EXHIBIT 10.1
SERVICE AGREEMENT
THIS AGREEMENT is made this 13th day of March, 1998, by and between
Innovative Telecom Corporation, a Delaware corporation having its principal
office at 2 Harrison Street, Nashua, New Hampshire 03060 (hereinafter
"Innovative") and Digitec 2000, Inc., a corporation organized and existing under
the laws of the state of New York with an office and principal place of business
at 8 West 38th Street, New York, New York 10018("Client").
WHEREAS, Client desires to purchase certain telecommunications services
from Innovative as described herein;
NOW, THEREFORE, in consideration of the foregoing, and other good and
valuable consideration, the receipt and sufficiency of which both parties
acknowledge, the parties agree as follows:
1. SERVICES
During the term of this Agreement Innovative shall provide the following
services(the "Services") to and for the benefit of Client:
A. In General. Innovative shall provide prepaid transaction services (the
"Services") for Client, using Innovative's switching facilities. Services
are described herein, and in detail in Exhibit A, attached hereto and made
a part hereof.
Major Components of Service. The Services involve receiving local or long
distance domestic calls from Client's customers via Client's carrier
transport and other carrier facilities, performing prepaid transaction
processing services on those calls, and presenting those calls for
completion via designated local, domestic long distance or international
carriers provided by Client. Client shall provide all call transport and
other carrier facilities. Client shall provide a unique 800 access number
for the program. However, Innovative shall provide all "local loop"
connections.
Client shall be responsible for all state and federal tariff and
telecommunications tax requirements.
Intellectual Property. All services and systems provided by Innovative,
including Services provided pursuant to Work Orders as described herein,
shall be proprietary to Innovative, and Innovative shall retain total
intellectual property rights in all Services provided in connection with
this Agreement.
B. Responsibilities of the Parties.
1. Innovative. Innovative's switching and transaction processing services will
be available 7 days per week, 24 hours per day, 365 days per year.
Innovative shall meet the quality standards described in Exhibit A, and
shall provide all services as further described in Exhibit A. Services
shall be provided in a good and workmanlike manner.
Carrier Management. Innovative will provide carrier management for
Client as forecasted by Client, as further described in Exhibit B.
Call Records. Innovative will capture Call Detail Records hereinafter
"CDR" at a location designated by Innovative (further described in
Exhibit A) for each of Client's calls entering and exiting Innovative's
equipment.
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2. Client. Client shall be responsible for local and long distance carrier
transport, local access and local carrier connections. Carrier
facilities in sufficient capacity according to Client's quarterly
forecasts will be provided by Client in consultation with Innovative.
Client must provide a single point of contact with adequate technical
qualifications for communication with Innovative's technical support
personnel. Client shall provide a unique toll free access number for
Client's use during the Term of this Agreement. Client shall also
provide a unique toll free test number for Innovative's use during the
Term of this Agreement.
Tariffs, Taxes. Client is responsible for all local, state, federal and any
required foreign tariffing requirements, and for payment of all local,
state, federal and other telecommunications, sales, use and other taxes in
connection with the Services. Client shall provide Innovative upon request
with updated copies of all tariffs and with state and federal excise
telecommunications sales or use tax identification numbers for its due
diligence files. Client shall provide resale certificates if Client
utilizes any of Innovative's carrier facilities.
CDR. Client will provide data line connection to Client's location and
shall receive CDR in Innovative's standard format. Client is responsible
for conversion of CDR to comply with its own or subcontracted tax rating
systems.
Pricing. Client shall be billed for prepaid transaction services, and live
operator services if needed, and for Service Enhancements under this
Agreement, according to the pricing schedules attached hereto and made a
part of Exhibits A through E hereof. Each page of such pricing schedules
shall be separately initialed and dated by both parties.
C. Statements. Innovative shall provide billing statements to Client including
total billable minutes for each category of the Services described in the
Exhibits hereto. Each billing statement shall describe activity for the
previous billing period.
D. Service Enhancements. Enhancements to Innovative's services are
described in Work Orders which will be signed by both parties, specifying
the required enhancements to Innovative's base platform. Such Work
Orders, if needed to provide the Services, are appended to Exhibit A, and
are a part thereof. In the future, further Service Enhancements shall
take the form of additional Work Orders. Terms of payment pertaining to
the changes specified in such Work Order are defined in each such Work
Order. Prices for underlying Services may be changed in the future if
changes or enhancements increase the cost of providing Services. No
patent, copyright or other proprietary or intellectual property rights
will be transferred to Client for any work done hereunder, including
under Work Orders.
