1
EXHIBIT 10.1
SERVICES AGREEMENT
THIS SERVICES AGREEMENT (the "Agreement"), entered into this 21st day
of October, 1996, by and between The Xxxxxx X. Xxxxxxxxx Corporation,
("Donnelley"), a Delaware corporation, located at 000 Xxxxxx Xxxxxx, Xxxxxxxx,
XX, 00000, and IT Network, Inc., ("ITN") a wholly-owned subsidiary of Source
Media, Inc., and a Texas corporation located at 0000 Xxxxxx Xxxx, Xxxxxx, XX,
00000. (Collectively, the "Parties" or individually a "Party".)
WHEREAS, Donnelley publishes yellow page directories and sells yellow
pages advertising in directories published by certain telephone companies and
Donnelley desires to assure the provision of audiotext services in the
directories identified on Appendix A ("Directories"); and
WHEREAS, ITN has the expertise and experience to provide a full-range of
audiotext services, including network content development and broadcasting,
advertising production, customer service, network operations and system service
and maintenance ("Services"); and
WHEREAS, Donnelley wishes to acquire Services from ITN for the Directories
and ITN wishes to provide Services for Donnelley ;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this agreement, Donnelley and ITN agree as follows:
1. DEFINITIONS. The following definitions shall be applicable in
connection with this Agreement:
a) "AMOUNT FOR SERVICES" shall mean the total due for Services
in any month.
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b) "AUDIOTEXT" shall mean recorded information prepared and
transmitted via the System and/or the Network and any reference to
the System and/or the Network shall mean the Audiotext System and/or
Audiotext Network.
c) "AUDIOTEXT INFORMATION" shall mean all common interest static
or broadcast audio information prepared by ITN or obtained by ITN
under license with third parties, including all advertising
messages produced by ITN under this Agreement, which information is
entered, stored and retrieved for transmission over the System to
telephone callers using a touch-tone telephone who call the
telephone numbers and codes listed in the Directories and retrieve
desired information by dialing an access code.
d) "CUSTOMER SERVICE" refers to preparing copy, scripting,
producing and loading advertising slots on the system. It does not
include handling claims relating to errors or omissions from
advertisers.
e) "DIRECTORIES" shall mean the telephone directories set forth
on Appendix A, attached to this Agreement and incorporated in it by
this reference. Appendix A may be amended by Donnelley to either
add or delete the Directories covered by this Agreement.
f) A "FIELD SITE" is a physical location where one or more
servers physically reside.
g) "NETWORK" shall mean the central computer operated by ITN and
all Field Site locations, as defined below, used to create and
transmit Audiotext Information.
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h) "SERVICES" shall mean the full range of audiotext services
including, but not limited to, network content development,
broadcasting, advertising production, customer service, network
operations and System service and maintenance.
i) The "SYSTEM" shall mean all of the assets used to prepare and
transmit Audiotext Information.
2. EFFECTIVE DATE, TERM. The initial term of this Agreement becomes effective
on ***, 1996, and remains in effect for the issue life of all Directories
published prior to ***, 1999, however, if ITN meets all of the Key Performance
Indicators (identified and defined in Section 4) for each year of the initial
term, the Agreement will be automatically extended for *** more years, to
include the issue life of all Directories published prior to ***. In the event
that ITN fails to meet the Key Performance Indicators during the *** years after
the initial term of the Agreement (if there has been an extension of the initial
term), then such failure shall constitute a material breach of this Agreement.
3. ITN RESPONSIBILITIES. During the Term of this Agreement, ITN shall be
responsible for providing to Donnelley all Audiotext Services requested by
Donnelley in the following areas: ***, as set forth specifically below:
a) Network Content Development and Broadcasting
i) ITN shall be responsible for ***
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b) Advertising Production and Customer Service
***
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***
c) Network Operations - ITN shall operate and manage the Network to
provide consistent and high quality Audiotext Services. This shall
include:
***
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***
d) System Service - Operation of the System and the Field Sites will be
consistent with industry standards including***
e) Content Assignment - Within ten (10) working days of the execution
of this Agreement, ITN will notify Donnelley as to which (if any) of
the***
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f) Transition Period - In order to facilitate the transition of the
audiotext services covered by this Agreement, Donnelley will ***
4. KEY PERFORMANCE INDICATORS. There are four (4) Key Performance Indicators
("KPIs") upon which the automatic extension of this Agreement for an additional
two years are contingent and thereafter will constitute a material breach of
this Agreement if they each are not met. However, ITN is granted thirty (30)
days to cure a material failure to meet any of the following KPIs:
***
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5. DONNELLEY'S RESPONSIBILITIES.
