Exhibit 4.3


 


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.


 


 


SHAREHOLDERS AGREEMENT


 


Dated as of October 17, 2002


 


Amended as noted for the purposes of this filing as of
December 3, 2004


 


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.


 





















 


TABLE OF CONTENTS


 


	
  SECTION 1.

  	
  SHARE CAPITAL
  AND BUSINESS OF THE COMPANY

  	
   

  
	
  1.1

  	
  Share Capital
  and General Share Premium Reserve

  	
   

  
	
  1.2

  	
  Company Growth Principles

  	
   

  
	
  1.3

  	
  Scope of
  Business of the Company; Synergies

  	
   

  
	
  1.4

  	
  Actions Relating to
  Company Shares

  	
   

  
	
  1.5

  	
  Exercise of Voting Rights

  	
   

  
	
  SECTION 2.

  	
  BOARD OF DIRECTORS

  	
   

  
	
  2.1

  	
  Governance Principles

  	
   

  
	
  2.2

  	
  Composition of
  the Board of Directors

  	
   

  
	
  2.3

  	
  The
  Chairman and the Vice-Chairman of the Board of Directors

  	
   

  
	
  2.4

  	
  Meetings of the
  Board of Directors

  	
   

  
	
  2.5

  	
  Place of the
  Board of Directors’ Meetings

  	
   

  
	
  2.6

  	
  Board of Directors
  Decisions

  	
   

  
	
  2.7

  	
  Secretary
  and Minutes of the Board of Directors

  	
   

  
	
  2.8

  	
  Officers

  	
   

  
	
  2.9

  	
  Performance of the Officers

  	
   

  
	
  2.10

  	
  Meetings of the Officers

  	
   

  
	
  2.11

  	
  Subsidiary Governance

  	
   

  
	
  2.12

  	
  Effects
  of Dilution on the Provisions of this Section 2

  	
   

  
	
  2.13

  	
  Representation of the
  Company

  	
   

  
	
  SECTION 3.

  	
  SHAREHOLDERS MEETINGS
  AND RIGHTS

  	
   

  
	
  3.1

  	
  Shareholders Meetings

  	
   

  
	
  3.2

  	
  Call Procedure

  	
   

  
	
  3.3

  	
  Chairing of
  Shareholders Meetings

  	
   

  
	
  3.4

  	
  Shareholder Decisions

  	
   

  
	
  3.5

  	
  Effects
  of Dilution on the Provisions of this Section 3

  	
   

  
	
  SECTION 4.

  	
  CELLULAR
  CHAIRMEN DEADLOCKS, WISE PERSONS PROCEDURE AND LIQUIDATION

  	
   

  
	
  4.1

  	
  Cellular Chairmen Deadlocks

  	
   

  
	
  4.2

  	
  Wise Persons Procedure

  	
   

  
	
  4.3

  	
  Liquidation of the Company

  	
   

  
	
  SECTION 5.

  	
  TRANSFER OF COMPANY SHARES

  	
   

  
	
  5.1

  	
  Transfer

  	
   

  
	
  5.2

  	
  Permitted
  Transferees; Transfers in the Context of Consolidation

  	
   

  
	
  5.3

  	
  Indirect Transfers

  	
   

  
	
  5.4

  	
  Right of First Refusal

  	
   

  
	
  5.5

  	
  Tag-Along Right

  	
   

  
	
  5.6

  	
  Conditional Put

  	
   

  
	
  5.7

  	
  Pre-emptive Rights

  	
   

  
	
  5.8

  	
  Tax Efficiency

  	
   

  
	
  5.9

  	
  Encumbrance of Company
  Shares

  	
   

  
	
  5.10

  	
  Transfer
  Restriction in Articles of Association, Exercise of Voting Rights

  	
   

  



 


2





















 


	
  SECTION 6.

  	
  DILUTION

  	
   

  
	
  6.1

  	
  Dilution

  	
   

  
	
  6.2

  	
  Diluted Interest
  Between 50% and 40%

  	
   

  
	
  6.3

  	
  Diluted Interest Below 40%

  	
   

  
	
  6.4

  	
  PT Group Put

  	
   

  
	
  6.5

  	
  Governance and Dilution in
  the Event of Listing

  	
   

  
	
  6.6

  	
  Listing of Holding
  Companies

  	
   

  
	
  SECTION 7.

  	
  FINANCIAL POLICIES

  	
   

  
	
  7.1

  	
  Financial Policies

  	
   

  
	
  7.2

  	
  Business Plan and
  Financing of the Company

  	
   

  
	
  7.3

  	
  GAAP

  	
   

  
	
  7.4

  	
  Annual Budget

  	
   

  
	
  7.5

  	
  Books of Account

  	
   

  
	
  7.6

  	
  Reasonable Access

  	
   

  
	
  7.7

  	
  Management Fees

  	
   

  
	
  7.8

  	
  Financial Services

  	
   

  
	
  SECTION 8.

  	
  NON-COMPETITION AND BUSINESS OPPORTUNITIES

  	
   

  
	
  8.1

  	
  Non-compete

  	
   

  
	
  8.2

  	
  Wireless Business
  Opportunities

  	
   

  
	
  SECTION 9.

  	
  INTERESTS IN NEW ACQUISITIONS AND FURTHER
  INTERESTS IN WIRELESS PROPERTIES

  	
   

  
	
  9.1

  	
  Acquisition of Interests
  in New Acquisitions and Further Interests

  	
   

  
	
  SECTION 10.

  	
  CONFIDENTIALITY

  	
   

  
	
  10.1

  	
  Confidential
  Information

  	
   

  
	
  10.2

  	
  Use and Disclosure

  	
   

  
	
  10.3

  	
  Duties of the Receiving
  Party

  	
   

  
	
  10.4

  	
  Exclusions

  	
   

  
	
  SECTION 11.

  	
  TERMINATION

  	
   

  
	
  11.1

  	
  Termination

  	
   

  
	
  11.2

  	
  Survival of Obligations
  and Liabilities

  	
   

  
	
  SECTION 12.

  	
  COVENANTS, REPRESENTATIONS AND WARRANTIES,
  REGISTRATION

  	
   

  
	
  12.1

  	
  Covenants,
  Representations and Warranties of the Shareholders and the Company

  	
   

  
	
  12.2

  	
  Survival of Covenants,
  Representations and Warranties

  	
   

  
	
  12.3

  	
  Shareholders’ Register

  	
   

  
	
  12.4

  	
  Consent by the Company

  	
   

  
	
  SECTION 13.

  	
  GOVERNING LAW AND SETTLEMENT OF DISPUTES

  	
   

  
	
  13.1

  	
  Governing Law

  	
   

  
	
  13.2

  	
  Arbitration

  	
   

  
	
  SECTION 14.

  	
  COMMUNICATIONS

  	
   

  
	
  14.1

  	
  Communications

  	
   

  



 


3





















 


	
  SECTION 15.

  	
  MISCELLANEOUS PROVISIONS

  	
   

  
	
  15.1

  	
  Entire Agreement

  	
   

  
	
  15.2

  	
  Modification and
  Amendment; Indexation

  	
   

  
	
  15.3

  	
  Waiver

  	
   

  
	
  15.4

  	
  Survival of Provisions

  	
   

  
	
  15.5

  	
  Exclusive Benefit of the
  Parties and the Company

  	
   

  
	
  15.6

  	
  Bona Fide

  	
   

  
	
  15.7

  	
  Penalty and Delay
  Interest

  	
   

  
	
  15.8

  	
  Counterparts

  	
   

  
	
  15.9

  	
  Language

  	
   

  
	
  15.10

  	
  Period of Time

  	
   

  
	
  15.11

  	
  General
  Interpretation

  	
   

  
	
  15.12

  	
  No Partnership

  	
   

  
	
  15.13

  	
  Severability

  	
   

  
	
  15.14

  	
  Taxes and Expenses

  	
   

  
	
  15.15

  	
  IPO

  	
   

  
	
  15.16

  	
  Public Announcements

  	
   

  
	
  15.17

  	
  Joint and Several

  	
   

  
	
  SECTION 16.

  	
  DEFINITIONS

  	
   

  
	
  16.1

  	
  Definitions

  	
   

  



 


4





















 


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


 


 


TELEFÓNICA
MÓVILES, S.A., a corporation duly organized, 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 organized, 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 organized, 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 company with limited liability duly
organized, existing and established in accordance with the laws of the
Netherlands, with corporate seat at Strawinskylaan 3105 (1077 ZX), Amsterdam,
the Netherlands, represented herein in accordance with its articles of
association (the “Company”).


 


5





















 


Capitalized terms used
herein shall have the meaning ascribed to them in Section 16 hereto,
elsewhere in this Agreement or in the Subscription Agreement (as defined
below).  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 Subscription 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 Subscription Agreement, the termination of the
latter agreement shall not affect such definition.


 


RECITALS


 


(A)          WHEREAS,
Portugal Telecom, PT Móveis and TEM, among others, in accordance with the terms
of a certain Joint Venture Agreement dated January 23, 2001 (the “Joint Venture Agreement”), entered into
a certain Subscription Agreement dated the date hereof (the “Subscription Agreement”), and agreed to
use the Company and to subscribe for all of the Company Shares with all of
their properties now or hereafter used in connection with the operation of the
Wireless Business, including the Interest in Wireless Properties and the Global
Telecom Interest listed in Exhibit I hereto as well as any Interest in New
Acquisitions and any Further Interest in Wireless Properties plus, when
applicable, cash and other Liquid Assets, as set forth in the Subscription
Agreement;


 


(B)           WHEREAS,
the Parties desire to promote their mutual interest by agreeing to certain
matters, among others, relating to the operation and management of the Company
and the disposition of the Company Shares;


 


(C)           WHEREAS,
the Parties commit to comply and to cause the Company to comply with this
Agreement;


 


(D)          NOW,
THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the Parties do hereby agree as follows:


 


SECTION 1.         SHARE CAPITAL AND BUSINESS OF
THE COMPANY


 


1.1          Share Capital and
General Share Premium Reserve


 


(a)           The
issued share capital of the Company, in the amount of Euro 18,000 (eighteen
thousand) on the date hereof, consists of 18,000 (eighteen thousand) Company
Shares, with a nominal value of Euro 1 (one Euro) each, divided between the
Shareholders in the proportion of 50% (fifty percent) to each Group as follows:


 


	
  (i)

  	
  TEM:

  	
  9000 (nine thousand) Company Shares;

  
	
   

  	
   

  	
   

  
	
  (ii)

  	
  PT Móveis:

  	
  8999 (eight thousand nine hundred ninety nine)

  
	
   

  	
   

  	
  Company Shares; and

  
	
   

  	
   

  	
   

  
	
  (iii)

  	
  Portugal Telecom:

  	
  1 (one) Company Share.

  
				



 


6





















 


(b)           The
Shareholders 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”).


 


(c)           The
Shareholders undertake to take all necessary actions to transform the corporate
nature of the Company from a private company with limited liability (besloten vennootschap) into a limited
liability company (naamloze vennootschap)
under the laws of the Netherlands.  The
Shareholders 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 this
Agreement.


 


(d)           As
between the Shareholders, the provisions of this Agreement and the Subscription
Agreement take precedence over any provision of the Articles of Association to
the extent such provision conflicts with this Agreement or the Subscription
Agreement.


 


1.2          Company Growth
Principles


 


(a)           The
Shareholders agree that the Company shall be the vehicle used for the
development of all the Wireless Business of the Groups in Brazil.  Consequently, the Shareholders undertake to
contribute or to procure that the relevant members of their respective Group
transfer to the Company, and to procure that the Company acquires, their
Wireless Properties and any Interest in a New Acquisition acquired directly by
either Group, on the terms and conditions set forth in this Agreement and in
the Subscription Agreement.


 


(b)           The
Shareholders also agree:


 


(X)          not
to prevent the Company from acquiring or developing, as the case may be, any
new Wireless Business, proposed by any or both Groups, provided that the
acquisition or development of the new business meets some of the following
criteria:


 


(i)            expands
footprint in Brazil;


 


(ii)           enhances
the Company’s market share or subscriber base;


 


(iii)          allows
for an increase in marketing, technological or operational efficiency;


 


(iv)          enhances
the platform for growth and profitability;


 


(v)           allows
for leveraging on management skills and know-how; or


 


(vi)          provides
a smooth transition to new products and services;


 


7





















 


provided that
all the new business to be acquired or developed, as the case may be, must
enhance shareholder value as demonstrated by an independent analysis from time
to time; and


 


(Y)           that:


 


(i)            [***];
and


 


(ii)           additional
spectrum and licenses, provided that spectrum and licenses enhance
shareholders value as demonstrated by an independent analysis, are within the
Company Growth Principles.


 


(c)           The
Shareholders also agree that the Company’s investments will be funded in
accordance with Section 7 hereto.


 


1.3          Scope of Business of
the Company; Synergies


 


(a)           The
Shareholders confirm their 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.


 


(b)           The
Shareholders also agree that one of the main objectives of the joint venture is
to achieve synergies by working together for the development of the Wireless
Business of the Company (the “Synergies”).


 


(c)           In
this connection, the Shareholders agree that as long [***] holds directly or
indirectly [***] in cellular and wireless operators [***], the Shareholders
shall procure to [***] in the management of the Company of all potential [***]
for those cellular and wireless operators as well as for [***] Brazil, provided
that [***] to the Company as a result of such actions.  The proposed [***] shall be submitted by
either Group (the “Proposing Party”): (i) to the management team of the
Company through its CEO, which management team shall analyse the matter; or
(ii) directly to the Board of Directors. 
In the event that the management team of the Company or the Board of
Directors determines that the proposal requires further analysis, the cost of
preparing such additional analysis shall fall upon the Proposing Party.  In the event that the matter is submitted
first to the management team of the Company and, within thirty (30) days
following the proposal of the Proposing Party, such management team fails to
consider or rejects such proposal, the Proposing Party shall have the right to
submit the proposal (together with such additional analysis considered relevant
in order to demonstrate [***] to the Company) to the Board of Directors for
final decision by [***].  In the event
that, pursuant to the foregoing, a manager authorised to represent the Company
approves the proposal or the Board of Directors approves the proposal, the
Shareholders shall use reasonable efforts [***] by the Company (and relevant
Subsidiaries), provided that, in such event, the Proposing Party shall
[***] that may [***] to the Company (or any such Subsidiaries) as a result of
[***].


 


8





















 


(d)           The
identification and use of the most appropriate brand will be made by mutual
agreement between TEM and PT Móveis and may be used by the TEF Group or the PT
Group anywhere.  The Parties agree that
in the event of [***], the brand thus identified to be used by the Company will
be [***] (or of the [***] they may agree); but [***].


 


1.4          Actions Relating to
Company Shares


 


Each Shareholder agrees
and shall procure that all actions taken by it in relation to any Company
Shares now or hereafter owned by it (or any of its Affiliates) shall be subject
to and taken in accordance with the terms of this Agreement.


 


1.5          Exercise of Voting
Rights


 


Each Shareholder agrees
to exercise its voting rights on the Company Shares in such a manner as to
allow the other Shareholders to exercise their rights and perform their
obligations under this Agreement and the Subscription Agreement.  The Shareholders in the PT Group shall always
exercise their voting rights on the Company Shares unanimously and the
Shareholders in the TEF Group shall always exercise their voting rights on the
Company Shares unanimously.  Wherever
this Agreement or the Subscription Agreement contains a provision placing an obligation
on a Group, the Shareholders which are members of such Group shall be obliged
to procure the performance of such obligation.


