EXHIBIT 10.35
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RELATIONSHIP AGREEMENT
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BETWEEN
CHELLO BROADBAND N.V.
AND
UNITEDGLOBALCOM, INC.
DATE AS OF MAY 17, 2000
THIS RELATIONSHIP AGREEMENT made as of May 17, 2000, between chello
broadband N.V. ("chello"), a company organized under the laws of The
Netherlands, and UnitedGlobalCom, Inc. ("UGC"), a company incorporated under
the laws of the State of Delaware.
W I T N E S S E T H
WHEREAS, chello is an international provider of broadband services;
WHEREAS, UGC has substantial cable television operations in different
parts of the world;
WHEREAS, UGC owns a majority of the outstanding shares of United
PanEurope Communications N.V. ("UPC");
WHEREAS chello is a subsidiary of UPC;
WHEREAS, chello is subject to certain geographic restrictions in
conducting its business under the terms of the agreement of February 1999
between UGC and UPC and chello wishes to be released from such restrictions;
and
WHEREAS, chello and UGC wish to regulate certain aspects of their
ongoing relationship, specifically their desire to enter into an agreement to
provide chello with the right to provide specified services through certain
UGC affiliates and other businesses in which UGC has an interest other than
UPC and entities (other than UGC) in which UGC has an interest indirectly
through UPC;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants set forth herein, chello and UGC hereby agree as
follows;
ARTICLE 1
DEFINITIONS
Whenever used in this Agreement, the following terms shall have the
following meanings:
"AFFILIATE" means, with respect to any specified Person, any entity that
directly, or indirectly through one or more intermediaries, is Controlled by
such Person.
"AGREEMENT" means this agreement, as executed by the parties hereto and
as amended from time to time, together with all annexes and exhibits hereto.
"CATEGORY A SERVICES" means:
(i) Internet Access Services and default chello portals, or similar
services, delivered by TCP/IP to homes (excluding two-way voice services,
two-way video and dial-up internet access) to personal computers;
(ii) Internet Access Services and default chello portals, or similar
services, delivered by TCP/IP to businesses (excluding two-way voice
services, two-way video and dial-up internet access); and
(iii) Internet Access Services and default chello portals, or similar
services, delivered by TCP/IP (excluding two-way voice services, two-way
video and dial-up internet access) to televisions or other end user
devices;
provided that UGC and chello will negotiate in good faith regarding
undefined application and content services other than those described
in (i), (ii) and (iii) above that may arise through third parties or
other sources to optimize each other's business strategies.
"CATEGORY B SERVICES" means interactive services designed to
supplement or complement Core Television and Video Service Offerings
consisting of Walled Garden and Electronic Programming Guides/Interactive
Entertainment Guides.
"CATEGORY C SERVICES" means two-way voice, two-way video and dial-up
internet services delivered by TCP/IP.
"chello FRANCHISE AGREEMENT" means the full franchise agreement between
chello and the relevant UGC Local Operator for the delivery of certain chello
services incorporating the terms of the Summarized UGC Local Operator Term
Sheet.
"CONTROL", "CONTROLLED" or "CONTROLLING" means, with respect to a
relevant entity, (i) the right or ability (by agreement or otherwise) to vote
all of the voting interest in the entity in question to procure that such
entity enters into a relevant agreement with chello required pursuant to this
Agreement, or (ii) the unilateral right through ownership or contract to
procure that such entity enters into a relevant agreement with chello
required pursuant to this Agreement; in each case without approval of any
lender, partner, governmental entity or shareholder.
"CORE TELEVISION AND VIDEO SERVICE OFFERINGS" means the delivery of a
broadcast stream, whether by request of the user or as delivered in
accordance with a set program broadcast schedule, for display on television.
"ELECTRONIC PROGRAMMING GUIDES/INTERACTIVE ENTERTAINMENT GUIDES" means
the pivotal navigational service or index point for all digital set-top
computer television services, including any default screens providing
directory or information services.
"FRANCHISE AREAS" means with, respect to any UGC Local Operator, the
geographical territory or number of homes and/or businesses in respect of
which a franchise or other license, authorization or consent enabling the
recipient to operate a cable television
system or other telecommunications network or technology, or to transmit via
wireless or satellite technologies, has been awarded or granted by any
Governmental Authority or under any Law to the UGC Local Operator.
"GOVERNMENTAL AUTHORITY" means any international, supranational,
national, provincial, state, municipal or local government, governmental,
regulatory or administrative authority, agency or commission or any court,
tribunal, or judicial or arbitral body.
"HFC" means hybrid fibre-optic coaxial cable.
"INTELLECTUAL PROPERTY" means (i) patents, patent applications and
statutory invention registrations, (ii) trademarks, service marks, domain
names, trade dress, logos and other source identifiers, including
registrations and applications thereof, (iii) copyrights including copyrights
in computer software, programs, databases, Internet Web sites, web content
and links, and registrations and applications for registrations thereof, (iv)
confidential and proprietary information, including trade secrets and
know-how, and (v) rights of privacy, publicity and endorsement.
"INTERNET ACCESS SERVICES" means any TCP/IP-based access to or from the
public backbone network or private peering points of presence.
"LAW" means any international, supranational, national, state,
provincial, municipal or local statute, law, ordinance, regulation, rule, code
or order.
"NON-CONTROLLED UGC BUSINESS" means any Person (i) which UGC does not
Control but in which UGC owns an interest other than UPC and Persons (other
than UGC) in which UGC has an interest indirectly through UPC and (ii) which
owns or operates broadband networks that pass or reach homes or places of
business.
"OFFICERS' CERTIFICATE" means a certificate signed by the Chief
Financial Officer of the Person whose certificate is so required.
