the elimination of interest on intercompany indebtedness between TCIC and Liberty. See note (1) above. (17) Represents assumed interest expense incurred by the Company on the Notes, calculated at an assumed rate of 7% per annum. (18) Represents assumed interest expense incurred by the Company on the assumed borrowings of $196 million to pay the remaining cash portion of the Cablevision purchase price and the interest expense that would have been incurred had the initial $20 million payment toward the Cablevision purchase price been paid on January 1, 1994. Such interest expense was calculated at the Company's weighted average interest rate of 7.5% for the year ended December 31, 1994. (19) Represents additional interest expense on assumed indebtedness of Cablevision. Interest expense was not reflected in the historical financial statements as such borrowings were not utilized to support the assets to be acquired by the Company. Such interest was calculated at the interest rate in effect at December 31, 1994 for such indebtedness (14.4% per annum). (20) Represents the elimination of TCIC's share of Liberty's historical earnings. (21) Reflects the estimated income tax effect of the pro forma adjustments. (22) Represents the dividend requirements on TCI's Series D Preferred Stock (issued in connection with the TeleCable Merger - see note 2). (23) Represents the elimination of the preferred stock dividend requirements on Liberty preferred stock held by TCIC converted into preferred stock of TCI. (continued) 11 28 TELE-COMMUNICATIONS, INC. AND SUBSIDIARIES (formerly TCI/Liberty Holding Company) Notes to Condensed Pro Forma Combined Financial Statements (24) Reflects the incremental increase in TCI's share of QVC's historical earnings resulting from the consummation of the QVC Transactions. (25) Represents the adjustment to TCI's share of the pro forma loss of the Purchaser after giving effect to the consummation of the QVC Transactions. Such adjustment reflects the estimated incremental interest, depreciation and amortization expense, net of income taxes, incurred by the Purchaser following the consummation of the QVC Transactions. (26) Reflects primary and fully diluted earnings per common and common equivalent share based upon 651,475,966 weighted average shares. Such amount is calculated utilizing 540,837,355 weighted average shares of TCI at December 31, 1994 (such amount representing TCI's weighted average shares, as disclosed in its historical financial statements), adjusted for the effect of shares issued in the TCI/Liberty Combination as if such transaction had occurred on January 1 and adjusted for the issuance of 42 million shares of TCI Class A common stock issued in connection with the TeleCable Merger. Shares issuable upon conversion of the Series D Preferred Stock (see note 2) have not been included in the computation of weighted average shares outstanding for the year ended December 31, 1994 because their inclusion would be anti-dilutive. 12 29 EXHIBIT INDEX The following exhibits are filed herewith or are incorporated by reference herein (according to the number assigned to them in Item 601 of Regulation S-K) as noted: (2.1) Stock Purchase Agreement, dated as of December 6, 1994, by and among Eduardo Eurnekian, stockholders of shares of the Common Stock of Cablevision S.A., Televisora Belgrano S.A., Construred S.A., Univent's S.A., and TCI International Holdings, Inc. (2.2) Amendment to Stock Purchase Agreement executed on December 6, 1994. (10) Stockholders Agreement, dated December 6, 1994, between Eduardo Eurnekian and TCI International Holdings, Inc. EX-2.1 2 STOCK PURCHASE AGREEMENT DATED 12/6/94 1 Exhibit 2.1 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT (the "Agreement" as herein defined), is entered into as of this 6th day of december of 1994 by and among Eduardo Eurnekian, the undersigned owners (collectively, Eduardo Eurnekian and the undersigned owners defined as the "Stockholders", and individually, a "Stockholder" as herein defined) of shares of the Common Stock (the "Common Stock"), of Cablevision S.A. (face value $ 1 per share), Televisora Belgrano S.A. (face value $ 1 per share), Construred S.A. (face value $ 1 per share), Univent's S.A. (face value $ 1 per share), all Argentine Corporations (Sociedades Anonimas) (all referred to hereinafter as the "Company" as herein defined), and TCI International Holdings, Inc., a Delaware (U.S.A.) corporation ("Buyer"). RECITALS A. The Stockholders own all of the outstanding Shares which represent one hundred per cent (100%) of the Common Stock and votes of the Company. B. The Stockholders desire to sell to Buyer, and Buyer desires to purchase from the Stockholders, the Shares which represent eighty per cent (80%) of the Common Stock of the Company ("the Shares" as herein defined), in accordance with the terms of this Agreement. C. The Stockholders and the Buyer also desire to enter into the Stockholders Agreement attached hereto as Exhibit 1 of this Agreement. NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations and warranties herein contained, the parties hereto agree as follows: DEFINITIONS For purposes of this Agreement, the following terms shall have the following meanings: 2 -2- "Agreement": this Stock Purchase Agreement and its exhibits and schedules; applicable also to the purchase of cuotas of the S.R.L. (as defined herein) resulting from the conversion of the Company. "Assets": All properties, privileges, rights, interests and claims, real and personal, tangible and intangible, of every type and description that are owned, leased, held, used or useful in the Company Business in which Stockholders or Company have any right, title or interest or in which Stockholders or Company have acquired any right, title or interest on or before the Closing Date, including Governmental Permits, Company Contracts, Equipment and Real Property. "Balance Sheet Date": shall mean the date of May 31st, 1995 or one month prior to the Closing Date if this were not June 30th, 1995. "Base Purchase Price": shall be that defined in Section 1.2. "Basic Services": the transmission of cable television programming sold to Company subscribers as a package, as part of the Company Business, for which a subscribers pay a fixed monthly fee to Company, including the satellite transmission related to Televisora Belgrano S.A., in the city of Chascomus, Province of Buenos Aires. "Closing": means the consummation of the transactions contemplated by this Agreement, the date of which is referred to as the Closing Date. "Closing Date": meaning the 30th day of June, 1995, or at the option of Buyer, the 31st day of May 1995 or 30th of April 1995 provided that the Conditions Precedent referred to in Articles IV and V are met or waived, or such other date as the parties mutually agree. "COMFER": meaning the Comite Federal de Radiodifusin of Argentina. "COMFER Approval": shall mean all necessary authorizations, or consents from COMFER required to consummate the transactions contemplated by this Agreement and/or the obligations assumed and/or provisions contained herein. "Company": meaning Cablevision S.A., Televisora Belgrano S.A., Construred S.A. and Univent's S.A., and the corpo- 3 -3- rations resulting from the conversion of the Company into a "sociedad de responsabilidad limitada" (S.R.L.). "Company Contracts": All contracts and agreements, other than Governmental Permits, pertaining to ownership, operation and maintenance of the Assets or the Company Business. "Company Business": meaning the operation of a complete cable television reception and distribution System located in the city of Buenos Aires, Greater Buenos Aires, and in the city of Chascomus, Province of Buenos Aires. "EBS": For the purposes of determining the Basic Purchase Price and the adjustments to the same, the Stockholders and the Buyer define EBS's as the number derived by dividing (a) the total income in pesos received by the Company for Basic Services and additional outlet charges during the full calendar month corresponding to that of the Closing Date including all payments for more than one period for such charges if paid in such month, by (b) 25 (twenty five) pesos. Notice is made that there is no V.A.T. applicable in relation to the income in pesos and that the same will not be considered in relation to the definition established herein and will therefore not be included in the calculation of "total income in pesos". "Encumbrances": any mortgage, lien, security interest, security agreement, conditional sale or other title retention agreement, limitation, pledge, option, charge, assessment, restrictive agreement, restriction, encumbrance, adverse interest, restriction on transfer or any exception to or defect in title or other ownership interest (including reservations, rights of way, possibilities of reverter, encroachments, easements, rights of entry, restrictive covenants, leases and licenses). "Equipment": all electronic devices, trunk and distribution coaxial and optical fiber cable, amplifiers, power supplies, conduit, vaults and pedestals, grounding and pole hardware, subscriber's devices (including converters, encoders, decoders, transformers behind television sets and fittings), headend hardware (including origination, earth stations, transmission and distribution system), test equipment, vehicles and other tangible personal property owned, leased, used or held for use in the Company Business. 4 -4- "Environmental Laws": any Legal Requirement relating to pollution or protection of public health, safety or welfare or the environment, including those relating to emissions, discharges, releases or threatened releases of Hazardous Substances into environment (including ambient air, surface water, ground water or land), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling or Hazardous Substances. "Financial Statements": meaning those defined in Section 2.10 of this Agreement. "GAAP": generally accepted accounting principals in force in the Argentine Republic as from time to time. "Governmental Authorities": (i) The Republic of Argentina, (ii) any state, territory or possession of the Republic of Argentina and any political subdivision thereof (including counties, municipalities and the like), (iii) any foreign (as to the Republic of Argentina) sovereign entity and any political subdivision thereof or (iv) any agency, authority or instrumentality of any of the foregoing, including any court, tribunal, department, bureau, commission or board, including, but not limited to, the COMFER. "Governmental Permits": all franchises, approvals, authorizations, permits, licenses, easements, registrations, qualifications, leases, variances and similar rights obtained from any Governmental Authority. "Hazardous Substances": any pollutant, contaminant, chemical, industrial, toxic, hazardous or noxious substance or waste which is regulated by law 24.051 or any other Argentine legal body (Regulation) or any Governmental Authority, including (a) any petroleum or petroleum compounds (refined or crude), flammable substances, explosives, radioactive materials or any other materials or pollutants which pose a hazard or potential hazard to the Real Property or to Persons in or about the Real Property or cause the Real Property to be in violation of any laws, regulations or ordinances of federal, state or applicable local governments, (b) asbestos or any asbestos-containing material of any kind or character, (c) polychlorinated biphenyls, (d) any materials or substances designated as "hazardous substances" pursuant to Governmental Authorities regulation (e) "chemical substance", "new chemical substance" or "hazardous chemical substance or mixture" pursuant to Governmental Authorities regula- 5 -5- tion, (f) "hazardous substances" pursuant to Governmental Authorities regulation, and (g) "hazardous waste" pursuant to Governmental Authorities regulation. "Legal Requirements": any statute, ordinance, code, law, rule, regulation, order or other requirement, standard or procedure enacted, adopted or applied by any Governmental Authority, including judicial decisions applying common or civil law or interpreting any other Legal Requirement. "Liabilities": those items classified as liabilities on the Company's balance sheet or in the Financial Statements prepared in accordance with GAAP on the Closing Date (or Balance Sheet Date), as the context requires). "Persons": any natural person, corporation, partnership, trust, unincorporated organization, association, limited liability company, Governmental Authority or other entity. "Programming Assets": those signals and/or television programmes currently produced by the Company and listed on Exhibit 2 or other which may be added to or replace the latter in the future. "Real Property": all Assets consisting of realty, including appurtenances, improvements and fixtures located on such realty, and any other interests in real property, including fee interests (if any) in Company's offices and headend sites and leasehold interests and easements. "Required Consents": all franchises, licenses, approvals and consents required under Governmental Permits, Company Contracts or otherwise for (a) Stockholders to transfer the Shares and control of the Company Business to Buyer, (b) Buyer to conduct the Company Business and to own, lease, use and operate the Shares, the Company Business and Assets at the places and in the manner in which the Company Business is conducted as of the date of this Agreement and on the Closing Date, and (c) the Company to assume and perform the Governmental Permits and the Company Contracts after the Closing Date. "Shares": meaning eighty percent (80%) of the Common Stock of the Company under the form of a corporation, or of cuotas (interest) of the Company under the form of an S.R.L. (as defined herein). "Stockholders": means Mr. Eduardo Eurnekian and the record and beneficial owners of the Shares. 6 -6- "Stockholders Agreement": meaning the document which shall govern the relationship of the Company's stockholders after the Closing and the management of the Company, all as set forth in Exhibit 1 of the Agreement. "SRL": means sociedad de responsabilidad limitada as that term is used in the Argentine Act 19.550 and in Argentine Commercial Code. "Subscriber": any Person who receives the company's Basic Services. "System": a complete cable television reception and distribution system operated in the conduct of the Company Business, consisting of one or more headends, subscriber drops and associated electronic and other equipment, and which is, or is capable of being without modification, operated as an independent system without interconnections to other systems. Any systems which are interconnected or which are served in total or in part by a common headend will be considered a single System. "TCI Stock": means the Class A Common Stock (par value U$S 1) of Tele-Communications, Inc., a Delaware (U.S.A.) corporation and parent of Buyer. Such TCI Stock will be "restricted" as that term is defined in Rule 144 under the United States Securities Act of 1933, as amended (the "Securities Act"). ARTICLE I PURCHASE AND SALE OF THE SHARES SECTION 1.1. Purchase and Sale of the Shares. Upon the terms and subject to the conditions set forth in this Agreement, at the Closing (as defined herein and in Section 1.7 hereof), the Stockholders shall sell the Shares to Buyer and Buyer shall purchase the Shares from the Stockholders. At the Closing, provided that the Conditions Precedent indicated in Articles IV and V have been met: a) the Stockholders shall deliver to Buyer such documents representing the Shares, with duly executed stock powers attached, as may be appropriate, in proper form for transfer, with appropriate transfer stamps, if any, affixed and any other document or instrument which may be necessary in order to vest Buyer with good and exclusive title to the Shares, and (b) Buyer shall deliver cash and negotiable and endorsable promissory notes, in payment of 7 -7- the Base Purchase Price (as hereinafter defined) pursuant to Sections 1.2, 1.3 and 1.4. SECTION 1.2 Base Purchase Price. In consideration of (i) the covenants, representations and warranties made by Stockholders in this Agreement, and (ii) the EBS's (as defined herein) which the Stockholders represent that the Company will have at Closing (460,000), Buyer will pay to Stockholders an amount equal to US $1,500 times eighty percent (80%) of the number of EBS's at Closing, minus eighty percent (80%) of all Liabilities to be deducted as provided in Section 1.4.1 (the "Base Purchase Price"), subject to adjustment as provided in Sections 1.3, and 1.4. as follows, provided that Stockholders comply with the duties assumed under this Agreement. Assuming an EBS number of 460,000 and Liabilities of US $25 million, the parties contemplate the Base Purchase Price to be US $532 million. a) Twenty million U.S. dollars (US $20,000,000) will be paid upon execution of this Agreement by wire transfer of readily available funds to the account which the Stockholders may so indicate. The Stockholders will simultaneously deliver to Buyer a letter from the notary Mr. Juan Bautista Cubas in the form attached hereto as Exhibit 3. The Shares mentioned therein will be referred to hereinafter as the Deposited Stock. b) In case Base Purchase Price were US $532 million at the Closing (as defined herein) and provided that the Conditions Precedent indicated in Articles IV and V have been met, Buyer shall deliver to Stockholders at Closing (i) US $191,140,016 by wire transfer of readily available funds to the account which Stockholders shall indicate, and (ii) the balance of US $320,859,984 (after substructing 80% of the assumed Liabilities of US $25,000,000, i.e. US $20,000,000) will be paid in 48 consecutive monthly installments maturing on the last day of each month, or the following working day if the last day were not a working day, commencing on July 30th, 1995, or on the last day following the month of Closing. The first twenty-four (24) installments will provide for a payment of US $5,031,666 each, and the remaining twenty-four (24) installments will provide for a payment of US $8,337,500 (the "Promissory Notes"). Installments representing this debt will be documented through eight negotiable and endorsable Promissory Notes issued by Buyer: (1) four negotiable and endorsable Promissory Notes for equal 8 -8- amounts will document the first 24 installments, and (2) the other four negotiable and endorsable Promissory Notes for equal amounts will document the remaining 24 installments. As an example as to the method with shall be used to calculate the payment of the Base Purchase Price the parties agree to the indicated under Exhibit 9. Amounts due under the said Promissory Notes will accrue interest at the Bank of New York Prime Rate at Closing, plus an extra one percent (1%) as from their date of issuance per annum. Said rate will be adjusted on each yearly anniversary of the Closing Date to Bank of New York Prime Rate which prevails on that date, plus one percent (1%) per annum. For these purposes, the prime rate for the first year will be the Bank of New York prime rate on Closing Date. Stockholders acknowledge that the Promissory Notes may not be sold by Stockholders in a "public offering". These Promissory Notes will be construed and interpreted under the laws of the state of New York, United States of America. Stockholders undertake the duty of negotiating said Promissory Notes only with a limited number (because they may not be sold in a public offering) of top ranked international banking institutions. At Closing, Stockholders will designate two bank accounts (one of which must be in the United States of America) to which Buyer may remit payments under the Promissory Notes. Buyer may remit scheduled payments to either account as it so chooses, subject to further instructions from Stockholders. The Promissory Notes will be issued in accordance with the terms of this Section as pertinent. Stockholders will provide Buyer with written instructions, before Closing, in relation to the Stockholders-beneficiaries in whose favour the Promissory Notes must be issued, and the names of the Persons or banking institutions authorized to receive payments. Buyer has the unrestricted rights to pre pay the Promissory Notes without penalty, together with accrued interest through the dates of pre-payments, anticipated payment to which the Stockholders irrevocably agree. Payment of these Promissory Notes are not subject to any condition and any Liabilities of the Stockholders which may represent the obligation of paying amounts of money to Buyer, will not authorize Buyer to carry out any act tending to non-payment, or to restrict, delay, reduce or limit amounts which are payable under the Promissory Notes. In case there were amounts due by the Stockholders, and subject to the limitations foreseen in Section 8.4, the Buyer may enforce the pledge provided for Section 2.12. 