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Smartalk Teleservices - Wholesale Distribution Agreement
Portions of this exhibit for which confidential treatment has been requested are marked by brackets [ ] and the pages on which they appear contain an asterick (*) in the upper right hand corner. The confidential information omitted has been filed separately with the Securities and Exchange Commission.
EXHIBIT 10.21
WHOLESALE DISTRIBUTION AGREEMENT
THIS WHOLESALE DISTRIBUTION AGREEMENT (the "Agreement") is made effective as of the 1st day of June, 1996 (the "Effective Date") by and between West Interactive Corporation, a Delaware corporation ("WIC") and SmarTalk TeleServices, Inc., a California corporation ("SmarTalk").
RECITALS
A. SmarTalk is a reseller of telecommunication services including, but not limited to, prepaid calling card services, and holds all consents and authorizations and has satisfied all filing, application and bonding requirements under all federal and state laws that are required to provide such services.
B. WIC desires to obtain SmarTalk's prepaid calling card services as more particularly described herein (the "Prepaid Calling Card Services") and distribute them as a wholesale distributor.
C. SmarTalk desires to provide the Prepaid Calling Card Services on the terms and conditions set forth herein.
WIC and SmarTalk agree as follows:
1. PREPAID CALLING CARD SERVICES.
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(a) SmarTalk. SmarTalk shall provide the Prepaid Calling Card Services
-------- described in the attached Exhibit A. Exhibit A shall include all of the Prepaid Calling Card Services offerings set forth in SmarTalk's tariffs. None of the Prepaid Calling Card Services currently listed in Exhibit A shall be deleted from Exhibit A so long as a WIC client is using a particular service. Such offerings may be modified from time to time at SmarTalk's discretion provided, however, that SmarTalk shall give WIC sixty (60) calendar days written notice before modifying or deleting a Prepaid Calling Card Service from Exhibit A. SmarTalk shall give WIC prompt notice of any changes, additions or deletions to its tariffed Prepaid Calling Card Services which shall supplement Exhibit A.
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(b) Selection by West. West may from time to time select tariffed Prepaid
----------------- Calling Card Services for its clients from those services listed on Exhibit A by giving SmarTalk written notice of its service selection or of changes to such selection. A current list of WIC clients and the Prepaid Calling Card Services provided to such clients will be attached to this Agreement as Exhibit B which may be modified from time to time at WIC's discretion.
(c) Designation as Service Provider. SmarTalk shall be the designated
------------------------------- service provider disclosed (i) on the prepaid calling cards; (ii) whenever reasonably possible, on the package; and (iii) in promotional literature distributed by WIC's clients for Prepaid Calling Card Services. In addition, SmarTalk shall provide to WIC for distribution to its clients, all disclosures that must be made on the prepaid calling cards that are customary in the industry or required by federal or state law. All disclosures will be customized for each WIC client to reflect the rates, terms and other information specific to each WIC client's prepaid calling card program and to comply with the Regulatory Requirements (as hereinafter defined) for the jurisdictional markets serviced by such WIC client.
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(d) Additional Services. The Prepaid Calling Card Services shall also
------------------- include, but shall not be limited to, the following additional services:
. Customer Service
. Fraud Detection/Control
. Tax Preparation and Submission
(collectively, the "Additional Services").
(e) SmarTalk Resources. SmarTalk shall assign the personnel and other
------------------ corporate resources required to provide the Prepaid Calling Card Services to each WIC client and to perform its other obligations under this Agreement. All SmarTalk personnel performing Prepaid Calling Card Services, and particularly Additional Services for WIC clients, shall be properly trained in all aspects of the Prepaid Calling Card Services provided to such WIC clients.