"PERSON" means any individual, partnership, limited liability company,
firm, corporation, company, association, trust, unincorporated organization
or other entity.
"PRIMARY BUSINESS" means a business which has contributed at least 50%
to a Person's consolidated revenues or operating income in any of the most
recent three fiscal years completed prior to the acquisition of such Person.
"PUBLIC COMPANY" means any Person which has a class or series of its
equity securities registered under Section 12(b) or 12(g), or which is
required to file reports pursuant to Section 15(d), of the Securities
Exchange Act of 1934, as amended (or any successor or comparable provisions
of the federal securities laws), which class or series of equity securities
are actively traded or any Person with a class or series of its equity
securities listed on a stock exchange outside the United States.
"SERVICES" means Category A Services, Category B Services and Category C
Services.
"SUMMARIZED UGC LOCAL OPERATOR TERM SHEET" means the form of the UGC
summarized term sheet between chello and a UGC Local Operator attached hereto
as Annex C.
"TCP/IP" means the Transmission Control Protocol/Internet Protocol as
the same may be modified or amended over time, or any widely used and
accepted successor or alternative to this protocol as may evolve over time.
"TERRITORY A" shall have the same respective meanings as the term
"Territory" in the Memorandums of Understanding and the term sheets agreed
upon between chello and each of Austar United Broadband Pty Ltd ACN 089 048
439 ("AUSTAR") (including the terms for Telstra Saturn Ltd. ("TELSTRA")), and
VTR Global Com S.A. "VTR" attached hereto as Annex A and B respectively (the
"AUSTAR AND TELSTRA TERM SHEET", and the "VTR TERM SHEET", respectively).
"TERRITORY B" means the first 3.2 million homes which are, or within a
reasonable time (as agreed by chello and UGC) will be, passed by two-way
upgraded HFC networks capable of providing the Services, of UGC Affiliates
and Non-Controlled UGC Businesses which are acquired after December 31, 1999
and, in the case of any Non-Controlled UGC Business, the relevant
Non-Controlled UGC Business has entered into a chello Franchise Agreement;
PROVIDED THAT if any consent or approval is required and not obtained within
six months of the date hereof with respect to the franchise agreement with
Austar, the 3.2 million homes number in Territory B shall be increased by the
number of homes which are, or within a 36 month of the date hereof will be,
passed by two-way upgraded networks capable of providing the Services, of
Austar and Telstra.
"TERRITORY C" means all homes and places of business which are reachable
by UGC, any UGC Affiliates and/or Non-Controlled UGC Businesses, excluding
those in Territory A and B.
"UGC AGREEMENT" means the agreement of February 1999 between UGC and
UPC.
"UGC AFFILIATE" means any Affiliate of UGC, except UPC and a Person
(other than UGC) in which UGC has an interest indirectly through UPC and
which owns or operates broadband networks that pass or reach homes or places
of business.
"UGC LOCAL OPERATORS" means UGC Affiliates and Non-Controlled UGC
Businesses.
"WALLED GARDEN" means access to a permissive list of world-wide-web
sites interactive content and applications such as those provided through
personal computers (e.g. e-mail, community tools and instant messaging), and
an interactive platform for management and delivery of electronic commerce to
digital set-top computers.
ARTICLE II
PROVISION OF SERVICES BY CHELLO
SECTION 2.01. TERRITORY A AND TERRITORY B.
(a) TERRITORY A. Subject to the terms and conditions of the Austar and
Telstra Term Sheet and the VTR Term Sheet, as the case may be, UGC will, with
respect to Territory A, within 60 days after the date of this Agreement,
cause each of Austar, Telstra and VTR to enter into a franchise agreement
with chello that incorporates the terms set forth in the Austar and Telstra
Term Sheet and the VTR Term Sheet, respectively, and such other terms as may
be agreed by the parties to the extent not inconsistent with such term sheets
and chello will enter into such agreements with Austar, Telstra and VTR.
(b) TERRITORY B. With respect to Territory B:
(i) At the request in writing of chello at any time during the Term of
this Agreement, UGC will cause each relevant UGC Affiliate (other than
Austar, Telstra and VTR and their respective subsidiaries), to enter into a
chello Franchise Agreement within 60 days of such request or such longer
period during the continuance of good faith negotiations between chello and
the relevant UGC Affiliate regarding the content of such agreement.
(ii) UGC may at any time during the term of this Agreement at its own
initiative offer to chello to cause each or any relevant UGC Local Operator a
majority of whose homes are, or will within a reasonable time be, connected
to two-way upgraded HFC networks capable of providing the Services (or such
lesser number of such homes as chello may agree is the minimum number of such
homes necessary to justify, on an economic and resource allocation basis,
roll-out of any Services to such UGC Local Operator), to enter into the
agreement referred to in Section 2.01(b)(i) and chello shall enter into such
agreement within 60 days of such request or such longer period during the
continuance of good faith negotiations between chello and the relevant UGC
Affiliate regarding the content of such agreement.
(iii) If any of UGC or chello has offered or requested, as the case may
be, to the other party to cause the relevant UGC Local Operator to enter into
a chello Franchise Agreement with a relevant UGC Local Operator pursuant to
Section 2.01(b)(i) or (ii) and such an agreement is not entered into within 60
days of such offer solely as a result of the other party's failure to enter
into the chello Franchise Agreement for a reason other than the continuation
of good faith negotiations between chello and the relevant UGC Local Operator
regarding the content of the chello Franchise Agreement, chello or the
relevant UGC Local Operator, as the case may be, may enter into an agreement
with a Competing Business (as defined in Section 3.02(a)).
(c) COMPUTATION OF THE NUMBER OF TERRITORY B HOMES. For the avoidance
of doubt, with respect to any UGC Local Operator, only those homes meeting
the criteria set forth in the definition of Territory B shall count against
the five million homes referred to in such definition.
