AMERICA ONLINE LATIN AMERICA INC
AGREEMENT FOR DEVELOPMENT OF TELPHONIC TRAFFIC
<DOCUMENT>
<TYPE>EX-10.5
<SEQUENCE>7
<FILENAME>g90476exv10w5.txt
<DESCRIPTION>AGREEMENT FOR DEVELOPMENT OF TELPHONIC TRAFFIC
<TEXT>
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                                                                    EXHIBIT 10.5


       AGREEMENT FOR DEVELOPMENT OF TELEPHONIC TRAFFIC BETWEEN SERVER AND
       TELECOMUNICACOES DE SAO PAULO S.A. - TELESP - ADHESION AGREEMENT.


                                                                 MODEL




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             REQUEST FOR REGISTRATION OF STANDARD OR MODEL AGREEMENT
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ILLUSTRIOUS REGISTRAR OF THE PUBLIC REGISTRY OF DOCUMENTS AND CIVIL REGISTRY OF
LEGAL ENTIITES OF THE CAPITAL




TELECOMUNICACOES DE SAO PAULO S/A - TELESP- with its address at Rua Martiniano
de Carvalho, n(0) 851, in this Capital, undersigned, comes before Your Honor to
request the REGISTRATION of the attached document of: AGREEMENT FOR FUNDS FOR
DEVELOPMENT OF TELEPHONIC TRAFFIC.

It requests granting of the above.

Sao Paulo,  August 22, 2003.

Signed by: FERNANDO ELIAS RIBEIRO
                National Registry of Individuals:
                 Identity Card:

 THREE STAMPS OF THE 2ND REGISTER OF DOCUMENTS AND CIVIL OF LEGAL ENTITIES.





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                                    AGREEMENT

                                       FOR
                        DEVELOPMENT OF TELEPHONIC TRAFFIC

                                     BETWEEN

                                     SERVER

                                       AND

                   TELECOMUNICACOES DE SAO PAULO S.A. - TELESP


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                 AGREEMENT FOR DEVELOPMENT OF TELEPHONIC TRAFFIC


Through this present private instrument and in the best form of the law, the
Parties qualified hereinunder, on one side::


(a) TELECOMUNICACOES DE SAO PAULO S.A., with its main place of business in the
City of Sao Paulo, at Rua Martiniano de Carvalho, 851, enrolled in the National
Registry of Legal Entities under n(0) 02.558.157/0001-62, in this act duly
represented pursuant to its Bylaws, hereinafter simply called "TELESP",

and, on the other,

(b) SERVER, duly qualified in the Request for Services, which is an integrant
inseparable Party to this Agreement, hereinafter simply called "SERVER";

and also, individually referred to as  a "Party" and when jointly,  "Parties",

Whereas the conditions set forth in the Promotional Plan for Supplying of Access
Infra-Structure to Narrowband Internet Services ("Promotional Plan") that TELESP
published in the site WWW.TELEFONICA.COM.BR/SP, on July 7, 2003, subsequently
complemented on July 22, 2003; and

Whereas the SERVER's interest in joining in and in hiring under the conditions
set forth in the aforementioned "Promotional Plan", specified in the Request for
Services;

they decide, of common concord, to enter into the present Adhesion Agreement,
which shall be governed by the following clauses and conditions:



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1. OBJECT

1.1.     The object of the present Adhesion Agreement is the development of the
         telephonic traffic in Region III of the General Plan of Grants ("GPG"),
         related to calls started at TELESP's network terminals of Commuted
         Landline Telephone Service ("CLTS") and finished at the Dial Provider
         Ports and/or E1s, hired by the SERVER from TELESP for users' dialed
         access to the Internet in Region III of GPG, through payment of the
         amounts hereinafter agreed upon.

2. SERVER'S DUTIES

2.1.     These are the SERVER's duties, with no loss to the other duties set
         forth in this instrument:

         2.1.1    To guarantee its full fidelity to the services of Access
                  Infra-Structure to Narrowband Internet Services towards
                  TELESP, in accordance with the Promotional Plan, making sure
                  that all the traffic arisen from its users and geared to the
                  SERVER is finished at TELESP's network, through the hiring of
                  the sufficient and necessary Dial Provider Port(s) and/or
                  E1(s).

                  2.1.1.1. The fidelity commitment set forth in the Promotional
                           Plan and ratified in the terms of item 2.1.1. above,
                           is conditioned to the compliance, by TELESP, with the
                           SERVER's requests for Dial Provider Ports and/or E1s.

