1
EXHIBIT 10.3
FORM OF SERVICE AGREEMENT
dated as of
among
[ PTK Company ] - Owner
A
and
B , As Agent
2
Service Agreement ("Agreement") effective as of among [PTK Company]
("Owner"), A and B ("Agent"), as agent of A .
WHEREAS, Owner is currently engaged in the construction, development,
operation and management of a cable communications system (the "System") within
the city of C and the surrounding area in the Republic of Poland;
WHEREAS, A , through Agent, and otherwise, has available and has access
to financial, administrative, technical, managerial, supervisory, architectural,
operational, programming, marketing, sales and promotional, personnel, computer
analysts, and other professional and experienced personnel knowledgeable in the
construction, development, operation and management of cable facilities,
including cable communications systems;
WHEREAS, Owner has experienced logistical and economic constraints in
obtaining and maintaining the necessary supply of qualified personnel, materials
and other services and products required to achieve its business goals without
the assistance of an intermediary outside the Republic of Poland, and desires to
engage the services of A , and Agent on a non-exclusive basis to more
efficiently and economically conduct its business;
WHEREAS, Owner desires to engage A to perform, or cause to be
performed, certain services on a non-exclusive basis, and A desires to perform,
or will cause to be performed, said services, in accordance with the terms of
this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual premises
and covenants hereinafter set forth, the parties agree with each other as
follows:
ARTICLE 1
THE PARTIES
Section 1.1 Description of the Parties.
(a) Owner is a
(b) A is a
(c) Agent is a
ARTICLE 2
THE SYSTEM
Section 2.1 The-Business of the Owner.
1
3
The existing business of the Owner is to acquire, construct, own and
operate cable television systems to service the city of C and surrounding areas
in the Republic of Poland. The business of the Owner includes the construction
and development and promotion of the System in the Republic of Poland, the
purchase of equipment, supplies, and other goods and materials for the System,
the evaluation and acquisition of cable television systems, the operation and
maintenance of the Systems and managing personnel needed to carry out its
business goals and objectives and all other functions relating to the successful
operation of a cable television system. The activities as described in this
Section are referred to below as the "Business of the Owner".
ARTICLE 3
SERVICES/FEES/EXPENSES
Section 3.1 Agency Services/Fees/Expenses.
(a) Agency Services: A shall (or may cause its Agent or affiliates, in
its sole discretion, to) provide services to and at the request of Owner
relating to technical, managerial, supervisory, purchasing, operational,
financial and administrative functions ("Agency Services"), as follows:
(i) A shall engage (or cause to be engaged) personnel for the
benefit of and on behalf of Owner as A shall deem necessary and as requested by
Owner to perform the Agency Services. Such personnel, whether located in Poland,
the United States, or elsewhere, shall be engaged substantially full-time in
providing such services. All reasonable out-of-pocket costs and expenses
incurred by A (or Agent or affiliates) relating to these personnel (including,
without limitation, salaries, social security, insurance and other benefits,
housing allowances, travel and entertainment expenses and any other related and
sundry costs) (collectively "Personnel Costs") shall be reimbursed by Owner
pursuant to this Section;
(ii) With the consent of Owner, A shall purchase (or may cause
to be purchased) from unaffiliated third parties, as A shall deem necessary, any
equipment, supplies or other goods or materials to be used or useful for the
Business of Owner. Upon receipt of consideration for such purchases from Owner,
title to the foregoing shall be in Owner. All reasonable out-of-pocket costs and
expenses of unaffiliated third parties incurred by A or Agent or affiliates)
relating to these purchases (including without limitation, any and all
transportation, freight, shipping, import taxes, other taxes, fees, insurance
and brokerage fees) (collectively "Purchasing Costs") shall be reimbursed by
Owner pursuant to this Section;
(iii) A shall, at Owner's request, supervise the
2
4
payment of, or at A 's election pay, any operating expenses relating to the
Business of the Owner ("Operating Expenses"). Expenses incurred by A or Agent in
accordance with this Subsection shall be reimbursed in full (with interest, if
applicable) by Owner pursuant to this Section;
(iv) A shall be entitled to reimbursement for all reasonable
out-of-pocket costs and expenses charged by unaffiliated third parties and
incurred by A or Agent or any of its affiliates on behalf of Owner in connection
with providing the Agency Services in accordance with this Agreement, including
without limitation, travel, lodging, entertainment, postage, or telephone costs
and expenses.