***
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e) Transition Period. Commencing with the effective date of this
Agreement and continuing until ***, 1997, unless sooner
terminated by the Parties, Donnelley will facilitate the transition
of audiotext services covered by this Agreement, by ***
f) Leased Equipment. The equipment shown on Appendix C is used
to support audiotext services to the publishers also shown on
Appendix C. This equipment is leased by Donnelley pursuant to leases
that expire on the dates shown in Appendix C. Until the date on
which the leases expire, Donnelley shall ***
6. CONTROL OF AUDIOTEXT SLOTS/PROGRAMMING. At Donnelley's direction, ITN shall
formulate policies relating to the wording, production, distribution and
sponsorship of the Audiotext Information. Such policies shall be in effect for
all contracts executed between ITN
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and audiotext advertising customers. All policies formulated by ITN shall be
consistent with the standards of the publisher of the Directories and subject
to approval by Donnelley. ITN will modify these policies as requested in
writing by Donnelley.
7. OWNERSHIP. ***
8. COST OF SERVICES. Unless otherwise provided under this Agreement, each
party shall independently bear the cost and expense complying with its
obligations under the terms of this Agreement.
9. COMPENSATION. The compensation due ITN each month during the Term of this
Agreement, shall be determined as set forth below:
a) Fixed Monthly Amount -
Each month during the initial Term of this Agreement, the amount for
that month is indicated on Appendix D, attached to this Agreement
and by this reference incorporated in it (the "Fixed Monthly Amount"
for the specific month).
b) Amounts for Services -
The charge for Services requested by Donnelley and performed by ITN
shall be:
i) ***
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ii) The charge for all *** provided by ITN in accordance with
this Agreement is $***.
iii) The charge for all *** provided by ITN in
accordance with this Agreement is $***.
iv) The charge for all *** provided by ITN in
accordance with this Agreement is $***.
c) For each month while this Agreement is in effect, Donnelley shall pay
ITN the greater of the fixed monthly amount for that month set forth
on Appendix D or the total Amount for Services as determined under
Article 9(b).
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d) ITN warrants that ***
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10. INVOICING AND PAYMENT.
a) By the 15th day of each calendar month (or the next following
business day if the 15th of the month is a Saturday, Sunday or legal
holiday), ITN shall invoice Donnelley for the Compensation due for
the previous month. Each invoice shall itemize separately the Fixed
Amount and the Amount for Services. The invoice shall include
instructions to transmit the amount to be paid to ITN.
b) Donnelley shall pay ITN the amount invoiced within forty-five (45)
days after receipt of the invoice. Any amounts not paid by Donnelley
to ITN by the due date shall accrue interest at the rate of one and
one-half percent (1-1/2%) per month, compounded monthly from the date
the amount were due until paid. Acceptance by ITN of any payment after
the due date shall not constitute a waiver of any rights under this
Agreement and the payment of an invoice by Donnelley shall not
constitute acceptance or waiver of any rights or claim that Donnelley
may have with respect to this Agreement or ITN's performance of its
obligations.