                  2.1.1.2. In the cases when TELESP states that it will not
                           comply with the SERVER's request for Dial Provider
                           Ports, the latter shall, through E1 hiring, assure
                           that the integrality of the dialed access connections
                           to the Internet in Region III of the GPG finishes at
                           the CLTS network or at any other TELESP network.


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                           2.1.1.2.1. In the hypothesis detailed in item
                                      2.1.1.2., in case the SERVER eventually
                                      hires E1 differently from the conditions
                                      set forth in the Promotional Plan, it will
                                      not be entitled to any payment arisen from
                                      having entered into this Agreement,
                                      related to such E1s.

                  2.1.1.3. With no loss to the provisions of item 2.1.1.2.,
                           whenever TELESP fails to comply with the service
                           levels ("SLA") established in the Agreements for
                           Providing Service and in the Agreement for Supplying
                           Access Infra-Structure to the Internet Services -
                           Dial Provider, the SERVER will be freed from the
                           fidelity duty set forth in item 2.1.1. above for the
                           localities where the ports, the service level to
                           which has not been complied with.

         2.1.2.   To keep the hiring of the Dial Provider Port(s) and/or E1(s),
                  pursuant to the terms of item 2.1.1. above, during all this
                  instrument's validity period.

         2.1.3.   To respect and comply with all the conditions established in
                  the Promotional Plan, bound to this instrument.

3. TELESP'S DUTIES

3.1.     TELESP shall have the following duties, with no loss to the other
         obligations set forth in this instrument:

         3.1.1.   To pay the SERVER for the development herein agreed upon,
                  pursuant to the terms of Clause 4 below;



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         3.1.2.   To assure the supply of the Dial Provider Port(s) and/or the
                  E1(s), in accordance with the terms agreed upon by the SERVER.

         3.1.3.   To respect and comply with all the conditions set forth in the
                  Promotional Plan, bound to this instrument.

4. VALUES AND PAYMENT FORMS

4.1.     TELESP will monthly pay to the SERVER for the development hereby hired,
         the amount corresponding to fourteen point five per cent (14.5%) of the
         value of the telephonic pulses that can be charged by TELESP, due to
         calls starting at TELESP's Commuted Landline Telephone Service network
         ("CLTS") and finished in the Dial Provider Port(s) and/or E1(s) hired
         from TELESP.

         4.1.1    For the purposes of this Agreement, it is understood by
                  telephonic pulse, the tariff unit of a call from CLTS in the
                  modality local (calls from conurbation areas will not be taken
                  into consideration), homologated by ANATEL and which can be
                  invoiced by TELESP from its subscribers.

                  4.1.1.1. The net value of the pulse homologated by ANATEL will
                           always be used.

         4.1.2.   The value of the pulse to be considered for the payment, which
                  item 4.1 refers to, will be calculated by the weighted
                  average, in accordance with the percentages established below:

                  4.1.2.1. For Sector 31 of the GPG, the value to be considered
                           will be ninety per cent (90%) of the pulse value.



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                  4.1.2.2. For Sector 32 of the GPG, the value to be considered
                           will be point nine per cent (0.9%) of the pulse
                           value.

                  4.1.2.3. For Sector 34 of the GPG, the value to be considered
                           will be point one per cent (0.1%) of the pulse value.

4.2.     TELESP will make available to the SERVER, up to the twentieth (20th) of
         the month subsequent to the invoicing cutting date of the Dial Provider
         and/or E1 services, a statement report ("Statement Report"), containing
         the total amount of pulses, as defined in item 4.1.

4.3.     The SERVER shall invoice the amounts to be paid by TELESP, pursuant to
         this Agreement, according to the Statement Report within five (5) days
         subsequent to its receipt, with maturity date on the thirtieth (30th )
         of each month.

         4.3.1.   The amounts re 18 27 lated to this Agreement's first and last
                  month will be invoiced PRO RATA DIE.

         4.3.2.   No kind of repassing of taxes will be accepted, including
                  related to the creation of new levying taxes or to changes in
                  the levying rules (whether modification of the calculation
                  basis or aliquots).

4.4.     TELESP shall make the respective payment through credit in bank current
         accounts to be informed by the SERVER in the Request for Services.

4.5.     The deposit vouchers in the SERVER's favor will be considered able
         documents for evidencing the acquittal of the payments due by TELESP.


