Exhibit 4.4


 


Any text removed pursuant to Portugal Telecom, SGPS, S.A.’s confidential treatment request has
been separately filed

with the U.S. Securities and Exchange Commission and is marked “[***]” herein.


 


 


SUBSCRIPTION
AGREEMENT


 


Dated as of
October 17, 2002


 


By and among


 


TELEFÓNICA
MÓVILES, S.A.,


 


PORTUGAL
TELECOM, SGPS, S.A.,


 


PT MÓVEIS,
SGPS, S.A.,


 


and


 


BRASILCEL B.V.


 


In relation to


 


BRASILCEL
B.V.


 





















 


THIS AGREEMENT is
made as of October 17, 2002 by and among:


 


TELEFÓNICA
MÓVILES, S.A., a corporation duly organised, existing and
established in accordance with the laws of the Kingdom of Spain, (“Spain”), with head offices at Goya 24,
Madrid, Spain, represented herein in accordance with its bylaws (“TEM”);


 


PORTUGAL
TELECOM, SGPS, S.A., a corporation duly organised, existing
and established in accordance with the laws of Portugal (“Portugal”), with head offices at Av.
Fontes Pereira de Melo, 40, 11o andar, Lisbon, Portugal, represented herein in
accordance with its bylaws (“Portugal
Telecom”);


 


PT
MÓVEIS, SGPS, S.A., a corporation duly organised, existing
and established in accordance with the laws of Portugal, with head offices at
Av. 5 de Outubro, 208, 4o andar, Lisbon, Portugal, represented herein in
accordance with its bylaws (“PT Móveis”);


 


and


 


BRASILCEL
B.V., a private limited liability company incorporated in
accordance with the laws of the Netherlands, with corporate seat in Amsterdam
and having its address at Strawinskylaan 3105, 1077 ZX, Amsterdam, the
Netherlands, represented herein in accordance with its Articles of Association
(the “Company”).


 


Capitalised terms
used herein shall have the meaning ascribed to them in Section 16 hereto,
elsewhere in this Agreement or if not defined herein, in the Shareholders
Agreement (as defined below) unless otherwise provided for in the Shareholders
Agreement. For the avoidance of doubt, in the event of any conflict between
capitalised terms used and defined in this Agreement and capitalised terms
defined in the Shareholders Agreement, then for purposes of this Agreement, the
definitions in this Agreement shall prevail. 
Where any term is used in this Agreement, but defined in the
Shareholders Agreement, the termination of the latter agreement shall not
affect such definition.


 


2





















 


RECITALS:


 


(A)          WHEREAS Portugal
Telecom, PT Móveis, Telefónica and TEM, among others, have entered into a
certain Joint Venture Agreement dated as of January 23, 2001 (the “Joint Venture Agreement”), by means of
which they confirmed their objective to build the leading wireless and mobile
telephone venture in Brazil, and to create shareholder value, as a result of
expected synergies, enhanced markets positioning and improved valuation by the
financial markets, by gathering their interests in Wireless Properties and New
Acquisitions in one sole company;


 


(B)           WHEREAS, in accordance
with the terms of the Joint Venture Agreement, the PT Group and the TEF Group
have agreed to utilise the Company to effect the Contributions and to take any
and all actions necessary to create a joint venture relationship for the
operation, ownership and management of their respective Wireless Properties and
New Acquisitions, through the Company;


 


(C)           WHEREAS, each of TEM,
Portugal Telecom, PT Móveis and Further Parties shall subscribe for all of the
Company Shares in consideration for contributing ownership interests in
Wireless Properties and New Acquisitions plus, when applicable, cash and other
Liquid Assets in accordance with the terms and conditions set forth in this
Agreement and in the Shareholders Agreement;


 


(D)          WHEREAS, in preparation
for the implementation of the joint venture contemplated in the Joint Venture
Agreement, the PT Group and the TEF Group shall, prior to the Initial Closing,
agree the value of their respective Initial Capital Contributions and shall,
prior to the Balance Closing, agree the value of their respective Balance
Capital Contributions, pursuant to which Contributions, the Groups will have
equal economic and voting ownership of the share capital of the Company
immediately after the Balance Closing and further agree that, in certain
circumstances as described herein, Independent Valuations of, among others,
their respective Additional Capital Contributions and of the Company will be
conducted;


 


(E)           WHEREAS, the Parties
have agreed to enter into this Agreement and a certain shareholders agreement
of even date hereof (the “Shareholders
Agreement”) to set forth the terms and conditions under which
each of the TEF Group and the PT Group (i) will transfer to the Company its
Contributions relating to Wireless Properties and New Acquisitions and, (ii)
until the transfer to the Company of all its Contributions relating to a
Wireless Property or New Acquisition, will, to the extent relevant and legally
permissible, operate, own and manage such Wireless Property or New Acquisition
for the benefit of the joint venture created pursuant to the Joint Venture
Agreement;


 


NOW, THEREFORE, the Parties agree as follows:


 


3





















 


SECTION 1:            CERTAIN OBLIGATIONS CONCERNING
THE COMPANY, THE WIRELESS PROPERTIES AND NEW ACQUISITIONS


 


1.1       Shareholders
Agreement, Conversion of the Company and Corporate Documents


 


(a)        The
Parties shall on the date hereof duly sign the Shareholders Agreement.


 


(b)        As
soon as possible after the date hereof, but by no later than the Initial
Closing, the Shareholders shall exercise their voting rights and the Parties
shall co-operate and take such other action as is necessary to procure the
amendment of the Articles of Association in order to change the corporate
nature of the Company from a private company with limited liability (besloten vennootschap) to a limited
liability company (naamloze vennootschap)
under the laws of the Netherlands.


 


(c)        The
TEF Group and the PT Group further agree to procure that the Company
establishes a general share premium reserve for the benefit of all Shareholders
in proportion to their shareholding interest in the Company at any time (the “General Share Premium Reserve”).


 


(d)        The
Parties shall further take such actions under applicable Netherlands law as may
be necessary to ensure that the organisational documents of the Company,
including the Articles of Association, at all times conform in all respects with
Netherlands law and any other applicable laws and regulations and executed in
such a manner so as to permit the Company to fully comply with the Company
Growth Principles, as such principles are set forth in the Shareholders
Agreement.


 


(e)        The
Parties agree that the transfer to the Company of the relevant Contributions
may be made through Further Parties, each Group undertaking to procure that the
relevant Further Party execute this Agreement and the Shareholders Agreement at
the time of transferring the relevant Contributions to the Company.


 


1.2       Contribution
of Wireless Properties and New Acquisitions


 


Subject to the
provisions of this Agreement and the Shareholders Agreement, each of the
Parties confirms its objective to build the leading wireless and mobile
telephone venture in Brazil by operating solely through the Company and
otherwise to take, or refrain from taking, any actions in such a manner to
permit the Company to fully comply with the Company Growth Principles, and to
cause each of the TEF Group and PT Group to act in the same manner.  Accordingly, the TEF Group and the PT Group
shall transfer to the Company all their Interests in Wireless Properties and
any New Acquisitions made by either Group or jointly by both Groups (as the
case may be) as set forth in the Shareholders Agreement and in this Agreement.


 


1.3       50%
- 50% Joint Venture, Shareholders Agreement


 


It is the
intention of the Groups that each Group shall subscribe for and hold at all
times 50% (fifty percent) of the economic and voting interests in the Company
in exchange for


 


4





















 


the transfer
to the Company of their respective Contributions.  The Parties acknowledge that the 50% - 50%
shareholding in the Company may not be achieved at all times for several
reasons.  This Agreement and the
Shareholders Agreement regulate the investments of the Groups in the Company
and in Wireless Businesses, the rights and obligations as parties to the joint
venture and vis-à-vis the
Company, and other related matters.


 


1.4       Selection
of Investment Banks


 


(a)        The
TEF Group and the PT Group have jointly retained [***] and [***], as the first
choice of Investment Banks to conduct the Independent Valuations required
pursuant this Agreement or the Shareholders Agreement (each a “First Choice Investment Bank” and
collectively the “First Choice Investment
Banks).  For purposes of
this Section it shall be considered that [***] has been appointed by the TEF
Group and that [***] has been appointed by the PT Group.


 


(b)        Save
as otherwise provided in Section 1.5(b)(iv)(A) below, the selection of any
investment banks different from the First Choice Investment Banks, either as a
result of any conflict of interest, or default, or at the request of the TEF
Group or the PT Group, shall be made pursuant to the provisions of this Section
1.4(b).


 


In the event
that an Independent Valuation is required under this Agreement or the
Shareholders Agreement, the proposing Group shall deliver to the other Group
and to the Company a notice requesting an Independent Valuation (“Independent Valuation Notice”) which
may contain its intention to substitute one or both of the First Choice
Investment Banks.  Should any of the
First Choice Investment Banks be requested to be replaced, the following will
apply:


 


(i)         If
the Group delivering the Independent Valuation Notice has shown its intention
to substitute (x) both First Choice Investment Banks or (y) the First Choice
Investment Bank appointed by it, it shall include in the Independent Valuation
Notice a list of three international investment banks from which the other
Group shall appoint a replacement Investment Bank (the “First
Group List”).


 


(ii)        If
the Independent Valuation Notice contains the intention of the delivering Group
to substitute (x) both First Choice Investment Banks or (y) the First Choice
Investment Bank appointed by the receiving Group, such receiving Group shall
deliver, within 5 (five) Business Days from the receipt of the Independent
Valuation Notice, a list of three international investment banks from which the
other Group shall appoint a replacement Investment Bank (the “Second Group List”).


 


(iii)       In
any other event, even if the Independent Valuation Notice does not contain the
intention of the delivering Group to substitute any or both of the First Choice
Investment Banks, the receiving Group, within 5 (five) Business Days from the
receipt of the Independent Valuation Notice, may submit a Second Group List (if
it desires to substitute its First Choice Investment Bank) and/or require the
other Group to submit a First Group List (if it desires to substitute the First
Choice Investment Bank of the other Group); provided that, in this
latter case, within the following 5


 


5





















 


(five) Business Days, the Group delivering
the Independent Valuation Notice shall submit to the other Group the First
Group List.


 


(iv)       The
First Group List and the Second Group List shall exclude any investment bank
which, (x) owns, or at any time after the date hereof will have owned, a
significant direct or indirect interest in the capital or (y) has, or at any
time after the date hereof will have had, one or more representatives in the
board of directors of any of the Groups or in the board of directors of, any of
the Wireless Properties or New Acquisitions of the Group providing such list.


 


(v)        Failure
by one of the Groups to timely send the First Group List or the Second Group
List shall be deemed (x) as an acceptance of any of the names contained in the
list provided by the non-defaulting Group and an implied authorisation for the
non-defaulting Group to select any of such names to be an Investment Bank for
the purposes hereunder, or (y) if no list has been delivered by the
non-defaulting Group, as an authorisation for such non-defaulting Group to
elect any internationally recognised investment bank as the First Choice
Investment Bank of the defaulting Group.


 


(vi)       The
Group receiving the First Group List or the Second Group List shall select one
name to be its choice of Investment Bank. 
Such selection shall be binding on the other Group and shall be made and
notified to the other Group and the Company no later than 5 (five) Business
Days after the receipt of the First or the Second Group List (as the case may
be).  The Investment Bank chosen by one
Group within the list provided by the other Group shall be considered, from
time to time, the First Choice Investment Bank appointed by this latter Group.


 


(vii)      Failure
by a Group to timely select an Investment Bank from the First or the Second
Group List, as applicable, shall be deemed as an acceptance of any of the
investment banks contained therein and an implied authorisation for the other
Group to select any of such investment banks to be an Investment Bank for the
purposes hereunder.  The Investment Bank
shall be considered the First Choice Investment Bank appointed by the
defaulting Group.


 


(c)        No
later than 15 (fifteen) Business Days from the later of the date of (i) the
receipt of the Independent Valuation Notice, or (ii) if applicable, the
selection of the later First Choice Investment Bank selected in accordance with
Section 1.4(b) above, the Company shall take any and all actions as may be
required to complete the retaining by the Company of the First Choice
Investment Banks, including obtaining the necessary corporate approvals,
executing the relevant mandate letters (the “Mandate
Letters”) and issuing letters of instruction from time to time,
and shall otherwise correspond with the First Choice Investment Banks (the PT
Group and the TEF Group undertaking not to correspond with the Investment
Banks).  The Groups shall procure that
the Company complies with its foregoing obligations.


 


(d)        If
the Company fails to execute the relevant Mandate Letters, then such Mandate
Letters shall be executed and all other correspondence shall be undertaken:


 


6





















 


(i)         in
the case of an Independent Valuation in terms of Section 1.6.1(d)(ii)(D) below,
by a Party in the TEF Group;


 


(ii)        in
the case of the acquisition of the relevant Interest in a New Acquisition
pursuant to Section 1.6.2 below, by a Party in the Group which nominated the
Directors that voted in favour of the acquisition;


 


(iii)       in
the case of the acquisition of a Further Interest in a Wireless Property
pursuant to Section 1.6.4(e)(i) below, by a Party in the Lead Group;


 


(iv)       in
the case of an Independent Valuation in terms of Section 7.2 below, by a Party
in the Group exercising the right to gradually buy;


 


(v)        in
the case of an Independent Valuation in terms of Section 7.3(a) below, by a
Party in the Non-Defaulting Group;


 


(vi)       in
the case of an Independent Valuation required in terms of Section 4.3(c) of the
Shareholders Agreement, by a Party in either Group;


 


(vii)      in
the case of an Independent Valuation required in terms of Section 5.6 of the
Shareholders Agreement, by a Party in the Group exercising the Put; and


 


(viii)     in
the case of an Independent Valuation required in terms of Section 6.4 of the
Shareholders Agreement, by a Party in the PT Group,


 


(in each such
case, the other Group and the Company undertaking not to correspond with the
First Choice Investment Banks), provided that, in the event that the
Directors, nominated by the Group which has the authority pursuant to the
foregoing to execute the relevant Mandate Letters, in any way prevented the
execution by the Company of the relevant Mandate Letters, then a Party in such
Group shall not have the authority to execute the relevant Mandate Letters and
the relevant Mandate Letters shall then be executed by a Party in the other
Group.


 


(e)        Each
Mandate Letter shall contain, inter alia, (i) details of the fees to be paid to
the First Choice Investment Bank, which in any case should be according to
market practice (ii) a requirement for the First Choice Investment Bank to
commence each required Independent Valuation as soon as possible thereafter,
but in any event within 45 (forty-five) days from the date of the Mandate
Letter, to complete such Initial Valuation, as defined below, (iii) an
indication to follow the Independent Valuation Principles and the guidelines
and criteria set forth in Exhibit I hereto, (iv) a financial adjustment
methodology to calculate the Contribution Valuations as set forth in Exhibit II,
and (v) in respect of an Independent Valuation of an Interest in a New
Acquisition, the requirement to conduct a due diligence review (legal, tax and
accounting) to be made by independent experts engaged in conjunction with the
other selected First Choice Investment Bank, the cost of which shall be
included in the fees to be paid to the First Choice Investment Banks.


 


7





















 


(f)         The
fees charged by the First Choice Investment Banks for conducting Independent
Valuations shall be paid by the Party executing the Mandate Letters, provided
that:


 


(i)         if
the Company has not executed the relevant Mandate Letters, then in the case of
an Independent Valuation required in terms of Section 1.6.2 below, Section
1.6.4(e)(i) below, or Section 4.3(c) of the Shareholders Agreement (as the case
may be), the Company shall forthwith reimburse such Party for such fees;


 


(ii)        if
the Company has executed the relevant Mandate Letters, then in the case of an
Independent Valuation required in terms of Section 7.2 below, each Group shall
forthwith reimburse the Company for the fees paid to its First Choice
Investment Bank, and if a Party in one of the Groups has executed the relevant
Mandate Letters, the other Group shall reimburse the relevant Party in the
firstmentioned Group for the fees paid to the other Group ́s First Choice
Investment Bank;


 


(iii)       in
the case of an Independent Valuation in terms of Section 7.3(a), if a Party in
the Non-Defaulting Group has executed the relevant Mandate Letters, then the
Defaulting Group shall reimburse the relevant Party in the Non-Defaulting
Group, and if the Company has executed the relevant Mandate Letters, the
Defaulting Group shall reimburse the Company;


 


(iv)       in
the case of an Independent Valuation required in terms of Section 5.6 of the
Shareholders Agreement, if the Target Shareholder has not executed the relevant
Mandate Letters, the Target Shareholder shall forthwith reimburse the Party
which executed the Mandate Letters; and


 


(v)        in
the case of an Independent Valuation required in terms of Section 6.4 of the
Shareholders Agreement, if a Party in the PT Group has not executed the
relevant Mandate Letters, the PT Group shall forthwith reimburse the Party
which executed the Mandate Letters.


 


(g)        If
applicable, the fees charged by the Third Investment Banks for conducting
Independent Valuations, shall be shared by the Groups equally.


 


1.5       Independent
Valuation


 


(a)        The
Initial Valuations, the Finalised Initial Valuations, the Contribution
Valuations and the Company Shares Exchange Ratio as defined below, prepared by
the Investment Banks, and, when applicable, by the Third Investment Bank, shall
be evidenced by a written report to be delivered to the Groups and the Company.  The Initial Valuations shall be expressed in
US Dollars and thereafter shall be converted into Euro by using the average
exchange rate for the 10 (ten) day trading period prior to the date of such
valuations.  The reference exchange rate
will be the official fixing for USD/EUR published by the ECB in the Reuters
Screen ECB37, or any other Reuters screen that in the future may substitute it
for the relevant fixing rate.


 


8





















 


(b)        When
an Independent Valuation of a Further Interest in a Wireless Property or an
Interest in a New Acquisition (as the case may be) is required under this
Agreement or the Shareholders Agreement in order to transfer such relevant
Interest to the Company as a Contribution, the following specific rules will
apply:


 


(i)         (A)       The
acquiring Group will have the option to require the Independent Valuations to
be conducted before or immediately after the date of the signing of a binding
agreement for the acquisition of the Interest in a New Acquisition or of the
Further Interest in a Wireless Property (the “Acquisition
Date”).  The acquiring
Group shall send the Independent Valuation Notice to the other Group and the
Company as set forth in Section 1.4 above to initiate the process of such
Independent Valuation. The Investment Banks shall determine the (X) equity
value of such Further Interest in a Wireless Property or of such Interest in a
New Acquisition (as the case may be), and (Y) equity value of the Company as if
(x) the Balance Capital Contributions had already been transferred to the
Company and (y) such relevant Interest had not yet been transferred to the
Company, (such valuations collectively referred to as the “Initial
Valuations”).


 


(B)       In
the case of an Independent Valuation of an Interest to be acquired in a New Acquisition,
the Initial Valuations shall reflect the adjustments (if any) arising as a
result of the due diligence conducted by the independent experts according to
the relevant Mandate Letters.