(v) All reimbursements by Owner shall be in the same currency
as payments, costs and expenses were made or incurred, unless otherwise agreed
to by the parties.
(b) A shall submit to Owner, within 30 days after each calendar
quarter, a statement indicating all payments, costs and expenses made or
incurred by A or Agent or affiliate during such calendar quarter and for which A
seeks to be reimbursed by Owner (each statement being referred to herein
individually as a "Statement" and collectively as "Statements"). Such amounts
shall be reimbursed within thirty (30) days of the date such Statement is
rendered unless otherwise agreed to by the parties. In no event shall any delay
or failure to list any cost or expense on a Statement waive any of A 's rights
to reimbursement upon submission of a Statement by A or its Agent setting forth
such cost or expense.
(c) Owner shall be deemed to have conclusively and irrevocably approved
any and all payments, costs and expenses made or incurred by A or Agent in
accordance with this Agreement (except for any payments, costs and expenses made
or incurred resulting from willful misconduct or gross negligence on the part of
A or Agent as described in Section 6.2 as it relates to Owner's indemnification
obligations set forth in Section 6.2) unless, as to each Statement , written
objection is given, as to each payment, cost or expense objected to, within
thirty (30) days of Owner's receipt of such Statement, specifying either that
(i) Owner notified A or Agent of its disapproval of such payment, cost or
expense prior to its having been made or incurred by WCCI29 A or Agent and
setting forth the specific facts regarding such disapproval, or (ii) A or Agent
was acting with gross negligence or willful misconduct in making or incurring
such payment, cost or expense. If Owner and A or Agent are in disagreement as to
right to reimbursement of a particular payment, cost or expense, the provisions
of Section 8.2 shall apply.
(d) Notwithstanding anything herein to the contrary, neither A nor
Agent nor any of their affiliates shall have any obligation
3
5
to advance any payments to third parties on behalf of Owner, or make or incur
any fees, costs or expenses required to be paid directly by A , Agent or
affiliates, and such decision shall be within the sole discretion of A or Agent,
and upon making or incurring any such costs and expenses, A (or Agent or
affiliates, if applicable) shall be entitled to reimbursement. This Section
3.1(d) shall not apply to the General Services provided below in Section 3.2(a),
so long as Owner is not in default under Section 3.2(b) or otherwise in material
default under this Agreement. Further, Owner shall continue to have all rights
and powers to make, incur and/or pay directly to any creditor any fees, costs or
expenses related to its Business or otherwise on its own behalf, including,
without limitation, payments and reimbursements made directly to employees of A
or its Agent.
(e) In providing the Services hereunder, A and Agent shall make
reasonable efforts to comply with legal requirements actually known to A , or
Agent, which are applicable to the System and the conduct of the Business of the
Owner. In providing the Services hereunder, A and Agent shall make reasonable
efforts to comply with the requirements actually known to A of the insurance
companies with which insurance covering the System is carried.
Section 3.2 General Services/Fees/Expenses.
(a) General Services: At Owner's request, A or Agent or any of its
affiliates shall provide, on a non-exclusive basis, general administrative
services (other than as described in Section 3.3) to Owner, relating to the use
of A 's and its affiliates phone system(s), office machine(s), office space,
office supplies, computer services, receptionist and other general office
services;
(b) (i) In consideration for the General Services provided under this
Agreement, Owner shall pay A a fee of per calendar quarter, payable in arrears
in legal tender of the United States of America, on or before the last day of
each March, June, September and December, commencing .
(ii) Notwithstanding the provision of Section 3.2 (b)(i) above, if
Owner is obligated to pay management fees to A pursuant to any applicable
management agreement, the fees set forth in Section 3.2(b)(i) are waived for the
period such management agreement is in effect.