2. TERM
Upon execution, this Agreement shall be effective on the date shown above for a
Term of 15 months. This Agreement and the services and prices associated with it
is available for execution for a period of no later than 30 days from the date
of Client's receipt of the Agreement for execution. If not executed within this
30 day period, Innovative retains the right to reevaluate the services and
prices proposed in this Agreement and, if necessary, make adjustments.
Voluntary Termination. Client may terminate at any time on ninety (90)
calendar days written notice by paying the Termination Fee set forth in
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Exhibit A, Section 1. For all terminations, Innovative shall upon request
provide assistance to Client in transitioning to another provider. Such
assistance may at Innovative's option be provided under a Work Order for an
extra charge. For all terminations, except pursuant to Innovative's uncured
Event of Default as defined in Section 5, the Termination Fee shall apply.
In the event of any termination except pursuant to Client's material uncured
Event of Default as defined in Section 5, Innovative shall continue operations
as contemplated hereunder for the sole purpose of supporting cards held by end
users at the time of termination, for a period of six months following
termination, or expiration of all cards, whichever occurs first. For purposes of
such continuation, all applicable terms and conditions of this Agreement shall
continue to apply.
3. PRICE AND PAYMENT
A. Invoices. Innovative shall invoice Client in accordance with the prices
set forth in the Exhibits hereto.
B. Timing. Innovative shall invoice Client according to the schedule appearing
in Exhibit A. Client shall pay each invoice within the time set forth in
Exhibit A. Innovative shall notify Client of all invoices not paid within
such time, and Client shall have five (5) calendar days after receipt of
such notice to pay such invoices ("Grace Period").
C. Disputes. If any dispute exists with respect to the amount, Client shall
immediately notify innovative of the dispute, pay the entire undisputed
amount to Innovative when due, and provide Innovative with a written
memorandum specifying the disputed portion of the invoiced amount and the
basis for such dispute. All disputed amounts shall immediately be placed
by Client into an escrow account under the care of Client's outside legal
counsel. The memorandum shall be delivered to Innovative within 10
business days of Innovative's receipt of the original notice of dispute.
Client and Innovative each agree that they shall discuss in good faith and
promptly resolve any disputes within ten business days of delivery of the
memorandum. Any refund due Client will be credited on Innovative's next
invoice. Unresolved disputes shall be submitted to arbitration as specified
in Section 11, upon the parties' failure to resolve the dispute within the
time frame set forth in this paragraph.
D. Definition of Late Payments. Payments of any invoiced amount received after
the five (5) calendar day Grace Period shall be considered late payments,
and interest shall begin accruinq as of the sixth calendar day following
the receipt of notice. Failure to pay such amounts during the Grace Period,
in addition to triggering the accrual of interest, shall be an Event of
Default under this Agreement.
E. Taxes. Except as otherwise provided herein, the prices which shall be paid
by Client under this Agreement do not include any state or local sales
taxes. It is the responsibility of Client or Client's agents to collect
such taxes as may be required, except as explicitly provided herein. Client
shall be responsible for all telecommunications taxes under Section 2.
F. Interest. Payments are deemed paid when received by Innovative. Past due
amounts shall bear interest at the rate of 1.5% per month or the maximum
allowed by applicable law, whichever is less.
G. Price Changes. Pricing shall remain constant during the term of this
Agreement, except that Customer Care and Carrier Management Services (if
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included) pricing may be increased no more frequently than every three
months, beginning with the first anniversary of this Agreement. Such
increases, as measured on a percentage basis, shall be limited to the
percentage increase of the CPI as that term is defined in the Wall Street
Journal.
4. WARRANTY
A. Innovative hereby represents, warrants and agrees as follows:
1. Innovative warrants that it owns or has rights to systems and equipment
adequate to provide Services as specified herein, and that it shall provide
services without substantial and material deviation from those described
herein.
2. Because regulation of telecommunications services changes rapidly,
Innovative makes no warranty that its Services in the future will be deemed
in conformity with state or federal laws or regulations as they now exist
or may be enacted. Innovative shall make best efforts on a continuing basis
to be apprised of state and federal regulatory requirements as they apply
to the activities required by Innovative hereunder, and to comply with
applicable state and federal telecommunications laws or regulations having
a material impact on Innovative's ability to continue to perform hereunder.
