Exhibit 10.13
EXECUTION COPY
SERVICES AGREEMENT
The parties to this Services Agreement (this "Agreement"), dated as of
April 5, 2000, are ZD Inc., a Delaware corporation ("ZD"), and Ziff Xxxxx
Publishing Inc., a Delaware corporation ("Buyer").
Pursuant to the Purchase Agreement among ZD, ZD Holdings (Europe) Ltd. and
Buyer, dated December 6, 1999 (the "Purchase Agreement"), Buyer has purchased
certain print publications (the "Buyer Publications") and other assets as
described in the Purchase Agreement (the "Business"). The Buyer Publications and
the Business exclude the Computer Shopper print publication, its various special
editions, including the edition published under the name eShopper, and any
successor publication thereto (collectively, the "Publication").
Prior to the purchase of assets pursuant to the Purchase Agreement, ZD
provided to the Publication certain services described in Section 1 below
(collectively, the "Services");
ZD now desires to retain Buyer to provide the Services to ZD for the
Publication, as ZD may request from time to time, and Buyer desires to provide
such Services to ZD for the Publication.
NOW, THEREFORE, in consideration of the premises and mutual covenants and
obligations set forth herein, the parties hereto agree as follows:
SECTION 1. PERFORMANCE OF SERVICES; BUDGET.
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(a) Subject to the terms and conditions of this Agreement, Buyer shall
perform for ZD the Services described on Schedule 1(a) attached hereto. As part
of the Services, ZD shall be entitled to receive the benefit of all contractual
arrangements which Buyer has in effect from time to time with third parties
which relate to the functions described in Schedule 1(a) hereto, including,
without limitation, the arrangements with Warner Publisher Services, for
distribution; Centrobe, for fulfillment services; and Direct
Media, for list rental. Buyer shall also manage ZD's relationships under the
arrangements with X.X. Xxxxxxxxx & Sons, for printing and Bowater Newsprint for
paper.
(b) At least ninety (90) days prior to the end of each calendar year during
the Term (as defined in Section 5), representatives of Buyer and ZD will meet to
discuss and agree upon a budget for the following year for the Services to be
performed by Buyer. Attached as Exhibit A is the budget for calendar year 2000,
which has been agreed to by the parties. ZD will provide Buyer with reasonable
detail as to the expected nature and extent of the Services desired to be used
and Buyer will provide ZD with projected costs of such Services based on ZD's
stated needs. ZD may notify Buyer of any changes to the nature or extent of the
Services it desires to obtain during any budgeted year and Buyer will use its
commercially reasonable efforts to accommodate ZD's request for increased or
decreased use of the Services as specified by ZD. Buyer shall promptly (to the
extent practicable) notify ZD of any material deviation from the budget and
shall make any changes reasonably requested by ZD to remedy such deviation.
SECTION 2. FEES; PAYMENT.
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(a) ZD shall pay to Buyer in exchange for the Services, the cost, both out-
of-pocket and an allocable portion (based on the allocation method described in
the following sentence) of overhead of such Services (collectively, the "Usage
Fees"), plus an annual payment of $5 million (such annual payment the "Annual
Fee"). The allocation method will be specified in Schedule 2 but revised from
time to time so as to not be any less favorable than the allocation method used
to charge Buyer's Publications for such Services. Buyer shall provide to ZD all
benefits of Buyer's third party arrangements such that the out of pocket costs
charged to ZD shall be the same per unit (or other comparable metric) amounts as
those applicable to the Buyer Publications.
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(b) The amounts payable for Services under this Agreement do not include
any amounts for sales, use or similar taxes. If any such taxes are found at any
time to be required to be paid, they will be added to the amounts payable by ZD
pursuant to this Agreement.
(c) Buyer shall send an itemized monthly invoice, in a format mutually
agreed to by Buyer and ZD, to ZD for the Usage Fees resulting from Services
provided by Buyer during the previous month and for one-twelfth of the Annual
Fee for the ensuing month. Payment terms are net cash payable in full by ZD
within the later of thirty (30) days after receipt of the invoice or forty-five
(45) days after the end of such previous month (the "Payment Due Date"). A late
charge will be charged each month for any payments received by Buyer later than
this Payment Due Date, except for payments which ZD disputes in good faith. The
late charge will be determined by multiplying the outstanding balance by X/12
where (X) is the prime rate announced from time to time by the Bank of New York.