9 -9- 1.2.2 If COMFER Approval has not been obtained by the Closing Date, or if the conditions in Article V have not been satisfied, the Buyer may -at its exclusive choice- either (a) terminate the Agreement, leaving in favour of Stockholders the monies indicated in 1.2 (a) above in full and final compensation, and the notary indicated in Exhibit 3 will proceed with the immediate returning of the Deposited Stock to Stockholders; or (b) extend for up to an additional 180 days the term to obtain COMFER Approval and comply with all conditions in Article V in which case if COMFER Approval is not obtained and all conditions are not complied with by the end of the extended period, Stockholders will immediately return monies received pursuant to 1.2 (a) above, except if COMFER Approval is not obtained by reasons directly attributable to Buyer in which case the notary will return the Deposited Stock to the Stockholders. Upon Buyer's receipt of the US$ 20 million, as in the case foreseen in the last part of Section 1.2.2 (b), the Deposited Stock will be immediately released to Stockholders. If COMFER Approval is obtained and all conditions in Article V are complied with prior to the end of such 180 day extension, parties will proceed with this Agreement and payments pursuant to Section 1.2 (b) will be made. SECTION 1.3 Adjustments to Base Purchase Price. The Base Purchase Price will be adjusted as follows: 1.3.1 Stockholders represent that on the Closing Date, the Company shall have at least 460,000 EBS's. Should there be materially fewer EBS's on the Closing Date, Buyer, in its sole discretion may elect to (i) consummate the Closing, in which case the cash portion of the Base Purchase Price will be reduced by an amount equal to U$S 1,500 multiplied by eighty percent (80%) of the positive difference between (a) 460,000 and (b) the number of EBS's as of the Closing Date and must be made in conformity with the method demonstrated in Exhibit 9 or (ii) terminate this Agreement if there were less than 350,000 EBS in which case the Stockholders will immediately return to Buyer all monies received under Section 1.2 a) and against said payment the Deposited Stock will be released. If on the Closing Date, there are greater than 460,000 EBS's, the Base Purchase Price will be increased in the same manner. 10 -10- 1.3.2 Stockholders represent that all Liabilities have been adequately reported and accounted for and that there are no Liabilities, disclosed or undisclosed, for which due provision have not been accounted if necessary. SECTION 1.4 Determination of Adjustments. Preliminary and final adjustments to the Base Purchase Price will be determined as follows: 1.4.1. At least five business days prior to the Closing, Stockholders will deliver to Buyer a report (the "Preliminary Adjustments Report"), certified as to completeness and accuracy by Stockholders, showing in detail any adjustments which are calculated as of the Closing Date (or as of any other date agreed by the parties) and any documents substantiating the adjustments proposed in the Preliminary Adjustments Report. The Preliminary Adjustments Report will include a complete list of Subscribers, a detailed calculation of EBS and a balance sheet as of the Balance Sheet Date audited by a firm reasonably acceptable to Buyer prepared in accordance with GAAP indicating, inter alia, all Liabilities as of the Balance Sheet Date. Stockholders also will furnish to Buyer a bring down letter stating that the Company has not incurred in any additional liabilities or modified in any material respect the Balance Sheet as of the Balance Sheet Date, other than in the ordinary course of Business. The net adjustment shown in the Preliminary Adjustments Report will be reflected as an adjustment to the Base Purchase Price payable at Closing. Those Liabilities which arise from the Preliminary Adjustments Report will be deducted equally (pro-rata) from the original principal amount of Notes # 1 to # 4 during the first twenty-four (24) installments provided for in 1.2 (b). 1.4.2. Within 150 days after the Closing, Shareholders will deliver to Buyer (i) a balance sheet as of the Closing Date audited by a firm reasonably acceptable to Buyer prepared in accordance with GAAP indicating, inter alia, all Liabilities as of Closing, and (ii) a report (the "Final Adjustments Report"), similarly certified by Stockholders, showing in detail the final determination of all adjustments which were not calculated as of the Closing Date and containing any corrections to the Preliminary Adjustments Report, together with any documents substantiating the adjustments proposed in the Fi- 11 -11- nal Adjustments Report. Buyer will provide Stockholders with reasonable access to all records which Buyer has in its possession and which are necessary for preparing the Final Adjustments Report. For the purposes of this Final Adjustments Report, the parties agree to include in the calculation of the Base Purchase Price only those subscribers whose Basic Services were installed before Closing and who have paid their first regularly scheduled billing for Basic Services after the Closing, and to exclude from the said calculation only all those Subscribers who as of the Closing Date had paid their first Basic Service billing and who had not paid their second Basic Service billing after the Closing Date. For the purposes of payment of these adjustments the parties agree to the EBS definition and calculation provided hereabove. 1.4.3. Within 30 days after receipt of the Final Adjustments Report and of the balance sheet referred to in 1.4.2, Buyer will give Stockholders written notice of Buyer's objections, if any, to the Final Adjustments Report and with respect to Liabilities indicated in said balance sheet. If Buyer makes any such objection, the parties will agree on the amount, if any, which is not in dispute within 30 days after Stockholders' receipt of Buyer's notice of objections to the Final Adjustments Report and with respect to Liabilities indicated in said balance sheet. Any undisputed amount will be paid by the Stockholders within ninety (90) days after the Final Adjustments Report. Should the Final Adjustments Report show undisputed amount in favour of the Stockholders, Buyer shall pay said amount within ninety (90) days after the Final Adjustments Report. Any disputed amounts will be determined within 210 days after the Closing Date by a mutually agreed accounting firm whose determination will be conclusive. Any Liability will be paid by the Stockholders to third parties upon receiving a judicial claim in this sense. Stockholders and Buyer will bear equally the fees and expenses payable to such firm in connection with such determination unless the determination of such firm results in a net decrease in the Base Purchase Price of more than 10% thereof, in which case the fees and expenses payable to such firm will be paid by Stockholders. SECTION 1.5 Additional Agreements. On or before February 15, 1995, Stockholders and/or Company will, and shall perform acts in order that licensees and/or owners not related to Stockholders or the Company, enter into the following agreements with Buyer and/or Company, as 12 -12- the Buyer may determine in relation to the parties to the agreement: (i) A mutually acceptable Irrevocable Right of First Refusal ("Right of First Refusal") granting Buyer or its designees a Right of First Refusal to purchase all or part of the Programming Assets. (ii) Programming supply agreements for the Programming Assets as provided herein will be executed for a 5 year period with an option in favour of Buyer to extend the same for another 5 year period. The extension of said agreement must be informed by Buyer with notice 6 months prior to the original date of termination. Said agreements will grant Buyer clause-by-clause "most favored nations" rights including lowest market prices, except in those cases where programming is provided for free. (iii) A license agreement for the name "Cablevision" and trademarks, service, marks, tradenames, dressings in every shape size and colors related to the Company Business which are currently used in the Company Business including, but not limited to, Cablevision, CV and CVN; and subject to the programming supply agreement to be agreed upon above. (iv) Agreement to supply to Company all those programs currently provided to Company by third parties in the terms of a final agreement to be executed. (v) An agreement on the Assets which will be taken out of the Company comprehensive of all ownership interests on Real Property, the shares of Radiodifusora El Carmen S.A. (Canal 2), the assets related to the Programming Assets and the production, transmittal and commercialization, including without limitation, the assets and Persons related to the satellite commercialization of the Programming Assets, and all those credits caused before Closing. Those credits which should have been excluded under this Section, but which were not excluded in due course, will be handed over to the Stockholders insofar they have been credited within five (5) years following the Closing Date. Buyer also acknowledges in favour of Stockholders the eventual claims against COMFER. Those credits related to Subscribers' obligations will not be excluded. The excluded receivables may be compensated under Section 1.4.3.. The exclusion of receivables under 13 -13- this agreement will not affect the normal development of the Company Business. (vi) The Stockholders Agreement according to the wording contained in Exhibit 1. (vii) The form of the Promissory Notes and of the pledge agreements forseen under this Agreement. SECTION 1.6 Late Payment. Default. The delay in the payment of the balance due pursuant to Section 1.2 b) will occur automatically, with the expiration of the agreed dates, without need of any judicial or out-of-court requirement, giving way to punitive and compensatory interests at a daily rate equivalent to a rate of 15% per annum, during which payment is due and until the date of payment. Default in paying two consecutive installments, or six late payments, whether consecutive or not, will entitle the Stockholders to: (i) demand fulfillment of the agreement in which case all granted financing will be considered due and the Stockholders may enforce the total pending balance considering it as due, together with the corresponding compensatory and punitive interests, or (ii) rescind this Agreement, the Buyer having to return the Shares, leaving in favour of the Stockholders all amounts handed over under any concept and at any time according to this Agreement as full and final indemnification. This rescission right will terminate when the Buyer has made enough payments under the Promissory Notes so that Stockholders have received 51% percent of the Base Purchase Price in cash. In order to enforce any of the rights provided for in (i) or (ii) above, the Stockholders must have previously demanded that Buyer fully satisfy his uncomplied obligation, including payment of capital and compensatory and punitive interests, within fifteen (15) days and Buyer must not have satisfied his uncomplied obligation. The parties agree that this benefit granted to Buyer prior demand for compliance will be one and only during the whole lifetime of the Agreement. The Buyer can not assign any rights as long as it is in default of payment. SECTION 1.6.1 Guarantees. As guarantee of payment of balances due, Buyer will execute a pledge agreement in favour of the Stockholders, affecting all the Shares, along the following guidelines (i) the pledge will be 14 -14- registered at the Inspeccion General de Personas Juridicas and other pertinent registers, together with the registration of the transfer of the Shares in favour of the Buyer; (ii) the guarantee will survive until the total cancellation of the balance due, interests and/or eventual punitive interests if applicable, (iii) all the provisions of the pledge agreement will be according to the requirements established in the Argentine Broadcasting Law and/or to those which the COMFER may suggest; (iv) the Company will duly acknowledge and register the pledge in the pertinent corporate books; (v) every capital increase decided by the Company will imply the obligation of the Buyer or assignees to pledge in favour of the Stockholders 80% of the shares subscribed for by Buyer or assignees as a result of the corresponding capital increase; (vi) the parties agree that the procedure foreseen in article 3223 of the Argentine Civil Code and/or in the Commercial Code of the Argentine Republic can be indistinctly used at the option of the Stockholders; (vii) in case of judicial enforcement, the Stockholders will appoint all the appraisers and auctioneers which may be necessary, except in case they take the option of the auctioning procedure under article 585 of the Commercial Code in which case the parties will agree beforehand to the appointment of a mutually agreeable appraiser among Price Waterhouse, Arthur Andersen, Deloitte Haskins & Sells and Citibank (Buenos Aires branch) and, should an agreement not be possible in this regard, the option among these firms/institutions will be made by the Stockholders; (viii) use of other standard clauses which arise from the form of the Registro Nacional de Creditos Prendarios (Act Nr 12.962); (ix) all registration, deregistration and cancellation costs will be faced by Buyer, same as all enforcement costs (unless otherwise determined by a court resolution); and (x) the pledge will continue in force until full cancellation of the balance due. The parties will appoint the administrator of the pledge ("the Agent") in the same way as provided in the preceding paragraph, to whom the following irrevocable powers of attorney will be granted at the Closing: (i) by the Buyer: a) so that the Agent may proceed with handing over of the Shares, issuing receipts for monies received and, payment of the same in case the Stockholders elect the procedure foreseen in article 3223 of the Argentine Civil Code (in which case the Notes foreseen in Section 1.2 b) can be used for payment) and, b) in case the Agreement is rescinded: in order that the Agent transfer 15 -15- the Shares to the Stockholders in accordance with legal provisions in force in Argentina; (ii) the Stockholders: in order that the Agent proceeds with the same empowerment for the case of enforcement of the pledge provided for herein and in Section 2.12. At Closing the Stockholders will execute a pledge agreement in favour of the Buyer, affecting the Stockholders 20% of its interest in the Company along the guidelines established in 1.6.1., in order to secure all Liabilities, disclosed or undisclosed, caused before Closing, and subject to the limitation provided in Section 8.4., enforceable to the extent of the amounts paid by the Company. SECTION 1.7 Closing. Unless this Agreement shall have been terminated pursuant to Section 7.1 hereof, the closing of the purchase and sale of the Shares (the "Closing") shall take place at the offices of M & M Bomchil, Suipacha 268, 12th floor, Buenos Aires, at 10 a.m. local time on the Closing Date or will be conducted by mail, or at any other place, time or date as the Buyer and the Stockholders may mutually establish (such time and date being referred to herein as the "Closing Date"). SECTION 1.8 Deliveries by Stockholders. Stockholders covenant and agree to deliver items and documents to Buyer as follows: 1.8.1 Stockholders have previously furnished to Buyer or at least ten (10) days prior to Closing Date, or such earlier date as provided herein, will furnish, without further demand, accurate and complete copies of all documents hereinafter specified: (a) a certified copy of the Articles of Incorporation of the Company, as amended, and of the Company's By-laws. (b) minutes and written actions containing an accurate record of proceedings of and actions by the shareholders, directors, and committees of directors of the Company from its inception. (c) copies of the shareholders book of the Company which accurately reflect all issuances, reissuances, can- 16 -16- cellations and transfers of Company stock, and when the Company has been converted to an SRL- of all registrations carried out at the Public Registry of Commerce which adequately reflect all ownership, cancellations, capital increase and transfers of Company interest or cuotas. (d) copies of all Governmental Permits for the ongoing Company Business. (e) copies of Company Contracts and Title Documents. (f) copies of any title documents or Company Contracts representing intangible property. (g) copies of the insurance policies presently in force. (h) copies of any employee incentive, bonus or benefit plans or agreements. (i) the Financial Statements and the Balance Sheet described in Sections 1.4.1 and 2.10 of the Agreement. (j) copies of all tax returns described in Section 2.14 of the Agreement that have been filed with any Governmental Authority within the seven (7) years preceding the date hereof and any additional tax returns for tax years that have not been agreed as final by the applicable Governmental Authority. Copies of any tax returns proposed to be filed by or on behalf of the Company, with any Governmental Authority following the date hereof and on or prior to the Closing shall be delivered to Buyer at least 5 days before the filing thereof for Buyer's review. (k) copies of such other documents and items as Buyer may reasonably request. 1.8.2 AT LEAST THIRTY (30) DAYS PRIOR TO CLOSING, Stockholders shall cause the Company to furnish to Buyer documents which accurately show the boundaries of all Real Property as owned or leased by the Company together with any and all improvements, rights of way, easements, roads and such other features as Buyer shall reasonably specify. 17 -17- 1.8.3 AT LEAST FIFTEEN (15) DAYS PRIOR TO CLOSING, Stockholders shall deliver to Buyer the Financial Statements. 1.8.4 WITHIN TEN (10) DAYS PRIOR TO CLOSING, Stockholders shall also cause the Company to procure and provide to Buyer a report dated within ten (10) days prior to the Closing Date, issued by Real Estate Registry or by a notary or other agency satisfactory to Buyer, to the effect that (i) none of the Assets is subject to any recorded lien, including any lien for federal, state or local taxes or assessments, and (ii) no suits or judgments have been filed against the Company except for those indicated in the Balance Sheet as of the Closing Date or in Exhibit 5 as may correspond. 1.8.5 AT THE CLOSING, provided that the Conditions Precedent indicated in Articles IV and V have been met, Stockholders will, with duly and fully executed instruments, certificates, documents and opinions, deliver to Buyer, or cause Company to deliver to Buyer: (a) The documents evidencing the Shares, duly endorsed, in blank if appropriate, and/or all necessary documentary or transfer tax stamps affixed thereto together with such other documents or instruments as Buyer may request, in order that Buyer be vested with good and exclusive title to the Shares. (b) To the extent not previously delivered, the minute books, shareholders books of the Company -if applicable- and such other papers, evidence of title or interest, books, records, files, correspondence, memoranda and other documents of the Company, all as Buyer may request prior to the Closing. (c) A bring down letter from the Stockholders indicating that all representations and warranties made under this Agreement are true and valid as of the Closing Date. (d) The written resignations, dated the Closing Date, of all of the directors or managers of the Company, except for those mutually agreed by the parties. (e) Employment Agreements, dated the Closing Date, executed by the Company and mutually agreed key employees. 