 


SECTION 2.         BOARD OF DIRECTORS


 


2.1          Governance Principles


 


(a)           The
Shareholders agree that, subject to applicable laws, the Articles of
Association and this Agreement, the Board of Directors shall be responsible for
the management of the Company.  The
Shareholders further agree that the Company and the Wireless Business of the
Company shall be managed in the spirit of a 50 - 50 (fifty - fifty) joint
venture, subject to the exceptions set forth in this Agreement with respect to
the dilution below certain levels of each Group’s Interest in the total issued
and outstanding share capital of the Company. 
The Shareholders agree that the management of the Company shall be
professional, oriented to obtaining results and excellence in the performance
of the Company’s activities and in compliance with the Company Growth
Principles.


 


(b)           (i)            Each
Shareholder agrees not to (nominate to) appoint any individual or entity which
may directly or indirectly be related to, employed or retained by another
telecommunications operator or any Person who directly or indirectly competes
with the Company and the Subsidiaries in Brazil (a “Conflicted Person”)
as its representatives for the Shareholders Meeting, in the Board of Directors
or in the board of directors of any of the Subsidiaries, or to any managerial
or official position in the Company or in any of the Subsidiaries, or to any
other business relationship with the Company or any of the Subsidiaries.


 


(ii)           The
restriction as set forth in Section 2.1(b)(i) above, agreed upon for the
benefit of the other Group, will not apply if the other Group has consented in
writing to


 


9





















 


the Person that would qualify as Conflicted Person
being involved in the management of, or having access to information
concerning, the Company or the Subsidiaries.


 


(iii)          Prior
to the (nomination for) appointment of each individual or entity to a position
referred to in Section 2.1(b)(i) above, the relevant Group shall provide
the other Group with such details of the individual or entity as are reasonably
necessary to enable the latter Group to determine whether the individual or entity
is, in its reasonable judgement, a Conflicted Person.  Unless, within 15 (fifteen) days of receipt
by the latter Group of such details, said Group objects to the appointment of
the individual or entity on the grounds that same is a Conflicted Person, the
relevant Group may proceed with the (nomination for) appointment of such
individual or entity to the aforementioned position.


 


(iv)          Notwithstanding
Section 2.1(b)(iii) above, in the event that in the reasonable judgement
of a Group, any individual or entity appointed (pursuant to the nomination) by
the other Group falls within the definition of a Conflicted Person and
therefore is subject to the restriction set forth in this Section 2.1(b)(i),
such other Group shall immediately thereafter use its best efforts to procure
that the restrictions are observed, that the Conflicted Person is removed from
any position or function being performed and that any other measure is
implemented by such other Group and the Company that might be appropriate to
prevent access to the Confidential Information by the Conflicted Person.


 


2.2          Composition of the
Board of Directors


 


(a)           The
Company shall have a Board of Directors composed of 12 (twelve) members each
Director having a term in office of 3 (three) years, re-election being
permitted.  Subject to the provisions of
Sections 2.12 and 6 hereto, each of the TEF Group and the PT Group shall have
the right to make binding nominations to appoint 6 (six) Directors, provided
that at least 3 (three) of each such 6 (six) Directors shall be required to
be resident in the Netherlands.


 


(b)           Each
of the Shareholders agrees to exercise its voting rights in the relevant
Shareholders Meeting to appoint the Directors nominated by each of the TEF
Group and the PT Group in terms of Section 2.2(a) above.  In the event of a vacancy in the Board of
Directors (including, without limitation, as a result of removal), the
replacement member shall be nominated by binding nomination of the Shareholder’s
Group which nominated the Director being replaced, for the period left to
complete the relevant term in office.  A
Shareholder may require the suspension, removal or replacement of a Director
nominated by that Shareholder’s Group at any time and for any reason.  Each Shareholder in a Group shall have the
right to require the suspension or removal of a Director nominated by the
Shareholders in the other Group, provided that this is for Just
Cause.  The Shareholder requesting the
replacement of a Director shall deliver a notice to the other Shareholders which
shall contain the request to replace the relevant Director and in the event
that such Director was nominated by the other Group a description of the
relevant Just Cause.  Provided that
the Just Cause as stated in such notice is accepted by the other


 


10





















 


Shareholders, a Shareholders
Meeting shall be held within 30 (thirty) days of the receipt of such notice to
replace the relevant Director.  Subject
to the mandatory provisions of any applicable law, and more particularly
Netherlands employment law, each of the TEF Group, the PT Group and the
Company, as the case may be, shall procure that the terms and conditions upon
which Directors are appointed in terms of the provisions of this Section 2.2,
shall be such that the Directors will not have the right to indemnification in
the event of suspension or removal from their duty as Directors.


 


2.3          The Chairman and the
Vice-Chairman of the Board of Directors


 


(a)           The
Board of Directors shall have a Chairman (the “Chairman”) and a Vice-Chairman (the “Vice-Chairman”).  The TEF Group shall designate by binding
nomination the Chairman and the PT Group shall designate by binding nomination
the Vice-Chairman.  The Chairman and the
Vice-Chairman shall be selected among the Directors then in office, for a term
of 3 (three) years (or, if shorter, the selected Director’s remaining term in
office as Director), re-election being permitted.  The first election of the Chairman and
Vice-Chairman shall take place at the first meeting of the Board of Directors
after its election at a Shareholders Meeting, and such Board of Directors
meeting shall occur as soon as practicable after the date of the Shareholders
Meeting that so elected the Board of Directors.


 


(b)           Without
prejudice to other matters provided for under Netherlands law, or in the
Articles of Association, or expressly established by the Shareholders, or this
Agreement, the Chairman shall have the following powers and duties:


 


(i)            to
call the Shareholders Meetings and the Board of Directors meetings whenever
deemed necessary or at the binding request of any Director and to prepare the
list of matters to be discussed at such meetings, which list shall also include
such matters as may be proposed by a Director;


 


(ii)           to
ensure that the decisions taken at the Shareholders Meetings and at the Board
of Directors meetings are properly implemented; and


 


(iii)          to
chair the Shareholders Meetings and the Board of Directors meetings.


 


(c)           In
the absence of the Chairman, the Vice-Chairman shall succeed the Chairman with
regard to the performance of the powers and duties of the Chairman as
established herein.


 


(d)           In
the event of a vacancy in the position of Chairman or Vice-Chairman (including,
without limitation, as a result of removal), the replacement member shall be
nominated among the Directors by binding nomination of the Group which
nominated the Chairman or the Vice-Chairman (as the case may be) such
replacement member being replaced for the period left to complete the relevant
term in office.  A Group may require the
suspension, removal or replacement of the Chairman or Vice-Chairman nominated
by that Group at any time and for any reason by delivering written notice
thereof to the other Group.


 


11





















 


(e)           Neither
the Chairman nor the Vice-Chairman shall have a casting vote in the event of a
tie vote at a meeting of the Board of Directors.


 


2.4          Meetings of the Board
of Directors


 


(a)           The
Board of Directors shall hold meetings on a regular basis, but at least once
every quarter and, on an extraordinary basis, whenever called by the Chairman
in accordance with Section 2.3(b)(i) above.  The quorum for a meeting of the Board of
Directors shall be 7 (seven) Directors. 
Directors shall participate at Board of Directors meetings (i) in
person, provided that an absent Director may be represented at any such
meeting by proxy granted by the absent Director to any other Director who was
appointed pursuant to a binding nomination of the Group which nominated the
absent Director, or (ii) by conference call or video conference, provided
that each participant has the ability to hear and speak to each other
participant.


 


(b)           Unless
all of the Directors are present, or those absent have expressly waived notice,
no meeting of the Board of Directors shall be validly convened unless at least
3 (three) Business Days prior written notice thereof, specifying the matters to
be discussed at the meeting, shall have been given to all of the Directors.  Notice of such meetings may be given by
letter sent by fax or by e-mail.


 


2.5          Place of the Board of
Directors’ Meetings


 


Meetings of the Board of
Directors shall be held at the registered office of the Company in the
Netherlands, or at such other place as agreed among its members.


 


2.6          Board of Directors
Decisions


 


(a)           The
Board of Directors shall decide on those matters as provided by applicable law,
or expressly provided for in the Articles of Association, or expressly
determined by the Shareholders from time to time.  Any resolution of, or proposal to the
Shareholders Meeting by the Board of Directors, shall require the affirmative
vote of a simple majority of Directors present or represented at the relevant
Board of Directors meeting, provided that:


 


(X)          (i)            for
as long as the PT Group and the TEF Group each hold an Interest of at least 40%
(forty percent) in the Company’s total issued and outstanding share capital
(except if such decrease in the participation in the Company derives from a
Transfer of Company Shares) and


 


(ii)           in the
case where a Group’s Interest is diluted to less than 40% (forty percent) due
to a capital increase by the Company, during the 6 (six) month period following
the occurrence of the relevant Dilution Event Below 40% (forty percent)
(subject to Section 2.6(c) below),


 


the affirmative vote shall be required of at least one Director
nominated by each of the PT Group and TEF Group;


 


12





















 


(Y)           subject
to Section 2.6(a)(Z) below, the following matters shall require the
affirmative vote of at least 7 (seven) Directors:


 


(i)            a
proposal to the Shareholders Meeting to adopt a Shareholders’ resolution for
the issuance of Company Shares and the determination of the conditions of such
issuance, including price, type and class of the shares to be issued;


 


(ii)           a
proposal to the Shareholders Meeting to adopt a Shareholders’ resolution for
the reduction of the Company’s share capital or for the reorganisation, merger,
de-merger or consolidation of the Company and/or any of the Subsidiaries (where
applicable, such proposal to also address the appointment of the COO of the
surviving entity or entities (as the case may be), as well as appropriate
adjustments to be made to the division of assets on Liquidation in terms of Section 4.3
below and the exercise of the Put in the case of a Change of Control pursuant
to Section 5.6 below);


 


(iii)          a
proposal to the Shareholders Meeting to adopt a Shareholders’ resolution for
the amendment of the Articles of Association or for a change in the corporate
nature of the Company;


 


(iv)          any
important decision about branding and technology, as adopted by the Company and
the Subsidiaries;


 


(v)           without
detracting from Sections 2.8 and 2.9 below, any appointment, amendment to the
terms of appointment of or proxies granted to, suspension or removal of the
secretary to the Board of Directors, any Officers or other members of senior
management of the Company or any of the Subsidiaries;


 


(vi)          a
proposal to the Shareholders Meeting to adopt a Shareholders’ resolution for
adoption of the consolidated annual accounts of the Company and its
Subsidiaries;


 


(vii)         a
proposal to the Shareholders Meeting to adopt a Shareholders’ resolution for
the dissolution or liquidation of the Company, other than as set forth in Section 4
below;


 


(viii)        the
acquisition or disposal by the Company, of any material assets, including,
without limitation, any Interest in a Subsidiary or a New Acquisition which is
not a Subsidiary, without detracting from the applicable provisions under the
Subscription Agreement;


 


(ix)           a
proposal to the Shareholders Meeting to adopt a Shareholders’ resolution for
the declaration and/or payment of dividends or other distributions by the
Company;


 


13





















 


(x)            adoption
or amendment of the annual Business Plan and the Annual Budget;


 


(xi)           any
increase or decrease with respect to the borrowing of amounts set forth in the
annual Business Plan, the execution of any amendment to any loans or other
borrowing facilities of the Company, and the creation of any security interest
on the current and/or future assets of the Company or the granting of any
guarantees to any Person whatsoever; and


 


(xii)          any
instruction to the Company’s legal representatives as to how to exercise the
Company’s voting rights at the shareholders meetings and meetings of the board
of directors of each Subsidiary (and any other similar corporate bodies
thereof), as necessary to procure compliance with the aforementioned items; and


 


(Z)           for
as long as the PT Group and the TEF Group each hold an Interest of at least 10%
(ten percent) in the Company’s total issued and outstanding share capital
(except if such decrease in the participation in the Company derives from a
Transfer of Company Shares):


 


(i)            the
acquisition by the Company of any Interest in an entity which is not a Wireless
Business shall require the affirmative vote of at least 1 (one) Director
nominated by each of the PT Group and the TEF Group;


 


(ii)           the
execution of any related party agreement between the Company and either of the
Groups shall require the approval by an internal audit committee to be created
by the Board of Directors, provided that such approval shall not be
denied, or withheld in the event that the relevant related party agreement is
on arms-length terms and conditions; or


 


(iii)          the
proposal to the Shareholders Meeting to adopt a Shareholders’ resolution for
any change in the purpose or scope of business of the Company shall require the
affirmative vote of at least one Director nominated by each of the PT Group and
the TEF Group,


 


provided that
the PT Group shall have no rights under this Section 2.6(a)(Z) during the
period commencing on the date on which the PT Group is diluted to holding an
Interest of less than 40% (forty percent) in the Company’s total issued and
outstanding share capital and ending on the date on which the PT Group Put is
no longer exercisable with respect to such Dilution Event Below 40% (forty
percent).


 


(b)           With
respect to matters contemplated in Section 2.6(a) above, it is expressly
agreed by the Shareholders that they shall procure that the Board of Directors
and the Shareholders Meeting shall affirmatively vote on such matters so as to
permit (i) the Company to achieve the Company Growth Principles (provided
that, if the Directors nominated by a Group vote on a bona fide basis
against the acquisition of an Interest in a New Acquisition and, subsequent
thereto, in terms of an arbitration decision pursuant to


 


14





















 


Section 10 of the
Subscription Agreement, it is determined that said acquisition is within the
Company Growth Principles, no penalty (as referred to in Section 15.7
below) shall attach to the relevant Group or the Directors who voted against the
acquisition, provided further that said Group shall, and shall procure
that the Directors nominated by it shall, following the arbitration decision,
vote in favour of the transfer to the Company of the relevant Interest in the
relevant New Acquisition, if applicable, (ii) a Group to increase its Interest
in the Company’s total issued and outstanding share capital pursuant to Section 6.1,
6.2, and 6.3 below, and (iii) each Shareholder to exercise its rights and
perform its obligations set out in this Agreement.


 


(c)           Without
detracting from the provisions set forth in Sections 6.1, 6.2 and 6.3 below,
the non-diluted Group may in its sole discretion decide to grant an additional
period to the diluted Group during which such diluted Group may maintain its corporate
governance rights in accordance with this Section 2.


 


2.7          Secretary and Minutes
of the Board of Directors


 


The secretary to the
Board of Directors shall be nominated and appointed by the Board of Directors
and shall keep minutes of all matters discussed and actions taken at any Board
of Directors meeting.  Such minutes shall
be distributed to all the Directors by such secretary within the 10 (ten)
Business Days following each Board of Directors meeting unless agreed otherwise
by the Board of Directors from time to time. 
The minutes shall be signed for approval by the Chairman, Vice-Chairman
and the secretary to the Board of Directors. 
The secretary to the Board of Directors shall not be a Director of the
Company and may or may not be an employee of the Company.


 


2.8          Officers


 


(a)           Without
detracting from Section 2.1 above, the Company shall be represented on a
day to day basis by the Officers in accordance with Section 2.9, which
shall include, at least: (i) a Chief Executive Officer (“CEO”); (ii) a Chief Financial
Officer (“CFO”), (iii) 1 (one) Chief
Operating Officer (“COO”) for
each of the Subsidiaries, and (iv) the general counsel of the Company, who
shall be responsible for all legal matters relating to the Wireless Properties
and New Acquisitions and will be nominated and appointed by the Board of
Directors, it being agreed that Mr. Francisco Padinha shall be the first CEO,
Mr. Fernando Abella shall be the first CFO and Mr. Evandro P. Kruel shall
be the first general counsel of the Company. 
The Officers shall not be Directors of the Company and may or may not be
employees of the Company.  The
Shareholders agree that, for the positions of Officers, there shall be
necessarily appointed recognized professionals with a background and experience
suitable to their duties and, whenever applicable, with proven
technical/managerial skills.


 


(b)           The
CEO shall be appointed by the Board of Directors upon the binding nomination of
the PT Group and shall report to the Board of Directors.  The CFO shall be appointed by the Board of
Directors upon the binding nomination of the TEF Group and shall report to the
Board of Directors.