In the event that filings or other actions are required by agencies to
continue the Services, Innovative will make all reasonable efforts to
promptly conform to such requests.
3. This Agreement is a legal, valid and binding obligation of Innovative and
is and shall remain enforceable against Innovative in accordance with its
terms. Innovative is a corporation duly organized and validly existing in
good standing under the laws of Delaware.
B. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, Innovative MAKES NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, TO CLIENT, ANY CONSUMER
OR OTHER PERSON RELATING TO MATTERS ADDRESSED IN THIS AGREEMENT, INCLUDING
WITHOUT LIMITATION, ANY WARRANTIES REGARDING THE MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE OF THE SERVICES.
C. Limitations of Warranty. This Warranty shall not apply, and Innovative
shall have no liability for any harm to Client in the event that a
failure is the result of Client's negligence, or misuse or abuse of the
Services, or where Services are not properly specified by Client. Client
shall notify its customers of the limitations of Innovative's liability
as set forth in this Agreement. Client shall hold Innovative harmless
against any expense, judgment or loss as a result of Client's failure to
notify its customers of Innovative's limited liability or as a result of
any other act or omission of Client. This warranty shall terminate upon
termination of this Agreement or the cessation of the provision of
Services by Innovative to Client.
5. DEFAULT
A. Event of Default Defined. It shall constitute an "Event of Default"
hereunder upon the occurrence of any one or more of the following:
1. Innovative. With respect to Innovative:
i. If Service is interrupted for one (1) continuous and complete
calendar day (midnight to midnight), or two continuous periods of at
least twelve (12) hours each occurring on each of two
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consecutive calendar days, following written notice by Client to
Innovative of the interruption (a "Material Interruption"). A
Material Interruption shall include any condition in which
substantially all callers are unable to reach the desired called
station, for reasons not due to the fault of Client, or Force
Majeure as defined below. In the event of a Material Interruption,
Client may exercise its right to terminate under 5.B.1, immediately,
and either party may also proceed with alternative dispute
resolution under Section 5.B.2.
ii. Any other material breach of this Agreement which remains uncured
for 30 calendar days following receipt of notice of the breach by
the other party. The parties shall proceed to alternative dispute
resolution under Section 5.B.2. The aggrieved party may exercise its
right to terminate under Section 5.B.1 only after a finding that an
Event of Default under this Section 5.A.l(ii) has occurred.
2. Client. With respect to Client:
i. Upon Client's failure to pay any invoiced amount during the Grace
Period as defined above.
In the event of Client's refusal to pay undisputed invoice amounts,
Innovative may exercise its rights under 5.B.1 immediately, and
either party may also proceed with alternative dispute resolution
under Section 5.B.2. Nonpayment of disputed amounts as allowed by
Section 3.C shall not trigger the right of immediate termination.
ii. Any other material breach of this Agreement which remains uncured
for 30 calendar days following receipt of notice of the breach by
the other party. The parties shall proceed to alternative dispute
resolution under Section 5.B.2. The aggrieved party may exercise its
right to terminate under Section 5.B.1 only after a finding by the
alternative dispute resolution provider that an Event of Default
Under this Section 5.A.2(ii) has occurred.
3. Either Party. With respect to either party, if such party either
(i) files a petition under the United States Bankruptcy Code or is
adjudicated a bankrupt, or (ii) a petition in bankruptcy is filed
against such party and not discharged within sixty (60) calendar days of
such filing, or (iii) such party becomes insolvent or makes an
assignment for the benefit of its creditors or any arrangement pursuant
to any bankruptcy law, or (iv) such party discontinues its business or a
receiver is appointed for it or its business, or (v) such party takes
steps to liquidate, reorganize or otherwise dissolve. The right to
terminate under Section 5.B.1 shall be exercised only after a finding
that an Event of Default under this Section 5.A.3 has occurred.
B. Remedies. Upon the occurrence of any Event of Default hereunder, then, as
to the party who was not in breach (the "Aggrieved Party"), the following
constitute the Aggrieved Party's exclusive remedies:
1. Termination. The Aggrieved Party may terminate this Agreement, and all
of its unaccrued obligations hereunder.
2. Damages, etc. The Aggrieved Party may proceed by alternative dispute
resolution to enforce performance or to recover damages.
