Exhibit 10.11
SERVICE PROVISION AGREEMENT
Service Provision Agreement made effective as of this 18th day of July,
1997, by and between:
NetCo Communications Corporation
("NetCo"), a Minnesota corporation, having
its principal place of business at 333 North
Washington Avenue, Suite 102,
Minneapolis, MN 55401
and
Time Inc. ("Time Inc."), a Delaware
corporation, having its principal place of
business at Time Life Building, Rockefeller
Center, New York, NY 10020.
PREMISES:
NetCo, through its wholly owned subsidiary, WAM!NET, Inc., has developed,
installed and is expanding its WAM!NET(R) data transportation and delivery
network which has application to the publishing, printing and prepress business.
Time Inc. is engaged in the magazine publishing business and currently uses
the services of eleven (11) geographically diverse printing companies for
simultaneous printing of Time Inc. magazine publications in the United States
and Canada.
Time Inc. desires to install and use WAM!NET data transportation and
delivery services for the simultaneous delivery of electronic data to printing
companies, including printing companies Time Inc. currently uses as well as
additional or different printing companies, for use in printing Time Inc.
magazine publications, and for other purposes contemplated by this Agreement.
Some of the printing companies Time Inc. currently uses already utilize
WAM!NET services for purposes unrelated to this Agreement.
As a condition to its use of WAM!NET data transportation and delivery
services for such purposes, Time Inc. desires NetCo to provide multiple WAM!NET
links, redundant equipment and satellite backup of land-line telephone circuits
in order to minimize the risk of delayed data delivery from Time Inc. to
printing companies.
As a further condition to its use of WAM!NET data transportation and
delivery services for such purposes, Time Inc. desires a third party to assure
continuation of all contracted WAM!NET services for a specified period of time
in the event that NetCo becomes unable to continue to provide such services
during the term of this Agreement.
In consideration of the premises and of the promises and other
consideration provided in, or contemplated by, this Agreement, NetCo and Time
Inc. agree as follows:
AGREEMENT:
Section 1. - Definitions
As used in this Agreement, unless the context requires otherwise, the
following words shall have the meanings ascribed to them in this Section 1.
Section references appearing in this Agreement refer to the corresponding
sections of this Agreement.
1.1. "Agreement" means this Service Provision Agreement.
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1.2. "Central Office" means the operations point of a local exchange
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telephone carrier.
1.3. "Data Transportation and Delivery Services" or "Services" means, for
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the purposes of this Agreement, the transportation and delivery of
electronic data across the WAM!NET Network between remote NADs,
whether by land-line or satellite telephone connection, and includes
Interactive Services, Simultaneous Broadcast and such other or
enhanced services as may be agreed by the parties from time to time.
1.4. "Destination NAD" means a NAD that is located on the premises of a
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Printer in accordance with Section 2.3, that is accessible to the
Printer's own internal computer network, and that is a destination
selected by Time Inc. for the receipt of a discrete transmission of
data originating from Time Inc.
1.5. "Dual T1" means a level of land line telephone service capable of
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carrying digitally formatted electronic data at the minimum rate of
one thousand (1,000) megabytes per hour, and includes any other or
future communications technology capable of reliably carrying
digitally formatted electronic data at no lesser rate.
1.6. "Equipment" means NADs that are installed on Time Inc.'s premises or
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on the premises of any Printer pursuant to the terms of this
Agreement, and includes SBS satellite transmitting or receiving
equipment that are installed on the premises of any Printer or
maintained by NetCo pursuant to the terms of this Agreement.
1.7. "Gigabyte" means one billion (1,000,000,000) bytes.
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1.8. "Hub" means a WAM!NET regional data receipt and distribution facility
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interconnected with other Hubs by redundant land-fine telephone
services and interconnecting multiple NADs to a NOC.
1.9. "Initial Term" means the Initial Term of this Agreement as defined in
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Section 10.
1.10. "Interactive Service" means an ancillary capability permitting
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interactive, real-time communication between NADs.
1.11. "Local Carrier" means a provider of publicly subscribed telephone
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service capable of connecting a NAD to a HUB in the geographic region
in which the NAD and HUB are located.
1.12. "Megabyte" means one million (1,000,000) bytes.
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1.13. "Network Access Device" or "NAD" means WAM!NET equipment and Software
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that is installed on a customer's premises, that is connected to a
HUB and that allows (a) a customer to deliver data from its own
computer or computer network into the NAD for transmission through
the WAM!NET Network to another NAD, or (ii) a customer to receive
data onto its own computer or computer network through the WAM!NET
Network from a remote NAD.
1.14. "Network Operations Center" or "NOC" means a WAM!NET national data
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receipt and distribution facility interconnecting NOCs and multiple
Hubs by redundant land-line telephone services.
1.15. "Printer" means a printing company engaged by Time Inc. to publish
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magazines or other printed material.
1.16. "Renewal Term" means the Renewal Term provided in Section 11.
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1.17. "Redundant Line" means T1 service provided to a Printer by a provider
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of publicly subscribed telephone service who does not otherwise
provide telephone service to that same Printer.
1.18. "Satellite Backup Service" or "SBS" means satellite communication
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capable of relaying digitally formatted electronic data at the
minimum rate of four hundred (400) megabytes per hour, and includes
DSS, VSAT, Millimeter Microwave, Spread Spectrum or any other or
future wireless technology capable of reliably carrying digitally
formatted electronic data at no lesser rate.
1.19. "Services Charges" means the Service Charges payable by Time Inc. in
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accordance with Section 3, and includes the "Base Charges," the "SBS
Availability Charges," the "SBS Priority Charges," the "Redundant
Line Charges," the "Interactive Service Charges," and the "Excess
Services Charges" as defined respectively in Section 3.