 


15





















 


(c)           (i)            Each
of the COO’s of each Subsidiary (other than Subsidiaries which have not been
contributed by one or both of the Groups), shall be appointed as an Officer by
the Board of Directors upon the binding nomination of the Group transferring
the Contribution to the Company or, if the Contribution is transferred to the
Company by both Groups, by the Group which controlled such Subsidiary (being
the Group holding the highest voting Interest in the Subsidiary at the time of
transfer to the Company of the Contribution, or, if both Group’s have the same
voting Interest, the Group which first acquired an Interest in the Subsidiary),
the Company and the Groups undertaking to procure that such nominated person be
appointed as COO of the relevant Subsidiary. 
The COO’s shall report to the CEO.


 


(ii)           The
COO’s (and their replacement from time to time) of each Subsidiary which has
not been contributed by one or both of the Groups, shall be nominated and
appointed by the Board of Directors.


 


(d)           Each
of the TEF Group and the PT Group may require the suspension or removal of an
Officer nominated by that Group at any time and for any reason by delivering
written notice thereof to the Company and the other Group, provided that
each first COO appointed pursuant to Section 2.8(c)(i) shall not, within
the first 12 (twelve) months from the date on which the respective Contribution
is transferred to the Company, be removed by the Group that nominated it
without Just Cause.


 


(e)           The
CEO, the CFO and each COO appointed pursuant to Section 2.8(c)(i), shall
be suspended or removed upon the request of the Group that did not nominate it
only if a Just Cause occurs.


 


(f)            In
the event of a vacancy in the position of CEO, the replacement CEO shall be
appointed by the Board of Directors upon the binding nomination of the PT
Group.  In the event of a vacancy in the
position of CFO, the replacement CFO shall be appointed by the Board of
Directors upon the binding nomination of the TEF Group.  In the event of a vacancy in the position of
a COO, the replacement COO shall be appointed by the Board of Directors upon
the binding nomination of the relevant Group referred to in Section 2.8(c)(i)
above.  In the event of a vacancy in the
position of any other Officer, the replacement Officer shall be nominated and
appointed by the Board of Directors.


 


(g)           Each
of the TEF Group and the PT Group shall procure that each Director appointed
pursuant to its binding nomination shall exercise its voting rights in the
relevant Board of Directors meeting to allow each Group to exercise its rights
under this Agreement.


 


2.9          Performance of the Officers


 


The Officers shall be
vested with the powers of management and representation of the Company as set
forth by the Board of Directors in written proxies to be deposited with the
relevant trade registry.  The Board of Directors
shall procure that such powers shall be exercised in accordance with said
powers of attorney, the provisions of this Agreement, the provisions of


 


16





















 


the Subscription
Agreement, the resolutions of the Shareholders Meetings and of the Board of
Directors meetings, the Business Plan, the Articles of Association and
applicable law.


 


2.10        Meetings of the
Officers


 


The Officers shall hold
meetings, on a regular basis, but at least once every 30 (thirty) days, and, on
an extraordinary basis, whenever called by any of the Officers, it being
incumbent upon the CEO to establish the agenda for such meetings.


 


2.11        Subsidiary Governance


 


(a)           The
Company shall procure that, at any shareholders meeting or meeting of the board
of directors (or other similar corporate bodies) of the Subsidiaries, each
individual acting as its representative in such meeting votes in accordance
with the instructions given by the Board of Directors from time to time.  To this effect the Parties shall procure that
the Board of Directors duly decides in advance on such instructions to be given
to the representatives.


 


(b)           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) above and the
Parties, 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 to the division of assets on liquidation of the Company in terms of Section 4.3
below and to the Put in Section 5.6 below).


 


2.12        Effects of Dilution on
the Provisions of this Section 2


 


(a)           The
Shareholders agree that the right of:


 


(i)            the
TEF Group to nominate by binding nomination (A) 6 (six) members of the Board of
Directors; (B) the CFO of the Company and (C) the COO’s of certain Subsidiaries
as set forth in Section 2.8 above; and


 


(ii)           the
PT Group to nominate by binding nomination (A) 6 (six) members of the Board of
Directors; (B) the CEO of the Company and (C) the COO’s of certain Subsidiaries
as set forth in Section 2.8 above,


 


subject to Section 2.12(e)
below, shall remain in full force until any Group is diluted as a consequence
of a capital increase by the Company to an Interest in the Company lower than
40% (forty percent)  of the Company’s
total issued and outstanding share capital, and shall continue to apply until
an additional period of 6 (six) months has elapsed calculated from the later of
(i) the date of such dilution or (ii) the date that this Section 2.12
becomes effective.


 


17





















 


(b)           Should
the aforementioned 6 (six)- month period elapse and the diluted Group fails to
increase its Interest in the Company’s total issued and outstanding share
capital, pursuant to Section 6 below, to a level at or above 40% (forty
percent) of the Company’s total issued and outstanding share capital, such
diluted Group shall, within 15 (fifteen) days from the delivery of a written
notice by the other Group to the Company and the diluted Group:


 


(i)            remove
a proportionate number of the Directors nominated by it to the Board of
Directors by causing such Directors to deliver their resignation letters to the
Company (with a copy to the other Group), in which case the Shareholder
belonging to the diluted Group shall exercise its voting rights in the relevant
Shareholders Meeting to appoint the replacement Directors nominated by binding
nomination of the non-diluted Group.  For
purposes of the foregoing, the proportionate number of Directors shall be
calculated as follows, based on the percentage of Company Shares which a Group
holds in the total issued and outstanding share capital of the Company:


 


	
  0 (zero)%-9
  (nine)%

  	
  :

  	
  no Directors;

  
	
  10 (ten)%-19
  (nineteen)%

  	
  :

  	
  2 (two)
  Directors;

  
	
  20 (twenty)%-39
  (thirty nine)%

  	
  :

  	
  4 (four)
  Directors;

  
	
  40 (forty)%-60
  (sixty)%

  	
  :

  	
  6 (six)
  Directors;

  
	
  61(sixty
  one)%-80 (eighty)%

  	
  :

  	
  8 (eight)
  Directors;

  
	
  81 (eighty
  one)%-90 (ninety)%

  	
  :

  	
  10 (ten)
  Directors;

  
	
  91 (ninety
  one)%-100 (one hundred)%

  	
  :

  	
  12 (twelve)
  Directors,

  
	
   

  	
   

  	
   

  
	
  (decimal amounts
  to be rounded up or down to the nearest whole number);

  



 


(ii)           cause
the CEO (in the case of the PT Group) or the CFO (in the case of the TEF Group)
(as the case may be) and all of the COO’s nominated by the diluted Group, to
resign from their offices, in which case the diluted Group agrees to take such
action as is necessary to appoint to those positions new Officers nominated by
binding nomination of the non-diluted Group.


 


(c)           If
the diluted Group increases its Interest in the total issued and outstanding
share capital of the Company to 50% (fifty percent) (but not less than 50%
(fifty percent), such diluted Group shall be entitled to restate such corporate
governance rights as of the date its Interest in the Company’s total issued and
outstanding share capital is so increased.


 


(d)           The
Shareholders agree that this Section 2.12 shall become effective on the
earlier of the following:


 


(i)            after
the Balance Closing; and


 


(ii)           without
detracting from Section 3.1.1(a) of the Subscription Agreement, after any
of the Balance Capital Contributions have been transferred to the Company by
only one of the Groups, provided that the relevant regulatory
constraints have been removed and accordingly all the Balance Capital
Contributions could have been transferred by both Groups to the Company.


 


18





















 


(e)           Without
detracting from the provisions as set forth in Sections 6.1, 6.2 and 6.3 below,
the non-diluted Group may at its sole discretion decide to grant an additional
period to the diluted Group during which such diluted Group may maintain its
corporate governance rights in accordance with Section 2.


 


2.13        Representation of the
Company


 


Only (i) the Board of
Directors acting in accordance with a resolution validly passed by it, and (ii)
the Person or Persons duly empowered through a valid power of attorney approved
by the Board of Directors in writing; will have the authority to represent the
Company.


 


SECTION 3.         SHAREHOLDERS MEETINGS AND RIGHTS


 


3.1          Shareholders Meetings


 


Shareholders Meetings
shall take place at the registered office of the Company in the Netherlands or
at such other place as permitted by the Articles of Association.  The Shareholders agree that an annual
Shareholders Meeting shall be held within the 4 (four) months following the
closing of each fiscal year, but in any event prior to the earlier of the
annual general meeting of any of the Shareholders following the closing of the
same fiscal year, for the discussion, and adoption of the consolidated audited
annual accounts of the Company and for the discharge of the Directors from
liability for their management over the last financial year.  Furthermore, special Shareholders Meetings
may be held following the request of any of the Groups for the replacement of
Directors in accordance with Section 2.2.(b) and 2.12.(b)(i) above, and
whenever and insofar as the business of the Company so requires.


 


3.2          Call Procedure


 


Shareholders Meetings may
be called by the Chairman directly or at the written request of any of the
Shareholders.


 


3.3          Chairing of
Shareholders Meetings


 


The Shareholders Meetings
shall be presided over by the Chairman. 
In the event of absence or temporary impediment of the Chairman, the
Shareholders Meeting shall be presided over by the Vice-Chairman, and in his
absence, by a person elected by the Shareholders in attendance.  The secretary to the Shareholders Meetings
shall be the person acting as secretary to the Board of Directors, from time to
time and in the absence or the temporary impediment of such secretary, by a
person as elected by the Shareholders in attendance.


 


3.4          Shareholder Decisions


 


(a)           Each
Company Share shall have attached to it the right to cast one vote.


 


19





















 


(b)           In
order to maintain the spirit of a 50-50 (fifty-fifty) joint venture, the
Shareholders agree that, subject to Section 3.5 below:


 


(i)            save
as otherwise required by applicable law, all shareholders’ resolutions,
including those matters in Section 2.6(a)(Y) above, which expressly
provide for a Shareholders’ resolution or Shareholders’ approval, shall require
the consensual approval by all of the Shareholders; and


 


(ii)           without
detracting from Section 3.4(b)(i) above, the quorum for a Shareholders
Meeting shall be 1 (one) Shareholder from each of the TEF Group and the PT
Group, represented by a duly authorised person, which may include a proxy;


 


(c)           Each
Shareholder shall affirmatively vote so as to permit a Group to increase its
Interest in the Company’s total issued and outstanding share capital pursuant
to Section 6.1, 6.2, and 6.3 hereto.


 


(d)           Each
Shareholder shall exercise its voting rights in the corporate bodies of the
Company in accordance with the Company Growth Principles, provided that,
if the Shareholders of a Group vote on a bona fide basis against the
acquisition of an Interest in a New Acquisition and, subsequent thereto, in
terms of an arbitration decision pursuant to Section 10 of the
Subscription Agreement, it is determined that said acquisition is within the
Company Growth Principles, no penalty (as referred to in Section 15.7
below) shall attach to the relevant Group or any of the Shareholders within
such Group who voted against the acquisition, provided further that the
Shareholders of said Group shall, and shall procure that the Directors
nominated by it shall, following the arbitration decision, vote in favour of
the transfer to the Company of the contribution of the relevant Interest in a
New Acquisition, as applicable.


 


(e)           The
Parties agree that each Shareholder shall have pre-emptive rights to subscribe
for newly issued Company Shares (or securities convertible into or exchangeable
for Company Shares) in the proportion as may be required in order to maintain
the same proportion of the Interest of each Shareholder in the voting and total
issued and outstanding share capital of the Company immediately prior to any
such issuance of new Company Shares.


 


3.5          Effects of Dilution
on the Provisions of this Section 3


 


(a)           (i)            The
requirement that the matters referred to in Section 3.4(b)(i) must be
approved by consensus and the quorum requirement set out in Section 3.4(b)(ii)
(collectively, the “Consensus Rule”), subject to Section 3.5(d) below,
shall remain in full force until any Group is diluted as a consequence of a
capital increase by the Company to an Interest in the Company lower than 40%
(forty percent) of the Company’s total issued and outstanding share capital,
and shall continue to apply until an additional period of 6 (six) months has
elapsed calculated from the later of (i) the date of such dilution, or (ii) the
date that this Section 3.5 becomes effective.


 


20





















 


(ii)           Should
the diluted Group have failed within the aforesaid 6 (six)-month period to
increase its Interest in the Company’s total issued and outstanding share
capital pursuant to Section 6 below, to a level at or above 40% (forty
percent) of the Company’s total issued and outstanding share capital, then upon
receipt of a written notice from the other Group the Consensus Rule shall no
longer apply.  In such event, unless
otherwise required by applicable law (X) the matters referred to in Section 3.4(b)(i)
shall require the affirmative vote of a simple majority of votes cast, and (Y)
the quorum for a Shareholders Meeting will be the presence (in person or by
proxy) of Shareholders representing a majority of the issued and outstanding
share capital of the Company.


 


(iii)          Notwithstanding
the provisions of Sections 3.5(a)(i) and (ii) above, for as long as the PT
Group and the TEF Group each hold an Interest of at least 10% (ten percent) in
the Company’s total issued and outstanding share capital (except if such
decrease in the participation in the Company derives from a Transfer of Company
Shares), any change in the purpose or scope of business of the Company or any
merger with any entity which is not a Wireless Business shall require the
affirmative vote of at least 1 (one) Shareholder from each of the PT Group and
the TEF Group, provided that the PT Group shall have no rights under
this Section 3.5.(a)(iii) during the period commencing on the date on
which the PT Group is diluted to holding an Interest of less than 40% (forty
percent) in the Company’s total issued and outstanding share capital and ending
on the date on which the PT Group Put is no longer exercisable with respect to
such Dilution Event Below 40%.


 


(b)           If
the diluted Group increases its Interest in the total issued and outstanding
share capital of the Company to 50% (fifty percent), such diluted Group shall
be entitled to restate the Consensus Rule as of the date its Interest in the
Company’s total issued and outstanding share capital is so increased.


 


(c)           The
Shareholders agree that this Section 3.5 shall become effective on the
earlier of the following:


 


(i)            after
the Balance Closing; and


 


(ii)           without
detracting from Section 3.1.1(a) of the Subscription Agreement, after any
of the Balance Capital Contributions have been transferred to the Company by
only one of the Groups, provided that the relevant regulatory
constraints have been removed and accordingly all the Balance Capital
Contributions could have been transferred by both Groups to the Company.


 


(d)           Without
detracting from the provisions as set forth in Sections 6.1, 6.2 and 6.3 below,
the non-diluted Group may in its sole discretion decide to grant an additional
period to the diluted Group during which such diluted Group may maintain its
corporate governance rights in accordance with Section 3.


 


21





















 


SECTION 4.         CELLULAR CHAIRMEN DEADLOCKS,
WISE PERSONS PROCEDURE AND LIQUIDATION


 


4.1          Cellular Chairmen
Deadlocks


 


(a)           If,
after (i) the holding of good faith negotiations and (ii) discussions between
the Shareholders or the Directors (as the case may be) in at least 2 (two)
different meetings of the corresponding corporate body of the Company, any
resolution to be passed or approval to be given by the Shareholders, or any
resolution to be passed or proposal to be made by the Board of Directors (as
the case may be) constituting a Cellular Chairmen Issue (as defined below),
results in a deadlock (a “Cellular Chairmen Deadlock”), which deadlock
shall also be considered to occur if the Shareholders Meeting or the Board of
Directors cannot take place due to the absence of a quorum, then, at the
request of any Shareholder, the Shareholders shall observe the following
procedure to resolve such Cellular Chairmen Deadlock (the “Deadlock Resolution
Procedure”):


 


(A)          Within
15 (fifteen) days from the date the Cellular Chairmen Deadlock occurred, the
Shareholders shall refer such Cellular Chairmen Deadlock to the Chairmen of TEM
and PT Móveis (the “Cellular Chairmen”),
and shall cause the Cellular Chairmen to meet and hold good faith discussions
to attempt to find a solution and to resolve the Cellular Chairmen Deadlock
within the 15 (fifteen) days period thereafter, after consulting with their
respective Group nominees in the Board of Directors.  In holding such discussions, the Cellular
Chairmen shall always make their determination based on the best interests of
the Company in achieving and in compliance with the Company Growth Principles,
and the basic principles underlying the ultimate goals of this Agreement and
the Subscription Agreement.


