Exhibit 10.5
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Confidential Materials omitted and filed separately with
the Securities and Exchange Commission.
Asterisks denote omissions.
CONFIDENTIAL
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THIRD AMENDMENT TO DIRECTORY AND LOCAL ADVERTISING PLATFORM SERVICES AGREEMENT
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THIS THIRD AMENDMENT to the Directory and Local Advertising Platform
Services Agreement (this "Third Amendment"), effective as of August 21, 2002
(the "Third Amendment Effective Date"), is made and entered into by and between
America Online, Inc. ("America Online" or "AOL"), a Delaware corporation with
its principal offices at ▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and Switchboard
Incorporated ("SB" and collectively with AOL, the "Parties"), a Delaware
corporation, with its principal offices at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇. Defined terms that are used but not defined herein shall be as defined in
the Directory and Local Advertising Platform Services Agreement between AOL and
SB effective as of December 11, 2000 (the "Original Agreement"), as amended by
that certain letter agreement dated February 23, 2001 (the "Letter Agreement"),
by that certain First Amendment to Directory Services and Local Advertising
Platform Services Agreement, dated November 15, 2001 (the "First Amendment"),
and by that certain Second Amendment to Directory Services and Local Advertising
Platform Services Agreement dated April 25, 2002 (the "Second Amendment").
WHEREAS, the Parties desire to modify and amend certain provisions of the
Agreement;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby mutually acknowledged, the Parties hereby agree
as follows:
1. The Parties agree to amend the Agreement to add a new Section 3.5.3 as
follows:
3.5.3 In addition to the foregoing, in the event that SB ceases to
make available certain [**] Enhancements on all SB Interactive
Sites, then SB shall be required to continue to provide such
[**] Enhancements to AOL for inclusion within the [**] Databases
and for distribution via the [**] for a minimum of [**]
additional months thereafter (but not later than the termination
of this Agreement) (the "Extended [**] Period"); provided,
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however, that if AOL requests that SB update such [**]
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Enhancements during such Extended [**] Period, the updates shall
be made at AOL's expense and at a commercially reasonable rate
to be mutually agreed upon by the Parties.. Notwithstanding the
foregoing, in the event that (a) SB is contractually or legally
prevented from continuing to so provide such [**] Enhancements,
or (b) in SB's reasonable opinion, SB would be unable to
continue to so provide such [**] Enhancements to AOL without
violating a third party's intellectual property rights or
incurring other substantially similar third party liability
("Restrictive Conditions"), then SB shall not be required to
continue to provide such [**] Enhancements to AOL for so long as
such Restrictive Conditions exist.
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2. The Parties hereby agree to delete Section 7.1.1 of the Agreement in
its entirety and replace it with the following:
7.1.1 SB. As between the Parties, except as otherwise provided in this
Agreement, SB shall own (i) all aspects of the [**] (x)
developed by SB prior to the Effective Date and integrated into
the [**], and/or (y) developed by SB outside the scope of this
Agreement, (ii) all SB Features or Functionality and all SB APIs
and tools which are owned or licensed by SB or were developed by
SB outside the scope of this Agreement, (iii) SB Features or
Functionality and/or any other feature or functionality owned or
licensed by SB and used hereunder that permits AOL Users to
perform searches on or through the [**] Databases (e.g., SB's
"Matrix" or other similar search functionality made available by
SB on any SB Interactive Site), (iv) all SB Data, and (v)
(consistent with and subject to the restrictions set forth in
Section 5.3 with respect to [**] and/or [**] as the case may be)
any [**] and any [**] (collectively, the "SB Platform
Components").
3. The Parties hereby agree to delete Section 11.1 of the Agreement in
its entirety and replace it with the following:
11.1 All-In Services. As part of this Agreement, SB shall perform (at
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no cost to AOL): (i) the Included SB Services, and (ii) [**]
Hours per month of Engineering Hours work during each Year of
the License Period (the "Monthly [**]-Hour Threshold," which
together with the Included SB Services shall be collectively
referred to herein as the "All-In Services"); provided, however,
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that in any calendar quarter in the period up to and including
the third quarter of calendar year 2002 during which SB does not
receive at least [**] Dollars ([**]) in Total Revenues (as
defined below), AOL shall be required to pay SB for any
Engineering Hours work carried out by SB during such quarter
(provided that such work does not otherwise constitute Included
SB Services) at the rates set forth in Exhibit J to this
Agreement. For purposes of this Section 11.1 only, "Total
Revenues" shall mean the sum of all (a) Directory Advertisement
Revenues, (b) Other Fees, (c) Engineering Fees, (d) Consulting
and Marketing Fees, and (e) any other revenues (in each case,
recognized and/or received by SB under this Agreement in any
calendar quarter).