(d) LAUNCH OF chello SERVICES. With respect to Territories A and B,
chello will launch the relevant Services within the period specified in the
chello Franchise Agreement applicable to such UGC Affiliate, but, in any
event, no later than a reasonable
time after entering into chello Franchise Agreements with UGC Affiliates with
respect to the Services.
SECTION 2.02. UGC'S OBLIGATIONS REGARDING TERRITORY C.
(a) Where the board of directors of UGC resolves to offer any of the
Services itself or through a UGC Local Operator or a third party in Territory
C or where UGC or a UGC Affiliate received an offer in writing from a third
party to provide any of such Services in Territory C that the board of
directors of UGC resolves to offer itself, through a UGC Local Operator or
such third party, UGC will either present the opportunity, cause the UGC
Affiliate concerned to present the opportunity, or in the case of a
Non-Controlled UGC Business or a third party, use commercially reasonable
efforts to cause it to present the opportunity, first to chello, which shall
have rights of first negotiation to provide such Services.
(b) For purposes hereof, "rights of first negotiation" means, in
respect of any individual opportunity relating to such Services in Territory
C, chello's right to be offered the opportunity to enter into mutually
exclusive good-faith negotiations with UGC and such other parties as may be
involved with a view to reaching agreement on the financial and other
relevant terms for provision of such Services. If chello declines the offer
to negotiate, or if chello, UGC and such other parties are unable to agree on
the relevant terms within 30 days after chello's receipt of the offer to
negotiate, or such extension of such 30-day period as the parties may agree
on, UGC and/or any UGC Affiliate may thereafter pursue the opportunity itself
or during a period of 90 days commencing on the day immediately following
expiry of such 30-day period or any extension thereof, offer the opportunity
to third parties and enter into an agreement with a third party on financial
and other relevant terms no more favorable to such third party than the terms
offered to chello and rejected or not agreed to by chello. If (i) during such
90-day period UGC or any UGC Affiliate offers the opportunity to a third
party on more favorable terms, or (ii) UGC or any UGC Affiliate has not
reached a binding agreement with a third party with respect to such
opportunity prior to the end of such 90-day period, such opportunity and
terms must be offered to chello, and chello will again have rights of first
negotiation in respect of such opportunity on such terms. Prior to executing
any binding documentation with a third party with respect to the Services in
Territory C, UGC will present a term sheet to the Board of Directors of
chello specifying (unless disclosure thereof to chello is precluded by
agreement) the terms finalized with such third party, prior to such terms
becoming legally binding, and an Officer's Certificate confirming that the
financial and other relevant terms are no more favorable to such third party
than the terms that had been offered to and not accepted by chello and that
such transaction has otherwise been negotiated and consummated in compliance
with this Agreement.
SECTION 2.03. LIMITATIONS OF UGC'S OBLIGATIONS.
(a) PRE-EXISTING CONTRACTS. UGC's obligations under Section 2.01(b)
will not apply to any UGC Affiliate if it or UGC is bound by conflicting
pre-existing contractual arrangements in relation to the Services and, after
using commercially reasonable efforts, UGC is unable to cause such UGC
Affiliate to enter into the standard chello Franchise Agreement. In this
event, it is agreed that section 2.05 below will not apply to any other terms
agreed by chello with any such UGC Affiliate which are more favorable than
the terms set out in the chello Franchise Agreement.
(b) CONFLICT. In the event of any conflict between the terms of this
Agreement and any term of the Summarized UGC Local Operator Term Sheet or the
franchise agreement in each case entered into under Section 2.01(a) or (b),
the terms of this Agreement will prevail.
SECTION 2.04. GOOD FAITH COOPERATION OF UGC LOCAL OPERATORS. UGC will
use reasonable commercial efforts to cause the good faith cooperation of the
UGC Local Operators in their ongoing relationships with chello and will
assist and support chello in resolving any network performance, installation,
billing, customer care, marketing or other service level issues it may have
with UGC Local Operators.
SECTION 2.05. MOST FAVORED NATION STATUS FOR UGC. Subject to Section
2.03(a) above, chello agrees that, if at any time during the term of the
Agreement, it or any of its subsidiaries or controlled affiliates grants to
any third party terms which, for comparable territories, services and local
distribution technologies, are more favorable than terms agreed to by UGC and
UGC Local Operators that have entered into a franchise agreement with chello,
chello will offer such more favorable terms to UGC and such UGC Local
Operator. If UGC or any UGC Local Operators accept new terms offered by
chello under this Section 2.05, then, to the extent possible, those new terms
take effect from the date on which the agreement with the third party has
come or will come into operation. This Section 2.05, however, shall not be
construed to (i) obligate chello or any of its subsidiaries or controlled
affiliates to offer such more favorable terms to UGC or any UGC Local
Operator to the extent such more favorable terms only appear in agreements
in existence at the date of this Agreement or (ii) apply to provisions
relating to the duration or the term of any agreement with a third party.
ARTICLE III
NON-COMPETITION
SECTION 3.01. UGC'S NON-COMPETE UNDERTAKING. Except as otherwise
provided in this Agreement, during the term of any franchise agreement
between chello and a UGC Local Operator, UGC will not compete with chello,
whether directly or through any of UGC's subsidiaries, subject to fiduciary
obligations, for the provision of (i) Category A Services to residential
homes in such UGC Local Operator's Franchise Areas, (ii) Category A Services
to businesses where UGC has granted exclusive rights to such UGC Local
Operator to provide such Category A Services and (iii) Category B Services
where such UGC Local Operator has agreed that such Category B Services will
be provided by chello on an exclusive basis. Together, these non-compete
activities are hereinafter referred to as "RESTRICTED ACTIVITIES".
