Exhibit 10.13
MASTER OPERATING AGREEMENT
Master Operating Agreement (this "Agreement") dated July 24, 1996, between
ITSA--INTERCONTINENTAL TELECOMUNICACOES LTDA., a Brazilian Limitada ("ITSA") and
TV FILME SERVICOS DE TELECOMUNICACOES LTDA., a Brazilian Limitada ("LicenseCo").
W I T N E S S E T H
WHEREAS, ITSA has, directly and through its affiliates, extensive
experience in designing, owning, constructing, marketing, operating and managing
subscription wireless cable operating systems ("Wireless Systems");
WHEREAS, LicenseCo holds a license from the Brazilian Ministry of
Telecommunications (the "Ministry") for the operation of a 16-channel Wireless
System in each of the Brazilian cities of Brasilia, Goiania and Belem (the
"Existing Licenses"), and heretofore also has owned and operated the Wireless
System in Brasilia;
WHEREAS, LicenseCo heretofore has been a wholly-owned subsidiary of ITSA,
and concurrently herewith (i) LicenseCo is being recapitalized as a result of
which 51% of its voting common stock will be owned by TVTEL Ltda., a Brazilian
Limitada, and all of its remaining equity interest will continue to be owned by
ITSA, and (ii) all of the operating assets and rights (other than the Existing
License for Brasilia) relating to the Brasilia System are being transferred from
LicenseCo to TV Filme Brasilia Servicos de Telecomunicacoes Ltda., a
newly-formed wholly-owned subsidiary of ITSA ("TV Filme Brasilia");
WHEREAS, the parties desire that TV Filme Brasilia, TV Filme Goiania
Servicos de Telecomunicacoes Ltda., a wholly-owned subsidiary of ITSA ("TV Filme
Goiania") and TV Filme Belem Servicos de Telecomunicacoes Ltda., a wholly-owned
subsidiary of ITSA ("TV Filme Belem" and, together with TV Filme Goiania and TV
Filme Brasilia, the "Operating Subsidiaries") continue to operate the Brasilia,
Goiania and Belem Wireless Systems (the "Current Systems") pursuant to a grant
of exclusive right under the Existing Licenses from LicenseCo, as provided
herein;
WHEREAS, LicenseCo has filed with the Ministry (i) applications to expand
the Existing Licenses from 16 to 31 channels and (ii) applications for the grant
of licenses in 19 new markets (collectively, the "Pending License
Applications"), and the parties desire that the grant of any of the Pending
License Applications be for the exclusive benefit of ITSA and its affiliates on
the terms herein provided;
WHEREAS, ITSA in the future may desire to operate Wireless Systems and/or
other subscription television systems (collectively, "Subscription Television
Systems") in additional markets and to have LicenseCo seek to obtain licenses
from the Ministry for such additional markets (the "Future License Applications"
and, together with the Pending License Applications, the "License Applications")
for the exclusive benefit of ITSA and its affiliates on the terms herein
provided;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, undertakings, covenants and conditions set forth herein, the parties
hereto do hereby agree as follows:
1. GRANT OF RIGHTS
1.1 Existing License. LicenseCo hereby grants to each of TV Filme
Brasilia, TV Filme Goiania and TV Filme Belem for the term of this Agreement, on
an exclusive basis, all rights to operate Wireless Systems in Brasilia, Goiania
and Belem, respectively, to the fullest extent permitted under the Existing
Licenses, including any expansion, renewal or modification thereof on the terms
set forth herein.
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1.2 License Applications. Upon any grant of the Pending License
Applications or Future License Applications, LicenseCo shall grant, pursuant to
a License Grant in substantially the form of Exhibit A hereto, to ITSA or such
affiliate thereof as ITSA may designate for the term of this Agreement, on an
exclusive basis, all rights to operate the related Subscription Television
Systems to the fullest extent permitted under such license grants, including any
expansion, renewal or modification thereof, on the terms set forth herein.
1.3 Rights Granted. Without limitation of the foregoing, the rights
granted and to be granted to ITSA and its affiliates pursuant to Sections 1.1
and Section 1.2 shall include the right to design and construct (with respect to
new markets), operate, maintain, purchase goods and services for, administer,
market, and provide programming for the market areas related to the applicable
licenses, and ITSA agrees to take such actions in accordance with standards
reasonably acceptable in the industry.