 


(C)       In
the event that the Initial Valuations have been requested before the
Acquisition Date, they shall be required to be delivered and reflect the
corresponding values at a date within the 4 (four) months before such
Acquisition Date, provided that if:


 


(X)          the
Initial Valuation reflects the value of the relevant Interest in a New
Acquisition (or in a Further Interest in a Wireless Property which is acquired
other than through a tender offer or a capital increase) at a date which is
more than (1) one month prior to the Acquisition Date; or


 


(Y)           the
Initial Valuation reflects the value of the relevant Interest in a New
Acquisition (or in a Further Interest in a Wireless Property which is acquired
other than through a tender offer or a capital increase) at a date which is 1
(one) month, or less, prior to the Acquisition Date, and the average of the
Fixing R$ / € exchange rate (calculated as the result of multiplying the
exchange rate USD / R$ PTAX Ask fixed by the Brazilian Central Bank (ticker
Bloomberg:  BZFXPTAX Index), by the
exchange rate € / USD fixed by the ECB (Reuters Screen ECB37) on the applicable
date) during the 10 (ten) days period prior to each of (x) the reference date
used for the Initial Valuation and (y) the Acquisition Date, differ by 20%
(twenty percent) or more of the lower of them,


 


9





















 


then the exchange rate
projections of the Initial Valuation of the relevant Interest in a New
Acquisition (or in a Further Interest in a Wireless Property which is acquired
other than through a tender offer or a capital increase) shall be adjusted, if
necessary, at the Acquisition Date in order to reflect the average of the
Fixing R$ / € exchange rate during the ten days period prior to the Acquisition
Date.


 


(D)       In
the event that the Initial Valuations have been requested after the Acquisition
Date, they shall be required to reflect the corresponding values at the
Acquisition Date.


 


(ii)        Should
one Investment Bank’s (A) Initial Valuation of the Interest in a New
Acquisition or the Further Interest in a Wireless Property (as the case may
be), and/or (B) Initial Valuation of the Company, differ by (x) €100 million
(one hundred million Euro) or less, or (y) 10 (ten) percentage points or less,
of the applicable lowest of the Initial Valuations, the difference will be
halved and the result respectively added to the lower of the relevant Initial
Valuation and deducted from the higher of the relevant Initial Valuation (such
Initial Valuations after, if applicable, the aforesaid adjustment, referred to
as the “Finalised Initial Valuations”);


 


(iii)       Should
one Investment Bank’s (A) Initial Valuation of the Interest in a New
Acquisition or the Further Interest in a Wireless Property (as the case may
be), and/or (B) Initial Valuation of the Company, differ by more than (x) €100
million (one hundred million Euro) or (y) 10 (ten) percentage points of the
applicable lowest of the Initial Valuations, the TEF Group and the PT Group
shall jointly retain the services of a third investment bank (“Third Investment Bank”) to conduct
an Independent Valuation of the relevant Interest and/or the Company (as the
case may be) and to determine the applicable Initial Valuation(s) (in each case
the “Finalised Initial Valuation” and
collectively the “Finalised Initial
Valuations”) within the range determined by the Investment Banks
in their respective Initial Valuations. 
As soon as possible, but in any event within 15 (fifteen) days after
delivery of a Mandate Letter, the Finalised Initial Valuation shall be provided
by the Third Investment Bank.


 


(iv)       The
Third Investment Bank shall be selected in accordance with to the following
rules:


 


(A)       The
Third Investment Bank shall be appointed by mutual agreement between the
Groups, which Groups shall jointly sign the relevant Mandate Letter, or,
failing the Groups reaching such an agreement within 15 (fifteen) days
following receipt of the relevant Initial Valuations, any of the Groups shall
cause the Investment Banks to appoint the Third Investment Bank and sign the
relevant Mandate Letter (such Mandate Letter to be issued in accordance with
this Section 1.5(b)(iv) with substantially the same the terms and conditions of
the relevant Mandate Letters issued to the First Choice Investment Banks), and
should the Investment Banks fail to make such appointment within 15 (fifteen)


 


10





















 


days following written request by any of the
Groups, the Groups shall refer the selection of such Third Investment Bank to
arbitration in terms of Section 10.2 of this Agreement.  Any selection by either the Investment Banks
or the arbitrators shall be final and binding on the Groups.


 


If, either as a result of a
conflict of interest, default or otherwise, or by mutual agreement between both
Groups, the Third Investment Bank appointed in terms of this Section
1.5(b)(iv)(A) is prevented from acting as the Third Investment Bank for the
purposes of this Section 1.5, a replacement Third Investment Bank shall be
appointed mutatis mutandis in
accordance with this Section 1.5(b)(iv)(A).


 


(B)       In
performing its own Independent Valuation as required under this Section 1.5,
the Third Investment Bank shall abide by the same Independent Valuation
Principles and other relevant provisions of this Section 1.5 concerning the
performance of the Independent Valuation.


 


(v)        As
soon as possible, but in any event within 15 (fifteen) days after delivery of a
letter of instruction, the two Investment Banks, acting jointly, shall:


 


(A)       adjust
the Finalised Initial Valuations at the time of transfer to the Company of such
Further Interest in a Wireless Property or Interest in a New Acquisition (as
the case may be), (x) using the financial adjustment methodology described in
Exhibit II hereto and (y) in the case of an acquisition of an Interest in a New
Acquisition, taking into account the applicable representations, warranties and
indemnities received in respect of such Interest, provided that the
Finalised Initial Valuation of the Interest in a New Acquisition shall also be
accrued with the Cost of Carrying (such adjusted and/or accrued Finalised
Initial Valuations referred to as the “Contribution Valuations”);
and


 


(B)       determine
the applicable number of Company Shares to be issued against the relevant
Contribution using the following formula: r/(s/t), where “r” is the
Contribution Valuation of such Further Interest in a Wireless Property or
Interest in a New Acquisition (as the case may be), “s” is the Contribution
Valuation of the Company and “t” is the number of Company Shares issued and
outstanding on the date of the Contribution Valuation (the “Company Shares Exchange Ratio”).


 


(c)        In
any other event, (other than an Independent Valuation in respect of a Further
Interest in a Wireless Property or of an Interest in a New Acquisition in order
to transfer them to the Company as Contributions) when an Independent Valuation
is required under this Agreement or the Shareholders Agreement, the rules
contained in this Section 1.5 shall apply mutatis mutandis.


 


11





















 


1.6       New
Acquisitions and Further Interests in Wireless Properties


 


1.6.1    Global
Telecom


 


(a)        It
is recorded that the PT Group through Telesp Celular Participações, S.A., (i)
has already acquired an Interest, and (ii) has the right to acquire the
remainder of the ownership interests in the New Acquisition, Global Telecom
(the total ownership of Global Telecom, as described in Exhibit IV, referred to
as the “Global Telecom Interest”). The
Parties agree that the TEF Group shall have a call right to purchase from the
PT Group up to 50% (fifty percent) of the Global Telecom Interest at the
Acquisition Price paid therefor by the PT Group in terms of the GT Acquisition
Agreement (the “Call Right”),
the Call Right being exercisable (in whole or in part and on one or more
occasions) until the transfer in full to the Company of the Global Telecom
Interest, provided that:


 


(i)         the
Call Right shall be enforceable in respect of the Global Telecom Interest to
the extent not yet transferred to the Company and, subject to Section 1.6.1(b)
below, also in case of (A) Liquidation of the Company (pursuant to Section 4.3
of the Shareholders Agreement), (B) exercise of the Put in case of Change of
Control (pursuant to Section 5.6 of the Shareholders Agreement), (C) exercise
of the PT Group Put (pursuant to Section 6.4 of the Shareholders Agreement) and
(D) termination of this Agreement or the Shareholders Agreement, for reasons
other than the default of the TEF Group, (pursuant to Section 7 below or
Section 11 of the Shareholders Agreement); and


 


(ii)        the
provisions set forth in Section 1.6.1(a)(i) above shall be applicable without
prejudice to the rights of the Parties pursuant to this Agreement and the
Shareholders Agreement in respect of that part of the Global Telecom Interest
that has already been transferred to the Company.


 


(b)        In
the circumstances referred to in Section 1.6.1(a)(i)(A), (B), (C), and (D)
above, other than in the event of termination set forth in Sections 7.2 and 7.3
below, the Call Right shall be exercisable until the expiration of a period of
2 (two) months from the time when both Groups acknowledge that the relevant
event has occurred or, if no such acknowledgement has been issued in writing by
both parties, from the time when the occurrence of the relevant event has been
declared in a final decision pursuant to the relevant dispute resolution
procedure set out in this Agreement or the Shareholders Agreement.


 


(c)        After
the TEF Group has given notice of its intention to exercise the Call Right, the
transfer of the relevant portion of the Global Telecom Interest shall be
consummated as soon as permissible under regulatory provisions.


 


(d)        (i)          The
Parties agree that (A) the Call Right and (B) any other right of the TEF Group
with respect to the Global Telecom Interest already transferred to the Company,
shall be exercisable over up to 50% (fifty percent) of the Global Telecom
Interest (the PT Group to procure that Telesp Celular Participações, S.A. and
each company in the chain of companies holding said Interest abides by this
Agreement so as to enable the PT Group to fulfil its obligation hereunder to
the TEF Group).


 


12





















 


(ii)        If:


 


(A)       the
PT Group for any reason (other than as a result of the failure by the TEF Group
to timely comply with its obligations set forth in this Section 1.6) fails to
cause Telesp Celular Participações, S.A. to deliver the relevant portion of the
Global Telecom Interest, (x) in the case where payment for the acquisition
thereof is to be made in cash and/or existing TEF shares and/or existing TEM
shares, within 2 (two) months after the TEF Group has given notice of its
intention to exercise the Call Right, or (y) in the case where payment for the
acquisition of the Global Telecom Interest is to be made using new TEF shares
and/or new TEM shares, on the date on which such new shares are tendered for
delivery, or


 


(B)       delivery
of the relevant portion of the Global Telecom Interest is prevented due to
legal or regulatory restrictions,


 


then the Call Right may be exercised against the PT Group, at the
option of the TEF Group, over such percentage in the share capital of Telesp
Celular Participações, S.A. as the value of the relevant portion of the Global
Telecom Interest represents in the value of Telesp Celular Participações, S.A.,
provided that, if shares of Telesp Celular Participações, S.A. were to
be delivered, then:


 


(C)       the
equity participation subject to the rights of the TEF Group shall comprise
voting and non-voting shares in the same proportionality as the PT Group holds
in each class of shares in Telesp Celular Participações, S.A.; and


 


(D)       (x)
the value of the relevant portion of the Global Telecom Interest shall be the Acquisition
Price paid therefor by the PT Group in terms of the GT Acquisition Agreement,
and (y) the value of Telesp Celular Participações, S.A. shall be defined
pursuant to an Independent Valuation (which shall include, as valuation of
Global Telecom, the Acquisition Price of the Global Telecom Interest in terms
of the GT Acquisition Agreement) as regulated in this Agreement at the time of
the exercise of the Call Right and other rights by the other Group.  Both values shall be compared for determining
the percentage which the value of the relevant portion of the Global Telecom
Interest represents in the value of Telesp Celular Participações, S.A.


 


(e)        The
TEF Group may elect to pay the consideration for the acquisition of the
Interests in Global Telecom (or in Telesp Celular Participações, S.A., as the
case may be) in cash, TEM shares, TEF shares or a combination thereof.  In the event of payment in TEM and/or TEF
shares, the relevant provisions of Section 6.4 of the Shareholders Agreement
shall apply.


 


(f)         In
the event of exercise by the TEF Group of the Call Right: (i) the Interests in
Global Telecom (or in Telesp Celular Participações, S.A., as the case may be)
shall be transferred to the TEF Group freely tradable, free of any liens,
rights in favour of third parties and other encumbrances, and (ii) the PT Group
shall give to the TEF Group (x) to the extent


 


13





















 


that same relate to the Interests in Global
Telecom transferred to the PT Group, the same representations, warranties and
indemnities which it received under the GT Acquisition Agreement (the foregoing
to apply except in the case where shares in Telesp Celular Participações, S.A.
are received by the TEF Group in terms of Section 1.6.1(d) above), and (y) to
the extent that same relate to Global Telecom (or Telesp Celular Participações,
S.A., as the case may be), the same representations and warranties referred to
in Section 5 of this Agreement.


 


1.6.2    New
Acquisitions pursuant Section 8.2 of the Shareholders Agreement


 


(a)        It
is hereby further agreed that the acquisition after the date hereof of any and
all Interests in a New Acquisition shall be negotiated and carried out by the
Company.  Without detracting from the
foregoing, if, notwithstanding Section 8.2 of the Shareholders Agreement, the
Company, acting through its Board of Directors, after reviewing the
corresponding proposal for the acquisition of an Interest in a New Acquisition,
which shall include a price range (the “Price Range”),
fails for any reason attributable to it to acquire the relevant business
opportunity, the Group which nominated the Directors who affirmatively voted on
such proposal shall have the right, but not the obligation, to acquire the
business opportunity as the acquisition of an Interest in a New Acquisition.


 


(b)        If
the Group which nominated the Directors who voted in favour of the acquisition
decides to acquire such Interest in a New Acquisition, an Independent Valuation
shall be required as set forth in Sections 1.4 and 1.5 above.


 


(c)        If
such Group negotiates an acquisition price lower than the Price Range, it must
submit such new proposal to the Company and if the Board of Directors does not
approve such proposal, said Group will have the right, but not the obligation,
to acquire the relevant Interest in the New Acquisition.


 


(d)        Immediately
after the acquisition of the Interest in the New Acquisition by a Group in
accordance with this Section 1.6.2, such Group will start an arbitration
procedure in terms of Section 10.2 below in order to determine if the relevant
Interest in the New Acquisition is within the Company Growth Principles (as set
out in Section 1.2(a) and (b) of the Shareholders Agreement) and, if so
determined, the Parties undertake to procure the transfer of the Interest in
the New Acquisition to the Company.  In
the event that the decision of the arbitration tribunal states that the
relevant Interest in the New Acquisition is not within the Company Growth
Principles as set forth in Section 1.2(a) and (b) of the Shareholders
Agreement, such Interest will not be transferred to the Company and the
acquiring Group may continue holding such Interest subject to Section 8.1 of
the Shareholders Agreement.


 


(e)        For
accounting purposes, the value of such Interest in the New Acquisition will be
determined in accordance with the Generally Accepted Accounting Principles as
in force under Netherlands law (“GAAP”)
until the moment that the International Accounting Standards (“IAS”) may be applied under
Netherlands law, in which case the IAS will be applied, all as effective as at
the corresponding Additional Closing.


 


14





















 


1.6.3    Common
Conditions to the New Acquisitions and Wireless Properties


 


(a)        The
Parties agree that (i) New Acquisitions and Wireless Properties shall not be
required to be kept and maintained as separate legal entities, and (ii) New
Acquisitions and Wireless Properties may merge, consolidate or amalgamate,
either between them or with any other Person, before or after the transfer to
the Company of the Interest acquired in the New Acquisition or Wireless
Property, (as the case may be), provided that, prior to any of the same
occurring and as a condition precedent thereto, the Board of Directors shall
approve such action in accordance with Section 2.6(a)(Y)(ii) of the
Shareholders Agreement and the Shareholders, after a non-binding proposal
submitted by the Board of Directors, shall be required to agree in each
specific case on the appropriate adjustments to be made (x) to the division of
assets on Liquidation of the Company in terms of Section 4.3 of the
Shareholders Agreement and (y) to the Put in Section 5.6 of the Shareholders
Agreement).


 


(b)        In
any case, (i) the operational control of the New Acquisitions shall be kept
with the Group that acquired the acquisition of the Interest in the New
Acquisition until the thus acquired Interest is fully transferred to the
Company, and (ii) the operational control of the Wireless Properties shall be
kept with the Group Controlling the relevant Wireless Properties until the
Balance Closing.


 


1.6.4    Further
Interests in the Wireless Properties


 


(a)        The
acquisition of any Further Interest in a Wireless Property, shall, after the
Balance Closing, be carried out only by the Company and neither Group shall
(have the right to) acquire any Further Interest in a Wireless Property.


 


(b)        The
Parties record that until the Balance Closing, each Group (the “Lead Group”) shall have the right,
but not the obligation, to acquire, directly or indirectly, any Further
Interest in any of its Wireless Properties, provided that the Lead Group
shall offer the other Group (the “Other Group”)
the right to acquire 50% (fifty percent) of the Further Interest in a Wireless
Property proposed to be acquired, at the Acquisition Price to be paid by the
Lead Group for said portion of the Further Interest in a Wireless Property (the
“Further Interest Acquisition Price”).
The portion of the Further Interest in a Wireless Property acquired by the
Other Group will be considered as a Wireless Property of such Other Group.  The obligation to offer the other Group the
possibility of acquiring 50% of the Further Interest in a Wireless Property
shall not apply in the event of the acquisition of a Further Interest in a Wireless
Property through a capital increase in which no new assets are contributed to
the relevant Wireless Property.


 


(c)        Before
the consummation by either Group of the acquisition of any Further Interest in
a Wireless Property, the Lead Group shall give written notice to the Other
Group (i) informing it about the Further Interest Acquisition Price and all
other relevant terms and conditions of the transaction, and (ii) requesting the
Other Group to indicate whether it wishes to acquire the 50% (fifty percent)
Interest referred to in Section 1.6.4(b) above on the aforesaid terms and
conditions.  The Other Group shall have
15 (fifteen) days after the receipt of the aforesaid notice, to inform in
writing the Lead Group of its decision. 
In the


 


15





















 


absence of any response within the
aforementioned period, the Other Group shall be deemed to have decided not to
execute such transaction.


 


(d)        If
the Other Group decides to execute such transaction on the terms and conditions
referred to in Section 1.6.4(c)(i) above, both Groups shall use their best
efforts to agree if the Other Group will participate as a co-acquirer in the
relevant acquisition agreement and/or other relevant documents relating to the
acquisition of the Further Interest, or will acquire the relevant Interest from
the Lead Group.


 


(e)        If
the other Group decides not to acquire the 50% (fifty percent) of the Further
Interest in a Wireless Property, or if the Groups fail to agree as set out in
Section 1.6.4(d) above, the Lead Group shall have the right, but not the
obligation, to acquire the Further Interest in a Wireless Property, as well as,
if such acquisition is finally performed, the obligation to then transfer it to
the Company.  In any event, the Parties
undertake to take all the necessary actions to transfer to the Company such
Further Interest in a Wireless Property. 
Such transfer shall be performed in accordance with the following
provisions:


 


(i)         Each
Further Interest in a Wireless Property acquired under this Section 1.6.4
shall, subject to the conditions set forth herein, be transferred to the
Company as an Additional Capital Contribution as soon as possible after the
Balance Closing, at the Company Shares Exchange Ratio determined in accordance with
the provisions of Section 1.5 above. 
Accordingly, the Lead Group shall request the Independent Valuation set
forth in Sections 1.4 and 1.5 above by sending an Independent Valuation Notice
to the other Group, provided that, if the Further Interest in a Wireless
Property is acquired in terms of a capital increase (other than capital
increases against reserves, capitalization of “agios”,
or by any other means which does not imply contribution of new assets to the
relevant Wireless Property) or a tender offer, the Acquisition Price of such
Further Interest in a Wireless Property will serve as the Finalised Initial
Valuation of such Further Interest, converted into a Euro amount, calculated
using the average of the Fixing R$ / € exchange rates applicable on each of the
days from the commencement date to the last day, both days inclusive, of (x)
the subscription period relating to the aforementioned capital increase or (y)
the tender offer period (as the case may be). 
Such Fixing exchange rate will be the result of multiplying the exchange
rate USD / R$ PTAX Ask fixed by the Brazilian Central Bank (ticker Bloomberg:
BZFXPTAX Index), by the exchange rate € / USD fixed by the ECB (Reuters Screen
ECB37) on the applicable date.  In the
event of the acquisition of a Further Interest in a Wireless Property through a
capital increase against reserves, capitalization of “agios”,
or by any other means which does not imply contribution of new assets to the
relevant Wireless Property, the provisions of Sections 3.1.1(b) or 3.1.1(c)
above (as the case may be), shall apply.