1.20. "Simultaneous Broadcast" means a transmission of electronic data from
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a NAD installed on Time Inc.'s premises for concurrent distribution
and delivery across the WAM!NET Network to geographically diverse
Destination NADs, and includes the ability to make group selections
for each Simultaneous Broadcast.
1.21. "Software" means all software used (i) to operate the Equipment, (ii)
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to transport data across the WAM!NET Network or (iii) produce
periodic or other reports, and also includes graphic user interfaces.
1.22. "T1" means a level of land line telephone service capable of carrying
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digitally formatted electronic data at the minimum rate of four
hundred (400) megabytes per hour, and includes any other or future
communications technology capable of reliably carrying digitally
formatted electronic data at no lesser rate.
1.23. "WAM!NET Network" means, for the purposes of this Agreement, the
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configuration and interconnection of NADs, Hubs and NOCs for the
purpose of transmitting electronic data between remote NADs, and will
include, when available, appropriate SBS satellite communications
equipment and connections necessary for such transmissions in the
event that land-line telephone connections are interrupted.
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1.24. "WAM!NET Operations Center" means NetCo's customer service and
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network operations monitoring and control facility for the WAM!NET
Network.
Section 2. - Provision of Services
2.1. General. NetCo will furnish the Services to Time Inc. and to each
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Printer in accordance with this Agreement. In furtherance thereof, NetCo will:
(a) Install, support and repair the Services and all Equipment or
Software furnished by NetCo; such repair and support to be in
accordance with the "WAM!NET Service Level Agreement for Time
Inc. Inc." which is appended to this Agreement as Exhibit 1;
(b) Maintain, support and repair the WAM!NET Network;
(c) Install, configure, test and make operational all Equipment and
Software, including the installation of Destination NADs as
NetCo may be directed periodically by Time Inc.;
(d) Furnish by December 1997, appropriate back-up SBS satellite
communication between a NOC and the Destination NADs chosen by
Time Inc.;
(e) Furnish training and training materials;
(f) Furnish telephone support twenty four (24) hours per day, seven
(7) days per week, including weekends and holidays;
(g) Install and support a graphic user interface which allows Time
Inc. to customize the destination of each Simultaneous
Broadcast to all or any combination of Destination NADs chosen
by Time Inc.;
(h) At the direction of Time Inc., disconnect Equipment provided
under this Agreement and discontinue furnishing Services under
this Agreement to Printers whose services are no longer then
being used by Time Inc.;
(i) Develop and implement by October 1997, Software, including a
graphic user interface, which will permit Time Inc. to use the
Services (i) to track the status of Simultaneous Broadcasts to
Destination NADs, (ii) to determine immediately if a fault or
error is the reason for any delay in delivery of Simultaneous
Broadcasts to Destination NADs, (iii) confirm the receipt of
data files by a Printer; and
(j) Develop and implement by October, 1997, Software, including a
graphic user interface, which will permit Time Inc. and
Printers (i) to view data files queued on a NAD and awaiting
shipment across the WAM!NET Network or awaiting delivery from a
NAD into a computer network, (ii) to reorder the priority of
shipment or delivery, as the case may be, and (iii) delete a
data file awaiting shipment from a NAD.
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2.2. Time Inc. Installation. In order to furnish the Services contemplated
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by this Agreement, NetCo will install at Time Inc.'s principal office the
following Equipment, Software and communications connections:
(a) Two (2) NADs in Time Inc.'s IT Net Ops. Center independently
accessible from Time Inc.'s internal computer network;
(b) Dual T1 telephone service respectively connecting each such NAD
to a separate Hub, with each such NAD to HUB connection made
via a diversely routed connection to a Central Office of a
different Local Carrier;
(c) Software, including graphic user interfaces, permitting
connection of each NAD to Time Inc.'s internal computer network
for purposes of implementing the Services; and
(d) Software, including a graphic user interface, allowing Time
Inc. to designate. Destination NADs intended by Time Inc. as
the recipients of discrete Simultaneous Broadcasts.
(e) Prior to interconnection of Time Inc.'s internal computer
network with the WAM!NET network, and subject to the terms of
an appropriate test specification and an appropriate
confidentiality agreement, each to be mutually agreed between
NetCo and Science Applications International Corporation
("SAIC"), security consultants to Time Inc., NetCo will provide
SAIC with information necessary for SAIC to assess firewall,
separation and other security features of the NADs being
installed on Time Inc.'s premises, and of the WAM!NET Network,
but not with any passwords, encryption keys, control lists,
file configurations, transport protocols, codes, or other
information, which may operate, alter or disable any such
security features. NetCo will pay the reasonable charges of
SAIC incurred in conducting such assessment, not to exceed Ten
Thousand Dollars ($10,000).
2.3. Printer Installations. In order to furnish the Services contemplated
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by this Agreement, NetCo will install at each Printer's facility the following
Equipment, Software and communications connections, in accordance with Time
Inc.'s instructions:
(a) Two (2) NADs, each of which shall be independently accessible
from a Printer's internal computer network, and one of which
shall be used for stand by purposes if the other becomes
inoperable for any reason;
(b) T1 telephone service connecting the routinely operational NAD
installed on a Printer's premises pursuant to this Agreement to
a Hub;
(c) By December 1997, one (1) SBS satellite receiver and ancillary
reception equipment and SBS software (i) that is suitable for
receiving electronic data in the event of any interruption of
land-line telephone connection and (ii) that is connected for
communications to the routinely operational NAD installed on a
Printer's premises pursuant to this Agreement;
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(d) Software permitting connection of each NAD to the Printer's own
internal computer network for purposes of implementing the
Services; and
(e) If economically practicable to NetCo and desired by Time Inc.,
a Redundant Line connecting the NAD used principally for
standby purposes with a HUB.
