1
Exhibit 10.8
TELEFONICA TERRA NETWORKS
AGREEMENT FOR PROVISION OF SERVICES
This Agreement for the Provision of Services is entered into by and between:
(i) TELEFONICA DEL PERU, S.A.A., identified under no. 10001749 of the Unified
Taxpayers Registry (Registro Unico de Contribuyentes - RUC), with
corporate offices at Xxxxxxx Xxxxxxxx 0000, Xxxxx Xxxxxxx, in the province
and department of Lima, Peru; represented herein by Xxxx Xxxxx Xxxx
Xxxxxxxx, in his capacity as General Manager, as authorized in a special
power of attorney bearing on this agreement, and identified with Alien
Identification Card No. N-87010; hereinafter referred to as "TELEFONICA."
(ii) TERRA NETWORKS PERU S.A., identified under no. 43280716 of the Unified
Taxpayers Registry (Registro Unico de Contribuyentes - RUC), with
corporate offices at in the city of Lima, Peru; represented herein by
Xxxxxx Xxxxx Xxxxxxx Xxxxx, in his capacity as General Manager, identified
with Voter Registration Card No. 07866791, who states that he has
sufficient authority to enter into this agreement; hereinafter referred to
as "TNP."
In addition, the following are also parties to the agreement to the effects
indicated within the body of the agreement.
(iii) TELEFONICA SERVICIOS INTERNET S.A.C., identified under no. 30753850 of the
Unified Taxpayers Registry (Registro Unico de Contribuyentes - RUC); with
corporate offices at Xxxxxxx Xxxxx Xxxxxxx 000, Xxxxxx 000, Xxxxx Xxxx,
Xxxx 0, San Isidro, Lima, represented herein by Xxxxx Xxxxxx Xxxxxxxx,
Peru, who states that he has sufficient authority to enter into this
agreement, and is identified with Alien Identification Card No. 97536;
hereinafter referred to as "TSI."
(iv) TERRA NETWORKS, S.A., a corporation founded under the laws of Spain,
identified under Tax ID No. A-82/196060, with corporate offices at Via de
las 2 Xxxxxxxxx Xx. 00, Xxxxxxx xx Xxxxxxx (Xxxxxx) 00000 Xxxxx,
represented herein by Xxxx Xxxxx Xxxxx de Buruaga in his capacity as
Chairman and Chief Executive, identified with National ID Card No.
14801736-W, who warrants that he has sufficient authority to enter into
this agreement; hereinafter referred to as "TERRA NETWORKS."
This Agreement for the Provision of Services is entered into according to the
following terms and conditions:
2
BACKGROUND
ONE. - ON TELEFONICA, TSI AND TNP
1.1 TELEFONICA is a publicly held corporation dedicated to providing a wide
range of public telecommunications services in Peru, either directly or
indirectly through its subsidiaries. These services include long distance
carrier services, local fixed phone service (domestic and international),
cable television service, and mobile telephony service, among others.
TELEFONICA disposes of all administrative licenses required for carrying
out the activities listed in this paragraph.
1.2 TSI is a subsidiary of TELEFONICA, founded as part of the latter's
strategy for providing value added services. For the purposes of this
agreement, the listed services shall hereinafter be referred to as the
"Internet Services."
In conducting its commercial activities, TSI provides Internet Services
(hereinafter, for the purposes of this agreement, the listed services
shall be referred to as the "INTERNET SERVICES"), not including what is
known as a "Portal," to two clearly defined market segments: (i) the
market consisting of corporate customers (including companies using
INTERNET SERVICES), and (ii) the market including residential customers.
TSI warrants that each line of business is conducted independently, as
demonstrated in the customer breakdown, listing the customers that belong
to each of these market segments.
1.3 Within the overall framework of the global strategies designed for the
various companies making up the Grupo Societario Telefonica, S.A.
(hereinafter, referred to as the "Telefonica Group"), including the
parties hereto, it was decided that it was in the interest of all
concerned to develop the residential user market on an integrated basis
worldwide. For this reason, a decision was made to run the services to be
offered to this market through a specific worldwide corporate sub-group,
owed by the Telefonica Group, and to this end, TERRA NETWORKS was founded.