 


(B)           In
the event the Cellular Chairmen are unable to resolve the Cellular Chairmen
Deadlock within said 15 (fifteen) days period, the Cellular Chairmen Deadlock
will be submitted by the Shareholders and the Cellular Chairmen to the Chairmen
(the “Group
Chairmen”) and the Chief Executive Officers (the “Group CEO’s”)
of Telefónica, and Portugal Telecom, who shall meet to attempt to find a final
solution and resolve the Cellular Chairmen Deadlock.  In their attempt to find a solution for the
Cellular Chairmen Deadlock, the Group Chairmen and the Group CEO’s shall always
make their determination based on the best interests of the Company in
achieving and in compliance with the Company Growth Principles, and the basic
principles underlying the ultimate goals of this Agreement and the Subscription
Agreement.


 


(b)           In
the event that, notwithstanding the efforts made by the Shareholders, the
Cellular Chairmen, the Group Chairmen and the Group CEO’s, a Cellular Chairmen
Deadlock remains unresolved for 90 (ninety) days calculated from the date on
which the occurrence of such Cellular Chairmen Deadlock as set forth in Section 4.1.(a)
has been notified by one of the Groups to the other Group, each Group shall be
entitled during the 15 (fifteen) Business Days following the expiration of the
aforesaid 90 (ninety) days period to (i) declare the existence of an
irreconcilable difference with the Shareholders of the other Group (a “Cellular Chairmen Deadlock
Event”), and (ii) at its option (a) propose in


 


22





















 


writing to the other Group the
dissolution and liquidation of the Company, or (b) submit the Cellular Chairmen
Deadlock Event to the Wise Persons in accordance with Section 4.2 below.


 


4.2          Wise Persons
Procedure


 


(a)           If
one of the Groups proposes to the other Group the dissolution and liquidation
of the Company in accordance with Section 4.1 and the other Group so
expressly accepts in writing, then the provisions set forth in Section 4.3
below shall apply.  However, if (i) the
other Group does not accept in writing the dissolution and liquidation of the
Company within 15 (fifteen) Business Days from the receipt of the notice
delivered to it in this respect by the other Group, or (ii) a Group proposes to
submit the Cellular Chairmen Deadlock Event to the Wise Persons then, at the
request of either Group, the Company shall submit the matter to a committee of
3 (three) persons (the “Wise Persons”) for binding determination
between the proposals submitted by the Groups.


 


The Wise Persons shall
comprise of three persons, each of whom shall be required to be highly regarded
and experienced in the wireless telecommunications industry.  The Wise Persons shall be nominated as
follows:


 


(i)            Each
Group shall have the right to nominate one of the Wise Persons, such nomination
to be notified to the other Group within 15 (fifteen) Business Days after
expiry of the period referred to in Section 4.1(b), or 4.2(a) above (as
the case may be), which notification shall include confirmation by the nominee
to act as a Wise Person;


 


(ii)           If
a Group fails to deliver such notification within the aforesaid period, the
other Group shall have the right to nominate a Wise Person in lieu of the Wise
Person that would otherwise have been nominated by first mentioned Group; and


 


(iii)          The
two Wise Persons nominated pursuant to this Section 4.2(a), shall, within
10 (ten) Business Days of the last such Wise Person being nominated, by
agreement nominate a third Wise Person.


 


(b)           The
Wise Persons shall make their determination by majority vote, each Wise Person
having 1 (one) vote.


 


(c)           The
fees to be charged by the Wise Persons shall be discussed with and agreed to by
the Groups in advance.  The Wise Persons
shall be required to include in their determination, a ruling on which Group
should pay (which portion of) the fees, provided that, to the extent
possible, the Wise Persons shall apply the rule that, having regard to the
proposal made by each of the Groups and Directors nominated by such Group, the
unsuccessful Group pays the fees.


 


(d)           The
Wise Persons shall be required to act impartially, expeditiously (but in any
event within 15 (fifteen) Business Days of being requested to determine the
matter), and in the best interests of the Company and the Subsidiaries, having
due regard to the proposal made by each of the Groups and Directors and between
the proposals submitted to them


 


23





















 


by the Groups.  The Wise Persons shall not have the authority
(i) to take any other decision or (ii) to deviate from such proposals, or (iii)
to decide that the Company shall be dissolved and liquidated.


 


(e)           The
Parties agree that the determination of the Wise Persons shall be final and
binding on the Parties and each Party shall duly effect and/or procure that
such determination is duly effected by the Company and relevant Subsidiaries.


 


(f)            The
Parties agree that the proposals or resolutions that shall comprise a “Cellular Chairmen Issue” shall only
be those proposals or resolutions involving an amount in excess of Euro [***], provided
that, to the extent that any of such decisions relate to the acquisition of
an Interest in a New Acquisition, the acquisition of a Further Interest in a
Wireless Property, or the increase by a Group of its Interest in the Company’s
total issued and outstanding share capital pursuant to Section 6, the
aforesaid Wise Person procedure shall not apply.


 


4.3          Liquidation of the
Company


 


(a)           Should
a Cellular Chairmen Deadlock Event occur, and should both Groups agree in
writing on the dissolution and liquidation (the “Liquidation”) of the Company as set
forth above, all the Shareholders shall take all such corporate actions,
including exercising their voting rights in favour of the Liquidation, which
may be required or convenient for the implementation thereof.


 


(b)           Subject
to applicable laws and subject to any adjustments to the [***] pursuant to Section 1.6.3
of the Subscription Agreement and Sections 2.6(a)(Y)(ii) and 2.11(b) above, the
Parties shall use their best efforts to procure that each Group receives, as
Liquidation distribution:


 


(i)            In
case of a 50% - 50% (fifty - fifty percent) Interest of each Group in the
Company at the time of initiating the Liquidation:  (a) [***] Interests in Wireless Properties [***]
as well as [***] in any Wireless Property [***] before the date hereof, which
was [***] and (b) [***] held by the Company.


 


(ii)           If
the Liquidation is initiated at a time when the Interests of the Groups in the
Company are not 50% - 50% (fifty – fifty percent) and the Balance Capital
Contributions have still not been transferred to the Company: the [***] to
which the Parties [***] pursuant to the provisions of the preceding Section 4.3(b)(i)
shall [***] to each Group.


 


(iii)          If
the Liquidation is initiated at a time when the Interests of the Groups in the
Company are not 50%  - 50% (fifty – fifty
percent), and the Balance Capital Contributions have been transferred by both
Groups to the Company, then:


 


(A)          [***]
in Wireless Properties [***] Group to the Company [***], as well as [***]
Interest in any Wireless Property [***];


 


(B)           50%
(fifty percent) [***] other than those referred to in [***]


 


24





















 


(C)           [***]
Interests in [***] the relevant Group to the Company that have [***]; and


 


(iv)          Such
[***] of the [***] not referred to in Section [***], as the case may be,
as corresponds with such [***].


 


(c)           Any
[***] the [***] to each Group pursuant to [***], and [***] in the Company will
be [***].  Both the [***] the assets
[***] to, and [***] of the Interest [***] the Company by each Shareholder will
be [***] to an [***]  made at the time of
[***] the [***] in accordance with Sections 1.4 and 1.5 of the Subscription
Agreement.


 


(d)           In
addition to the right to a portion of the assets in the Company, the TEF Group
will have a call option to purchase 50% (fifty percent) of that portion of the
Global Telecom Interest still not transferred to the Company, as set forth in Section 1.6.1
of the Subscription Agreement.


 


(e)           The
provisions of this Section 4.3 shall apply mutatis mutandis to any other liquidation of the Company.


 


(f)            Each
Group shall fulfil all legal requirements which may be applicable in the event
of a liquidation of the Company (including but not limited to any requirements
imposed by regulatory agency, including, ANATEL, CVM, or any other Governmental
Authority with jurisdiction over the Company or the Subsidiaries).  The Parties undertake to use their reasonable
efforts to fulfill any such requirements and to obtain any such necessary
approval as soon as practicable.


 


SECTION 5.         TRANSFER OF COMPANY SHARES


 


5.1          Transfer


 


No Shareholder belonging
to one Group (a “Transferring Party”)
may Transfer all or part of its Company Shares (the “Offered Shares”), or agree to do so, to
a Third Party (a “Third Party Sale”),
without first offering such Offered Shares to the Shareholders belonging to the
other Group (collectively the “Non-Transferring
Party”), who shall have the option of (i) exercising a right of
first refusal to acquire all but not less than all of the Offered Shares (the “Right of First Refusal”) or (ii) a
right to co-sell the Non-Transferring Party’s own Company Shares in the same
proportion as the Offered Shares represents to the Transferring Party’s entire
Interest in the Company (the “Tag-Along
Right”) (except as provided in Section 5.2 below).  Such offer shall be effected in compliance
with the procedures set forth in this Section. 
Any transfer made in violation of the provisions of this Section 5
shall be null and void and of no effect against the Company or the other
Shareholders.


 


5.2          Permitted
Transferees; Transfers in the Context of Consolidation


 


(a)           Notwithstanding
anything in this Agreement to the contrary, each Shareholder of a Group may
freely transfer all or part of its Company Shares to a Permitted Transferee
without the consent of the Shareholders in the other Group and without
compliance with the Right


 


25





















 


of First Refusal provisions
hereof and the Tag-Along Right, provided that the Permitted Transferee
shall, as a condition for any such transfer, have agreed in writing to be bound
by the terms of this Agreement and the Subscription Agreement, and to be
jointly and severally liable for any debt, liability or obligation of the
Transferring Party under this Agreement or the Subscription Agreement,
irrespective of whether such obligation, debt or liability arises prior or
subsequent to any such transfer.


 


(b)           It
is acknowledged by the Groups that the trends in the mobile telecommunication
sector are for the establishment of global mobile companies.  The Parties are willing to discuss such
combinations in the future with third parties, while reserving the right to
contribute or not contribute their Company Shares to any combined entity.  It is hereby agreed that the Right of First
Refusal and Tag-Along Right referred to in this Section 5 shall not be
applicable if the transfer of the Company Shares by either Group has been
agreed previously by the Groups and forms part of a consolidation process in
the mobile telecommunication industry.


 


5.3          Indirect Transfers


 


Each Shareholder
acknowledges, agrees and shall procure that the provisions of
Sections 5.1, 5.2, 5.4, 5.7, and 5.9, shall apply, mutatis mutandis, to any Transfer of any
Interest held by either Group in any Person (irrespectively whether such Person
is also a Shareholder), the assets of which consist, now or at the time of the
transfer, exclusively or virtually exclusively of, directly or indirectly,
Company Shares.


 


5.4          Right of First
Refusal


 


(a)           Prior
to the proposed Third Party Sale, the Transferring Party shall deliver a
written notice to the Non-Transferring Party and the Company, indicating the
terms of the irrevocable offer by the Third Party (the “Third Party Offer”)
which shall contain, at least, the following: (i) the total number of Offered
Shares; (ii) the name, address and nationality of the Third Party and of its
direct and indirect controlling shareholders; (iii) the consideration per
Company Share; (iv) the payment conditions; (v) the means of payment, which in
any event must be cash and/or marketable securities and/or shares listed on an
internationally recognised stock exchange; and (vi) any other material terms
and conditions.  This notice (the “Transfer Notice”),
shall have the effect of an irrevocable offer to sell and transfer the Offered
Shares to the Non-Transferring Party.


 


(b)           Within
3 (three) Business Days from the receipt by the Non-Transferring Party of the
Transfer Notice, it may deliver a notice to the Transferring Party (the “Initial Non-Transferring
Party Offer”) in which it shall include:


 


(i)            the
payment conditions and the means of payment under which it proposes to exercise
its Right of First Refusal, and/or


 


(ii)           in
the event the Third Party Offer and/or the Initial Non-Transferring Party Offer
contemplates a total or partial non-cash consideration or a deferred payment,
or if the Non-Transferring Party is willing to exercise its Tag-Along Right a
list of 3 (three) internationally recognized investment banks and/or


 


26





















 


(iii)          an
indication as to whether or not it whishes to transfer to the Third Party the
number of Company Shares equal to the number of Offered Shares as a result of
the exercise of the Tag-Along Right in terms of this Section 5.4 (the “Tag
Along Shares”),


 


provided that
such Initial Non-Transferring Party Offer shall not be considered as a binding
offer and shall not be understood as an exercise of its Right of First Refusal
or of the Tag-Along Right.


 


The Initial Non-Transferring
Party Offer may contain an offer to exercise the Right of First Refusal in (i)
cash and/or PT shares in the event the Non-Transferring Party is a member of
the PT Group, or (ii) in cash and/or Telefónica shares and/or TEM shares in the
event the Non-Transferring Party is a member of the TEF Group.


 


(c)           Within
2 (two) Business Days from the receipt of the Initial Non-Transferring Party
Offer, the Transferring Party shall communicate in writing (the “Election Notice”)
to the Non-Transferring Party the name of 1 (one) investment bank selected from
the list of 3 (three) investment banks included in the Non-Transferring Party
Offer, which shall determine, within 10 (ten) Business Days from the execution
of the relevant Mandate Letter:


 


(A)          in
the event the Initial Non-Transferring Party Offer contains an offer for the
exercise of the Right of First Refusal:


 


(i)            whether
or not the Third Party Offer and the Initial Non-Transferring Party Offer are
[***];


 


(ii)           in
the event that the Initial Non-Transferring Party Offer [***] than the Third
Party Offer, the value [***], and


 


(iii)          in
the event that the Initial Non-Transferring Party Offer [***] Third Party
Offer, [***] to the Initial Non-Transferring Party Offer in order to [***] to
the Third Party Offer, which, if the Initial Non-Transferring Party Offer
contemplates [***], at the option of the Non-Transferring Party, [***] of the
consideration or to the [***] of the consideration;


 


(the report issued by the investment bank with respect
to paragraphs (i), (ii) and (iii) above referred to as the “Right of First Refusal Valuation”); and


 


(B)           in
the event the Initial Non-Transferring Party Offer contains the intention of
the Non-Transferring Party to exercise the Tag-Along Right, the value of the
Company as of the date of delivery of the Transfer Notice (in accordance with
the principles and criteria set forth in Exhibit I of the Subscription
Agreement) and the percentage that the Third Party Offer, if made with respect
to 100% of the total outstanding share capital of the Company, would represent
over the value of the Company in accordance with such valuation (the “Tag-Along Valuation”).


 


27





















 


(d)           As
soon as practicable, but in no event later than 2 (two) Business Days after the
receipt of the Election Notice, the Non-Transferring Party shall execute the
relevant Mandate Letter and shall otherwise correspond with the elected
investment bank (the Transferring Party and the other Shareholders of its Group
[***] to [***] with [***]).  The fees of
the elected investment bank shall be paid by the Non-Transferring Party, but
the Transferring Party shall reimburse the Non-Transferring Party such
fees.  In the event the Transferring
Party does not deliver an Election Notice or otherwise fails to select one
investment bank from the list of 3 (three) investment banks included in the Non-Transferring
Party Offer within 2 (two) Business Days from the receipt of such Initial Non-Transferring
Party Offer, the Non-Transferring Party shall execute the relevant Mandate
Letter with any of the 3 (three) Banks included in the Non-Transferring Party
Offer.  In any event, the relevant
Mandate Letter shall state:


 


(A)          with
respect to the Right of First Refusal Valuation, that the investment bank [***]
the guidelines and criteria referred to in Section 1.5 of the Subscription
Agreement, but the valuation shall be based [***] and the terms and conditions
of the Third Party Offer and of the Initial Non-Transferring Party Offer, and
that the same criteria shall be applied to both such offers;


 


(B)           with
respect to the Tag-Along Valuation, an indication to follow the provisions of Section 1.5
of the Subscription Agreement, the [***] and the [***] set forth in [***] of
the Subscription Agreement.