SECTION 3.02. LIMITATIONS ON UGC'S NON-COMPETE UNDERTAKING.
(a) With respect to Sections 2.02 and 3.01, UGC and its subsidiaries
will nevertheless be entitled to (i) own voting interests of no more than 10%
in Public Companies that directly compete with chello for the provision of
Category A and B Services; (ii) own, lease and operate internet backbone
connections; or (iii) acquire an interest in any business that competes with
chello's Category A and B Services, if the competing business is not the
acquired entity's Primary Business, provided that UGC will use reasonable
commercial efforts to give chello the opportunity to purchase the competing
part of the business ("COMPETING BUSINESS") in an arms' length transaction
promptly subsequent to the acquisition. In the event that chello purchases
the Competing Business or part thereof, homes to which chello provides any
Category A or B Services as a result of such purchase shall not be counted
towards the 3.2 million homes referred to in the definition of Territory B.
(b) With respect to Section 3.01, each UGC Local Operator which has
entered into a franchise agreement with chello shall nevertheless be entitled
to engage or participate in limited testing, trials and similar activities
with respect to any Restricted Activity so long as (i) such engagement or
participation is solely for testing or trail purposes, (ii) such UGC Local
Operator makes any such service available to a limited number of homes passed
or businesses passed (which shall not exceed 50,000 in the aggregate), (iii)
the duration of such testing or trial does not exceed six months and (iv) the
public disclosures made by such UGC Local Operator shall not characterize or
represent such services as other than a test or trial, provided, however,
that such testing, trials and similar activities will (aa) not be permissible
in any territory where chello has already launched any of the Services, (bb)
not prevent chello from launching any of the Services anywhere (cc) will not
be conducted in conjunction with a Competing Business and (dd) will not begin
within 90 days prior to the commencement of chello's trials, testing or
launching of any Services by chello in the relevant territory of which UGC is
aware. Once chello furthermore launches any of the Services in a territory
where testing, trials or similar activities as specified above are being
conducted by UGC or a UGC Local Operator, UGC or the UGC Local Operator will
promptly migrate to chello the customers to whom services are provided
pursuant to this subsection. Each UGC Local Operator will agree that it
will advise chello of its intention to conduct such testing, trial or other
activity, and chello and each UGC Local Operator will
agree to discuss in good faith arrangements to conduct such testing or trial
jointly, provided that neither party shall be under any obligation to agree
to any joint testing arrangements.
SECTION 3.03. chello's NON-COMPETE UNDERTAKING. (a) During the
respective terms of franchise agreements which remain in force between chello
and the UGC Local Operators pursuant to which UGC Local Operators have agreed
to provide such services exclusively through chello, chello will not,
directly or indirectly, in the respective territories covered by each such
franchise agreement, provide Category A or Category B Services to residential
homes or businesses other than through UGC Local Operators.
(b) Subject to Section 4.06, in any geographical area outside the
territories covered by Section 3.03(a) and for so long as UGC holds 50% or
more of the outstanding ordinary shares of UPC on a fully diluted basis and
chello is a majority-owned affiliate of UPC; (i) chello shall not, and shall
not permit its majority-owned affiliates to, pursue any video services or
telephone opportunities (except for the provision of any Category A, B or C
Services) in Saudi Arabia or in other markets outside of Europe or the Middle
East as defined below unless (x) chello has first presented such opportunity
through UPC in writing to the board of directors of UGC and (y) the members
of the board of directors of UGC who are not officers or directors of UPC or
chello have declined to pursue such opportunity in writing to UPC and chello;
and (ii) chello may pursue any business in the United States and its
territories and possessions without regard to the activities of UGC. UGC will
respond with reasonable promptness after the presentation of the opportunity
by chello pursuant to clause (i). For purposes of this Section 3.03(b),
"Europe" means Xxxxxxx, Xxxxxxx, Xxxxxxx, Xxxxxx, Xxxxxxxx, Xxxxxxx, Czech
Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary,
Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Moldova, The
Netherlands, Norway, Poland, Portugal, Romania, Russia, Slovak Republic,
Spain, Sweden, Switzerland, Ukraine and the United Kingdom and "Middle East"
means Armenia, Azerbaijan, Bahrain, Cyprus, Egypt, Georgia, Iran, Iraq,
Israel, Jordan, Kuwait, Lebanon, Oman, Palestine, Qatar, Syria, Turkey,
United Arab Emirates and Yemen; in each case as such territories are
currently constituted or as they may be constituted in the future.
ARTICLE IV
MISCELLANEOUS
SECTION 4.01 UGC FINANCIAL COVENANTS. chello will not take any actions
or omit to take any action, which action or omission would result in any of
UGC or its subsidiaries and certain restricted affiliates breaching any of
its covenants under (i) its financing agreements are listed in Annex D
hereto, a copy of each of which has been provided to chello provided,
however, that UGC will keep chello informed of any material changes in the
terms of these agreements and (ii) any other financing agreements to which
UGC is a party governing indebtedness of UGC that replaces or refinances any
indebtedness governed by the financing agreements referred to in (i) above, a
copy of each of which will be provided to chello promptly upon its being
executed provided, however, that UGC shall use reasonable efforts to ensure
that changes to agreements referred to in (i) above and covenants in
financing arrangements referred to in (ii) above are not materially more
restrictive on actions of chello than the current covenants in agreements
referred to in (i) above. In addition to the foregoing, without UGC's prior
consent, chello will not take any action or omit to take any action the
result of which would reduce the capacity of any of UGC and its subsidiaries
and
certain restricted affiliates to incur indebtedness or make investments or
other restricted payments under such financing agreements provided, however,
that this Section 4.01 shall not preclude chello from (x) operating its
business in the ordinary course, or from incurring losses or operating with
negative cash flow even though UGC's capacity to incur debt or make restricted
payments may be reduced thereby or (y) entering into any transaction or
agreement outside the ordinary course of business that has been approved by
chello's supervisory board.
