Exhibit 10.3
MANAGEMENT AGREEMENT
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THIS MANAGEMENT AGREEMENT (the "Agreement") is made as of the 9th day of
October, 1997 by and between Cablevision S.A., an Argentine company duly
incorporated in Argentina, with its legal domicile at Xxxxxxxx 0000, Xxxxxx
Xxxxx, Xxxxxxxxx (hereinafter defined in Section 1 as the "Company"), and TINTA
Cable Management, Inc., a Colorado corporation and wholly owned subsidiary of
Tele-Communications International, Inc. ("TINTA") a Delaware corporation with
its legal domicile at 0000 XXX Xxxxxxx, Xxxxxxxxx, Xxxxxxxx 00000 (USA) (the
"Managing Agent").
WITNESSETH:
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WHEREAS, the Company's stockholders desire Managing Agent to manage the
Company as described below; and
WHEREAS, the Managing Agent has the experience and ability to manage the
Company and is willing to do so; and
WHEREAS, the Company desires to enter into a Management Agreement with the
Managing Agent providing for the management of the Company;
NOW, THEREFORE, in consideration of the premises, the mutual covenants, and
the mutual benefits to be derived therefrom, the parties hereto agree as
follows:
I. Appointment of Managing Agent. The Company hereby designates the
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Managing Agent, and the Managing Agent hereby accepts the designation of
exclusive managing agent of the Company, upon the conditions and for the term
and compensation herein set forth. As used herein, "Company" shall mean
Cablevision S.A. and all its property and employees, contracts and other assets
including its distribution systems (fiber optic and coaxial cable, MMDS and UHF
but excluding DTH and free-to-air television) now owned or acquired in the
future (in whole or in part) and all its subsidiaries, successors and assigns
now owned or acquired in the future.
I. Term of Appointment and Ownership. This Agreement shall become
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effective on the date hereof and shall continue in full force and effect from
its effective date until 30 September 2002 (the "Initial Term"), unless extended
or terminated sooner in accordance with the provisions of Paragraph 15 hereof.
While it serves as Managing Agent, Managing Agent will remain a wholly-owned
subsidiary of TINTA.
I. Duties and Responsibilities of Managing Agent. Except as prohibited or
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limited by this Agreement, the Managing Agent shall:
(1) perform all services necessary for the management of the Company;
(1) manage in all respects and at the Company's expense all the Company's
sales and marketing efforts;
(1) manage in all respects and at the Company's expense all matters related
to programming, including program selection, pricing, promotion, packaging,
channel line up and the like;
(1) take any action not specifically prohibited or limited by this Agreement
or the Company's By-laws (the "Company's By-Laws"), or by law or administrative
enactment, which may be necessary or desirable in the judgement of the Managing
Agent in order to manage the Company;
(1) have exclusive control of the physical plant and equipment of the
Company, including all phases of installation and operation thereof;
(1) have the responsibility for the supervisory management of the day-to-day
operation of the Company and shall devote thereto such time as may be necessary
for the proper and efficient supervisory management of the Company;
(1) make available to the Company its experience and knowledge as to
operating methods for distribution systems, and will advise the Company
regarding all phases of the operation of the Company;
(1) as permitted by law and by contract, make available to the Company at
the Company's expense all new ideas and technology relevant to the Company's
business presented to Managing Agent by third parties or that become available
in the market;
(1) keep or cause to be kept (at the Company's expense, as herein provided)
all necessary books and records of the Company's affairs, in which shall be
entered the transactions of the Company; such books and records shall be open to
the inspection and examination of the Company or its representatives at any
reasonable time and shall be kept in accordance with generally accepted
accounting principles in Argentina and the United States of America ("USA") and
procedures consistently applied, except when the Company instructs the Managing
Agent otherwise;
(1) manage in all respects and at the Company's expense all aspects of the
Company's assets and liabilities (both long and short term) and to provide for
the
adequate financing of the Company on terms and conditions available in the
market for companies of similar credit quality.