2. COVENANTS OF LICENSECO
2.1 Obtaining Licenses from the Ministry. LicenseCo shall use its
best efforts to obtain the grant from the Ministry at the earliest practicable
date of the Pending License Applications and of any Future License Applications
which ITSA may from time to time request, with ITSA to provide to LicenseCo all
funds necessary for the acquisition of licenses pursuant to such grants in the
form of Loans (as defined herein). LicenseCo shall make such modifications to
the Pending License Applications, and shall file Future License Applications in
such form, as ITSA may request. LicenseCo shall keep such representative or
representatives as ITSA may from time to time designate fully involved in and
informed of the license application process, including providing immediate
notification of any matters which may have a bearing on the grant, denial or
modification of such licenses, providing
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copies of any correspondence to LicenseCo from the Ministry, obtaining the
approval of such representative(s) for any filings or other communications from
LicenseCo to the Ministry, and advising such representative(s) of any meetings
or conferences to be held between LicenseCo and the Ministry and providing such
representative(s) with the opportunity to participate in such meetings or
conferences.
2.2 Acquiring Licenses from Third Parties. In the event that ITSA
acquires a Subscription Television System from a third party, or desires that a
license granted to a third party be transferred to LicenseCo in order for ITSA
to construct and/or operate the related Subscription Television System,
LicenseCo shall make appropriate application to the Ministry as requested by
ITSA and, upon approval of the Ministry, accept assignment of and hold such
licenses for the exclusive and perpetual benefit of ITSA and its affiliates on
the same terms as provided in this Agreement with respect to Existing Licenses
and Pending and Future License Applications which may be granted. ITSA shall
provide to LicenseCo all funds necessary for the acquisition of such licenses in
the form of Loans.
2.3 Maintenance of Licenses. LicenseCo at all times shall use its
best efforts, at ITSA's expense, to obtain and maintain in full force and effect
any licenses contemplated by this Agreement (the "Licenses") and shall timely
file and prosecute all necessary applications for renewal and, when requested by
ITSA, for expansion, modification or otherwise (all after review and approval by
ITSA and at ITSA's expense). LicenseCo shall not assign, transfer, sell, trade,
dispose or otherwise encumber the Licenses except as provided in the Articles of
Association of LicenseCo.
2.4 Compliance with Law. LicenseCo shall at all times comply with
all laws applicable to the holding of Licenses, including timely making all
necessary filings (after review and approval by ITSA and at ITSA's expense) with
the Ministry, assuring that
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the stock ownership of LicenseCo continues to comply with applicable law, and
conducting itself in a manner so as to preclude any suspension or nonrenewal of
a License or any fine, censure or administrative proceeding with respect
thereto.
2.5 Repeaters. LicenseCo specifically authorizes ITSA to secure such
licenses as may be required by the Ministry from time to time for ITSA to
utilize low power signal repeaters to expand the number of its subscribers. ITSA
shall pay all costs, including legal, engineering, equipment, construction,
installation and other expenses associated with obtaining and maintaining such
authorization and constructing, operating, and maintaining the authorized
facilities.
2.6 Further Efforts. LicenseCo shall, at ITSA's expense and
direction, file and diligently prosecute such petitions to deny or other
protests against applications of third parties for licenses as may be requested
by ITSA. LicenseCo shall make available to ITSA relevant research, findings and
strategies as to future subscription television technology developments of which
LicenseCo becomes aware.
2.7 Prosecution of Applications and Amendments. In the event any
person petitions the Ministry to deny or otherwise challenge any License held or
License Application filed pursuant to this Agreement, or in the event the
Ministry grants any License Application and any person petitions for review or
reconsideration of such grant before the Ministry or seeks judicial review of
such grant, then LicenseCo shall use its best efforts, at the direction and
expense of ITSA, to oppose such petition or challenge before the Ministry or
defend such grant by the Ministry. Should the Ministry deny any License
Application filed by LicenseCo hereunder, ITSA shall utilize its best efforts,
as directed by ITSA and at ITSA's expense, to secure reconsideration or review
of such denial and, should such denial become a final order, shall utilize its
best efforts as directed by ITSA, at ITSA's expense, to take such
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actions with respect to the related License or License Application in order to
meet ITSA's legitimate business needs and to satisfy the objections of the
Ministry.