SECTION 4.02. REPORTING REQUIREMENTS. Chello (i) will timely provide UGC
with audited financial statements of chello in such form and with respect to
such periods as UGC may reasonably request, until UGC is no longer required
to include financial statements of chello in its filings with the Securities
and Exchange Commission; (ii) will not alter or amend its accounting
principles without the prior written consent of UGC, until such time as UGC no
longer consolidates chello's financial results; (iii) will provide, prior to
the beginning of the conversion period of chello's ordinary C shares held by
UGC, information in connection with the arrangements concerning such shares;
and (iv) will provide other information about chello and its subsidiaries
which UPC may reasonably request. UGC will similarly timely provide chello
with such financial information as chello may require to comply with its
financial reporting obligations. chello and UGC will consent to the
disclosure of all matters deemed necessary or appropriate by UGC or chello,
as the case may be, in order to comply with its obligations under the U.S.
securities laws.
SECTION 4.03. COSTS OF chello INITIAL PUBLIC OFFERING. chello covenants
and agrees with UGC that chello will pay or cause to be paid all fees,
disbursements, costs and other expenses of whatsoever nature incurred by UGC,
any UGC Affiliate or any Non-Controlled UGC Business in connection with
chello's initial public offering up to a maximum of the difference of (a)
US$1,000,000, including, but not limited to, the fees and disbursements of
Holme Xxxxxxx & Xxxx minus (b) any such fees, disbursements, costs and other
expenses paid by chello to or on behalf of UPC.
SECTION 4.04. USE OF PROCEEDS BY chello. UGC hereby agrees that chello
shall be permitted to use the proceeds chello receives from its initial
public offering the sale by chello of shares to Microsoft Corporation
("MICROSOFT") pursuant to Microsoft's option with UPC and the sale to Liberty
Media Corporation ("Liberty") to fund chello's own cash requirements,
including without limitation to make investments in chello's fixed assets,
property and other permitted investments under UGC's indentures; PROVIDED,
HOWEVER, that if chello has not fully invested that portion of these proceeds
that is required to be invested in fixed assets, property or other permitted
investments under the indentures prior to the 21st Business Day before all
such amounts are required to be so invested under the indentures and UGC
makes an irrevocable offer to purchase notes pursuant to the terms of the
indentures, chello shall hold in reserve such funds so that they are
available at UGC's request as necessary to UGC or one of its subsidiaries to
purchase any notes tendered; PROVIDED, FURTHER, that except as otherwise
permitted under UGC's and UPC's indentures as the case may be, nothing herein
shall restrict chello and its subsidiaries from paying dividends or making
other distributions to or on behalf of, or paying any obligation to or on
behalf of, or otherwise transferring assets or property to or on behalf of, or
making or paying loans or advances to or on behalf of, UGC, UPC or any
subsidiary (as defined in the indentures) of either of them. Any such loan to
UGC or UPC shall be made pursuant to the terms of an intercompany note, the
form of which is attached hereto as Annex E.
SECTION 4.05. SHARES AS CONSIDERATION. In consideration of UGC entering
into this Agreement and the rights obtained by chello under Section 4.06,
chello will:
(a) issue fully paid 28,372,930 ordinary shares B having a nominal value
of 0.50 each of chello to UGC or one or more subsidiaries of UGC which UGC
nominates for this purpose at such time or times as UGC shall direct.
(b) issue fully paid 643,333 convertible shares C having a nominal value
of 0.05 each of chello to UGC or one or more subsidiaries of UGC which UGC
nominates for this purpose at such time as UGC shall direct. chello agrees
that a portion of these shares may be reallocated between UPC and UGC to
reflect their respective contributions to chello's aggregate revenues in the
quarter ended December 31, 2003.
SECTION 4.06. ASSIGNMENT OF RIGHTS. UGC shall execute a deed of
assignment (the "DEED OF ASSIGNMENT") pursuant to which UGC shall assign to
chello all of UGC's rights and benefits under Section 1(b) (Covenant Not to
Compete) of the UGC Agreement BUT ONLY INSOFAR as such rights and benefits
would restrict the ability of chello and its majority-owned affiliates (but
not UGC and its other affiliates) to pursue the Services. The foregoing,
however, is subject to any and all rights and benefits held by Austar United
Communications Limited ("AUC") under the General Agreement, dated as of June
16, 1999, between UGC (formerly known as United International Holdings, Inc.)
and AUC to the extent provided in the Deed of Assignment.
SECTION 4.07. INDEMNIFICATION FOR LIABILITIES IN CONNECTION WITH THE
UNDERWRITING AGREEMENT. As additional consideration for UGC agreeing to
execute the underwriting agreement in connection with chello's initial public
offering of securities (the "Underwriting Agreement"), chello shall
indemnify, defend and hold harmless UGC from and against any and all claims,
damages, liabilities or expenses (including court costs, reasonable expenses
and reasonable attorney's fees) incurred in connection with any suit or claim
that may be brought against UGC (collectively "LIABILITIES") based upon
arising out of by reason of or otherwise in respect of or in connection with
the Underwriting Agreement; PROVIDED, HOWEVER, that chello will not be liable
to UGC (i) to the extent that it is finally judicially determined that such
Liabilities resulted from the wilful misconduct or gross negligence of UGC,
(ii) to the extent that it is finally judicially determined that such
Liabilities resulted solely from the material breach by UGC of any
representation, warranty, covenant or other agreement of UGC contained in the
Underwriting Agreement or (iii) to the extent that such claims, damages,
liabilities or expenses result from any material omission or misstatement in
information provided by UGC for purposes of inclusion in the registration
statement relating to chello's initial public offering at the time of
effectiveness, PROVIDED FURTHER, that if and to the extent that such
indemnification is unenforceable for any reason, chello shall make the
maximum contribution to the payment and satisfaction of such indemnified
liability which shall be permissible under applicable laws. The
indemnification and contribution provided for in this Section 4.07 will
remain in full force and effect regardless of any investigation made by or on
behalf of UGC.