(1) with the exception of fiscal year 1998 (which budget and business
plan will be produced cooperatively by Managing Agent and the Company's
stockholders and their directors), at least 60 days prior to the end of each
fiscal year, the Managing Agent shall deliver to the Board of Directors a draft
annual budget and business plan for the following year, setting forth the
Managing Agent's proposed expenditures by the Company for the repair,
maintenance and operation and financing and expansion and other capital
expenditures (the "Budget") of the Company for the next fiscal year of the
Company; and upon receipt of all required approvals thereof, the Managing Agent
shall be entitled to make disbursements of the Company's funds in accordance
with such Budget. Except as provided above, the Managing Agent shall also
deliver to the Board of Directors of the Company, together with the Budget and
the Business Plan, a strategic plan for the following five (5) years, of which
the first year will correspond to the year of the Budget and the Business Plan;
(1) furnish to the Company, at Company's expense (and to any other
persons requested by the Company): (i) within 15 days after the end of each
calendar month, an unaudited statement of the Company's income and expenses for
such month and quarter and for the period since the end of the preceding fiscal
year (which statement may be under whatever names are then employed for
statements containing the same financial information) and all statements
required by the SEC, CNV, Bolsa, COMFER, INPI, federal and provincial securities
commissioners and other relevant regulatory agencies, all prepared in accordance
with Argentine and USA generally accepted accounting principles and procedures
consistently applied, except when the Company instructs the Managing Agent
otherwise;
(ii) the annual financial statements of the Company as of December 31,
and the quarterly statements on the last day of every calendar quarter according
to accounting principles generally accepted in Argentina and the United States,
(iii) information, according to the requirements and systems of the
Company's shareholders, in a monthly, quarterly and annual basis, related to the
business of the Company.
Such reports shall at least contain the following:
1. operative, commercial and financial matters;
2. financial and sales prospects;
3. proposals on policies related to finance, commercialization, supplies,
investments, expenses, services, staff and compensations;
4. insurance contracts;
5. any other matter that may be reasonably requested by any of the
Partners.
(1) at Company's expense, render a monthly statement showing all
connections to and disconnections from the Company's distribution systems;
(1) within 45 days after the end of each fiscal year and within 30
days after the end of each fiscal quarter, at Company's expense, cause the books
and records of the Company to be audited by Xxxxxx Xxxxxxxx, Price Waterhouse,
KPMG, Deloitte & Touche, Coopers & Xxxxxxx or Xxxxx and Xxxxx, who shall prepare
and render its audit opinion on the year-end balance sheet, the profit and loss
statement, and on such related statements as it deems necessary and all
statements required by the SEC, CNV, Bolsa, COMFER, INPI, federal and provincial
securities commissioners and other relevant regulatory agencies, all prepared in
accordance with Argentine and USA generally accepted accounting principles and
procedures consistently applied, except when the Company instructs the Managing
Agent otherwise;
(1) at Company's expense, (i) timely file or cause to be filed all
federal, state and local returns and reports as may be required, including,
without limitation, tax reports, reports to federal and provincial securities
commissioners, income tax withholding reports, social security reports,
employment tax reports, unemployment compensation reports, information reports,
CNV reports, reports to entities franchising the Company and reports to local
and state regulatory agencies, and (ii) cause all payments required thereunder
to be made by the Company from the Company's funds;
(1) with the Company, select and engage, at Company's expense, and
individually supervise such contractors or other persons considered by the
Managing Agent and the Company to be necessary for the construction, improvement
or maintenance of the Company's distribution systems; except as provided in
Xxxxxxx 00, xxxx of such persons shall be employees of the Managing Agent, and
the Managing Agent shall not be liable to the Company, the stockholders of the
Company, or to others for any act or omission on the part of any such persons;
(1) supervise, instruct, discharge, pay on behalf of the Company
solely from Company funds and otherwise manage all on-site managers, servants,
employees, agents or contractors considered by the Managing Agent to be
necessary for the efficient construction, development, maintenance or operation
of the Company; all of such persons shall be employees of (and paid by) the