2.4. Simultaneous Broadcast. The Services will permit Time Inc. to make
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Simultaneous Broadcasts to Destination NADs designated by Time Inc. to receive
each broadcast. Time Inc. may customize the designation for each Simultaneous
Broadcast.
2.5. Interactive Service. Each NAD installed on Time Inc.'s premises or,
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at Time Inc.'s direction, on each Printer's premises will permit interactive
communication. For purposes hereof, "interactive communications" means
communications meeting the functional specifications to reasonably agreed
between Time Inc. and NetCo. Time Inc. and NetCo each agree to use their
reasonable best efforts, respectively, to promptly undertake to develop and
agree upon such specifications. NetCo shall have a reasonable time following
such agreement to implement, make operational and deliver the interactive
communications conforming to such agreed specifications.
2.6. Satellite Transmission Priority. By December, 1997, and at Time
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Inc.'s periodic elections, NetCo will provide Time Inc. with first priority SBS
satellite communication in the event of land-line communications interruption,
and will discontinue such priority at Time Inc.'s direction.
2.7. Network Monitoring. NetCo will continually staff and operate the
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WAM!NET Operations Center, seven (7) days per week, twenty four (24) hours per
day, week ends and holidays included, and will constantly monitor the WAM!NET
Network in order to identify within fifteen (15) minutes of occurrence any
equipment or line malfunction interfering with data transmissions between NADs
installed pursuant to the terms of this Agreement. NetCo will furnish Time Inc.
with monthly status reports showing the incidence of any equipment or line
malfunctions affecting data transmissions between NADs installed pursuant to the
terms of this Agreement, and, upon Time Inc.'s reasonable request, will furnish
Time Inc. the opportunity to review all records maintained by NetCo bearing upon
the operational performance of the WAM!NET Network and of the NOCs and Hubs.
2.8. Corrections; Redundancies. NetCo will use its best efforts to
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correct within two (2) hours of occurrence any malfunction interfering with
land-line telephone communication between NADs installed pursuant to the terms
of this Agreement. If NetCo is unable to correct such malfunction within the
time so limited, NetCo (i) will implement, from and after December, 1997, data
transmissions through SBS satellite communication to the Destination NAD(s)
unreachable by land-line communications, or (ii) until SBS satellite
communication becomes available in December, 1997, will route the communication
through the Redundant Line if the same has been installed pursuant to this
Agreement. Time Inc. may independently switch from land-line communication to
either the Redundant Line or SBS satellite communication, as the case may be,
prior to the expiration of two (2) hours following the occurrence of any such
malfunction.
2.9. Installation; Disconnection. Promptly upon receipt of Time Inc.'s
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written instructions, NetCo will order T1 service and thereafter, concurrently
with the installation of T1 service, install operational Services with any
Printer designated by Time Inc. for installation. Promptly upon receipt of Time
Inc.'s written instructions, NetCo will disconnect Services from any Printer
designated by Time Inc. for disconnection from Services. The payment obligation
for a Printer whose installation has been disconnected pursuant to this Section
2.10 shall continue until the earliest of (i) the
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termination of NetCo's purchase obligation for the local telephone service to
such Printer, or (ii) sixty (60) days following NetCo's receipt of such written
instructions.
2.10. Initial Redundant Lines. NetCo will install a Redundant Line to each
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of the Printers listed on Exhibit 2 concurrently with the installation of
Services for each such Printer. Subject to the provisions of Section 2.3(e),
NetCo will install a Redundant Line at other or additional Printers as directed
by Time Inc. in writing.
Section 3. - Prices and Payment
3.1. General. For the Term of this Agreement, Time Inc. will pay NetCo
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each of the amounts set forth in this Section 3 for the Services enumerated in
Section 2. Any item of Service enumerated in Section 2 that is not separately
charged for in this Section 3 shall be deemed to be comprehended in the amounts
due as Base Charges.
3.2. Base Charges. As Base Charges, Time Inc. will pay each of the
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following sums monthly for the Services and Equipment identified in Section 2.2:
3.2.1. The sum of Twenty-two Thousand Dollars ($22,000) for the Two
(2) NADs and Dual T1 service installed at Time Inc. as enumerated in Section
2.2; it being understood that the annualized amount hereof is Two Hundred Sixty
Four Thousand Dollars ($264,000).
3.2.2. The sum of One Thousand Dollars ($1,000) for each NAD with T1
service connections installed at a Printer as enumerated in Sections 2.3(a) and
2.3(b); it being understood that the annualized amount hereof for each such NAD
and T1 service is Twelve Thousand Dollars ($12,000).
3.2.3. The sum of Five Hundred Dollars ($500) for each NAD installed
on a Printer's Premises without T1 connection principally for standby use
pursuant to Section 2.3(a); it being understood that the annualized amount
hereof is Six Thousand Dollars ($6,000).
3.3. SBS Availability Charges. When SBS satellite services become
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available, Time Inc. will pay monthly the sum of One Thousand Five Hundred
Dollars ($1,500) for each installation of SBS satellite reception capability at
the premises of a Printer as contemplated by Section 2.1, subparagraph (c); it
being understood that the annualized amount hereof is Eighteen Thousand Dollars
($18,000) per installed site for the availability of such SBS satellite
communications.
3.4. SBS Priority Charges. When SBS satellite services become available,
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Time Inc. will pay monthly the sum of Five Hundred Dollars ($500) for each NAD
designated by Time Inc. for Satellite Transmission Priority as contemplated by
Section 2.6; it being understood that the annualized amount hereof is Twelve
Thousand Dollars for each NAD designated by Time Inc. for Satellite Transmission
Priority.