(d) ZD shall have the right, on at least ten (10) days prior notice to
Buyer, to examine or appoint an independent certified public accountant, who
shall agree to hold all information confidential except in connection with any
claim for ZD reimbursement hereunder, to examine and audit, at its own expense,
not more than twice each calendar year, during normal business hours and for a
reasonable duration, the relevant records of Buyer relating to calculation of
the Usage Fees. If such audit uncovers an overpayment by ZD, Buyer shall
promptly reimburse ZD in the amount of such overpayment and if the overpayment
is five percent (5%) or greater of the amount that should properly have been
charge for such period, Buyer shall also promptly reimburse ZD for the
reasonable costs of such audit actually incurred by ZD.
SECTION 3. DIRECTION AND CONTROL OF BUYER'S PERSONNEL.
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Buyer shall have the exclusive right to direct and control its employees
providing the Services under the terms of this Agreement, free of any
interference by
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ZD (other than in respect of ZD's right, as the recipient of the Services, to
specify the nature of the Services desired to be performed and the right to
receive and approve strategies and materials created or to be distributed by
such employees, in each case, specifically for the Publication). All of Buyer's
personnel providing the Services herein shall be exclusively employees of Buyer
or its affiliates, and Buyer shall have the sole right to determine their
conditions of employment, their working hours, employment and vacation policies,
seniority, promotions and assignments. Buyer will be solely responsible for
compensation of such employees and for all withholding taxes, F.I.C.A. and
F.U.T.A. taxes, unemployment insurance, workmen's compensation, and any other
insurance and fringe benefits with respect to its employees. Buyer shall also
have the exclusive rights to hire and fire any such personnel.
SECTION 4. SERVICES TO BE RENDERED CONSISTENT WITH PAST PRACTICES. During
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the Term (as defined in Section 5), Buyer shall in all material respects render
the Services and otherwise assist ZD in connection with the Publication in a
manner and of a quality consistent with past practice prior to the closing under
the Purchase Agreement, including, among other things, providing the Services
for the Publication in all respects with the same level of care and expertise as
it provides similar service to the Buyer Publications.
SECTION 5. TERM AND TERMINATION.
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(a) The term (the "Term") of this Agreement shall commence as of the date
hereof and, unless earlier terminated pursuant to this Section 5, shall end on
the third anniversary of the date hereof. Upon termination or expiration, all
rights and obligations of each party hereunder shall cease as of the date of
termination and any amounts owed by either party under this Agreement shall be
paid in full in accordance with Section 2(c).
(b) ZD may terminate this Agreement on at least ninety (90) days prior
notice to Buyer for any reason or for no reason.
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(c) Either party may terminate this Agreement in the event that the other
party is in material breach of such other party's obligations under this
Agreement, unless such party is also in material breach of its obligations under
this Agreement, (i) if the defaulting party has not cured the breach within
fifteen (15) days after notice by the non-defaulting party specifying the nature
of the breach, or (ii) if the breach is not amenable to cure, then immediately
upon receipt of such notice by the defaulting party.
(d) Either party may terminate this Agreement as permitted under Section 8
in the event of a force majeure that prevents or materially delays the
performance by the other party of its obligations under this Agreement.
(e) Sections 6, 7, and 9 through 11 shall survive termination or expiration
of this Agreement. In addition, ZD's obligation to pay the Annual Fee until the
third anniversary of the date of the Agreement shall survive early termination
of this Agreement for any reason other than termination pursuant to Section 5(c)
due to a breach by Buyer.
SECTION 6. INDEMNIFICATION.
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(a) Buyer, will, at its expense, promptly reform or correct any Services
which do not meet the requirements of this Agreement to the extent that such
errors were caused by Buyer, its equipment, its employees or agents. Buyer shall
not be responsible in any manner for any Services which do not meet the
requirements of this Agreement to the extent that such Services are due to
causes external to Buyer or otherwise beyond Buyer's control.
(b) Buyer agrees to indemnify and hold ZD and its affiliates, successors
and assigns harmless against and in respect of, and to pay any costs, damages,
claims, losses, settlements, deficiencies, expenses and liabilities arising from
(A) Buyer's failure to have all rights, licenses, and/or approvals necessary to
permit it to perform the Services and (B) the gross negligence or willful
misconduct of Buyer, its employees or its agents; and (ii) any breach by Buyer,
its employees or its agents of any of Buyer's
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obligations hereunder.