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4.6.     Subsequently to the invoicing of the amounts stated in the Statement
         Report, the SERVER may challenge, with justification, TELESP's report
         within ten (10) days, counted as of such invoicing date.

4.7.     TELESP will have a (10) ten-day term, counted as of the receipt of the
         SERVER's challenge to appraise and adjudge such challenge.

         4.7.1.   In case TELESP considers that the SERVER's challenge of the
                  Statement Report has grounds, the SERVER shall, in the
                  following month's invoice, include the amounts resulting from
                  the challenge verification, added of the charges set forth in
                  item 4.8, calculated on the basis of the overcharged
                  difference.

         4.7.2.   If, after TELESP's decision about the SERVER's challenge, the
                  divergence between the Parties still persists, the issue shall
                  be solved in accordance with the terms of Clause 10
                  hereinbelow.

4.8.     Assuming that the payments established in this Clause are not honored
         on the date herein agreed upon, there will levying on the amount of the
         portion due, independently of notification, of fine for payment on
         arrears of two per cent (2%) or of the maximum percentage allowed by
         the legislation in force that may eventually replace it, a single time,
         and fine for payment on arrears of one per cent (1%) per month or
         fraction of month, as well as monetary restatement verified by the
         variation of the General Index of Prices - DI (IGP-DI), released by the
         Getulio Vargas Foundation, as of the maturity date until the date of
         the actual payment. In the absence of IGP-DI, another official index
         that may eventually replace it will be applied to it, calculated PRO
         RATA DIE..

4.9.     In the hypothesis of ANATEL or TELESP eventually establishing
         alternative remuneration plans for the dialed access traffic to the
         Internet, which disregard the pulses arisen from the traffic finished
         at the Dial Provider Ports and/or E1 hired by


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         the SERVER, the amount to be paid by TELESP by virtue of the
         development hereby hired, will be equivalent to twenty per cent (20%)
         of the net amount invoiced per each of the SERVER's users that opts for
         such alternative plans, being this amount added to the verified amount,
         pursuant to item 4.2. above.

4.10.    The Parties may come to an agreement about granting discounts over the
         value of the pulse stemming from the calls started by the SERVER's
         users at CLTS network and finished at the Dial Provider Ports and/or E1
         hired from TELESP.

         4.10.1   In case the Parties eventually agree about the discounts which
                  item 4.10. above refers to, the full amount corresponding to
                  the discounts granted to the SERVER's users will be deduced
                  from the total amount of the development to be paid for, in
                  accordance with the terms of item 4.1. above.

                  4.10.1.1. The provisions set forth in item 4.10.1 above, will
                           only be applied to the period in which the discount
                           granted to the users is valid, which will not be
                           longer than ninety-five ( 95) days, whether
                           uninterrupted or not.

         4.10.2.  Whenever the value of the discounts granted to the SERVER's
                  users is higher than the total value of the development,
                  calculated pursuant to the terms of item 4.1. above, the
                  SERVER will not owe any difference to TELESP.

5. VALIDITY

5.1.     The present Agreement will remain in force for a period of twelve (12)
         months, counted as its execution date and can be automatically renewed
         until December 31, 2005, through the SERVER's previous express wish.

         5.1.1.   This Agreement cannot be extended pursuant to the terms of
                  item 5.1 above, in case the SERVER eventually fails to comply
                  with any of this Agreement's conditions or those of the
                  Promotional Plan, or in case the Agreements for Supplying


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                  Access Infra-Structure to the Narrowband Internet Services,
                  entered into by virtue of the Promotional Plan (Dial Provider
                  and/or E1) are eventually terminated.

6. TERMINATION

6.1.     The present instrument cannot be terminated in advance by any of the
         Parties, due to unjustified accusation.

6.2      Any of the Parties can terminate the Agreement in the event of:

         6.2.1.   Bankruptcy of the other Party;

         6.2.2.   Incompliance, by the other Party, with any of the duties set
                  forth in this Agreement, without the due remedy within a (60)
                  sixty-day term, counted as of the notification date;

         6.2.3.   Incompliance with any provision of the Promotional Plan;

6.3.     In any assumption of termination, including those described in item
         6.2. above, the Agreement for Supplying Access Infra-Structure to the
         Narrowband Internet Services, as well as the Agreement for Availability
         for Advertising Space, entered into with TELESP by virtue of the
         Promotional Plan, will be automatically terminated, being the Party
         which has not given reason for termination, the creditor of the
         termination fine set forth in those agreements, and the aforementioned
         fine will have to be paid to the creditor Party within thirty (30)
         weekdays days, counted as of those Agreements' termination date.