3.5. Redundant Land-Lines Charges. Time Inc. will pay monthly the sum of
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One Thousand Dollars ($1,000) for each Redundant Line contemplated by Section
2.3(e); it being understood that the annualized amount hereof is Twelve Thousand
Dollars ($12,000) for the availability of each Redundant Line.
3.6. Interactive Service Charges. Time Inc. will pay monthly the sum
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Three Hundred Dollars ($300) for each NAD installed with Interactive Service
capability in accordance with Section
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2.5; it being understood that the annualized amount hereof is Three Thousand Six
Hundred Dollars ($3,600) for each NAD installed with Interactive Service
capability.
3.7. Excess Service Charges. Time Inc. will pay monthly an additional
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amount calculated as the sum of all of the following:
3.7.1. Four cents ($0.04) for each megabyte of data transmitted from
a NAD installed on Time Inc.'s premises that is in excess of six thousand five
hundred (6,500) Gigabytes transmitted during the Initial Term or during each
year of the Renewal Term from all NADs installed on Time Inc.'s premises. For
purposes hereof, the computation of Gigabytes transmitted per year is not
cumulative from the Initial Term or a year of the Renewal Term to any other
year.
3.7.2. Twenty-five cents ($0.25) each megabyte of data transmitted
from a NAD installed on a Printer's premises that is in excess of Four Thousand
(4,000) Megabytes transmitted during such month from all NADs installed on that
same Printer's premises.
3.7.3. Four cents ($0.04) for each megabyte of data transmitted
during a month for Interactive Services.
3.7.4. Thirty-five cents ($0.35) for each megabyte of data
transmitted during a month via SBS satellite services; provided, however, if the
event or occurrence necessitating the usage of SBS satellite services is due to
any fault of NetCo, then the price for each such megabyte of data shall be four
cents ($0.04). For purposes hereof, the phrase "fault of Netco" does not include
a disruption, for any reason whatsoever, in telephone service provided by any
telephone carrier.
3.8. Commencement of Payment Obligations. Time Inc.'s payment obligation
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for each of the several Services comprehended in Section 2 hereof shall commence
when such item of Service is installed, made operational on Time Inc.'s premises
or on a Printer's Premises, as the case may be, and has begun to operate in
accordance with the respective provisions of this Agreement to the reasonable
satisfaction of Time Inc. NetCo will certify the installation and operational
capability of each such item of Service to Time Inc. The applicable Service
Charge for an item of Service that becomes installed and operational during a
month shall be prorated for the number of days during such month that the item
of Service has been installed and operational.
3.9. Payments Due. All amounts payable by Time Inc. to NetCo under this
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agreement shall be due and payable no later than thirty (30) days following
NetCo's invoice therefor to Time Inc.
3.10. Credits; Graphic User Interfaces, SBS Backup. Time Inc. may deduct
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monthly from any amounts then owed to NetCo under this Agreement, and shall not
be thereafter obligated to pay, a sum (herein the "Credit") calculated in
accordance with this Section 3.10, for each month, or portion thereof, that
NetCo has failed to deliver and implement (a) the graphic user interface
specified in Section 2.1(i), (b) the graphic user interface specified in Section
2.1(j), or (c) that NetCo has failed to deliver and install the SBS satellite
receiver and ancillary reception equipment and SBS software specified in Section
2.3(c). "Delivery" for purposes hereof shall be deemed to have occurred when (d)
each such graphic user interface has been installed, made operational and begun
to perform the functions specified in Section 2.1(i) and Section 2.1(j),
respectively, and (e) such receiver, equipment and software have been installed
and made operational to perform the functions specified in Section 2.3(c), in
each such case to the reasonable satisfaction of Time Inc.
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3.10.1. Onset of Credit. The Credit shall be due to Time Inc. for
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each month commencing November, 1997 respecting either of the graphic user
interfaces specified, respectively, in Section 2.1(i) or Section 2.1(j), and for
each month commencing January, 1998 respecting the SBS satellite receiver and
ancillary reception equipment and SBS software specified in Section 2.3(c) of
this Agreement.
3.10.2. Amount of Credit. The amount of the Credit shall be an
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increasing amount, initially equal to ten percent (10%) of the aggregate Service
Charges payable by Time Inc. under this Agreement, and thereafter increasing
each month that any Credit is due by an additional amount equal to ten percent
(10%) of such aggregate Service Charges. After four months of applied credit,
the amount of credit shall be established at forty percent (40%) of the
aggregate Service Charges payable by Time Inc. for each additional month that
any credit is due.
Section 4. - Commencement of Services
4.1. Tampering or Removal. As a condition to the provision of Services to
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any Printer, NetCo may require such Printer to execute and deliver to NetCo and
agreement prohibiting such Printer (i) from tampering with any Equipment, (ii)
from seeking access to the WAM!NET Network for any purpose not expressly
authorized by NetCo, or (iii) from moving the Equipment without NetCo's prior
consent.
4.2. UCC Filings. As a further condition to the provision of Services to
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any Printer, NetCo may require such Printer to execute and deliver to NetCo (i)
documentation duly executed in recordable form and reasonably sufficient in
NetCo's opinion to grant, perfect and preserve to NetCo a security interest in
the Equipment furnished to the Printer in accordance with Section 2.3, and (ii)
the written agreement of the Printer to peaceably return the Equipment to NetCo
at (a) the termination of this Agreement or (b) the earlier instruction of Time
Inc., and to indemnify NetCo against any loss, costs or expenses suffered or
incurred by NetCo as a result of damage or destruction of the Equipment or as a
result of a proceeding necessary to return the Equipment to NetCo.