2.8 Litigation. When LicenseCo is a necessary party, LicenseCo shall
join, at ITSA's expense, in any litigation or other proceeding brought by or
against ITSA relating to ITSA's Subscription Television Systems or the related
Licenses, including to prevent any unauthorized individual or entity from
receiving signals transmitted by ITSA or from transmitting signals which would
interfere with ITSA's signals or which could be received within ITSA's market
areas.
2.9 Control. Notwithstanding anything herein to the contrary,
LicenseCo will retain total control over and responsibility for the Licenses as
is required by the Ministry's rules. To that end, ITSA will provide LicenseCo
access to all transmission equipment and data necessary for LicenseCo to carry
out such responsibility.
2.10 Sole Business. LicenseCo shall not engage in any business other
than applying for, holding and maintaining Licenses for the benefit of ITSA and
its affiliates as contemplated hereby.
3. COVENANTS OF ITSA
3.1 License Applications. All License Applications filed hereunder
shall be prepared at the direction and expense of ITSA, which shall provide all
necessary information with respect to its capabilities and plans for operation
of the related Subscription Television System.
3.2 Operation of Subscription Television Systems. ITSA or its
affiliates, as the case may be, shall operate all Subscription Television
Systems under grant from LicenseCo hereunder in compliance with all applicable
law, and shall conduct such operations in a manner so as to preclude any
suspension or nonrenewal of a License or any
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fine, censure or administrative proceeding with respect thereto. Without
limitation of the foregoing, ITSA shall use its best efforts, directly or
through its affiliates and at its or their expense (subject to Section 2.2
hereof), to construct new Subscription Television Systems in a timely fashion as
required under applicable law and the related License Application in the case of
new markets.
4. ROYALTIES; EXPENSES; LOANS
4.1 Royalties. In consideration for the grant of rights under any
License hereunder by LicenseCo, the affiliate of ITSA which operates the related
Subscription Television Systems shall pay to LicenseCo a royalty equal to 10% of
subscriber installation fees received by such operating entity during the term
of grant (the "Royalty"). The Royalty shall be paid, in Reals, once per year
within 30 days following receipt by ITSA of its audited financial statements for
each year, but not later than April 30 in any year. The Royalty shall be
calculated in accordance with the calculation of subscriber installation fees as
set forth in such financial statements, a copy of which shall be furnished to
LicenseCo. ITSA may effect payment of the Royalty by credit against the
outstanding amount of any Loan.
4.2 Expenses. LicenseCo shall obtain the prior written approval of
ITSA for the incurrence of any expenses of LicenseCo to be borne by ITSA
hereunder in an individual amount greater than $10,000, or in an aggregate
amount exceeding $25,000 during any fiscal quarter, and shall not retain any
third party whose fees or expenses are to be borne by ITSA without its prior
written consent. Where possible, ITSA shall pay such expenses directly, and
shall do so in a timely fashion. Where LicenseCo directly pays expenses for
which ITSA is responsible under this Agreement, ITSA shall reimburse LicenseCo
within 10 business days of receiving an invoice for such expenses (which shall
be furnished not less
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frequently than quarterly), accompanied by such supporting documentation as ITSA
shall reasonably request.
4.3 Loans. ITSA shall provide all funds necessary for the
acquisition of Licenses by LicenseCo, whether such Licenses are to be acquired
from the Ministry or from third parties, in the form of loans ("Loans") to
LicenseCo, in each case at an interest rate equivalent to the cost of such funds
to ITSA. Such Loans shall not have a fixed maturity date but instead shall be
payable out of (1) Royalties received by LicenseCo hereunder, and (2) all
proceeds received by LicenseCo from any assignment, transfer, sale, trade,
disposal or other encumbrance of any License, subject to Section 2.3 above.