11. DONNELLEY RIGHT TO REJECT. In the event Donnelley determines that any
Audiotext Information on the System is objectionable for any reasonable reason
as set forth below and notifies ITN, ITN shall have the obligation to cure the
objected to matter by electing to, remove or revise such Audiotext Information
within two (2) business days of notice of Donnelley's objections. Programming
may be considered objectionable if it is; (i) of inadequate transmission
quality as determined by Donnelley or (ii) containing objectionable program
material. Objectionable program material shall include (i) material prohibited
by applicable federal, state, or local law, (ii) material which contains
obscene, indecent, lewd, lascivious, or sexually explicit content, as
determined by Donnelley (iii) material containing profanity, (iv) any material
which, in the reasonable opinion of Donnelley, is likely to damage the
reputation of Donnelley, or (v) is objectionable to the publishers of the
Directories that are Donnelley's clients or partners. ITN's
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refusal to cure, remove or revise such information within five business days of
notice of Donnelley's objection will be considered a material breach of this
Agreement
12. INDEMNIFICATION AND THIRD-PARTY CLAIMS. While neither Donnelley nor ITN
insures or guarantees that there will be no errors, failures or omissions in
the production or transmission of Audiotext Information of the System, the
Parties acknowledge that suits may be instituted or claims filed against either
of the Parties with respect to the production or transmission of the Audiotext
Information or operation of the System and/or Network. In such event, ITN and
Donnelley agree that the Party primarily responsible, as mutually agreed upon
by the Parties, for the error will indemnify, defend and hold harmless the
other Party from any liability to any third Party resulting to such Party. ITN
and Donnelley shall fully cooperate in the defense of third-party claims and
lawsuits. In the event that responsibility for the third-party claims and
lawsuits cannot be allocated primarily to one Party, ITN and Donnelley each
shall bear their own costs, including attorney's fees, of defending such claims
or lawsuits and shall negotiate in good faith a reasonable allocation of said
responsibility for third-party liability. Nothing in the foregoing shall be
deemed or interpreted as limiting the rights of either Party to seek such legal
or equitable relief as it determines to be appropriate from the other Party.
13. TERMINATION. This Agreement may terminate (although certain obligations
shall continue as provided) prior to the end of its term if either Party
materially breaches this Agreement and such material breach has not been cured
(where feasible) within thirty (30) days of the breaching Party's receipt of
written notice of the material breach from the other Party. If the breach has
not been cured, the non-breaching Party has the right to (1) terminate this
Agreement upon notice to the other Party effective with the publication of the
successor Directory to any Directories in canvass or such earlier date as the
non-breaking party may select, provided that adequate arrangements have been
made to assure that audiotext advertiser obligations have been and will met,
(2) attempt to have this Agreement specifically performed, or (3) to pursue
other equitable or legal remedies with respect to such material breach instead
of terminating this Agreement.
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Termination of this Agreement pursuant to this provision shall not preclude any
legal or equitable remedies otherwise available for any material breach of this
Agreement.
a) In the event that this Agreement is terminated as the result
of breach by ITN, ITN on termination, will supply Donnelley with such
customer records, advertising and any other material that is needed
to continue providing audiotext services in support of Directories
then in publication or in canvass.
14. AUDIT.
a) Upon reasonable notice and during reasonable business hours,
Donnelley may audit ITN's records to the extent the records pertain
to sales, customer service, billing and collections of accounts
pursuant to this Agreement.
b) Upon reasonable notice and during reasonable business hours, ITN may
audit Donnelley's records which pertain to phone line operation for
audiotext services offered pursuant to this Agreement.
c) If a dispute arises as a result of an audit, and the dispute cannot
be resolved, the Party having requested an audit shall engage, at its
expense, a mutually acceptable independent nationally recognized
accounting firm to audit the other Party's records. The results of
such independent audit shall be binding on both Parties, and the
Party not prevailing in the dispute shall be required to
reimburse the Party prevailing, of any expense of the audit.
15. TRADE SECRETS. Each Party acknowledges that in the course of its
performance of responsibilities under this Agreement, the Party is likely to
have had access to and acquire knowledge of information, including formulas,
patterns, combinations, programs, devices,
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methods, techniques or processes that derive independent economic value, actual
or potential, from not being generally known to the public or to other persons
who can obtain economic value from its disclosure or use; and, are the subject
of efforts by the Party that are reasonable under the circumstances to maintain
their secrecy such that this information constitutes trade secrets that are
proprietary to the Party owning such Secrets. Each Party further acknowledges
that any conveyance, transfer or communication in any manner of such trade
secrets to third parties whether directly or indirectly would be improper and
that such transferal would constitute a misappropriation of the trade secret
that would occasion all available legal sanctions for such misappropriation of
a trade secret. All records, files, drawings, documents, models, equipment and
the like relating to the businesses of a Party which the other Party may use,
prepare or come in contact with during the performance of this Agreement, shall
be and remain the sole property of the Party owning such secret All
proprietary and intellectual rights associated with the work product prepared
by a Party under this Agreement shall be the property of the preparing Party.