 


(ii)        In
the event that the Further Interest in a Wireless Property is acquired in terms
of a capital increase by the Wireless Property and the Company decides not to
exercise its pre-emptive rights, the Company, to the extent legally
permissible, will transfer to the Lead Group such pre-emptive rights, provided
that, after such capital increase is effected, the percentage shareholding
of the Company and the acquiring Group in the


 


16





















 


relevant Wireless Property must, in the
aggregate, not decrease and, accordingly, the Lead Group shall be obliged to
exercise so many of the pre-emption rights as is necessary to ensure that the
aggregate percentage shareholding of said Group and the Company in the relevant
Wireless Property does not decrease.


 


(iii)       For
accounting purposes, the value of such Further Interest will be determined in
accordance with the GAAP until the moment that the IAS may be applied under
Netherlands law, in which case the IAS will be applied, all as effective as at
the Additional Closing.


 


(f)         Each
of the PT Group and TEF Group expressly agree that all action taken by them in
exercising their rights and performing their obligations under this Section
1.6.4, shall be done in compliance with all applicable laws of Portugal, Spain,
Brazil, the U.S.A. and The Netherlands, and any other laws or regulations that
may be applicable.


 


1.7       Tax
Optimisation of the Contributions


 


(a)        The
Parties agree that it is in their best interest that all Contributions provided
for herein be transferred by each of them to the Company in the most tax
efficient manner vis-à-vis the
Company and the Party transferring any such Contribution.  The Parties will use their best efforts to
agree upon the most tax efficient manner for such transfer.  In the event the Parties do not agree on such
most tax efficient manner within a reasonable period of time, the Party that
transfers a Contribution to the Company in a manner which is not considered the
most tax efficient manner vis-à-vis
the Company, shall promptly reimburse the Company for any amounts of any taxes
and related costs payable and incurred by the Company as a result of such tax
inefficient transfer.  Accordingly, any
capital tax or other similar tax or duty which is levied on the Company as a
result of Contributions transferred to the Company (whether against further
issuance of Company Shares or as informal capital contributions or otherwise),
shall be reimbursed to the Company by the Party transferring the Contribution.


 


(b)        Furthermore,
the Parties agree that the Articles of Association will include a clause in
terms of which “the Company will promote, among other activities, the
exportation of goods and services from the parent companies to the wireless
companies in Brazil”.


 


1.8       Acquisition
of shares of Telesp Celular Participações, S.A.


 


(a)        In
order to maintain the 50%-50% spirit set forth in Section 1.3 above, the TEF
Group will acquire from the PT Group and the PT Group will transfer to the TEF
Group certain shares of Telesp Celular Participações, S.A. in accordance with
the Share Purchase Agreement attached as Exhibit III (the “TCP
Shares”), issued in terms of the capital increases approved by
the general meeting of shareholders of such company on June 25, 2002, as
ratified by the board of directors on September 6, 2002, which will be
transferred to the Company at the Balance Closing.


 


17





















 


(b)        Such
acquisition of TCP Shares will be made on the terms and conditions defined in
the Share Purchase Agreement attached as Exhibit III, and once such acquisition
is made, the TCP Shares will be considered as a TEF Wireless Property.


 


SECTION 2:            INITIAL CAPITAL CONTRIBUTIONS


 


2.1       Initial
Capital Contributions and Initial Closing: Subscription, Issuance and Payment
of the Company Shares


 


Subject to the
conditions set forth herein and as early as possible during the fourth quarter
of 2002, each of the TEF Group and the PT Group shall transfer to the Company
its Initial Capital Contributions against the issuance of a number of Company
Shares, (the “Initial Closing”).  The PT Group and the TEF Group agree with
each other that:


 


(a)        each
Group shall transfer its Initial Capital Contributions to the Company at the
same time;


 


(b)        each
Group’s Initial Capital Contributions, the value of each Group’s Initial
Capital Contributions, and the number of Company Shares to be issued to each
Group in respect of such Contributions shall be agreed between the TEF Group
and the PT Group by no later than the Initial Closing, which agreement shall be
evidenced by a written document signed by the Groups at the Initial Closing, provided
that it is agreed that any TCP Shares acquired by the TEF Group pursuant to
Section 1.8 above shall not form part of the TEF Group’s Initial Capital
Contributions; and


 


(c)        if
the aggregate value of such Initial Capital Contributions exceeds the aggregate
nominal value of the Company Shares issued in respect of the transfer of said
Initial Capital Contributions, the difference shall be credited to the General
Share Premium Reserve.


 


2.2       Initial
Closing: Conditions Precedent


 


The respective
obligation of each Group to consummate the transactions contemplated herein to
occur at the Initial Closing is subject to the satisfaction or waiver, at or
prior to the Initial Closing, of the following conditions:


 


(a)        no
statute, rule or regulation shall have been enacted, entered, promulgated or
enforced by any court or Governmental Authority which prohibits or restricts
the consummation of the transactions contemplated hereby;


 


(b)        there
shall not be in effect any judgement, order, injunction or decree of any court
of competent jurisdiction or Governmental Authority enjoining the consummation
of the transactions contemplated hereby;


 


(c)        there
shall not be any suit, action, investigation, inquiry or other proceeding
instituted, pending or threatened by any Governmental Authority which seeks to
enjoin or otherwise prevent consummation of the transactions contemplated
hereby;


 


(d)        each
consent, authorisation and approval of any Person or any Governmental Authority
(other than CADE, but including the European Union antitrust


 


18





















 


commission) or required under applicable law
shall have been obtained or the applicable requirement to obtain such consent,
authorisation or approval shall have been waived;


 


(e)        the
TEF Group and the PT Group, as applicable, shall have performed in all material
respects its obligations under this Agreement required to be performed by it at
or prior to the Initial Closing, provided that a Breach shall be deemed
not to be non-performance for purposes of this Section 2.2(e); and


 


(f)         the
other Group and the Company shall have executed and delivered any and all
documents and shall have taken any and all actions as may be required for the
timely completion of the transfer to the Company of the Initial Capital
Contributions;


 


provided that
the conditions precedent set out in Sections 2.2(a), 2.2(b), 2.2(c) and 2.2(d)
may only be waived by both Groups, and the conditions precedent set out in
Sections 2.2(e) and 2.2(f) may only be waived by the non-defaulting Group.


 


2.3       Initial
Closing: Deliveries


 


At the Initial
Closing, the Parties shall take, or cause to be taken, the following actions:


 


(a)        each
relevant member of the TEF Group and each relevant member of the PT Group shall
transfer to the Company its Initial Capital Contributions;


 


(b)        the
relevant member of the TEF Group and the relevant member of the PT Group shall
sign a notarial deed of issuance pursuant to which the relevant Company Shares
are issued to such relevant member of the TEF Group and such relevant member of
the PT Group;


 


(c)        the
shareholders’ register of the Company shall be duly updated to reflect the
number of Company Shares held by each Group;


 


(d)        the
delivery of letters or other documents evidencing the waiver of any applicable
rights of first refusal which otherwise could be exercised by any Person in
connection with the transfer, to the Company, of the Initial Capital
Contributions; and


 


(e)        the
relevant member of the TEF Group and the relevant member of the PT Group and
the Company shall take all other actions and execute all other documents,
certificates and requests as may reasonably be required for the timely completion
of transfer to the Company of the Initial Capital Contributions.


 


2.4       Obtaining
of the regulatory approvals for the Balance Closing before the Initial Closing


 


The Parties
agree that, in the event that the relevant regulatory approvals for the Balance
Closing are obtained before the Initial Closing takes place, an Initial Closing
shall not take place and the Parties shall, as soon as practicable after such
regulatory approvals are


 


19





















 


obtained,
transfer to the Company their Balance Capital Contributions, provided that in
this specific case the respective Balance Capital Contributions of each Group
shall comprise those Interests held by each of the PT Group and the TEF Group
in the Wireless Properties and Global Telecom (as specified in Exhibit IV
hereto) and (when applicable) the corresponding amount of cash referred to in
Section 3.1.1(b)below.  Such transfer to
the Company of the Balance Capital Contributions shall be performed in
accordance with Section 3 below.


 


SECTION 3:            BALANCE CAPITAL CONTRIBUTIONS
AND ADDITIONAL CAPITAL CONTRIBUTIONS


 


3.1.1    Balance
Capital Contributions: Subscription, Issuance and Payment of Additional Company
Shares


 


(a)        Subject
to the conditions set forth herein, as soon as possible after the relevant
regulatory restrictions have been removed, each of the TEF Group and the PT
Group shall transfer to the Company its Balance Capital Contributions, against
the issuance of a number of Company Shares (the “Balance
Closing”).  The PT Group
and the TEF Group agree with each other that:


 


(i)         each
Group shall transfer its Balance Capital Contributions to the Company at the
same time;


 


(ii)        the
value of each Group’s Balance Capital Contributions and the number of Company
Shares to be issued to each Group in respect of such Contributions shall be
agreed between the TEF Group and the PT Group by no later than the Balance
Closing, which agreement shall be evidenced by a written document signed by the
Groups at the Balance Closing, provided that upon the transfer of the
Balance Capital Contributions to the Company each Group shall hold the same
number of Company Shares; and


 


(iii)       if
the aggregate value of such Balance Capital Contributions exceeds the aggregate
nominal value of the Company Shares issued in respect of the transfer to the
Company of said Balance Capital Contributions, the difference shall be credited
to the General Share Premium Reserve.


 


(b)        In
the event that between the date hereof and the Balance Closing any acquisition
of Further Interest in a Wireless Property occurs through capital increases in
any of the TEF Wireless Properties or PT Wireless Properties without giving
rise to an increase in the number of shares to be transferred directly by the
relevant Group to the Company in accordance with Exhibit IV of this Agreement
(including but not limited to capital increases without issuance of new
shares), the other Group, as applicable, shall contribute to the Company in
Euro, at the Balance Closing, the amount paid or incurred, directly or
indirectly, in such capital increase by the relevant Group,if any, such Euro
amount to be calculated using the average of the Fixing R$ / € exchange rates
applicable on each of the days from the commencement date to the last day, both
days inclusive, of the subscription period relating to the aforementioned
capital increase.  Such Fixing exchange
rate will be


 


20





















 


the result of multiplying the exchange rate
USD / R$ PTAX Ask fixed by the Brazilian Central Bank (ticker Bloomberg:
BZFXPTAX Index), by the exchange rate € / USD fixed by the ECB (Reuters Screen
ECB37) on the applicable date.  For the
avoidance of doubt, capital increases by means of capitalization of “agios” or against reserves, will not give
rise to the obligation of the other Group to transfer any amount in cash to the
Company.


 


(c)        In
the event that between the date hereof and the Balance Closing any acquisition
of Further Interest in a Wireless Property occurs through a capital increase in
any of the TEF Wireless Properties or PT Wireless Properties, by any mean which
does not imply contributions of new assets to the relevant Wireless Property
(including but not limited to capitalization of “agios” or capital increases against reserves), but that does
give rise to an increase in the number of shares to be transferred directly to
the Company in accordance with Exhibit IV of this Agreement, such Further
Interest in a Wireless Property shall be transferred to the Company at the
Balance Closing together with the Balance Capital Contributions, and the other
Group shall not contribute any amount in cash to the Company as a consequence
of the transfer to the Company of such Further Interest in a Wireless Property.


 


3.1.2    Additional
Capital Contributions and Additional Closings: Subscription, Issuance and
Payment of Additional Company Shares


 


Subject to the
conditions set forth in this Agreement, as soon as possible, after the Balance
Closing, each of the PT Group and/or the TEF Group (as the case may be from
time to time) shall transfer to the Company its Additional Capital
Contributions, against the issuance of further Company Shares.  The PT Group and the TEF Group agree with
each other that:


 


(i)         each
Group shall transfer to the Company:


 


(A)       the
Interests of the transferring Group in all New Acquisitions;


 


(B)       all
Further Interests in Wireless Properties held by the transferring Groupand not
transferred to the Company at the Balance Closing;


 


(C)       in
the case of a make-up Contribution by a Reduced Shareholder as referred to in
Sections 6.1, 6.2 and 6.3 of the Shareholders Agreement, an amount of cash in
Euro and/or (if accepted by the other Group) Liquid Assets equivalent to the
value of (that portion of) the Contribution having caused the dilution, as determined
in the Contribution Valuation, accrued with the Cost of Carrying (when
applicable) as set forth in Sections 6.1, 6.2 and 6.3 of the Shareholders
Agreement; and


 


(ii)        unless
otherwise agreed in writing by the TEF Group and the PT Group in respect of the
Additional Capital Contribution:


 


(A)       other
than in the case of a make-up Contribution by a Reduced Shareholder as referred
to in Sections 6.1, 6.2 and 6.3 of the Shareholders Agreement, the


 


21





















 


number of Company Shares to be issued against
the transfer to the Company of the Additional Capital Contribution shall be
determined using the Company Shares Exchange Ratio.  If the accounting value of the aforesaid Contribution
as defined in Sections 1.6.2(e) and 1.6.4(e)(iii) above (as the case may be)
exceeds the aggregate nominal value of the Company Shares issued as defined
above, the difference shall be credited to the General Share Premium Reserve;
and


 


(B)       in
the case of a make-up Contribution by a Reduced Shareholder as referred to in
Sections 6.1, 6.2 and 6.3 of the Shareholders Agreement, the transferring Group
shall be issued with so many Company Shares as corresponds to the number of
Company Shares issued in respect of (that portion of) the Additional Capital
Contribution having caused the dilution. 
If the amount of cash plus, if applicable, Liquid Assets of the make-up
Contribution, exceeds the aggregate nominal value of the Company Shares issued
as defined above, the difference shall be credited to the General Share Premium
Reserve.


 


3.2       Balance
Closing and Additional Closings: Conditions Precedent


 


The respective
obligation of each Group to transfer to the Company the Balance Capital
Contributions and any of the Additional Capital Contributions contemplated
hereby is subject to the satisfaction or waiver, at or prior to the respective
Balance Closing or Additional Closing, of the following conditions:


 


(a)        no
statute, rule or regulation shall have been enacted, entered, promulgated or
enforced by any court or Governmental Authority which prohibits or restricts
the transfer of  the relevant
Contribution;


 


(b)        there
shall not be in effect any judgement, order, injunction or decree of any court
of competent jurisdiction or Governmental Authority enjoining the transfer of
the relevant Contribution;


 


(c)        there
shall not be any suit, action, investigation, inquiry or other proceeding
instituted, pending or threatened by any Governmental Authority which seeks to
enjoin or otherwise prevent transfer of the relevant Contribution;


 


(d)        each
consent, authorisation and approval of any Person or any Governmental Authority
(other than CADE) or the European Union antitrust commission or required under
applicable law for each Group to make the relevant Contribution, including, but
not limited to, ANATEL ́s prior written consent for the transfer of the voting
control of the Wireless Properties and/or the New Acquisitions to the Company,
shall have been obtained or, when applicable, the  requirement to obtain such consent,
authorisation or approval shall have been waived;


 


(e)        each
of the TEF Group and the PT Group, as applicable, shall have performed in all
material respects its obligations under this Agreement required to be performed
by it at or prior to the date of Balance Closing or Additional Closing (as the
case may be),


 


22





















 


provided that a
Breach, shall be deemed not to be non-performance for purposes of this Section
3.2(e);


 


(f)         the
other Group and the Company shall have executed and delivered any and all other
documents and shall have taken any and all other actions as may reasonably be
required for the timely completion of the transfer of the relevant
Contribution;


 


provided that
the conditions precedent set out in Sections 3.2(a), 3.2(b), 3.2(c) and 3.2(d)
may only be waived by both Groups, and the conditions precedent set out in
Sections 3.2(e) and 3.2(f) may only be waived by the non-defaulting Group.


 


3.3       Balance
Closing and Additional Closings; Deliveries


 


At the Balance
Closing and each Additional Closing, the Parties shall take, or cause to be
taken, the following actions:


 


(a)        each
relevant member of the TEF Group and/or (as the case may be), each relevant
member of the PT Group shall transfer to the Company its Balance Capital
Contributions or relevant Additional Capital Contribution (as the case may be),
and, if such Additional Capital Contribution is cash, in immediately available
funds;


 


(b)        the
relevant member of the TEF Group and/or (as the case may be), the relevant
member of the PT Group shall sign a notarial deed of issuance in terms of which
a number of Company Shares are issued to such relevant member of the TEF Group
and/or such relevant member of the PT Group (as the case may be);


 


(c)        the
shareholders’ register of the Company shall be duly updated to reflect the
number of Company Shares held by each Group;


 


(d)        the
delivery of letters or other documents evidencing the waiver or the
non-exercise of any applicable rights of first refusal which otherwise could be
exercised by any Person in connection with the transfer, to the Company, of the
relevant Contribution contemplated hereunder; and


 


(e)        the
relevant member of the TEF Group and/or (as the case may be), the relevant
member of the PT Group and the Company shall take all other actions and execute
other documents, certificates and requests as may reasonably be required for
the timely completion of the transfer to the Company of the relevant
Contribution.


 


SECTION 4:            REPRESENTATIONS AND WARRANTIES
BY THE TEF GROUP


 


In consideration for the PT Group entering into this Agreement and
consummating the transactions hereunder, the TEF Group represents and warrants
to the PT Group that the representations and warranties as set out in this
Section 4, which representations and warranties are supplemented by the
disclosure schedules attached hereto as Exhibit V, (the “TEF Group Disclosure Schedule”), are,
individually and jointly, true and not misleading, provided that, save
as otherwise required by the context of the relevant representation or
warranty, the representations and warranties:


 


23





















 


(a)        are
made and given as at the date of this Agreement; and


 


(b)        shall:


 


(i)         in
respect of the representations and warranties contained in Sections 4.2, 4.4,
4.7, and 4.17 below, be deemed to be repeated, on the Initial Closing, on the
Balance Closing and on each applicable Additional Closing, as being
individually and jointly true and not misleading as at the Initial Closing, as
at the Balance Closing, and as at the applicable Additional Closing (as the
case may be);


 


(ii)        in
respect of the representations and warranties not referred to in Section
4(b)(i) above, be deemed to be repeated, on the Initial Closing, on the Balance
Closing and on each applicable Additional Closing, as being individually and
jointly true and not misleading as at the date of this Agreement, with respect
to all the Interests in the TEF Covered Assets being transferred by the TEF
Group to the Company on the Initial Closing, the Balance Closing, or the
applicable Additional Closing (as the case may be);


 


Accordingly, the TEF Group hereby represents and warrants to the PT
Group as follows:


 


4.1       Organisation


 


Each of the
TEF Covered Assets listed in Exhibit VIII 
is and, on the date of the Initial Closing and, if it is the case, on
the date of each other Closing relating to an Interest in such TEF Covered
Assets, will be a corporation or a company, as the case may be, duly organised,
validly existing under the laws of their respective country of incorporation
and has and will have all requisite corporate and other power and corporate
authority to own, lease and operate its properties and to carry on its
operations as now being conducted.  TEM
has  made available to Portugal Telecom
and PT Móveis in Section 4.1 of the TEF Group Disclosure Schedule complete and
correct copies of the bylaws and the shareholders agreements of each of the TEF
Covered Assets as currently in effect. 
The rights and obligations set forth in such shareholders agreements
are, on the date hereof, (a) the valid and binding rights and obligations of
each of the parties thereto enforceable against each of such parties in
accordance with their terms, and no party thereto is in default thereunder; and
(b) duly annotated in TEF Covered Assets corporate books and records, except
for Section 4.1 of the TEF Group Disclosure Schedule.