Where ITSA is to provide funds to LicenseCo in the form of Loans, LicenseCo
shall provide written notice to ITSA at least 10 business days prior to the date
such funds are required to be remitted by LicenseCo, with such notice to specify
the amount of funds required, the purpose therefor, the name of the payee and
the date by which LicenseCo is required to remit such funds to the payee. Such
notice shall be accompanied by such supporting documentation as ITSA shall
reasonably request. Each Loan shall be pursuant to a note and other appropriate
documentation in customary form.
5. REPRESENTATIONS
5.1 Representations of each of the Parties. Each of the parties
represents and warrants to the other the following, with respect to facts and
issues relating to it:
(a) Each party has all necessary power and authority to
execute and deliver this Agreement, to perform its obligations under this
Agreement and to consummate the transactions contemplated hereby.
(b) The execution, delivery and performance of this Agreement
by such party and the consummation by such party of the transactions
contemplated hereby have
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been duly authorized by the Board of Directors (or other similar governing body)
of such party and no other proceedings on the part of such party are necessary
to authorize this Agreement and the consummation by such party of such
transactions. This Agreement has been validly executed and delivered by such
party and, assuming the due authorization, execution and delivery hereof by the
other party hereto, constitutes a legal, valid and binding obligation of such
party, enforceable against such party in accordance with its terms.
5.2 Representations of LicenseCo.
(a) Existing Licenses. The Existing Licenses consist of the
licenses described on Schedule 5.2(a) attached hereto. The Existing Licenses are
in full force and effect, are owned by LicenseCo free and clear of any lien,
claim, charge or encumbrance of any kind ("Liens"), and there are not pending or
threatened any actions or proceedings of the Ministry or any other person which
could adversely affect in any way the ownership of the Existing Licenses by
LicenseCo, the suspension or renewal thereof, or the grant of authority to the
Operating Subsidiaries to operate the Existing Systems pursuant thereto as
contemplated hereby.
(b) Pending License Applications. LicenseCo has filed with the
Ministry the Pending License Applications listed on Schedule 5.2(b) attached
hereto. Each of the Pending License Applications is pending before the Ministry,
and LicenseCo is not aware of any information (including from the Ministry) that
would lead it to believe that it is not qualified for the grant of any of the
Pending License Application nor that any Pending License Application will not be
granted to LicenseCo (although there can be no assurance that any Pending
License Applications will be granted to LicenseCo).
6. BREACH. Further to the provisions of Section 8.12 hereof, LicenseCo's
sole remedy for breach, or alleged or threatened breach, of this Agreement by
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ITSA shall be to seek appropriate damages from and other appropriate relief
against ITSA in legal proceedings, but in no event shall it be entitled to
terminate this Agreement or the grant of rights under Licenses hereunder.
7. TERM. This Agreement shall become effective on the date hereof and
shall remain valid for the period in which the licenses held by LicenseCo remain
valid, which term shall be renewed for the term of any relevant renewals thereof
upon the written consent of the parties which shall not be unreasonably
withheld.
8. MISCELLANEOUS
8.1 Assignment. LicenseCo may not assign its rights, obligations or
interests under this Agreement to any person or entity whatsoever. A change in
control of 50% or more of LicenseCo's voting equity shall constitute an
assignment hereunder.
8.2 Benefit. This Agreement shall inure to the benefit of and shall
be binding upon the parties hereto and their respective permitted successors and
assigns. Nothing in this Agreement, expressed or implied, is intended to or
shall:
(a) confer on any person other than the parties hereto or
their respective permitted successors or assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement; or
(b) constitute a partnership or joint venture between the
parties.
8.3 Confidentiality. All information exchanged by the parties or
acquired by them in connection with their performance under this Agreement shall
be kept confidential unless (i) the information is in the public domain, or (ii)
was lawfully acquired by the other party prior to the negotiation of this
Agreement, or (iii) is obtained lawfully through third parties not breaching an
obligation or trust.
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8.4 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.5 Not Agents. No party is, nor shall any party hold itself out to
be, vested with any power or right to contractually bind, or act on behalf of
any other as its contracting broker, agent or otherwise for committing, selling,
conveying or transferring any of the other party's assets or property,
contracting for or in the name of the other party, or making any contractually
binding representations as to the other party which shall be deemed
representations contractually binding upon such party.