2. CUSTOMER SERVICE.
----------------
(a) Customer Inquiries. SmarTalk shall respond to customer inquiries from
------------------ users of prepaid calling cards distributed by WIC clients that identify SmarTalk as the service provider ("Calling Card Users"). SmarTalk shall use its reasonable best efforts to respond diligently to all inquiries and resolve all disputes related to the Prepaid Calling Card Services; except that, if SmarTalk determines that it is necessary for WIC or a WIC client to resolve a particular customer inquiry (e.g. providing a refund of the calling card purchase price),
----
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then SmarTalk shall contact the designated WIC representative described in Section 6(b). SmarTalk shall provide customer service in accordance with the following terms:
(i) Standard Customer Service. SmarTalk shall provide its Standard Customer Service twenty-four (24) hours per day, seven (7) days per week including holidays, in compliance with SmarTalk's applicable tariffs. Any inquiry, problem, or dispute that is not handled by Standard Customer Support personnel will be referred to Enhanced Customer Service for action.
(ii) Enhanced Customer Service. SmarTalk shall provide Enhanced Customer Service to respond to any Calling Card User inquiries that are not satisfied by Standard Customer Service. Enhanced Customer Service shall be available Monday through Friday from 9:00 A.M. to 6:00 P.M. PST and on Saturdays from 10:00 A.M. to 3:00 P.M. PST, with no service provided on Sundays or holidays. If SmarTalk is unable to resolve the Calling Card User's inquiry at the Standard Customer Service level, then SmarTalk shall make at least two (2) phone calls and write at least one (1) letter in an effort to contact such Calling Card User and resolve the inquiry. Such efforts to contact the Calling Card User shall be completed within ten (10) days of the initial Calling Card User inquiry.
(iii) Emergency PINs. Starting August 1, 1996, SmarTalk shall make available to Calling Card Users emergency PINs allowing for 15 minutes of emergency calling time on a prepaid calling card when, in the determination of a Standard or Enhanced Customer Service operator, it is necessary to resolve a complaint online.
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(iv) Customer Service Procedures. SmarTalk will cooperate with WIC to develop written customer service procedures detailing the procedures SmarTalk will follow to service Calling Card Users. SmarTalk shall provide WIC with written customer service procedures by July 31, 1996 which shall be subject to WIC's written approval. These customer service procedures, which will be attached as Exhibit C, may be modified by the parties from time to time. If a major issue arises during a Calling Card User inquiry, SmarTalk will notify the
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*
designated WIC representative described in Section 6(b) of such matter within twenty-four (24) hours.
(b) Customer Service Report. SmarTalk shall deliver to WIC weekly via
----------------------- telecopier, a log of all Calling Card User inquiries. The log shall include the identification number on the calling card, the name and address of the Calling Card User, a description of the inquiry, a description of the resolution and whether there is the need for additional follow-up.
3. FRAUD DETECTION/CONTROL. Based on SmarTalk's receipt of originating and
----------------------- terminating caller identification and PIN code, SmarTalk shall provide its specialized fraud control services to monitor suspicious activities, and SmarTalk agrees to provide its standard fraud control and detection services described on Exhibit D for each WIC client using the Prepaid Calling Card Services.
4. TAX PREPARATION. SmarTalk shall prepare, pay, and timely file all
--------------- necessary tax returns and filings associated with the Prepaid Calling Card Services after the Effective Date.
5. PRICING; PAYMENTS.
-----------------
(a) Service Fees. WIC shall pay SmarTalk [ ] for each
------------ In-Only minute and [ ] for each Redirected minute used by Calling Card Users (collectively the "Service Fees").
(b) Tax Preparation Fees. Each month, WIC shall pay SmarTalk tax
-------------------- preparation fees [ ] for Prepaid Calling Card Services [ ]. WIC shall be liable for all taxes due. Each month, WIC shall pay SmarTalk the applicable
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taxes on Prepaid Calling Card Services provided to WIC's clients which a reseller is obligated to pay.