 


4.2       Authorisation


 


Each member of
the TEF Group is a corporation duly organised, validly existing under the laws
of its country of incorporation.  Each
member of the TEF Group has the legal right, capacity and corporate power and
authority to execute and deliver this Agreement and the Shareholders Agreement
and consummate the transactions contemplated hereby and thereby.  The execution and delivery of this Agreement
and the Shareholders Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorised by the
board of directors of each of the members of the TEF Group, and no other
corporate proceedings on the part of same are necessary to authorise the


 


24





















 


execution,
delivery and performance of this Agreement, the Shareholders Agreement or the
consummation of the transactions contemplated hereby and thereby.  This Agreement and the Shareholders Agreement
have been duly executed and delivered by each of the members of the TEF Group
and constitute, and each of the other agreements, documents and instruments to
be executed and delivered by each of the members of the TEF Group pursuant
hereto and thereto, when executed and delivered, will constitute, valid and
binding obligations of each of the members of the TEF Group, enforceable
against each of the members of the TEF Group in accordance with its terms,
except that such enforcement may be subject to any applicable bankruptcy,
insolvency, moratorium or similar law.


 


4.3       Capital
Stock


 


Set forth on
Section 4.3 of the Disclosure Schedule is the number of all common shares and preferred
shares representing the entire capital stock of each of the TEF Covered Assets,
all of which were validly issued and fully paid, and the name of each
shareholder therein who is the owner of record or beneficial owner of not less
than 5% of the total capital stock of each of the TEF Covered Assets.  Except as set forth in Section 4.3 of the TEF
Group Disclosure Schedule, there are no outstanding securities of, or any
securities or other obligations convertible into, exchangeable for, or carrying
the right to acquire, or otherwise conferring rights in, equity securities of
the TEF Covered Assets, nor are there any subscriptions, warrants, options,
rights or other arrangements or commitments (other than this Agreement) which
could obligate the TEF Covered Assets to issue, or the TEF Group to sell all or
a portion of the Interests in the TEF Covered Assets, nor is any of the TEF
Covered Assets committed to issue any such security, warrants, options, rights
or enter into such arrangements or commitments.


 


4.4       Ownership
of the Capital Stock


 


The TEF Group
will, as of the Initial Closing, the Balance Closing and any Additional
Closings, be the record and beneficial owner of, and will have good and
marketable title to all of the Interests in the TEF Covered Assets intended to
be transferred to the Company at any such Closing, free and clear of all liens,
claims, title defects, charges, restrictions, rights of first refusal, options,
security interests, mortgages, pledges, debts, demands or other encumbrances (“Liens”).


 


4.5       Ownership
and Good Title of Assets


 


The TEF
Covered Assets are and will be on the date of the Initial Closing and on the
date Interests in such TEF Covered Assets are transferred by the TEF Group to
the Company at the Balance Closing and at any Additional Closing, the sole
owners of any and all of each of their relevant Assets, which have before, on,
or will have after, the Closings, good and marketable title, free and clear of
all Liens, except as set forth in Section 4.5 of the TEF Disclosure Schedule,
or otherwise where the failure to have such title or rights would not be
reasonably expected to have a Material Adverse Effect.


 


25





















 


4.6       Condition
and Sufficiency of Assets


 


All of the
relevant Assets of the TEF Covered Assets are and will be on the date of the
Initial Closing and on the date Interests in such TEF Covered Assets are
transferred to the Company at the Balance Closing and at any Additional
Closing, structurally sound, are and will be in good operating condition and
repair, and are and will be adequate for the uses to which they are being put,
and none of such Assets are or will be in need of maintenance and repairs that
are material in nature or cost and that are out of the ordinary course of
business.  The Assets of the TEF Covered
Assets are and will be sufficient for the continued conduct of the their
businesses after each of the Closings, in substantially the same manner as
conducted prior to the respective Closing.


 


4.7       Consents
and Approvals; No Violations


 


Except as set
forth in Section 4.7 of the TEF Group Disclosure Schedule with respect to items
(b) and (c) below, neither the execution and delivery of this Agreement and the
Shareholders Agreement, nor the consummation by the TEF Group of the
transactions contemplated hereby or thereby will (a) conflict with or result in
any breach of any provision of the bylaws of the members of the TEF Group; (b)
require any filing with, or the obtaining of any permit, authorisation, consent
or approval of, any governmental or regulatory authority whether within or
outside Brazil, Spain, or Portugal; (c) violate, conflict with or result in a
default (or any event which, with notice or lapse of time or both, would
constitute a default) under, or give rise to any right of termination,
cancellation or acceleration under, any of the terms, conditions or provisions
of any note, mortgage, other evidence of indebtedness, guarantee, license,
agreement (including, but not limited to, shareholders’ agreements regarding
the shares of TEF Covered Assets), lease or other contract or instrument or
obligation to which the TEF Covered Assets or any of the members of the TEF
Group is a party or by which the TEF Covered Assets, any of the members of the
TEF Group or any of their assets may be bound; (d) result in the creation of
any Lien of any kind upon the TEF Covered Assets or any property or assets of
any of the TEF Covered Assets, or any member of the TEF Group, under any debt,
obligation, contract, agreement or commitment to which it is a party or by
which it is bound; or (e) violate any order, injunction, decree, statute, rule
or regulation applicable to the TEF Covered Assets or any member of the TEF
Group, excluding from the foregoing clauses (b), (c), (d) and (e) such
requirements, conflicts, defaults, rights, security interests, claims, Liens,
charges, other encumbrances or violations which could not reasonably be
expected to have a Material Adverse Effect and could not be reasonably expected
to adversely affect the ability of each of the TEF Covered Assets, or the TEF
Group to consummate the transactions contemplated by this Agreement free and
clear of Liens.


 


4.8       Financial
Statements


 


Attached in
Section 4.8 of the Disclosure Schedule are copies of the audited consolidated
financial statements as of and for the year ended December 31, 2001 and copies
of the reviewed, consolidated financial statements as of the period ended June
30, 2002 with respect to each of the TEF Covered Assets (the financial statements
referred to above and the accompanying notes thereto are referred to herein
collectively as the “TEF Group


 


26





















 


Financial
Statements”). 
Except as stated otherwise in the TEF Group Financial Statements or in
Section 4.8 of the TEF Group Disclosure Schedule, such TEF Group Financial
Statements (a) fairly present, in all material respects, the financial position
of the TEF Covered Assets as of the respective dates thereof, all in accordance
with Brazilian GAAP consistently applied throughout the period indicated; and
(b) are correct and complete in all material respects and are consistent with
the books and records of the TEF Covered Assets.


 


4.9       Absence
of Undisclosed Liabilities


 


Except (a) for
liabilities and obligations (i) incurred in the ordinary course of business
consistent with past practices since the date of the TEF Group Financial
Statements or (ii) which are duly reflected, or reserved against, in the TEF
Group Financial Statements and (b) as otherwise disclosed herein or in Section
4.9 of the TEF Group Disclosure Schedule, none of the TEF Covered Assets has
incurred any liabilities or obligations (whether direct, indirect, accrued or
contingent).


 


4.10     Absence
of Material Adverse and Other Changes


 


Except as set
forth in Section 4.10 of the TEF Group Disclosure Schedule, since December 31,
2001, the business of TEF Covered Assets has been conducted in the ordinary
course consistent with past practices and there has not been any change in the
business, results of operations or financial condition of any of the TEF
Covered Assets as described in the TEF Group Financial Statements, which could
be reasonably be expected to have a Material Adverse Effect.


 


4.11     Intellectual
Property


 


Section 4.11
of the TEF Group Disclosure Schedule sets forth a complete and accurate list of
the relevant trademarks, trade names, service marks, service names, internet
domain names, software, mark registrations, logos, assumed names, copyrights
and copyright registrations, patents and all applications therefor which TEF
Covered Aseets own or have the right to used in the operation of the TEF
Covered Assets Wireless Business as currently conducted (collectively,  the “TEF
Group Intellectual Property”). 
Except as set forth in Section 4.11 of the TEF Group Disclosure
Schedule:,


 


(a)        there
are no pending or, to the Knowledge of each of the members of the TEF Group,
threatened proceedings or litigation or other adverse claims by any person
relating to the use by the TEF Covered Assets of any TEF Group Intellectual
Property.


 


(b)        TEF
Covered Assets owns, free and clear of Liens, all TEF Group Intellectual
Property Rights owned by TEF Group and has a valid and enforceable right to use
all of TEF Group Intellectual Property used by TEF Covered Assets;


 


(c)        the
conduct of the business by TEF Covered Assets as currently conducted does not
infringe upon any rights with respect to intellectual property owned or
controlled by any third party;


 


27





















 


(d)        none
of the TEF Group Intellectual Property used by TEF Covered Assets that are
material to the operation of their respective businesses has been adjudged
invalid or unenforceable in whole or part;


 


(e)        the
execution, delivery and performance by TEF Group of this Agreement, and the
consummation of the transactions contemplated hereby, will not result in the
loss or impairment of, or give rise to any right of any third party to
terminate, any of TEF Covered Assets rights to own any of its TEF Group Intellectual
Property, nor require the consent of any Governmental Authority or third party
in respect of any such TEF Group Intellectual Property; and


 


(f)         the
material software owned or purported to be owned by TEF Covered Assets, was
either (A) developed by employees of TEF Covered Assets within the scope of
their employment; (B) developed by independent contractors who have assigned
their rights to TEF Covered Assets pursuant to written agreements; or (C)
otherwise acquired by TEF Covered Assets from a third party.


 


4.12     Litigation


 


Except as set
forth in Section 4.12 of the TEF Group Disclosure Schedule, there is no claim,
action, suit, proceeding or governmental, administrative, arbitration or
regulatory proceeding or investigation pending or, to the Knowledge of  the members of the TEF Group, threatened
against or affecting each of the TEF Covered Assets, or their respective
business, properties or assets by or before any court, governmental or
regulatory authority or by any third party which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect and
in excess of R$ 100,000 (one hundred thousand Brazilian Reais) or the
equivalent in other currencies in respect to claims of labour nature or in
excess of R$ 500,000 (five hundred Brazilian Reais) or the equivalent in other
currencies in respect to claims of any other nature.


 


4.13     Compliance
with Applicable Law


 


Each of the
TEF Covered Assets is in compliance with all applicable laws, ordinances, rules
and regulations of any Governmental Authority applicable tothe TEF Group, the
TEF Covered Assets, respectively, and their respective operations, except for
violations, if any, which could not reasonably be expected to have a Material
Adverse Effect.  Except as set forth in
Section 4.13 of the TEF Group Disclosure Schedule, each of the TEF Covered
Assets has all material permits, licenses, approvals and authorisations of all
Governmental Authorities necessary to conduct its business as presently
conducted except for those permits, licenses, approvals and authorisations
which could not reasonably be expected to have a Material Adverse Effect.


 


4.14     Material
Contracts and Arrangements


 


Except as set
forth in Section 4.14 of the TEF Group Disclosure Schedule, as of the date
hereof:


 


28





















 


(a)        none
of the TEF Covered Assets is a party to or bound by any written (i) employment
agreement; (ii) indenture, mortgage, note, loan, financing, instalment
obligation, agreement or other instrument relating to the borrowing of money by
it, or the guarantee by it of any obligation for the borrowing of money; or
(iii) other agreement, including without limitation, purchase orders, or any
enforceable oral agreement, which individually involves the receipt or payment
after the date hereof of more than R$ 1,000,000 (one million Brazilian Reais)
or the equivalent in other currencies on an annual basis or R$ 1,000,000 (one
million Brazilian Reais) or the equivalent in other currencies over the remaining
term thereof.  All such agreements are
valid, binding and enforceable in accordance with their terms and neither the
relevant Wireless Property nor, to the Knowledge of Wireless Property, any
other party thereto is in default under any of the aforesaid agreements, other
than such defaults, if any, which could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect;


 


(b)        There
are no existing contracts material to the business of any of the TEF Covered
Assets to which any member or Affiliate of the TEF Group is a party;


 


(c)        No
TEF Covered Asset is party to any contract material to the business of the TEF
Covered Asset, with any of its current or former employees, directors, officers
or consultants or any Person connected (as defined by applicable law in the
relevant jurisdiction) with any of such Persons, or in which any such Person is
interested (whether directly or indirectly), other than on normal commercial
terms in the ordinary course of business;


 


(d)        all
material contracts and agreements have all necessary corporate authorisation
for their execution, delivery and performance by TEF Covered Assets, in
accordance with their by-laws and applicable legislation; and


 


(e)        all
material contracts and agreements entered into by the TEF Covered Assets with
their Affiliates and any entity of the TEF Group represent arm’s length
transactions, being such term interpreted as a transaction in good faith
negotiated on fair market value basis by unrelated parties acting with independent
interests in the ordinary course of business;


 


4.15     Labour
Matters


 


Except as set
forth in Section 4.15 of the TEF Group Disclosure Schedule, none of the TEF
Covered Assets is and, on the date of the Initial Closing and on the date
Interests in such TEF Covered Assets are transferred to the Company at any
Additional Closing, will be a party to any collective bargaining agreement with
any labour union, confederation or association, stock option plans, profit
sharing, pension, deferred compensation, bonus, severance, halth, welfare, life
insurance and other fringe benefit and there are no discussions, negotiations,
demands or proposals that are pending or have been conducted or made with or by
any labour union, confederation or association and there are not pending
against any of the TEF Covered Assets any general labour disputes, strikes or
work stoppages.


 


29





















 


4.16     Taxes


 


(a)        Except
as set forth in Section 4.16 of the TEF Group Disclosure Schedule, each of the
TEF Covered Assets has and, on the date of the Initial Closing and on the date
such TEF Covered Assets are transferred to the Company at any Additional
Closing, shall have (a) timely filed or caused to be filed on a timely basis
with the appropriate taxing authorities all material Tax Returns required to be
filed by or with respect to each of the TEF Covered Assets, and (b) paid or
made adequate provision for the payment of all Taxes shown to be due on such
Tax Returns except such Taxes, if any, being contested in good faith and as to
which adequate reserves have been provided. 
Such Tax Returns are and will be true, correct and complete in all
material respects;


 


(b)        Except
as set forth in Section 4.16 of the TEF Group Disclosure Schedule:


 


(i)         there
are and, on the date of the Initial Closing and on the date Interests in such
TEF Covered Assets are transferred to the Company at any Additional Closing,
there shall be no Liens for Taxes with respect to the assets of the Company and
no material claims with respect to Taxes are being asserted by any taxing
authority in writing, which individually would have a Material Adverse Effect
on the business or other assets of each of the TEF Covered Assets except for
statutory Liens for current taxes not yet delinquent;


 


(ii)        none
of the Tax Returns of each of the TEF Covered Assets is currently being and, on
the date of the Initial Closing and on the date Interests in such TEF Covered
Assets are transferred to the Company at any Additional Closing, shall be audited
or examined by any taxing authority;


 


(iii)       there
is and on the date of the Initial Closing and on the date Interests in such TEF
Covered Assets are transferred to the Company at any Additional Closing, there
shall be no material unpaid tax deficiency, determination or assessment
currently outstanding against any of the TEF Covered Assets; and


 


(iv)       there
are, and on the date of the Initial Closing and on the date Interests in such
TEF Covered Assets are transferred to the Company at any Additional Closing,
there shall be no outstanding agreements or waivers extending the statute of
limitations relating to the payment of Taxes of any of the TEF Covered Assets
for taxable periods for which the periods of the applicable statutes of
limitations have not expired.


 


4.17     Certain
Fees


 


Except for the
engagement of Salomon Smith Barney, none of the members of the TEF Group or any
of their respective Affiliates has employed any financial advisor or finder or
incurred any liability for any financial advisory or finders’ fees in
connection with this Agreement or the transactions contemplated hereby.


 


30


















 


4.18     Representations
and Warranties for Subsidiaries


 


All the
representations and warranties made by the TEF Group with respect to the TEF
Covered Assets shall also be deemed to have been made with respect to the
Subsidiaries of each of the TEF Covered Assets, if any.


 


SECTION 5:            REPRESENTATIONS AND WARRANTIES
BY THE  PT GROUP


 


In consideration for the TEF Group entering into this Agreement and
consummating the transactions hereunder, the PT Group represents and warrants
to the TEF Group that the representations and warranties as set out in this
Section 5, which representations and warranties are supplemented by the
disclosure schedules attached hereto as Exhibit VI (the “PT Group Disclosure Schedule”), are,
individually and jointly, true and not misleading, provided that, save
as otherwise required by the context of the relevant representation or
warranty, the representations and warranties:


 


(a)        are
made and given as at the date of this Agreement; and


 


(b)        shall:


 


(i)         in
respect of the representations and warranties contained in Sections 5.2, 5.4,
5.7, and 5.17 below, be deemed to be repeated, on the Initial Closing, on the
Balance Closing and on each applicable Additional Closing, as being
individually and jointly true and not misleading as at the Initial Closing, as
at the Balance Closing, and as at the applicable Additional Closing (as the
case may be);


 


(ii)        in
respect of the representations and warranties not referred to in Section
5(b)(i) above, be deemed to be repeated, on the Initial Closing, on the Balance
Closing and on each applicable Additional Closing, as being individually and
jointly true and not misleading as at the date of this Agreement, with respect
to all the Interests in the PT Covered Assets being transferred by the PT Group
to the Company on the Initial Closing, the Balance Closing, or the applicable
Additional Closing (as the case may be),


 


provided that where a representation or warranty
(other than the representations and warranties referred to in Section 5(b)(i)
above) relates to Global Telecom, a Breach in respect of the representations
and warranties contained in this Section 5, for purposes of this Section 5 and
Section 8, shall only be considered to exist if the circumstance or fact giving
rise to such breach arose or occurred after the date of acquisition by the PT
Group of an Interest in Global Telecom under the “Share Sale and Purchase Agreement” dated January 13, 2001
(the “GT Acquisition Agreement”);


 


Accordingly, the PT Group hereby represents and warrants to the TEF
Group as follows:


 


5.1       Organisation


 


Each of the PT
Covered Assets listed in Exhibit VII is and, on the date of the Initial Closing
and, if it is the case, on the date of each other Closing relating to an
Interest in


 


31





















 


such Wireless
Property or Global Telecom, will be a corporation or a company, as the case may
be, duly organised, validly existing under the laws of their respective country
of incorporation and has and will have all requisite corporate and other power
and corporate authority to own, lease and operate its properties and to carry
on its operations as now being conducted. 
Each of Portugal Telecom and PT Móveis has heretofore made available to
TEM in Section 4.1 of the PT Group Disclosure Schedule complete and correct
copies of the bylaws and the shareholders agreements of each of the PT Covered
Assets as currently in effect.  The
rights and obligations set forth in such shareholders agreements are, on the
date hereof, (a) the valid and binding rights and obligations of each of the
parties thereto enforceable against each of such parties in accordance with
their terms, and no party thereto is in default thereunder; and (b) duly
annotated in PT Covered Assets corporate books and records.