18 -18- (f) Duly certified copies of resolutions of the Board of Directors or similar governing body of, and, if required by applicable law, the Stockholders or other holders of ownership interest in each Stockholder that is not a natural person, authorizing the execution, delivery and performance of this Agreement by such Stockholder which resolutions shall be in full force an effect at and as of the Closing. (g) Documentary proof and counsel opinion reasonably acceptable to Buyer that: (i) The Company has timely obtained all authorizations needed to carry all signals being carried and all authorizations needed to utilize the frequencies on which these signals are carried; (ii) Except with respect to general rulemakings and similar matters relating generally to the Company activity, there is no legal action or governmental proceeding pending or, to such counsel's best knowledge after due inquiry, any investigation pending or proceeding threatened (nor any basis therefor) for the purpose of modifying, revoking, terminating, suspending, canceling or reforming any of the Company's certificates of compliance or licenses or which might have any other adverse effect upon, or cause disruption to, the Company Business; (iii) that the Company is in good standing with and has appropriate authority from the COMFER in order to carry on the Company Business as conducted as of the date of this Agreement and the Closing; (iv) that Stockholders have the power and capacity to sell the Shares so as to vest good and marketable title to the same, and (v) such other matters as Buyer may reasonably request. (h) All blueprints, schematics, drawings, diagrams, maps, system design bill of material, engineering and technical data, used by the Company in connection with the Assets and the Company Business, unless Buyer shall direct in writing that the same or part thereof be delivered to Buyer elsewhere. (i) A certificate signed by the Secretary (or other person having and exercising equivalent authority) of each Stockholder that is not a natural person, certifying to Buyer the incumbency of such Stockholder officers (or persons having and exercising equivalent authority) from the date hereof to the Closing Date, and bearing the authentic signatures of all such officers (or other persons) who shall have executed this Agreement, or any of the other documents required or contemplated by this agreement, prior to or at the Closing. 19 -19- (j) A long-form certificate of good standing for the Company dated not more than five (5) days prior to the Closing Date, a certificate of tax good standing for the Company dated not more than five (5) days prior to the Closing Date and a "bring-down" tax good standing telegram for the Company dated the Closing Date, in each case from the Company syndic or the Chairman of the board of directors. (k) And a bring down letter dated the Closing Date stating that between the Balance Sheet Date and the Date of Closing, there have not been modifications to the Financial Statements other than those attributable to the evolution of the ordinary Company Business, nor have there been distribution or payings of Company dividends other than those paid in kind or cash as provided in Section 2.11 herein. (l) Such documents and instruments as may be necessary or as Buyer may request in order to change the authorized signatures for all bank accounts, and the persons authorized to have access of the Company or otherwise in order to vest in Buyer exclusive control over and possession of such accounts and safety deposit boxes and the funds and other property deposited therein. ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS Stockholders and Company (where noted) represent and warrant to Buyer, as of the date of this Agreement and as of the Closing, as follows: SECTION 2.1. Organization and Qualification. Company is a corporation duly organized, validly existing and in good standing under the laws of Argentina and has all requisite corporate power and authority to own, lease and use its Assets as they are currently owned, leased and used and to conduct the Company Business as it is currently conducted. The Company is duly qualified or licensed to do business and is in good standing under the laws of each jurisdiction in which the character of the Company Business makes such qualification necessary, except any such jurisdiction where the failure to be so qualified or licensed and in good standing would not have 20 -20- a material adverse effect on Company or on the validity, binding effect or enforceability of this Agreement. SECTION 2.2. Good title. Stockholders have good, valid, marketable and exclusive title to the Shares free and clear of any liens, encumbrances, rights of first refusal (except as agreed herein), pledges or claims, with full right and lawful authority to transfer to Buyer the Shares. There are no outstanding options, warrants or any other preemptive rights or commitments of any kind for third parties to acquire or become beneficiary of the Shares in any way. All of the Shares have been duly authorized and validly issued and have been fully paid for and there are no pending increases of capital nor convertible securities. Should full payment of any Shares be pending, the same must be canceled (either through the cancelling of that portion of the capital increase not paid in, or through payment of the capital increase before Closing). Spousal consent provided for in article 1277 of the Argentine Civil Code has been granted by the spouse of each Stockholder when necessary. SECTION 2.3. Authority and Validity. Company and Stockholders have authority to execute and deliver, to perform its obligations under, and to consummate the Stockholders transactions contemplated by this Agreement. The execution and delivery by Stockholders and Company and the performance by Stockholders and Company of their obligation hereunder, and the consummation by Stockholders and Company of the transactions contemplated by this Agreement have been duly authorized by all requisite corporate and other appropriate action of Stockholders and Company. This Agreement has been duly executed and delivered by Stockholders and Company and is the valid and binding obligation of Stockholders and Company, enforceable against Stockholders and Company in accordance with its terms, except insofar as enforceability may be affected by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect affecting creditor's rights generally or by principles governing the availability of equitable remedies. SECTION 2.4. No Breach or Violation. Subject to obtaining the COMFER Approval and other Required Consents, the execution, delivery and performance of this Agreement by Stockholders and Company will not: (a) violate any provision of the charter or bylaws of the Company; 21 -21- (b) constitute a material violation of any Legal Requirement; (c) require any consent, approval or authorization of, or any filing with or notice to, any Person; or (d) (i) violate, conflict with or constitute a breach of or default under, (ii) permit or result in the termination, suspension or modification of, (iii) result in the acceleration of (or give any Person the right to accelerate) the performance of the Company under, or (iv) result in the creation or imposition of any Encumbrance under, any Company Contract or any other instrument evidencing any of the Assets or any instrument or other agreement to which Company is a party or by which Company, Company Business or any of its Assets is bound or affected, except for purposes of this clause (d) such violations, conflicts, breaches, defaults, terminations, suspensions, modifications, and accelerations as would not, individually or in the aggregate, have a material adverse effect on any System, the Company Business or the Company. SECTION 2.5. Assets. Company has exclusive, good and marketable title to (or, in the case of Assets that are leased, valid leasehold interests in) the Assets (other than Real Property, as to which the representations and warranties in Section 2.6 apply). The Assets are free and clear of all Encumbrances of any kind or nature, except (a) restrictions stated in the Governmental Permits and (b) Encumbrances disclosed in this Agreement. Except as set forth on Exhibit 6, none of the Equipment is leased by Company from any other Person. The Assets will remain in the Company and are all the assets necessary to permit Buyer to conduct the Company Business substantially as it is being conducted on the date of this Agreement in compliance with all Legal Requirements. All the Equipment is in good operating condition and repair, ordinary wear and tear excepted and is suitable and adequate for continued use in the manner in which it is presently used. No Stockholder or any affiliate of Stockholder has been granted or has applied for a cable television franchise in any area currently served by the Company Business, except for Saprotel S.R.L., corporation which in the course of this year has not increased its number of subscribers, and will not in the future. SECTION 2.6. Real Property. 22 -22- 2.6.1. All the Assets consisting of Real Property interests are described on Exhibit 4. Company has valid leasehold interests in Real Property leased by Company and, with respect to other Real Property not owned or leased by Company, Company has the valid and enforceable right to use all other Real Property pursuant to easements, licenses, rights-of-way or other rights. 2.6.2. The documents delivered by Company or Stockholders to Buyer as evidence of each lease of Real Property constitute the entire agreement with the landlord in question, except for the agreements indicated under Exhibit 4 as subject to renegotiation which will be renegotiated in order to have them meet current practice and market prices for which purposes the parties may request the appraisal of three respectable local real estate brokers. There are no leases or other agreements, oral or written, granting to any Person other than Company the right to occupy or use any Real Property. All easements, rights-of-way and other rights appurtenant to, or which are necessary for the Company's current use of, any Real Property are valid and in full force and effect, and the Company has not received any notice with respect to the termination or breach of any of those rights. Each parcel of Real Property, any improvements constructed thereon and their current use conform to (a) all applicable Legal Requirements, including zoning requirements, and (b) all restrictive covenants, if any, or other Encumbrances affecting all or part of such parcel. SECTION 2.7. Environmental Matters. 2.7.1. The Real Property currently complies with and, to Stockholders' best knowledge, has previously been operated in compliance with, all Environmental Laws. Company has not generated, released, stored, used, treated, handled, discharged or disposed of any Hazardous Substances at, on, under, in or about, or in any other manner affecting any Real Property, transported any Hazardous Substances to or from any Real Property or discharged any Hazardous Substances from any Real Property into any body of water, directly or indirectly, and Stockholders have no notice that any other present or previous owner, tenant, occupant or user of any Real Property or any other Person has committed or suffered any of the foregoing. To Stockholders' best knowledge, no release of Hazardous Substances outside the Real Prop- 23 -23- erty has entered or threatens to enter any Real Property, nor is there any pending or threatened claim based on Environmental Laws which arises from any condition of the land surrounding any Real Property. No claim or investigation based on Environmental Laws which relates to any Real Property or any operations on it (a) has been asserted or conducted in the past or is currently pending against or with respect to Company or, to the Stockholders' best knowledge, any other Person, or (b) to the Stockholders' best knowledge, is threatened or contemplated. 2.7.2. To Stockholders' best knowledge, (a) no underground storage tanks are currently or have been located on any Real Property, (b) no Real Property has been used at any time as a gasoline service station or any other facility for storing, pumping, dispensing or producing gasoline or any other petroleum products or wastes and (c) no building or other structure on any Real Property contains asbestos. There are no incinerators, septic tanks or cesspools on the Real Property and all waste is discharged into a public sanitary sewer system. 2.7.3. Stockholders have caused the Company to provide Buyer with complete and correct copies of (a) all studies, reports, surveys or other materials in the Company's possession or to which the Company has access relating to the presence or alleged presence of Hazardous Substances at, on or affecting the Real Property, (b) all notices or other materials in the Company's possession or to which the Company has access that were received from any Governmental Authority having the power to administer or enforce any Environmental Laws relating to current or past ownership, use or operation of the Real Property or activities at the Real Property and (c) all materials in the Company's possession or to which the Company has access relating to any claim, allegation or action by any private third party under and Environmental Law. SECTION 2.8. Compliance with Law: Governmental Permits. 2.8.1. The ownership, leasing and use of the Assets as they are currently owned, leased and used, and the conduct of the Company Business as it is currently conducted do not violate any Legal Requirement, which vio- 24 -24- lation, individually or in the aggregate, would have a material adverse effect on the System, the Company Business or the Company. The Company has received no notice claiming a violation by Company or the Company Business of any Legal Requirement applicable to Company or the Company Business as it is currently conducted and to Stockholder's and Company's best knowledge, there is no basis for any claim that such a violation exists. Shareholders and Company have complied fully with the laws of the Argentine Republic and United States of America Foreign Corrupt Practices Act. 2.8.2. Complete and correct copies of the Governmental Permits have been delivered by Company to Buyer. The Governmental Permits are currently in full force and effect, are not in default, and are valid under all applicable Legal Requirements according to their terms. There is no legal action, governmental proceeding or investigation, pending or threatened, to terminate, suspend or modify any Governmental Permit and Company is in compliance with the terms and conditions of all Governmental Permits and with other applicable requirements of all Governmental Authorities relating to the Governmental Permits, including all requirements for notification, filing, reporting, posting and maintenance of logs and records. 2.8.3. Without limiting the generality of the foregoing: (a) the operation of Company Business and each System has been, and is, in compliance with the rules and regulations of the Argentine Republic, (b) Company has made all filings required to be made with the Governmental Authorities; (c) Company has provided all notices to subscribers and maintained all public files required under Argentine Law; (d) each System is in compliance with all must carry requirements and has received all necessary retransmission consents; and (e) each System is in compliance with all signal leakage criteria prescribed by the Argentine regulations. SECTION 2.9. Patents. Trademarks and Copyrights. Company has timely and accurately made all requisite filings and payments with the Register of Copyrights and is otherwise in compliance with all applicable rules and regulations of the Copyright Office. Company has delivered to Buyer complete and correct copies of all current reports and filings, and all reports and filings for the 25 -25- past five years, made or filed pursuant to copyright rules and regulations with respect to the Company Business. Company has collected and paid to the appropriate Governmental Authority all withholding taxes payable on fees and/or royalties paid to non-resident suppliers and licensors. Company does not possess any patent, patent right, trademark or copyright except for licenses respecting program material and obligations applicable to cable television systems generally. The operation of the Company Business as currently conducted does not violate or infringe upon the rights of any Person in any copyright, trademark, service mark, patent, license, trade secret or the like. SECTION 2.10. Financial Statements. Stockholders shall cause the Company to deliver to Buyer combined financial statements of the Company for the nine months ended September 30, 1994 and years ended December 31, 1994 (within 45 days of year's end) 1993 and 1992 and for each quarter after January 1995 (within 30 days of each quarter's end). Stockholders will cause the Company to deliver to Buyer correct and complete copies of its audited balance sheets and related statements of income, Stockholders' equity and cash flows for the nine months ended September 30, 1994, the three years ended December 31 1994 (within 45 days of year end), 1993 and 1992, and for each quarter after January 1995 (within 30 days of each quarter's end) all of which shall be presented in timely manner to Buyer (collectively, the "Financial Statements"). The Financial Statements were and will be prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby and fairly present Company's financial position, results of operations and changes in financial position as of the dates and for the periods indicated. Except as disclosed by, or reserved against in, its most recent balance sheet included in the Financial Statements, Company did not have as of the date of such balance sheet any liability or obligation, whether accrued, absolute, fixed or contingent (including liabilities for taxes or unusual forward or long-term commitments), which was or would be material to the Company Business, results of operations or financial condition of Company, nor to Stockholders' or Company's best knowledge does any aspect of the Company Business form a basis for any claim by a third party which, if asserted, could result in a liability not disclosed by or reserved against in such balance sheet, if pertinent. Stockholders will and shall cause the Company to cooperate fully with Buyer in the production of Finan- 26 -26- Statements, and with the production of all financial statements and related information required in connection with Buyer's reporting obligations to the SEC. SECTION 2.11 Since the date of the most recent balance sheet included in the Financial Statements (i) the Company Business has been operated only in the ordinary course, (ii) Company has not sold or disposed of any Assets other than in the ordinary course of business, except for payment of dividends necessary to transfer the Programming Assets, Real Property, assets affected to the programming and the shares of Radiodifusora El Carmen S.A. (Canal 2) and the credits excluded under Section 1.5 (v), out of the Company, (iii) there has been no material adverse change in, and no event has occurred which is likely, individually or in the aggregate, to result in any material adverse change in, the business, operations, Assets, prospects or condition (financial or otherwise) of the Company Business, other than changes affecting the cable television industry generally. SECTION 2.12 Stockholders represent that all Liabilities have been adequately reported and accounted for and that there are no Liabilities, disclosed or undisclosed, for which due provision have not been accounted, if pertinent. Should there be materially greater Liabilities upon the Company on the Closing Date, Buyer in its sole discretion may elect to terminate this Agreement or to consummate the Closing. If Buyer elects to consummate the Closing, the cash portion of the Base Purchase Price will be reduced in an amount equal to 80% of said Liability with the agreement of the Stockholders, or the Stockholders will otherwise guarantee said liability with a pledge over 20% of the shares of the Stockholders in the same manner as that provided for in Section 1.6.1 as applicable. SECTION 2.13. Legal Proceedings. Except as set forth on Exhibit 5 there is no judgment or order outstanding, or any action, suit, complaint, proceeding or investigation by or before any Governmental Authority or any arbitration pending, or to Stockholders' best knowledge, threatened, involving or affecting all or any part of the Company Business or Company. 