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(c) Payment of Service Fees. Commencing on July 30, 1996 and on the
----------------------- last day of each month during the term of this Agreement, WIC shall pay SmarTalk the Service Fees earned during the previous month pursuant to an invoice which SmarTalk shall provide to WIC no later than two weeks before each payment is due. The Service Fees for each month will be based upon information provided to WIC from SmarTalk (where SmarTalk will obtain such information from SmarTalk's calling card platform service provider), which shall be paid based upon WIC's records pertaining to Calling Card User minutes. All payments that are to be made to SmarTalk may be made by check or wire transfer at WIC's option.
(d) Setoff. WIC may setoff any amounts SmarTalk owes WIC against the
------ monthly Service Fees.
(e) Reporting/Auditing Rights. WIC may, upon five (5) days advance
------------------------- notice to SmarTalk, examine all of SmarTalk's books and records pertaining to Prepaid Calling Card Services offered by WIC clients ("Books and Records"). All such examinations shall take place at SmarTalk's offices during normal business hours. WIC shall bear the costs incurred for such examinations. SmarTalk shall make the Books and Records available to WIC during such examination or audit described herein and shall cooperate with WIC in completing its examination or audit. In addition to the above-described examination rights, WIC may perform, or cause the performance of an audit of the Books and Records no more than twice per calendar year. Such audit may be performed by WIC or an independent accountant selected by WIC. WIC shall pay all costs relating to the performance of such audit. Notwithstanding the preceding sentence, if such audit reveals that SmarTalk has overcharged WIC for any Service
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Fees, Taxes or other sums owed by WIC pursuant to this Agreement, and the amount of the overcharge is
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four percent (4%) or more of the amount actually owed as determined by such audit, SmarTalk shall not only immediately refund to WIC the amount of the overcharge together with interest on such amount at the rate of ten percent (10%) per annum accrued from the date such amount was paid to the date refunded, but also shall pay the costs of such audit.
6. WIC Clients; Transactional Records and Confidentiality.
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(a) WIC Clients. SmarTalk (including its employees, representatives and
----------- agents) shall have no contact with WIC's clients (including their employees, representatives and agents) regarding matters related to the Prepaid Calling Card Services (including Calling Card User inquiries) unless (i) requested by WIC; or (ii) the WIC client, on its own, contacts SmarTalk. SmarTalk may state in its promotional material and advertising that WIC is a SmarTalk client, provided that the terms of this Agreement and other information given to SmarTalk by WIC is treated as Confidential Information in accordance with subsection (d) below. SmarTalk shall not refer to any WIC client as its customer or make any reference to a WIC client in any of SmarTalk's promotional literature or advertising, sales presentations or otherwise without WIC's prior written approval. Notwithstanding this provision, SmarTalk may disclose such information if required by law in connection with a public offering provided, however, that SmarTalk shall provide WIC, prior to such disclosure, with adequate proof to demonstrate that such disclosure is required by law and further provided that WIC must agree that such disclosure is required by law.
(b) Designated Representatives. All notices or any Calling Card User
-------------------------- disputes requiring a resolution from WIC's client shall be directed to the WIC representative listed on
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Exhibit E. WIC shall direct its notices and other inquiries relating to SmarTalk's performance
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of this Agreement to the SmarTalk representative listed on Exhibit E. Each party may change its representative and such change shall become effective when notice is given to the appropriate party in accordance with Section 11(d).
(c) Transactional Records. All transactional records created by SmarTalk
--------------------- from the Prepaid Calling Card Services shall be WIC's property and may be used in any manner WIC desires unless SmarTalk provides WIC with proof acceptable to WIC in its sole discretion to demonstrate that applicable law limits such use.