 


5.2       Authorisation


 


Each member of
the PT Group is a corporation duly organised, validly existing under the laws
of its country of incorporation.  Each
member of the PT Group has the legal right, capacity and corporate power and
authority to execute and deliver this Agreement and the Shareholders Agreement
and consummate the transactions contemplated hereby and thereby.  The execution and delivery of this Agreement
and the Shareholders Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorised by the
board of directors of each of the members of the PT Group, and no other
corporate proceedings on the part of each of the members of the PT Group are
necessary to authorise the execution, delivery and performance of this
Agreement, the Shareholders Agreement or the consummation of the transactions
contemplated hereby and thereby.  This
Agreement and the Shareholders Agreement have been duly executed and delivered
by each of the members of the PT Group and constitute, and each of the other
agreements, documents and instruments to be executed and delivered by each of
the members of the PT Group pursuant hereto and thereto, when executed and
delivered, will constitute, valid and binding obligations of each of the members
of the PT Group, enforceable against each of the members of the PT Group in
accordance with its terms, except that such enforcement may be subject to any
applicable bankruptcy, insolvency, moratorium or similar law.


 


5.3       Capital
Stock


 


Set forth on
Section 5.3 of the Disclosure Schedule is the number of all common shares and
preferred shares representing the entire capital stock of each of the PT
Covered Assets, all of which were validly issued and fully paid, and the name
of each shareholder therein who is the owner of record or beneficial owner of
not less than 5% of the total capital stock of each of the PT Covered
Assets.  Except as set forth in Section
5.3 of the PT Group Disclosure Schedule, there are no outstanding securities
of, or any securities or other obligations convertible into, exchangeable for,
or carrying the right to acquire, or otherwise conferring rights in, equity
securities of the PT Covered Assets, nor are there any subscriptions, warrants,
options, rights or other arrangements or commitments (other than this
Agreement) which could obligate the PT Covered Assets to issue, or the PT Group
to sell all or a portion of the Interests in the PT Covered Assets, nor is any
of the PT Covered 


 


32





















 


Assets
committed to issue any such security, warrants, options, rights or enter into
such arrangements or commitments.


 


5.4       Ownership
of the Capital Stock


 


The PT Group
will, as of the Initial Closing, the Balance Closing and any Additional
Closings, be the record and beneficial owner of, and will have good and
marketable title to all of the Interests in the PT Covered Assets intended to
be transferred to the Company at any such Closing, free and clear of all liens,
claims, title defects, charges, restrictions, rights of first refusal, options,
security interests, mortgages, pledges, debts, demands or other encumbrances (“Liens”).


 


5.5       Ownership and Good Title of Assets


 


The PT Covered
Assets are and will be on the date of the Initial Closing and on the date
Interests in such PT Covered Assets are transferred by the PT Group to the
Company at the Balance Closing and at any Additional Closing, the sole owners
of any and all of each of their relevant Assets, which have before, on, or will
have after, the Closings, good and marketable title, free and clear of all
Liens, except as set forth in Section 5.5 of the PT Disclosure Schedule, or
otherwise where the failure to have such title or rights would not be
reasonably expected to have a Material Adverse Effect.


 


5.6       Condition
and Sufficiency of Assets


 


All of the
relevant Assets of the PT Covered Assets are and will be on the date of the
Initial Closing and on the date Interests in such PT Covered Assets are
transferred to the Company at the Balance Closing and at any Additional
Closing, structurally sound, are and will be in good operating condition and
repair, and are and will be adequate for the uses to which they are being put,
and none of such Assets are or will be in need of maintenance and repairs that
are material in nature or cost and that are out of the ordinary course of
business.  The Assets of the PT Covered
Assets are and will be sufficient for the continued conduct of the their
businesses after each of the Closings, in substantially the same manner as conducted
prior to the respective Closing.


 


5.7       Consents and Approvals; No
Violations


 


Except as set
forth in Section 5.7 of the PT Group Disclosure Schedule with respect to items
(b) and (c) below, neither the execution and delivery of this Agreement and the
Shareholders Agreement, nor the consummation by the PT Group of the
transactions contemplated hereby or thereby will (a) conflict with or result in
any breach of any provision of the bylaws ofthe members of the PT Group; (b)
require any filing with, or the obtaining of any permit, authorisation, consent
or approval of, any governmental or regulatory authority whether within or
outside Brazil, Spain, or Portugal; (c) violate, conflict with or result in a
default (or any event which, with notice or lapse of time or both, would
constitute a default) under, or give rise to any right of termination,
cancellation or acceleration under, any of the terms, conditions or provisions
of any note, mortgage, other evidence of indebtedness, guarantee, license,
agreement (including, but not limited to,


 


33





















 


shareholders’
agreements regarding the shares of PT Covered Assets), lease or other contract
or instrument or obligation to which the PT Covered Assets or any of the members
of the PT Group is a party or by which the PT Covered Assets or any equity
interests in the PT Covered Assets, any of the members of the PT Group or any
of their assets may be bound; (d) result in the creation of any Lien of any
kind upon the PT Covered Assets or any property or assets of  any of the PT Covered Assets, or any member
of the PT Group, under any debt, obligation, contract, agreement or commitment
to which it is a party or by which it is bound; or (e) violate any order,
injunction, decree, statute, rule or regulation applicable to the PT Covered
Assets, or any member of the PT Group, excluding from the foregoing clauses
(b), (c), (d) and (e) such requirements, conflicts, defaults, rights, security
interests, claims, Liens, charges, other encumbrances or violations which could
not reasonably be expected to have a Material Adverse Effect and could not be
reasonably expected to adversely affect the ability of each of the PT Covered
Assets, or the TEF Group to consummate the transactions contemplated by this
Agreement free and clear of Liens.


 


5.8       Financial Statements


 


Attached in
Section 5.8 of the Disclosure Schedule are copies of the audited consolidated
financial statements as of and for the year ended December 31, 2001, and copies
of the reviewed, consolidated financial statements as of the period ended June
30, 2002 with respect to each of the PT Covered Assets (the financial
statements referred to above and the accompanying notes thereto are referred to
herein collectively as the “PT Group Financial
Statements”).  Except as
stated otherwise in the PT Group Financial Statements or in Section 5.8 of the
PT Group Disclosure Schedule, such PT Group Financial Statements (a) fairly
present, in all material respects, the financial position of the PT Covered
Assets as of the respective dates thereof, all in accordance with Brazilian
GAAP consistently applied throughout the period indicated; and (b) are correct
and complete in all material respects and are consistent with the books and
records of the PT Covered Assets.


 


5.9       Absence of Undisclosed Liabilities


 


Except (a) for
liabilities and obligations (i) incurred in the ordinary course of business
consistent with past practices since the date of the PT Group Financial
Statements or (ii) which are duly reflected, or reserved against, in the PT
Group Financial Statements and (b) as otherwise disclosed herein or in Section
5.9 of the PT Group Disclosure Schedule, none of the PT Covered Assets has
incurred any liabilities or obligations (whether direct, indirect, accrued or
contingent).


 


5.10     Absence of Material Adverse and Other Changes


 


Except as set
forth in Section 5.10 of the PT Group Disclosure Schedule, since December 31,
2001, the business of PT Covered Assets has been conducted in the ordinary course
consistent with past practices and there has not been any change in the
business, results of operations or financial condition of any of the PT Covered
Assets as described in the PT Group Financial Statements, which could be
reasonably be expected to have a Material Adverse Effect.


 


34





















 


5.11     Intellectual Property


 


Section 5.11
of the PT Group Disclosure Schedule sets for the a complete and accurate list
of the relevant trademarks, trade names, service marks, service names, internet
domain names, software, mark registrations, logos, assumed names, copyrights
and copyright registrations, patents and all applications therefor which PT
Covered Assets own or have the right to used in the operation of the PT Covered
Assets Wireless Business as currently conducted (collectively, the “PT Group Intellectual Property”).  Except as set forth in Section 5.11 of the PT
Group Disclosure Schedule:


 


(a)        there
are no pending or, to the Knowledge of each of the members of the PT Group,
threatened proceedings or litigation or other adverse claims by any person
relating to the use by the PT Covered Assets of any PT Group Intellectual
Property;


 


(b)        PT
Covered Assets owns, free and clear of Liens, all PT Group Intellectual Property
Rights owned by PT Group and has a valid and enforceable right to use all of PT
Group Intellectual Property used by PT Covered Assets;


 


(c)        the
conduct of the business by PT Covered Assets as currently conducted does not
infringe upon any rights with respect to intellectual property owned or
controlled by any third party;


 


(d)        none
of the PT Group Intellectual Property used by PT Covered Assets that are
material to the operation of their respective businesses has been adjudged
invalid or unenforceable in whole or part;


 


(e)        the
execution, delivery and performance by PT Group of this Agreement, and the
consummation of the transactions contemplated hereby, will not result in the
loss or impairment of, or give rise to any right of any third party to
terminate, any of PT Covered Assets rights to own any of its PT Group
Intellectual Property, nor require the consent of any Governmental Authority or
third party in respect of any such PT Group Intellectual Property; and


 


(f)         the
material software owned or purported to be owned by PT Covered Assets, was
either (A) developed by employees of PT Covered Assets within the scope of
their employment; (B) developed by independent contractors who have assigned
their rights to PT Covered Assets pursuant to written agreements; or (C)
otherwise acquired by PT Covered Assets from a third party.


 


5.12     Litigation


 


Except as set
forth in Section 5.12 of the PT Group Disclosure Schedule, there is no claim,
action, suit, proceeding or governmental, administrative, arbitration or regulatory
proceeding or investigation pending or, to the Knowledge of the members of the
PT Group, threatened against or affecting each of the PT Covered Assets, or
their respective business, properties or assets by or before any court,
governmental or regulatory authority or by any third party which, individually
or in the aggregate, could reasonably be expected


 


35





















 


to have a
Material Adverse Effect and in excess of R$ 100,000 (one hundred thousand
Brazilian Reais) or the equivalent in other currencies in respect to claims of
labour nature or in excess of R$ 500,000 (five hundred Brazilian Reais) or the
equivalent in other currencies in respect to claims of any other nature.


 


5.13     Compliance with Applicable Law


 


Each of the PT
Covered Assets, is in compliance with all applicable laws, ordinances, rules
and regulations of any Governmental Authority applicable to the PT Group, the
PT Covered Assets, respectively, and their respective operations, except for
violations, if any, which could not reasonably be expected to have a Material
Adverse Effect.  Except as set forth in
Section 5.13 of the PT Group Disclosure Schedule, each of the PT Covered Assets
has all permits, licenses, approvals and authorisations of all Governmental
Authorities necessary to conduct its business as presently conducted except for
those permits, licenses, approvals and authorisations which could not
reasonably be expected to have a Material Adverse Effect.


 


5.14     Material Contracts and Arrangements


 


Except as set
forth in Section 5.14 of the PT Group Disclosure Schedule, as of the date
hereof:


 


(a)        none
of the PT Covered Assets is a party to or bound by any written (a) employment
agreement; (b) indenture, mortgage, note, financing, loan, instalment
obligation, agreement or other instrument relating to the borrowing of money by
it, or the guarantee by it of any obligation for the borrowing of money; or (c)
other agreement, including without limitation, purchase orders, or any
enforceable oral agreement, which individually involves the receipt or payment
after the date hereof of more than R$ 1,000,000 (one million Brazilian Reais)
or the equivalent in other currencies on an annual basis or R$ 1,000,000 (one
million Brazilian Reais) or the equivalent in other currencies over the
remaining term thereof.  All such
agreements are valid, binding and enforceable in accordance with their terms
and neither the relevant Wireless Property nor, to the Knowledge of Wireless
Property, any other party thereto is in default under any of the aforesaid
agreements, other than such defaults, if any, which could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect


 


(b)        There
are no existing contracts material to the business of any of the PT Covered
Assets to which any member or Affiliate of the PT Group is a party; and


 


(c)        No
PT Covered Assets is party to any contract material to the business of the PT
Covered Asset, with any of its current or former employees, directors, officers
or consultants or any Person connected (as defined by applicable law in the
relevant jurisdiction) with any of such Persons, or in which any such Person is
interested (whether directly or indirectly), other than on normal commercial
terms in the ordinary course of business;


 


36





















 


(d)        all
material contracts and agreements have all necessary corporate authorisation
for their execution, delivery and performance by PT Covered Assets, in
accordance with their by-laws and applicable legislation; and


 


(e)        all
material contracts and agreements entered into by the PT Covered Assets with
their Affiliates and any entity of the PT Group represent arm’s length
transactions, being such term interpreted as a transaction in good faith
negotiated on fair market value basis by unrelated parties acting with
independent interests in the ordinary course of business.


 


5.15     Labour Matters


 


Except as set
forth in Section 5.15 of the PT Group Disclosure Schedule, none of the PT
Covered Assets is and, on the date of the Initial Closing and on the date
Interests in such PT Covered Assets are transferred to the Company at any
Additional Closing, will be a party to any collective bargaining agreement with
any labour union, confederation or association, stock option plans, profit
sharing, pension, deferred compensation, bonus, severance, health, welfare,
life insurance and other fringe benefit and there are no discussions,
negotiations, demands or proposals that are pending or have been conducted or
made with or by any labour union, confederation or association and there are
not pending against any of the PT Covered Assets any general labour disputes,
strikes or work stoppages.


 


5.16     Taxes


 


(a)        Except
as set forth in Section 5.16 of the PT Group Disclosure Schedule, each of the
PT Covered Assets has and, on the date of the Initial Closing and on the date
such PT Covered Assets are transferred to the Company at any Additional
Closing, shall have (a) timely filed or caused to be filed on a timely basis
with the appropriate taxing authorities all material Tax Returns required to be
filed by or with respect to each of the PT Covered Assets, and (b) paid or made
adequate provision for the payment of all Taxes shown to be due on such Tax
Returns except such Taxes, if any, being contested in good faith and as to
which adequate reserves have been provided. 
Such Tax Returns are and will be true, correct and complete in all
material respects;


 


(b)        Except
as set forth in Section 5.16 of the PT Group Disclosure Schedule:


 


(i)         there
are and, on the date of the Initial Closing and on the date Interests in such
PT Covered Assets are transferred to the Company at any Additional Closing,
there shall be no Liens for Taxes with respect to the assets of the Company and
no material claims with respect to Taxes are being asserted by any taxing
authority in writing, which individually would have a Material Adverse Effect
on the business or other assets of each of the PT Covered Assets except for
statutory Liens for current taxes not yet delinquent;


 


(ii)        none
of the Tax Returns of each of the PT Covered Assets is currently being and, on
the date of the Initial Closing and on the date Interests in such PT Covered
Assets are transferred to the Company at any Additional Closing, shall be
audited or examined by any taxing authority;


 


37





















 


(iii)       there
is and on the date of the Initial Closing and on the date Interests in such PT
Covered Assets are transferred to the Company at any Additional Closing, there
shall be no material unpaid tax deficiency, determination or assessment
currently outstanding against any of the PT Covered Assets; and


 


(iv)       there
are, and on the date of the Initial Closing and on the date Interests in such
PT Covered Assets are transferred to the Company at any Additional Closing,
there shall be no outstanding agreements or waivers extending the statute of
limitations relating to the payment of Taxes of any of the PT Covered Assets
for taxable periods for which the periods of the applicable statutes of
limitations have not expired.


 


5.17     Certain Fees


 


Except for the
engagement of JP Morgan Securities Inc., none of the members of the PT Group or
any of their respective Affiliates has employed any financial advisor or finder
or incurred any liability for any financial advisory or finders’ fees in
connection with this Agreement or the transactions contemplated hereby.


 


5.18     Representations and Warranties for Subsidiaries


 


All the
representations and warranties made by the PT Group with respect to the PT
Covered Assets shall also be deemed to have been made with respect to the
Subsidiaries of each of the PT Covered Assets, if any.


 


SECTION 6:            COVENANTS


 


6.1       Conduct of Business


 


Each of the
TEF Group and the PT Group agrees that, (i) in respect of TEF Covered Assets
and PT Covered Assets, respectively, during the period from the date of this
Agreement to the Balance Closing, and (ii) in respect of a New Acquisition,
from the date on which the TEF Group or the PT Group (as the case may be)
acquires, directly or indirectly (other than through the Company) an Interest
in the New Acquisition, to the date of transfer to the Company of the entire
such Interest, except as otherwise contemplated by this Agreement or consented
to by the other Group in writing:


 


(a)        Each
of the TEF Group and the PT Group shall use its best efforts to cause its
Covered Assets, or New Acquisition (as the case may be), to conduct its
business operations in the ordinary course consistent with past practice;


 


(b)        Unless
previously and expressly agreed in writing by the Parties in each specific
event, each of TEF Group and the PT Group shall cause its Covered Assets or New
Acquisition or subsidiary thereof (as the case may be), not to:


 


38





















 


(i)         sell,
dispose of or acquire any material properties, assets or rights (including,
without limitation, leaseholds), except in the ordinary course of business, or
to merge, consolidate or amalgamate any of the Covered Assets or New
Acquisitions or their subsidiaries, either between them, or with any other
Person;


 


(ii)        make
any loans, advances (other than advances in the ordinary course of business) or
capital contributions to, or investments in, any other Person;


 


(iii)       terminate
or materially amend any of its material contracts, leases or licenses, except
in the ordinary course of business;


 


(iv)       enter
into any new material agreement other than customer contracts or renewals of
existing agreements in the ordinary course of business;


 


(v)        enter
into any employment agreement with any person or increase in any manner the
compensation of any of the officers or other employees of its Covered Assets or
New Acquisition or subsidiary thereof (as the case may be), except for such
increases as are granted in the ordinary course of business in accordance with
its customary practices (which shall include normal periodic performance
reviews and related compensation and benefit increases);


 


(vi)       adopt,
grant, extend or increase the rate or terms of any bonus, insurance, pension or
other employee benefit plan, payment or arrangement made to, for or with any
officers or employees of its Covered Assets or New Acquisition or subsidiary
thereof (as the case may be), except increases required by any applicable law,
rule or regulation (which shall include normal periodic performance reviews and
related compensation and benefit insurance);


 


(vii)      decrease
its capital stock or declare, set aside or pay any dividend or other
distribution (whether in cash, assets, stock or a combination thereof) in
respect of any of its capital stock or profit reserves (other than dividend
payments made due to the applicable requirements according to the applicable
Brazilian laws and by-laws of those of its Covered Assets or New Acquisition or
subsidiary thereof (as the case may be), which have as minority shareholders or
preferred shareholders Persons which are not part of either Group, provided
that 50% (fifty percent) of the difference between the aggregate amount of
any such dividend payments which are received by members of the PT Group in
Euros and the aggregate amount of any such dividend payments which are received
by members of the TEF Group in Euros, shall be paid to the other Group at the
Balance Closing by the Group having received the highest of such aggregate
amount of dividends);


 


(viii)     pledge
or otherwise encumber any of the Interests held in any of their subsidiaries;


 


39





















 


(ix)       make
any change in any of its present accounting methods and practices, except as
required by changes in generally accepted accounting principles; or


 


(x)        make
any commitment or engage in any negotiations to take any actions referred to in
Sections 6.1(b)(i) through (ix) above.


 


(c)        Unless
previously and expressly agreed in writing by the Parties in each specific
event, each of the TEF Group and the PT Group shall not sell or otherwise
dispose of or pledge or otherwise encumber, any of the Interests held in any of
their Covered Assets or New Acquisitions, or make any commitment or engage in
any negotiations to do any of the foregoing.