(c) ZD agrees to indemnify and hold Buyer and its affiliates, successors
and assigns harmless against and in respect of, and to pay any costs, damages,
claims, losses, settlements, deficiencies, expenses and liabilities arising from
(i) any breach by ZD, its employees or its agents of any of ZD's obligations
hereunder and (ii) any claims arising against Buyer relating to the Publication
provided such claims do not result from the negligence or willful misconduct of
Buyer, its employees or its agents.
(d) The obligation of either party to provide indemnification under this
Agreement shall be contingent upon the party seeking indemnification (i)
providing the other party with prompt written notice of any claim for which
indemnification is sought and (ii) cooperating fully with the other party and,
so long as such other party acknowledges its obligations to indemnify the party
seeking indemnification for such claim, allowing the other party to control the
defense and settlement of such claim. The party seeking indemnification may not
settle any such claim without the other party's prior consent, which consent
shall not be unreasonably withheld. The party seeking indemnification shall have
the right, at its own expense, to participate in the defense of any such claim.
SECTION 7. CONFIDENTIALITY. Confidential or proprietary information
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disclosed by either party to the other for the purposes of this Agreement which
is clearly identified as such in writing or which the circumstances surrounding
its disclosure indicate that it is confidential or proprietary (which shall
include, without limitation, all circulation strategies and results for the
Publication) shall not be disclosed to any third party and shall be protected by
the recipient in the same manner and to the same degree that the recipient
protects its own confidential information. Such information will be disclosed
only to those employees of the recipient requiring access thereto in order to
perform the party's obligations under this Agreement (it being understood that
access in a manner consistent with past practice will be permitted) and
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shall not be used in any manner other than as specifically provided in this
Agreement.
SECTION 8. FORCE MAJEURE. Neither ZD nor Buyer shall be responsible for any
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failure or delay in performance of its obligations under this Agreement because
of circumstances beyond its reasonable control including, but not limited to,
acts of God, fires, floods, wars, civil disturbances, sabotage, accidents, labor
disputes (whether or not the employees' demands are reasonable and within the
party's power to satisfy), governmental actions or transportation delays. Either
party may terminate this Agreement without any liability to the other party,
subject to Section 5(g), if such other party is substantially unable, as a
result of any circumstance set forth in this Section, to perform its obligations
under this Agreement for a continuous period of thirty (30) days or for thirty
(30) or more days during any sixty-day period.
SECTION 9. NOTICES.
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(a) All notices, requests, instructions, claims, demands, consents and
other communications required or permitted to be given hereunder shall be in
writing and shall be deemed to have been duly given (i) when delivered
personally to the recipient, (ii) one business day after being sent to the
recipient by reputable overnight courier service (charges prepaid), (iii) upon
machine-generated acknowledgment of receipt after transmittal by facsimile if so
acknowledged to have been received before 5:00 p.m. on a business day at the
location of receipt and otherwise on the next following business day, provided
that each such notice, demand or other communication is also deposited within 24
hours thereafter with a reputable overnight courier service (charges prepaid)
for delivery to the same Person or (iv) five days after being mailed to the
recipient by certified or registered mail, return receipt requested and postage
prepaid, to the parties at the following addresses:
If to ZD, addressed to: ZD Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Legal Department
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With a copy to: Xxxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: 212/000-0000
Facsimile: 212/558-3588
Attention: Xxxx X. Xxxxxxxxxx
Xxxxxxxx X. Xxxxx
If to Buyer, addressed to: Ziff Xxxxx Publishing Inc.
x/x Xxxxxx Xxxxx & Xxxxxxxx XX, X.X.
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxxx
Avy X. Xxxxx
With a copy to: Xxxxxxxx & Xxxxx
000 X. Xxxxxxxx Xxxxx
00xx Xxxxx
Xxxxxxx, XX 00000
Telephone: 312/000-0000
Facsimile: 312/861-2200
Attention: Xxxx X. Xxxxxxxxxxx
or to such other address or addresses as may be specified from time to time in a
notice given by such party as permitted under this Section 9(a).
(b) Notwithstanding the foregoing, routine instructions, requests,
directions and notices dealing with day to day operations under this Agreement
may be given in such manner to such persons as may be agreed by the parties from
time to time is reasonable and practicable.
SECTION 10. SCHEDULES. The parties hereto acknowledge and agree that the
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Schedules referenced herein and attached hereto are an integral part of this
Agreement. Such Schedules are hereby incorporated by reference herein and made a
part hereof.
SECTION 11. MISCELLANEOUS.