TERRA NETWORKS is responsible for developing market activities in the
various countries where the Telefonica Group operates, either directly or
through its affiliates or subsidiaries, for INTERNET SERVICES aimed at
residential users and small business markets, known as "small offices/home
offices" (hereinafter, "SOHOs"). Telefonica and the other parties
understand that the growth strategy for these markets, as defined, will
allow for economies of scale in the provision of INTERNET SERVICES.
1.4 TNP is an affiliate of TERRA NETWORKS devoted to providing interactive
services over the Internet aimed at the residential user market
(hereinafter, the "TNP Business"). TNP does not offer its value added
activities in the corporate customer market segment.
1.5 For the purposes of this agreement, it shall be understood that the
residential user market consists of (i) individuals who at the time of
contracting for the INTERNET SERVICES, and for as long as they remain
users of such services, have no intention of using the services, nor do
they currently use them to carry out commercial activities related to
providing goods or services of any type; and (ii) individuals,
telecommuters and self-
3
employed professionals who have the intention to use the INTERNET SERVICES
from their homes for carrying out commercial activities related to
providing goods or services.
TWO. - REPRESENTATIONS AND WARRANTIES
2.1 In its execution of the overall strategy set by the companies making up
the Telefonica Group, TELEFONICA, understanding it to be in its best
interest, has therefore decided to restrict its activities to providing
INTERNET SERVICES for corporate customers (for the purposes herein,
corporate customers shall include any individual or legal entity not
included in the definition given under paragraph 1.5). To this end, and in
accordance with the business strategy designed by TELEFONICA, it shall
cease developing or offering Internet Services to residential customers.
2.2 In view of the Parties' shared interests, they are entering into this
Agreement for the Provision of Services under the terms and conditions set
forth below.
PURPOSE AND TERM OF THE AGREEMENT
THREE. - RULES GOVERNING CONTENT
By entering into this Agreement, TELEFONICA agrees to institute or not to
institute on TNP's behalf the services listed below. In exchange for these
services, TNP shall be obligated to pay TELEFONICA the amount indicated under
Clause Six, paragraph 6.1 herein.
The services TELEFONICA will perform on TNP's behalf are listed below:
3.1 Service to be performed - TELEFONICA shall provide the telecommunications
services to TNP that it needs to carry out its activities, and it shall do
so as a whole under the most favorable terms it offers.
3.2 Service to be performed - TELEFONICA shall grant TNP, either directly or
through its subsidiaries, the right to use its cable broadcast network
under the terms mutually agreed upon in the respective contracts, so that
TNP may offer the TNP Business to users of the cable broadcast service.
3.3 Service not to be performed - By this agreement, TELEFONICA promises TNP
that it will not set up INTERNET SERVICES, either directly or through its
affiliates or subsidiaries, aimed at residential users.
Both Parties to the Agreement expressly agree that the effective performance of
the services to be performed by TELEFONICA, as mentioned under paragraphs 3.1
and 3.2 of this Clause, shall give rise to TNP's obligation to pay, in addition
to the consideration it undertakes herein, the specific remuneration on a case
by case basis that the parties may agree to from time to time.
4
The Parties expressly warrant that in no case may it be construed hereby that
TELEFONICA assigns any real or moveable property, whether it be tangible or
intangible, or liabilities or contractual relationships related to any type of
business (in particular, the INTERNET SERVICES). This agreement does not imply
that any agreement will be entered into for the sale or purchase of assets or
the conveyance of business between TELEFONICA and TNP.
FOUR. - TERM OF THE AGREEMENT
This agreement shall extend for a term of ten years following the date of its
execution.
FIVE. - AUTOMATIC RENEWAL
In the absence of any notice to terminate the agreement given by either Party no
later than fifteen (15) days prior to the expiration of the term or any
extension thereto, the agreement shall be successively and automatically renewed
for additional terms of one year each.
RELATIONSHIP AND OBLIGATIONS OF THE PARTIES
SIX. - OBLIGATIONS OF TNP
The Parties agree that TNP shall have the obligations set forth below:
6.1 To pay consideration in a single payment amounting to and under no
circumstances less than the amount of US$25,000,000 (twenty-five million
00/100 United States dollars).