Company or a particular distribution system and not of the Managing Agent; the
Managing Agent shall not be liable to the Company or to stockholders of the
Company or to third parties for any act or omission on the part of such
employees;
(1) take every step reasonably necessary in order that the Company
comply with all union contracts and all pension, insurance and other employee
benefit
programs and other obligations relating to the Company's employees, the costs of
which shall be paid from the Company's funds;
(1) carry out all negotiations with unions, whether relating to
elections, contracts, grievances or other matters and assist the Company's
attorneys in the preparation of union contracts, if any are required;
(1) in conjunction with attorneys employed by and at the expense of the
Company, negotiate on behalf of the Company all contracts necessary for the
construction, operation, maintenance, servicing, protection, improvement and
expansion of the Company, issue purchase orders for all necessary materials and
supplies and supervise the work of all material contractors;
(1) at Company expense, cause the Company to be maintained and serviced
at all times in all manner consistent with well-managed cable TV companies but
giving due consideration to the quality, location, finances and other attributes
of the systems given to Managing Agent to manage. Any and all construction,
reconstruction and expansion of any distribution system, including that required
to comply with the requirements of this Section, shall be at the sole expense of
the Company;
(a) cause to be purchased and maintained in effect: such policies of
insurance as the Company may from time to time direct to be carried against fire
and extended coverage (and other such hazards as the Company may elect to insure
against), policies of insurance against liability for injury or death to persons
and damage to property and policies of insurance or other coverage for workers'
compensation, in such forms and in such amounts as the Managing Agent may from
time to time consider appropriate; each of such policies and coverages shall be
at the expense of the Company and, except with respect to fire and extended
coverage or other hazard insurance, shall name both the Company and the Managing
Agent as insured thereunder;
(1) perform all other supervisory management services as required to
result in the efficient operation of the Company;
(1) employ and maintain on its staff, at the Company's sole cost and
expense, an adequate and competent staff of experts and specialists required for
the operation and management of the Company, including among others, as
required, programmers, marketing and sales personnel, engineers, operations and
construction supervisors, accountants and attorneys;
I. Limitations on Rights and Powers of Managing Agent. The Managing
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Agent shall not, without authorization from the Company (or the Executive
Committee of the Company's Board of Directors), for an on behalf of the Company:
(1) terminate any of the franchises or other governmental authorizations
relating to the Company;
(1) make, cause to be made, contract for or agree to any expenditures
involving any aggregate variance in excess of five percent (5%) above the
relevant budget for any year or a variance in any major budget item in excess of
US$ 1 million not provided for in the Company's approved budgets;
(1) commence or institute any legal action or litigation in the name of
the Company, except that the Managing Agent may, in its discretion, institute
collection proceedings, including legal actions incident thereto, in the name
of, and at the expense of, the Company to enforce the collection of payments due
from customers of the Company;
(1) consent to unionization of the Company or of the employees of the
Company;
(1) make any payment on behalf of the Company or obligate the Company to
make any payment regarding or relating to any expenditure or obligation of the
Company outside the scope of this Agreement or outside the scope of the normal
operating expenditures contemplated by this Agreement and the Company's approved
budgets (the Managing Agent shall, upon receipt of any statement, invoice, xxxx
or other notification of any items clearly outside the scope of this Agreement,
immediately forward such notification to the Company);
(1) sell or hypothecate any of the assets of the Company, except worn
out or obsolete materials, supplies and equipment, any proceeds of which shall
be the property of the Company to the extent not expended for replacement of
such materials, supplies or equipment.
(1) directly or indirectly provide management services to companies
competing with the Company in Argentina and Uruguay, excluding companies in
which the Company has any equity interest.
(1) enter into any management agreement similar to this Management
Agreement while the Management Agreement is in effect.