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(a) This Agreement constitutes the entire Agreement between the parties
with respect to the provision or performance of Services for ZD by Buyer, and is
a complete allocation of risks between them as to the subject matter hereof.
This Agreement supersedes and cancels all previous oral or written
communications, negotiations, representations, undertakings and agreements
heretofore made between the parties in respect to the subject matter hereof.
(b) If any term or provision of this Agreement is held to be invalid or
unenforceable by reason of any rule of law or public policy, then this Agreement
shall be deemed amended to delete therefrom the term or provision held to be
invalid or unenforceable, and all of the remaining terms and provisions of this
Agreement shall remain in full force and effect.
(c) This Agreement shall be interpreted, construed and governed under and
by the laws of the State of New York, without regard to its choice of law rules.
In connection with any proceeding arising from this Agreement or the
transactions contemplated herein, the parties hereby irrevocably consent to the
exclusive jurisdiction of any Federal court or state court located in New York,
NY.
(d) Except as expressly set forth herein, no person not a party hereto
shall be a third-party beneficiary of any provision of this Agreement. Nothing
contained herein shall be construed or deemed to confer any benefit or right
upon any third party.
(e) The failure of a party to insist upon strict or timely adherence to any
term of this Agreement on any occasion shall not be construed a waiver, or
deprive that party of the right thereafter to insist upon strict or timely
adherence to that term or any other term of this Agreement.
(f) The headings in this Agreement are intended solely for the convenience
of reference and shall be given no effect in the construction or interpretation
of this Agreement. No modification of this Agreement shall be effected by the
acknowledgement or acceptance of any purchase order, acknowledgement or other
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forms containing terms or conditions at variance with or in addition to those
set forth in this Agreement.
(g) Neither this Agreement nor any provision hereof may be waived,
released, discharged, abandoned, changed or modified in any manner, orally or
otherwise, except by an instrument in writing signed by duly authorized officers
or representatives of the parties.
(h) Nothing in this Agreement shall be construed to place the parties in
the relationship of partners, joint venturers, principal and agent, or employer
and employee.
(i) This Agreement may be executed in counterparts, each of which shall
constitute an original but all of which, taken together, shall constitute a
single instrument.
(j) Each party to this Agreement has reviewed and commented upon or fully
participated in the preparation of this Agreement. In no event will any
provision of this Agreement be interpreted to the disadvantage of any party
based on such party's having been the draftsperson of such provision.
(k) ZD may assign this Agreement to any entity acquiring all or
substantially all of the Publication, provided that the assuming party executes
documents reasonably acceptable to Buyer assuming all of ZD's obligations
hereunder and ZD remains liable hereunder.
(l) Buyer may assign this Agreement to any entity acquiring all or
substantially all of Buyer's assets, provided that the assuming party executes
documents reasonably acceptable to ZD assuming all of Buyer's obligations
hereunder and Buyer remains liable hereunder.
(SIGNATURE PAGE TO FOLLOW)
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ZIFF XXXXX PUBLISHING INC. ZD INC.
By: /s/ XXXXXX X. XXXXXXXXXX BY: /s/ J. XXXXXXX XXXXXX
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Name: Xxxxxx X. Xxxxxxxxxx Name: J. Xxxxxxx Xxxxxx
Title: President Title: Senior Vice President
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EXHIBIT A
2000 BUDGET
(amounts to be paid only for the period after the
closing under the Purchase Agreement)
Production: annual budget of 300,000
Circulation: annual budget of $531,000
Benchmarks: annual budget of $167,000
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SCHEDULE 1
SERVICES DESCRIPTION
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(a) Services Description:
(1) Production: paper, printing, prepress operations (e.g., layout,
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transmission of pages to the printer etc.) and other similar services.
(2) Circulation: subscription acquisition services, newsstand placement and
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management services, list rental management, fulfillment services,
relationships with wholesalers. This includes contractual arrangements
with, among other parties, third party subscription agents and national
distributors.
(3) Distribution: postal service, trucking and other transportation services.
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(4) Benchmarks: access to all Benchmark products and services and access to and
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participation in the Benchmark intranet Test Site for the Publication, and
xxxxxxxxxxxxxxx.xxx, and membership in all Benchmark advisory committees on
the same basis as the Buyer Publications. ZD shall be exempt from
compliance with the benchmark disclosure requirements to the same extent
waived for the Buyer Publications.
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SCHEDULE 2
ALLOCATION METHOD
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The Allocation method will be agreed to by the parties hereto from time to time.
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