27 -27- SECTION 2.14. Tax Returns: Other Reports. Company has duly and timely filed in proper form all income, franchise, sales, use, property, excise, payroll and other tax returns and all other reports (whether or not relating to taxes) required to be filed with the appropriate Governmental Authority. All taxes, fees and assessments of whatever nature due and payable by Company have been paid, except such amounts as are being contested diligently and in good faith and are not in the aggregate material. There are no outstanding agreements or waivers extending the statutory period of limitations applicable to any federal, state, local or foreign income tax return for any period. SECTION 2.15. Employment Matters. 2.15.1. On or before 15 December 1994 Stockholders will cause Company to deliver to Buyer a complete and correct list of names and positions of all employees of Company engaged in the Company Business and their current hourly wages or monthly salaries and other compensation. Company has complied in all respects with all Legal Requirements relating to the employment of labor, continuation coverage requirements with respect to group health plans, and those relating to wages, hours, collective bargaining, unemployment compensation, worker's compensation, equal employment opportunity and benefit plans, age and disability discrimination, immigration control and the payment and withholding of taxes. 2.15.2. Except as provided in Exhibit 8 Company is not bound by any contract with any labor organization, and Company has not recognized or agreed to recognize and is not required to recognize any union or other collective bargaining unit. No union or other collective bargaining unit been certified as representing any of its employees, nor has Company received any requests from any party for recognition as a representative of employees for collective bargaining purposes. To Company's best knowledge, its employees are not engaged in organizing activity with respect to any labor organization. Company has no employment agreement of any kind, oral or written, or implied, that would require Buyer to employ any Person after the Closing Date. 28 -28- SECTION 2.16. EBS Numbers. As of the Closing Date, the Company Business will have no fewer than 350,000 EBS's. SECTION 2.17. Finders and Brokers. Stockholders have not employed any financial advisor, broker or finder or incurred any liability for any financial advisory, brokerage, finder's or similar fee or commission in connection with the transactions contemplated by this Agreement for which Buyer could be liable. SECTION 2.18. Disclosure. No representation or warranty by Stockholders in this Agreement or in any schedule or Exhibit to this Agreement, or any statement, list or certificate furnished or to be furnished by Stockholders or Company pursuant to this Agreement, contains or will contain any untrue statement or material fact, or omits or will omit to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading in light of the circumstances in which made. Without limiting the generality of the foregoing, the information set forth herein concerning the Company Business is accurate and complete in all material respects. ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER Buyer represents and warrants to the Stockholders that: SECTION 3.1 Organization, Power and Authority. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, United States of America, and has the sufficient legal power and authority to own or lease and to operate its properties and to carry on its business as now being conducted. SECTION 3.2 Authorization. Buyer has the corporate power and authority to execute and deliver this Agreement, to consummate the transactions contemplated 29 -29- hereby and to perform its obligations under this Agreement, at its sole discretion. This Agreement, upon its execution and delivery by Buyer (assuming the due authorization, execution and delivery hereof by the Stockholders), will constitute the legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, and the rules of law of the country and/or State to which this Agreement is submitted as per Section 8.14 hereunder. SECTION 3.3 No Conflict or Violation. Neither the execution and delivery of this Agreement by Buyer, nor the consummation of the transactions contemplated hereby, will (a) violate any provision of the Articles of Incorporation of Buyer, (b) violate, conflict with or result in the breach or termination of, or otherwise give any other contracting party the right to terminate, or constitute a default under the terms of, any mortgage, bond, indenture or material agreement to which Buyer is a party or by which Buyer or any of its property or assets may be bound or materially affected, or (c) violate any judgment, order, injunction, decree or award of any court, administrative agency or governmental body against, or binding upon, Buyer or upon the property or business of Buyer. SECTION 3.4 Brokers' Fees. No broker, finder or similar agent has been employed by or on behalf of Buyer in connection with this Agreement or the transactions contemplated hereby, and no person or entity with which Buyer has had any dealings or communications of any kind is entitled to any brokerage commission, finder's fee or any similar compensation in connection with this Agreement or the transactions contemplated hereby. ARTICLE IV CONDITIONS TO THE OBLIGATIONS OF THE STOCKHOLDERS The obligations of each of the Stockholders to consummate the transactions contemplated by this Agreement are subject to the fulfillment, on or before the Closing Date, of the following conditions, subject to the right of the Majority Stockholders (as defined in Section 7.1 hereof) to waive any such condition. 30 -30- SECTION 4.1 Representations and Warranties True. All of the Representations and Warranties of Buyer contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date as if made on and as of the Closing Date. SECTION 4.2 Agreements Performed. Buyer shall have performed, in all material respects, all agreements required by this Agreement to be performed by Buyer prior to or on the Closing Date. SECTION 4.3 No Actions, Suits or Proceedings. No preliminary or permanent injunction or other order issued by any federal or state court of competent jurisdiction preventing consummation of the sale of any or all of the Shares to Buyer shall be in effect. ARTICLE V CONDITIONS TO THE OBLIGATIONS OF BUYER The obligations of Buyer to consummate the transactions contemplated by this Agreement, are subject to the fulfillment, on or before the Closing Date, of the following conditions (subject to the right of Buyer to waive any and/or all such condition in full, or partially). SECTION 5.1 Representations and Warranties True. All of the representations and warranties of the Company and each Stockholder contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date as if made on and as of the Closing Date. SECTION 5.2 Agreement Performed. Each Stockholder and the Company shall have performed, in all material respects, all agreements and covenants required by this Agreement to be performed by such Stockholder and the Company prior to or on the Closing Date. SECTION 5.3 No Actions, Suits or Proceedings. No preliminary or permanent injunction or other order issued by any Governmental Authority or any federal or state court of competent jurisdiction preventing consummation 31 -31- of the sale of any or all of the Shares to Buyer shall be in effect. SECTION 5.4 Stockholders' and Officer's Certificates. (a) Buyer shall have been furnished with certificates executed by each of the Stockholders, dated the Closing Date, representing and certifying (i) with respect to such Stockholder that the conditions set forth in this Article V have been fulfilled at or prior to the Closing Date, and (ii) that such Stockholder is not in material default under any provision of this Agreement. (b) Buyer shall have been furnished with a certificate signed by an appropriate officer of the Company, but without any personal liability to such officer, regarding the Company's Business and financial condition. SECTION 5.5 Required Consents. All Required Consents (including but not limited to consents to change of control of the Company), have been obtained on or before the Closing. SECTION 5.6 Contracts. All Company Contracts are in full force and effect and the Company has not incurred in any default under the same. SECTION 5.7 Employment Agreements. Mutually acceptable employment agreements will have been entered into between the Company and its key employees. SECTION 5.8 Assets and Employees. The parties will have agreed which assets and which employees, managers and executives will remain in the Company after Closing. SECTION 5.9 Non-Competition and Agreement Not To Hire. Each of the Stockholders will have entered into mutually acceptable agreements not to compete with the Company (as provided herein) and not to hire employees of the Company after Closing (as provided herein). SECTION 5.10 "Cablevision" License and Programming Assets. Mutually acceptable agreements will have been 32 -32- reached with respect to: (i) Company's continued use of the name "Cablevision", "CV", "CVN" and all associated names and trade and service marks and (ii) the obligation of the Company to execute agreements regarding the Programming Assets at cost or at the lowest existing price for third parties with inclusion of "most favoured nation" provision, except when programming is provided free of charge. SECTION 5.11 COMFER Approvals: All necessary COMFER Approvals required in connection with this Agreement, to the conditions precedent provided for in this Article and to any other duty or obligation provided for herein have been obtained. Such approvals will not impose any material change to the Company's license nor will they impose conditions that do not permit the Company to operate substantially as it did prior to Closing. Any COMFER Approval in favour of Buyer prior to Closing Date will not grant any right nor may any right be invoked on the basis of said approval, until the Buyer has complied with all its obligations at Closing. In case COMFER Approval has been obtained prior to Closing and this Agreement has been terminated, Buyer will carry out all acts, and sign all documents, which may be necessary to cancel the COMFER Approval. SECTION 5.12 Additional Agreements. Stockholders must have caused Company and/or third parties to enter into the additional Agreements established in Section 1.5, which include, but is not limited to, the Right of First Refusal. SECTION 5.13 Due diligence. All aspects related with a broad due diligence of the Company must have been satisfactorily completed by the Buyer or its representatives. SECTION 5.14 Reports for SEC. Financial Statements be prepared by Buyer, at its cost, in order that Buyer and its Affiliates may file the same to satisfy (i) its undertaking under Section 512(a) of Regulation S-K to keep the prospectuses contained in certain presently effective registration statements current, (ii) the requirements of any forms for the registration of securities under the Securities Act which Buyer may hereafter 33 -33- use to register any of its securities, and (iii) its obligation to file periodic and current reports under the Exchange Act, (iv) the requirements of any proxy statement under the Securities Act, and (v) such other rules of the Securities and Exchange Commission of the United States of America which Buyer may deem applicable. Stockholders shall fully cooperate with the preparation of these reports which shall be made under generally accepted accounting principals of the United States of America. ARTICLE VI COVENANTS Buyer and the Stockholders hereby covenant and agree as follows: SECTION 6.1 Access to Premises and Records. Between the date of execution and delivery of this Agreement and the Closing Date, Stockholders will give Buyer and its representatives full access at reasonable times to all the premises and books and records of the Company Business and will furnish to Buyer and its representatives all information regarding the Company Business as Buyer may from time to time reasonably request. Buyer may immediately send its agents and other personnel to the Company's offices to work closely on a day - to - day basis with all top level and other staff of the Company, including Stockholders. Stockholders will and will cause the Company's staff to work with and cooperate with Buyer's assigned personnel. Notwithstanding any investigation that Buyer may conduct of the Company Business, Buyer may fully rely on Stockholders representations, warranties, covenants and indemnities, which will not be waived or affected by or as a result of such investigation. SECTION 6.2 Continuity and Maintenance of Operations. Financial Statements. Except as Buyer may otherwise agree in writing, until the Closing: 6.2.1 Stockholders will continue to operate the Company Business in the ordinary course consistent with past practices (including completing line extensions, placing conduit or cable in new developments and fulfilling ins- 34 -34- tallation requests) and will use its best efforts to keep available the services of its employees employed in connection with the Systems and to preserve any beneficial business relationships with customers, suppliers and others having business dealings relating to the Company Business. Without limiting the generality of the foregoing, Company will maintain the Assets in good conditions and repair, will maintain adequate inventories of spare Equipment consistent with past practice, will maintain insurance as in effect on the date of this Agreement and will keep all of its business books, records and files in the ordinary course of business in accordance with past practices. Company will not itself, and will not permit any of its officers, directors, shareholders, agents or employees to, pay any of Company's subscriber accounts receivable (other than for their own residences) prior to the Closing Date nor will they hire any of the current employees officers or directors of the Company except for those agreed herein. Company will continue to implement its procedures for disconnection and/or discontinuance of service to subscribers whose accounts are delinquent in accordance with those in effect on September 30, 1994. 6.2.2 Stockholders will cause the Company not to, without the prior written consent of Buyer: (a) materially change the rate charged for Basic Services and will not add or delete any program services; (b) engage in any new promotions modifying the Basic Service charge or method of payments, or any promotions which differ materially from usual prior practice, (c) sell, transfer or assign any of the material Assets or permit the creation of any Encumbrance on any material Asset or a material Encumbrance on the Assets as a whole; (d) permit the amendment or cancellation of any of the Governmental Permits, Company Contracts or any other contract or agreement which affects or is applicable to the System or the Company Business which adversely affects the Company or the Company Business; (e) enter into any contract or commitment or incur indebtedness or other liability or obligation of any kind relating to any System or the Company Business involving an expenditure in excess of Company's past ordinary business practice; (f) take or omit to take any action that would cause Company to be in breach of any of its representations or warranties in this Agreement, or (g) pay any dividends except as provided in Section 2.11. 35 -35- 6.2.3 Stockholders will timely cause Company to deliver to Buyer correct and complete copies of monthly, quarterly and annual financial statements and operating reports for the Company Business and any reports with respect to the operations of the System prepared by or for Company at any time between the date of this Agreement and the Closing. All financial statements so delivered will be prepared in accordance with GAAP on a basis consistent with the Financial Statements referred to in Section 2.10. SECTION 6.3 Employee Matters. 6.3.1 Stockholders will cause Company to pay to employees employed in the Company Business all compensation, including salaries, commissions, bonuses, deferred compensation, severance, insurance, pensions, profit sharing, vacation, sick pay and other compensation or benefits to which they are entitled for periods prior to the Closing. Stockholders will cause Company not to, without the prior written consent of Buyer, change the compensation or benefits of any employees of the Company Business, except for normal prior practice in the labor relationship. 6.3.2 Stockholders will have paid or properly accrued for maintenance and distribution of benefits accrued under any employee benefit plan maintained by Company pursuant to the provisions of such plans. Buyer will assume neither any liability for any such accrued benefits nor any fiduciary or administrative responsibility to account for or dispose of any such accrued benefits under any employee benefit plans maintained by Company. 6.3.3 All claims and obligations under, pursuant to or in connection with any welfare, medical, insurance, disability or other employee benefit plans of Company or arising under any Legal Requirement affecting employees of Company incurred on or before the Closing Date or resulting or arising from events or occurrences occurring or commencing on or prior to the Closing Date will have been paid or properly accrued for, whether or not such employees are hired after the Closing. 