I. Manager. The Managing Agent shall propose to the Board of Directors
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that the Company employ, a manager, as general manager ("gerente general") of
the Company (the "Manager") for all the Company. The Company's consent to such
proposal will not be withheld unreasonably. If two proposed candidates in a row
are rejected, managing Agent may appint the third. Each of Managing Agents
proposals must be made in good faith, and the proposed candidate must be a "buen
hombre de negocios" and have significant management experience in positions of
similar responsibility. Such Manager shall be in charge of, and have authority
over, the routine day-to-day operations of the Company subject to the general
supervision and control of the Managing Agent and its designated officers and
employees in Denver and/or Buenos
Aires. In the event the size and requirements of any of the Company's
distribution systems are such that one or more other managers are required, in
the opinion of the Managing Agent, for the proper and efficient management of
such systems, then such other managers shall be employed by the Managing Agent
at the expense of the Company to serve under the supervision and authority of
the Manager and the Managing Agent. All on-site employees under the supervision
and authority of the Manager shall be considered employees of the Company at the
expense of the Company.
Managing Agent will provide all such support and assistance as it deems
necessary from the resources available in its Denver or Buenos Aires offices.
Such assistance will include general managerial assistance and programming,
sales and marketing, accounting, operations, construction, engineering and legal
support. Such support will be rendered both in person and by
telephone/facsimile throughout the term of this Agreement. Managing Agent
currently anticipates that such assistance will be regular and often quite
extensive often on a daily basis and, during periods of material development
and/or growth at the Company, will involve on-the-ground involvement of
personnel and time from Managing Agent's Denver or Buenos Aires offices.
I. Other Employees. General supervision, direction and control of the
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Company by the Managing Agent shall be provided by officers, agents and
employees of the Company; all expenses incurred for supervisory and management
services performed by such persons or for periodic and routine visitations to,
and inspections of, the Company or for regular consultations with, and advice
to, the Manager and the cost of all on-site supervisory or management personnel,
shall be borne by the Company.
I. Allocation of Costs. Except as provided herein, all the costs incurred
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under this Agreement shall be borne by the Company.
I. Management Fee. The Managing Agent shall receive one and three tenths
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percent (1.3%) of the Company's EBITDA, but in no event less than the "Minimum
Fee" as defined below per quarter, as a management fee for supervisory
management services rendered by the Managing Agent as provided for herein.
"EBITDA" shall mean earnings before interest, taxes, depreciation and
amortization as such terms are used in generally accepted accounting principals
in the USA. The amount to be paid pursuant to this section, will be paid prior
to any Argentine income tax, withholding tax, V.A.T. or any other tax or cost
which may be applicable. If the Company requires a controlling interest in VCC,
Mandeville or a company of comparable size, the Minimum fee will be US $450,000.
Otherwise, the Minimum Fee will be US $350,000. To the extent that the Managing
Agent can take advantage of the tax credits associated with the payment of the
Argentine income withholding tax in its domicile, the payment of the Management
Fee shall not be grossed-up by said taxes. Until these arrangements have been
formally agreed and confirmed between Managing Agent and Company, Company will
continue to pay the gross up for taxes.
(a) Reimbursement for Expenses. Except for those expenses which are herein
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specified to be the expenses of the Managing Agent, the Managing Agent shall be
entitled to reimbursement for salaries and other employment costs of its
employees, performing programming, sales and marketing, accounting, advertising,
legal, marketing, purchasing, secretarial, transfer, governmental reporting,
engineering, technical, on-site supervisory, manual and other services for the
Company and for travel and other direct out-of-pocket and indirect expenses
allocable to the operation or management of the Company pursuant to the Company
Agreement and this Management Agreement. The amounts so reimbursed shall not be
in excess of charges for similar services by similarly situated but unrelated
third parties.
I. Additional Charges. In the event it becomes necessary to temporarily
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assign home office personnel or other employees of the Managing Agent to the
Company to perform work or services which would otherwise be performed by
employees of the Company employed at the Company's expense, and for other than
management and supervisory purposes of the type to be performed by the Managing
Agent (and in any event for periods in excess of three days), then an additional
charge not in excess of charges for similar services from similarly situated but
unrelated third parties may be made therefor. Unless approved by the Board of
Directors or Executive Committee or contained in an approved budget, any use of
employees of Managing Agent or of ex-patriots generally which results in an
annual expenditure of more than US $200,000 will be borne by Managing Agent.