 


6.2       Access
to Information


 


Subject to the
full compliance with the confidentiality obligations of Section 13 below,
(i) in respect of the TEF Covered Assets and PT Covered Assets,
respectively, between the date of this Agreement and the Balance Closing, and
(ii) in respect of a New Acquisition, between the date on which the TEF Group
or the PT Group (as the case may be) acquires, directly or indirectly (other
than through the Company) an Interest in the New Acquisition, and the date of
transfer to the Company of the entire such Interest, upon written request by
one Group delivered to the other Group, each of the TEF Group or the PT Group
shall, or shall cause the relevant TEF Covered Assets and PT Covered Assets, or
New Acquisition (as the case may be), to:


 


(a)        give  the requesting Group (the “Requesting Group”) and its
authorised representatives reasonable access to all books, records, offices and
other facilities and properties of the TEF Covered Assets and PT Covered
Assets, or the New Acquisition (as the case may be);


 


(b)        permit
the Requesting Group to make such inspections thereof as the Requesting Group
may reasonably request; and


 


(c)        furnish
the Requesting Group with such financial and operating data and other
information with respect to the business and properties of the Wireless
Properties or the New Acquisition (as the case may be), as the Requesting Group
may from time to time reasonably request.


 


6.3       Consents


 


(a)        Each
of the TEF Group and the PT Group and the Company shall, co-operate and use all
commercially reasonable efforts to make all filings and obtain all licenses,
permits, consents, approvals, authorisations, qualifications and orders of
Governmental Authorities and other third parties necessary to consummate the
transactions contemplated by this Agreement, including, without limitation, (i)
the obtaining of any such necessary consent from any lender or Governmental
Authority, including without limitation the European Commission on antitrust
matters, and (ii) the filing by the 
Company of the transaction with CADE and the ANATEL (provided that
no Party shall have any liability whatsoever hereunder arising from the failure
of ANATEL or CADE to approve the transactions


 


40





















 


contemplated herein, except to the extent
that such failure is attributable to the failure by such Party to submit to
ANATEL or to CADE, in timely fashion, the information necessary and required
pursuant to current Brazilian telecommunications and antitrust laws and
regulations).


 


(b)        All
fees and expenses incurred in connection with obtaining such approvals shall be
shared equally between the Groups, except that each of the Groups shall be
solely responsible for any claims, costs, fines, fees or similar expenses which
arise as a direct result of and are solely attributable to any action or
omission on the part of such Group.


 


(c)        With
respect to any required consent or approval not obtained prior to the relevant
Closing, the Groups shall, and shall cause the Company, the TEF Covered Assets
and PT Covered Assets or the New Acquisition (as the case may be), to use
commercially reasonable efforts to obtain any such consent or approval after
such Closing until such consent or approval has been obtained.


 


(d)        Each
of the TEF Group and the PT Group expressly undertakes to obtain all relevant
authorisations, approvals and waivers of any rights of Third Parties and
minority shareholders of TEF Covered Assets and PT Covered Assets, as the case
may be, (including but not limited to rights of first refusal by virtue of the
TEF Covered Assets and PT Covered Assets by-laws and shareholders agreements in
force) which may be required to consummate the transactions contemplated by
this Agreement prior to the relevant Closing.


 


6.4       Best
Efforts to Consummate Transactions


 


Each of the
TEF Group and the PT Group shall co-operate and use all commercially reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate the transactions contemplated by this Agreement and
the Shareholders Agreement.


 


6.5       Public Announcements


 


From the date
hereof, except as otherwise mutually agreed in writing by the Parties, no Party
shall issue any report, statement or press release or otherwise make any public
statements with respect to this Agreement or the Shareholders Agreement and the
transactions contemplated hereby, except as may be required by law or in
connection with any applicable obligations of a publicly-held, exchange-listed
company, in which case the language of any such report, statement or press
release shall be mutually agreed to by the Parties.


 


6.6       Acquisitions


 


With regard to
an acquisition of an Interest in a New Acquisition made by a Group pursuant to
Section 1.6.2 above:


 


41





















 


(a)        such
Group shall:


 


(i)         use
reasonable efforts to procure that any representations and warranties which it
receives in respect of the Interests acquired in such New Acquisition are no
less favourable than substantially similar representations and warranties,
subject to reasonable disclosure, as contained in Section 4 or 5 (as the case
may be); and


 


(ii)        procure
that any rights under such representations and warranties are assigned to the
Company if allowed by the applicable laws and regulations and, if not possible,
that all benefits under any claims and rights to make claims pursuant to such
representations and warranties, are transferred to the Company; and


 


(b)        substantially
similar representations and warranties, to those contained in Section 4 or 5
(as the case may be), supplemented by a disclosure schedule reasonably
acceptable to the other Group, shall be made and given at the Additional
Closing at which an Interest in the New Acquisition is transferred by the
acquiring Group to the Company relating to the period from the date of
acquisition by such Group of the Interest in said New Acquisition to the date
of such Additional Closing.


 


6.7       Financing


 


Each of the
TEF Group and PT Group further agree that:


 


(a)        it
shall use its reasonable efforts to prevent any early repayment obligations or
any other adverse consequences in respect of any third party debt, financing,
bonds, debentures, loans, credits or any other kind of indebtedness (“Financing”) being triggered as a
result of the execution of and performance by the Parties in terms of this
Agreement and the Shareholders Agreement;


 


(b)        No
early repayment obligations or any other adverse consequences in respect of any
inter-company Financing (to any of its Covered Assets or vice versa, or of any
of its Covered Assets to another of its Covered Asset), whether or not the
creditor ́s rights under such Financing are assigned or otherwise transferred to
a third party, shall be triggered as a result of the execution of and
performance by the Parties in terms of this Agreement and the Shareholders
Agreement; and


 


(c)        No
agreement entered into after the date hereof in respect of any Financing of the
Company or any of the Subsidiaries, shall include a provision that performance
by the parties in terms of this Agreement and the Shareholders Agreement
(including without limitation the transfer to the Company of the Balance
Capital Contributions) shall be a breach of such agreement or trigger an early
repayment obligation or any other adverse consequences in respect of any
Financing of the Company or any of the Subsidiaries.


 


6.8       Global Telecom contract; representations and
warranties


 


(a)        Portugal
Telecom shall, and shall procure that Telesp Celular Participações, S.A. shall,
fully comply with the contract “Promessa Irrevogável de Compra e Venda de
Ações”,


 


42





















 


dated 13 January 2001 and more particularly
undertakes that either Telesp Celular Participações, S.A. or itself acquires
all the shares in Global Telecom in order to become the owner of the Global
Telecom Interest.


 


(b)        Portugal
Telecom shall, and shall procure that Telesp Celular Participações, S.A. shall,
during the period from the date of this Agreement to the Balance Closing, duly
and fully exercise the rights which any member of the PT Group may have in
respect of representations, warranties and indemnities received in respect of
all Interests acquired by the PT Group in Global Telecom under the GT
Acquisition Agreement.


 


6.9       Transactions related to financing and derivative
operations of the Covered Assets


 


(a)        Both
Groups agree that all the transactions related to financing and derivative
operations of their Covered Assets (including but not limited to unwinding,
transfers, local financing) performed after March 31, 2002 until the Balance
Closing and not included in the information provided during the due diligence
process performed as of such date, will be disclosed to the other Group as soon
as practicable after the date hereof (or after the execution of such
transaction) and will be audited quarterly by the auditors of such other
Group’s auditor in Brazil.


 


(b)        The
audit report regarding such transactions shall be submitted to two independent
banks nominated mutatis mutandis
in accordance with Section 1.4(b) of the Subscription Agreement.  If such independent banks conclude that: (i)
one of the Groups or any of its Covered Assets performed such transactions not
on an arms-length basis; or (ii) one of the Groups has extracted value from its
Covered Assets; or (iii) one of the Groups or any of its Covered Assets left
unhedged foreign currency debt during any period; they shall determine the loss
in the relevant Covered Asset(s) arising as a consequence of such transactions
and the amount which the relevant Group shall pay as compensation to the other
Group in cash immediately after such amount is determined.


 


SECTION 7:            TERMINATION OF AGREEMENT


 


7.1       Termination


 


This Agreement
may be terminated:


 


(a)        upon
termination of the Shareholders Agreement for any reason other than the events
set forth in Section 7.1(b), (c) and (d) below;


 


(b)        by
the TEF Group or the PT Group, if any court or other Governmental Authority
shall have issued an order, decree, judgement or ruling or taken any other
action which enjoins, restrains or otherwise prohibits the consummation of the
Balance Closing on or before December 31, 2005, provided that, in such
event, the provisions of Section 7.2 shall apply;


 


(c)        by
the TEF Group, if the PT Group fails to comply with the provisions of this
Agreement, or fails to make any Contribution hereunder, or otherwise takes any
action or fails to take any action, and the result of the foregoing is that:


 


43





















 


(i)         the
Balance Closing is not consummated by December 31, 2005, and the PT Group fails
to remedy such breach within 30 (thirty) days of receipt of a notice from the
TEF Group calling upon the PT Group to remedy such breach; or


 


(ii)        the
consummation of the Initial Closing or Balance Closing (as the case may be),
would be impossible (if the breach were to persist) and the PT Group fails to
remedy such breach within 30 (thirty) days of receipt of a notice from the TEF
Group calling upon the PT Group to remedy such breach,


 


in each of
which events the provisions of Section 7.3 shall apply; or


 


(d)        by
the PT Group, if the TEF Group fails to comply with the provisions of this
Agreement, or fails to make any Contribution hereunder, or otherwise takes any
action or fails to take any action, and the result of the foregoing is that:


 


(i)         the
Balance Closing is not consummated by December 31, 2005, and the TEF Group
fails to remedy such breach within 30 (thirty) days of receipt of a notice from
the PT Group calling upon the TEF Group to remedy such breach; or


 


(ii)        the
consummation of the Initial Closing or Balance Closing (as the case may be),
would be impossible (if the breach were to persist) and the TEF Group fails to
remedy such breach within 30 (thirty) days of receipt of a notice from the PT
Group calling upon the TEF Group to remedy such breach,


 


in each of
which events the provisions of Section 7.3 shall apply.


 


7.2       Effects of Termination due to the Events set forth
in Sections 7.1(b)


 


In the case of occurrence of an event set forth in Section 7.1(b)
hereto:


 


(a)        the
Parties shall procure that the Company shall be immediately liquidated pursuant
to the provisions of Section 4.3 of the Shareholders Agreement if the Interest
in any Wireless Property or New Acquisition has been totally or partially
transferred to the Company; and


 


(b)        if
the Interests held by any of the Groups in the Wireless Properties referred to
in Exhibit IV hereto, have not been fully transferred to the Company, each of
the Groups shall have the right to gradually buy from the other Group or from
the Company, and the obligation to sell and transfer within the 6 (six) months
following receipt of notice from the other Group making the request to buy, the
maximum percentage allowed by regulatory authorities from time to time, up to
25% (twenty-five percent) of the respective voting ownership of the PT Group
and the TEF Group in Selected Wireless Properties based on an Independent
Valuation, as well as to appoint the corresponding representatives in each
board of directors, as long as such appointment does not violate regulatory
provisions, provided that if such transfer is subject to the prior (i)
fulfilment of legal or regulatory requirements, and/or (ii) approval by any
regulatory agency (including, without limitation, ANATEL, CVM or any other
Governmental Authority with jurisdiction over the Company and the
Subsidiaries), the time period during which such transfer may be consummated
shall be


 


44





















 


extended until the expiration of 15 (fifteen)
Business Days after all such requirements have been fulfilled and/or such
approvals have been received.  This
transaction shall be carried out in the most efficient manner for tax
purposes.  The notice referred above
shall be sent within 2 (two) months from the earlier event determining the
possibility of exercising the cross-selling right.  Termination of this Agreement pursuant to
this Section 7.2 shall not affect the right to exercise the Call Right provided
for in Section 1.6.1 hereof, which may be exercised by the TEF Group during the
2 (two) month period set forth in this Section 7.2(b).


 


7.3       Effects
of Termination due to Breach of Sections 7.1(c) or (d)


 


(a)        In
the case of occurrence of an event set forth in Section 7.1(c) or (d) above,
(i) the Parties shall procure that the Company shall be immediately liquidated
pursuant to the provisions of Section 4.3 of the Shareholders Agreement if any
Interest in any Wireless Property or New Acquisition has been totally or
partially transferred to the Company, and (ii) if the Interests held by any of
the Groups in the Wireless Properties referred to in Exhibit IV hereto, have
not been fully transferred to the Company, the non-defaulting Group under the
relevant section (the “Non-Defaulting Group”)
shall have the right to acquire from the defaulting Group under such section (the
“Defaulting Group”) an interest
equal to 35% (thirty-five percent) of the voting ownership in the Selected
Wireless Properties of such Defaulting Group (the “Penalty
Shares”) at a price equal to (A) the value of such interest in
the Wireless Properties as determined by an Independent Valuation to be
conducted pursuant to Sections 1.4 and 1.5 above, minus (B) a 20% (twenty
percent) discount on such value.


 


(b)        The
exercise of the call right on the Selected Wireless Properties created under
this Section 7.3 shall be made upon notice sent by the Non-Defaulting Group to
the Defaulting Group indicating the breach or the action that triggered the
termination of this Agreement as set forth in Section 7.1(c) and (d) (such
breach or action referred as a “Triggering Event”).  Upon receipt of such notice, the Defaulting
Group shall, or cause its Affiliates to, take all actions as may be required by
law or this Agreement to sell and transfer to the Non-Defaulting Group the
Penalty Shares no later than 15 (fifteen) days following the date the value
resulting from the Independent Valuation is received, provided that if
such transfer is subject to the prior (i) fulfilment of legal or regulatory
requirements, and/or (ii) approval by any regulatory agency (including, without
limitation, ANATEL, CVM or any other Governmental Authority with jurisdiction
over the Company and the Subsidiaries), the time period during which such
transfer may be consummated shall be extended until the expiration of 15
(fifteen) Business Days after all such requirements have been fulfilled and/or
such approvals have been received.


 


(c)        The
call right created hereunder may be exercised within 6 (six) months after (x)
the Non-Defaulting Group becomes aware of the Triggering Event, or (y), if the
existence of the Triggering Event is disputed, the date on which the
arbitration process set forth in Section 10 below determines the existence of
such Triggering Event.  In any case, if
the Non-Defaulting Group is the TEF Group it shall remain entitled to the Call
Right provided for in Section 1.6.1 hereof during the same period stated in
this Section 7.3(c).


 


45





















 


(d)        Except
with respect to the Liquidation of the Company, which, in such case, will not
occur, the provisions of this Section 7.3 shall also apply if a Change of
Control occurs before the Balance Closing, and the Group not suffering the
Change of Control does not reach an agreement with the new controlling operator
on the management and strategic plan for the Company, in addition to the
provisions of Section 5.6 of the Shareholders Agreement.


 


(e)        The
call right on Selected Wireless Properties provided for herein may be exercised
by the Non-Defaulting Group, fully or partially, gradually as permitted by
applicable regulations. The Non-Defaulting Group may also exercise the call
right directly or indirectly, or transfer such right to a non-telecom operator
third party to partially or totally exercise the call right.  The identity of the non-telecom operator
third party must be approved by the Defaulting Group, which approval shall not
be unreasonably withheld.


 


SECTION 8:            INDEMNIFICATION; SURVIVAL OF
REPRESENTATIONS; LIMITATIONS; PROCEDURE


 


8.1       Agreement
to Indemnify


 


(a)        Each
Group (the “Indemnitor”) shall be liable
to and shall indemnify and hold harmless the other Group (the “Indemnitee”) from and against all
Damages suffered by the Indemnitee as a result of, or in relation to:


 


(i)         any
representation or warranty, given by it to the other Group in terms of this
Agreement, being, individually or jointly, untrue or misleading; or


 


(ii)        a
breach of any covenant, obligation or undertaking in this Agreement by any
Party in the Indemnitor ́s Group,


 


(a “Breach”), provided that, the
Parties agree that:


 


(x)        Damages
suffered by (A) any of the Covered Assets (B) the Company, and (C) directors,
officers, employees, Affiliates, controlling persons, agents, representatives,
successors and subsidiaries of the Indemnitee, shall, for the purposes of this
Section, be deemed to be suffered by the Indemnitee; and


 


(y)        all
indemnifications for Damages suffered by an Indemnitee, shall, at the option of
the Indemnitee, be paid:


 


(A)       to
such Indemnitee in proportion to the percentage Interest held in the Company by
the Indemnitee; or


 


(B)       to
the Company or relevant Covered Asset (provided that it does not cause Tax
disadvantages to the Company or such Covered Asset), but then without regard to
the percentage Interest held in the Company by the Indemnitee.


 


(b)        Liability
for a Breach shall exist irrespective if, at the time of the Breach, a Group
knew, or should, or could have known that such a Breach existed or could arise,
whether or not such Knowledge was obtained from the due diligence review
initiated by it or otherwise.


 


46





















 


(c)        In
the event that, in the period between the date of execution of this Agreement
and the Balance Closing, an Indemnitee becomes aware of a Breach in relation to
a Covered Asset, the liability of an Indemnitor to pay Damages shall be
calculated as if all the Interests in the corresponding Covered Asset had been
transferred to the Company, provided that such Damages shall be due and
payable to the Indemnitees (i) at the Initial Closing, in respect of Damages
suffered prior to the Initial Closing, in proportion to the Interests held by
the Company in such Covered Asset upon the Initial Closing, (ii) at the Balance
Closing, in respect of Damages suffered prior to the Balance Closing, in
proportion to the Interests transferred to the Company in such Covered Asset at
the Balance Closing and (iii) if applicable, in respect of Damages suffered
prior to the Additional Closing, at the relevant Additional Closing in
proportion to the Interests transferred to the Company in such Covered Asset at
such Additional Closing.


 


(d)        Damages
shall be payable in Euro and shall be increased with the interest rate applied
from time to time by the ECB to the financial institutions having access to the
credit facilities of the ECB for overnight financing in Euro, calculated from
the date on which the Damages have arisen until the date of payment of such
Damages.


 


(e)        For
the avoidance of doubt, Damages caused by facts or circumstances having
occurred prior to the date of this Agreement, shall be subject to
indemnification under this Section 8, even if they arise or become known by the
Indemnitee after the date of this Agreement.


 


(f)         Damages
caused by facts or circumstances having commenced prior to the date of this
Agreement and continuing thereafter, shall only be subject to indemnification
under this Section 8 for that portion of the Damages caused before the date of
this Agreement.


 


(g)        For
the avoidance of doubt, a Breach by a Party shall be deemed to be a Breach by
the Group to which such Party belongs.


 


(h)        For
the avoidance of doubt, Damages suffered by a Party shall be deemed to be
Damages suffered by the Group to which such Party belongs.


 


8.2       Survival of Representations, Warranties and
Covenants


 


(a)        The
right to claim Damages for a Breach shall survive until the earlier of:


 


(i)         expiry
of a period of 25 (twenty-five) years from date hereof;


 


(ii)        expiry
of the maximum period under the applicable statute of limitations; and


 


(iii)       the
termination, or the assignment of this Agreement in accordance with Section
5.4(i) of the Shareholders Agreement, provided that:


 


(X)       if
this Agreement terminates or is assigned (in which event the provisions set
forth in Section 11.1(iii) of the Shareholders Agreement shall apply) prior to
the Balance Closing having occurred or within 2 (two) years from the Balance
Closing, then the right to make any such claim:


 


47





















 


(x)        which
is based upon a third party claim, shall survive for the maximum period under
the applicable statute of limitations; and


 


(y)        which
is not based upon a third party claim, shall survive for 2 (two) years after
termination, or assignment, of this Agreement; and


 


(Y)       if
this Agreement terminates or is assigned (in which event the provisions set
forth in Section 11.1(iii) of the Shareholders Agreement shall apply), after
expiry of a period of 2 (two) years after the Balance Closing, then the right
to make any such claim shall only survive if the claim is based on a third
party claim and then for the maximum period under the applicable statute of
limitations.