4.3. Insurance. As a further condition to the provision of Services to
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any Printer, NetCo may require the Printer to furnish an appropriate certificate
of insurance insuring the Equipment furnished to the Printer in accordance with
Section 2.3 against loss or casualty in appropriate amounts, and naming NetCo as
an additional loss payee. It is hereby acknowledged and agreed that the fair
market value of each NAD Fifteen Thousand Dollars ($15,000). NetCo will provide
reasonable estimates of fair market value for other items of Equipment which may
be furnished to Printers pursuant to this agreement.
4.4. Procedure. NetCo will prepare and furnish all documents required by
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this Section 4 to each Printer for signature and return to NetCo.
4.5. Security Assessment. No interconnection between Time Inc.'s internal
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computer network and the WAM!NET Network shall occur until and unless Time Inc.
has received the favorable report of SAIC pursuant to Section 2.2(e).
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Section 5. - Warranties
5.1. Up-Time Inc. NetCo warrants under this Agreement the architecture,
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redundancy and operational capability of the WAM!NET Network to deliver
electronic data without interruption or failure in accordance with the warranty
of delivery set forth in Section 5.2 of this Agreement.
5.2. Delivery. NetCo warrants under this Agreement the delivery of
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electronic data without degradation from a sending NAD located at Time Inc.'s
premises to the receiving NAD located at the Printer's premises selected by Time
Inc. for receipt of such delivery at no less that Four Hundred (400) megabytes
per hour, subject to interruption in the T1 service connecting the NAD located
on the Printer's premises with a Hub. The "subject to" clause of the foregoing
warranty is inapplicable if the Printer's premises is also served by SBS
satellite service or a Redundant Line.
5.3. NetCo warrants under this Agreement that the Interactive Service will
conform to specifications determined in accordance with Section 2.5.
5.4. Equipment and Software. NetCo warrants the Equipment and the
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Software will be free from defects in materials and workmanship.
5.5. Non-Infringement. NetCo warrants that the sale and/or use of
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Services does not infringe any patent or technology of any third party.
5.6. Exclusion. NETCO MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED,
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INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR
OTHERWISE. NETCO IS NOT RESPONSIBLE FOR, AND TIME INC. WILL NOT MAKE ANY CLAIM
AGAINST NETCO, FOR ANY CONSEQUENTIAL, SPECIAL, OR INDIRECT DAMAGES.
5.7. Limitation. Except for the warranty in Section 5.5, if NetCo fails
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to comply with the warranties given in this Service Agreement, its liability
shall not exceed $100 per occurrence to a maximum, for all such occurrences, of
the total of the Service Charges that have been paid by Time Inc. during the
calendar year in which such event(s) occurred. "Occurrence" for these purposes
means a single transmission of data from a sending NAD into the WAM!NET Network
regardless of the number of Destination NADs. Under no circumstance shall NetCo
be liable upon any claim, regardless of cause or kind, for any amount in excess
of the Services Charges received by NetCo during the calendar year in which the
claim first arose.
5.8. Indemnity. NetCo shall indemnify and hold Time Inc. harmless against
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any losses, claims, damages or liabilities, including reasonable fees of
counsel, to which Time Inc. may become subject insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise or are based upon a
claim that Time Inc.'s use of the Services infringe the patent or other
intellectual property rights of any third party. Promptly after Time Inc.'s
receipt of notice of the commencement of any action of or the intent to commence
any action, Time Inc. will, if a claim in respect thereof is to be made against
NetCo, notify NetCo in writing of the commencement thereof or of the intent to
commence an action, as the case may be, and omission so to notify NetCo will
relieve NetCo from any liability hereunder as to the particular item for which
indemnification is then being sought. In case any such action is brought against
Time Inc. and it notify NetCo of the commencement thereof, NetCo will be
entitled to participate therein and, to the extent that NetCo may wish, to
assume the defense thereof, with counsel who shall be to Time Inc.'s reasonable
satisfaction, and after notice from NetCo to Time
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Inc. of NetCo's election so to assume the defense thereof, NetCo will not be
liable to Time Inc. for any legal or other expenses Time Inc. may subsequently
incur in connection with the defense thereof. NetCo shall not be liable to Time
Inc. on account of any settlement of any claim or action effected without
NetCo's consent. NetCo shall not be liable to Time Inc. for any lost
opportunity, consequential or other damages whatsoever due to Time Inc.'s
inability to use the Services.
Section 6. - Quarterly Performance Reviews
Netco and Time Inc. shall conduct quarterly performance reviews of matters
appropriate to this Agreement, including NetCo's provision of Services, and
future products, services and coordinated efforts that may be appropriate to
this Agreement.
Section 7. - NetCo Insurance Requirements
7.1. NetCo shall obtain, pay for and maintain the following types and
amounts of insurance covering the performance of work under this Agreement: (a)
Workers' Compensation and Occupational Disease insurance as required by law; (b)
Employers' Liability insurance with limits of $500,000 per occurrence; (c)
Comprehensive General Liability insurance with limits of not less than
$2,000,000 per occurrence for bodily injury and $1,000,000 per occurrence for
property damage; and (d) if automobiles are used in connection with work to be
performed under this Agreement, Comprehensive Automobile Liability insurance
covering all owned or rented vehicles, each with limits of not less than
$1,000,000 per occurrence for bodily injury and $500,000 per occurrence for
property damage.
7.2. NetCo shall provide certificates of insurance evidencing such
insurance signed by an authorized representative of the insurance company. Such
insurance shall provide that in the event of any material change in coverage or
cancellation, at least ten (10) days prior written notice shall be provided to
Time Inc.
Section 8. - Loss, Damages; Insurance.