 


(e)           The
Non-Transferring Party may exercise its Right of First Refusal or the Tag-Along
Right, by delivery of a written notice to the Transferring Party (the “Acceptance Notice”),
within 3 (three) Business Days following the receipt of the Right of First
Refusal Valuation and the Tag-Along Valuation (or if the Non-Transferring Party
Offer did not include the list of investment banks in accordance with Section 5.4.(b)(ii))
(the “Acceptance
Period”), provided, however, that the Tag-Along
Right may only be exercised by the Non-Transferring Party if the circumstances
set forth in Section 5.5 below occur.


 


(f)            In
the event the Non-Transferring Party does not deliver the Acceptance Notice
within the Acceptance Period, it will be considered that it does not desire to
exercise its Right of First Refusal nor its Tag-Along Right, whether or not it
has delivered an Initial Non-Transferring Party Offer.


 


(g)           In
the event of exercise of the Right of First Refusal by the delivery of the
Acceptance Notice, the Initial Non-Transferring Party Offer, [***] as set forth
above [***] Initial Non-Transferring Party Offer [***] Third Party Offer, shall
be referred hereinafter to as the “Definitive Non-Transferring Party Offer”.  The Acceptance Notice shall be binding and
irrevocable.


 


The consummation of any
transfer of the Offered Shares pursuant to Section 5.4(g) above shall
occur within the period and in accordance with the terms and conditions
provided in the Definitive Non-Transferring Party Offer, provided  that
the Definitive Non-Transferring Party Offer shall [***] to the Non-Transferring
Party of the Third Party


 


28





















 


Offer, unless the Third
Party Offer contemplates a longer period for the payment, in which event the
Definitive Non-Transferring Party Offer may equalize the term contained in the
Third Party Offer.


 


(h)           In
the event of exercise of the Tag-Along Right by the delivery of the Acceptance
Notice, such Acceptance Notice shall be binding and irrevocable, and the
consummation of the transfer of the Tag-Along Shares pursuant to this Section 5.4(h)
shall occur within the period and in accordance with the terms and conditions
provided in the Transfer Notice.


 


(i)            If
within the Acceptance Period, the Transferring Party has not received the Acceptance
Notice in accordance with Section 5.4.(e) above, the Transferring Party
shall transfer all, but not less than all, the Offered Shares to the Third
Party in accordance with the terms and conditions of the Transfer Notice.


 


(j)            If
after receipt of an Acceptance Notice in accordance with Section 5.4.(e)
above, the Non-Transferring Party fails (other than as a result of force majeure or the Transferring Party’s
own actions or omissions) to (x) consummate the acquisition of the Offered
Shares in accordance with the terms and conditions provided for in the
Definitive Non-Transferring Party Offer; or (y) consummate the transfer of the
Tag-Along Shares in accordance with the terms and conditions provided for in
the Transfer Notice; then the Transferring Party will be free to transfer all,
but not less than all, the Offered Shares to the Third Party in accordance with
the terms and conditions of the Transfer Notice.  Such transfer of the Offered Shares to the
Third Party must be consummated within twenty (20) days from the expiration of
the Acceptance Period.


 


(k)           If
the transfer to a Third Party by the Transferring Party is not consummated
within the time period set forth in Sections 5.4.(i) and 5.4.(j) above, the
Transferring Party may not transfer any Company Shares without repeating the
procedures set out in this Section 5.4.


 


(l)            Notwithstanding
anything to the contrary contained in this Agreement, in no event shall a
Transferring Party have any liability (except to reimburse cost in accordance
with this Section) to the Non-Transferring Party in the event that the sale and
transfer of the Offered Shares and the Tag Along Shares contemplated pursuant
to this Section 5.4 is not consummated provided the Transferring Party has
not breached its obligations under this Section 5.4, and provided
further that such Transferring Party has not consummated the Third Party
Sale.  In any event, if the Third Party
decides not to acquire the Tag-Along Shares tendered by the Non-Transferring
Party in exercise of its Tag-Along Right, the Transferring Party shall not
Transfer to the Third Party the Offered Shares, and the Transferring Party
shall reimburse the Non-Transferring Party for any cost incurred by it in
connection with the proposed sale.


 


(m)          In
the event the Initial Non-Transferring Party Offer [***], such Initial Non-Transferring
Party Offer shall include a list of 3 (three) internationally recognized
investment banks, among which the Transferring Party shall elect 1 (one)
bank.  In the event the Non-Transferring
Party exercises its Right of First Refusal, (i) [***] in terms of the
Definitive Non-Transferring Party Offer, shall be delivered to [***], and (ii)
any transaction [***] by the Non-Transferring Party [***] exercise of its Right
of First Refusal, shall be [***]


 


29





















 


the aforesaid investment bank
in compliance with the terms and conditions, if any, provided for in the
Initial Non-Transferring Party Offer. 
[***] be borne by the Transferring Party, provided, however,
that a [***], to be borne by the Non-Transferring Party, may be agreed between
the Non-Transferring Party and the aforesaid investment bank, provided further
that [***] delivered by the Non-Transferring Party as payment for the exercise
of its Right of First Refusal, being stable over time


 


(n)           Notwithstanding
the periods set forth in this Section 5.4 for the consummation of any
transfer of Company Shares (either to a Third Party or to the Non-Transferring
Party), in the event the relevant transfer of shares is subject to the prior
(i) fulfillment of legal or regulatory constraints, 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 shall be consummated shall be
extended until the expiration of 5 (five) Business Days after such requirements
have been fulfilled and/or all such approvals shall have been received.  In connection with the consummation of the
transfer as contemplated herein, the involved parties shall deliver to each
other all documents reasonably required to be executed in connection with the
transfer of the Offered Shares.


 


(o)           At
the sole and exclusive option of the Non-Transferring Party, the exercising of
such option to be notified in writing to the Transferring Party (the “Notification”)
within the Acceptance Period, the validity of a Third Party Sale involving the
sale of the entire Interest of one of the Groups in the Company shall be
expressly conditional upon the execution of an agreement by the Third Party by
virtue of which the Third Party shall assume all rights and obligations of the
Transferring Party under this Agreement and the Subscription Agreement concerning
the Transferring Party as a shareholder of the Company (the “Assignment Agreement”),
with the exception of the representations, warranties covenants and
indemnities, in which event the provisions set forth in Section 11.1(iii)
bellow shall apply, such condition being construed as a condition precedent, so
long as the execution is not evidenced. 
In the event of a Third Party Sale involving only a portion of the
entire Interest of one of the Groups in the Company, the voting rights of both
Groups will be immediately and automatically syndicated and, therefore, both
Groups undertake in such event to exercise their voting rights in the Company
in accordance with the instructions given by the Group holding a higher number
of Company Shares.  In this event, this
Agreement will remain in force an effect exclusively between the two Groups, provided
that any provisions of this Agreement contrary to the aforementioned
syndication of voting rights or which could prevent the effectiveness of such
syndication, shall be considered null and superseded by such syndication of
votes.


 


5.5          Tag-Along Right


 


The Tag-Along Right may
only be exercised by the Non-Transferring Party if (i) the Offered Shares grant
to its holder 50% or more of the voting rights in the Company in accordance
with this Agreement; and (ii) if the Tag-Along Valuation determines that the
Third Party Offer (if made with respect to 100% of the total outstanding share
capital of the Company) [***]. 
Notwithstanding the above, in the event of a series of sales to the


 


30





















 


same Third Party, to
Affiliates of such Third Party or to any other Person acting in concert with
such Third Party, such series of sales shall be considered as a single
transaction for purposes of Section 5.4 above.


 


5.6          Conditional Put


 


(a)           If
there is a Change of Control relating to a Group, the other Group shall have
the right to put (the “Put”) all but not less than all of the Company Shares held
by it to any of the Shareholders being part of the Group which is the subject
of the Change of Control (the “Target Shareholder”) at a value determined by
an Independent Valuation.  The payment
for the Company Shares under this Put shall be made, at the option of the Group
exercising the Put, either:


 


(i)            in
cash; or


 


(ii)           subject
to the applicable laws and regulations and subject to any adjustments pursuant
to Section 1.6.3 of the Subscription Agreement and Sections 2.6(a)(Y)(ii)
and 2.11(b) above, in kind [***] or


 


(iii)          in
kind, [***], Section 5.6.(a)(ii)(A), or (y) [***] in Section 5.6(a)(ii)(A)
and Section 5.6(a)(ii)(B), or (z) [***] Section 5.6(a)(ii)(A), Section 5.6(a)(ii)(C)
and Section 5.6(a)(ii)(D),


 


provided that,
in the event that the Put is exercised while the Balance Capital Contributions
have not been transferred to the Company due to regulatory restraints, the
Group exercising the Put shall be entitled to receive, under Section 5.6(a)(ii)(B)
above, [***] of the [***] solely by any one of the Groups and not balanced by
the other Group; and in such case the provisions of Section 5.6(iii) shall
be construed and applied accordingly.


 


Payment of the price
defined under Section 5.6(a)(ii) or (iii) above due to the Group
exercising the Put will be combined with a cash settlement for the difference
between [***].  The value of the Company
and of each of its assets will be determined by an Independent Valuation in
accordance with Sections 1.4 and 1.5 of the Subscription Agreement.


 


(b)           The
Target Shareholder acknowledges and expressly agrees that, if it fails to
structure otherwise the fulfilment of its obligation hereunder in favour of the
Group exercising the Put, the Target Shareholder [***] the Company, and the
Company [***] Target Shareholder, [***]. 
The Target Shareholder [***].  The
Target Shareholder shall indemnify and hold harmless the Company and the Group
exercising the Put against any and all costs and Taxes incurred by the Company
or said Group pursuant to this Section 5.6.


 


(c)           In
addition to the settlement of the obligations arising out of the exercise of
the Put, TEF Group will have a call option to purchase up to 50% (fifty
percent) of that portion of the Global Telecom Interest still not transferred
to the Company as a Contribution, as set forth in Section 1.6.1 of the
Subscription Agreement.


 


31





















 


(d)           The
Put can be exercised by written notice delivered to the Target Shareholder
within 6 (six) months from the date on which the other Group becomes aware of
the relevant Change of Control.  The
consummation of any transfer of the relevant Company Shares pursuant to Section 5.6(a)
above shall occur as promptly as practicable but in no event later than (i) 30
(thirty) days after the delivery of the Independent Valuations in case the
Group exercising the Put elected payment in cash, and (ii) 60 (sixty) days
after the delivery of the Independent Valuations in case the Group exercising
the Put elected payment in kind, at the time and place as may be agreed upon by
the Target Shareholder and the Group exercising the Put; 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 5 (five) Business Days after all such requirements have been
fulfilled and/or such approvals shall have been received.  In connection with the consummation of the
transfer as contemplated herein, the involved parties shall deliver to each
other all documents reasonably required to be executed in connection with the
transfer of the relevant Company Shares. 
The Parties undertake to use their reasonable efforts to fulfill any
such requirements and to obtain any such necessary approval as soon as
practicable.


 


5.7          Pre-emptive Rights


 


The same rules provided
for in this Section 5 shall be applicable mutatis mutandis to transfers,
by any Shareholder of a Group, of its pre-emptive rights for the subscription
of new Company Shares, provided that the periods for the exercise of the
Right of First Refusal or the Tag-Along Right with respect to the pre-emptive
rights for new Company Shares shall be the following: (i) the Transfer Notice
must be delivered to the Non-Transferring Party within 5 (five) Business Days
from the approval of the capital increase and must contain the number of
Offered Shares subject to the pre-emptive rights, the selling price and the
other conditions of the sale and the name and complete identification of the
Third Party and of its direct and indirect controlling shareholders, and the
agreement by the Third Party to increase the Third Party Offer so as to permit
the Non-Transferring Party to sell to the Third Party its pre-emptive rights
for the subscription of new Company Shares as a result of the exercise of the
Tag-Along; (ii) the Acceptance Period shall be 5 (five) Business Days from the
effective receipt of the Transfer Notice, and should the above mentioned period
elapse without the Non-Transferring Party expressing its intention in a written
notice delivered to the Transferring Party, the offer shall be deemed not to
have been accepted; and (iii) within 3 (three) Business Days from the effective
receipt of the Acceptance Notice, the acquisition of all offered pre-emptive
rights shall be completed.  Any decision
taken by the Non-Transferring Party, will be irrevocable and binding upon such
Non-Transferring Party.


 


Upon the expiration of
the period mentioned in Section 5.7(a)(ii) above without the Non-Transferring
Party exercising its Right of First Refusal or the Tag-Along Right with respect
to the pre-emptive rights of the offering Shareholder, such rights may be
assigned to the Third Party who may exercise them under the same conditions of
the offer made to


 


32





















 


the Non-Transferring
Party pursuant to such item until the end of the term for the exercise of the
pre-emptive right established by the relevant Shareholders Meeting.


 


5.8          Tax Efficiency


 


Any transfer as provided
for in this Section 5 shall be made in the most tax efficient manner vis-à-vis the Company and the Non-Transferring
Party, or the Group exercising the Put (as the case may be).


 


5.9          Encumbrance of
Company Shares


 


Except with the prior
written consent of the Shareholders in the other Group, no Shareholder shall
create, or permit the creation of, any lien on, pledge, option, charge, debt,
restriction, security interest, demand or other encumbrances of whatsoever
nature and howsoever incurred, whether voluntarily or involuntarily, in respect
of any of its or any other Shareholder in its Group’s Company Shares.  Without detracting from the generality of the
foregoing, a Shareholder shall not have the right to vest the voting rights in
any Company Shares in any pledgee or usufructuary of such Company Shares.


 


5.10        Transfer Restriction in
Articles of Association, Exercise of Voting Rights


 


In order to achieve that
no transfer of Company Shares is made in breach of any provision of this Section 5,
the Shareholders agree that the Articles of Association shall provide for the
unanimous prior approval of the Shareholders being required for any transfer of
Company Shares.  For the avoidance of
doubt it is expressly agreed that each Shareholder shall exercise its voting
rights on the Company Shares in such a manner as to allow the other Shareholders
to exercise their rights under this Section 5, provided that such
other Shareholders have complied with the relevant provisions of this Section 5.


 


SECTION 6.         DILUTION


 


6.1          Dilution


 


Without prejudice to the
provisions of Sections 2 and 3 above concerning the effects of dilution on the
corporate governance rights, the provisions of this Section 6 shall only
apply after the Balance Closing.  The
total direct and indirect Interest of any Group (a “Reduced Shareholder”) in the Company’s
total issued and outstanding share capital that does not reach, or is reduced
to less than, 50% (fifty percent) of the Company’s total issued and outstanding
share capital as a consequence of a capital increase by the Company will be
referred to as the “Diluted Interest”).


 


6.2          Diluted Interest
Between 50% and 40%


 


(a)           In
the event that as a consequence of a capital increase by the Company the
Diluted Interest is less than 50% (fifty percent) but at or above 40% (forty
percent) of the Company’s total issued and outstanding share capital (the “Dilution Event Above 40%”),
the Reduced Shareholder shall have the right to transfer Additional Capital
Contributions to the Company, so as to cause such Reduced Shareholder’s total
Interest


 


33










 










 


to be increased to 50% (fifty
percent) of the total issued and outstanding share capital of the Company, provided
that such Additional Capital Contributions shall be transferred to the
Company not later than 12 (twelve) months from the occurrence of the relevant
Dilution Event Above 40%.


 


(b)           For
purposes of determining the total amount of the Additional Capital
Contributions required under Section 6.2(a), the Shareholders agree that
such total amount will be equivalent to the value of (that portion of) the
Contribution having caused the dilution, as determined in the Contribution
Valuation, as set forth in the Subscription Agreement (the “Locked-up Price”),
provided that such Locked-up Price shall only be valid if the increase
to the agreed-upon 50% (fifty percent) Interest is consummated within the 6
(six)-month period following the Dilution Event Above 40%.  If the increase to the agreed-upon 50% (fifty
percent) Interest is consummated later than 6 (six) months after the Dilution
Event Above 40%, but in any event prior to expiry of the period of 12 (twelve)
months after the occurrence of such Dilution Event Above 40%, the Shareholders
agree that the Locked-up Price shall be accrued with the Cost of Carrying.


 


In any case, if the value
of the Additional Capital Contribution transferred to the Company under Section 6.2(a)
exceeds the aggregate nominal value of the Company Shares issued in respect of
such Contribution, then such difference shall be credited to the General Share
Premium Reserve.


 


6.3          Diluted Interest
Below 40%


 


(a)           In
the event that as a consequence of a capital increase by the Company the
Diluted Interest is less than 40% (forty percent) of the Company’s total issued
and outstanding share capital (the “Dilution Event Below 40%”), the Reduced Shareholder
shall have the right to transfer to the Company Additional Capital
Contributions at one or more Additional Closings, so as to cause the Reduced
Shareholder’s total Interest to be increased to:


 


(i)            at
least 40% (forty percent) (and not less than forty percent), but in any case to
no more than 50% (fifty percent), of the total issued and outstanding share
capital of the Company, in which case such Additional Capital Contributions
shall be transferred to the Company no later than 6 (six) months from the
occurrence of the Dilution Event Below 40%. 
In this case, the Shareholders agree that the Reduced Shareholder shall
transfer to the Company as a Contribution an amount equal to the relevant
portion of the Locked-up Price in order to return to an Interest of at least
40% (forty percent) of the total issued and outstanding share capital of the
Company; or


 


(ii)           in
the event that the increase set forth in Section 6.3(a)(i) above shall not
occur, 50% (fifty percent) (and not less or more than fifty percent) of the
total issued and outstanding share capital of the Company, in which case such
Additional Capital Contributions shall be transferred to the Company within the
6 (six)-month period following the expiration of the period set forth in Section 6.3(a)(i)
above and in no event later than 12 (twelve) months from the occurrence of the
Dilution Event


 


34





















 


Below 40%.  In this case, the Shareholders agree that the
Reduced Shareholder shall transfer to the Company as a Contribution an amount
equal to the Locked-up Price plus the Cost of Carrying in order to return to an
Interest of 50% (fifty percent) of the total issued and outstanding share
capital of the Company.


 


In any case, any
difference between the value of the Additional Capital Contribution transferred
to the Company under this Section and the aggregate nominal value of the
Company Shares issued in respect of such Contribution, shall be credited to the
General Share Premium Reserve.


 


6.4          PT Group Put


 


(a)           If
(i) the PT Group is the Reduced Shareholder as a consequence of a capital
increase, (ii) the Diluted Interest is lower than 40% and (iii) the PT
Group has not exercised its right to build up its Interest back to at least 40%
of the total issued and outstanding share capital of the Company within the
prescribed 6 month time period, then the PT Group shall have the right to sell
and transfer all but not less than all the Company Shares which it owns at the
date of delivery of the PT Group Notice, as defined below, (the “PT Group Company Shares”)
to TEM at the value resulting from an Independent Valuation (the “PT Group Put”),
such right, subject to the last sentence of this paragraph, to be exercised
within the 12 month period (the “PT Group Put Exercise Term”) following the end
of the aforementioned 6-month period; provided  that the PT Group
Put Exercise Term shall terminate if the PT Group recovers its corporate
governance rights as a consequence of increasing its Interest in the Company to
50%, on the date such increase takes place, and provided, further,
that the PT Group Put, subject to Section 6.4.(b) below, may not be
exercised at any time after 31 December 2007.  In the event the PT Group Put Exercise Term
expires due to the PT Group building up its Interest in the Company to 50% and
the PT Group has not exercised the PT Group Put, this will not prevent the
exercise of the PT Group Put in the event the PT Group is diluted below 40% and
the PT Group has not exercised its right to build up its Interest back to at
least 40% of the total issued and outstanding share capital of the Company
within the prescribed 6 month time period.


 


Subject to Section 6.4.(e)
below, at the option of TEM, payment for the PT Group Company Shares may be
made in (i) cash, (ii) shares in Telefónica and/or shares in TEM, or (iii) a
combination of cash and shares in Telefónica and/or shares in TEM.


 


The acquisition of the PT
Group Company Shares shall, at the option of TEM, be performed by one or more
members of the TEF Group and/or Telefónica, and/or by one or more Third Parties
(hereinafter, the “Acquirer/s”),
provided  that in such event the TEF Group shall be jointly and
severally liable with the Acquirer/s for the obligation of payment of the PT
Group Company Shares in accordance with this Agreement.


 


(b)           If
the PT Group wishes to exercise the PT Group Put, it shall deliver a notice to
TEM and the Company not later than 5 (five) Business Days prior to the expiry
of the PT Group Put Exercise Term, indicating that it is exercising such PT
Group Put and the number of


 


35





















 


the Company Shares that is then
owned by such PT Group (the “PT
Group Put Notice”). 
This notice will have the effect of an irrevocable exercise of the PT
Group Put.


 


(c)           In
the event the PT Group delivers the PT Group Put Notice, an Independent
Valuation shall be conducted as set forth in Sections 1.4 and 1.5 of the
Subscription Agreement, which shall take into account the following specific
rules:


 


(A)          The
Mandate Letter shall provide that the Investment Banks must complete the
Initial Valuations of the Company as of the date the PT Group Put Notice is
received by TEM, for purposes of determining the value in Euros of the PT Group
Put.


 


(B)           The
Investment Banks shall prepare neither the Company Shares Exchange Ratio
referred to in Section 1.5 of the Subscription Agreement nor the
Contribution Valuation.


 


(C)           The
Initial Valuations and the Finalized Initial Valuation of the Company shall be
based on the equity value of the Company as a going concern, without iliquidity
or minority share discount, and the valuation methodology followed to value the
Company will include a discounted cash flow, precedent transactions multiples
and trading multiples of comparable companies analysis.


 


(D)          Each
of the TEF Group and the PT Group, to the extent that it is able to do so,
shall cause the Company to provide to the Investment Banks and, if applicable,
the Third Investment Bank, reasonable access to the Company management and all
information concerning the business, assets, liabilities, operations, financial
condition and prospects of the Company and its Subsidiaries which any of the
Investment Banks reasonably request in connection with the preparation of the
valuations contemplated by this Section 6.4.  All such information shall be complete and
accurate and each of the Investment Banks and, if applicable, the Third
Investment Bank, shall be afforded equal access to such information.


 


(d)           The
purchase price to be paid by the TEF Group for the transfer to it (and/or to
the Person/s nominated by it) of the PT Group Company Shares owned by the PT
Group shall be determined by multiplying the Finalized Initial Valuation of the
Company by the percentage that such PT Group Company Shares represent over the
total issued and outstanding share capital of the Company at the time of the
delivery of the PT Group Put Notice.


 


(e)           The
Acquirer/s shall have the option to pay for the PT Group Company Shares with
(i) cash, and/or (ii) existing and/or new shares in Telefónica and/or TEM,
provided that the number of such Telefónica and/or TEM shares shall not
exceed the total number of TEF and/or TEM shares (as the case may be) traded on
the Madrid Stock Exchange and the New York Stock Exchange (ADRs converted into
shares) [***] for the PT Group Company Shares.


 


(f)            Within
twenty two (22) Business Days following the receipt by TEM of the Independent
Valuation, (provided, that exclusively for purposes of this Section 6.4,
the days falling


 


36





















 


between (i) August 1st
and August 30th (both inclusive) and (ii) December 15th
and January 15th (both inclusive), shall not be considered
Business Days), TEM shall send a written notice to the PT Group which shall
contain: (i) the kind of consideration for the payment of the PT Group Company
Shares; (ii) the Person/s appointed by TEM to act as Acquirer/s; (iii) the date
of the TEM board meeting (and/or Telefónica board meeting, if applicable) which
decided the kind of consideration for the payment of the PT Group Company
Shares; and (iv) the value per share of the TEM shares (and of the shares in
Telefónica, if applicable) calculated in accordance with Section 6.4.(l)
below.  Failure by TEM to deliver the
written notice to the PT Group in accordance with this Section 6.4.(f)
will be considered as an election of TEM to pay in cash the PT Group Company
Shares.


 


(g)           In
the event that the Acquirer/s decide to pay all or a portion of the purchase
price for the PT Group Company Shares using cash and/or existing shares in
Telefónica and/or TEM, the sale and transfer of the PT Group Company Shares
shall take place on the date notified by TEM to the PT Group, provided  that
such date shall fall within 10 Business Days after the date of the written
communication referred to in Section 6.4.(f) above, and provided
further that, in the event of payment in existing shares in Telefónica
and/or TEM, such shares shall be credited to a securities account or accounts
in Spain designated by the PT Group with the investment bank selected in
accordance with the provision of Section (B) of Exhibit II.  In the event such transfer is subject to the
prior fulfillment of any requirements and/or to the prior approval by any
regulatory agency (including, without limitation, ANATEL, CVM or any other
Governmental Authority with jurisdiction over the Company and the
Subsidiaries), the sale and transfer of the PT Group Company Shares shall be
extended until the expiration of 5 (five) Business Days after all such
requirements are fulfilled and/or all such approvals shall have been received,
provided that in this event, the relevant purchase price for the PT Group
Company Shares shall not be increased with any Cost of Carrying.  The Parties undertake to use their reasonable
efforts to fulfill any such requirements and to obtain any such regulatory
approval as soon as possible.


 


(h)           In
the event that the Acquirer/s decides to pay all or a portion of the purchase
price for the PT Group Company Shares using new shares in Telefónica and/or
TEM, the sale and transfer of the PT Group Company Shares shall take place, as
defined below, as soon as possible after (A) compliance with applicable law and
regulations, and (B) the first annual general meeting of shareholders of Telefónica
(if applicable) and/or TEM, as the case may be, convened on or after the date
of the board meetings referred to in Section 6.4.(f) above, provided
that such sale and transfer of the PT Group Company Shares shall be
performed and settled no later than [***] after the date of the written
communication referred to in Section 6.4.(f) above (taking into account
that if an annual general shareholders meeting is not going to be convened on
or after the date of the board meetings referred to in Section 6.4.(f)
above and to be held before the expiration of the aforesaid [***], an
extraordinary shareholders meeting shall be convened in order to be held within
such [***]), provided  further that if such transfer is subject to
the prior fulfillment of any requirements and/or to the prior approval by any
regulatory agency (including, without limitation, ANATEL, CVM or any other
Governmental Authority with jurisdiction over the Company and the
Subsidiaries), the sale and transfer of the PT Group Company Shares shall take
place as soon as possible after all such requirements


 


37





















 


are fulfilled and/or all such
approvals shall have been received, provided that in this event, the relevant
purchase price for the PT Group Company Shares shall not be increase with any
Cost of Carrying.  The proposed date of
sale and transfer shall be notified by TEM (or the Acquirer/s) to the PT Group
in writing.  In the event the sale and
transfer of the PT Group Company Shares in accordance with the provisions of
this Section 6.4.(h) does not take place within the [***] period provided
for herein, the relevant portion of the PT Group Company Shares shall be
purchased and sold, and the relevant portion of the purchase price for the PT
Group Company Shares shall then be paid by TEM and/or Telefónica, within 10
(ten) Business Days from the date which is [***] after the date of the written
communication referred to in Section 6.4.(f) above, provided  that,
in such event, the purchase price for the PT Group Company Shares shall be
increased in the Cost of Carrying from the date of the written communication
referred to in Section 6.4.(f) above until the date such sale and transfer
of the relevant portion PT Group Company Shares takes place, unless the delay
in the sale and purchase of the relevant portion of the PT Group Company Shares
is attributable to the PT Group.


 


On the date of sale and
transfer, the PT Group shall deliver the number of the PT Group Company Shares
equal to all or a portion, as applicable, of the purchase price to be paid in
new shares in Telefónica and/or TEM to a notary and/or to the notaries in Spain
selected by TEM and/or Telefónica (if applicable), before whom the capital
increase/s will be notarized.  Telefónica
and/or TEM shall have filed, prior to the date of sale and transfer, the
prospectus for such newly issued shares with the CNMV.


 


Telefónica and/or TEM
shall, immediately after the above mentioned delivery by the PT Group, (A) seek
to obtain the granting of a Public Deed and/or the Public Deeds evidencing the
increase and/or increases in share capital in an amount equal to the value of
the newly issued shares to be delivered and declaring the subscription and
disbursement of said shares; (B) file the Public Deed with the Mercantile
Registry of Madrid to register such share capital increase and/or share capital
increases; (C) deliver a copy of the Public Deed and/or the Public Deeds to the
SCLV and cause the SCLV to credit such shares to a securities account or
accounts in Spain designated by the PT Group with the investment bank selected
in accordance with the provision of Section (B) of Exhibit II; (D) deliver
a copy of the Public Deed to the CNMV and the Madrid Stock Exchange with a
request that such shares be admitted to listing on the Spanish Stock Exchanges
as soon as practicable; and (E) cause such shares to be listed on the Spanish
Stock Exchanges.  Thereafter, as soon as
practicable, Telefónica and/or TEM shall certify to the PT Group that the
foregoing actions have been completed.


 


In the event TEM (or the
Acquirer/s) communicated to the PT Group its intention to pay all or a portion
of the PT Group Company Shares using new shares in Telefónica and/or TEM and
(i) the shareholders’ meeting of TEM and/or Telefónica does not resolve to
increase their share capital and to issue the new shares in favor of the PT
Group in exchange of the PT Group Company Shares, or (ii) such capital increase
cannot take place due to any legal restriction, the relevant portion of the PT
Group Company Shares shall be purchased and sold, and the relevant portion of
the purchase price for the PT Group Company Shares shall then be paid by TEM
and/or Telefónica in cash and/or


 


38





















 


existing shares, within
10 (ten) Business Days from the date of the shareholders’ meeting of TEM and/or
Telefónica (as the case may be).


 


(i)            In
the event the consideration for the payment of all or a portion of the purchase
price for the PT Group Company Shares consist of existing and/or new shares in
Telefónica and/or TEM, certain provisions as set out in the Exhibit II will
apply in respect of said shares of Telefónica and/or TEM (as the case may be).


 


(j)            Unless
otherwise agreed by the PT Group and the TEF Group, where payment of all or
part of the purchase price for the PT Group Company Shares is made using new
shares in Telefónica and/or TEM, the sale and transfer of the PT Group Company
Shares pursuant to this Section 6.4 shall be effected at the registered
office of Telefónica in Spain.  In any
other case, unless otherwise agreed by the PT Group and the TEF Group, the sale
and transfer of the PT Group Company Shares pursuant to this Section 6.4
shall take place at the registered office of the Company in the Netherlands.


 


(k)           On
the date of sale and transfer, the PT Group shall deliver to the TEF Group
and/or its nominee or nominees:


 


(i)            the
PT Group Company Shares to TEM and/or the Person/s nominated by TEM, free and
clear of any and all encumbrances, by executing the relevant notarial deed of
transfer, (if payment is to be made totally or partially in newly issued shares
the corresponding PT Group Company Shares shall be delivered to the notary
and/or notaries as set forth in Section 6.4.(h) for granting the
corresponding Public Deed of capital increase),


 


(ii)           to
the extent the purchase price is paid in cash and/or existing Telefónica and/or
TEM shares, a receipt for the relevant purchase price payment (to the extent
the purchase price is paid, totally or partially, in new Telefónica and/or TEM
shares the corresponding receipt for the purchase price paid in new shares
shall be issued upon delivery of such new shares).