The consideration referred to in this section shall include neither the
General Sales Tax (Impuesto General a las Ventas - IGV) nor the Municipal
Promotion Tax (Impuesto de Promocion Municipal - IPM). Both taxes shall be
added to the consideration that must be paid by TNP. Likewise, in the
event that on the payment date any tax were to be levied on the
consideration, said tax shall be paid entirely by TNP, even when the
taxpayer or the economic subject were TELEFONICA, in which case, the
consideration must be readjusted so that TELEFONICA is always paid the
amount agreed in the previous paragraph.
TNP undertakes to pay the consideration no later than December 15, 1999.
The payment shall be made in cash in United States dollars in accordance
with the terms of Article 1237 of the current Civil Code.
6.2 To pay the consideration by making a deposit to the TELEFONICA bank account:
Beneficiary: Telefonica del Peru, S.A.A.
Account Number:
Bank:
Address:
ABA Number:
5
6.3 Not to offer for its own account, either directly or indirectly, or to
hold shares in legal entities or take part in associations that offer or
develop INTERNET SERVICES for customers other than residential users.
To this end, TNP shall not be allowed to provide or offer INTERNET
SERVICES, either on its own or through branches or subsidiaries, to third
parties other than those included in the market segment consisting of
residential users, nor shall it be a partner, shareholder or member in any
kind of association, corporation or business collaboration agreement that
provides INTERNET SERVICES to third parties other than those included in
the market segment consisting of residential users. The ban set out in
this paragraph affects the entire territory of Peru only and does not
include the TNP Business.
In the event that TNP wishes to provide INTERNET SERVICES for customers
other than those included in the residential user market segment, it must
apply to TELEFONICA for the appropriate permission. The appropriate
permission must be set out in writing and signed by both Parties.
6.4 TNP also undertakes not to develop or take part, whether directly or
indirectly, in any business, corporation, association or group whose
purpose is to provide telecommunications services that at any time are or
may be in competition with those provided by TELEFONICA. In the event that
TNP were to intend to carry on any business that is likely to compete with
the services provided directly or indirectly by TELEFONICA, it must apply
to TELEFONICA for permission, and TELEFONICA may decide, entirely at its
own discretion, whether or not there might be any conflict of competition
arising out of its contractual relationship with the TELEFONICA Group.
Depending on the case, TELEFONICA shall either bar TNP from carrying on
such business or else set the most suitable corporate structure and
conditions for avoiding the competition conflicts described above.
6.5 To use only the telecommunications infrastructure and services provided by
TELEFONICA and/or its affiliates and subsidiaries and which TNP needs to
contract and use in order to carry on its activities, under the terms laid
down in Clause Three, paragraphs 3.1 and 3.2 and in the next to last
paragraph of Clause Three hereof. Accordingly, TNP shall, under the terms
hereof, be prevented from contracting for use of such telecommunications
infrastructures and services with any suppliers other than TELEFONICA and
its respective affiliate or subsidiary companies, provided that they are
offered on terms that are economically and technologically competitive.
Should this not be the case, the parties shall jointly agree on the best
way of attaining such conditions. In the event that TELEFONICA were not to
provide the services that may at any time be required by TERRA, the
parties shall make every effort to implement said services as quickly as
possible.
SEVEN. - OBLIGATIONS OF TELEFONICA
The Parties agree that TELEFONICA shall have the obligations set forth below:
6
Not to offer INTERNET SERVICES directly or indirectly to residential customers.
To this end, TELEFONICA shall not be allowed to provide INTERNET SERVICES,
either on its own or through branches or subsidiaries, to third parties in said
market segment. The ban set out in this paragraph affects the entire territory
of Peru.
In the event that TELEFONICA wishes to provide INTERNET SERVICES for customers
in the residential user market segment, it must apply to TNP for the appropriate
permission. The appropriate permission must be set out in writing and signed by
both Parties.
EIGHT. - OBLIGATIONS OF TERRA NETWORKS
The Parties agree that TERRA NETWORKS shall have the obligations set forth below
in reference to the territory of Peru:
8.1 Not to offer for its own account, either directly or indirectly, INTERNET
SERVICES for customers other than residential users.