3. Right of Cure. In all cases involving termination for breach, a
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breaching party may avoid termination and liability for damages by curing
such default within the time frames specified in 5.A. above. In all cases,
the time periods shall be measured from the breaching Party's receipt of
the notice of breach. In cases requiring a 30 day cure period, the
breaching party shall provide, within 5 calendar days of receipt of the
Aggrieved Party's notice, a written motion to cure describing the steps to
be taken to cure the breach.
4. Additional Limitation as to Certain Interruptions. If the Event of Default
is Innovative's non-intentional interruption of Services, Client's right
to (a) terminate and (b) receive a credit and/or refund (as applicable) on
pro-rated monthly minimum charges and services not delivered shall be its
exclusive remedies. Innovative will work with Client to transition, but
shall not be responsible for additional costs associated with obtaining
substitute services.
5. INDEMNIFICATION, LIMITATION OF LIABILITY
A. Indemnification. Except as otherwise stated in Section 5, DEFAULT, each
party to this Agreement hereby agrees to indemnify, defend and otherwise
hold the other harmless from and against all suits, claims and any other
losses (any of the foregoing, a "Loss"), including but not limited to
attorneys' fees, that arise from or are in any way related to the
Services or this Agreement, to the extent that such loss results from
the indemnitor's negligence, willful misconduct or Event of Default. In
the event a party receives notice of any action or event which would
give rise to the indemnification obligations contained herein, such
party shall within twenty (20) calendar days of receipt of such notice,
notify the other of the occurrence of such action or event, as the case
may be; provided, however, that the indemnitor's failure to receive such
notice shall not relieve it of its obligation to provide such indemnity
except to the extent such failure prejudices the indemnitor's ability to
avoid liability. Upon receipt of such notice, the indemnitor shall
immediately take all actions necessary to protect the indemnitee's
interests and to defend, settle or otherwise resolve such Loss.
Additionally, the indemnitee shall have the option but not the
obligation to defend, settle or otherwise resolve such Loss.
B. Limitation on Liability. All other provisions in this Agreement
notwithstanding, liability of Innovative under this Agreement shall be
limited to the greater of the total amount billed by Innovative for
Services to Client in the one (1) month prior an Event of Default, or the
total amount of any disputed invoices. Client must notify Innovative
within 60 calendar days of the invoice amount for the invoice to be
included under this section B.
7. COMPETITION, NONDISCLOSURE
A. Competition. Either party may provide or procure similar services to or
from any third party or parties.
B. Nondisclosure. Neither party shall directly or indirectly divulge or
communicate, to any other entity, any information concerning any matters
affecting or relating to the business of the other party. This
nondisclosure section applies but is not limited to customer lists,
credit classifications, records, statistics, the identity of any of the
customers of the party, pricing, concepts, methods of operation, and
other data. The parties hereto stipulate that as between them, this
information is important, material and confidential and gravely affects
the success of the business of the parties. Any breach of the terms of
this nondisclosure section shall be a material breach of this Agreement.
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This nondisclosure section shall survive the termination of the business
relationship between the parties for any reason.
C. Promotion. The parties may disclose the existence and general nature of
this contractual relationship for marketing purposes. The disclosing party
shall, prior to such disclosure, provide the other party with a copy, and
obtain written permission to make such disclosure. Such permission shall
not be unreasonably withheld. The parties shall work together to publish a
jointly-authored press release announcing the existence of this business
relationship.
8. ASSIGNMENT
This Agreement and the Services provided hereunder may not be assigned by either
Party, unless the express written consent of the other has been obtained prior
to any assignment, and such consent shall not be unreasonably delayed or
withheld. The transfer of all or substantially all of the assets or merger of
either party such that the financial condition of such party is not materially
worsened, shall not be deemed to violate this Section.
9. NOTICES
Any notice hereunder shall be in writing to the following addresses, and shall
be effective when received by the Parties hereto, or on the business day
(Monday-Friday excluding legal state and federal holidays) designated for
delivery via United States Postal Service Express Mail, return receipt requested
at the time designated by the Postal Service for delivery, whichever occurs
first:
Mark Tubinis, President Diego E. Roca, V.P., Prepaid Svcs.
Innovative Telecom Corp. Digitec 2000, Inc.