4. The Parties hereby agree to delete Section 18.1 of the Agreement
(inclusive of Sections 18.1, 18.1.1, 18.1.2 and 18.1.3) in its
entirety and replace it with the following:
18.1 Guaranteed Payment. Subject to Section 20.7 of the Agreement, SB
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shall pay AOL a fixed payment of Fifteen Million Dollars
($15,000,000) (the "Fixed Payments") as follows:
18.1.1 [**] Million Dollars ($[**]) as of the Effective Date of the
Original Agreement.
18.1.2 [**] Million Dollars ($[**]) as of April 25, 2002.
18.1.3 The Parties entered into an Advertising Insertion Order
Agreement ("Insertion Order") dated October 1, 2000, pursuant to
which:
(i) SB is obligated to make monthly guaranteed payments in the
amount of [**] Dollars ($[**]) to AOL for textual sponsorship on
Netscape Inventory as defined herein; and
(ii) SB provides data for the Netscape yellow pages product.
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Whereas SB made one payment of $[**] under the Insertion Order,
and whereas the Parties acknowledge and agree that such
Insertion Order terminated upon the Effective Date of the
Original Agreement, SB shall accordingly be credited with a like
amount of $[**] against the Guaranteed Payments required under
this Section 18.1, and SB shall not be responsible for any
further payments under the Insertion Order.
5. The Parties hereby agree to delete Section 18.2.1 and 18.2.2 of the
Agreement in their entirety and replace them with the following:
18.2.1 For Directory Advertisement Revenue generated and accrued
between the Effective Date of the Original Agreement and June
30, 2002 (when aggregated together with any Consulting and
Marketing Fees and Other Fees), AOL shall receive [**]% of such
revenues and SB shall receive [**]% of such revenues,
respectively.
18.2.2 For Directory Advertisement Revenue generated and accrued after
June 30, 2002 (when aggregated together with any Consulting and
Marketing Fees and Other Fees), the Parties shall share such
revenues as follows:
SB Percentage AOL Percentage
Of Directory of Directory
Directory Advertisement Advertisement Advertisement
Revenue Amount Revenues Revenues
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Between $[**] and $[**] [**]% [**]%
In Directory Advertisement Revenues
In Excess of $[**] and
Up to $[**] in Directory [**]% [**]%
Advertisement Revenues
In Excess of $[**] and
Up to $[**] in [**]% [**]%
Directory Advertisement Revenues
In Excess of $[**] and
Up to $[**] in Directory [**]% [**]%
Advertisement Revenues
In Excess of $[**] [**]% [**]%
in Directory Advertisement Revenues
6. The Parties hereby delete Section 18.2.3 in its entirety and replace
it with the following:
18.2.3 "Directory Advertisement Revenues" shall mean gross revenues
recognizable by AOL from the sale or license by AOL (or by any
AOL Alternative Sales Force), of the items listed in (a)-(d)
below, less in each case, any applicable taxes, or applicable
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advertising sales commissions payable to AOL or any third party,
and/or uncollectable amounts:
(a) Directory Advertisements;
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(b) Self-Published Ads;
(c) Any fees (e.g., slotting fees, exclusivity fees, branding
fees) paid to AOL by any of its Alternative Sales Forces that
are directly related to the sale of Directory Advertisements (if
applicable);
(d) Any Incremental Net Revenue as set forth in Sections 18.2.4,
and Additional DA Upsells revenues as set forth in Section
18.2.6, and any Specifically Attributed Revenues as set forth in
Section18.2.7 of this Agreement.
"Directory Advertisement Revenues" shall not include (x) any
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in-kind, non-cash consideration (e.g., where AOL barters
Directory Advertisements for non-cash consideration), (y) except
as provided in Section 18.2.7, revenues generated from bundled
transactions (e.g., where an AOL partner pays for promotional
inventory on the AOL Network and receives Directory
Advertisements as part of (but not the primary focus of) such
arrangement) or (z) Telemarketing Commissions (as defined
below).
For purposes of this Section 18.2, "Telemarketing Commissions"
shall mean [**] percent ([**]%) of the gross revenues generated
from sales of any Directory Advertisements through AOL
telemarketing agents or representatives (such that [**] percent
([**]%) of such gross revenues shall be subject to the Directory
Advertisement Revenue share arrangement set forth in this
Section); provided, however, that (i) such [**] percent ([**]%)
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Telemarketing Commission shall be deemed to apply regardless of
whether the actual telemarketing commission paid or incurred by
AOL is greater than or less than such amount; provided further,
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that (ii) to the extent technically feasible and commercially
reasonable (e.g., from a payment administration standpoint), (x)
[**] of the Telemarketing Commission with respect to each
Directory Advertisement shall be deducted from Directory
Advertisement Revenue in each month during the first year of
such Directory Advertisement and (y) no such Telemarketing
Commission shall be deemed to apply in any renewal year (such
that [**] percent ([**]%) of the gross revenue from such
Directory Advertisement in any advertisement renewal year shall
be subject to the revenue sharing arrangement set forth in this
Section 18.2).