6.4.     It is hereby set forth that none of the Parties can claim any other
         indemnification or compensation, including losses and damages, due to
         this instrument's advanced termination, except for the penalty
         established in item 6.3.


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7. CONFIDENTIALITY

7.1.     By virtue of the access they have had and will have to the other
         Party's privileged or confidential information, the Parties
         reciprocally commit:

         7.1.1.   Not to allow access to the other Party's confidential
                  information to any third parties whatsoever, which are not
                  their respective administrators, employees, representatives,
                  agents or consultants, and to these, just in the extension
                  needed to allow the achievement of this Agreement's object;

         7.1.2.   Not to use any Confidential Information, except for the
                  purposes established in this Agreement and/or other deals
                  entered into by the Parties; to keep utmost confidentiality
                  regarding the received Confidential Information, including
                  rigorously endeavoring to prevent circulation of copies,
                  e-mails, faxes and other forms of private or public disclosure
                  of such Confidential Information, apart from those which are
                  strictly needed for complying with this Agreement.

7.2.     The Parties acknowledge that there will be no violation to the
         provisions of this clause, in the assumptions when:

         7.2.1.   The Confidential Information becomes available to the public
                  in general, through a means that does not result from its
                  disclosure by the Parties or their respective
                  shareholders/quotaholders, controlled or controlling companies
                  of their respective shareholders/quotaholders,
                  representatives, employees or consultants, which have been
                  previously authorized in accordance with item 7.2.3;

         7.2.2.   The disclosure is demanded by a governmental authority, under
                  the penalty of incompliance or another penalty being featured.
                  In such hypotheses, the Confidential Information to be
                  disclosed shall be object of all the applicable governmental


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                  or judicial protection, and the Party that is compelled to
                  disclose such information must notify the other Party about
                  such disclosure;

         7.2.3.   The disclosure has been previously authorized, in writing, by
                  the other Party, in writing.

7.3.     The Parties shall advise all those to whom they provide access to
         Confidential Information of the other Party about the secrecy and
         non-disclosure duties herein agreed upon.

7.4.     The Parties will remain under the obligation of keeping the strictest
         secrecy regarding the Confidential or Privileged Information obtained
         by virtue of the Agreement execution, for a (5) five-year term, counted
         as of its expiration and the expiration of its possible extensions.

7.5.     Violation to the duties established in this item or incompliance with
         the confidentiality duties set forth in this instrument, shall subject
         the infracting Party to compensate all the losses incurred by the Party
         damaged by such violation, being this duty to indemnify exclusively
         limited to the direct damages, duly evidenced, which such damaged Party
         will eventually undergo by virtue of the incompliance with the
         confidentiality duties herein agreed upon.

8. COMMUNICATIONS

8.1.     Any notice, notification, request or communication related to the
         present Agreement shall be sent by:

         8.1.1.   registered letter, hypothesis when the terms will be counted
                  as of the effective receipt date;

         8.1.2.   telegram;

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         8.1.3.   fax, with transmission voucher, being that, in this case, the
                  original counterpart shall be delivered to the addressed Party
                  by mail, copied and docketed within five (5) working days; or

         8.1.4.   personal delivery, with voucher signed by the other Party's
                  authorized representative.

9. MISCELLANEOUS

9.1.     The present Agreement binds the Parties and their successors, on any
         account.

9.2.     Any amendment to this Agreement will only be valid through written
         instrument, duly executed by the Parties.

9.3.     Unenforceability or invalidity of any clause or provision of this
         Agreement will not affect the enforceability or validity of the other
         clauses and provisions, except if the combination of their provisions
         makes clear that the Parties' wish would not have been to hire without
         the unenforceable or invalid provisions.

9.4.     None of the Parties can assign and, under no circumstances, transfer,
         either fully or partially, the present Agreement, or any rights arisen
         therefrom, without the written consent of the other Party.

9.5.     The possible assignment or the full or partial transference of the
         present Agreement or any rights and duties arisen therefrom, will not
         exempt the assigning Party from any of its responsibilities or duties
         arisen from this Agreement.