36 -36- SECTION 6.4 Required Consents, Estoppel Certificates and Franchise Renewals. Stockholders, Company and Buyer will obtain, as soon as possible, all the Required Consents and COMFER Approvals, in form and substance satisfactory to the parties. Buyer, Company and Stockholders will cooperate in obtaining all Required Consents and COMFER Approvals, but will not be required to agree to any changes in, or the imposition of any condition to the transfer to Buyer which may imply a material modification to the Company Business and/or to the conditions or Sections of this Agreement. Such failure to agree will not constitute a reason attributable to the same. Should there be changes in, impositions or conditions which are acceptable to the Buyer but not to the Stockholders, the latter - in case Closing is not executed - will immediately return the U$S 20 million received under Section 1.2.a) and the Deposited Stock will be immediately released. Stockholders will cause the Company to require, at its expense, such estoppel certificates or similar documents from lessors and other Persons who are parties to Company Contracts as Buyer may request. Stockholders will use their best efforts to obtain, and will cooperate with Company to obtain, renewals or extensions of any COMFER and Governmental Authority licenses and franchises which expire prior to January 1, 2000 ("Extended Franchises"), for applicable legal terms. SECTION 6.5 No Shopping. None of Stockholder, Company or any agent or representative of any of them will, during the period commencing on the date of this Agreement and ending with the earlier to occur of the Closing or the termination of this Agreement, directly or indirectly (a) solicit or initiate the submission of proposals or offers from any Person for, (b) participate in any discussions pertaining to or (c) furnish any information to any Person other than Buyer relating to, any direct or indirect acquisition or purchase of all or any portion of the Company Stock. SECTION 6.6 Notification of Certain Matters. Stockholders will promptly notify Buyer of any fact, event, circumstance or action (a) which, if known on the date of this Agreement, would have been required to be 37 -37- disclosed to Buyer pursuant to this Agreement and (b) the existence or occurrence of which would cause any Stockholders' representations or warranties under this Agreement not to be correct and complete. SECTION 6.7 Risk of Loss. Condemnation. Stockholders will bear the risk of any loss or damage to the Company resulting from fire, theft or other casualty (except reasonable wear and tear) at all times prior to the Closing. If any such loss or damage is so substantial as to prevent normal operation of any material portion of a System or the replacement or restoration of the lost or damaged property within 20 days after the occurrence of the event resulting in such loss or damage, Stockholders will immediately notify Buyer of that fact and Buyer, at any time within 10 days after receipt of such notice, may elect by written notice to Stockholders either (i) to waive such defect and proceed toward consummation of this Agreement or (ii) terminate this Agreement, losing monies paid to Stockholders. If Buyer elects so to terminate this Agreement, Buyer and Stockholders will be discharged of any and all obligations hereunder, and the Deposited Shares will be released. If Buyer elects to consummate the transactions contemplated by this Agreement notwithstanding such loss or damage and does so, 80% of all insurance proceeds payable as a result of the occurrence of the event resulting in such loss or damage will be delivered by Stockholders or Company to Buyer, or 80% of the rights to such proceeds will be assigned by Stockholders to Buyer if not yet paid over to Stockholders, and Stockholders will pay to Buyer (or Buyer may withhold from the Base Purchase Price) an amount equal to the difference between the amount of such insurance proceeds and 80% of the full replacement cost of the damaged or lost Assets. If loss or damage were not covered by an insurance policy, and should Buyer wish to consummate the transactions contemplated in this Agreement, the Base Purchase Price payable to Stockholders will be reduced as per market value of 80% of the said loss or damage. SECTION 6.8 If, prior to the Closing, any part of or interest in the Company is taken or condemned as a result of the exercise of the power of eminent domain, or if a Governmental Authority having such power informs Stockholders or Buyer that it intends to condemn all or any part of the Company Business or Assets (such event being 38 -38- called, in either case, a "Taking"), then Buyer may terminate this Agreement, and Buyer will order the Deposited Shares to be released. If Buyer does not elect to terminate this Agreement, then (a) Buyer will have the sole right, in the name of Stockholders and the Company, if Buyer so elects, to negotiate for, claim, contest and receive 80% of all damages with respect to the Taking, (b) Stockholders will be relieved of its obligation to convey to Buyer the Assets or interests that are the subject of the Taking, (c) at the Closing Stockholders will assign to Buyer 80% of all of Stockholders' rights to all damages payable with respect to such Taking and will pay to Buyer 80% of all damages previously paid to Stockholders or Company with respect to the Taking and (d) following the Closing, Stockholders will give Buyer such further assurances of such rights and assignments with respect to the taking as Buyer may from time to time reasonably request. SECTION 6.9 Lien and Judgment Searches. Buyer may produce, at its cost in the shortest possible time (a) results of a lien search conducted by a professional search company of records in the office of the secretaries of state in each state and county clerks in each county where there exist tangible Assets, and in the state and county where Company's principal offices are located, including copies of all financing statements or similar notices or filings (and any continuation statements) discovered by such search company and (b) the results of a search of the dockets of the clerk of each federal and state court sitting in the city, county or other applicable political subdivision where the principal office or any material assets of Company may be located, with respect to judgments, orders, writs or decrees against or affecting Stockholders or any of the Assets. For these purposes Stockholders will give full collaboration to the representatives of Buyer. SECTION 6.10 Transfer Taxes. Stockholders and Buyer will be responsible to the extent determined by law for the payment of any state or local sales, use, transfer, excise, documentary or license taxes or fees or any other charge (including filing fees) imposed by any Governmental Authority with respect to the transfer pursuant to this Agreement, according to the rules provided by the pertinent legislation. Buyer will pay costs for converting the Company into an S.R.L. and Stockholders will timely comply with all legal requirements to enable said 39 -39- conversion; and Shareholders will pay cost related to removal from the Company of the assets to be excluded (Section 1.5 v). The removal will not affect the Company Business. SECTION 6.11 Use of Company Trade-name. For a period of 5 years after the Closing Date, (with Buyers option to extend another 5 years as long as the Programming Supply Agreement is in force Buyer may continue to operate the Systems using the trademark/tradename "Cablevision" and all derivations and abbreviations of such name and related marks. Prior to Closing, Buyer and the owner of such rights will enter into an agreement with respect to such rights, in accordance with Section 5.10. SECTION 6.12 Satisfaction of Conditions. Each party will use its best efforts to satisfy, or to cause to be satisfied, the conditions to the obligations of the other party to consummate the transactions contemplated by this Agreement, provided that Buyer will not be required to agree to any increase in the amount payable, or the method of payment. SECTION 6.13 Confidentiality. Neither party will issue any press release or make any other public announcement regarding this Agreement or the transactions contemplated hereby without the consent of the other party. Each party will hold, and will cause its employees, consultants, advisors and agents to hold, in confidence, the terms of this Agreement and any non-public information concerning the other party obtained pursuant to this Agreement. Notwithstanding the preceding, a party may disclose such information to the extent required by any Legal Requirement (including disclosure requirements under Argentine and United States of America federal and state securities laws), but the party proposing to disclose such information will first notify and consult with the other party concerning the proposed disclosure, to the extent reasonably feasible. Each party also may disclose such information to employees, consultants, advisors, agents and actual or potential lenders whose knowledge is necessary to facilitate the consummation of the transactions contemplated by this Agreement. Each party's obligation to hold information in confidence will be satisfied if it exercises the same care with respect to such information as it would exercise to preserve the confidentiality of its own similar information. Stockholders 40 -40- authorize Buyer to use all the information which may be necessary for presentations and filings before the Securities and Exchange Commission, or applicable state securities commissions. SECTION 6.14 Necessary Endorsements. Stockholders agree to endorse, assign and otherwise facilitate the sale and/or assignment of any TCI Stock used by Buyer to finance this transaction to an agreed third-party. To this effect the Stockholders are obliged to follow the written instructions given by the Buyer. Performance of these duties by Stockholder will not cause any personal or economic liability deriving from claims from Buyer or third parties. The Buyer will hold Stockholders harmless against any claim derived from such endorsement or assignment. Buyer acknowledges that this covenant in no way obligates Stockholders to accept any consideration other than cash and Notes in connection with this transaction foreseen in Section 1.2 b). This obligation of the Stockholders will only be demandable at the Closing Date. ARTICLE VII TERMINATION SECTION 7.1 Termination. Anything herein to the contrary notwithstanding, this Agreement may be terminated and the transactions contemplated hereby abandoned at any time prior to the Closing Date (a) by mutual written consent of Buyer and the Majority Stockholders (as hereinafter defined), (b) by Buyer if any of the conditions precedent to Closing set forth in Article V of this Agreement have not been met on the Closing Date and Buyer is not in default of its obligations hereunder, or (c) by the Majority Stockholders if any of the conditions precedent to Closing set forth in Article IV of this Agreement have not been met on the Closing Date and the Stockholders are not in default of their obligations hereunder. Termination under clauses (b) and (c) of the immediately preceding sentence shall be effective when a notice of termination is deemed to have been given pursuant to Section 8.8 hereof by the party or parties giving such notice to the other party or parties to whom such notice is directed. For the purposes of this Agreement, "Majority Stockholders" means Stockholders beneficially owning at least 51% of the Shares being sold pursuant to this Agreement. 41 -41- SECTION 7.2 Effects of Termination. If this Agreement is terminated and the transactions contemplated hereby are not consummated as provided in Section 1, this Agreement shall have no further force and effect. In case this Agreement is terminated on the grounds of breach of the statements made under Exhibit 7 the US $20,000,000 will be returned to the Buyer by the Stockholders, in which case the Deposited Stock will be released. This general provisions does not apply with regard to the provisions of Section 6.13 hereof relating to the confidentiality obligations of the parties, Section 6.13 hereof relating to publicity, and Sections 2.17 and 3.4 hereof relating to expenses; and provided that nothing in this Article VII shall relieve any party of liability if the failure to consummate the transactions contemplated hereby is due to an intentional action or inaction by such party which such party knew or reasonably should have known would cause the Closing hereunder not to occur on the Closing Date. ARTICLE VIII MISCELLANEOUS SECTION 8.1 Survival of Representations, Warranties and Agreements. The representations and warranties of Stockholders in this Agreement and in the documents and instruments to be delivered by Stockholder pursuant to this Agreement will survive until the sixth anniversary of the Closing Date, except that (a) all such representations and warranties with respect to any federal, state or local taxes, environmental matters, labor, social contributions, governmental authorizations, employee benefits and tort and contract claims will survive until 180 days after the expiration of the applicable statute of limitations (including any extensions). The representations and warranties of Buyer in this Agreement and in the documents and instruments to be delivered by Buyer pursuant to this Agreement will survive until the sixth anniversary of the Closing Date. The periods of survival of the representations and warranties prescribed by this Section are referred to as the "Survival Period". The liabilities of the parties under their respective representations and warranties will expire as of the expiration of the applicable Survival Period; provided, however, that such expiration will not include, extend or apply to any representation or warranty, the breach of which has been asserted by Buyer in a written notice to Stockholders before such expiration or about which Stockholders have given Buyer written notice before such 42 -42- expiration indicating that facts or conditions which exist or that, with the passage of time or otherwise, can reasonably be expected to result in a breach. SECTION 8.2 Indemnification by Stockholders. Stockholders jointly and severally, agree to (and prior to the Closing and following any rescission of the transactions consummated at the Closing, shall cause the Company to) indemnify and/or defend and/or hold harmless Buyer from and against: (a) all losses, damages, liabilities, deficiencies or obligations of or to the Company, Buyer or any such other indemnified person resulting from or arising out of (i) any misrepresentation or breach of warranty or any nonperformance or breach of any covenant or agreement of Stockholders contained in this Agreement or any additional agreements; (ii) the ownership of the Shares, the ownership or operation of the Company Assets, or the control, management or operations of the Company Business, prior to the Closing, whether known or unknown, asserted or unasserted, now existing or arising at any time prior to, at or after the Closing, including, without limitation, fines or forfeitures imposed or threatened to be imposed by any authority for any operation of the Company Business at or prior to the Closing which was not in full compliance with applicable rules, or for any operation at or prior to the Closing of any facility used in conjunction with the operation of the Company Business which was not in full compliance with said rules and any future, additional assessment imposed on Buyer or Company after the Closing by the Copyright Tribunal, the liability for which occurred prior to the Closing, but excluding any of such liabilities that are reflected on the Balance Sheet to the extent reflected thereon; and (b) all claims, actions, suits, proceedings, demands, judgments, assessments, fines, interest, penalties, costs and expenses (including, agreed to settlement costs and reasonable legal, accounting, experts' and other fees, costs and expenses) incident or relating to or resulting from any of the foregoing. SECTION 8.3 Stockholders further indemnification. Each of the Stockholders severally and jointly, agrees to indemnify and hold harmless Buyer, and its assigns from and against any and all claims, losses, damages and expenses (including, without limitation, settle- 43 -43- ment costs and reasonable legal or other expenses) incurred by the Company, Buyer or assignee resulting from or arising out of any misrepresentation or breach of any warranty relating to such Stockholder or the Shares sold by such Stockholder or the nonperformance or breach of any covenant, agreement or obligation of such Stockholder. SECTION 8.4 Limitation to Indemnification. The only limitation on Stockholders' indemnity obligation in favor of Buyer, Company or assignees will be in reference to liabilities for tax, environmental, labour, employee benefits, social contributions, contract claims, tort claims and Governmental Permits issues (except for COMFER licenses of the Company for which this limitation will not apply). Stockholders total obligation to indemnify Company, Buyer or assignees with respect to all such claims will be limited in the aggregate to US $50 million. SECTION 8.5 Indemnification by Buyer. Buyer agrees to indemnify, defend and hold harmless each Stockholder, its successors and assigns, from and against all losses, damages and expenses (including, agreed to, settlement costs and reasonable legal or other expenses) incurred by such Stockholder or any other indemnified person in connection with any misrepresentation or breach of any warranty made by Buyer in this Agreement or the nonperformance or breach of any covenant, agreement or obligation of Buyer contained in this Agreement. SECTION 8.6 Third Party Claims. Promptly after the receipt by any party hereto of notice of any claim, action, suit or proceeding by any person who is not a party to this Agreement (collectively, an "Action") which is subject to indemnification hereunder, such party (the "Indemnified Party") shall give reasonable written notice to the party from whom indemnification is claimed (the "Indemnifying Party"). At the sole expense and liability of the Indemnifying Party and within a reasonable time after the giving of such notice by the Indemnified Party, the Indemnifying Party shall: (i) admit or decline in writing to the Indemnified Party, the Indemnifying Party's liability to the Indemnified Party for such Action, (ii) notify the Indemnified Party in writing of the Indemnifying Party's intention to assume the defense thereof, (iii) post an indemnity or similar bond (in form 44 -44- and substance satisfactory to the Indemnified Party), in both cases for the full amount (including interest and penalties) for which the Indemnified Party may be liable as a result of such Action or provide other evidence satisfactory to the Indemnified Party of the Indemnifying Party's ability to pay such amount in full, and (iv) retain legal counsel reasonably satisfactory to the Indemnified Party to conduct the defense of such Action. The Indemnified Party and the Indemnifying Party shall cooperate with the party assuming the defense, in defending, compromising or settling any such Action in any manner that such party reasonably may request. If the Indemnifying Party so assumes the defense of any such Action, the Indemnified Party shall have the right to employ separate counsel and to participate in (but not control) the defense, compromise or settlement thereof, but the fees and expenses of such counsel shall be to the expense of the Indemnified Party unless (i) the Indemnifying Party has agreed to pay such fees and expenses, (ii) any relief other than the payment of money damages is sought against the Indemnified Party or (iii) the Indemnified Party shall have been advised by its counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the Indemnifying Party, and in any such case the fees and expenses of such separate counsel shall be borne by the Indemnified Party. No Indemnified Party shall settle or compromise any such Action for which it is entitled to indemnification hereunder without the prior written consent of the Indemnifying Party, unless the Indemnifying Party shall have failed, after reasonable notice thereof, to undertake control of such Action in the manner provided above in this Section. No Indemnifying Party shall settle or compromise any such Action in which any relief other than the payment of money damages is sought against any Indemnified Party unless the Indemnified Party consents in writing to such compromise or settlement. SECTION 8.7 Assignment: Successors and Assigns; Third Parties. No party to this Agreement shall convey, assign or otherwise transfer any of its rights or obligations under this Agreement without the express written consent of Buyer or the Majority Stockholder, as the case may be, except for the Stockholders rights to assign their rights and duties under this Agreement to an S.R.L. controlled by the Stockholders, (in which case the Stockholders will assume joint several liability), and Buyer's authorized assignment of its rights and obligations hereunder in favour of subsidiaries of Buyer or Carlos Avila 45 -45- y Cia. S.R.L. (in which case Buyer will assume joint several liability). Assignment can also be made in favour of Time Warner and/or US WEST provided that these assignees may comply with the legal requirements of COMFER. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Subject to the immediately preceding sentence, this Agreement is not intended to benefit, and shall not run to the benefit of or be enforceable by, any other person or entity other than the parties hereto and their permitted successors and assigns. Assignments of rights must be notified to the other party. SECTION 8.8 Notices. All notices or other communications required or permitted to be given hereunder shall be in writing and shall be delivered by hand (acknowledgement of receipt requested) or through a notary public, or sent by facsimile, telegram or registered mail (carta documento) and shall be deemed given when so delivered by hand or through a notary, or if faxed, telegraphed or mailed when so delivered. Said notices and communications must be addressed as follows: If to the Stockholders, addressed to: Mr. Eduardo Eurnekian Honduras 5663 1414 - Buenos Aires Argentina Telephone: (54 1) 777-1111 or (54 1) 777-1234 Fax: 777-1111 with a copy to: Mr. Mariano Ibanez Bonpland 1745 1414 - Capital Federal Telephone: 777-1234 Telecopier: 777-1234 (extension 765) If to Buyer, addressed to: TCI International Holdings, Inc. 5619 DTC Parkway Englewood, Colorado 80111, U.S.A. 46 -46- Attention: President Telephone: (1 303) 267 5740 Telecopier: (1 303) 488 3242 with a copy to: TCI International Holdings, Inc. 5619 DTC Parkway Englewood, Colorado 80111, U.S.A. Attention: General Counsel Telephone: (1 303) 267 4800 Telecopier: (1 303) 488 3245 and to: M & M BOMCHIL - Abogados Suipacha 268, 12th floor 1355 - Buenos Aires, Argentina Attention: Messrs. Marcelo Bombau/Nestor Belgrano Telephone: 328 8400 Fax: 326 7217 or in any case to such other address or addresses as hereafter shall be furnished as provided in this Section 8.8 by any of the parties hereto to each of the other parties hereto. SECTION 8.9 Waiver: Remedies. No delay on the part of Buyer, on the one hand, or the Stockholders, on the other, in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of Buyer or the Stockholders of any right, power or privilege hereunder operate as a waiver of any other right, power or privilege hereunder, nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. Upon any default by the Buyer, 47 -47- on the one hand, or any of the Stockholders, on the other hand, the Buyer or any such Stockholder, as the case may be, may proceed to protect his or its rights by suit in equity, action at law or other appropriate proceedings, whether for the specific performance of any covenant or agreement contained in this Agreement or to enforce any and all other legal or equitable rights. SECTION 8.10 Entire Agreement. This Agreement, including the schedules and Exhibits attached hereto, constitute the entire agreement among the parties hereto with respect to the subject matter hereof and supersede all other prior agreements or understandings of the parties relating thereto. There are no representations, warranties, agreements or undertakings of any party hereto with respect to the transactions contemplated by this Agreement other than those set forth in this Agreement or in the documents delivered at the Closing. All Exhibits annexed hereto, and all schedules referred to herein, are hereby incorporated in and made a part of this Agreement as if set forth in full herein. SECTION 8.11 Amendments; Waivers; Control By Majority. This Agreement may be modified or amended only by a written agreement signed by Buyer and the Majority Stockholders. Provisions hereof may be waived, and other actions permitted hereunder or contemplated hereby may be taken, in the case of Buyer, by an instrument signed by Buyer, and in the case of the Stockholders, by an instrument signed by the Majority Stockholder. SECTION 8.12 Further Assurances. Each Stockholder shall, at the request of Buyer, at any time and from time to time following the Closing hereunder, execute and deliver to Buyer all such further instruments and take all such further action as may be reasonably necessary or appropriate in order more effectively to sell, assign, transfer and convey to Buyer, or to perfect or record Buyer's title to or interest in, the Shares sold by such Stockholder hereunder. Buyer shall at any time and from time to time following the Closing hereunder execute and deliver to the Stockholders, or any of them, all such further instruments and take all such further action as may reasonably be necessary or appropriate in order more effectively to confirm or carry out the provisions of this Agreement. The parties hereto shall use their best 48 -48- efforts to consummate the transactions contemplated by this Agreement. SECTION 8.13 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute a single instrument. SECTION 8.14 Governing Law: Choice of Forum. This Agreement shall be governed by and construed in accordance with the laws of the Republic of Argentina, except for the Promissory Notes # 1 to 8 which will be exclusively governed in accordance with the laws of the State of New York, United States of America. SECTION 8.15 Submission to Arbitration. The parties will use their best efforts to resolve amicably any disputes arising under this Agreement, or those contained in its Exhibits or schedules. Except as otherwise expressly provided herein, and except for those cases related to default in payment of moneys due and the enforcement of pledge agreement indicated in Section 1.6.1. and Section 2.12, all disputes arising between the parties under this Agreement which cannot be resolved amicably shall be resolved by submission to arbitration pursuant to the Rules of the Inter-American Commission on International Commercial Arbitration then in force. The arbitration shall be held in Geneva, Switzerland. There shall be three arbitrators, one selected by the Stockholders, one selected by the Buyer and the third selected by mutual agreement of the parties, and failing their agreement, pursuant to the Rules of the Commission. None of the arbitrators shall be citizens of the U.S.A. or the Republic of Argentina. The arbitration shall be conducted in the English and Spanish languages. The arbitrators shall decide the case on the basis of Argentine law, and shall give written reasons for their award. The party in whose favour an award is issued shall be entitled to recover its costs or the arbitration, and any costs incurred in the enforcement of the award, including reasonable attorney's fees. The award of the arbitrators may be enforced in any jurisdiction where a party has assets or may be found, and the parties hereby irrevocably waive, to the fullest extent permitted by law, any defenses to recognition and enforcement of the award on the grounds of the invalidity of the submission to arbitration, and improper constitution of the arbitral panel (if constituted pursuant to this Section). Should an 49 -49- issue related to default In payment of moneys due or enforcement of the pledge agreement foreseen in Sections 1.6.1. arise, parties agree to submit to the jurisdiction of the courts of the city of Buenos Aires, or the city of New York as the Stockholders may decide, except for the case of enforcement of the pledge provided for under Section 2.12 in which case the option will be in favour of the Buyer. SECTION 8.16 Noncompetition. Each Stockholder covenants and agrees that, during the period in which his director or Stockholder of the Company, and for five years thereafter neither he, nor it, nor any of its officers, directors or affiliates, directly or indirectly, shall manage, operate, join, control, participate, or become interested in, or be connected with (as an employee, consultant, partner, officer, director, stockholder or investor, other than through ownership of up to a 5% equity interest in a publicly-traded entity) any cable television company or System nor in any Direct Broadcast Satellite or Direct to Home System which has Subscribers located within 40 (forty) kilometers miles from the periphery of any portion of the Company Business. This non-competition clause will terminate five (5) years as from the date the Stockholders ceases in his capacity as Stockholder or director of the Company. SECTION 8.17 Disclosure. This Agreement does not contain any untrue statement nor omit to state a material fact necessary to make the statements contained herein not misleading. There is no fact known to Stockholders which materially and adversely affects, or which in the future may so affect, the Common Stock or the Shares, which has not been set forth in this Agreement. SECTION 8.18 Captions. All section titles or captions contained in this Agreement, in any Exhibits annexed hereto or in any Schedule referred to herein, and the table of contents to this Agreement are for convenience only, and shall not be deemed a part of this Agreement and shall not affect the meaning or interpretation of this Agreement. All references herein to numbered sections, except otherwise indicated, are to sections of this Agreement. 50 -50- SECTION 8.19. This Agreement is executed in English and Spanish versions, and in case of differences among them, the Spanish version shall prevail. SECTION 8.20. The Stockholders and Buyer will execute those documents which may be necessary for the best implementation of the agreements contained herein. SECTION 8.21. All the provisions, rights and obligations undertaken by the Buyer and Stockholders are subject to the suspensive condition of the corresponding COMFER Approval. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written. 1) TCI International Holdings, Inc. By: Mr. Fred A. Vierra Chief Executive Officer /s/ FRED A. VIERRA 2) THE STOCKHOLDERS /s/ EDUARDO EURNEKIAN 3) COMPANY Cablevision S.A. By: /s/ EDUARDO EURNEKIAN Televisora Belgrano S.A. By: /s/ EDUARDO EURNEKIAN Construred S.A. By: /s/ EDUARDO EURNEKIAN 51 -51- Univent's S.A. By: /s/ EDUARDO EURNEKIAN 4) Spouses of Stockholders /s/ EDUARDO EURNEKIAN EX-2.2 3 AMENDMENT TO STOCK PURCHASE AGREEMENT 1 Exhibit 2.2 M. & M. BOMCHIL ABOGADOS AMENDMENT TO STOCK PURCHASE AGREEMENT EXECUTED ON DECEMBER 6, 1994 In the city of Buenos Aires, on this 27th day of March 1995, the parties to the Stock Purchase Agreement executed on December 6, 1994 (the "Contract"), Mr. Eduardo Eurnekian representing the Stockholders, and Mr. Fred Vierra representing the Buyer (as said terms are defined in the Contract), agree to partially amend the Contract as provided in this Amendment to Stock Purchase Agreement ("Agreement"). Unless otherwise indicated, all capitalized terms shall have the meaning given them in the Contract. 1) Upon the terms and subject to the conditions set forth in the Contract and this Agreement, at the Closing Stockholders shall sell to Buyer good and exclusive title to fifty-one percent (51%) of the Common Stock of the Company and Buyer shall deliver cash in the form of a bank transfer of readily available monies and negotiable and endorsable promissory notes in payment of the Base Purchase Price as provided below. 2) The Closing Date will be April 30, 1995 or as otherwise agreed by the parties and the Base Purchase Price will be calculated according to the number of EBS's (as defined below) on March 31, 1995 (the "EBS Date"). 3) EBS. For the purpose of defining the Base Purchase Price and adjustments to the same, EBS shall have the meaning set forth in Exhibit 1 to this Agreement. 4) At Closing, Buyer will pay Stockholders an amount equal to U$S 1,500 times fifty-one percent (51%) of the number of EBS on the EBS Date (U$S 321,428,520 as per the example which follows herein), minus fifty-one percent (51%) of all Liabilities to be deducted according to the Contract. Assuming a) revenues in pesos of 12,500,000, b) an EBS number of 420,168 and c) Liabilities of U$S 85 million, the parties contemplate the Base Purchase Price to be U$S 278,078,520. Buyer has already transferred twenty million U.S. Dollars (U$S 20,000,000) of such amount to Stockholders. The Base Purchase Price and the Exercise Price (as defined below) will be paid sixty percent (60%) by a bank transfer of immediately available funds, and forty percent 2 M. & M. BOMCHIL -2- ABOGADOS (40%) in the form of promissory Notes payable in two years as provided below. The 60%-40% calculation will be made prior to any applicable deductions. Liabilities will be deducted from the 40% calculation. 5) Assuming a Base Purchase Price of U$S 278,078,520 at the Closing, the same shall be paid as follows: Buyer shall deliver to Stockholders (i) U$S 172,857,112 in cash (after subtracting the U$S 20 million already transferred from Buyer to Stockholders) by bank transfer of readily available funds to the account which Stockholders will indicate and (ii) the balance of U$S 85,221,408 (after subtracting the 51% of the assumed Liabilities of U$S 85 million i.e. U$S 43,350,000) in the form of four (4) promissory notes of U$S 21,305,352 payable in twenty (20) equal and consecutive monthly installments of U$S 4,261,070, starting the last day of the fourth month after the closing. Each promissory note will bear interest as provided in the Contract. On the last day of the fourth month following the Closing, all interest accrued during such four month period will be paid in full in addition to the first of the twenty monthly installments. 6) Stockholders hereby grant Buyer an option (the "Option") with a term which expires automatically two years after the Closing to purchase up to an additional twenty-nine (29%) of the Common Stock of the Company. The option may be exercised in full or in part from time to time during its entire term. 7) (a) The exercise price of such option (the "Exercise Price") will be calculated by multiplying U$S 1,500 times the number of EBS's on the date of exercise of the Option and then multiplying that number by the percentage amount of the Option which Buyer is exercising at that time (the "Option Amount"). Finally, a percentage of Liabilities as of the EBS Date (March 31, 1995) corresponding to the Option Amount will be subtracted. For purposes of determining the Exercise Price, EBS will be calculated as follows: R x C = EBS ------------- U$S 29,75 3 M. & M. BOMCHIL -3- ABOGADOS Where: R: Total income in Argentine pesos (Argentine currency) from cable television operations for the month immediately prior to the relevant exercise date. As used herein "total income in Argentine pesos from cable television operations" shall have the meaning that "total income in pesos" has in the definition of EBS attached hereto as Exhibit 1. C: That number necessary to convert Argentine pesos into U.S. Dollars at the average of the free market exchange rate in effect six months before and six months after the relevant exercise date. (b) if, on the relevant Option exercise date, the Company has any line of business other than those in which it is currentely engaged, including telephony operations, the Exercise Price for such lines of the Company business will be calculated by multiplying the Option Amount by the Company's capital expenditures and the unexpended capital contributions from the shareholders from the Closing Date to the date of exercise attributable solely to such line of business. The amount resulting from this procedure will be added to the amount resulting from the procedure foreseen in (a) above. 8) The parties agree that, if COMFER Approval is not received (as provided in Section 5.11 of the Contract) within sixty (60) days of Buyer's providing Stockholders with all COMFER application information for which Buyer is responsible, this Agreement and the Contract will terminate and Stockholders will immediately refund Buyer's US $20 million as provided in Section 7.2 of the Contract. Except for paragraphs 1B, 1C, 1D, 1E and 4, all other conditions in Exhibit 7 of the Contract which would entitle Buyer to return to its US $20 million are hereby waived and without effect. 9) The parties will enter into programming agreements for all of the Programming Assets with a term of two years and a most favored nation clause applicable to each provision, except for provisions in which programming is provided for free. Buyer will have a right of first negotiation to extend such agreements. The parties will agree on the best 4 M. & M. BOMCHIL -4- ABOGADOS approach to negotiating extensions on all current Company Contracts with third party programmers. 10) The parties will amend fully the Contract and its exhibits in conformity with what is established in this Agreement (for instance, 51% of Liabilities upon the Stockholders and 49% upon the Company, equal number of managers with deadlock voting to be decided by a casting vote of one of the Buyer's directors, non-existance of the veto rights by the Shareholders or their representatives in case of non-agreement). The remaining provisions of the Contract, including but not limited to those related to Representations and Warranties, Conditions to the Obligations, Covenants, Termination and Miscellaneous will remain in effect. 11) All the dates provided in Sections 1.4, 1.5 and 1,8 of the Contract are no longer in effect. All deliveries required prior to Closing will be made three (3) days prior to the Closing Date. 12) After Closing, the senior officers of the Company and their offices will be as follows: Eduardo Eurnekian Chairman Fred Vierra Vice Chairman Greg Bicker CEO The parties will agree on Mr. Eurnekian's role after Closing at their earliest possible convenience. 13) In the event that all or any portion of the Liabilities deducted from the Base Purchase Price or the Exercise Price as provided herein are not paid when due, Buyer will refund to Stockholders the relevant unpaid portion of such deducted Liabilities (without interest) within six (6) months after all applicable statues of limitation in connection with the non-payment of such Liabilities have expired. 14) The parties agree that the non-competition provision established in Section 8.16 of the Contract will not apply to the current activities which the Shareholders have in Oeste Cable Color S.A. 5 M. & M. BOMCHIL -5- ABOGADOS 15) Mr. Eduardo Eurnekian is personally liable for all the Liabilities which may arise or stem against the Company as a consequence of the case named "Gomez, Jose Alberto and others versus Cablevision S.A." claiming damages which is being heard by the First Instance National Court in Civil Law Nr 54 of the city of Buenos Aires. 16) The parties may agree that the cash portion of the Base Purchase Price which is payable at the Closing Date may be in Argentine pesos (legal currency of the Argentine Republic). 17) This Agreement contains certain principal points on which the parties have agreed. It does not contain all the amendments to the Contract to which the parties have tentatively agreed and it does not constitute the comprehensive, definitive agreement which the parties will execute on or prior to the Closing Date. 6 M. & M. BOMCHIL ABOGADOS EXHIBIT 1 "EBS": For the purposes of determining the Base Purchase Price and the adjustments to the same, the Stockholders and the Buyer define EBS's as the number derived by dividing (a) the total income in pesos received by the Company for Basic Services and additional outlet charges during the full calendar month immediately prior to that of the Closing Date including all payments for more than one period for such charges if paid in such month, by (b) US $29.75. Notice is made that there is no V.A.T. applicable relation to the income in pesos and that the same will not be considered in relation to the definition established herein and will therefore not be included in the calculation of "total income in pesos". Within 90 days as from Closing Date the amount of EBS will be adjusted as of the EBS Date for the sole purpose of including in the calculation of the Base Purchase Price only those subscribers whose Basic Services were installed before Closing and who have paid their first regularly scheduled billing for Basic Services after the Closing, and excluding from the said calculation only all those Subscribers who as of the Closing Date had paid their first Basic Service billing and who had not paid their second Basic Service billing after the Closing Date. 7 M. & M. BOMCHIL -2- ABOGADOS MODIFICACION AL CONVENIO DE COMPRAVENTA DE ACCIONES SUSCRIPTO EL 6 DE DICIEMBRE DE 1994 En la ciudad de Buenos Aires, a los 28 dias del mes de marzo de 1995, las partes del Convenio de Compraventa de Acciones celebrado el 6 de diciembre de 1994 (el "Convenio"), Sres. Eduardo Eurnekian en representacion de los Accionistas, y el Sr. Fred Vierra en representacion del Comprador (conforme se definen dichos terminos en el Convenio), acuerdan en modificar parcialmente el Convenio conforme se preve en este Acuerdo de modificacion al Convenio (el "El Acuerdo"). Salvo indicacion en sentido contrario, todos los terminos que comiencen con mayusculas tendran el mismo significado que les fuera asignado en el Convenio. 1) En los terminos y sujeto alas condiciones establecidas en el Convenio y este Acuerdo, al Cierre los Accionistas venderan al Comprador titulo suficiente y exclusivo al cincuenta y un por ciento (51%) de las Acciones Ordinarias con derecho a voto de la Compania, y el Comprador abonara el Precio Base de Compra mediante la transferencia bancaria de importes en efectivo inmediatamente disponibles y entrega de pagares negociables y endosables conforme se especifica mas abajo. 2) La Fecha de Cierre sera el dia 30 de abril de 1995, o aquel otro que acuerden las partes, y el Precio Base de Compra sera calculado de conformidad con la cantidad de EBS (conforme se define mas abajo) al dia 31 de marzo de 1995 (la "Fecha EBS"). 3) EBS. A los fines de definir el Precio Base de Compra y los ajustes al mismo, el significado de EBS sera aquel establecido en el anexo I a este Acuerdo. 