16. INDEPENDENT CONTRACTOR. Each Party undertakes its responsibilities under
this Agreement as an independent contractor. A Party's personnel participating
in the performance of this Agreement shall remain that Party's employees.
There shall be no employer-employee relationship between the employees of one
Party and the other Party.
17. EQUAL OPPORTUNITY. ITN shall comply as required by law with all applicable
portions of the non-discrimination compliance provisions appended to this
Agreement and labeled "non-discrimination provision" and if requested by
Donnelley shall sign and return to Donnelley a non-discrimination compliance
certificate.
18. NOTICES. Any notice or agreement shall be in writing and shall be
conclusively deemed to have been received and to be effective on the date on
which received at the office of the recipient, or if sent by registered or
certified mail, on the third business day after the day on which it was
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mailed. Any notices, consents or other communications hereunder shall be sent
as follows (unless such addresses are modified by either of the parties):
If to Donnelley:
-----------------
Xxxx X. XxXxxxxx and to Xxxxxx X. XxXxxxxx
General Counsel Vice President
& Senior Vice President The Xxxxxx X. Xxxxxxxxx Corporation
The Xxxxxx X. Xxxxxxxxx Corporation 000 Xxxxxx Xxxxxx
000 Xxxxxx Xxx Xxxxxxxx, XX 00000
Xxxxxxxx, XX 00000
If to ITN:
-----------
Xxxxx Xxxxxxx
Chief Operating Officer
IT Network, Inc.
One Xxxx Lakes
0000 Xxxxxx Xxxx Xxxx #0000
Xxxxxx, Xxxxx 00000
19. ITN EQUIPMENT LOCATED AT DONNELLEY SITES ***.
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20. PUBLIC STATEMENTS. ITN shall not originate any written or oral statement,
news release, or other public announcement or publication, relating to its
retention by Donnelley or relating to Donnelley, its subsidiaries, its
customers, its personnel, or agents without the prior written approval of
Donnelley through its authorized representative. ITN also agrees that he will
not use in any public written or oral statement, news release, or other public
announcement or publication, the indicia or name of Donnelley, or of any of its
subsidiaries, its customers, its personnel, or agents without the prior written
consent of Donnelley through its authorized representative.
21. FORCE MAJEURE.
a) If any Party hereto shall be prevented from performing any of its
obligation under this Agreement because of any act of God, lockout,
strike or other labor dispute, riot or civil commotion, act of public
enemy, law, order or act of government, whether federal, state or
local, or other similar event beyond the Party's control, hereafter
referred to as a "force majeure event," then that Party shall be
excused from performing any of its obligations which are so
prevented. However, the Party so excused is responsible for
performing those obligations, of which it had been relieved due to
the force majeure event, as soon as the force majeure event has
ceased to prevent the Party's performance.
b) Donnelley's obligation under this Agreement to remit payment for
invoices issued by ITN shall not be excused by any force majeure
event, provided however that ITN shall proportionately reduce the
invoice to Donnelley to account for the day(s) and/or the
Directory(ies) for which the Audiotext Information was not available.
And, similarly the Initial Term Amount will be reduced
proportionately to account for the day(s) and/or Directory(ies) for
which the Audiotext Information was not available.
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22. AMENDMENT AND MODIFICATION. No amendment or modification of any terms,
conditions or provisions of this Agreement, shall be valid or of any effect
except when an amendment or modification is in writing and signed by the
parties.
23. ASSIGNMENT. Neither Party may assign this Agreement, without the express
prior written consent of the other which consent will not be unreasonably
withheld. Notwithstanding the above, either Party may assign this Agreement to
a parent, to wholly-owned affiliates or to an affiliate wholly-owned by a
parent so long as the original Party remains obligated for all obligations set
forth in this Agreement.
24. WAIVER. The failure of ITN or Donnelley at any time to require performance
by the other Party of any provision of this Agreement shall not affect the
Party's right to require such performance at any time thereafter, nor shall the
waiver by either Party of a breach of any provision of this Agreement
constitute a waiver of any succeeding breach of the same or any other
provision.