Section 3.3 Specific Services/Fees/Expenses.
(a) Specific Services: A shall provide or cause to be provided to
Owner, at Owner's request, legal, financial and other professional services, at
commercially reasonable rates, for specified activities, which services may be
performed by personnel of A or Agent or their affiliates, or by third parties
engaged by
4
6
A or Agent on behalf of Owner at A 's or Agent's sole discretion ("Specific
Services").
(b) All fees, costs and expenses for Specific Services made, rendered,
or incurred by A , Agent or any of their affiliates from time to time in
accordance with Section 3.3(a), including reasonable out-of-pocket expenses,
shall be separately billed and shall be paid or reimbursed by Owner within
thirty (30) days of receipt of the xxxx.
(c) The provisions of Section 3.1(d) shall apply to this Section.
Section 3.4 Advances/Interest.
A , Agent or any of their affiliates, may, in accordance with this
Agreement but in no event shall A or its Agent have any obligation to, advance
funds to or on behalf of Owner or make or incur costs or expenses on behalf of
Owner. Any such funds advanced to or on behalf of Owner, or any such costs or
expenses or incurred by A , Agent or any of their affiliates on behalf of Owner
(individually "Advance", collectively "Advances"), shall bear interest at the
Market Interest Rate, as defined hereafter, accruing from and after the date
advanced, made or incurred, as applicable, until paid or reimbursed in full. The
Market Interest Rate shall be the rate of ten percent (10%) per annum for U.S.
dollar denominated advances.
Section 3.5 Documentation.
A and Agent shall promptly supply to Owner on request all supporting
documentation with respect to any payments or reimbursements asserted to be due
from Owner hereunder.
ARTICLE 4
THE ENGAGEMENT
Section 4.1 Engagement of A and Agent.
Owner engages A and Agent, on an non-exclusive basis, to perform the
various Services described in Article 3 of the Systems for the term of this
Agreement. A and Agent each accepts the engagement and agrees to perform the
Services in accordance with this Agreement. The parties acknowledge that, for
the purposes of this Agreement, Agent is acting solely on behalf of and as the
agent for A in carrying out A 's obligations under the terms of this Agreement
and its liability in all respects shall be limited to that status and as
otherwise set forth in Article 6 herein.
Section 4.2 Term of Agreement.
5
7
(a) The term of this Agreement shall commence as of the date of this
Agreement and terminate on .
(b) The term of this Agreement shall be extended automatically for
successive periods of one calendar year unless a party notifies the others on or
before January 31 of any calendar year (after the year ) of its desire that the
term of this Agreement shall end on December 31 of the same calendar year, and,
in that event, this Agreement shall terminate on the December 31 of that
calendar year.
Section 4.3 Control and Compliance.
(a) It is the intention of the parties that the management and
operation of the System and the Business of the Owner be in compliance with the
pertinent rules, regulations and policies of Polish law. Nothing in this
Agreement shall serve, or shall be construed to serve, to prevent or hinder the
Owner from retaining and exercising full and complete control over the System
and the Business of the Owner, including but not limited to its assets, its
policies and practices, its personnel and the advertising and broadcast on the
System. In the event that the Polish government indicates to Owner, by formal or
informal means, that any term or provision of this Agreement is objectionable
under Polish law, the parties shall promptly make reasonable efforts to modify
this Agreement to the extent necessary to remove the objection of the Polish
government.
(b) No payments shall be made under this Agreement which require the
permission of the National Bank of Poland without the receipt of such
permission.
ARTICLE 5
AUTHORITY OF A AND AGENT
Section 5.1 Grant of Authority.
A (together with its Agent or any affiliates acting on its behalf
pursuant to this Agreement) is an independent contractor respect to the Agency
Services provided in Section 3.1.
ARTICLE 6
RELEASE/INDEMNIFICATION/LIABILITY
Section 6.1 Release.