To this end, TERRA NETWORKS shall not be allowed to provide or offer
INTERNET SERVICES, either on its own or through branches or subsidiaries,
to third parties other than those included in the market segment
consisting of residential users. The ban set out in this paragraph affects
the entire territory of Peru only.
In the event that TERRA NETWORKS wishes to provide INTERNET SERVICES for
customers other than those included in the residential user market
segment, it must apply to TELEFONICA for the appropriate permission. The
appropriate permission must be set out in writing and signed by both
Parties.
8.1 TERRA NETWORKS also undertakes not to develop or take part, whether
directly or indirectly, in any business, corporation, association or group
whose purpose is to provide telecommunications services that at any time
are or may be in competition with those provided by TELEFONICA. In the
event that TERRA NETWORKS were to intend to carry on any business that is
likely to compete with the services provided directly or indirectly by
TELEFONICA, it must apply to TELEFONICA for permission, and TELEFONICA may
decide, entirely at its own discretion, whether or not there might be any
conflict of competition arising out of its contractual relationship with
the Telefonica Group. Depending on the case, TELEFONICA shall either bar
TERRA NETWORKS from carrying on such business or else set the most
suitable corporate structure and conditions for avoiding the competition
conflicts described above.
8.2 To use only the telecommunications infrastructure and services provided by
TELEFONICA and/or its affiliates and subsidiaries and which TERRA NETWORKS
needs to contract and use in order to carry on its activities, under the
terms laid down in Clause Three, paragraphs 3.1 and 3.2 and in the next to
last paragraph of Clause Three hereof. Accordingly, TERRA NETWORKS and its
affiliate or subsidiary companies operating in Peru shall, under the terms
hereof, be prevented from contracting the use of
7
such telecommunications infrastructures and services with any suppliers
other than TELEFONICA and its respective affiliate or subsidiary
companies.
NINE. - NATURE OF THE SERVICES PROVIDED
The Parties expressly state that the services provided that are the object of
this Agreement shall under no circumstances imply any transfer of secret or
other knowledge of a technical, economic, financial or any other nature
regarding TELEFONICA'S commercial or industrial experience. Thus, this Agreement
shall not entitle any of the parties to be paid royalties under any heading.
TEN. - RELATIONSHIP BETWEEN THE PARTIES
The Parties expressly agree that this Agreement, by its very nature, does not
give rise to any labor-related rights or benefits between the contracting
parties, nor between the contracting parties and the workers and/or employees of
all the other contracting parties. Accordingly, each Party must pay their
remuneration and social security contributions and benefits.
ELEVEN. - CONFIDENTIALITY
The Parties expressly agree that all the information provided by TNP to
TELEFONICA during the term of this Agreement, relating to its business, shall be
deemed to be confidential. TELEFONICA, therefore, agrees to keep such
information confidential and not to disclose it, and to do so with the care that
it normally uses to safeguard its own information of similar importance.
Thus, TELEFONICA may not, under any circumstances, use such information for its
own benefit or disclose it to third parties, either while this Agreement is in
force or after it terminates.
TERMINATION OF THE CONTRACT
TWELVE. - CAUSES FOR TERMINATION ATTRIBUTABLE TO TELEFONICA
The following causes for termination shall, in accordance with the terms of
Article 1430 of the Civil Code, be attributable to TELEFONICA:
12.1 If TELEFONICA files for insolvency or a petition is made by a third party
to have it declared insolvent, or it applies for a Preventive Meeting of
Creditors which might affect the obligations it has entered into
hereunder, or it admits in writing that it is unable to pay two-thirds
(2/3) of the debts due to third parties, or it were required to set up a
trust for the benefit of its creditors, or it decides to dissolve in
accordance with the General Corporations Act, or, in general, in the event
that, for any reason, it were unable to carry on its corporate purpose.
8
12.2 If TELEFONICA breaches its obligation not to take part in legal entities
or associations that provide INTERNET SERVICES for residential users, laid
down in Clause Seven, paragraph 7.1.
THIRTEEN. - CAUSES FOR TERMINATION ATTRIBUTABLE TO TNP
The following causes for termination shall, in accordance with the terms of
Article 1430 of the Civil Code, be attributable to TNP:
13.1 If TNP fails to pay the remuneration set in Clause Six, paragraph 6.1
hereof.