 


(b)        The
right to claim indemnification for damages for a breach of a representation or
a warranty or of a covenant received from a third party and transferred by the
acquiring Group to the Company regarding a New Acquisition (in accordance with
Section 6.7 above) shall survive for the period agreed with such third party.


 


(c)        The
right to claim indemnification for Damages regarding a New Acquisition (in
accordance with Section 6.6 above) will survive as set forth in Section 8.2(a),
provided that the reference to the Balance Closing shall be understood
to be made to the Additional Closing at which the relevant New Acquisition is
fully contributed to the Company.


 


(d)        The
expiry of the survival periods set forth in this Section 8.2 shall be without
prejudice to any accrued rights, claims and liabilities of the Parties in
existence at the time of such expiry.


 


8.3       Limitation to the Obligation to Indemnify


 


Neither Group
shall be liable to the other Group in respect of any individual claim for
Damages relating to the same Breach, where the liability, agreed or determined,
in respect of such claim is equal to or less than the equivalent of Euro
1,000,000 (one million Euro). A Group shall be liable to the other Group in
respect of each claim for which the liability, agreed or determined, is equal
to or less than the equivalent of Euro 1,000,000 (one million Euro) if the
aggregate liability for all such claims exceeds the amount of Euro 10,000,000
(ten million Euro), provided that:


 


(a)        Damages
relating to Taxes are not subject to any of the limitations set out in this
Section 8.3;


 


(b)        in
the case of Damages based on a Breach relating to a Covered Asset or a New
Acquisition, no regard shall be had to the fact that the other Group holds a
direct or indirect interest in such Covered Asset or New Acquisition; and


 


(c)        the
net amount (after deducting any related taxes, costs and expenses) received by
the Company and any of the Covered Assets from a third party (or insurers,
including insurance companies) as a result of the same matter giving rise to
the Damages, shall be taken into account in calculating the liability of the
Indemnitor hereunder.


 


48





















 


8.4       Indemnification
Procedure


 


(a)        When
any Indemnitee is entitled to indemnification under the provisions of this
Section 8, it shall notify the Indemnitor promptly in writing of any Breach as
to which the Indemnitee may request indemnification hereunder; provided that
any failure by an Indemnitee to notify the Indemnitor shall not relieve the
Indemnitor from its indemnification obligations hereunder and shall not relieve
the Indemnitor from any other obligation that the Indemnitor may have hereunder
or otherwise, except to the extent that the Indemnitor is materially prejudiced
by such failure.


 


(b)        When
applicable, immediately upon the receipt of the notice of a Breach, the
Indemnitor shall assume the defence or the responsibility for the settlement of
any action or proceeding by a third party involving a Covered Asset or a New
Acquisition that is the subject of a claim for indemnification hereunder.  The involved Covered Asset or a New
Acquisition shall be entitled (but not obliged) to participate in any
negotiations or proceedings to settle or otherwise eliminate any claim.  The Indemnified Party and the Company shall
be kept fully informed at all times of the defence and the development of the
claim.  If the Indemnitor fails to
effectively assume the defence, settlement or negotiation and to appoint
counsel to take charge of any such defence, settlement or negotiation of any
action or proceeding, the Indemnitee may, on behalf of the involved Covered
Asset or a New Acquisition, engage counsel to defend, settle or otherwise
dispose of such action or proceeding; provided that the Indemnified
Party shall not settle or compromise any such action, proceeding or claim
without the consent of the Indemnitor (which consent shall not be unreasonably
withheld or delayed).  All costs and fees
due in connection with the defence, settlement or negotiation of any action or
proceeding as set forth in this Section 8.4(b) shall be borne by the
Indemnitor.


 


(c)        If
indemnification for a Breach in relation to a claim by a third party is
requested, the Indemnitor, its agents and representatives shall have access to
the premises, books and records of the Indemnitee, its Affiliates and the
Covered Assets or New Acquisitions (as the case may be), to the extent
reasonably necessary to assist the Indemnitor in defending or settling any
action, proceeding or claim; provided that said access shall be utilised
in such manner as not to interfere unreasonably with the operation or the
business of the Indemnitee, its Affiliates and the Covered Assets or New
Acquisitions (as the case may be). 
Except as reasonably necessary to assist the Indemnitor in defending or
settling such action, proceeding or claim, the Indemnified Party shall not be
required to disclose any information with respect to itself or any of its
Affiliates, and the Indemnified Party shall not be required to participate in
the defence of any claim to be indemnified hereunder (except as otherwise set
forth herein), unless otherwise lawfully required or reasonably necessary in the
defence of any third party claim to be indemnified hereunder.


 


SECTION 9:            BONA FIDE AND PENALTY


 


9.1       Bona fide


 


The Parties
acknowledge that bona fide
compliance with this Agreement requires, in addition to the fulfillment of the
specific undertakings and obligations expressly provided


 


49





















 


for herein,
that all the Parties act in good faith and diligently in executing other
actions and decisions, and refrain from carrying out other actions or
decisions, as may be necessary or convenient for a fair, complete, prompt and
adequate implementation of all the effects that reasonably follow from (a) the
common will and purposes of the Parties in consideration of which they enter
into this Agreement, and (b) the terms used by the Parties to describe their
rights and obligations hereunder.  The
Parties expressly undertake to proceed as appropriate for the bona fide compliance with this Agreement.


 


9.2       Penalty
and Delay Interest


 


(a)        The
PT Group and the TEF Group agree with each other that the substantial breach of
any material obligation of a Group expressly provided for herein which does not
have a specific remedy (other than damages and/or specific performance)
pursuant to this Agreement, shall place the defaulting Group under the
obligation to pay the other Group a penalty of [***] in addition to a full
indemnification to the non-defaulting Group for the damage and the loss of
profit suffered as a consequence of such default by the other Group.


 


(b)        In
case of default of a payment obligation, the Group in breach of its obligations
shall pay the non-defaulting Group a delay interest payment calculated at the
reference interest rate applied from time to time by the ECB to the financial
institutions having access to the credit facilities of the ECB, for overnight
financing in Euros, increased by 2 (two) percentage points.  The delay interest shall be accrued on a
daily basis and shall be paid on the last business day of each calendar month,
and if not paid, the accrued interest shall be added to, and capitalized to
become part of the amount then due but unpaid, and shall accrue additional
delay interest thereinafter.


 


SECTION 10:          APPLICABLE LAW AND SETTLEMENT OF DISPUTES


 


10.1     Governing Law


 


This
Agreement, and any question related to it or to its performance or consequences
of any breach of it, shall be governed by and construed in accordance with the
laws of the Netherlands.


 


10.2     Arbitration


 


(a)        If
any dispute arises in relation to this Agreement, then at the request of any
Party the dispute shall be submitted for final decision by arbitration to be
conducted in Amsterdam, the Netherlands, under the Rules of Arbitration of the
International Chamber of Commerce. Without prejudice to the site of the
arbitration being Amsterdam, the Netherlands and that the award must be issued
in that town, hearings and other activities during the arbitration proceeding
may be held elsewhere.


 


(b)        There
shall be 3 (three) arbitrators, with each Group appointing 1 (one) arbitrator,
who shall accept its appointment within 15 (fifteen) days, and who collectively
shall select a third arbitrator as chairman within 15 (fifteen) days from the
acceptance of their appointments.  If the
two appointed arbitrators do not agree on the selection of the third


 


50





















 


arbitrator, the third arbitrator shall be
appointed by the International Chamber of Commerce.  The International Chamber of Commerce shall
also appoint the arbitrator for one Group if such Group fails to appoint the
arbitrator within 30 (thirty) days of the written notification to such Group by
the other Group of the beginning of the arbitration proceeding.  The language to be used in the arbitration
proceedings shall be English.


 


(c)        The
Parties submit irrevocably to the decision of the arbitration tribunal, giving
their consent to comply with such decision and waive any other jurisdiction
that could apply.  The arbitration
tribunal shall apply the laws of the Netherlands.  The fees shall be paid by the losing party
and shall include any reasonable expenses including without limitation
attorneys’ fees and any expenses related with the proceeding.


 


(d)        Consistent
with the expedient nature of arbitration, each Party shall, upon the written
request of the other Parties, promptly provide the other with copies of
documents relevant to any issue of the claim or counterclaim, save to the
extent that such documents are subject to confidentiality restrictions imposed
on the first mentioned Party by a third party, or are subject to first
mentioned Party’s attorney-client privilege. 
Any dispute regarding discovery, or the relevance or scope thereof,
shall be determined by the arbitrators, which determination shall be conclusive.


 


(e)        The
Parties shall make their agents and employees available upon reasonable notice
at reasonable times at the place of arbitration without the necessity of
subpoenas or other court orders.  The
arbitrators shall issue subpoenas to compel the attendance of, and the
production of documents by, third parties witnesses at depositions or at the
hearing.


 


(f)         Information
obtained by either Group or the Company during the arbitration shall be kept
confidential and shall not be used except in connection with the arbitration
proceeding, and at the conclusion of the proceeding, the documents disclosed
shall be returned to the other Group.


 


(g)        Any
award in arbitration initiated under this Section may include monetary damages
as well as specific performance of the obligations set forth herein.


 


(h)        No
details of any arbitration award pursuant to this Section 10 shall made public
by any Party or the arbitration tribunal, and the arbitration award shall be
subject to the provisions of Section 13 below.


 


SECTION 11:          NOTICES


 


11.1     All
notices, requests, permissions, consents, waivers, and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
signed by the respective persons giving them and delivered by hand, or
deposited in the mail (registered, return receipt requested), properly
addressed and postage prepaid, as follows:


 


51





















 


If to TEM:


Attn: Mr
Antonio Hornedo Muguiro

General Counsel

Goya 24

Madrid, Spain

Tel: + (34) 91 42 34 054

Fax: + (34) 91 42 34 016

E-mail: hornedo_a@telefonicamoviles.com


 


If to Portugal
Telecom:


 


Attn: Av.
Fontes Pereira de Melo, 40, 11o andar

Lisbon, Portugal

Tel:

Fax:

E-mail:


 


If to PT
Móveis:


 


Attn:

Av. 5 de Outubro, 208, 4o andar

Lisbon, Portugal

Tel:

Fax:

E-mail:


 


If to the
Company:


 


Attn: General
Manager

Attn: General Manager

Strawinskylaan 3105

1077 ZX Amsterdam

The Netherlands


 


11.2     Such
names and addresses may be changed by written notice delivered by each such
Persons.


 


SECTION 12:          ASSIGNMENT; ENTIRE AGREEMENT; JOINT AND SEVERAL


 


12.1     Assignment


 


Except with
the express written consent of all the Parties hereto or as expressly provided
under the Shareholders Agreement, this Agreement shall not be assignable or
otherwise transferred in whole or in part. 
This Agreement shall inure to the benefit of and be binding upon the
Parties and their respective successors and permitted assigns.  Nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies
under or by reason of this Agreement.


 


52





















 


12.2     Entire
Agreement


 


This Agreement
(which includes the Exhibits and the Disclosure Schedules hereto), and the
other documents and agreements delivered in connection with this Agreement and
the Shareholders Agreement contain the entire agreement among the Groups with
respect to the transactions contemplated herein and therein and supersede all
other prior arrangements made by any of them with respect thereto, including
the Joint Venture Agreement, except for the following provisions contemplated
in the Joint Venture Agreement: (i) the provision named as “Other
Considerations”, and (ii) the last paragraph of the provision named “HoldCo
Ownership”, both of  which shall remain
in full force and effect.  No representation
or warranty is made by any Party hereto with respect to the subject matter
hereof and of the Shareholders Agreement, other than as expressly set forth in
any of the aforementioned documents.


 


12.3     Joint
and Several


 


The members of
a Group shall be jointly and severally liable for the obligations under this
Agreement of the Group of which they are members.  Each member of a Group shall be entitled to
the rights under this Agreement of the Group of which it is a member.


 


12.4     Modification
and Amendment; Indexation


 


(a)        Subject
to Section 12.4(b) below, this Agreement cannot be orally changed, amended or
terminated, and no provision or requirement hereof may be orally waived.  Any change, amendment or (save as otherwise
expressly provided) termination shall only be by agreement, in writing, signed
by the Parties and any waiver shall only be effective if made in writing and
signed by the Party waiving its rights.


 


(b)        Where
reference to the amounts referred to in Sections 1.5(b)(ii), 1.5(b)(iii), and
9.2(a), such amounts shall be increased (or decreased) on 1 January of each
year by the average of the official general inflation index applicable in the
Euro Zone on said date, the first such increase (or decrease) to take place on
1 January 2004.


 


SECTION 13:          CONFIDENTIALITY


 


13.1     Confidential
Information


 


Each Party
acknowledges that, pursuant to this Agreement and the Shareholders Agreement,
it may have access to certain information (including, without limitation,
financial information and the information contained in this Agreement and the
Shareholders Agreement) made available by, and concerning the business,
operations and prospects of, any of the other Parties (a “Disclosing Party”) which is either
confidential or proprietary in nature (each “Confidential Information”).  Each Party acknowledges and agrees that all
Confidential Information, is the property of the Disclosing Party and
constitutes valuable, special and unique assets of the business of such Party.


 


53





















 


13.2     Use
and Disclosure


 


Each Party
(the “Receiving Party”)
agrees in relation to any Confidential Information of any other Party: (i) to
use such Confidential Information solely for the purposes contemplated in this
Agreement and the Shareholders Agreement, and in facilitating the business
objectives of the Company; (ii) to keep such information confidential and to
disclose it only to officers, employees, consultants and professional advisers
and in the case of a Third Party Sale as referred to in Section 5.4 of the
Shareholders Agreement, to such Third Party, who (A) have a need to know (and
only to the extent that each has a need to know); (B) are aware that the
Confidential Information should be kept confidential; (C) are aware of the Receiving
Party’s undertakings in relation to such information in terms of this
Agreement; (D) have been directed by the Receiving Party to keep the
Confidential Information confidential; and (E) in the case of a Third Party
Sale as referred to in Section 5.4 of the Shareholders Agreement, has executed
a confidentiality agreement on terms and conditions not less favourable than
those set out in this Agreement in favour of the Parties.


 


13.3     Duties of Receiving Party


 


(a)        The
Receiving Party shall (i) establish and maintain reasonable security measures
to safeguard Confidential Information from access or use not authorised by this
Agreement; (ii) keep the Confidential Information under its control; (iii) use
reasonable best efforts to comply with any reasonable direction issued by the
owner from time to time regarding the enforcement of confidentiality
requirements including, without limitation, commencing and conducting,
enforcement proceedings; and (iv) on ceasing to be one of the Parties (A)
continue to keep confidential the Confidential Information received while a
Party; and (B) at each owner’s option, return to that owner or destroy and
certify the destruction of that owner’s Confidential Information.


 


(b)        The
Receiving Party shall further, in relation to such Confidential Information (i)
at its own cost and expense use reasonable efforts to ensure, at all times,
that each Person to whom it discloses such Confidential Information complies
with the confidentiality obligations set out in this Agreement; (ii) at its own
cost and expense immediately notify the owner of any suspected or actual
unauthorised use, copying or disclosure of Confidential Information of that
owner of which the notifying Party becomes aware; and (iii) provide such
assistance as may reasonably be requested by any owner of Confidential
Information (at such owner’s sole cost, unless the Receiving Party is in breach
of its confidentiality obligations under this Agreement) in connection with any
proceedings that the owner may initiate against any recipient or third party
for the unauthorised use, copying or disclosure of such Confidential
Information of said owner.


 


13.4     Exclusions


 


The foregoing
obligations of confidentiality shall not apply to, nor restrict the use of data
or Confidential Information which: (i) was already in the rightful possession
or control of the recipient at the time of disclosure and not subject to an
obligation of confidentiality on such party, and of which the recipient has
evidence so to prove; (ii) the recipient thereafter develops independently and
has evidence of such development; (iii) was received from a 


 


54





















 


third party
who was entitled to disclosure; (iv) was necessary financial and/or other
information provided by the Party to prospective financiers and/or investors
but only if such information was given subject to the execution of the
appropriate confidentiality agreement(s) with the receiving party(ies); (v) was
or became known or available to the public or to the trade without fault of the
recipient, except that, even in such instance, the recipient shall not disclose
any correlation between such Confidential Information or techniques and any
such unrestricted information; (vi) is required to be disclosed under law or
rules applicable to the Party or as a result of a court order not subject to
appeal, provided insofar as possible the recipient gives the Disclosing Party
prior notice of such disclosure so that the Disclosing Party may intervene in
the proceedings to protect the confidential nature of the Confidential
Information.


 


13.5     Survival
of Certain Obligations


 


The provisions
of Section 13 shall survive for an indefinite period of time and claims
thereunder may be brought at any time irrespective of the termination of this
Agreement for any reason whatsoever.


 


SECTION 14:          SEVERABILITY


 


Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or this Agreement.


 


SECTION 15:          LANGUAGE


 


This Agreement shall be executed in the English language.


 


SECTION 16:          DEFINITIONS


 


Unless a different meaning clearly appears from the context herein or
unless otherwise defined in this Agreement, the capitalised terms used
throughout this Agreement shall have the meanings set forth in this Section 16.


 


“Acquisition Date” has the meaning set forth in Section
1.5(b)(i)(A) of this Agreement.


 


“Acquisition Price” means, in each case, the price effectively
paid or incurred for the acquisition of the relevant Interest in the relevant
New Acquisition or the Further Interest in a Wireless Property (as the case may
be), by the Group making such acquisition.


 


“Additional Capital Contribution” means any capital contribution
to the Company, including contributions made (i) in cash or (ii) in kind in the
form of Liquid Assets (if accepted by the other Group), Interests in New
Acquisitions or any Further Interest in a Wireless Property (as the case may
be), (to be) transferred by any of the Groups after the Balance Closing, in such
a manner as set forth in this Agreement and the Shareholders Agreement.


 


55





















 


“Additional Closing” means the date on which any Additional
Capital Contribution is transferred to the Company.


 


“Affiliate” means, when used with reference to a specified
Person, any other Person that directly or indirectly Controls or is Controlled
by or is under common Control with the specified Person.


 


“Agreement” means this Subscription Agreement and any and all
Exhibits, Disclosure Schedules and amendments hereto and thereto from time to
time.


 


“ANATEL” means the Agência
Nacional de Telecomunicações, or any substitute agency, department
or regulatory body of the telecommunications industry in Brazil.


 


“Articles of Association” means the articles of association of
the Company, as amended from time to time.


 


“Asset” or “Assets” mean all property, rights and other
assets held, leased or owned, beneficially or not, by any of the Wireless
Properties or New Acquisitions (as the case may be), and used in the operation
of their respective Wireless Businesses, including, without limitation, fixed
assets, chattels, office equipment, furniture, other office supplies, accounts
receivables, credits, early payments, cash and other short and long-term
assets, whether tangible or intangible.


 


“Balance Capital Contributions” means (a) those Interests held
by each of the PT Group and the TEF Group in the Wireless Properties and Global
Telecom (as specified in Exhibit IV to this Agreement) and not transferred to
the Company at the Initial Closing; and (b), when applicable, the corresponding
amount of cash referred to in Section 3.1.1(b) of this Agreement, to be
transferred to the Company by the Groups in accordance with Section 3 of this
Agreement, and “Balance Capital Contribution” means any one of them.