Time Inc. is responsible for any loss, theft, destruction or damage
(collectively "Loss") of or to the Equipment, to the extent of its then fair
market value, located on Time Inc.'s premises from any cause at all, whether or
not insured, until it is delivered to NetCo at the end of this Agreement. Time
Inc. shall pay all Service Charges even if there is a Loss. Time Inc. shall
notify NetCo in writing immediately of any Loss. It is agreed Netco's Equipment
to be located on Time Inc.'s Premises is valued at Thirty Five Thousand Dollars
($35,000). Time Inc. will furnish NetCo upon request with certification
satisfactory to NetCo's insurance carrier that the Equipment is located on Time
Inc.'s premises.
Section 9. - Software, Software License
The Software is furnished by NetCo solely for use in connection with the
Data Transportation and Delivery Services and is protected by copyright and is
subject to pending US patents. NetCo grants to Time Inc. and to each Printer a
limited license for the term of this Agreement to use the Software in connection
with the Data Transportation and Delivery Service. Time Inc. agrees that it will
not use the Software for any purpose other than the transmission of data across
the WAM!NET network pursuant to this Service Agreement Time Inc. covenants and
agrees to transfer to NetCo any right that Time Inc. may have or claim that is
derived from any reverse engineering of the Software or
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that may be otherwise inconsistent with NetCo's sole and exclusive ownership of
the Software or of the Services.
Section 10. - Initial Term
The Initial Term of this Agreement shall commence on the day first above
written and, unless earlier terminated in accordance with Section 12, shall
continue for one (1) year until July 18, 1998, and then terminate, unless
extended for the Renewal Term provided in Section 6.
Section 11. - Renewal Term
Time Inc. shall have the option to extend this Agreement, upon the same
terms and conditions of this Agreement, for two successive periods of one (1)
year each (each a "Renewal Term") commencing, respectively immediately upon
expiration of the Initial Term or the first Renewal Term, as the case may be,
and expiring, unless earlier terminated in accordance with Section 12, at five
o'clock p.m., New York time, on the day preceding the anniversary of such
commencement. This option shall be exercised by Time Inc. by notice given no
later that sixty (60) days prior to the expiration of the Initial Term or the
first Renewal Period, as the case may be.
Section 12. - Default and Remedies
12.1. Default for Bankruptcy or Insolvency. The filing by either party of
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a voluntary petition under any chapter of the United States Bankruptcy Act or
any similar state or foreign law, the filing of an involuntary petition against
either party under the United State Bankruptcy Act which is not dismissed within
sixty (60) days, the insolvency of either party, or the appointment of a
receiver for either party, which is not dismissed within sixty (60) days shall
also constitute a default by that party.
12.2. NetCo's Default. If NetCo defaults, Time Inc. may terminate this
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Agreement by notice effective immediately upon NetCo's receipt.
12.2.1. Material Obligations. NetCo's failure to comply with any
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material obligations under this Agreement for a period of thirty (30) days
following notice from Time Inc. shall constitute a default by NetCo. The term
"material obligations" expressly include NetCo's warranties set forth in Section
5 of this Agreement.
12.2.2. Premium Charges. In addition, if Time Inc. incurs premiums
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totaling greater than Five Thousand Dollars ($5,000) per month for any two (2)
months due to NetCo's breach of warranty, including, without limitation, NetCo's
warranty of delivery set forth in Section 5.2, then, in that event, Time Inc.
may terminate this Agreement upon sixty days prior notice. Such termination
shall relieve Time Inc. of all payment obligations under this Agreement, and
shall be without cost or penalty to Time. For purposes hereof, "premium" means
costs charged to Time by a Printer for production delays in a Printer's
scheduled production occasioned by the absence of data files necessary to
complete the production.
12.3. Time Inc.'s Default. Any of the following will constitute a default
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by Time Inc.: (a) failure to pay any Service Charges or any other payment within
thirty (30) days of its due date; (b) failure to comply with or perform any
other material term of this Service Agreement required of Time Inc., and such
failure continues for 10 days after following notification from NetCo. If Time
Inc. defaults, NetCo may do one or more of the following: (a) upon sixty (60)
days prior written notice to
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Time Inc., cancel or terminate this Agreement or any or all other agreements
that NetCo has entered into with Time Inc.; (b) require Time Inc. to immediately
pay NetCo, as compensation for loss of bargain, a sum equal to the present
value, discounted eight percent (8%), of all unpaid monthly Service Charges that
would have been payable during the term of this Agreement but for its early
termination, together with any other amounts then or later due; (c) upon sixty
(60) days prior written notice to Time Inc. discontinue providing Data
Transportation and Delivery Services; or (d) exercise any other right or remedy
available at law. These remedies are cumulative, and NetCo's exercise of any
remedy will not prevent NetCo from then or later exercising any other remedy.
12.4. Without Default. Either party may terminate this Agreement upon
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thirty (30) day's prior notice in the event that Time does not receive the
favorable report of SAIC pursuant to Section 2.2(e). In the event of such
cancellation, neither party shall be liable to the other for any damages or
penalties.
Section 13. - Obligations on Termination
Within thirty (30) days after the end of the term of this Agreement, Time
Inc. will return the Equipment, including any Software, to NetCo in good and
serviceable condition, ordinary wear and tear excepted, and will certify to
NetCo in writing that Time Inc. have returned, or destroyed, all copies to the
Software. The Software License shall terminate at the same time that the term of
this Service Agreement is terminated.
Section 14. - Confidential Information
14.1. Confidential Information Defined. "Confidential Information" shall
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mean any information of a confidential or proprietary nature which is disclosed
by either party ("Disclosing Party") to the other party ("Confidant") including,
but not limited to, all information of a confidential or proprietary nature,
software, firmware, all processes and process controls, security procedures, all
technical, know-how and/or trade secrets whatsoever which relate to the business
of the Disclosing Party, and all marketing and sales information relating to the
marketing or sales of any product or service of the Disclosing Party.