I. Payment of Fees and Charges. The fees and charges provided for in this
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Agreement shall be paid to the Managing Agent in USA Dollars on a quarterly
basis as follows. Based on EBITDA to date, the Managing Agent shall submit an
invoice to the Company for the management fee on a quarterly basis and shall
submit to the Company within 45 days after the close of each calendar quarter a
statement for such fees and all charges accrued to date. The Company shall pay
such estimated fee and other charges within ten days after receiving the
Managing Agent's quarterly invoice and statement.
I. Repayment of Advances. In addition to the foregoing fees and charges,
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the Managing Agent shall be entitled to reimbursement of any costs chargeable to
the Company, but advanced by the Managing Agent, but the Managing Agent has no
obligation to advance such funds. The Managing Agent shall render monthly
statements for any such additional reimbursement and such statements shall be
paid by the Company within ten days after receipt thereof.
I. Limitation of Liability. Notwithstanding anything to the contrary
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contained in the Argentine Civil Code or elsewhere, termination of this
Agreement will be Company's sole and exclusive remedy for any event of default
or breach of this Agreement by Managing Agent or for any malfeasance (including
gross negligence and willful misconduct) by Managing Agent or its agents.
Termination will not extinguish any obligations that the parties may have to
each other under Paragraph 18.
I. Default. A default by the Company or the Managing Agent shall occur
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hereunder if the Company or the Managing Agent shall breach any material
covenant or condition of this Agreement to be kept or performed by it.
I. Extension and Termination. On or before 45 days before the end of the
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Initial Term, this Agreement may be extended by Managing Agent with the consent
of the Company's Board of Directors (such consent not unreasonably to be
withheld) for an additional term of five (5) years on terms identical to those
contained herein. This Agreement may be terminated:
(1) by either the Company or the Managing Agent on written notice to the
other in the event of any default by the other which continues uncured for 15
days (in the case of any failure to make a payment of money between the parties)
or for 60 days (in the case of any other non-monetary default) after written
notice from the nondefaulting party to the other party; or
(1) upon the termination, dissolution and winding up of the Company.
(1) by the Company if: (i) Managing Agent materially xxxxx the Company as
a result of its gross negligence or willful misconduct, (ii) TINTA's equity
ownership in the Company declines below sixteen percent (16%) or (iii) Managing
Agent or TINTA loses access to technology or expertise of Tele-Communications,
Inc. to which it once had access.
I. Actions After Notice of Termination. After receipt of notice of
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termination and before the date of termination provided by the notice of this
Agreement, the Managing Agent shall continue the management of the Company in
accordance with this Agreement. Unless instructed by the Company to the
contrary, Managing Agent shall take all actions necessary to deliver to the
Company possession or control of all property of the Company or its designee in
an orderly manner and without interruption of the Company's obligations to its
obligees; including, but not limited to, its subscribers, customers,
advertisers, servants, employees, agents, contractors, all governmental
authorities and creditors.
I. Relinquishing Control. Subject to any special instructions by the
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Company, upon termination of this Agreement, the Managing Agent shall
immediately relinquish to the Company, or its designee, possession and control
of all property of the Company, including, but not limited to, the physical
plant and equipment and all documents, records and data pertaining to the
Company.
I. Liabilities and Fees. In the event of termination of this Agreement
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pursuant to the terms hereof, the Managing Agent shall remain liable to the
Company for any required payment to the Company or other obligations hereunder
accrued prior to the date of termination; and the Managing Agent shall be
entitled to receive the amount of
any accrued but unpaid management fees and the amount of any accrued but unpaid
claims for reimbursement or for services or work performed under the provisions
hereof.
I. Bankruptcy. If a petition in bankruptcy or insolvency is filed by
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either the Company or the Managing Agent or if either shall make an assignment
for the benefit of creditors, or if either shall file a petition for a
reorganization, or for the appointment of a receiver or trustee of all or a
substantial portion of its property, or if a petition in bankruptcy or other
above-described petition is filed against either which is not discharged within
60 days thereafter, then either party may terminate this Agreement by serving
written notice on the other party as herein provided.