9.6.     In case any of the Parties abstains to perform the right or power
         granted to it by this Agreement, or in case it agrees with the other


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         Party's delay in complying with its duties, this will not affect those
         rights or power that can be exercised, at any time, at the exclusive
         discretion of the Party that are entitled to them, nor will it change
         the conditions contained in this Agreement.

9.7.     All the periods of time set forth in this Agreement will be counted in
         accordance with article 184 of the Civil Procedure Code, that is, with
         the exclusion of the start date and including the maturity date.

9.8.     Neither this Agreement, nor any of its provisions shall be construed as
         constituting any corporate relationship between the Parties (whether a
         legally existing company or a de facto company or a consortium). The
         Parties commit not to perform acts that might induce third parties into
         error regarding the nature of their relationship and the total
         independence of one towards the other.

9.9.     In the cases of service E1 hiring, TELESP, when verifying the pulses
         which the present Agreement refers to, will be allowed to use the
         network's occupation averages, as well as the minute/pulse relationship
         to determine the amount to be paid.

         9.9.1.   The assumption in item 9.9. above will only be taken into
                  consideration in the situations when TELESP makes evidence of
                  the technical impossibility for pulses verification.

9.10.    The present Agreement is executed in irrevocable unretractable way,
         binding the Parties and their successors, on any account. For the
         purposes of the present Agreement, the company that results from
         merger, split-off or incorporation of any of the Parties will be
         considered a successor, independently of its having the same
         designation and/or corporate registers of the Parties which were
         originally the Contracting Parties.

9.11.    None of the Parties will be liable for losses and damages, particularly
         incidental or indirect damages and loss of profit, nor will it


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         indemnify commercial failure of the other Party, nor will it be liable
         for claims of third parties or clients arisen from failures occurred in
         the performance of the other Party's responsibility, except for the
         situations of direct damages and in those cases in which deliberate
         action or omission of one Party to damage the other (malice) is
         evidenced.

9.12.    The present Agreement comprises all the agreements and deals executed
         between the Parties related to its object and substitute all kinds of
         prior agreements, deals and communications, whether in writing or
         verbal, carried out by the Parties, regarding the object at issue.

9.13.    The present Agreement is fully bound and dependent on the terms stated
         in the Promotional Plan, published by TELESP in its site:
         HTTP://WWW.TELEFONICA.COM.BT/SP, on July7, 2003, subsequently
         complemented on July 22, 2003.

9.14.    The Parties agree that, in the event of conflict between the
         Promotional Plan and the present Agreement, the provisions set forth in
         this Agreement will prevail.

10.CONFLICT SOLVING

10.1.    The Parties shall lend their best efforts towards solving, in a
         friendly way, any conflicts that may eventually arise from the
         execution of the present instrument.

10.2.    The conflicts arisen from divergence regarding the Statement Report to
         which item 4.2. hereinbefore refers to, will be solved in the following
         way:

         10.2.1.  In case the difference between the minutes stated in the
                  Statement Report delivered by TELESP and the well-founded
                  verification performed by the SERVER is higher than three per
                  cent (3%), the SERVER will be allowed, at its expenses, to
                  audit the verification process used by TELESP.


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                 10.2.1.1. For the purposes of the auditing established in item
                           10.2.1 above, the SERVER shall appoint independent
                           auditors, chosen among the four major auditing firms
                           in the market, to perform such auditing.

                 10.2.1.2. Within thirty (30) days, counted as of the auditors'
                           appointment by the SERVER, TELESP shall allow the
                           onset of the auditing process, by complying with the
                           necessary conditions required for the auditing
                           process.

                 10.2.1.3. Having the auditing been concluded, the verified
                           amount will be compared to the amount invoiced by the
                           SERVER and paid by TELESP and, there being any
                           difference, it will be inserted in the subsequent
                           month's invoicing.

11. VENUE

11.1.    It is hereby elected the Court of the City of Sao Paulo -SP, with
         express waiver of any other, privileged as it may be, to settle any
         queries or controversies arisen from the present Agreement.


Sao Paulo, July 22, 2003.

/s/ FABIO SILVESTRE MICHELI                  /s/ STAEL PRATA SILVA FILHO
-----------------------------                ----------------------------------
FABIO SILVESTRE MICHELI                      STAEL PRATA SILVA FILHO
VICE-PRESIDENT                               EXECUTIVE VICE-PRESIDENT
COMMERCIAL -RESIDENTIAL                      OF STRATEGIC PLANNING

                   TELECOMUNICACOES DE SAO PAULO- S.A. -TELESP



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