Owner releases A , Agent, their affiliates, officers, directors,
stockholders, employees, partners, joint ventures, successors and assigns, from
any loss, liability or damage which may arise as a result of or in connection
with:
6
8
(a) any occurrence to the extent which such loss, liability or damage
is covered by fire insurance or any of the perils covered by extended coverage
or difference of condition endorsements; and/or
(b) act or omission of A , Agent, or any of their affiliates, partners,
officers, directors, stockholders, employees, partners or joint
venturers,successors and assigns other than willful misconduct or gross
negligence in the conduct of its duties unless such action shall have been in
good faith reliance on the opinion of counsel.
Section 6.2 Indemnification and Liability.
(a) Owner hereby indemnifies and holds harmless A , Agent, their
successors and assigns, their affiliates, officers, directors, stockholders,
employees, partners or joint venturers (jointly and severally, "Indemnitee")
from and against all claims and liabilities, whether they proceed to judgment or
are settled, and from and against all out-of-pocket expenses incurred by the
Indemnitee which are payable to any unaffiliated third party in defense of such
claims and liabilities, including reasonable attorney's fees, to which the
Indemnitee may become subject by reason of providing the Agency Services,
General Services, or Specific Services in accordance with this Agreement,
including, without limitation: (1) the choice, manner or extent of any Services
provided; (2) the entering into contractual relationships of any sort, whether
in the name of Indemnitee or Owner, on behalf of the Owner; and (3) the filing
or failure to file reports, notices, certificates or accounting required by any
law, rule, regulation or agreement of any country, state or other governmental
authority; provided, however, that the Indemnitee shall not be indemnified or
reimbursed in relation to any matter with respect to which it shall be
determined in a final judgment by a court of competent jurisdiction that
Indemnitee's action constituted gross negligence or willful misconduct in the
conduct of its duties unless such action shall have been determined to be in
good faith reliance on the opinion of counsel.
(b) The rights accruing to the Indemnitee hereunder shall not exclude
any other right to which it may be or come to be lawfully entitled, nor shall
anything contained herein restrict the right of the Owner to reimburse any
Indemnitee, in any lawful cause, even though not specifically provided for
herein.
(c) A and Agent shall not be liable in any respect for any act or
omission on the part of A , Agent, or any of their affiliates, partners,
officers, directors, stockholders, employees, partners, or joint venturers,
unless a final judgment is rendered by a court of competent jurisdiction that
such act or failure to act constitutes willful misconduct or gross negligence in
the conduct of A 's (or Agent's) duties hereunder unless such action
7
9
shall have been in good faith reliance on the opinion of counsel. In no event
shall the officers, directors, stockholders, or employees of A or Agent have any
individual liability in any respect for any act or failure to act under the
terms of this Agreement.
ARTICLE 7
ASSIGNMENT AND SUBORDINATION
Section 7.1 Assignment.
A or Agent may assign its rights under this Agreement to a parent,
affiliate or subsidiary of A or Agent, or as collateral security to any lending
institution providing credit to A or Agent.
Section 7.2 Assignment by Owner.
Owner may assign its rights and interest under this Agreement to any
lending or financial institution providing financing to Owner or to a new owner
of the System.
Section 7.3 Conditions to Assignment.
The following shall apply if any party assigns its interest, by law or
agreement. No assignment, other than to a lender as collateral security, shall
be effective unless and until the assignee assumes in writing or by law (i.e.,
merger or otherwise) all of the obligations of the assignor under this
Agreement. Such assignment shall not relieve the assignor of its obligations
under this Agreement.
ARTICLE 8
DEFAULTS AND DISPUTES
Section 8.1 Termination for Cause.
Owner or A or its Agent on its behalf may terminate this Agreement for
cause upon delivery of a written notice to the other parties.
(a) Owner shall have cause for termination if A or Agent shall default
in the performance of any material covenant, agreement, term or provision of
this Agreement, and the default shall continue for a period of sixty days after
written notice to A or Agent from Owner setting forth the specific default,
provided however, that if A or Agent commences to cure a default within the 60
day period but is unable to complete the cure within the 60 days despite the
exercise of reasonable diligence, A or Agent shall have the right to cure as
long as A or its Agent diligently
8
10
prosecutes the cure thereafter.