8.6 Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) state the entire agreement between the parties with respect to
the subject matter hereof and supersedes all pre-existing oral or written
agreements or commitments with respect thereto.
8.7 Further Action. From time to time after the date of execution,
the parties shall use their best efforts to take such further action and execute
such further documents, assurances and certificates as either party may
reasonably request of the other (and at ITSA's expense in the case of LicenseCo)
in order to effectuate the purpose of this Agreement. In addition, each party
agrees that it will not take any action which would adversely affect the rights
granted by it to the other party hereunder.
8.8 Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of Brazil.
8.9 Headings. The headings herein are inserted for convenience only
and shall not constitute a part hereof.
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8.10 Notices. Any notices and documentation given under this
Agreement shall be in writing and shall be deemed given when personally
delivered, or upon confirmation of receipt of notice by fax, to the other party
at the following address:
If to ITSA:
SCS - Quadra 7 - Bloco A
Ed. Educational Tower - Sala 601
Brasilia/DF 00000-000
Xxxxxx
Attention: Xxxxxx Xxxxx Xxxxxxx Xxxx de Albuquerque
Fax: 000-00-00-000-0000
If to LicenseCo:
SCS - Quadra 7 - Bloco A
Ed. Educational Tower - Sala 601
Brasilia/DF 00000-000
Xxxxxx
Attention: Hermano Studart Lins de Albuquerque
Fax: 000-00-00-000-0000
8.11 Reformation. If the Brazilian government, the Ministry, or any
other governmental authority should amend or clarify the law, rules, regulations
or policies, or if any court should interpret any law, rule, regulation or
policy in a manner that would materially adversely affect the rights or
obligations of the parties obligations under this Agreement, then the parties
hereto shall promptly negotiate using their best efforts and in good faith to
reform and amend this Agreement, so as to effectuate as nearly as reasonably
possible the intention of the parties expressed in this Agreement. No party
shall take any action that contributes to such amendment, clarification or
interpretation without the prior written consent of the other party. Only in the
event the parties are unable to reach agreement with respect to the appropriate
action to be taken shall the offending provision(s)
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be stricken from this Agreement and the remainder of the Agreement shall be
enforced to the greatest extent permitted by law.
8.12 Specific Performance. The parties acknowledge and agree that
the rights reserved to each of them hereunder are of a special, unique, unusual
and extraordinary character, which gives them a particular value, the loss of
which cannot be adequately or reasonably compensated for in damages in an action
at law, and the breach by either of the parties of any of the provisions hereof
will cause the other parties irreparable injury and damage. In order to secure
the performance of the obligations set forth herein, each of the parties shall
have the right to claim in Court the specific performance of the obligations
contained in this Agreement or any portion hereof, pursuant to the applicable
provisions of the Brazilian Civil Procedure Code, including, without limitation,
Articles, 461, 632, 639 et al. Neither this provision nor any exercise by any
party of rights to equitable relief or specific performance herein granted shall
constitute a waiver of any other rights which it may have to damages or
otherwise.
8.13 Amendments; Waiver. Any amendment or modification hereto shall
not be binding upon the parties unless in writing signed by both parties. The
express or implied waiver by either party of any breach of any representation or
warranty or any failure to fulfill any condition, covenant or other obligation
or liability under this Agreement shall not constitute a waiver of any other
representation or warranty or of any other failure in the future or in the past
by the other party to fulfill such representation, warranty, condition,
covenant, obligation or liability hereunder.
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IN WITNESS WHEREOF, the parties, by their duly authorized signatories,
have executed this Agreement on the date and year first above written together
with the two (2) witnesses named below.
ITSA--INTERCONTINENTAL
TELECOMUNICACOES LTDA.
By: /s/ Hermano Studart Lins de Albuquerque
-----------------------------------------------------
Name: Hermano Studart Lins de Albuquerque
Title: Director
TV FILME SERVICOS DE
TELECOMUNICACOES LTDA.