2 Harrison Street 8 West 38th Street
Nashua, NH 03060 New York, NY 10018
(603) 889-8411 (212) 944-8888
10. CUMULATIVE RIGHTS
The rights and remedies reserved to the parties herein are cumulative and in
addition to any further rights and remedies available at law or in equity.
11. GOVERNING LAWS AND ALTERNATIVE DISPUTE RESOLUTION
This Agreement shall be deemed to have been entered into in the state of New
Hampshire and shall be governed by, construed and interpreted in accordance with
the laws of the State of New Hampshire. If a dispute arises between the parties
about the performance of this Agreement, Innovative and Client shall attempt in
good faith to resolve or cure the dispute by mutual agreement before initiating
legal action to enforce any rights or remedies hereunder. If the parties cannot
resolve the matter by discussion, they will engage in nonbinding mediation
within ten (10) working days. If the matter cannot be resolved by mediation
within 30 days, the parties will select one (1) arbitrator, in accordance with
the then-existing expedited commercial dispute resolution procedures of the
American Arbitration Association. The binding arbitration shall be held in
Boston, Massachusetts or Manchester or Nashua, New Hampshire as selected by
Innovative. The arbitrators shall render their decision in less than thirty (30)
days after their selection in a ruling that sets forth the specific factual
findings and, if applicable, legal conditions on which the decision is based.
12. MERGER; SURVIVAL OF OBLIGATIONS UNDER PRIOR AGREEMENTS
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This Agreement, together with any exhibits or attachments hereto, and any
subsequent amendments hereto, and nondisclosure agreements entered into between
the parties, contains the entire agreement between the parties hereto with
respect to the subject matter hereof, and supersedes all prior negotiations and
representations by or between them, whether oral or written, and all prior or
contemporaneous agreements, whether oral or written. This Agreement may be
amended from time to time by mutual written agreement of both, parties. The
headings used in this Agreement are for the convenience of the parties and are
not deemed to be part of this Agreement.
Client shall execute the resale certificates attached with this Agreement
covering any and all carrier transport services provided by Innovative to Client
which may be provided by Innovative to Client in the future as mutually
agreed-upon.
13. SEVERABILITY
If any portion of this Agreement is found to be invalid or unenforceable, the
parties agree that the remaining portions shall remain in effect. If one portion
limiting liability is found unenforceable, remaining portions limiting liability
shall remain in effect. The parties further agree that in the event an invalid
or unenforceable portion is an essential part of this Agreement, it shall be
replaced with one which most nearly reflects the intentions of the parties as
expressed in the portion.
14. WAIVER
No delay or omission to exercise any right or remedy accruing to Innovative or
Client hereunder upon any breach or breaches or event of default or defaults by
Innovative or Client shall impair any right or remedy on subsequent breach or
default.
15. SCOPE
Nothing contained herein shall be construed to constitute the parties hereto as
partners, joint venturers or as agents of each other, but the relationship shall
be one of independent contractors with Innovative providing the Services
described hereunder to Client for the considerations set forth in this Agreement
and any attachments hereto.
16. BENEFIT
This Agreement and the Services to be rendered hereunder are solely for the
benefit of the parties hereto, their successors and assigns. No third person
shall acquire any rights or claims by reason of or under this Agreement, except
as both parties hereto shall agree in writing, or in cases where substantially
all of the assets of a party are purchased by another party or acquired in a
merger.
17. FORCE MAJEURE
No default in performance of any obligation hereunder shall constitute an event
of default or a breach of this Agreement, to the extent that such failure to
perform, delay or default arises out of a cause that is beyond the reasonable
control and without negligence of the party otherwise chargeable with such
default, including, but not limited to acts of God, interruption of power,
utility, transportation or communications services, cable-cut, action of civil
or military authority, sabotage, national emergencies or catastrophe. Either
party desiring to rely upon any of the foregoing as an excuse for default shall
give to the other party prompt written notice of the facts which constitute such
excuse, and when such excuse ceases to exist, prompt notice
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thereof to the other party. This Section shall in no way limit the right of
either party to make any claim against any third party for any damages suffered
due to said causes.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their res ve executive officers being hereunto duly authorized.
INNOVATIVE CLIENT
By: /s/ Arthur Butt By: /s/ Diego E. Roca
------------------- ---------------------
Name: Arthur Butt Name: Diego R. Roca
Title: VP New Business Title: Vice President, Prepaid Svcs.
Date: 3/17/98 Date: 13 Mar 98
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