SECTION 4.08. REGISTRATION RIGHTS AGREEMENT. chello and UGC agree to
enter into a Registration Rights Agreement in the form attached as Annex F
hereto.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. REPRESENTATIONS AND WARRANTIES OF UGC
(a) ORGANIZATION AND AUTHORITY. UGC is a company duly incorporated,
validly existing and in good standing under the laws of the state of Delaware
and has all necessary power and authority to enter into this Agreement, to
carry out its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by UGC, the
performance by it of its obligations hereunder and the consummation by it of
the transactions contemplated hereby have been duly authorized by all
requisite action on its part. This Agreement has been duly executed by UGC
and (assuming due authorization, execution and delivery by the other person
signatory hereto) this Agreement constitutes a legal, valid and binding
obligation of UGC enforceable against it in accordance with its terms.
(b) NO CONFLICT. The execution and performance of this Agreement by UGC
do not and will not (i) violate, conflict with or result in the breach of any
provision of its Articles of Association, (ii) conflict with or violate any
law, governmental regulation or governmental order applicable to UGC or any
of its subsidiaries, except chello, or any of its or their assets, properties
or businesses or (iii) conflict with, result in any breach of, constitute a
default (or event with which the giving of notice or lapse of time or both,
would become a default) under, require any consent under, or give to others
any rights pursuant to, any contract, agreement or arrangement by which UGC
or any of its subsidiaries, except chello, is bound; except to the extent
that any conflict under (ii) or (iii) above would not prevent or materially
delay the consummation of the transactions contemplated by this Agreement.
(c) OPERATING PERMITS, LICENSES, CONSENTS, ETC. Each of UGC and its
relevant Affiliates has obtained all permits, governmental licenses,
authorizations, qualifications, consents and approvals, technology licenses
and contractual consents, waivers and amendments as are necessary for the
conduct of its business and the business of each of the UGC Affiliates in all
jurisdictions as carried out on the date hereof, including, without
limitation, all cable franchises and telecommunication permits, licenses and
consents, except in each case to the extent that the failure to obtain or
maintain such permits, governmental licenses, authorizations, qualifications,
consents and approvals, technology licenses and contractual consents, waivers
and amendments would not adversely affect UGC or its Affiliates' ability to
perform its or their obligations under this Agreement and the transactions
contemplated hereby or would not have a material adverse effect on the
business, operations, properties, prospects or condition (financial or
otherwise) of UGC or any of its Affiliates.
SECTION 5.02. REPRESENTATIONS AND WARRANTIES OF chello.
(a) DUE ORGANIZATION AND AUTHORIZATION. chello is a limited liability
company duly organized, validly existing and in good standing under the laws
of the Netherlands and has all necessary power and authority to enter into
this Agreement, to carry out its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by chello, the performance by it of its obligations hereunder and
the consummation by it of the transactions contemplated hereby have been duly
authorized by all requisite action on its part. This Agreement has been duly
executed and delivered by chello and (assuming due authorization, execution
and delivery by the other person signatory hereto) this Agreement constitutes
a legal, valid and binding obligation of chello enforceable against it in
accordance with its terms.
(b) NO CONFLICT. The execution delivery and performance of this
Agreement by chello do not and will not (i) violate, conflict with or result
in the breach of any provision of its Articles of Association, (ii) conflict
with or violate any Law or governmental order applicable to chello or any of
its assets, properties or businesses or (iii) conflict with, result in any
breach of, constitute a default (or event with which the giving of notice or
lapse of time or both, would become a default) under, require any consent
under, or give to others any rights pursuant to, any contract, agreement or
arrangement by which chello is bound; except to the extent that any conflict
under (ii) or (iii) above would not prevent or materially delay the
consummation of the transactions contemplated by this Agreement.
(c) OPERATING PERMITS, LICENSES, CONSENTS, ETC. Each of chello and its
relevant Affiliates has obtained all permits, governmental licenses,
authorizations, qualifications, consents and approvals, technology licenses
and contractual consents, waivers and amendments as are necessary for the
conduct of its business and the business of each of the relevant chello
Affiliates in all jurisdictions as carried out on the date hereof, including,
without limitation, any telecommunications permits, licenses and consents,
except in each case to the extent that the failure to obtain or maintain such
permits, governmental licenses, authorizations, qualifications, consents and
approvals, technology licenses and contractual consents, waivers and
amendments would not adversely affect chello or its Affiliates' ability to
perform its or their obligations under this Agreement and the transactions
contemplated hereby or would not have a material adverse effect on the
business, operations, properties, prospects or condition (financial or
otherwise) of chello or any of its relevant Affiliates.
ARTICLE VI
INDEMNIFICATION, LIMITATION OF WARRANTY AND LIABILITY
SECTION 6.01. UGC INDEMNIFICATION. UGC shall indemnify, defend
and hold harmless chello, its affiliates and their respective shareholders,
members, officers, agents, directors and employees (the "CHELLO PARTIES")
from and against any and all claims, damages, liability or expenses
(including court costs, reasonable expenses and reasonable attorney's fees)
incurred in connection with any suit or claim that may be brought against the
chello Parties by third parties (other than the UGC Affiliates or the
Non-Controlled UGC Businesses) to the extent that such claims, damages,
liabilities and expenses arise out of or accrue from (i) the negligence, bad
faith or wilful misconduct of UGC in performance of its obligations under
this Agreement; (ii) any misrepresentation or breach of any representations
or warranties of UGC set forth in this Agreement; (iii) any non-compliance by
UGC with any covenants, agreements or undertakings of such party contained in
the Agreement; or (iv) UGC's failure to comply with any Laws.