I. Accounting Period. The annual accounting period of the Company shall
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be the calendar year and the Company's books of account shall be kept on the
accrual basis of accounting.
I. Notices. All communications permitted or required between the parties
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hereto shall be effective when sent by registered or certified mail, postage
prepaid, addressed to the following addresses or at such other addresses as may
be designated from time to time by written notice to the other party:
If to the Company: Cablevision S.A.
Xxxxxxxx 0000
Xxxxxx Xxxxx, Xxxxxxxxx
Attn:
Fax: (541)
With copies to: CEI CitiCorp Holdings S.A.
Xxxxxxx 0
Xxxx 00
Xxxxxx Xxxxx, Xxxxxxxxx
Attn: Chief Operating Officer
Fax: (000) 000-0000
and
T. I. Telefonica Internacional de Espana S.A.
Atencion: Secretario General
Xxxxx Xxxxxxxx 00
Xxxxxx, Xxxxxx
Phone: (000) 000-0000
and
Estudio de las Dres. X'Xxxxxx
Atencion Xx. Xxxxx X. Xxxxxxx
Xxxx. xx Xxxx 000, 00 Xxxx
Xxxxxx Xxxxx, Xxxxxxxxx
Telefono: (000) 000-0000
Facsimil: (541) 346-1000 int. 4999
If to the Managing Agent: TINTA Cable
Management, Inc.
0000 XXX Xxxxxxx
Xxxxxxxxx, Xxxxxxxx
Attn: President
Fax: (000) 000-0000
With copies to: Tele-Communications International, Inc.
0000 XXX Xxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attn: Chief Operating Officer
Fax: (000) 000-0000
and
Attn: General Counsel
Fax: (000) 000-0000
and
M. & X. Xxxxxxx
Xxxxxxxx 000
Xxxxxx Xxxxx, Xxxxxxxxx
Attn: Xxxxxxx X. Xxxxxx
Fax: (000) 000-0000
I. Assignment. Neither party shall have the right to assign this
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Agreement without the written consent of the other party, nor shall this
Agreement or any of the rights or obligations of the parties hereunder be
transferable by operation of law or otherwise, except that the Managing Agent's
interest may be transferred to an entity which becomes a successor to TINTA, as
a result of a merger or consolidation or to a purchaser of all or a substantial
portion of the assets of TINTA, if such purchaser is approved as the Managing
Agent of the Systems by the Company. Upon any permitted assignment, this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns. Notwithstanding the above, Managing
Agent may assign this Agreement to a wholly owned subsidiary of TINTA.
I. INPI. Parties agree that this Agreement will be filed for registration
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before the "Instituto Nacional de la Propiedad Industrial" ("INPI"). Costs for
said registration will be paid by the Company.
I. Entire Agreement. This Agreement constitutes the entire agreement
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between the parties with respect to the subject matter hereof and may not be
modified, altered, or amended in any manner except by agreement in writing duly
executed by the parties hereto.
I. Counterparts. This Agreement may be signed in any number of
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counterparts with the same effect as if the signatures to each counterpart were
upon the same instrument.
I. Governing Law. This Agreement shall be governed by and construed
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according to the laws of the Republic of Argentina. The parties will use their
best efforts to resolve amicably any disputes arising under this Agreement.
Except as otherwise expressly provided herein, 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 "Tribunal de Arbitraje
de la Bolsa de Comercio de Buenos Aires". The arbitrations shall be held in
Buenos Aires, Argentina. There shall be three arbitrators, one selected by the
Company, one selected by the Managing Agent and the third selected by mutual
agreement of the parties, and failing their agreement, pursuant to the Rules of
the Court. None of the arbitrators shall be citizens of the U.S.A. or the
Republic of Argentina. 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 for 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).
IN WITNESS WHEREOF, the parties have executed this Management Agreement as
of the day and year first above written.
THE MANAGING AGENT:
TINTA Cable Management, Inc.
By:
Name: Xxxx X. Xxxxxx
Title:
THE COMPANY:
CABLEVISION S.A.
By:
Name:
Title:
