Document:

QuickLinks
 -- Click here to rapidly navigate through this document

EXHIBIT 4.3  

 
 

SHAREHOLDERS AGREEMENT    
    

Dated
as of October 17, 2002 

By
and among 

TELEFÓNICA
MÓVILES, S.A., 

PORTUGAL
TELECOM, SGPS, S.A., 

PT
MÓVEIS, SGPS, S.A., 

and 

BRASILCEL
B.V., 

in
relation to 

BRASILCEL
B.V. 

        Pages
where confidential treatment has been requested are stamped 'Confidential Treatment Requested and the Redacted Material has been separately filed with the Commission', and the
confidential section has been marked with a star (*). 

 
 
 

TABLE OF CONTENTS    
    

	Section
 
	 	 
	 	Page

	1	 	SHARE CAPITAL AND BUSINESS OF THE COMPANY	 	 
	 	1.1	 	Share Capital and General Share Premium Reserve	 	4
	 	1.2	 	Company Growth Principles	 	5
	 	1.3	 	Scope of Business of the Company; Synergies	 	6
	 	1.4	 	Actions relating to Company Shares	 	6
	 	1.5	 	Exercise of Voting Rights	 	6
	2	 	BOARD OF DIRECTORS	 	7
	 	2.1	 	Governance Principles	 	7
	 	2.2	 	Composition of the Board of Directors	 	7
	 	2.3	 	The Chairman and the Vice-Chairman of the Board of Directors	 	8
	 	2.4	 	Meetings of the Board of Directors	 	9
	 	2.5	 	Place of the Board of Directors' Meetings	 	9
	 	2.6	 	Board of Directors Decisions	 	9
	 	2.7	 	Secretary and Minutes of the Board of Directors	 	11
	 	2.8	 	Officers	 	11
	 	2.9	 	Performance of the Officers	 	12
	 	2.10	 	Meetings of the Officers	 	13
	 	2.11	 	Subsidiary Governance	 	13
	 	2.12	 	Effects of Dilution on the Provisions of this Section 2	 	13
	 	2.13	 	Representation of Company	 	14
	3	 	SHAREHOLDERS MEETINGS AND RIGHTS	 	14
	 	3.1	 	Shareholders Meetings	 	14
	 	3.2	 	Call Procedure	 	15
	 	3.3	 	Chairing of Shareholders Meetings	 	15
	 	3.4	 	Shareholder Decisions	 	15
	 	3.5	 	Effects of Dilution on the Provisions of this Section 3	 	16
	4	 	CELLULAR CHAIRMEN DEADLOCK, WISE PERSONS PROCEDURE AND LIQUIDATION	 	17
	 	4.1	 	Cellular Chairmen Deadlock	 	17
	 	4.2	 	Wise Persons Procedure	 	17
	 	4.3	 	Liquidation of the Company	 	18
	5	 	TRANSFER OF SHARES	 	19
	 	5.1	 	Transfer of shares	 	19
	 	5.2	 	Permitted Transferees; Transfers in the Context of Consolidation	 	19
	 	5.3	 	Indirect Transfers	 	19
	 	5.4	 	Right of First Refusal	 	20
	 	5.5	 	Tag-Along Right	 	22
	 	5.6	 	Conditional Put	 	22
	 	5.7	 	Pre-emptive Rights	 	23
	 	5.8	 	Tax Efficiency	 	23
	 	5.9	 	Encumbrance of Company Shares	 	24
	 	5.10	 	Transfer restriction in Articles of Association, Exercise of voting rights	 	24
	6	 	DILUTION	 	24
	 	6.1	 	Dilution	 	24
	 	6.2	 	Diluted Interest Between 50% and 40%	 	24
	 	6.3	 	Diluted Interest Below 40%	 	25
	 	6.4	 	PT Group Put	 	25
	 	6.5	 	Governance and Dilution in the Event of Listing	 	29
	 	6.6	 	Listing of Holding Companies	 	29
	7	 	FINANCIAL POLICIES	 	29
	 	7.1	 	Financial policies	 	29
	 	7.2	 	Business Plan and Financing of the Company	 	29
	 	 	 	 	 

2

 

	 	7.3	 	GAAP	 	30
	 	7.4	 	Annual Budget	 	30
	 	7.5	 	Books of Account	 	30
	 	7.6	 	Reasonable Access	 	31
	 	7.7	 	*	 	31
	 	7.8	 	Financial Services	 	31
	8	 	NON-COMPETITION AND BUSINESS OPPORTUNITIES	 	31
	 	8.1	 	Non-compete	 	31
	 	8.2	 	Wireless Business Opportunities	 	31
	9	 	INTEREST IN NEW ACQUISITIONS AND FURTHER INTERESTS IN WIRELESS PROPERTIES	 	31
	 	9.1	 	Acquisition of Interests in New Acquisitions and Further Interests	 	31
	10	 	CONFIDENTIALITY	 	32
	 	10.1	 	Confidential Information	 	32
	 	10.2	 	Use and Disclosure	 	32
	 	10.3	 	Duties of the Receiving Party	 	32
	 	10.4	 	Exclusions	 	32
	11	 	TERMINATION	 	33
	 	11.1	 	Termination	 	33
	 	11.2	 	Survival of Obligations and Liabiliies	 	33
	12	 	COVENANTS, REPRESENTATIONS AND WARRANTIES, REGISTRATION	 	34
	 	12.1	 	Covenants, Representations and Warranties of the Shareholders and the Company	 	34
	 	12.2	 	Survival of Covenants, Representations and Warranties	 	34
	 	12.3	 	Shareholders' Register	 	34
	 	12.4	 	Consent by the Company	 	34
	13	 	GOVERNING LAW AND SETTLEMENT OF DISPUTES	 	34
	 	13.1	 	Governing Law	 	34
	 	13.2	 	Arbitration	 	34
	14	 	COMMUNICATIONS	 	35
	 	14.1	 	Communications	 	35
	15	 	MISCELLANEOUS PROVISIONS	 	36
	 	15.1	 	Entire Agreement	 	36
	 	15.2	 	Modification and Amendment; Indexation	 	36
	 	15.3	 	Waiver	 	37
	 	15.4	 	Survival of Provisions	 	37
	 	15.5	 	Exclusive Benefit of the Parties and the Company	 	37
	 	15.6	 	Bona fide	 	37
	 	15.7	 	Penalty and delay interest	 	37
	 	15.8	 	Counterparts	 	38
	 	15.9	 	Language	 	38
	 	15.10	 	Period of Time	 	38
	 	15.11	 	General Interpretation	 	38
	 	15.12	 	No Partnership	 	38
	 	15.13	 	Severability	 	38
	 	15.14	 	Taxes and Expenses	 	39
	 	15.15	 	IPO	 	39
	 	15.16	 	Public Announcements	 	39
	 	15.17	 	Joint and Several	 	39
	16	 	DEFINITIONS	 	40
	 	16.1	 	Definitions	 	40

	*
	Confidential treatment requested and redacted material has been separately filed with the Commission

3

   
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").

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 

4

 

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.

	(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; 

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

 

	*
	Confidential treatment requested and redacted material has been separately filed with the Commission

5

 

	(ii)
	*, 

	(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)
	*

	(d)
	*

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. 

	*
	Confidential treatment requested and redacted material has been separately filed with the Commission

6

 

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 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. 

7

 
	(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 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 

8

 

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. 

	(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,

	(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 

9

 

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;

	(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, 

10

 

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 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. 

11

 
	(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.

	(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 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. 

12

   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. 

	(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 

13

 

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.

	(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 

14

 

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.

	(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. 

15

 

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.
	

 	

(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. 

16

 

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 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 

17

 

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 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)
	*

	(c)
	*

	*
	Confidential treatment requested and redacted material has been separately filed with the Commission

18

 
	(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 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 

19

 

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

	(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)
	*

	(d)
	*

	(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.

	*
	Confidential treatment requested and redacted material has been separately filed with the Commission

20

 
	(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, if applicable, adjusted in
accordance with the Right of First Refusal Valuation as set forth above in order to make the Initial Non-Transferring Party Offer equivalent in economic value to the Third Party Offer,
shall be referred hereinafter to as the "Definitive Non-Transferring Party Offer". The Acceptance Notice shall be binding and irrevocable. 

*

	(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)
	*

	(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.

	*
	Confidential treatment requested and redacted material has been separately filed with the Commission

21

  

	(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) represents a premium of at least * over the value of the Company. Notwithstanding the above, in the event of a series of sales to the 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 *

	(b)
	*

	(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.

	*
	Confidential treatment requested and redacted material has been separately filed with the Commission

22

 
	(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 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). 

23

 

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 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. 

24

 

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 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 

25

 

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 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) *

	*
	Confidential treatment requested and redacted material has been separately filed with the Commission

26

 
	(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 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 *, 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 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. *. 

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. 

	*
	Confidential treatment requested and redacted material has been separately filed with the Commission

27

 

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 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)
	*

	*
	Confidential treatment requested and redacted material has been separately filed with the Commission

28

 
	(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 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% 

29

 

(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. 

	(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. 

30

 

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   *

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 arms-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. 

	*
	Confidential treatment requested and redacted material has been separately filed with the Commission

31

   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 (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 

32

 

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

	(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 

33

 

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. 

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 

34

 

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.

	(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:

35

 

Attn:
Mr Antonio Hornedo Muguiro

General Counsel

Goya 24

Madrid, Spain

Tel: + (34) 91 42 34 054

Fax: + (34) 91 42 34 016

E-mail: hornedo_a@telefonicamoviles.com 

If
to Portugal Telecom:

Attn:

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

Lisbon, Portugal

Tel:

Fax:

E-mail: 

If
to PT Móveis: 

Attn:

Av. 5 de Outubro, 208, 4o andar

Lisbon, Portugal

Tel:

Fax:

E-mail: 

If
to the Company: 

Attn:
General Manager

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. 

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. 

36

 
	(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. 

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.

	*
	Confidential treatment requested and redacted material has been separately filed with the Commission

37

 
	(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 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. 

38

 

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 *

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)
	*

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. 

	*
	Confidential treatment requested and redacted material has been separately filed with the Commission

39

   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 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. 

40

 

        "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

	(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. 

41

 

        "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, 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). 

        "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. 

42

 

        "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 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. 

43

 

        "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. 

        "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,  *

        "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. 

	*
	Confidential treatment requested and redacted material has been separately filed with the Commission

44

 

        "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. 

        "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. 

        *

	*
	Confidential treatment requested and redacted material has been separately filed with the Commission

45

 

        "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 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. 

	*
	Confidential treatment requested and redacted material has been separately filed with the Commission

46

 

        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:	 
	

 	
 	

By:	

 
	 	 	 	

	 	 	Name:	 
	 	 	Title:	 
	 	 	PORTUGAL TELECOM, SGPS, S.A.
	

 	
 	
By:	

 
	 	 	 	

	 	 	Name:	 
	 	 	Title:	 
	 	 	PT MÓVEIS, SGPS, S.A.
	

 	
 	
By:	

 
	 	 	 	

	 	 	Name:	 
	 	 	Title:	 
	 	 	BRASILCEL B.V.
	

 	
 	
By:	

 
	 	 	 	

	 	 	Name:	 
	 	 	Title:	 

47

QuickLinks

SHAREHOLDERS AGREEMENT

TABLE OF CONTENTSQuickLinks
 -- Click here to rapidly navigate through this document

EXHIBIT 4.4  

 
 

SUBSCRIPTION AGREEMENT    
    

Dated
as of October 17, 2002 

By
and among 

TELEFÓNICA
MÓVILES, S.A., 

PORTUGAL
TELECOM, SGPS, S.A., 

PT
MÓVEIS, SGPS, S.A., 

and 

BRASILCEL
B.V. 

In
relation to 

BRASILCEL B.V.  

        Pages where confidential treatment has been requested are stamped 'Confidential Treatment Requested and the Redacted Material has been separately filed with the
Commission', and the confidential section has been marked with a star (*). 

 

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

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

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

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

        and

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

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

RECITALS:  

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

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

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

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

2

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

        NOW,
THEREFORE, the Parties agree as follows: 

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

1.1   Shareholders Agreement, Conversion of the Company and Corporate Documents  

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

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

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

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

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

1.2   Contribution of Wireless Properties and New Acquisitions  

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

1.3   50%-50% Joint Venture, Shareholders Agreement  

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

3

 

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

1.4   Selection of Investment Banks  

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

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

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

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

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

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

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

 

	*
	Confidential treatment requested and redacted material has been separately filed with the Commission

4

 

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

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

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

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

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

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

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

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

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

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

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

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

5

 

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

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

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

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

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

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

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

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

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

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

6

 

1.5   Independent Valuation  

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

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

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

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

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

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

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

then
the exchange rate projections of the Initial Valuation of the relevant Interest in a New Acquisition (or in a Further Interest in a Wireless Property which is acquired other than through a tender
offer or a capital increase) shall be adjusted, if necessary, at the Acquisition 

7

 

Date
in order to reflect the average of the Fixing R$ / € exchange rate during the ten days period prior to the Acquisition Date. 

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

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

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

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

	(A)
	The
Third Investment Bank shall be appointed by mutual agreement between the Groups, which Groups shall jointly sign the relevant Mandate Letter, or, failing the Groups reaching such
an agreement within 15 (fifteen) days following receipt of the relevant Initial Valuations, any of the Groups shall cause the Investment Banks to appoint the Third Investment Bank and sign the
relevant Mandate Letter (such Mandate Letter to be issued in accordance with this Section 1.5(b)(iv) with substantially the same the terms and conditions of the relevant Mandate Letters
issued to the First Choice Investment Banks), and should the Investment Banks fail to make such appointment within 15 (fifteen) days following written request by any of the Groups, the Groups shall
refer the selection of such Third Investment Bank to arbitration in terms of Section 10.2 of this Agreement. Any selection by either the Investment Banks or the arbitrators shall be final and
binding on the Groups. 

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

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

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

	(A)
	adjust
the Finalised Initial Valuations at the time of transfer to the Company of such Further Interest in a Wireless Property or Interest in a New Acquisition (as the case may be), 

8

 

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

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

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

1.6   New Acquisitions and Further Interests in Wireless Properties  

1.6.1 Global Telecom  

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

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

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

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

9

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

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

	(ii)
	If:

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

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

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

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

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

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

10

  

	(f)
	In
the event of exercise by the TEF Group of the Call Right: (i) the Interests in Global Telecom (or in Telesp Celular Participações, S.A., as the
case may be) shall be transferred to the TEF Group freely tradable, free of any liens, rights in favour of third parties and other encumbrances, and (ii) the PT Group shall give to the TEF
Group (x) to the extent that same relate to the Interests in Global Telecom transferred to the PT Group, the same representations, warranties and indemnities which it received under the GT
Acquisition Agreement (the foregoing to apply except in the case where shares in Telesp Celular Participações, S.A. are received by the TEF Group in terms of
Section 1.6.1(d) above), and (y) to the extent that same relate to Global Telecom (or Telesp Celular Participações, S.A., as the case may be), the same
representations and warranties referred to in Section 5 of this Agreement. 

1.6.2 New Acquisitions pursuant Section 8.2 of the Shareholders Agreement  

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

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

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

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

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

1.6.3 Common Conditions to the New Acquisitions and Wireless Properties  

	(a)
	The
Parties agree that (i) New Acquisitions and Wireless Properties shall not be required to be kept and maintained as separate legal entities, and (ii) New Acquisitions
and Wireless Properties may merge, consolidate or amalgamate, either between them or with any other Person, before or after the transfer to the Company of the Interest acquired in the New Acquisition
or Wireless 

11

 

Property,
(as the case may be), provided that, prior to any of the same occurring and as a condition precedent thereto, the Board of Directors shall
approve such action in accordance with Section 2.6(a)(Y)(ii) of the Shareholders Agreement and the Shareholders, after a non-binding proposal submitted by the Board of
Directors, shall be required to agree in each specific case on the appropriate adjustments to be made (x) to the division of assets on Liquidation of the Company in terms of Section 4.3
of the Shareholders Agreement and (y) to the Put in Section 5.6 of the Shareholders Agreement). 

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

1.6.4 Further Interests in the Wireless Properties  

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

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

	(c)
	Before
the consummation by either Group of the acquisition of any Further Interest in a Wireless Property, the Lead Group shall give written notice to the Other Group
(i) informing it about the Further Interest Acquisition Price and all other relevant terms and conditions of the transaction, and (ii) requesting the Other Group to indicate whether it
wishes to acquire the 50% (fifty percent) Interest referred to in Section 1.6.4(b) above on the aforesaid terms and conditions. The Other Group shall have 15 (fifteen) days after the receipt of
the aforesaid notice, to inform in writing the Lead Group of its decision. In the absence of any response within the aforementioned period, the Other Group shall be deemed to have decided not to
execute such transaction.

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

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

12

 

Company
such Further Interest in a Wireless Property. Such transfer shall be performed in accordance with the following provisions: 

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

	(ii)
	In
the event that the Further Interest in a Wireless Property is acquired in terms of a capital increase by the Wireless Property and the Company decides not to
exercise its pre-emptive rights, the Company, to the extent legally permissible, will transfer to the Lead Group such pre-emptive rights, provided
that, after such capital increase is effected, the percentage shareholding of the Company and the acquiring Group in the relevant Wireless Property must, in the aggregate, not
decrease and, accordingly, the Lead Group shall be obliged to exercise so many of the pre-emption rights as is necessary to ensure that the aggregate percentage shareholding of said Group
and the Company in the relevant Wireless Property does not decrease.

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

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

1.7   Tax Optimisation of the Contributions  

	(a)
	The
Parties agree that it is in their best interest that all Contributions provided for herein be transferred by each of them to the Company in the most tax efficient manner  vis-à-vis the Company and
the Party transferring any such Contribution. The Parties will use their best efforts
to agree upon the most tax efficient manner for such transfer. In the event the Parties do not agree on such most tax efficient manner within a reasonable period of time, the Party that transfers a
Contribution to the Company in a manner which is not considered the most tax efficient manner vis-à-vis the
Company, shall promptly reimburse the Company for any amounts of 

13

 

any
taxes and related costs payable and incurred by the Company as a result of such tax inefficient transfer. Accordingly, any capital tax or other similar tax or duty which is levied on the Company
as a result of Contributions transferred to the Company (whether against further issuance of Company Shares or as informal capital contributions or otherwise), shall be reimbursed to the Company by
the Party transferring the Contribution. 

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

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

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

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

SECTION 2: INITIAL CAPITAL CONTRIBUTIONS  

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

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

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

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

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

2.2   Initial Closing: Conditions Precedent  

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

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

14

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

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

	(d)
	each
consent, authorisation and approval of any Person or any Governmental Authority (other than CADE, but including the European Union antitrust commission) or required under
applicable law shall have been obtained or the applicable requirement to obtain such consent, authorisation or approval shall have been waived;

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

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

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

2.3   Initial Closing: Deliveries  

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

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

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

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

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

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

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

        The Parties agree that, in the event that the relevant regulatory approvals for the Balance Closing are obtained before the Initial Closing takes place, an
Initial Closing shall not take place and the Parties shall, as soon as practicable after such regulatory approvals are obtained, transfer to the Company their Balance Capital Contributions, provided
that in this specific case the respective Balance Capital Contributions of each Group shall comprise those Interests held by each of the PT Group and the TEF Group in the Wireless Properties and
Global Telecom (as specified in Exhibit IV hereto) and 

15

 

(when
applicable) the corresponding amount of cash referred to in Section 3.1.1(b) below. Such transfer to the Company of the Balance Capital Contributions shall be performed in accordance with
Section 3 below. 

SECTION 3: BALANCE CAPITAL CONTRIBUTIONS AND ADDITIONAL CAPITAL CONTRIBUTIONS  

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

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

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

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

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

	(b)
	In
the event that between the date hereof and the Balance Closing any acquisition of Further Interest in a Wireless Property occurs through capital increases in any of the TEF
Wireless Properties or PT Wireless Properties without giving rise to an increase in the number of shares to be transferred directly by the relevant Group to the Company in accordance with
Exhibit IV of this Agreement (including but not limited to capital increases without issuance of new shares), the other Group, as applicable, shall contribute to the Company in Euro, at the
Balance Closing, the amount paid or incurred, directly or indirectly, in such capital increase by the relevant Group, if any, such Euro amount to be calculated using the average of the Fixing R$ /
€ exchange rates applicable on each of the days from the commencement date to the last day, both days inclusive, of the subscription period relating to the aforementioned capital
increase. Such Fixing exchange rate will be the result of multiplying the exchange rate USD / R$ PTAX Ask fixed by the Brazilian Central Bank (ticker Bloomberg: BZFXPTAX Index), by the exchange rate
€ / USD fixed by the ECB (Reuters Screen ECB37) on the applicable date. For the avoidance of doubt, capital increases by means of capitalization of
"agios" or against reserves, will not give rise to the obligation of the other Group to transfer any amount in cash to the Company.

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

16

 

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

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

	(i)
	each
Group shall transfer to the Company:

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

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

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

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

	(A)
	other
than in the case of a make-up Contribution by a Reduced Shareholder as referred to in Sections 6.1, 6.2 and 6.3 of the Shareholders Agreement, the number of Company
Shares to be issued against the transfer to the Company of the Additional Capital Contribution shall be determined using the Company Shares Exchange Ratio. If the accounting value of the aforesaid
Contribution as defined in Sections 1.6.2(e) and 1.6.4(e)(iii) above (as the case may be) exceeds the aggregate nominal value of the Company Shares issued as defined above, the difference shall
be credited to the General Share Premium Reserve; and

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

3.2   Balance Closing and Additional Closings: Conditions Precedent  

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

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

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

17

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

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

	(e)
	each
of the TEF Group and the PT Group, as applicable, shall have performed in all material respects its obligations under this Agreement required to be performed by it at or prior to
the date of Balance Closing or Additional Closing (as the case may be), provided that a Breach, shall be deemed not to be non-performance
for purposes of this Section 3.2(e);

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

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

3.3   Balance Closing and Additional Closings; Deliveries  

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

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

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

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

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

18

  

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

SECTION 4: REPRESENTATIONS AND WARRANTIES BY THE TEF GROUP  

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

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

	(b)
	shall:

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

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

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

4.1   Organisation  

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

4.2   Authorisation  

        Each member of the TEF Group is a corporation duly organised, validly existing under the laws of its country of incorporation. Each member of the TEF Group has
the legal right, capacity and corporate power and authority to execute and deliver this Agreement and the Shareholders Agreement and consummate the transactions contemplated hereby and thereby. The
execution and delivery of this 

19

 

Agreement
and the Shareholders Agreement and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorised by the board of directors of each of the members
of the TEF Group, and no other corporate proceedings on the part of same are necessary to authorise the execution, delivery and performance of this Agreement, the Shareholders Agreement or the
consummation of the transactions contemplated hereby and thereby. This Agreement and the Shareholders Agreement have been duly executed and delivered by each of the members of the TEF Group and
constitute, and each of the other agreements, documents and instruments to be executed and delivered by each of the members of the TEF Group pursuant hereto and thereto, when executed and delivered,
will constitute, valid and binding obligations of each of the members of the TEF Group, enforceable against each of the members of the TEF Group in accordance with its terms, except that such
enforcement may be subject to any applicable bankruptcy, insolvency, moratorium or similar law. 

4.3   Capital Stock  

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

4.4   Ownership of the Capital Stock  

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

4.5   Ownership and Good Title of Assets  

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

4.6   Condition and Sufficiency of Assets  

        All of the relevant Assets of the TEF Covered Assets are and will be on the date of the Initial Closing and on the date Interests in such TEF Covered Assets are
transferred to the Company at the Balance Closing and at any Additional Closing, structurally sound, are and will be in good operating condition and repair, and are and will be adequate for the uses
to which they are being put, and none of such Assets are or will be in need of maintenance and repairs that are material in nature or cost and that are out of the ordinary course of business. The
Assets of the TEF Covered Assets are and will be 

20

 

sufficient
for the continued conduct of the their businesses after each of the Closings, in substantially the same manner as conducted prior to the respective Closing. 

4.7   Consents and Approvals; No Violations  

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

4.8   Financial Statements  

        Attached in Section 4.8 of the Disclosure Schedule are copies of the audited consolidated financial statements as of and for the year ended
December 31, 2001 and copies of the reviewed, consolidated financial statements as of the period ended June 30, 2002 with respect to each of the TEF Covered Assets (the financial
statements referred to above and the accompanying notes thereto are referred to herein collectively as the "TEF Group Financial Statements"). Except as
stated otherwise in the TEF Group Financial Statements or in Section 4.8 of the TEF Group Disclosure Schedule, such TEF Group Financial Statements (a) fairly present, in all material
respects, the financial position of the TEF Covered Assets as of the respective dates thereof, all in accordance with Brazilian GAAP consistently applied throughout the period indicated; and
(b) are correct and complete in all material respects and are consistent with the books and records of the TEF Covered Assets. 

4.9   Absence of Undisclosed Liabilities  

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

21

 

4.10 Absence of Material Adverse and Other Changes  

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

4.11 Intellectual Property  

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

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

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

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

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

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

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

4.12 Litigation  

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

22

 

4.13 Compliance with Applicable Law  

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

4.14 Material Contracts and Arrangements  

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

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

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

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

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

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

4.15 Labour Matters  

        Except as set forth in Section 4.15 of the TEF Group Disclosure Schedule, none of the TEF Covered Assets is and, on the date of the Initial Closing and on
the date Interests in such TEF Covered Assets are transferred to the Company at any Additional Closing, will be a party to any collective bargaining agreement with any labour union, confederation or
association, stock option plans, profit sharing, pension, deferred compensation, bonus, severance, halth, welfare, life insurance and other fringe benefit and there are no discussions, negotiations,
demands or proposals that are pending or have been conducted or made with or by any labour union, confederation or association and there 

23

 

are
not pending against any of the TEF Covered Assets any general labour disputes, strikes or work stoppages. 

4.16 Taxes  

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

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

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

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

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

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

4.17 Certain Fees  

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

4.18 Representations and Warranties for Subsidiaries  

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

	*
	Confidential treatment requested and redacted material has been separately filed with the Commission

24

 

SECTION 5: REPRESENTATIONS AND WARRANTIES BY THE PT GROUP  

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

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

	(b)
	shall:

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

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

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

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

5.1   Organisation  

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

5.2   Authorisation  

        Each member of the PT Group is a corporation duly organised, validly existing under the laws of its country of incorporation. Each member of the PT Group has the
legal right, capacity and corporate 

25

 

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

5.3   Capital Stock  

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

5.4   Ownership of the Capital Stock  

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

5.5   Ownership and Good Title of Assets  

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

5.6   Condition and Sufficiency of Assets  

        All of the relevant Assets of the PT Covered Assets are and will be on the date of the Initial Closing and on the date Interests in such PT Covered Assets are
transferred to the Company at the Balance Closing and at any Additional Closing, structurally sound, are and will be in good operating condition and repair, and are and will be adequate for the uses
to which they are being put, and none 

26

 

of
such Assets are or will be in need of maintenance and repairs that are material in nature or cost and that are out of the ordinary course of business. The Assets of the PT Covered Assets are and
will be sufficient for the continued conduct of the their businesses after each of the Closings, in substantially the same manner as conducted prior to the respective Closing. 

27

   5.7   Consents and Approvals; No Violations  

Except
as set forth in Section 5.7 of the PT Group Disclosure Schedule with respect to items (b) and (c) below, neither the execution and delivery of this Agreement and the
Shareholders Agreement, nor the consummation by the PT Group of the transactions contemplated hereby or thereby will (a) conflict with or result in any breach of any provision of the bylaws
ofthe members of the PT Group; (b) require any filing with, or the obtaining of any permit, authorisation, consent or approval of, any governmental or regulatory authority whether within or
outside Brazil, Spain, or Portugal; (c) violate, conflict with or result in a default (or any event which, with notice or lapse of time or both, would constitute a default) under, or give rise
to any right of termination, cancellation or acceleration under, any of the terms, conditions or provisions of any note, mortgage, other evidence of indebtedness, guarantee, license, agreement
(including, but not limited to, shareholders' agreements regarding the shares of PT Covered Assets), lease or other contract or instrument or obligation to which the PT Covered Assets or any of the
members of the PT Group is a party or by which the PT Covered Assets or any equity interests in the PT Covered Assets, any of the members of the PT Group or any of their assets may be bound;
(d) result in the creation of any Lien of any kind upon the PT Covered Assets or any property or assets of any of the PT Covered Assets, or any member of the PT Group, under any debt,
obligation, contract, agreement or commitment to which it is a party or by which it is bound; or (e) violate any order, injunction, decree, statute, rule or regulation applicable to the PT
Covered Assets, or any member of the PT Group, excluding from the foregoing clauses (b), (c), (d) and (e) such requirements, conflicts, defaults, rights, security interests, claims,
Liens, charges, other encumbrances or violations which could not reasonably be expected to have a Material Adverse Effect and could not be reasonably expected to adversely affect the ability of each
of the PT Covered Assets, or the TEF Group to consummate the transactions contemplated by this Agreement free and clear of Liens. 

5.8   Financial Statements  

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

5.9   Absence of Undisclosed Liabilities  

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

27

 

5.10 Absence of Material Adverse and Other Changes  

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

5.11 Intellectual Property  

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

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

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

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

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

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

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

5.12 Litigation  

Except
as set forth in Section 5.12 of the PT Group Disclosure Schedule, there is no claim, action, suit, proceeding or governmental, administrative, arbitration or regulatory proceeding or
investigation pending or, to the Knowledge ofthe members of the PT Group, threatened against or affecting each of the PT Covered Assets, or their respective business, properties or assets by or before
any court, governmental or regulatory authority or by any third party which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect and in excess of R$
100,000 (one hundred thousand Brazilian Reais) or the equivalent in other currencies in 

28

 

respect
to claims of labour nature or in excess of R$ 500,000 (five hundred Brazilian Reais) or the equivalent in other currencies in respect to claims of any other nature. 

5.13 Compliance with Applicable Law  

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

5.14 Material Contracts and Arrangements  

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

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

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

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

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

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

5.15 Labour Matters  

Except
as set forth in Section 5.15 of the PT Group Disclosure Schedule, none of the PT Covered Assets is and, on the date of the Initial Closing and on the date Interests in such PT Covered 

29

 

Assets
are transferred to the Company at any Additional Closing, will be a party to any collective bargaining agreement with any labour union, confederation or association, stock option plans, profit
sharing, pension, deferred compensation, bonus, severance, health, welfare, life insurance and other fringe benefit and there are no discussions, negotiations, demands or proposals that are pending or
have been conducted or made with or by any labour union, confederation or association and there are not pending against any of the PT Covered Assets any general labour disputes, strikes or work
stoppages. 

5.16 Taxes  

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

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

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

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

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

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

5.17 Certain Fees  

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

	*
	Confidential treatment requested and redacted material has been separately filed with the Commission

30

 

5.18 Representations and Warranties for Subsidiaries  

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

SECTION 6: COVENANTS  

6.1   Conduct of Business  

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

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

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

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

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

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

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

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

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

	(vii)
	decrease
its capital stock or declare, set aside or pay any dividend or other distribution (whether in cash, assets, stock or a combination thereof) in respect of any of its capital
stock or profit reserves (other than dividend payments made due to the applicable requirements 

31

 

according
to the applicable Brazilian laws and by-laws of those of its Covered Assets or New Acquisition or subsidiary thereof (as the case may be), which have as minority shareholders or
preferred shareholders Persons which are not part of either Group, provided that 50% (fifty percent) of the difference between the aggregate amount of
any such dividend payments which are received by members of the PT Group in Euros and the aggregate amount of any such dividend payments which are received by members of the TEF Group in Euros, shall
be paid to the other Group at the Balance Closing by the Group having received the highest of such aggregate amount of dividends); 

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

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

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

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

6.2   Access to Information  

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

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

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

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

6.3   Consents  

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

32

 

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

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

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

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

6.4   Best Efforts to Consummate Transactions  

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

6.5   Public Announcements  

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

6.6   Acquisitions  

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

	(a)
	such
Group shall:

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

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

33

 

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

6.7   Financing  

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

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

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

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

34

   6.8   Global Telecom contract; representations and warranties  

	(a)
	Portugal
Telecom shall, and shall procure that Telesp Celular Participações, S.A. shall, fully comply with the contract "Promessa
Irrevogável de Compra e Venda de Ações", dated 13 January 2001 and more particularly undertakes that either Telesp Celular
Participações, S.A. or itself acquires all the shares in Global Telecom in order to become the owner of the Global Telecom Interest.

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

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

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

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

SECTION 7: TERMINATION OF AGREEMENT  

7.1   Termination  

This
Agreement may be terminated: 

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

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

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

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

	(ii)
	the
consummation of the Initial Closing or Balance Closing (as the case may be), would be impossible (if the breach were to persist) and the PT Group fails to remedy such breach 

35

 

within
30 (thirty) days of receipt of a notice from the TEF Group calling upon the PT Group to remedy such breach, 

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

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

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

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

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

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

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

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

	(b)
	if
the Interests held by any of the Groups in the Wireless Properties referred to in Exhibit IV hereto, have not been fully transferred to the Company, each of the Groups shall
have the right to gradually buy from the other Group or from the Company, and the obligation to sell and transfer within the 6 (six) months following receipt of notice from the other Group making the
request to buy, the maximum percentage allowed by regulatory authorities from time to time, up to 25% (twenty-five percent) of the respective voting ownership of the PT Group and the TEF
Group in Selected Wireless Properties based on an Independent Valuation, as well as to appoint the corresponding representatives in each board of directors, as long as such appointment does not
violate regulatory provisions, provided that if such transfer is subject to the prior (i) fulfilment of legal or regulatory requirements, and/or
(ii) approval by any regulatory agency (including, without limitation, ANATEL, CVM or any other Governmental Authority with jurisdiction over the Company and the Subsidiaries), the time period
during which such transfer may be consummated shall be extended until the expiration of 15 (fifteen) Business Days after all such requirements have been fulfilled and/or such approvals have been
received. This transaction shall be carried out in the most efficient manner for tax purposes. The notice referred above shall be sent within 2 (two) months from the earlier event determining the
possibility of exercising the cross-selling right. Termination of this Agreement pursuant to this Section 7.2 shall not affect the right to exercise the Call Right provided for in
Section 1.6.1 hereof, which may be exercised by the TEF Group during the 2 (two) month period set forth in this Section 7.2(b). 

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

	(a)
	In
the case of occurrence of an event set forth in Section 7.1(c) or (d) above, (i) the Parties shall procure that the Company shall be immediately liquidated
pursuant to the provisions of Section 4.3 of the Shareholders Agreement if any Interest in any Wireless Property or New Acquisition has been totally or partially transferred to the Company, and
(ii) if the Interests held by any of the Groups in the Wireless Properties referred to in Exhibit IV hereto, have not been 

36

 

fully
transferred to the Company, the non-defaulting Group under the relevant section (the "Non-Defaulting Group") shall have
the right to acquire from the defaulting Group under such section (the "Defaulting Group") an interest equal to 35% (thirty-five percent) of
the voting ownership in the Selected Wireless Properties of such Defaulting Group (the "Penalty Shares") at a price equal to (A) the value of
such interest in the Wireless Properties as determined by an Independent Valuation to be conducted pursuant to Sections 1.4 and 1.5 above, minus (B) a 20% (twenty percent) discount on such
value. 

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

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

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

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

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

8.1   Agreement to Indemnify  

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

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

37

 

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

(a
"Breach"), provided that, the Parties agree that: 

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

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

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

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

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

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

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

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

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

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

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

38

 

8.2   Survival of Representations, Warranties and Covenants  

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

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

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

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

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

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

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

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

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

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

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

8.3   Limitation to the Obligation to Indemnify  

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

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

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

	(c)
	the
net amount (after deducting any related taxes, costs and expenses) received by the Company and any of the Covered Assets from a third party (or insurers, including insurance
companies) as a 

39

 

result
of the same matter giving rise to the Damages, shall be taken into account in calculating the liability of the Indemnitor hereunder. 

8.4   Indemnification Procedure  

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

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

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

SECTION 9: BONA FIDE AND PENALTY  

9.1   Bona fide  

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

40

 

hereunder.
The Parties expressly undertake to proceed as appropriate for the bona fide compliance with this Agreement. 

9.2   Penalty and Delay Interest  

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

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

SECTION 10: APPLICABLE LAW AND SETTLEMENT OF DISPUTES  

10.1 Governing Law  

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

10.2 Arbitration  

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

	(b)
	There
shall be 3 (three) arbitrators, with each Group appointing 1 (one) arbitrator, who shall accept its appointment within 15 (fifteen) days, and who collectively shall select a
third arbitrator as chairman within 15 (fifteen) days from the acceptance of their appointments. If the two appointed arbitrators do not agree on the selection of the third arbitrator, the third
arbitrator shall be appointed by the International Chamber of Commerce. The International Chamber of Commerce shall also appoint the arbitrator for one Group if such Group fails to appoint the
arbitrator within 30 (thirty) days of the written notification to such Group by the other Group of the beginning of the arbitration proceeding. The language to be used in the arbitration proceedings
shall be English.

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

	*
	Confidential treatment requested and redacted material has been separately filed with the Commission

41

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

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

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

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

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

SECTION 11: NOTICES  

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

If
to TEM: 

Attn:
Mr Antonio Hornedo Muguiro

General Counsel

Goya 24

Madrid, Spain

Tel: + (34) 91 42 34 054

Fax: + (34) 91 42 34 016

E-mail: hornedo_a@telefonicamoviles.com 

If
to Portugal Telecom: 

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

Lisbon, Portugal

Tel:

Fax:

E-mail: 

If
to PT Móveis: 

Attn:

Av. 5 de Outubro, 208, 4o andar

Lisbon, Portugal

Tel:

Fax:

E-mail: 

42

 

If
to the Company: 

Attn:
General Manager

Attn: General Manager

Strawinskylaan 3105

1077 ZX Amsterdam

The Netherlands 

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

SECTION 12: ASSIGNMENT; ENTIRE AGREEMENT; JOINT AND SEVERAL  

12.1 Assignment  

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

43

   12.2 Entire Agreement  

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

12.3 Joint and Several  

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

12.4 Modification and Amendment; Indexation  

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

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

SECTION 13: CONFIDENTIALITY  

13.1 Confidential Information  

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

13.2 Use and Disclosure  

Each
Party (the "Receiving Party") agrees in relation to any Confidential Information of any other Party: (i) to use such Confidential
Information solely for the purposes contemplated in this Agreement and the Shareholders Agreement, and in facilitating the business objectives of the Company; (ii) to keep such information
confidential and to disclose it only to officers, employees, consultants and professional advisers and in the case of a Third Party Sale as referred to in Section 5.4 of the Shareholders
Agreement, to such Third Party, who (A) have a need to know 

44

 

(and
only to the extent that each has a need to know); (B) are aware that the Confidential Information should be kept confidential; (C) are aware of the Receiving Party's undertakings in
relation to such information in terms of this Agreement; (D) have been directed by the Receiving Party to keep the Confidential Information confidential; and (E) in the case of a Third
Party Sale as referred to in Section 5.4 of the Shareholders Agreement, has executed a confidentiality agreement on terms and conditions not less favourable than those set out in this Agreement
in favour of the Parties. 

13.3 Duties of Receiving Party  

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

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

13.4 Exclusions  

The
foregoing obligations of confidentiality shall not apply to, nor restrict the use of data or Confidential Information which: (i) was already in the rightful possession or control of the
recipient at the time of disclosure and not subject to an obligation of confidentiality on such party, and of which the recipient has evidence so to prove; (ii) the recipient thereafter
develops independently and has evidence of such development; (iii) was received from a third party who was entitled to disclosure; (iv) was necessary financial and/or other information
provided by the Party to prospective financiers and/or investors but only if such information was given subject to the execution of the appropriate confidentiality agreement(s) with the receiving
party(ies); (v) was or became known or available to the public or to the trade without fault of the recipient, except that, even in such instance, the recipient shall not disclose any
correlation between such Confidential Information or techniques and any such unrestricted information; (vi) is required to be disclosed under law or rules applicable to the Party or as a result
of a court order not subject to appeal, provided insofar as possible the recipient gives the Disclosing Party prior notice of such disclosure so that the Disclosing Party may intervene in the
proceedings to protect the confidential nature of the Confidential Information. 

45

 

13.5 Survival of Certain Obligations  

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

SECTION 14: SEVERABILITY  

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

SECTION 15: LANGUAGE  

This
Agreement shall be executed in the English language. 

SECTION 16: DEFINITIONS  

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

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

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

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

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

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

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

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

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

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

46

 

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

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

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

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

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

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

"CADE" means the Conselho Administrativo de Defesa Econômica. 

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

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

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

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

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

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

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

"CNMV" means Comisión Nacional del Mercado de Valores of Spain. 

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

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

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

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

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

47

 

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

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

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

"Cost of Carrying" means: 

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

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

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

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

"CVM" means the Brazilian Comissão de Valores Mobiliários. 

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

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

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

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

"ECB" means the European Central Bank. 

"Euro" or "€" means the European lawful currency. 

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

48

 

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

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

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

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

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

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

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

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

49

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

"Global Telecom" means the New Acquisition Global Telecom, S.A. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

50

 

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

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

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

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

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

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

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

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

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

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

	(b)
	do
not qualify as a Wireless Property, 

which
are (to be) acquired by either one or both of the Groups or by the Company, *. 

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

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

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

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

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

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

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

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

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

	*
	Confidential treatment requested and redacted material has been separately filed with the Commission

51

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

*

	*
	Confidential treatment requested and redacted material has been separately filed with the Commission

52

 

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

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

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

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

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

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

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

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

*

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

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

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

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

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

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

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

	*
	Confidential treatment requested and redacted material has been separately filed with the Commission

53

 

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

	SIGNED by
[                                         
       ]	 	 
	 	 	

	

SIGNED by
[                                         
       ]	
 	

 
	 	 	

	

SIGNED by
[                                         
       ]	
 	

 
	 	 	

	

on behalf of:	
 	

 
	
TELEFÓNICA MÓVILES, S.A.	
 	

 
	

SIGNED by
[                                         
       ]	
 	

 
	 	 	

	

on behalf of:	
 	

 
	
PORTUGAL TELECOM, SGPS, S.A.	
 	

 
	

SIGNED by
[                                         
       ]	
 	

 
	 	 	

	

on behalf of:	
 	

 
	
PT MÓVEIS, SGPS, S.A.	
 	

 
	

SIGNED by
[                                         
       ]	
 	

 
	 	 	

	

on behalf of:	
 	

 
	
BRASILCEL B.V.	
 	

 

54

QuickLinks

SUBSCRIPTION AGREEMENT

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00053-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00053-of-00352.parquet"}]]