 


(l)            In
the event that the Acquirer/s elects to use Telefónica and/or TEM shares to pay
all or part of the purchase price for the PT Group Company Shares, those
Telefónica and/or TEM shares shall be valued [***].


 


(m)          Upon
the consummation of the transfer of the PT Group Company Shares in terms of
this Section 6.4, the PT Group shall be prevented from competing in the
Wireless Business for a period of one year following such transfer and from
hiring any Senior Executive employed by any Wireless Property, the Company or
any New Acquisition at any time during the 12 (twelve) month period prior to
the consummation of the transfer and that was not employed by the PT Group
before being employed by the Company, any Wireless Property or any New
Acquisition.  For the purposes of this
Section, “Senior Executive” shall mean any employee which reports directly to
the board of directors, the chief executive officer, the chief operating
officer, the chief financial officer or any equivalent manager or officer of
the Company, any Wireless Property or any New Acquisition.  The consummation of the sale and transfer of
the PT Group Company


 


39





















 


Shares in terms of this Section 6.4
shall constitute full, satisfactory and final compensation to the PT Group for
its participation in the Company and in any New Acquisition.


 


(n)           In
case of a valid exercise of the PT Group Put pursuant to this Section 6.4,
the TEF Group will have a call option to purchase up to 100% of that portion of
the Global Telecom Interest still not transferred to the Company.  This call right will be governed by the
provisions of Section 1.6.1 of the Subscription Agreement, provided
that references therein to “up to 50%” will be read as references to “up
to 100%”.


 


6.5          Governance and
Dilution in the Event of Listing


 


The Groups will analyse
the advisability of applying for the listing of the Company on such stock
exchanges they consider convenient.  The
governance and dilution provisions contained in this Agreement would in that
case remain applicable to the extent legally permissible, comparing the
Interest of each Group to the total Interests that the Groups hold (directly or
indirectly) in the Company’s total issued and outstanding share capital from
time to time.


 


6.6          Listing of Holding
Companies


 


Notwithstanding Section 6.5
above, unless otherwise agreed by the TEF Group and the PT Group, neither Group
shall have the right to cause the listing on any stock exchange of any
securities in any entity which holds any Company Shares as its only significant
asset and whose operations are primarily centred in Brazil.


 


SECTION 7.         FINANCIAL POLICIES


 


7.1          Financial Policies


 


The Company’s Board of
Directors shall, from time to time adopt, by resolution, financial policies to
support the achievement of the Business Plan and the Synergies and in
compliance with the Company Growth Principles.


 


7.2          Business Plan and
Financing of the Company


 


(a)           As
between the TEF Group and the PT Group, the Groups undertake to have the Board
of Directors agree on a medium term business plan up-front which, in any event,
must allow the achievement of the Company Growth Principles and provide the
Company with cash through shareholder loans, guarantees from the Groups to
institutions lending to the Company (which guarantees may carry a fee to be
charged to the Company if agreed by both Groups), or capital contributions, all
as to be resolved by the Board of Directors from time to time, to be provided
by the Groups from time to time pro-rata to their respective Interests in the
Company’s total issued and outstanding share capital.  The contribution of a Reduced Shareholder may
be proportionally higher if such Reduced Shareholder so requests to exercise
its rights hereunder to build up to 40% (forty percent) or 50% (fifty percent)
(as the case may be) in accordance with Sections 6.2 and 6.3 its Interest in
the Company’s total issued and outstanding share capital.


 


40





















 


(b)           No
Shareholder shall be under any obligation to subscribe for Company Shares to be
issued against cash, the effect on the non-subscribing Shareholder being
dilution of its interest in the Company and for the subscribing Shareholder the
right to subscribe for all or part of the Company Shares not subscribed for by
the other Shareholder.  Additionally, no
Shareholder will be under the obligation to fund the Company, or to provide
loans or parent guarantees to the Company, as set out in a Business Plan in the
event that the Directors appointed upon their nomination voted against such
Business Plan.


 


(c)           The
TEF Group and PT Group further agree that:


 


(A)          Each
Group 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 Subscription Agreement;


 


(B)           No
early repayment obligations or any other adverse consequences in respect of any
inter-company Financing (of any Group to any of the Subsidiaries or vice versa,
or of any of the Subsidiaries to another Subsidiary), 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 Subscription
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 Subscription 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.


 


7.3          GAAP


 


Books and records of the
Company shall be maintained and financial reports and statements shall be
prepared in a manner to comply with the Generally Accepted Accounting
Principles as in force under Netherlands law (“GAAP”).  If
practicable, such mutually-accepted GAAP shall not affect the ability of the
Shareholders to, as permitted by applicable laws, consolidate the Company in
their respective year-end results.  Such
GAAP principles shall remain in full force and effect until the moment that it
will be allowed under Netherlands law to apply the International Accounting
Principles (“IAS”) for the
books and records of the Company, after which moment the Company will apply IAS
for its books and records.


 


7.4          Annual Budget


 


The Company shall be
operated in accordance with an annual budget adopted or amended by the Board of
Directors in terms of Section 2.6(a)(Y)(x) above.


 


41





















 


7.5          Books of Account


 


Without detracting from Section 7.3,
the Company shall keep and maintain or cause to be kept and maintained books of
account and records in accordance with good accounting and business practice.  Such books and records shall be kept at the
registered office of the Company.


 


7.6          Reasonable Access


 


Each Shareholder or its
representatives shall, at its own expense and subject to the restrictions
imposed under Section 10 herein, be entitled to:


 


(i)            reasonable
access at reasonable times to, and the right to inspect and obtain copies of,
books and records under the control of the Company as well as of the
Subsidiaries, if any; and


 


(ii)           reasonable
access at reasonable times to, and the right to inspect and observe, the
operations of the Company as well as at the Subsidiaries, if any.


 


7.7          Management Fees*


 


The Shareholders shall
share the economic interest in any existing or future management contracts
signed by each Shareholder with any Wireless Property and New Acquisition.  For this purpose, no later than the day that
is fifteen days after the termination of each quarter (i.e. on April 15th,
July 15th, October 15th and January 15th)
of each year, TEM will send a notice to Portugal Telecom and Portugal Telecom
will send a notice to TEM (each, a “Management
Notice”), stating the amount in Euros effectively received (and
not only accrued or accounted for) up to such date by the Party delivering the
Management Notice from the Wireless Properties and the New Acquisitions and
corresponding to management fees and not already included in previous
Management Notices (the “Management Amount”),
provided that the first Management Notice shall be delivered by either
Party no later than on December 14th, 2004 and shall include all the
amount in Euros effectively received (and not only accrued or accounted for) by
the Parties up to such date corresponding to the management fees from January 1st,
2003 until the date of delivery of such first Management Notice.


 


In the event TEM or PT
disagrees with the Management Amount provided for in the Management Notice, the
disputing Party shall provide notice to the other Party within 10 Business Days
from the receipt of the Management Notice. 
In this event, the Management Amount shall be audited by the auditors of
the relevant Wireless Property or New Acquisition, at the request of any of the
Parties, and their decision shall be final and binding for the TEF Group and
for the PT Group.  Such audit shall be
finalized no later than 30 days after the dispute has been notified to the
auditors, and the TEF Group and the PT Group undertake to provide all the
information reasonably requested by the auditors in order to perform their
duty.


 










* Amended for the
purposes of this filing as of December 3, 2004.


 


42





















 


No later than 5 Business
Days after (i) the receipt by the Parties of the Management Notice (if the
Management Amount is not disputed) or (ii) after the final decision of the
auditors of the relevant Wireless Property or New Acquisition (if the
Management Amount is disputed), the Party which has received the higher of the
Management Amounts shall pay in Euros and in immediately available funds to the
other Party fifty per cent (50%) of the difference between the two Management
Amounts, to the bank account notified by the recipient Party for that purpose.


 


The Parties will
undertake their commercial reasonable efforts to ensure that any amounts owed
to the PT Group and to the TEF Group by any Wireless Properties or New
Acquisitions deriving from management agreements entered into with them shall
be paid in accordance with the provisions of the relevant agreement.


 


7.8          Financial Services


 


The Shareholders shall
procure that the Company shall contract from the TEF Group or its Affiliates
located in Brazil (subject to the agreement with the relevant member of the TEF
Group or the relevant Affiliate) on arm’s-length and “most favoured nation”
basis the financial and administrative services that are currently provided by
the TEF Group or its Affiliates located in Brazil to the TEF Wireless
Properties which both Groups declare to be aware of, and any other financial or
administrative services which the CFO may find necessary or advisable in the future.


 


SECTION 8.         NON-COMPETITION AND BUSINESS
OPPORTUNITIES


 


8.1          Non-compete


 


Except as otherwise
expressly provided for herein or in the Subscription Agreement, each Group
shall, as long as any of its members is a shareholder of the Company, refrain
from engaging, directly or indirectly through any Affiliate (other than the
Company), in any project in the Wireless Business in competition with the
Company.


 


8.2          Wireless Business
Opportunities


 


Each Group shall and
shall procure that any of their Affiliates shall promptly, fairly and fully
disclose and offer to the Company all potential acquisitions within the scope
of the Wireless Business which come to their attention, provided that if
the Board of Directors rejects a proposal for the acquisition of an Interest in
a New Acquisition the provisions of Section 1.6.2 of the Subscription
Agreement shall apply.


 


SECTION 9.         INTERESTS IN NEW ACQUISITIONS
AND FURTHER INTERESTS IN WIRELESS PROPERTIES


 


9.1          Acquisition of
Interests in New Acquisitions and Further Interests


 


The acquisition (and
transfer to the Company) of Interests in New Acquisitions and Further Interests
in Wireless Properties shall be done in accordance with the provisions of Section 1.6
of the Subscription Agreement.


 


43





















 


SECTION 10.       CONFIDENTIALITY


 


10.1        Confidential
Information


 


Each Party acknowledges
that, pursuant to this Agreement and the Subscription Agreement, it may have
access to certain information (including, without limitation, financial information
and the information contained in this Agreement and the Subscription 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.


 


10.2        Use and Disclosure


 


(a)           Each
of the Parties (a “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 Subscription Agreement,
and in facilitating the business objectives of the Company; and (ii) to keep
such information confidential and to disclose it only to officers, employees,
consultants and professional advisers and in case of a Third Party Sale as
referred to in Section 5.4 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
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 case of a Third Party Sale as referred to
in Section 5.4, has executed a confidentiality agreement on terms and
conditions not less favourable than as set out in this Agreement in favour of
the Parties.


 


10.3        Duties of the Receiving
Party


 


(a)           Each
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)           Each
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


 


44





















 


(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.


 


10.4        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 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  that insofar as possible the recipient gives the
Disclosing Party prior written notice of such disclosure so that the Disclosing
Party may intervene in the proceedings to protect the confidential nature of
the Confidential Information.


 


SECTION 11.       TERMINATION


 


11.1        Termination


 


This Agreement shall
terminate:


 


(i)            at
any time by mutual written agreement among the Parties,


 


(ii)           automatically,
upon completion of the liquidation of the Company, or


 


(iii)          automatically,
as a result of only one of the two Groups holding Company Shares, provided
that if one of the Shareholders transfers to a third party its interest in
the Company and an Assignment Agreement is executed in accordance with Section 5.4(i)
above, (A) such Assignment Agreement shall govern the relationship between the
shareholders of the Company and (B) the representations, warranties and
covenants set out in Sections 4, 5, 6, 8 and 9 of the Subscription Agreement,
shall apply with the following exceptions:


 


(x)            the
Transferring Party will be liable, indemnify and hold harmless the Non-Transferring
Party from and against all Damages asserted against or incurred, directly or
indirectly through the Company or the Subsidiaries, by the Non-Transferring
Party as a result of or arising out of any Breach; and


 


45





















 


(y)           the
representations, warranties and covenants set out in Sections 4, 5, 6, 8 and 9
of the Subscription Agreement will be considered to have been made and given to
the Company and the Non-Transferring Party will be liable, indemnify and hold
harmless the Company from and against all Damages asserted against or incurred
by the Company as a result of or arising out of any Breach.


 


Unless terminated in accordance with (i), (ii), or
(iii) above, this Agreement shall be in force, valid and binding for the period
of 25 (twenty five) years calculated from the date of the execution
hereof.  In the event no Shareholder
informs the others, by written notice, of its decision not to extend the period
of this Agreement, such notice to be delivered at least 1 (one) year in
advance, this Agreement shall be extended for an additional period of 25
(twenty five) years and thereafter, subject to the same notice provision,
subsequent periods of 5 (five) years at a time.


 


11.2        Survival of Obligations
and Liabilities


 


Any termination of this
Agreement, as aforesaid, shall not relieve any Shareholder of any obligations
and liabilities accrued prior to the date of termination, and the provisions of
Section 10 shall survive for an indefinite period of time and claims under
such Section 10 may be brought at any time irrespective of the termination
of this Agreement for any reason whatsoever.


 


SECTION 12.       COVENANTS, REPRESENTATIONS AND
WARRANTIES, REGISTRATION


 


12.1        Covenants, Representations
and Warranties of the Shareholders and the Company


 


In addition to the
representations, warranties and covenants made under the Subscription
Agreement, each of the Shareholders hereby covenants, represents and warrants
to the other Parties that:


 


(A)          It
has full power and authority to enter into this Agreement and any agreement or
instrument referred to or contemplated by this Agreement and to carry out and
perform all of its obligations and duties hereunder.


 


(B)           It
has duly obtained all corporate and regulatory authorizations necessary for the
execution and performance of this Agreement and any agreement or instrument
referred to or contemplated by this Agreement and such execution and
performance and the consummation of the transaction contemplated therein
(i) will not conflict with or result in a breach of any covenants or
agreements contained in any indenture, agreement or other instrument whatsoever
to which it is a party or by which it is bound and (ii) does not contravene any
applicable laws.


 


(C)           This
Agreement has been duly executed by it and is valid, binding and enforceable
against it in accordance with the terms of this Agreement.


 


46





















 


12.2        Survival of Covenants,
Representations and Warranties


 


Each of the Shareholders
acknowledges and agrees that its covenants, representations and warranties
shall survive for as long as this Agreement is in effect and shall be deemed to
have been repeated in full on the date of any Contribution as though made on
and as of such date.


 


12.3        Shareholders’ Register


 


The Shareholders and the
Company shall procure that the name of each Person owning any Company Shares
shall forthwith be entered in the shareholders’ register of the Company
together with the number of Company Shares held by such Person from time to
time.


 


12.4        Consent by the Company


 


The Company hereby
declares to have knowledge of and to consent to and to be bound by the terms
and conditions of this Agreement and the attachments to this Agreement.  The Company undertakes to file and keep one of
the counterparts of this Agreement and its attachments filed at its registered
office in the Netherlands.


 


SECTION 13.       GOVERNING LAW AND SETTLEMENT OF
DISPUTES


 


13.1        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.


 


13.2        Arbitration


 


(a)           If
any dispute arises in relation to this Agreement (and which shall not be
submitted to the Wise Persons Procedure in accordance with Section 4.2 of
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 of 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
will 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
arbitrator, the third arbitrator shall be appointed by the International
Chamber of Commerce.  The International
Chamber of Commerce will 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.


 


47





















 


(c)           The
Parties shall submit irrevocably to the decision of the arbitration tribunal,
giving their consent to comply with such decision and waive any other jurisdiction
which 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 expedited 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 an arbitration initiated under this Section may include monetary
damages as well as any remedy or any specific performance of the obligations
set forth herein.