7. The Parties hereby delete Section 18.2.8 in its entirety and replace
it with the following:
18.2.8 Commencing with the Third Amendment Effective Date, and as
related to the receipt of cash payments for the sale of
Directory Advertisements, AOL shall pay to SB applicable
Directory Advertisement Revenues collected by AOL and owed to SB
on a monthly basis (as promptly as commercially reasonable
following each such month); provided, however, that if at any
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time during the Term or the [**] Period, AOL has a good faith
belief that the foregoing monthly payment structure will have a
material adverse impact on AOL, then AOL shall have the
immediate right to discontinue the monthly payment structure and
to make quarterly payments thereafter (in such case, AOL will
use commercially reasonable efforts to make such payments within
[**] days following the end of the quarter in which such amounts
were generated, but shall make such payments in no event later
than [**] days following the end of the quarter in which such
amounts were generated); provided further, that SB shall have
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the right to escalate the matter to the Management Committee for
further review and resolution.
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8. The Parties hereby delete the last sentence of Section 18.3 in its
entirety and replace it with the following:
All payments required to be made to SB shall be paid in
immediately available, non-refundable (except as otherwise
expressly set forth herein) U.S. funds wired to the "Switchboard
Incorporated" account, Account Number [**], at Silicon Valley
East Bank (ABA: 121 140 399).
9. The Parties hereby agree to delete Section 18.6 of the Agreement
(inclusive of Sections 18.6, 18.6.1 and 18.6.2) in its entirety.
10. The Parties hereby agree to delete Section 20.1 of the Agreement in
its entirety and replace it with the following:
20.1 Term. Unless earlier terminated as set forth herein, the initial
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term of this Agreement shall commence on the Effective Date and
end on December 31, [**] (the "Initial Term"). To the extent
that the Parties mutually agree in writing to renew this
Agreement upon expiration of the Initial Term (each such renewal
term, a "Renewal Term"), the Renewal Term(s), together with the
Initial Term, shall be collectively referred to herein as the
"Term."
11. The Parties hereby agree to amend Exhibit A of the Agreement by
deleting the following definition of "[**] Year" in its entirety:
[**] Year. The period commencing on the day immediately
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following the [**] anniversary of the Effective Date and ending
on the [**] anniversary of the Effective Date (if applicable).
12. The Parties also hereby agree to amend Exhibit A of the Agreement by
deleting the definition of "Year" in its entirety and replacing it
with the following new definition:
Year. Each of the [**] Year, the [**]Year, the [**] Year and the
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[**] Year.
13. The Parties also hereby agree to amend Exhibit A of the Agreement by
deleting the definition of "[**] Enhancements" in its entirety and
replacing it with the following new definition:
[**] Enhancements. Any Data beyond a Standard Business Listing
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contained in the [**] Database that enhance the Standard
Business Listings inserted into the [**] Database, including
enhanced data (such as store hours, brands carried, specific
services offered, credits cards carried, etc.) which SB has
compiled prior to the date of this Amendment (or which SB
compiles or otherwise aggregates at any time after the date
hereof) and which SB makes available on any SB Interactive Site
(including, without limitation, the Standard SB Site).
14. The Parties also hereby agree to amend Exhibit H of this Agreement by
replacing such Exhibit in its entirety and replacing it with the
following:
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"EXHIBIT H
Steering Committee Representatives
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Sales Manager Operations Manager Executive (optional)
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SB [**] [**] [**]
AOL [**] [**] [**]
15. This Third Amendment is supplementary to and modifies the Agreement.
The terms of this Third Amendment supersede provisions in the
Agreement only to the extent that the terms of this Third Amendment
and the Agreement expressly conflict. However, nothing in this Third
Amendment should be interpreted as invalidating the Agreement, and
provisions of the Agreement will continue to govern relations between
the Parties insofar as they do not expressly conflict with this Third
Amendment.
16. This Third Amendment may be executed in counterparts and by facsimile,
each of which shall be deemed an original and all of which together
shall constitute one and the same document.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Parties have caused this Third Amendment to
Directory and Local Advertising Platform Services Agreement to be executed by
their duly authorized representatives as of the Third Amendment Effective Date
set forth above.
AMERICA ONLINE, INC. SWITCHBOARD INCORPORATED
By: /s/J. ▇▇▇▇▇▇▇ ▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇ Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
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Title: COO Title: President
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Date: August 21, 2002 Date: August 21, 2002
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