(d) Confidentiality. WIC and SmarTalk shall each keep confidential, and
--------------- shall not disseminate to any third party or use for any purpose (except as may be required to satisfy its obligations under this Agreement or with the written consent of the other party) the existence and terms of this Agreement, any information received directly or indirectly from or about a WIC client that is not in the public domain, the transactional records described in Section 6(c) (except as authorized under Section 6(c)), customer lists or customer information exchanged by the parties in connection with this Agreement, any business plans or financial information given to either party and information received from the other that is marked as "Confidential" or "Proprietary". Notwithstanding the foregoing, the parties may disclose Confidential or Proprietary information if the disclosing party obtains written consent for such disclosure from the other party before disclosing such Confidential Information or the disclosing party is compelled to do so by court order or an administrative order from a governmental agency after (i) notifying the other party of the order compelling disclosure and (ii) providing the other party and, if applicable, any of WIC's clients the opportunity to
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seek a protective order to prevent disclosure. Each party must cooperate with the other and with WIC's client to obtain the protective order described above. This Section 6(d) shall survive the expiration or termination of this Agreement for a period of three (3) years or a time period requested by WIC that is required pursuant to a confidentiality agreement with a WIC client, whichever is longer.
(e) No Solicitation. SmarTalk shall not solicit any WIC client, directly
--------------- or indirectly, to perform the Prepaid Calling Card Services or to provide other telecommunications services to a WIC client while this Agreement remains in effect and for a period of one (1) year after the termination or expiration of this Agreement, unless SmarTalk can demonstrate with absolute certainty that it had been soliciting a WIC client or working with a WIC client prior to the Effective Date of this Agreement or the date that the customer becomes a WIC client, whichever date occurs later. Provided, however, this provision shall not apply if such WIC client first solicits SmarTalk to provide such services or publicly announces a review of its prepaid calling card vendor relationship, in which case, should SmarTalk get the prepaid calling card business from the WIC client, SmarTalk shall use commercially reasonable efforts to insure that WIC is used to provide call processing services under any of SmarTalk's agreement with such client.
7. COMPLIANCE.
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(a) WIC and SmarTalk intend that SmarTalk shall (i) be solely liable for compliance with all federal, state and local laws, rules and regulations governing the operation of resellers of prepaid calling card services ("Regulatory Requirements") and (ii) except as
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expressly limited in Section 8, indemnify WIC against any liability arising out of an allegation that either WIC or SmarTalk has failed to comply with such Regulatory Requirements in accordance with the terms of Section 8(a).
(b) So long as this Agreement is in effect, SmarTalk shall (i) obtain and maintain in force all federal and state tariffs, permits, licenses and authorizations required for SmarTalk to act as a reseller of the Prepaid Calling Card Services and (ii) comply with all Regulatory Requirements. SmarTalk shall notify WIC of any modifications to its tariffs, permits, licenses and authorizations to reflect any changes in the terms and conditions (including rates) of the Prepaid Calling Card Services before such tariffs, permits, licenses or authorizations are filed with the appropriate jurisdiction. In addition, SmarTalk shall consider filing any amendments or modifications to SmarTalk's tariffs, permits, licenses or authorizations requested by WIC to accommodate WIC clients. Although WIC shall not have a right to approve or to disapprove any proposed filing, WIC will be provided at least ten (10) days to review any proposed filing, prior to the filing, and to consult with SmarTalk if said filing involves a substantive change which may have an impact on WIC or a WIC client. SmarTalk shall make reasonable efforts to resolve any issues affecting WIC or WIC's clients as a result of SmarTalk's proposed filing of any tariff, permit, license, or authorization, or any modification thereto. Any review of such filings by WIC shall not relieve SmarTalk of its responsibility to insure compliance with all applicable Regulatory Requirements.
8. INDEMNIFICATION.
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(a) Indemnification of WIC. SmarTalk shall indemnify, defend and hold
---------------------- harmless WIC, its officers, directors, employees, representatives and agents from and of any
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obligations, claims, demands, actions, causes of action, suits, debts, dues, liabilities, damages, losses, judgments, taxes, assessments, penalties, fines, setoffs, fees, costs or expenses (including reasonable attorneys' fees) of any kind whatsoever (collectively "Claims"), for, arising out of, based upon, or in any manner connected with:
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