(b) A or Agent may terminate this Agreement for cause:
(i) If the Owner shall default in the performance of any
material covenant, agreement, term or provision of this Agreement (other than as
contemplated in clause (v) below) and the default shall continue for a period of
60 days after written notice to Owner from A or Agent stating the specific
default.
(ii) If the System shall be damaged by fire or other casualty
and if the Owner fails to commence repairing, restoring, rebuilding or replacing
the portion of the System damaged or destroyed within 60 days after the fire or
other casualty, or shall fail to complete the work within a reasonable period of
time; or
(iii) If the license of or franchise for of the System cannot
be obtained or renewed, or is at any time suspended, terminated, or revoked; or
(iv) If, in the sole discretion of A or its Agent, a material
adverse change occurs or exists at any time in the Business, the System, and/or
the financial condition of Owner; or
(v) If Owner shall fail to make any material payment due
hereunder to A or Agent within 30 days after receiving written notice from A or
Agent of such failure.
In the event this Agreement is terminated for cause under one or more
of the terms of this section, all fees and payments due to A or its Agent
pursuant to this Agreement will remain payable and will be paid by Owner in
full.
Section 8.2 Disputes.
Any dispute arising under this Agreement which Owner, on the one hand,
and A or Agent, on the other hand, cannot resolve within a reasonable time shall
be resolved by arbitration by a board of three arbitrators in the United States,
one to be designated by Owner, one to be designated by A or Agent, and the third
to be designated by the first two arbitrators. The board of arbitrators shall
adopt procedures for the arbitration and, for this purpose, may adopt some or
all of the rules and regulations of the American Arbitration Association. The
cost of any arbitration shall be borne as determined by the board of
arbitrators. The decision of the board shall be in writing and shall be final
and unappealable.
ARTICLE 9
GENERAL PROVISIONS
Section 9.1 Notice.
9
11
Notices given under this Agreement shall be valid only if in writing
and properly mailed. A notice shall be properly mailed only if delivered by
overnight courier, with signature required, or if mailed by certified or
registered mail, if postage is prepaid, and if the notice if properly addressed.
A notice to a party shall be properly addressed only if addressed to the address
of the party set forth under Section 1 or to any other address the party may
designate by giving notice to the other party.
Section 9.2 Interpretation.
Captions and headings used in this Agreement are for reference only and
shall not be considered in connection with the interpretation of any provision
of this Agreement.
A male or female person may be referred to in this Agreement by a
neuter pronoun. A provision of this Agreement which requires a party to perform
an action shall be construed so as to require the party to perform the action or
to cause the action to be performed. The word "include" and variations of the
word such as "includes" and "including" shall not be construed as to limit the
generality of the statements they follow or precede and the phrase "shall not be
limited to" shall be deemed to follow every reference to the word "include" and
its variations. The singular includes the plural, and the plural includes the
singular. "Any" means "any and all".
"Notices" includes notices, consents, "approvals" and other
communications. This Agreement may not be changed or cancelled orally. No person
shall be regarded as a third party beneficiary of this Agreement.
Section 9.3 Status Reports.
Recognizing that each party may find it necessary, from time to time,
to establish to third parties, such as accountants, banks, mortgagees,
shareholders or the like, the financial status of its interest in this
Agreement, Owner and A agree to furnish, as promptly as practicable upon written
request of the other party a written statement as to the status of any matter
pertaining to this Agreement and the rights and obligations created by this
Agreement.
Section 9.4 Binding Effect.
This Agreement shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns. The submission of an
unexecuted copy of this Agreement shall not constitute an offer to be legally
bound by the provisions of the copy submitted; and no party shall be bound by
this Agreement until it is executed by all of the parties. This Agreement may be
executed in counterparts, and each counterpart constitutes an original document.
10
12
Section 9.5 Governing Law.
This Agreement shall be governed and construed in accordance with the
laws of the State of Connecticut.
To signify their agreement to the foregoing, the parties hereto have
caused this Agreement to be executed by duly authorized representatives.
[PTK Company]
By:
------------------------------
Its:
By:
------------------------------
Its:
A
By:
------------------------------
Its:
B
By:
------------------------------
Its:
11