Confidential Information does not include any information which a Confidant can
establish (i) was in that Confidant's possession prior to first receipt of the
same, directly or indirectly, from the Disclosing Party, but was not received or
derived from the Disclosing Party; (ii) is or becomes part of the public domain
without breach of this Agreement by the Confidant; (iii) was heretofore or
hereafter furnished to the Confidant by another party as a matter of right
without restriction on disclosure; (iv) was developed by the Confidant
independently and without any use of any Confidential Information, (v) was
disclosed to any third party by the Disclosing Party without any restriction on
further dissemination or (vi) was forced to disclose pursuant to any law,
regulation or governmental order or by any judgment, order, decree or award of a
competent court.
14.2. Ownership And Limitations on Use of Confidential Information. All
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Confidential Information disclosed by a Disclosing Party to the Confidant under
this Agreement shall remain the property of the Disclosing Party. Confidant
covenants (i) to maintain in confidence all Confidential Information received
from the Disclosing Party, (ii) only to use the Confidential Information for the
purposes and under the circumstances provided in this Agreement, (iii) not use
the Confidential Information for its or his own benefit or for the benefit of
any third party, and (iv) unless required to do so by law, not to disclose any
Confidential Information to any third party. Confidant shall give the Disclosing
Party prompt written notice of the commencement or any suit or proceeding in
which Confidant may be required to disclose any such Confidential Information,
and shall give the Disclosing
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Party a further written notice immediately upon receipt of any motion or other
request to have any tribunal issue an order for the disclosure of any
Confidential Information. Confidant shall give the Disclosing Party at least
fifteen (15) days prior written notice of its intention to make a disclosure of
Confidential Information believed to be required by law to any third party which
written notice shall set forth (a) the nature of the information proposed to be
disclosed and (b) the basis for the conclusion that such disclosure is required
by law. Confidant shall seek to maintain the confidentiality of such
Confidential Information by, for example, seeking a protective order limiting
the use and disclosure of such Confidential Information to the limited purposes
of such suit or proceeding.
14.3. Limitation On Disclosure of Agreement. Neither Party shall disclose
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the contents of this Agreement, except in accordance with the requirements of
law, including any registration or reporting requirement imposed under the
Securities Act of 1933, as amended, or under the Securities Exchange Act of
1934, as amended.
Section 15. - Miscellaneous Provisions
15.1. Publicity. Neither party shall use the name of the other party in
---------
any news release, public announcement, advertisement or other form of publicity
without the prior written consent of the other party. NetCo will provide Time
Inc. with the text of all promotional materials wherein Time Inc. is mentioned
as a customer in advance for approval which shall not be unnecessarily withheld
or delayed. Except as expressly permitted herein, NetCo may not use any logo,
trademark or trade name of Time Inc. for any purpose without prior express
written consent of Time Inc. NetCo grants Time Inc. permission during the term
of this Agreement to use the trademarks and trade names used by NetCo in
connection with the products and services covered by this Agreement. Such
permission is expressly limited to uses by Time Inc. necessary to the
performance of Time Inc.'s obligations under this Agreement. Time Inc. hereby
acknowledges NetCo's exclusive ownership of such marks and names and that
NetCo's marks and names are renowned both worldwide and specifically in the U.S.
Time Inc. agrees not to take any action inconsistent with such ownership and
further agrees to take any action, including without limitation the conduct of
legal proceedings at NetCo's expense, which NetCo reasonably deems necessary to
establish and preserve NetCo's exclusive rights in and to its trademarks and
trade names. Reproductions of NetCo's trademarks, logos, symbols, etc., shall be
true photographic reproductions.
15.2. Further Documents. Time Inc. agrees to execute upon NetCo's request
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from time to time any additional documents reasonably necessary for NetCo to
perfect or continue a security interest in the Equipment installed on Time
Inc.'s premises.
15.3. Removal; Environment; Tampering. Time Inc. may not disconnect or
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reconnect the Equipment without prior notice to NetCo and NetCo's prior consent,
which shall not be unreasonably withheld. Netco shall not be responsible for any
failure of Services resulting from an unauthorized disconnection or reconnection
of the Equipment. Time Inc. will provide at its expense a suitable environment
for the Equipment. Time Inc. will not make any alterations, additions or
replacements to the Equipment without NetCo's prior written consent, and will
not tamper with the Equipment or seek access to the WAM!NET Network for any
purpose not expressly authorized by NetCo. Time Inc. will not remove, make or
permit any alterations in any labels or other identifying markings placed by
NetCo on any of its products and services covered by this Agreement. NetCo win
relocate the Equipment for Time Inc. upon Time Inc.'s payment of circuit and
miscellaneous out-of-pocket reinstallation charges incurred by NetCo.
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15.4. Taxes and Fees. When required by any state, local or other
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government authority, Time Inc. will pay when due, any taxes or fees, including
UCC filing fees, relating to this Agreement or to the Equipment, that are now or
in the future assessed, levied or required, by any state, local or other
government authority. NetCo may, but is not obligated to, pay any or all such
taxes or fees on Time Inc.'s behalf, and Time Inc. will reimburse NetCo for such
taxes or fees promptly against invoice accompanied by evidence of payment. NetCo
will file all personal property, use or other tax returns (unless NetCo notifies
Time Inc. otherwise in writing).
15.5. Security Regulations. Time Inc. and NetCo, their employees,
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representatives and agents, will comply with all security regulations in effect
from time to time at each other's premises and with all policies and procedures
of the other respecting security.
15.6. No Rights or Licenses. No rights to manufacture are granted by
---------------------
NetCo to Time Inc. under this Agreement. Moreover, no licenses are granted or
implied by this Agreement under any patents owned or controlled by NetCo or
under which NetCo has rights, except the right to market and sell the products
and services covered by this Agreement during the term and as contemplated
herein.