SECTION 6.02. INDEMNIFICATION BY CHELLO. Chello shall indemnify,
defend and hold harmless UGC, its Affiliates and their respective
shareholders, members, officers, agents, directors and employees (the "UGC
PARTIES") from and against any and all claims, damages, liability or expenses
(including court costs, reasonable expenses and reasonable attorney's fees)
incurred in connection with any suit or claim that may be brought against the
UGC Parties by third parties, to the extent that such claims, damages,
liabilities and expenses arise out of or accrue from (i) the negligence, bad
faith or wilful misconduct of chello in performance of its obligations
under this Agreement; (ii) any misrepresentation or breach of any
representations or warranties of chello set forth in this Agreement; (iii)
any non-compliance by chello with any covenants, agreements or undertakings
of such party contained in the Agreement; and (iv) the failure of chello to
comply with any Laws.
SECTION 6.03. INDEMNIFICATION PROCEDURES. Whenever the chello
Parties or the UGC Parties, as the case may be (the "INDEMNIFIED PARTY")
shall become aware that a claim by a third party has been asserted or
threatened which, if valid, would subject UGC or chello, as the case may be
(the "INDEMNIFYING PARTY"), to an indemnity obligation under this Agreement,
the Indemnified Party promptly will notify the Indemnifying Party in writing
of such claim in sufficient detail to enable the Indemnifying Party to
evaluate the claim. The Indemnifying Party will have the right, but not the
obligation, to assume the defense of such claim. If the Indemnifying Party
fails to assume the defense of such claim within fifteen (15) days after the
receipt of notice of the claim, the Indemnified Party (upon delivering
written notice to such effect to the Indemnifying Party) shall have the right
to undertake, at the Indemnifying Party's cost and expense, the defense,
compromise or settlement of such claim, subject to the right of the
Indemnifying Party to assume the defense of such claim at any time prior to
settlement, compromise or final determination thereof, and provided however
that the Indemnified Party shall not enter into any such compromise or
settlement without the written consent (such consent not being unreasonably
withheld) of the Indemnifying Party. In the event the Indemnified Party
assumes the defense of the claim, the Indemnified Party will keep the
Indemnifying Party reasonably informed of the progress of any such defense,
compromise or settlement.
ARTICLE VII
DISPUTE RESOLUTION
SECTION 7.01. COOPERATION AND SUPPORT; PROCEDURES FOR DISPUTE
RESOLUTION. The parties acknowledge and agree that cooperation and mutual
support will be necessary to achieve the purposes contemplated by several
provisions of this Agreement. Chello and UGC shall therefore attempt to
resolve any dispute relating to the Agreement promptly and effectively in
the context of such purposes. In the event the parties are unable to do so,
all disputes arising in connection with this Agreement shall be settled
according to the following provisions:
(a) If either party believes that the other party has
materially breached this Agreement, or if any other dispute regarding the
interpretation or implementation of the Agreement arises, the dispute or
alleged breach shall be referred, by means of a written notice which sets out
facts and circumstances in reasonably sufficient detail for a determination
to be made on the basis thereof, to the chief executive officers of each of
chello and UGC (the "CEOs"). The CEOs will then in good faith attempt, in
communications which shall include at least one face-to-face meeting, to
resolve the allegation or dispute and to reach agreement on remedial steps,
if any, to be taken by the offending party or any other measures to resolve
the allegation or dispute.
(b) If the CEOs fail to reach a joint decision within 14 days
after the receipt of the written notice referred to in section 7.01(a) above,
each of chello and UGC will appoint a member of the Supervisory Board of
chello which was neither nominated nor appointed by chello or UGC (the
"INDEPENDENT MEMBERS") to a committee which will include the CEOs and the
Independent Members (the "DISPUTE RESOLUTION COMMITTEE"). The Dispute
Resolution Committee will then in good faith attempt, in the same manner as
described in subsection 7.01(a) above, to resolve the matter.
(c) If the Dispute Resolution Committee fails to reach a joint
decision within 21 days after the written notice referred to in subsection
7.01(a) above, then either party may submit the matter to arbitration. Such
dispute will thereupon be finally settled under the Rules of Arbitration of
the London Court of International Arbitration by a panel of three
arbitrators, one appointed by chello, one appointed by UGC and the third
appointed by the two arbitrators appointed by chello and UGC. In the event
that chello or UGC fails to appoint an arbitrator within 30 days of notice of
the submission of the dispute to arbitration or the two arbitrators fail to
appoint a third within 30 days of the appointment of the second of such
arbitrators, then any party may request the London Court of International
Arbitration to appoint an arbitrator. In making any selection of arbitrators,
the London Court of International Arbitration shall take into consideration
the expertise of potential candidates in the field of telecommunications. The
arbitration shall take place in London, United Kingdom. The arbitral
proceedings shall be conducted in the English language.
ARTICLE VIII
TERMINATION
SECTION 8.01. TERM. Subject to Section 8.02 and 8.03, and except
for (i) the representations and warranties and the indemnification
obligations of each of the parties, which shall survive the termination of
this Agreement indefinitely, (ii) the non-compete obligations of each of UGC
and chello pursuant to Sections 3.01 and 3.03 respectively, which shall
survive for the periods stated in those sections, (iii) Section 4.01, which
shall survive for so long as chello's conduct may impact on the compliance of
covenants under UGC's financing agreements and (iv) Section 4.02, which shall
survive for so long as UGC or chello requires the information stated therein
for purposes of compliance with its reporting requirements, as stated
therein, this Agreement shall remain in force for seven (7) years from the
date hereof.