4) Al Cierre, el Comprador abonara a los Accionistas un importe equivalente a US $1.500 multiplicado por el cincuenta y un por ciento (51%) de la cantidad de EBS a la Fecha EBS, (US $321.429.520,00 conforme el ejemplo que se desarrolla en el presente) menos el cincuenta y un por ciento (51%) de todas las Responsabilidades a ser deducidas conforme al Convenio. Suponiendo a) ingresos en pesos por $12.500.000, b) una cantidad de 420.168 EBS y c) Res- 8 M. & M. BOMCHIL -3- ABOGADOS tual de Responsabilidades existentes a la fecha EBS, (31.03.95) correspondientes a la Cantidad de la Opcion sera restado. A los fines de calcular el Precio de Opcion, los EBS Opcion calculados del modo que sigue: RxC = EBS ---------- U$S 29.75 En dicho ejemplo: R: significa ingresos totales en Pesos (moneda de curso legal en la Argentina) provenientes de la actividad de televisi6n por cable durante el mes inmediato anterior a la fecha de ejercicio de la Opcion. A los fines aqui indicados los "ingresos totales en Pesos provenientes de la actividad de television por cable" tendran el significado dado a "ingreso total en Pesos" en la definici6n de EBS adjunta bajo el Anexo 1. C: significa el numero necesario para convertir los Pesos (moneda de curso legal en la Argentina) en Dolares Estadounidenses conforme al promedio del tipo de cambio libre durante los seis meses anteriores y posteriores a la fecha de ejercicio de la Opcion. (b) Si a la fecha de ejercicio de la Opcion, la Compania tuviere cualquier otra actividad distinta a la que actualmente desarrolla (vgr. telefonia), el Precio de Opcion por dichas actividades adicionales de la Compania se calculara multiplicando la Cantidad de Opcion por los egresos realizados por la Compania, y por los aportes realizados por los Accionistas que no sean traducidos en egresos por la Compania, desde la Fecha de Cierre a la fecha de ejercicio de la Opcion exclusivamente atribuible a tales actividades. El importe resultante de este procedimiento se adicionara al que resultare al establecido en el apartado (a). 8) Las partes acuerdan que si la Aprobacion del COMFER no se obtiene (conforme se preve en el Articulo 5.11. del Convenio) dentro de los sesenta (60) dias a contar desde que el Comprador provea a los Accionistas con toda la informacion requerida por el COMFER por la cual el Comprador 9 M. & M. BOMCHIL -4- ABOGADOS es responsable, este Acuerdo y el Convenio concluiran y los Accionistas devolveran inmediatamente al Comprador los U$S 20.000.000 de conformidad con lo previsto en el Articulo 7.2 del Convenio. Excepcion hecha de los parrafos 1B, 1C, 1D, 1E y 4 todas las demas condiciones previstas en el Anexo 7 del Convenio que darian derecho al Comprador a la restitucion de sus U$S 20.000.000 son renunciadas por la presente y dejadas sin efecto. 9) Las partes celebraran acuerdos de programacion por todos los Bienes de la Programacion con una extension de dos anos y una clausula de nacion mas favorecida aplicable a cada articulo, salvo para las clausulas en que se estipule la provision de programacion en forma gratuita. El Comprador tendra un derecho de primera opcion de negociacion para la prorroga de dichos convenios. Las partes acordaran la mejor metodologia para negociar la prorroga de todos los Convenios de la Compania actualmente vigentes con programadores terceras partes. 10) Las partes ajustaran todas las clausulas establecidas en el Convenio y sus anexos a lo establecido en este Acuerdo (por ejemplo, 51% de las Responsabilidades sobre los Accionistas y 49% sobre la Compania, igual numero de directores con voto de desempate en favor de uno de los directores del Comprador en caso de empate, inexistencia de derechos de veto por los accionistas o sus representantes en caso de disidencia). Las restantes provisiones del Convenio, especialmente, y sin que se entienda como una limitacion, aquellos relacionados con Declaraciones y Garantias, Condiciones a las Obligaciones, Compromisos, Terminacion, y Varios permaneceran en vigencia. 11) Todas las fechas previstas en los Articulos 1.4, 1.5 y 1.8 del Convenio carecen de efectos. Todas las entregas requeridas con anterioridad al Cierre seran efectuadas tres (3) dias antes de la Fecha de Cierre. 12) Luego del Cierre los directivos de la Compania y sus posiciones seran: Eduardo Eurnekian - Presidente; Fred Vierra -Vicepresidente; Gregory Bicket -Chief Executive Officer. Las partes acordaran sobre el rol del Sr. Eurnekian a la brevedad posible luego del Cierre. 10 M. & M. BOMCHIL -5- ABOGADOS 13) En el caso que todas o parte de las Responsabilidades deducidas del Precio Base de Compra o el Precio de Opcion conforme se preve en el presente no fueren abonadas a sus vencimientos, el Comprador devolvera a los Accionistas los importes que no fueran afectados para cancelar las Responsabilidades deducidas (sin intereses) dentro de los seis (6) meses luego de vencido todo periodo de prescripcion relativo al no pago de dicha Responsabilidad. 14) Las partes acuerdan que la clausula de no competencia prevista en el Articulo 8.16 del Convenio, no es aplicables a las actividades que desarrollen actualmente los Accionistas en Oeste Cable Color S.A. 15) El Sr. Eduardo Eurnekian, se hace responsables en forma personal de todas las Responsabilidades que pueda devenir o sobrevenir a la Compania a consecuencia de los autos caratulados "Gomez Jose Alberto y otros C/ Cablevision S.A. S/ danos y perjuicios" que tramitan por ante el Juzgado Nacional de Primera Instancia en lo Civil Nro. 54, de la ciudad de Buenos Aires. 16) Las partes podran acordar que el pago en efectivo del Precio Base de Compra a realizarse a la Fecha de Cierre sea en Pesos (moneda de curso legal en la Republica Argentina). 13. Este convenio contiene ciertos puntos principales sobre los cuales las partes han acordado. No contiene todas las modificaciones al Convenio que las partes han tentativamente acordado y no constituye el acuerdo comprensivo y definitivo que las partes celebraran en o antes de la Fecha de Cierre. 11 M. & M. BOMCHIL ABOGADOS ANEXO 1 "EBS": a Los fines de la determinacion del Precio Base de Compra y el ajuste al mismo, los Accionistas y el Comprador definen como EBS el numero resultante de dividir (a) el ingreso total en Pesos a la Compania por los rubros de Servicios Basicos y bocas adicionales, durante todo el mes calendario inmediato anterior al de la Fecha de Cierre, incluyendo todo pago correspondiente a mas de un periodo por iguales conceptos en caso de ser abonado en dicho mes, por b) U$S 29,75. Se deja constancia que no existe I.V.A. sobre el ingreso en pesos y que el mismo no se considerara en cuanto a la definicion establecida por las partes en este articulo, por lo tanto no se incluira en el calculo del "ingreso total en pesos". Dentro de los noventa (90) dias a contar desde la Fecha de Cierre, sera ajustada la cantidad de EBS a la Fecha EBS al solo y unico efecto de incluir en el calculo del Precio Base de Compra solamente a los Suscriptores alos que se le hubiesen instalado el Servicio Basico antes del Cierre y que paguen su primera factura regularmente programada por Servicios Basicos con posterioridad al Cierre, y excluir solamente a todos aquellos Suscriptores que a la Fecha de Cierre hubieren abonado su primer facturacion por Servicios Basicos y no abonaren la segunda facturacion por Servicios Basicos con posterioridad al Cierre. EX-10 4 STOCKHOLDERS AGREEMENT DATED 12/6/94 1 Exhibit 10 STOCKHOLDERS AGREEMENT THIS AGREEMENT is made on December 6, 1994 BETWEEN: (1) Eduardo Eurnekian, I.C. Nbr. 4.086.268, in his individual capacity and on behalf of Basilia Jaliquias, I.C. Nbr. 3.304.838; Natalio Wende, I.C. Nbr. 4.203.286; Alberto Antranik Eurnekian, I.C. Nbr. 2.073.441; Enrique Kevorkyan, I.C. Nbr. 16.821.610; Sebastian Arias Duval, I.C. Nbr. 20.987.869; Lorenzo Luis Marchese, I.C. Nbr. 7.640.022 and Tomas Daniel Kolakovic, I.C. Nbr. 7.861.707, ("the Sellers"); and (2) TCI International Holdings, Inc. ("TCI") a corporation organized under the laws of the State of Delaware, USA, with its main offices at 5619 DTC Parkway Englewood, Colorado, 80111, U.S.A. WHEREAS: (A) Cablevision S.A., Televisora Belgrano S.A., Construred S.A. Univent's S.A. ("the Companies") are corporations organized under the laws of the Republic of Argentina with their main offices within the City of Buenos Aires, Argentina. (B) The Sellers hold shares which represent 100% of the capital stock and votes of the Companies. (C) The Sellers and TCI executed as of the date hereof a stock purchase agreement by which TCI agreed to acquire from the Sellers the shares or quotas representing the 80% of the capital stock and votes of the Companies ("the Purchase Agreement"). (D) The Sellers and TCI agree that the future relationship between them as co-owners of the Companies as "sociedades anonimas" and/or after their conversion into "sociedades de responsabilidad limitada" as foreseen in the Purchase Agreement, shall be governed by the terms set out in this Agreement. NOW IT IS HEREBY AGREED as follows: 1. DEFINITIONS 2 -2- In this Agreement, unless the context otherwise requires, the following expressions have the following meanings: All capitalized terms not defined herein will have the meaning given them in the Purchase Agreement. "Affiliate" one company or individual shall be deemed to be an affiliate of another if one is Controlled by, under common Control with, or Controlling the other; "the Auditors" the firm of accountants referred to in Clause 4 or the firm of accountants subsequently appointed pursuant to Clause 4; "TCI's Directors or Managers" the directors or managers of the Companies nominated from time to time by TCI in accordance with Clause 2.1.1 hereof; "Sellers' Director or Manager" the director or manager of the Companies nominated from time to time by the Sellers in accordance with Clause 2.1.1. hereof; "the Board or the Managers" the board of directors or managers of the Companies; "Control" a company or a person shall be deemed to have control over another company if it (directly or indirectly) owns, or has the right to exercise more than half the voting rights in such other company or otherwise exercises (whether directly or indirectly) a legal right of decision making in such company's affairs; "Net Worth" share capital plus reserves and retained earnings of each of the Companies; "the Shares" ordinary nominative and non-endorsable shares issued in the Companies at a par value of 1 peso each; "the Quotas" the quotas in which the capital stock of the Companies will be represented after the conversion of the Companies pursuant to the Purchase Agreement; "the Territory" the Republic of Argentina; "the Partners" the partners or stockholders of the Companies. 1.2 Except where inconsistent with anything contained herein: 3 -3- 1.2.1 words in this Agreement denoting the masculine gender shall include the feminine gender and the singular number shall include the plural and vice versa; 1.2.2 the titles and headings herein are used for convenience of reference only and shall not be deemed part of this Agreement for the purpose of interpretation; 1.2.3 all schedules to this Agreement form an integral part hereof. 2. SHAREHOLDERS OR PARTNERS UNDERTAKINGS 2.1 Notwithstanding anything contained in the by-laws of the Companies, the Partners respectively undertake that they shall at all times take all steps necessary to ensure that the following provisions shall apply to each other and to the Companies. 2.1.1 Unless otherwise agreed in writing between the Partners, the number of directors or managers of each of the Companies shall be five (5), of which four (4) shall be TCI' Directors or Managers and one (1) shall be Sellers' Director or Manager; TCI and the Sellers may appoint the alternate Directors or alternate Managers in the same proportion as they may appoint Directors or Managers. Subject to any necessary approval being obtained from the "Comite Federal de Radiodifusion" (COMFER) the Partners shall each be entitled at any time to remove or substitute any of their respective nominated directors or managers or alternate directors or managers. 2.1.2 To be quorate a meeting of the Board or of the Managers shall require the presence of a majority of Directors or Managers then in office present in person or by their alternates of whom one (1) at least shall be an TCI' Director or Manager and one (1) at least shall be a Sellers' Director or Manager. However, if at any meeting of the Board or of the Managers duly convened in accordance with the by-laws of the Companies and this Agreement a quorum is not present that meeting may be adjourned to a date not earlier than ten (10) days thereafter. Such adjourned meeting shall be quorate if a majority of the Directors or Managers then in office are present in person or by their alternates and all business properly transacted at that adjourned meeting shall be valid. 2.1.3 Meetings of the Board or Managers shall be held from time to time as the parties may agree but in any 4 -4- event at intervals of not more than six (6) months unless otherwise agreed by the Partners or required by law. 2.1.4 No Director or Manager shall have a second or casting vote. 2.1.5 Unless otherwise agreed by all of the Directors or Managers, notice of every meeting or adjourned meeting of the Board or of the Managers shall be given to each Director or Manager at the address (in the Territory or elsewhere) notified to the Companies by such Director or Manager from time to time for this purpose at least ten (10) business days (or in the case of an adjourned meeting at least five (5) days in advance thereof. 2.1.6 Every notice convening a meeting of the Board or of the Managers shall set out the agenda of the business to be transacted thereat in full and sufficient detail. No item of business not included in the agenda may be discussed and voted upon or transacted at the meeting unless all of the Directors or Managers of the corresponding Company are present and unanimously consent. 2.1.7. Directors or Managers appointed by each party must comply with any requirement under Argentine law, and must be persons of good reputation and "buenos hombres de negocios" (good businessmen) as said expression is understood in Argentina. 2.1.8. The supervisory committee shall have three (3) members, of which the Sellers will have the right to appoint a member and TCI shall have the right to appoint two members. TCI and Sellers may appoint alternate members in the same proportion as they appoint members. 2.1.9. After the Closing Date (as defined in the Purchase Agreement), all matters shall be decided by a vote of a simple majority (i.e. more than 50%) of the Shares or Quotas. However, until the Stockholders have received in cash seventy five percent (75%) of the Base Purchase Price, through the payment of the Base Purchase Price foreseen in Section 1.2 a) of the Purchase Agreement and the necessary payments to said effect under the Promissory Notes referred to in Section 1.2.b) of the Purchase Agreement, the following matters must be approved by the positive vote of not less than ninety percent (90%) of the Shares or Quotas: a) each year's annual operating budget; b) each year's annual capital budget; 5 -5- c) any variance from the operating or capital budgets of ten percent (10%) or more; d) a sale of the Company Business; e) any fundamental change in the Company Business; or f) capital increases. If the Partners are unable to agree on the budgets referred to in items a) and b) above, they will apply the budgets of the previous year automatically adjusted in accordance with the Argentine Consumer Price Index for the previous year. 2.1.10. Each Partner shall indemnify and keep harmless the other Partner for any damage caused to it by any Manager or Director acting (in a wilful or grossly negligent manner) in such capacity appointed by TCI or the Sellers, as the case may be. 2.1.11. Capital Increase: The Sellers and TCI have reached the Base Purchase Price under the Purchase Agreement on the basis of the number of EBS at Closing. Accordingly, the Partners determine that, for purposes of calculating any dilution as a result of capital increases, the corporate capital - -notwithstanding anything to the contrary stemming from the corporate by-laws or books- shall be the amount which results from multiplying the number of EBS at Closing times U$S 1,500. Such amount is currently believed to be approximately U$S 600 million. Accordingly, the Partners agree that, only for the purposes of calculating any dilution caused to any Partner as a result of its failure to participate or to participate fully in capital increases, the corporate capital (notwithstanding anything to the contrary in the corporate by-laws or books) will be deemed to be derived from the Base Purchase Price paid to the Stockholders on the Closing Date. As an example, the parties illustrate on a U$S 120.000.000 capital increased upon a capital of U$S 600.000.000, with corporate capital book value at U$S 10.000.000, which is not suscribed by the Sellers. 1) Situation before the capital increase. TCI 8.000.000 = 80% Sellers 2.000.000 = 20% 2) Situation after the capital increase. 6 -6- TCI 10.000.000 = 83,33% Sellers 2.000.000 = 16,67% Capital Stock 12.000.000 ----------- Premium 118.000.000 ----------- 2.1.12. No distribution of dividends may be made to any Partners until TCI has paid enough of the principal amount of the Promissory Notes referred to in Section 1.2 b) of the Purchase Agreement in order that 75% of the Base Purchase Price has been paid in cash by TCI to the Stockholders. 3. GENERAL MEETINGS OR PARTNERS MEETINGS 3.1 No General Meeting or Partners Meeting of the Companies shall be quorate unless representatives of the Partners representing more than 50% of the voting shares or quotas of each of the Companies are present. 3.2 Written notice of a General Meeting or a Partners Meeting of the Companies (or of an adjourned General Meeting or Partners Meeting of the Companies) shall if not waived, notwithstanding any provisions of applicable law which may provide for a shorter period, be given to each Partner at least ten (10) business days in advance thereof. 3.3 Every notice convening a General Meeting or Partners Meeting of the Companies shall set out the agenda of the business to be transacted thereat in full and sufficient detail. No item of business not included in the agenda may be discussed and voted upon or transacted at the meeting unless all of the Partners of the Companies are represented at the meeting and unanimously consent. 4. AUDITORS The accounts and records of the Companies shall be audited by KPMG Finsterbusch Pickenhayn Sibille or such other firm of independent accountants of international repute as may be approved by the Board or the Managers from time to time. 5. FINANCIAL AND GENERAL REPORTING The Partners shall procure that: 7 -7- 5.1 the accounts of the Companies shall be made up to 31st December or such other date as may be agreed in each year; 5.2 the Companies shall report to the parties in Argentine and US GAAP and in accordance with the requirements and systems of TCI at monthly, quarterly and yearly intervals. Such reports shall deal with at least the following: 5.2.1 financial, commercial and operating matters; 5.2.2 sales and financial forecasts; 5.2.3 proposed financial, marketing, procurement, capital expenditure, services, personnel and remuneration policies; 5.2.4 insurance arrangements; 5.2.5 pension schemes and the funding thereof; and 5.2.6 such other matters as may be reasonably requested by any of the Partners. 5.3 All quarterly and annual financial statements will comply fully with the requirements of the United States of America's Securities and Exchange Commission. Quarterly financial statements will be delivered to the Partners no later than thirty (30) days after each quarter's end. Annual financial statements will be delivered no later than forty five (45) days after each year's end. The Partners will cooperate fully in the timely preparation of all reports required hereunder. 5.4 The Companies shall prepare, in a manner and form to be specified by the Partners, monthly management accounts and shall provide the Partners with such monthly management accounting information in a form and at times reasonably required by the Partners for their own management accounting purposes and shall further provide the Partners with such other accounting information as each may reasonably require for the purposes of the preparation of their own statutory accounts. 