15.7. Modifications. NetCo reserves the right to make design
-------------
modifications in any of the Equipment and Services covered by this Agreement at
any time, provided that Services are not adversely affected thereby, but shall
not be obligated, except as otherwise expressly agreed herein, to implement such
modifications in the products and services that have previously been delivered
to Time Inc.
15.8. Waiver and Amendment. No waiver, amendment or modification,
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including those by custom, usage of trade, or course of dealing, of any
provision of this Agreement will be effective unless in writing and signed by
the party against whom such waiver, amendment or modification is sought to be
enforced. No waiver by any party of any default in performance by the other
party under this Agreement or of any breach or series of breaches by the other
party of any of the terms or conditions of this Agreement shall constitute a
waiver of any subsequent default in performance under this Agreement or any
subsequent breach of any terms or conditions of that Agreement. Performance of
any obligation required of a party under this Agreement may be waived only by a
written waiver signed by a duly authorized officer of the other party, that
waiver shall be effective only with respect to the specific obligation described
in that waiver.
15.9. Entire Agreement. The parties acknowledge that this Agreement
----------------
expresses their entire understanding and agreement, and that there have been no
warranties, representations, covenants or understandings made by either party to
the other except expressly set forth in this Agreement. The parties further
acknowledge that this Agreement supersedes, terminates and otherwise renders
null and void any and all prior Agreements or contracts, whether written or
oral, entered into between NetCo and Time Inc. with respect to the matters
expressly set forth in this Agreement.
15.10. Survival. Rights and obligations relating to each party's
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respective ownership of any Confidential Information shall survive the
termination of this Agreement.
15.11. No Association. This Agreement is not intended to create, nor shall
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it be construed as, a joint venture, association, partnership, franchise or
other form of business or relationship. Neither party shall have nor hold itself
out as having any right or power or authority to assume, create, or incur any
expense, liability or obligation, expressed or implied, on behalf of the other
party, except as expressly provided herein.
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15.12. Governing Law. This Agreement shall be governed by the laws of the
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State of New York, exclusive of the conflicts of law provisions thereof.
15.13. Except as otherwise provided in this Agreement, neither Netco nor
Time Inc. shall be liable to the other, or to any third party claiming under
either of them respectively, for any special, indirect or consequential damages
(such as lost business profits) in connection with or arising out of this
Agreement.
15.14. Force Majeur. Neither party shall be responsible or deemed to be in
------------
default for nonperformance or delays in performance of this Agreement due to
causes beyond its control and not occasioned by the fault or negligence of such
party to be excused, including, but not limited to, civil war, insurrections,
unforeseeable strikes, riots, fires, floods, explosions, earthquakes, acts of
God or the public enemy, and any stature, order, regulation, proclamation,
ordinance, demand or requirement of any governmental agency imposed after the
effective date. Upon the occurrence of such event, the party so affected, upon
giving prompt written notice to the other party, shall be excused from such
performance to the extent of such prevention, restriction or interference
provided that the party so affected shall take all reasonable steps to avoid or
remove such causes of nonperformance and shall continue performance hereunder
with dispatch whenever such causes are removed. In the event that a party's
performance of its obligations is excused in accordance with this Section for a
period in excess of thirty (30) days in the aggregate, the other party may
terminate its obligations under this Agreement upon written notice to the party
whose performance of its obligations was excused.
15.15. Captions. Captions appearing in this Agreement are for convenience
--------
of reference only, and shall not be considered a part of this Agreement.
15.16. Interpretation and Construction. Wherever possible, each provision
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of this Agreement will be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable under any applicable law or rule in any
jurisdiction, such provision will be ineffective only to the extent of such
invalidity, illegality, or unenforceability in such jurisdiction without
invalidating the remainder of this Agreement in such jurisdiction or any
provision hereof in any other jurisdiction.
15.17. Notices. Any notice permitted or required under this Agreement
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shall be given by NetCo or by Time Inc. by registered or certified mail, postage
prepaid mail to other party at its address appearing on the first page of this
Agreement. Notice so given shall be effective on receipt. Any instruction
contemplated by Section 2.9 may be given orally and confirmed by facsimile
transmission.
Section 16. - Condition Subsequent
16.1. WorldCom's Assurance. It is expressly a condition subsequent to
--------------------
this Agreement that Time Inc. shall have received from WorldCom Inc.
("WorldCom"), no later than the tenth (10th) day following the effective day of
this Agreement, the written agreement of WorldCom to furnish or to cause NetCo
to furnish, in the event of NetCo's financial inability to perform its material
obligations under this Agreement, all Services contracted for by Time Inc., for
a period commencing upon such inability and continuing for one hundred twenty
(120) days following WorldCom's written notification to Time Inc. that WorldCom
intends to furnish, or to cause NetCo to furnish, such Services.
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16.2. Right to Cancel. In the absence of WorldCom's timely written
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agreement in accordance with Section 15.1, Time Inc. may cancel this Agreement
upon written notice without any obligation, cost or penalty.
SIGNATURES:
We have carefully reviewed this agreement and accept its terms and
conditions. We are executing this Agreement to be effective as of the month, day
and year first written above.
NetCo Communications Corporation Time Inc.
By: /s/ Edward J. Driscoll By: /s/ Guy Gleysteen
----------------------------------------- ----------------------------
Name: Edward J. Driscoll Name: Guy Gleysteen
--------------------------------------- --------------------------
Title: President and Chief Executive Officer Title: Director of Printing
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Attachments:
Exhibit 1: Service Level Agreement
Exhibit 2: Redundant Line Installations
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