 


“Balance Closing” has the meaning set forth in Section 3.1.1(a)
of this Agreement.


 


“Board of Directors” means the managing board (“raad van bestuur”) of the Company from
time to time.


 


“Brazil” has the meaning set forth in the preamble of this
Agreement.


 


“Breach” has the meaning set forth in Section 8.1 of this
Agreement.


 


“Business Day” means a day other than a Saturday, Sunday or
statutory holiday in Sao Paulo, Rio de Janeiro, Madrid, Lisbon or Amsterdam.


 


“CADE” means the Conselho
Administrativo de Defesa Econômica.


 


“Call Right” has the meaning set forth in Section 1.6.1(a) of
this Agreement.


 


“Change of Control” means any event or a series of events the
result of which is that:


 


(a)        a
percentage of 15% (fifteen percent) or more in the total voting rights in (A)
Telefónica is directly or indirectly reached by another telecom operator which
is not acting in concert 


 


56





















 


with Portugal Telecom, or (B) Portugal
Telecom is directly or indirectly reached by another telecom operator which is
not acting in concert with Telefónica; or


 


(b)        (i)         a
corporate transaction is effected by any of Telefónica or Portugal Telecom
(each in this case a “Target”) by virtue of which a number of shares is
issued such that the voting share capital of such Target is at least doubled at
the time of the approval of  such
transaction; and


 


(ii)        as
a consequence of such transaction there is a change in the majority of the
board members of such Target; or


 


(c)        in
case of any member of a Group or any Affiliate of any of such members (other
than Telefónica and Portugal Telecom, but including TEM and PT Móveis) which
directly or indirectly owns an Interest in the Company, a majority of the
voting rights in any such Affiliate is directly or indirectly transferred to
another telecom operator, and there is a change of the majority of the members
of the respective board of directors.


 


“Closings” means the Initial Closing, the Balance Closing and
the Additional Closings, and “Closing” means any one of them.


 


“CNMV” means Comisión Nacional del Mercado de Valores of Spain.


 


“Company” has the meaning set forth in the preamble of this
Agreement.


 


“Company Growth Principles” means the principles set out in
Sections 1.2(a), 1.2(b) and 1.2(c) of the Shareholders Agreement.


 


“Company Shares” means all issued shares in the share capital of
the Company, whether or not of a specific class, and “Company Share”
means any one such share.


 


“Company Shares Exchange Ratio” has the meaning set forth in
Section 1.5(b)(v)(B) of this Agreement.


 


“Confidential Information” has the meaning set forth in Section
13.1 of this Agreement.


 


“Contributions” means the Initial Capital Contributions, the
Balance Capital Contributions and the Additional Capital Contributions and “Contribution”
means any one of them.


 


“Contribution Valuations” has the meaning set forth in Section
1.5(b)(v)(A) of this Agreement.


 


“Control”, “Controlled” or “Controlling” in
provisions other than those concerning “Change of Control”, means the
possession, directly or indirectly, of (i) at least 51% (fifty-one percent) of
the voting stock, and (ii) the power to direct or cause the direction of the
management and policies of, a Person or other entity whether by means of voting
rights, contracts or otherwise.


 


“Cost of Carrying” means:


 


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(a)        in respect of Section
3.1.2(i)(C) of this Agreement and Sections 6.2(b) and 6.3(a)(ii) of the
Shareholders Agreement, the financial cost, determined at the corresponding
Additional Closing, when applicable, that the Company would have paid to raise
financing to fund the value of the Contribution having caused the dilution, as
determined in the Contribution Valuation, under applicable market financial
terms and conditions, unsecured and without the support of any of the TEF Group
or the PT Group.  The Cost of Carrying
shall be calculated for the period from the date of the transfer to the Company
by the relevant Group of the Contribution that caused the dilution until the
Additional Closing removing such dilution;


 


(b)        in respect of Section
1.5(b)(v)(A) of this Agreement, the financial cost, determined at the
corresponding Additional Closing, that the Company would have paid to raise
financing to fund the value of the corresponding Interest in a New Acquisition,
as determined in the Finalised Initial Valuation, under applicable market
financial terms and conditions, unsecured and without the support of any of the
TEF Group or the PT Group.  The Cost of
Carrying shall be calculated for the period from the Acquisition Date until the
Additional Closing at which such Interest in a New Acquisition is transferred
to the Company; and


 


(c)        in respect of Section
6.4(h) of the Shareholders Agreement, the financial cost, determined at the
date of the sale and purchase of the relevant portion of the PT Group Company
Shares, that TEM would have paid to raise financing to fund the value of the
corresponding portion of the purchase price for the PT Group Company Shares.


 


“Covered Assets” means the PT Covered Assets and/or TEF Covered
Assets (as the case may be).


 


“CVM” means the Brazilian Comissão de Valores Mobiliários.


 


“Damages” or “Damage” mean, with respect to any Person,
any direct or indirect damage (including consequential damage), loss,
out-of-pocket expense, whether or not as a result of, or in relation to, a
third party claim, including, without limitation, all interest, penalties,
reasonable attorneys’ fees, all amounts paid or incurred in connection with any
action, demand, proceeding, investigation or claim by any third party
(including, without limitation, any Governmental Authority), Taxes, fines or
other losses as a result of, or in relation to, any Breach.


 


“Defaulting Group” has the meaning set forth in Section 7.3(a)
of this Agreement.


 


“Directors” mean the persons who are from time to time, in
accordance with the Shareholders Agreement, members of the Board of Directors
and “Director” means any one of them.


 


“Disclosing Party” has the meaning as set forth in Section 13.1
of this Agreement.


 


“ECB” means the European Central Bank.


 


“Euro” or “€” means the European lawful currency.


 


“Finalised Initial Valuations” has the meaning set forth in
Section 1.5(b)(ii) or Section 1.5(b)(iii) of this Agreement (as the case may
be).


 


58





















 


“Financing” has the meaning set forth in Section 6.7(a) of this
Agreement.


 


“Financing Party” has the meaning as set forth in Section 6.7(a)
of this Agreement.


 


“First Choice Investment Banks” and “First Choice Investment
Bank” have the meaning set forth in Section 1.4(a) of this Agreement.


 


“First Group List” has the meaning set forth in Section
1.4(b)(i) of this Agreement.


 


“Further Interest Acquisition Price” has the meaning as set
forth in Section 1.6.4(b) of this Agreement.


 


“Further Interest in Wireless Properties” means all new
Interests in Wireless Properties, which Interests do not form part, directly or
indirectly, of the Initial Capital Contributions or the Balance Capital
Contributions, and which are directly or indirectly acquired by any of the
Groups or by both Groups after the date hereof, (including, but not limited to,
any new shares issued in capital increases and shares acquired from third
parties), and “Further Interest in a Wireless Property” means any one of
them.


 


“Further Parties” means 
in respect of a Group, those wholly owned subsidiaries of such Group
which are used as intermediate holding companies for the transfer to the
Company of any Interest in any Wireless Property or New Acquisition as a
Contribution against an issuance of Company Shares to such wholly owned
subsidiaries, provided that such wholly owned subsidiaries execute this
Agreement and the Shareholders Agreement and “Further Party” means any
one of them.


 


“GAAP” has the meaning set forth in Section 1.6.2 of this
Agreement.


 


“General Share Premium Reserve” has the meaning set forth in
Section 1.1(c) of this Agreement.


 


“Global Telecom” means the New Acquisition Global Telecom, S.A.


 


“Global Telecom Interest” has the meaning set forth in Section
1.6.1(a) of this Agreement.


 


“Governmental Authority” means (a) the government of Brazil,
Spain, Portugal, the Netherlands, and any state, municipality or subdivision or
quasi-governmental authority of any of the same, including but not limited to
courts, tribunals, departments, commissions, boards, bureaux, agencies and
other instrumentalities; and (b) any foreign (as to Brazil) sovereign entity
and any political subdivision, quasi-governmental authority, or instrumentality
of any of the same.


 


“Groups” means the TEF Group and the PT Group and “Group”
means any one of them.


 


“GT Acquisition Agreement” has the meaning set forth in Section
5(a)(ii) of this Agreement, a copy of which agreement is attached to this
Agreement as Exhibit IX.


 


“IAS” has the meaning set forth in Section 1.6.2 of this
Agreement.


 


“Indemnitee” has the meaning set forth in Section 8.1 of this
Agreement.


 


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“Indemnitor” has the meaning set forth in Section 8.1 of this
Agreement.


 


“Independent Valuation” means an independent valuation of (i)
Interests in Wireless Properties, (ii) Interests in New Acquisitions, (iii) the
Company and/or (iv) other items, (as may be required in this Agreement or the
Shareholders Agreement), to be conducted by each of the First Choice Investment
Banks and, when applicable, the Third Investment Bank and to be prepared in the
form of an Initial Valuations report, Finalised Initial Valuations report,
Contribution Valuations report, and/or a report on the Company Shares Exchange
Ratio (as the case may be), and/or as otherwise may be required in the given
circumstances, such independent valuation to be conducted in accordance with
Sections 1.4 and 1.5 of this Agreement and by applying the Independent
Valuation Principles and such other guidelines and criteria set forth in
Exhibits I and II to this Agreement.


 


“Independent Valuation Notice” has the meaning set forth in
Section 1.4(b) of this Agreement.


 


“Independent Valuation Principles” means such valuation
techniques to be used by the Investment Banks and the Third Investment Bank in
performing the Independent Valuations, customary in transactions of this type,
including, without limitation (a) discounted cash flows, (b) publicly available
terms of transactions involving companies comparable to the business of the Parties
and the consideration paid in such transactions, and (c) to the extent publicly
available, multiples on comparable companies.


 


“Initial Capital Contributions” means the Interests held in
Wireless Properties and Global Telecom, to be agreed to by the Groups in terms
of Section 2.1(b) of this Agreement, to be transferred to the Company by each
of the Groups in accordance with Section 2 of this Agreement.


 


“Initial Closing” means the date on which the transfer to the
Company of Initial Capital Contributions is completed, as set forth in Section
2.1 of this Agreement.


 


“Initial Valuations” has the meaning set forth in Section
1.5(b)(i)(A) of this Agreement.


 


“Interest” means a direct or indirect (as the case may be)
ownership interest of the PT Group and/or the TEF Group (as the case may be) in
the equity securities, whether voting or non-voting, of the relevant Person.


 


“Investment Bank” means each of those reputable internationally
recognised investment banks, selected from time to time as First Choice Investment
Banks or as a Third Investment Bank in terms of Section 1.4 or Section 1.5 of
this Agreement (as the case may be), whose Mandate Letters remain effective.


 


“Joint Venture Agreement” has the meaning set forth in the
preamble of this Agreement.


 


“Knowledge” means, in respect of the relevant Person and the
relevant matter, the actual knowledge of such matter, or the actual knowledge
of such matter that would have been obtained by, such Person or any of its
executive officers, directors or individuals occupying corresponding positions,
after due inquiry as would cause a reasonably prudent person to make due
inquiry in


 


60





















 


respect of such matter and such reasonably prudent person would, after
such due inquiry, gain such knowledge about such matter.


 


“Lead Group” has the meaning set forth in Section 1.6.4(b) of
this Agreement.


 


“Liens” has the meaning set forth in Section 4.4 or Section 5.4
of this Agreement (as the case may be).


 


“Liquid Assets” means any equity security or bond or
interest-bearing security or any other security listed on an OECD stock
exchange or organized securities market to the extent that the foregoing is
expressly accepted, as to the eligibility of such securities as well as to the value
to be allocated thereto, by the Group other than the Group transferring the
relevant Contribution to the Company.


 


“Liquidation” has the meaning set forth in Section 4.3 of the
Shareholders Agreement.


 


“Mandate Letters” has the meaning set forth in Section 1.4(c) of
this Agreement and “Mandate Letter” means any one of them.


 


“Material Adverse Effect” means any adverse effect on the
business, financial condition, Assets, results of operations (other than
actions arising from each Party’s mere participation in the transactions
contemplated in this Agreement or the Shareholders Agreement, or actions taken
in accordance with this Agreement or the Shareholders Agreement) of each of the
(a) TEF Group, (b) PT Group, (c) Company, or (d) TEF Group, PT Group and Company,
taken as a whole, involving an amount or liability equal to or in excess of
€1,000,000 million (one million Euro).


 


“New Acquisition” means each legal Person which owns or
beneficially holds property, rights and other assets (including, but not limited
to, licenses, concessions or spectrum), that:


 


(a)        are primarily used in the
operation of a Wireless Business, and


 


(b)        do not qualify as a
Wireless Property,


 


which are (to be) acquired by either one or both of the Groups or by
the Company, including, without limitation, [***].


 


“Non-Defaulting Group” has the meaning set forth in Section
7.3(a) of this Agreement.


 


“Other Group” has the meaning set forth in Section 1.6.4(b) of
this Agreement.


 


“Parties” means TEM, Portugal Telecom, PT Móveis, the Company
and the Further Parties, and “Party” means any one of them.


 


“Penalty Shares” has the meaning set forth in Section 7.3(a) of
this Agreement.


 


“Permitted Transferee” means, in the case of a Group, any
Affiliate of said Group.


 


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“Person” means any individual, company, corporation,
partnership, joint venture, association, joint stock corporation, trust,
unincorporated organisation or Government Authority.


 


“Portugal” has the meaning set forth in the preamble of this
Agreement.


 


“Portugal Telecom” has the meaning set forth in the preamble of
this Agreement.


 


“Price Range” has the meaning set forth in Section 1.6.2(a) of
this Agreement.


 


“PT Covered Assets” means the companies set forth in Exhibit VII
to this Agreement and any of their respective subsidiaries from time to time.


 


“PT Group” means Portugal Telecom, PT Móveis, the Further
Parties in the PT Group and any Permitted Transferee in relation to any of the
former, if applicable, in accordance with Section 5.2 of the Shareholders
Agreement.


 


“PT Group Disclosure Schedule” means the disclosure schedules
attached to this Agreement as Exhibit VI.


 


“PT Group Financial Statements” has the meaning set forth in
Section 5.8 of this Agreement.


 


“PT Group Intellectual Property” has the meaning set forth in
Section 5.11 of this Agreement.


 


“PT Group Put” has the meaning set forth in Section 6.4 of the
Shareholders Agreement.


 


“PT Móveis” has the meaning set forth in the preamble of this
Agreement.


 


“PT Wireless Properties” means the current Interests in all the
Wireless Properties, directly or indirectly held by the PT Group and which are
listed in Exhibit IV to this Agreement, 
together with any Further Interest in a Wireless Property acquired by
the PT Group as set forth in Section 1.6.4 of this Agreement.


 


“Put” has the meaning set forth in Section 5.6 of the
Shareholders Agreement.


 


“Reais”, “Brazilian Reais” and “R$” mean the
lawful currency of Brazil from time to time.


 


“Receiving Party” has the meaning set forth in Section 13.2 of
this Agreement.


 


“Reduced Shareholder” has the meaning set forth in Section 6.1
of the Shareholders Agreement.


 


“Requesting Group” has the meaning set forth in Section 6.2(a)
of this Agreement.


 


“SCLV” means the Servicio de Compensación y Liquidación de
Valores, S.A.


 


“Second Group List” has the meaning set forth in Section
1.4(b)(ii) of this Agreement.


 


“Selected Wireless Properties” means (a) with respect to the TEF
Group, Tele Sudeste Celular Participações S.A. and its successors or assignees
of its business or any portion thereof, and (b)


 


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with respect to the PT Group, Telesp Celular Participações S.A. and its
successors or assignees of its business or any portion thereof.


 


“Shareholders” means TEM, Portugal Telecom, PT Móveis, the
Further Parties and any Permitted Transferee in relation to any of the former,
if applicable, in accordance with Section 5.2 of the Shareholders Agreement,
and “Shareholder” means any of them.


 


“Shareholders Agreement” has the meaning set forth in the
preamble of this Agreement.


 


“Spain” has the meaning set forth in the preamble of this
Agreement.


 


“Tax” or “Taxes” mean all taxes, levies, charges or fees,
including income, corporation, advance corporation, gross receipts, transfer,
excise, property, sales, use, value-added, license, payroll, pay-as-you-earn,
withholding, social security and franchise or other governmental taxes or
charges, imposed by the Netherlands, Brazil, Spain or Portugal, or any state, county,
local or foreign government, and such term shall include any interest,
penalties or additions to tax attributable to such taxes.


 


“Tax Returns” means any reports, returns or statements required
to be supplied to a taxing authority in connection with Taxes.


 


[***]


 


“TCP Shares” has the meaning set forth in Section 1.8 of this
Agreement.


 


“TEF Covered Assets” means the companies set forth in Exhibit
VIII to this Agreement and any of their respective subsidiaries from time to
time.


 


“TEF Group” means TEM, the Further Parties in the TEF Group and
any Permitted Transferee in relation to any of the former, if applicable, in
accordance with Section 5.2 of the Shareholders Agreement.


 


“TEF Group Disclosure Schedule” means the disclosure schedules
attached to this Agreement as Exhibit V.


 


“TEF Group Financial Statements” has the meaning set forth in
Section 4.8 of this Agreement.


 


“TEF Group Intellectual Property” has the meaning set forth in
Section 4.11 of this Agreement.


 


“TEF Wireless Properties” means all the current Interests in
Wireless Properties, directly or indirectly held by the TEF Group and which are
listed in Exhibit IV to this Subscription Agreement, together with (a) any
Further Interest in a Wireless Property acquired by the TEF Group as set forth
in Section 1.6.4 of this Agreement, and (b) the shares of Telesp Celular
Participações, S.A. that the TEF Group will acquire in accordance with Section
1.8 of this Agreement.


 


“Telefónica” means Telefónica S.A., a corporation duly
organized, existing and established in accordance with the laws of Spain, with
head offices at c/ Gran Via, 28, Madrid, Spain.


 


63





















 


[***]


 


“TEM” has the meaning set forth in the preamble of this
Agreement.


 


“Third Investment Bank” has the meaning set forth in Section
1.5(b)(iii) of this Agreement.


 


“Third Party” means any prospective purchaser or transferee
(other than a Shareholder or a Permitted Transferee) of Company Shares, or
pre-emptive rights to Company Shares, in a bona fide, arm ́s length transaction.


 


“Triggering Event” has the meaning in Section 7.3 of this
Agreement.


 


“US Dollars”, or “USD” mean the lawful currency of the
United States of America from time to time.


 


“Wireless Business” means wireless and mobile telephone operations
currently or hereafter conducted by any Person in Brazil.


 


“Wireless Properties” means the TEF Wireless Properties and the
PT Wireless Properties and “Wireless Property” means any one of them.


 


64





















 


IN WITNESS WHEREOF, the Parties have duly executed this Agreement in 10
counterparts as of the date first above written.


 


	
  SIGNED by [                                  ]

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED by [                                  ]

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED by [                                  ]

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  on behalf
  of:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  TELEFÓNICA MÓVILES, S.A.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED by [                                  ]

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  on behalf
  of:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  PORTUGAL TELECOM, SGPS, S.A.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED by [                                  ]

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  on behalf
  of:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  PT MÓVEIS, SGPS, S.A.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED by [                                  ]

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  on behalf
  of:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BRASILCEL B.V.

  	
   

  	
   

  



 


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