6. SUBSCRIPTION FOR AND TRANSFER AND ASSIGNMENT OF SHARES OR QUOTAS 6 If at any time any of the Partners to this Agreement wishes to sell or otherwise transfer or assign any of the 8 -8- Shares or Quotas held by it, it shall so in accordance with the provisions contained in this Agreement, including Schedule A. 6.2 Except as otherwise provided herein, all Partners agree not to transfer, sell or in any way assign their respective participation in the Companies for a term of two (2) years as from the Closing Date as defined in the Purchase Agreement. At the end of said term, the Partners may sell, transfer or assign their respective participations in the Companies, subject to this Agreement, including Schedule A. 6.3 The Partners of the Companies shall have pre-emptive rights to acquire any additional Shares or Quotas which the Companies may issue, such Shares or Quotas to be offered to the Partners in proportion to their shareholdings in the Companies at the time of the said issue. 6.4 Upon receiving the prior consent of a majority of the shares or quotas, any Partner may transfer any or all of its Shares or Quotas to an Affiliate, provided that, in all cases, the Affiliate agrees to join in this Agreement and shall be bound by the terms of this Agreement as though it were an original party hereto. Such consent shall not be unreasonably withheld. 6.5 The Partners acknowledge and agree that TCI may after the date hereof and in accordance with Section 8.7 of the purchase Agreement assign a portion of its interest in the Companies or in this Agreement to U.S. West, Time-Warner, Torneos y Competencias S.A., Avila Cab or Carlos Avila y Cia. S.R.L. or their Affiliates or all or a portion of its interest to an entity jointly Controlled by or by any combination of TCI, US West and Time-Warner; and that the Sellers may assign their interest in the Companies or this Agreement to an S.R.L. controlled by the Sellers in accordance with Section 8.7 of the Purchase Agreement, provided that the assignees, in all cases, agree to join in this Agreement and shall be bound by the terms of this Agreement as though it were an original party hereto. 6.6 In the event that any of the Partners sells, transfers or assigns all or a portion of its Shares or Quotas in the Companies in violation of this Agreement, including Schedule A: 9 -9- 6.6.1 the Partners will be able to exclude the proposed purchaser of such Quotas pursuant to the law of Argentine commercial companies Nbr. 19.550, Section 152. 6.7 All Partners agree that the procedure foreseen in Clause 6.6 shall also be applicable in case of sales, assignments or transfers resulting from the bankruptcy of any of Partner. 6.8 Save as provided in this Agreement neither this Agreement nor any right under this Agreement shall be assignable or transferable by any Partner hereto without the prior written consent of the others. 7. CONFIDENTIALITY 7.1 Neither party will issue any press release or make any other public announcement regarding this Agreement or the transactions contemplated hereby without the consent of the other party. Each party will hold, and will cause its employees, consultants, advisors and agents to hold, in confidence, the terms of this Agreement and any non-public information concerning the Companies or the other party obtained pursuant to or as a result of this Agreement. Notwithstanding the preceding, a party may disclose such information to the extent required by any Legal Requirement (including disclosure requirements under Argentine and United States of America ("USA") federal and state securities laws), but the party proposing to disclose such information will first notify and consult with the other party concerning the proposed disclosure, to the extent reasonably feasible. Each party also may disclose such information to employees, consultants, advisors, agents and actual or potential lenders whose knowledge is necessary to facilitate the consummation of the transactions contemplated by this Agreement. Each party's obligation to hold information in confidence will be satisfied if it exercises the same care with respect to such information as it would exercise to preserve the confidentiality of its own similar information. The Sellers authorize TCI and/or its transferees to use all information which may, in such persons' estimation, be necessary for their and their Affiliates' presentations and filings with the USA's Securities and Exchange Commission and the appropriate state securities agencies. The obligations set forth in this Clause shall survive termination of this Agreement. 7.2 The foregoing obligations shall not apply to any information which: 10 -10- 7.2.1 the recipient party can prove by documentary evidence to have been in its possession or the possession of any of its Affiliates prior to receipt of this information except such information as has been exchanged in confidence between the parties prior to the entering into of this Agreement; or 7.2.2 the recipient party can prove by documentary evidence to have been independently created by it or one of its Affiliates prior to or subsequent to the receipt of the information; or 7.2.3 has entered the public domain otherwise than as the result of a breach of this Clause 7 by the recipient party or by a third party to whom the recipient party has disclosed the information; or 7.2.4 has been or is disclosed to the recipient party by a third party otherwise than in breach of an obligation of confidentiality to the disclosing party; or 7.2.5 is disclosed under compulsion of law or the regulations of any relevant stock exchange. 8. UNDERTAKING The parties agree to amend the by-laws of the Companies in order to reflect as much as possible the agreements contained herein. 9. LANGUAGE OF CONTRACT This Agreement shall be prepared in the English and the Spanish languages, and shall be executed in two (2) copies one of each of which will be retained by each party hereto. In case of differences between both versions, the Spanish version will prevail. 10. WAIVER No forbearance, indulgence or relaxation or inaction by any party at any time to require performance of any provision of this Agreement shall in any way affect, diminish or prejudice the right of such party to require performance of that provision, and any waiver or acquiescence by any party of any breach of any provision of this Agreement shall not be construed as a waiver or acquiescence of any continuing or succeeding breach of such provision, a waiver or an amendment of the provision itself, or a waiver of any right under or arising out of this 11 -11- Agreement or acquiescence to or recognition of rights and/or position other than that expressly stipulated in this Agreement. 11. REMEDIES CUMULATIVE All remedies of the parties under this Agreement whether provided herein or conferred by law, custom or trade usages, are cumulative and not alternative and may be enforced successively or concurrently. 12. INVALIDITY 12.1 If any provision of this Agreement is invalid under any applicable law this Agreement shall be considered divisible as to such provision and such provision shall be inoperative and shall not be part of the consideration moving from any party hereto to the other parties and the remainder of this Agreement shall be valid and binding and of like effect as though such provision was not included herein. 12.2 Notwithstanding the provisions of Clause 12.1 hereof the parties shall use their best endeavors to establish a practical and commercial solution to problems arising out of such invalidity or enforceability and to agree and embody in a supplementary agreement a substitute provision which as closely as possible resembles the inoperative provision but which is itself not invalid or unenforceable or prohibited by any applicable law. 13. NOTICES 13.1 Any notice or communication required or authorized to be given by this Agreement shall be given in writing and may be served by delivery to the served party's main office address as given in this Agreement by pre-paid, registered recorded delivery letter, cable, telex or facsimile addressed to such office or address and any notice or communication so given by airmail shall be deemed to have been served fourteen (14) days after the same shall have been airmailed and any notice or communication so given by cable, telex or facsimile shall be deemed to have been served forty eight (48) hours after it shall have been despatched. In addition each party may serve such notice by hand and such notice shall be deemed to have been properly served if it is delivered by hand to and receipted by the representative in the Territory of the served party at the address specified in Clause 13-2 12 -12- receipt of such notice alone to be sufficient for the purposes herein. 13.2 The addresses of the representatives referred to in Clause 13.1 are as follows: To the Sellers Mr. Eduardo Eurnekian Honduras 5663 (1414) Buenos Aires Argentina Telephone: (54 1) 777 1111 Fax: (54 1) 777 1111 With a copy to: Mr. Mariano Ibanez Bonpland 1745 (1414) Buenos Aires Argentina Telephone: (54 1) 777 1234 Fax: (54 1) 777 1234 To TCI TCI International Holdings, Inc. 5619 DTC Parkway Englewood, Colorado 80111, U.S.A. Attention: President Telephone:(1 303) 267 5740 Telecopier: (1 303) 488 3242 With a copy to: TCI International Holdings, Inc. 5619 DTC Parkway Englewood, Colorado 80111, U.S.A. Attention: General Counsel Telephone: (1 303) 267 4800 Telecopier: (1 303) 488 3207 M. & M. Bomchil Suipacha 268, 12th Floor Buenos Aires - 1355 - Argentina Attention: Mr. Nestor J. Belgrano Telephone: (54 1) 328 8400 Telecopier: (54 1) 326 7217 13 -13- 14. ENTIRE AGREEMENT This Agreement together with the Purchase Agreement of even date, and their exhibits and schedules and those agreements to be executed pursuant to this Agreement and the Purchase Agreement are the entire agreement between the parties as to the subject matter hereof and no amendments hereto shall be effective unless in writing and signed by or on behalf of each of the parties. 15. AUTHORIZATION Each party confirms to the others that the execution, delivery and performance of this Agreement and the transactions contemplated hereby have been duly authorized and that each is within the powers granted to it by law or its Memorandum and Articles of Association, Statutes and By-Laws or equivalent documents. 16. DURATION 16.1. Once converted to S.R.L.s, the Companies will have terms of thirty (30) years. This Agreement shall be in effect as from Closing and shall remain in effect as long as TCI and the Sellers or their permitted assignees hold Shares or Quotas. 16.2. The Companies will dissolve if any of the Partners becomes bankrupt or incompetent. However, the Partners will continue with the business of the dissolved Companies, through the Companies reformed to said effect. 17. LAW - ARBITRATION This Agreement shall be construed and shall take effect in accordance with the laws of the Territory and any proceedings relating to any matters arising out of the interpretation of this Agreement or to purported breaches of this Agreement, irrespective of where the breach occurs, or to any matter arising out of or incidental to the rights and liabilities of the parties hereto shall be resolved by arbitration as provided in the Purchase Agreement. 18. INCONSISTENT PROVISIONS 14 -14- In the event that any provision of this Agreement is inconsistent with the provisions of any agreement ancillary hereto including the provisions of the Companies' by-Laws the parties agree that the provisions of this Agreement shall prevail to the extent of any such inconsistency, except in the case of the Purchase Agreement. AS WITNESS the parties have executed this Agreement the date first above written, at .... /s/ EDUARDO EURNEKIAN /s/ FRED A. VIERRA EDUARDO EURNEKIAN TCI INTERNATIONAL HOLDINGS, INC. 15 SCHEDULE A TRANSFER OF SHARES OR QUOTAS AND PRE-EMPTION RIGHTS Transfers of Shares or Quotas of the Companies shall be in accordance with and subject to this Agreement, including the following provisions: 1. If any Partner wishes to sell any of the Shares or Quotas held by it in any or all of the Companies, ("the Selling Party") it shall give to each of the other Partners ("the Option Parties") written notice thereof setting out all the relevant terms including the price at which it wishes to sell the Shares or Quotas ("the Option Price"). Each of the Option Parties shall have the right and option for a period of sixty (60) days from receipt of such notice ("the Option Period") to serve a notice (which notice may be served jointly or by any of them) on the Selling Party stating their intention: 1.1 to purchase all of the Shares or Quotas offered at the Option Price and in accordance with all the relevant terms. 2. If a notice is served pursuant to paragraph 1.1 above the shareholding of the Selling Party shall be purchased by the Option Parties within a further period of sixty (60) days in such proportions pro rata to their existing shareholdings in the corresponding Company. 3. If none of the Option Parties elects to purchase the Shares or Quotas (or in the event that the Shares or Quotas are not purchased in accordance with provisions of this Agreement within the relevant stated time periods which default is not attributable to any delay on the part of the Selling Party) then the Selling Party shall have the right to sell the Shares or Quotas subject to the notice in the corresponding Company to any third party within a further period of sixty (60) days at a price not less than the Option Price and in material accordance with all the relevant terms contained in the original notice of sale, provided that the prior consent of the majority of the Partners in the corresponding Company is obtained. The requirement of prior majority consent will 16 -2- terminate with respect to Sellers five (5) years after the Closing Date. 4. At TCI's sole option, notwithstanding any other provision of this Agreement, Shares or Quotas originally issued to TCI equal to twenty-one percent (21%) of the total Shares or Quotas of each of the Companies may not be transferred without the prior unanimous consent of the Partners. All transferees of TCI will assume pro-rata the above limitation on the transferability of Shares or Quotas. TCI and its transferees agree that the above limitation is reasonable and agree not to challenge it under Argentine law. 5. Any time limits referred to in this Schedule shall be subject as appropriate to any necessary delay caused by the attaining of any applicable governmental and other regulatory consents which have been notified to the other parties hereto by the party subject to such consents. 17 EXHIBIT 7 The $ 20,000,000 (without interest) will be returned to Buyer within five business days of notice from Buyer to Stockholders if the Agreement is terminated for the following reasons by Buyer: 1. On the Closing Date, the representations and warranties of the Company and each Stockholder set forth below are not true and correct in all material respects in relation to the normal and ordinary Company Business, on and as of the Closing Date: A. Company is a corporation duly organized, validly existing and in good standing under the laws of Argentina, and it and the Stockholders have all requisite corporate power and authority to own, lease and use its assets as they are currently owned, leased and used and to conduct the Company Business as it is currently conducted. B. Stockholders have good, valid, marketable and exclusive title to the Shares free and clear of any encumbrances, with full right and lawful authority to transfer to Buyer the Shares. Should full payment of any Shares be pending, the same shall be canceled (either through the cancelling of that portion of the capital increase not paid in or through payment of the capital increase before the Closing Date). Spousal consent provided for in Article 1277 of the Argentine Civil Code has been granted by the spouse of each Stockholders when necessary. C. Company and Stockholders have authority to execute and deliver, to perform its obligations under, and to consummate the transactions contemplated by the Agreement. The Agreement has been duly executed and delivered by Stockholders and Company and is the valid and binding obligation of Stockholders and Company. D. The execution, delivery and performance of the Agreement by Stockholders and Company will not, individually or in the aggregate, have a material adverse effect on any System, the Company Business or the Company. 18 -2- E. Company has exclusive, good and marketable title to the Assets. The Assets will remain in the Company and are all the assets necessary to permit Buyer to conduct the Company Business substantially as it is being conducted on the date of the Agreement. F. The Company has received no notice claiming a violation by Company or the Company Business of any Legal Requirement applicable to Company or the Company Business as it is currently conducted. G. Stockholders shall cause the Company to deliver to Buyer combined financial statements of the Company after giving effect to its conversion to an S.R.L. for the nine months ended September 30, 1994, and years ended December 31, 1994 (within 45 days of year end), 1993 and 1992 and for each quarter thereafter (within 30 days of each quarter's end). Stockholders will cause the Company to deliver to Buyer correct and complete copies of its audited balance sheets and related statements of income, Stockholders' equity and cash flows for the nine months ended September 30, 1994, the three years ended December 31, 1994 (within 45 days of year end), 1993 and 1992, and for each quarter thereafter (within 30 days after each quarter's end), all of which shall be presented in timely manner to Buyer (collectively, the "Financial Statements"). The Financial Statements were prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby and fairly present Company's financial position, results of operations and changes in financial position as of the dates and for the periods indicated. H. Since the date of the most recent balance sheet included in the Financial Statements, (i) the Company Business has been operated only in the ordinary course, (ii) Company has not sold or disposed of any Assets other than in the ordinary course of business, except for payment of the dividends necessary to transfer the two buildings located at Fitz Roy and Gorriti, the Programming Assets and the shares of Radiodifusora El Carmen S.A. (Canal 2) out of the Company, and (iii) there has been no material adverse change in, and no event has occurred which is likely, individually or in the aggregate, to result in any material adverse change in, the business, operations, Assets, prospects or condition (finan- 19 -3- cial or otherwise) of the Company Business, other than changes affecting the cable television industry generally. I. Except as set forth on Exhibit 5 of the Agreement, there is no judgment or order outstanding, or any action, suit, complaint, proceeding or investigation by or before any Governmental Authority or any arbitration pending, or to Stockholders' best knowledge, involving or affecting all or any part of the Company Business or Company. J. Company has duly and timely filed in proper form all income, franchise, sales, use, property, excise, payroll and other tax returns and all other reports (whether or not relating to taxes) required to be filed with the appropriate Governmental Authority. 2. Company and Stockholders have not complied with the provisions of this Exhibit 7. 3. The Parties have failed to execute the agreements referred to in Section 1.5 of the Agreement by December 31, 1994, and the Buyer has given notice to Stockholders by March 15, 1995, that it will terminate the Agreement because of such failure. 4. If the Company conversion into an S.R.L. is not possible due to reasons directly attributable to Stockholders or to legal impediments or acts of third parties. In case the Agreement is terminated by Buyer due to any of the reasons provided in this Exhibit, with the returning of the U$S 20.000.000 to the Buyer and the release of the Deposited Shares to the Stockholders, the parties will have no further claim against the other. -----END PRIVACY-ENHANCED MESSAGE-----