 


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


 


SECTION 14.       COMMUNICATIONS


 


14.1        Communications


 


For purposes of this
Agreement the Shareholders irrevocably establish the following special
domiciles, where all notices, consents, requests, instruments, approvals and
other communications provided for herein shall be in writing and shall be
deemed validly given when delivered personally or sent by fax, certified mail,
return receipt requested, postage prepaid, to the addresses below or at such
other addresses as the Shareholders shall provide by written notice as herein
provided:


 


If to Telefónica
Móviles:


 


Attn:
Mr Antonio Hornedo Muguiro


General
Counsel


Goya
24


Madrid,
Spain


 


48





















 


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


Strawinskylaan
3105


1077
ZX Amsterdam


The
Netherlands


 


SECTION 15.       MISCELLANEOUS PROVISIONS


 


15.1        Entire Agreement


 


This Agreement (which
includes the Annexes hereto), and the other documents and agreements delivered
in connection with this Agreement and the Subscription Agreement contain the
entire agreement among the Shareholders 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 Subscription Agreement, other than as expressly
set forth in any of the aforementioned documents.


 


49





















 


15.2        Modification and
Amendment; Indexation


 


(a)           Subject
to Section 15.2(b), 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 4.2(f) and 15.7(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.


 


15.3        Waiver


 


Failure or delay on the
part of any Party hereto to exercise a right, power or privilege under this
Agreement and the Annexes hereto shall not operate as a waiver thereof, nor
shall any single or partial exercise of a right, power of privilege preclude
any other future exercise thereof.


 


15.4        Survival of Provisions


 


If any term or other
provision of this Agreement shall become invalid, illegal or incapable of being
enforced by any rule of law, or public policy, all other provisions of this
Agreement shall nevertheless remain in full force and effect.  Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the Parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the Parties as closely as possible to the extent legally
permissible.


 


15.5        Exclusive Benefit of
the Parties and the Company


 


This Agreement is solely
and exclusive for the benefit of the Parties and their respective successors
and permitted assigns, and this Agreement shall not otherwise be deemed to
confer upon or give any third shareholder or any third party any remedy, claim,
liability, cause of action or other right.


 


15.6        Bona Fide


 


The Parties acknowledge
that bona fide compliance with
this Agreement requires, in addition to the fulfilment of the specific
undertakings and obligations expressly provided for herein, that all the
Parties act in good faith and diligently in executing other actions and
decisions, and refraining 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.


 


50





















 


15.7        Penalty and Delay
Interest


 


(a)           The
Shareholders agree that any significant breach by any Shareholder of any
material obligation expressly provided for herein which does not have a
specific remedy (other than damages and/or specific performance) pursuant to
this Agreement and which is not remedied within 10 (ten) Business Days after
the receipt by the defaulting Shareholder of a written notice by the other
Shareholder stating such breach, shall place the defaulting Shareholder under
the obligation to pay the other Shareholder a penalty of [***] in addition to a
full indemnification to the non-defaulting Shareholder for the damage and the
loss of profit suffered as a consequence of such breach by the other
Shareholder.


 


(b)           In
case of breach of a payment obligation, the Shareholder in breach of its
obligations shall pay the non-defaulting Shareholder 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 Euro, increased by 2 (two) percentage points.  The delay interest will accrue on a daily
basis and shall be paid on the last business day of each calendar month; if not
paid, the accrued interest will be added to, and capitalized to become part of
the amount then due but unpaid, and will accrue additional delay interest thereinafter.


 


15.8        Counterparts


 


This Agreement will be
executed in 5 (five) counterparts, each of which shall be deemed an original
and all of which together shall constitute and be considered one and the same
Agreement.


 


15.9        Language


 


This Agreement shall be
executed in the English language.


 


15.10      Period of Time


 


When calculating the
period of time within which or following which any act is to be done or step
taken pursuant to this Agreement, the date which is the reference date in
calculating such period shall be excluded. 
If the last day of such period is not a Business Day, the period in
question shall end on the next Business Day.


 


15.11      General Interpretation


 


In this Agreement, unless
otherwise expressly stated:


 


(a)           The
words “herein”, “hereof” and “hereunder” and other similar words for reference
purposes refer to this Agreement as a whole and not to any particular Sections
or other subdivision.


 


(b)           The
headings contained in this Agreement are for convenience and reference purposes
only and shall not affect in any way the meaning or construction of this 


 


51





















 


Agreement
and are not intended to interpret, define or limit the scope, extent or intent
of this Agreement or any provision hereof.


 


(c)           Any
reference to a statute includes the regulations made pursuant thereto, all
amendments made to such statute or regulations and in force from time to time
and any statute or regulations that may be passed which have the effect of
supplementing or superseding such statute or regulation.


 


15.12      No Partnership


 


Nothing contained in this
Agreement shall be deemed to constitute either Group, the partner of the other,
nor to constitute either Group, the agent or legal representative of the other
nor to create any fiduciary relationship between the Groups.  It is not the intention of the Shareholders
to create nor shall this Agreement be construed to create any commercial or
other partnership.  Neither Shareholder
shall have any authority to act for or to assume any obligation or
responsibility on behalf of the other Shareholders except as otherwise
expressly provided herein.  The rights,
duties, obligations and liabilities of the Shareholders shall be several and
not joint or collective.  Each
Shareholder shall indemnify, defend and hold harmless each of the other
Shareholders, its directors, officers, employees, agents and attorneys from and
against any and all losses, claims, damages and liabilities arising out of any
act or any assumption of liability by the indemnifying Shareholder or any of
its directors, officers, employees, agents and attorneys done or undertaken on
behalf of the other Shareholder, except pursuant to the authority expressly
granted herein or as otherwise agreed in writing among the Shareholders.


 


15.13      Severability


 


Whenever possible, each
provision of this Agreement will 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 will be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or this
Agreement.


 


15.14      Taxes and Expenses


 


Except as otherwise
provided in this Agreement or the Subscription Agreement, Taxes and expenses
accrued or incurred in connection with this Agreement and its fulfilment will
be paid by the Shareholder legally bound to pay the relevant tax or having
incurred the relevant expense, provided that any such Tax or expense which
is due or incurred by any of the Subsidiaries shall be paid by such
Subsidiaries.


 


15.15      IPO


 


In the event of an IPO in
respect of any Company Shares, the Parties shall in good faith negotiate
appropriate amendments to this Agreement.


 


52





















 


15.16      Public Announcements


 


(a)           From
the date hereof, except as otherwise mutually agreed in writing by the Groups,
no Group shall issue any report, statement or press release or otherwise make
any public statements with respect to this 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 Groups.


 


(b)           With
respect to public communications relating to the Company, the following
principles shall apply:


 


(i)            The
Company will not [***] the financial community and [***] Investor Relations (“IR”)
team.


 


(ii)           The
Groups will coordinate and communicate any announcement concerning the Company
through their respective IR teams and Press Relations (“PR”)
teams.


 


(iii)          The
Officers will not have regular contacts with investors or analysts.  Potential meetings of the Officers with
investors and analysts will be agreed among the Groups and always [***].  The contacts with the media must be known in
advance and approved by the Groups.


 


(iv)          In
order to have [***] of the Company, the IR teams of the Groups will elaborate
the “equity story” of the Company that will be continuously updated.  This presentation, jointly with a “questions
& answers” document, that will be also updated regularly, will be the base
for any communication regarding the Company. 
In order to have the most updated information on the performance of the
Company, the Groups will maintain a direct and regular contact with the Chief
Financial Officer of the Company or with a member of his team, nominated by the
Chief Financial Officer.  This contact
could be done through a monthly conference call.


 


(v)           All
the press releases, presentations or other type of communications on the
Company will be always agreed in writing among the Groups.  The Groups will send to each other the draft
of any material communication of their respective Group mentioning the Company
(press releases, public announcements, quarterly reports, annual reports, 20-F...).  The draft will be sent by each Group to the
other Group at least 2 (two) working days prior to the announcement of the
release.  However in the event of an
annual report, 20-F, prospectus, etc., the draft will be sent by each Group to
the other Group at least 5 (five) working days prior to the announcement of the
release.


 


(vi)          All
the institutional information and official press releases must be submitted by
the PR team of the Company to the PR teams of the Groups at least 2 (two)
Business Days prior to the announcement for their eventual correction of the
same, and for their prior approval.  All
institutional and financial information regarding or referring to the Company
in the form of official communiqués (press


 


53





















 


releases), presentations or
rationales which the Company (or the Groups) are obliged to use, must be
explicitly approved by the Groups.


 


(vii)         The
IR and PR departments of the Subsidiaries [***] the Company and will [***].


 


(viii)        The
Groups will decide on the single format and content of future quarterly results
releases of the Subsidiaries.


 


15.17      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 it is a member. 
Each member of a Group shall be entitled to the rights under this
Agreement of the Group of which they are a member.


 


SECTION 16.       DEFINITIONS


 


16.1        Definitions


 


In this Agreement the
following capitalised terms shall have the respective meanings ascribed
thereto:


 


“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 Subscription Agreement.


 


“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 Shareholders Agreement and any and all Exhibits 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.


 


“Annual Budget”
has the meaning as defined in Section 7.4 of this Agreement.


 


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


 


“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 the Subscription 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 the


 


54





















 


Subscription Agreement,
to be transferred to the Company by the Groups in accordance with Section 3
of the Subscription Agreement, and “Balance Capital Contribution” means
any one of them.


 


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


 


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


 


“Business Plan”
means a description in reasonable detail of the operations to be conducted and
objectives to be accomplished by the Company for a year or any longer period.


 


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


 


“CEO” has the
meaning set forth in Section 2.8.(a) of this Agreement.


 


“Cellular Chairmen
Deadlock” has the meaning set forth in Section 4.1(a) of this
Agreement.


 


“Cellular Chairmen
Deadlock Event” has the meaning set forth in Section 4.1(b) of this
Agreement.


 


“Cellular Chairmen
Issue” has the meaning set forth in Section 4.2(f) of this Agreement.


 


“CFO” has the
meaning set forth in Section 2.8(a) of this Agreement.


 


“Chairman” has the
meaning set forth in Section 2.3(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 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


 


55





















 


(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 this
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
the Subscription Agreement.


 


“Confidential
Information” has the meaning set forth in Section 10.1 of this
Agreement.


 


“Conflicted Person”
has the meaning set forth in Section 2.1(b)(i) of this Agreement.


 


“Consensus Rule”
has the meaning set forth in Section 3.5(a)(i) 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 the
Subscription 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.


 


“COO” has the
meaning set forth in Section 2.8(a) of this Agreement.


 


“Cost of Carrying”
means:


 


(a)           in
respect of Section 3.1.2(i)(C) of the Subscription Agreement and Sections
6.2(b) and 6.3(a)(ii) of this 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,


 


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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 the Subscription 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 this 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.


 


“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.


 


“Deadlock Resolution
Procedure” has the meaning set forth in Section 4.1(a) of this Agreement.


 


“Diluted Interest”
has the meaning set forth in Section 6.1 of this Agreement.


 


“Dilution Event Above
40%” has the meaning set forth in Section 6.2 of this Agreement.


 


“Dilution Event Below
40%” has the meaning set forth in Section 6.3 of this Agreement.


 


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


 


“Disclosing Party”
has the meaning as set forth in Section 10.1 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 the Subscription Agreement (as the case may be).


 


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“Financing” has
the meaning set forth in Section 7.2(c)(A) of this Agreement.


 


“First Choice
Investment Banks” and “First Choice Investment Bank” have the
meaning set forth in Section 1.4(a) of the Subscription 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 Subscription Agreement and “Further Party” means any
one of them.


 


“GAAP” has the
meaning set forth in Section 7.3 of this Agreement.


 


“General Share Premium
Reserve” has the meaning set forth in Section 1.1(b) 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 the
Subscription 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.


 


“Group CEO’s” has
the meaning set forth in Section 4.1(a)(B) of this Agreement.


 


“Group Chairmen”
has the meaning set forth in Section 4.1(a)(B) of this Agreement.


 


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


 


“IAS” has the
meaning set forth in Section 7.3 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 Subscription 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


 


58





















 


otherwise may be required
in the given circumstances, such independent valuation to be conducted in
accordance with Sections 1.4 and 1.5 of the Subscription Agreement and by
applying the Independent Valuation Principles and such other guidelines and
criteria set forth in Exhibits I and II to the Subscription 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 the
Subscription Agreement, to be transferred to the Company by each of the Groups
in accordance with Section 2 of the Subscription 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 the
Subscription Agreement.


 


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


 


“Just Cause” means
(a) the wilful and substantial failure by the Officer or Director, as
applicable, after notice thereof, to perform his duties and responsibilities to
the Company; (b) disloyalty, gross negligence, wilful misconduct, dishonesty or
breach of fiduciary duty to the Company; (c) the commission of an act of
embezzlement or fraud; (d) the deliberate disregard of the rules or policies of
the Company which results in a material direct or indirect loss, damage or
injury, monetarily or otherwise, to the Company; or (e) the plea of guilty to,
or conviction for, the commission of a felony by the Officer or Director, as
applicable, in any jurisdiction.


 


“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.


 


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


 


“Locked-up Price”
has the meaning set forth in Section 6.2(b) of this Agreement.


 


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


 


“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-Transferring
Party” has the meaning set forth in Section 5.1 of this Agreement.


 


“Offered Shares”
has the meaning set forth in Section 5.1 of this Agreement.


 


“Officers” mean
those individuals who, from time to time, are granted written proxies, to be
deposited with the relevant trade registry, to represent the Company in the
conduct of its day to day business, and “Officer” means any one of them.


 


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


 


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


 


“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.


 


“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 this Agreement.


 


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


 


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


 


“Receiving Party”
has the meaning set forth in Section 10.2(a) of this Agreement.


 


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


 


“Right of First
Refusal” shall have the meaning set forth in Section 5.1 of this
Agreement.


 


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


 


“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 this Agreement, and “Shareholder” means any of them.


 


“Shareholders Meeting”
means a meeting of the shareholders of the Company held in accordance with the
Articles of Association, this Agreement and the Subscription Agreement.


 


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


 


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


 


“Subsidiary” means
(a) any Person which is under the direct or indirect Control of the Company,
(b) any Wireless Property or New Acquisition in which the Company directly or
indirectly holds an Interest, (c) each Person in any chain of Persons holding
the aforesaid Interest in such Wireless Property or New Acquisition, and (d)
any Person which is under the direct or indirect Control of the aforesaid
Wireless Property or New Acquisition, including, without limitation, the
sub-holding companies and the operating companies that own cellular or wireless
licenses within Brazil, listed by each of the TEF Group and the PT Group in
Exhibit IV to the Subscription Agreement.


 


“Synergies” has
the meaning set forth in Section 1.3(b) of this Agreement.


 


“Tag-Along Right”
has the meaning set forth in Section 5.1 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.


 


[***].


 


“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 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 the Subscription


 


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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 the Subscription 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.


 


[***]


 


“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 the Subscription
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.


 


“Transfer” means
any sale, assignment, transfer (including without limitation by means of a
merger, consolidation, amalgamation, spinoff and liquidation) or other form of
disposition, whether voluntary or involuntary.


 


“Transferring Party”
has the meaning set forth in Section 5.1 of this Agreement.


 


“Vice-Chairman”
has the meaning set forth in Section 2.3(a) of this Agreement.


 


“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.


 


“Wise Persons” has
the meaning set forth in Section 4.2(a) of this Agreement.


 


IN
WITNESS WHEREOF, the Parties have duly executed this
Agreement as of the day and year first above written.


 


	
   

  	
  TELEFÓNICA
  MÓVILES, S.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  



 


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  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  



 


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  PORTUGAL
  TELECOM, SGPS, S.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  PT
  MÓVEIS, SGPS, S.A.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  



 


 


	
   

  	
  BRASILCEL
  B.V.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  



 


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