13.2 If TNP files for insolvency or a petition is made by a third party to have
it declared insolvent, or it applies for a Preventive Meeting of Creditors
which might affect the obligations it has entered into hereunder, or it
admits in writing that it is unable to pay two-thirds (2/3) of the debts
due to third parties, or it were required to set up a trust for the
benefit of its creditors, or it decides to dissolve in accordance with the
General Corporations Act, or, in general, in the event that, for any
reason, it were unable to carry on its corporate purpose.
13.3 If the present shareholders of TNP lose control over TNP.
FINAL PROVISIONS
FOURTEEN. - HEADINGS
The headings used in each Clause are for reference purposes only and shall not
be construed to have any effect on the content or scope of this Agreement.
FIFTEEN. - WAIVERS
Any failure to exercise a right shall not entail a waiver thereof.
SIXTEEN. - APPLICABLE LAW
This Agreement shall be construed and governed in accordance with the current
law of the Republic of Peru.
SEVENTEEN. - PARTIAL INVALIDITY
In the event that any stipulation or agreement herein is deemed to be invalid or
unenforceable by any arbitration award rendered under the terms of the
Agreement, or by any competent court, said decision shall not affect the
validity of any other provision of this Agreement, provided that they can be
separated.
9
EIGHTEEN. - EXPENSES
Each Party shall pay the expenses it has incurred for preparing, formalizing and
carrying out this Agreement, including the respective notary's expenses. The
above notwithstanding, TNP shall refund TELEFONICA up to a net amount of
US$4,000.00 (Four thousand 00/100 United States dollars) at the simple request
of TELEFONICA.
NINETEEN. - ADDRESS FOR NOTICES
Any notices sent to any of the Parties and to TSI shall be deemed to have been
validly received by the other party if (i) it is delivered in person or sent by
a messenger, courier or similar service; or (ii) it is sent by fax with
acknowledgement of receipt, on the date of delivery, to the addresses given
below:
To TELEFONICA:
Xx. Xxxxxxxx 0000, xxxx 0
Xxxxx Xxxxxxx
Xxxx, Xxxx
Attn.: General Manager
To TNP:
Av._____________________
________________________
Lima, Peru
Attn.___________________
To TSI:
Xx. Xxxxxxxx 0000, xxxx 0
Xxxxx Xxxxxxx
Xxxx, Xxxx
Attn.: General Manager
To TERRA NETWORKS:
Xxx xx xxx 0 Xxxxxxxxx, Xx. 00
Xxxxxxx xx Xxxxxxx
(Xxxxxx) 00000
Xxxxx
Attn: Xxxx Xxxxx Xxxxx de Buruaga
These addresses may be changed to new addresses in the city of Lima, giving 15
days' prior written notice to the other party.
10
TWENTY. - ARBITRATION AGREEMENT
Any disputes or disagreement between the Parties arising from the interpretation
or performance of this Agreement shall be submitted to an Arbitration Panel made
up of three members, whose decision shall be binding. TELEFONICA and TSI shall
jointly appoint one arbitrator, TERRA NETWORKS and TNP shall jointly appoint
another arbitrator, and the third arbitrator shall be appointed by the two
arbitrators so appointed. In the event that no agreement is reached on the
appointment of the third arbitrator, or if either of the parties fails to
appoint its arbitrator within the ten days after being called on to do so by the
other party, the appropriate appointment shall be made by the Lima Chamber of
Commerce.
The arbitration shall be by right and shall be governed by the rules of
procedure laid down by the Arbitration Center of the Lima Chamber of Commerce.
TWENTY-ONE. - GENERAL PROVISIONS
This Agreement may be modified, regulated or terminated only upon the express,
written agreement of the Parties.
TWENTY-TWO. - COPIES
Set out on four identical copies, one copy each remaining in the possession of
each of the Parties, in Lima on October 20, 1999.
[Illegible signature] [Illegible signature]
TELEFONICA DEL PERU, S.A.A. TERRA NETWORKS PERU S.A.C.
[Illegible Signature] [Illegible Signature]
TELEFONICA SERVICIOS INTERNET, S.A.C. TERRA NETWORKS, S.A.