By: /s/ Xxxxxx Xxxxx Xxxxxxx Xxxx de Albuquerque
-----------------------------------------------------
Name: Xxxxxx Xxxxx Xxxxxxx Lins de Albuquerque
Title: Director
Witnesses:
1. /s/ Xxxxx X. Xxxxxx
-------------------------------
2. /s/ Xxxxx X. Xxxxxxx
-------------------------------
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EXHIBIT A
FORM OF LICENSE GRANT
Pursuant to the terms of the Master Operating Agreement (the "Master
Operating Agreement") dated _______ ___, 1996, between ITSA--Intercontinental
Telecomunicacoes Ltda. and TV Filme Servicos de Telecomunicacoes Ltda.
("LicenseCo"), LicenseCo hereby grants to [NAME OF LICENSE GRANTEE], on an
exclusive basis, all rights to operate the Subscription Television System (as
such term is defined in the Master Operating Agreement) in [NAME OF CITY]
pursuant to the license owned by LicenseCo to operate a Subscription Television
System in such location, to the fullest extent permitted under such license,
including any expansion, renewal or modification thereof. The terms and
conditions of the grant, including royalties to be paid therefor, shall be as
set forth in the Master Operating Agreement.
Dated as of _____________
TV FILME SERVICOS DE
TELECOMUNICACOES LTDA.
By:______________________________
Name:
Title:
[NAME OF LICENSE GRANTEE]
By:______________________________
Name:
Title:
SCHEDULE 5.2(a)
LicenseCo owns three permits for the operation of Multi-point Multi-channel
Distribution Service ("MMDS") services, as described below:
(a) Brasilia: On September 19, 1990, LicenseCo was granted a permit for the
provision of CFTV service (closed television circuit) in the City of
Brasilia.
Before the regulatory rules for MMDS services were issued by the Ministry
of Communications, the then current permissionaires of MMDS were granted a
CFTV license.
Administrative Act 43, of February 10, 1994 issued by the Ministry of
Communications adopted Rule No. 002/94 (basic MMDS rule) and automatically
transformed all CFTV licenses listed therein into MMDS permits. The
permissionaires whose licenses had been so transformed were then required
to comply with certain obligations in order to adapt their operations and
equipment to the requirements of the MMDS service.
On February 27, 1996, Ministry Act No. 008 authorized the installation of
MMDS stations in the City of Brasilia and determined that within the
following 12 months, all the CFTV permissionaires would be required to
install MMDS required equipment and request a visit from representatives
of the Ministry of Communications in order to obtain a new operating
license. On February 27, 1996, such Ministry Act was published in the
Brazilian Official Gazette. On March 20, 1996 LicenseCo sent a letter to
the Ministry of Communications requesting a visit from representatives of
the Ministry of Communications in order to obtain the operating license.
(b) Belem: On December 22, 1994, Ministry Act No. 1163 approved the transfer
to LicenseCo of the permit granted on October 21, 1988 to TVA Brasil
Radioenlaces through Ministry Act No. 209, for the provision of MMDS in
the City of Belem.
(c) Goiania: On December 22, 1994, Ministry Act No. 1164 approved the transfer
to LicenseCo of the permit granted on September 29, 1988 to TVA Brasil
Radioenlaces through Ministry Act No. 097, for the provision of MMDS in
the City of Goiania.
SCHEDULE 5.2(b)
The cities listed below are those where LicenseCo has applied for MMDS permits:
City State Process No.
---- ----- -----------
1. Teresina PI 53000.001689/94
2. Natal RN 53000.001690/94
3. Fortaleza CE 53000.001691/94
4. Cuiaba MT 53000.001692/94
5. Aracaju SE 53000.001693/94
6. Campo Grande MS 53000.001694/94
7. Parnaiba PI 53000.001695/94
8. Xxxx Xxxxxx PB 53000.001696/94
9. Rio Verde GO 53000.001697/94
10. Mossoro RN 53000.001698/94
11. Xxxxxx XX 53000.001699/94
12. Dourados MS 53000.001700/94
13. Aparecida de Goiania GO 53000.001701/94
14. Campina Grande PB 53000.001702/94
15. Imperatriz MA 53000.001703/94
16. Juazeiro do Norte CE 53000.001704/94
17. Anapolis GO 53000.001705/94
18. Maceio AL 53000.001707/94
19. Divinopolis MG 53000.001773/94