25. BINDING EFFECT. This Agreement shall be binding upon and shall inure to
the benefit of the Parties and their respective successors and assigns.
26. SEVERABILITY. If any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement,
provided that the provision held to be invalid is not material to the operation
of this Agreement or the intentions of the Parties.
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27. GOVERNING LAW. The validity, performance, construction and effect of this
Agreement shall be governed by the laws of the State of New York and the site
of any controversy, claim, arbitration or litigation shall be in Westchester
County, New York.
28. ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement between
the Parties and supersedes all prior agreements, representations, warranties,
statements, promises, information, arrangements, and understandings, whether
oral, written, express or implied with respect to the subject matter hereof,
with the sole exception of a non-disclosure Agreement signed between the
Parties on May 20, 1996.
IN WITNESS WHEREOF, the Parties have cause their respective
representatives duly authorized to sign this Agreement on their behalf.
THE XXXXXX X. XXXXXXXXX CORPORATION
By:
---------------------------------
Title:
------------------------------
IT NETWORK, INC.
By:
---------------------------------
Xxxxxxx Xxxxx Bedford
Title: Chief Operating Officer
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APPENDIX A
XXXXXX X. XXXXXXXXX
AUDIOTEX OPERATIONS
ASSET INVENTORY -- OWNERSHIP
# OF
SITE NODE SERIAL # ITEM
---- ---- -------- ----
***
22
# OF
SITE NODE SERIAL # ITEM
---- ---- -------- ----
III. STUDIO EQUIPMENT
***
23
ASSET INVENTORY - BOOKS AND PERIODICALS
----------------------------------------
***
00
XXXXXXXX X
SOFTWARE
ITEM NAME STATUS
---- ---- ------
***
25
APPENDIX C
XXXXXX X. XXXXXXXXX
CLIENT DIRECTORY
---------------------------------- ----------------------------------
***
26
APPENDIX A
XXXXXX X. XXXXXXXXX
AUDIOTEX OPERATION OUTSOURCING
CLIENT & DIRECTORY LIST
-----------------------
October 9, 1996
CLIENT DIRECTORY
-------------------------- ----------------------------
***
27
CLIENT & DIRECTORY LIST
PAGE 2
***
28
APPENDIX B
AUDIOTEXT CONTENT PROVIDERS
AGREEMENTS TO BE ASSIGNED OR CANCELLED
NAME DESCRIPTION
---- -----------
***
29
APPENDIX C
XXXXXX X. XXXXXXXXX
AUDIOTEX OPERATIONS
LEASED SERVERS
SITE PUBLISHER SERIAL # # OF ITEM
---- --------- -------- ---------
***
30
APPENDIX D
GUARANTEED PAYMENT SCHEDULE
Fixed Monthly Amounts
FROM DONNELLEY TO SOURCE MEDIA
PAYMENT # DATE AMOUNT
--------- ---- ------
YEAR ONE: 1 01-Nov-96 $ ***
2 01-Dec-96 ***
3 01-Jan-97 ***
4 01-Feb-97 ***
5 01-Mar-97 ***
6 01-Apr-97 ***
7 01-May-97 ***
8 01-Jun-97 ***
9 01-Jul-97 ***
10 01-Aug-97 ***
11 01-Sep-97 ***
12 01-Oct-97 ***
YEAR TWO: 00 00-Xxx-00 $ ***
14 01-Dec-97 ***
15 01-Jan-98 ***
16 01-Feb-98 ***
17 01-Mar-98 ***
18 01-Apr-98 ***
19 01-May-98 ***
20 01-Jun-98 ***
21 01-Jul-98 ***
22 01-Aug-98 ***
23 01-Sep-98 ***
24 01-Oct-98 ***
YEAR THREE: 00 00-Xxx-00 $ ***
26 01-Dec-98 ***
27 01-Jan-99 ***
28 01-Feb-99 ***
29 01-Mar-99 ***
30 01-Apr-99 ***
31 01-May-99 ***
32 01-Jun-99 ***
33 01-Jul-99 ***
34 01-Aug-99 ***
35 01-Sep-99 ***
36 01-Oct-99 ***