SECTION 8.02. TERM AS TO TERRITORY A. With respect to Territory
A, this Agreement shall remain in force for the respective periods set forth
in the Austar, Telstra and VTR franchise agreements, entered into pursuant to
the Austar and Telstra Term Sheet and the VTR Term Sheet, respectively.
SECTION 8.03. TERMINATION BY EITHER PARTY. This Agreement shall
be subject to termination upon the occurrence of any of the following events.
Either party may terminate immediately upon notice if:
(i) the other party files a petition for bankruptcy or is
adjudicated as bankrupt (or the equivalent in any country in which either
party operates);
(ii) a petition in bankruptcy (or the equivalent in any
country in which either party operates) is filed against the other party and
such petition is not removed or resolved within thirty (30) calendar days;
(iii) the other party becomes insolvent or makes an
assignment for the benefit of its creditors or an arrangement for its
creditors pursuant to any bankruptcy laws;
(iv) the other party discontinues its business; or
(v) a receiver is appointed for the other party or its
business.
SECTION 8.04. EFFECT OF TERMINATION.
(a) Termination of this Agreement by either party shall not act
as a waiver of any breach of this Agreement and shall not act as a release of
either party hereto from any liability for breach of such party's obligations
under this Agreement.
(b) Within 60 calendar days following the expiration or
termination of this Agreement, each party shall pay to the other party all
sums, if any, due and owing as of the date of expiration or termination, net
of any amounts due from the other party as of such date.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. EXPENSES. Except as otherwise provided in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs and expenses.
SECTION 9.02. NOTICES. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by
delivery in person, by courier service, by cable, by telecopy, by telegram or
by telex to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in
accordance with this Section 5.02):
(a) if to UGC:
UnitedGlobalCom, Inc.
Attention: President and Legal Department
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
XXX
Telecopy: x0 000 000 0000
(b) if to chello:
chello broadband N.V.
Attention: General Counsel
Boeing Xxxxxx 000
0000 XX Xxxxxxx-Xxxx
Xxx Xxxxxxxxxxx
Telecopy: x00 00 000 0000
SECTION 9.03. HEADINGS. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement.
SECTION 9.04. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in an
acceptable manner in order that the transactions
contemplated hereby are consummated as originally contemplated to the
greatest extent possible.
SECTION 9.05. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and undertakings, both written and oral,
between UGC and chello with respect to the subject matter hereof.
SECTION 9.06. ASSIGNMENT. Except as provided herein, this Agreement
may not be assigned without the express written consent of chello and UGC
(which consent may not be unreasonably withheld). Notwithstanding the
foregoing, this Agreement may be assigned by either party to any entity
directly or indirectly controlling or controlled by or under common control
with the party concerned. For purposes of this Section 9.06, "control" means
the power to direct the management and policies of a Person, directly or
through one or more intermediaries, whether through the ownership or voting
power or contract. This Agreement will be binding on the parties and their
respective successors and permitted assigns.
SECTION 9.07. NO THIRD PARTY BENEFICIARIES. Except for the provisions
of Article VI this Agreement shall be binding upon and inure solely to the
benefit of the parties hereto and their successors and permitted assigns and
nothing herein, express or implied, is intended to or shall confer upon any
other Person any legal or equitable right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
SECTION 9.08. FURTHER ASSURANCES; NO CONFLICTS. Each party, to the
fullest extent permitted by applicable Law, shall take all actions and
execute and deliver all documents as reasonably necessary to fulfill and
accomplish the purposes and transactions contemplated by this Agreement.
Notwithstanding anything to the contrary in this Agreement, but subject to
Section 2.03, UGC shall not be required to cause or procure that any third
party, including any UGC Local Operator, take or omit any action if any
contractual, fiduciary or other obligation of UGC or its affiliates would
preclude UGC from doing so or result in a breach or default of any such
obligation, provided, however, that in such an event UGC shall use
commercially reasonable efforts to achieve the intended objective of such
action or omission by means which would not result in such a breach or
default, or which is not precluded by such obligations, PROVIDED, FURTHER
that, except as otherwise specifically required by this Agreement, no loan
agreement or contract for borrowed money shall be repaid, in whole or in
part, and no contract shall be amended to increase the amount payable
thereunder or otherwise to be more burdensome to UGC or any of its affiliates
in order to achieve such objective and neither UGC nor any of its affiliates
shall be required to make any cash payment or relinquish any property or
contractual rights to achieve such objective except for filing fees and
reasonable expenses of attorneys and accountants.
SECTION 9.09. NO PARTNERSHIP. No provision of this Agreement creates a
partnership or joint venture between or among any of the parties or makes a
party the agent of another party for any purpose. A party has no authority
or power to bind, to contract in the name of, or to create a liability for
the other party in any way or for any purpose.
SECTION 9.10. AMENDMENT. This Agreement may not be amended or
modified except by an instrument in writing signed by chello and UGC.
SECTION 9.11. GOVERNING LAW. This agreement shall be governed by, and
construed in accordance with, the Laws of The Netherlands.
SECTION 9.12. COUNTERPARTS. This agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original
but all of which taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, chello and UGC have executed or have caused their
respective officers thereunto duly authorized to execute this agreement as of
the date first written above.
CHELLO BROADBAND N.V.
By: /s/ Xxxxx Xxxxx
--------------------------------
Name: Xxxxx Xxxxx
Title: CEO
By: /s/ Xxxxx Xxxxxx
--------------------------------
Name: Xxxxx Xxxxxx
Title: Managing Director Corporate
Development
UNITEDGLOBALCOM, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: President and COO