<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 2
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1997 Commission file number 0-27890
MINDSPRING ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 58-2113290
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1430 WEST PEACHTREE STREET, SUITE 400 30309
ATLANTA, GEORGIA (Zip Code)
(Address of principal executive offices)
(404) 815-0770
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
(Not applicable)
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 (the "Exchange Act") during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
Based upon the closing price of the registrant's Common Stock as of March 23,
1998 the aggregate market value of the Common Stock held by non-affiliates of
the registrant is $276,024,426.*
The number of shares of Common Stock outstanding as of March 23, 1998 was
7,556,630.
- --------------------
* Solely for purposes of this calculation, all executive officers and
directors of the registrant and all shareholders reporting beneficial
ownership of more than 5% of the registrant's Common Stock are considered
to be affiliates.
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TABLE OF CONTENTS
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PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . 1
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) The following consolidated financial statements of registrant and
its subsidiaries and report of independent auditors are included in Item 8
hereof.
Report of Independent Public Accountants.
Balance Sheets as of December 31, 1997 and 1996.
Statements of Operations - Years Ended December 31, 1997, 1996 and
1995.
Statements of Stockholders' Equity - Years Ended December 31, 1997,
1996 and 1995.
Statements of Cash Flows - Years Ended December 31, 1997, 1996 and
1995.
Notes to Financial Statements.
(a)(2) Except for the following, all schedules for which provision is made
in the applicable accounting regulations of the Securities and Exchange
Commission either have been included in the Financial Statements or are
not required under the related instructions, or are inapplicable and
therefore have been omitted:
Report of Independent Public Accountant as to Schedules
Schedule II - Valuation of Qualifying Accounts
(a)(3) The following exhibits are either provided with this Report or are
incorporated herein by reference:
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EXHIBIT EXHIBIT
NUMBER DESCRIPTION
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3(a) - Amended and Restated Certificate of Incorporation of MindSpring Enterprises, Inc. (Filed as
Exhibit 3(a) to Quarterly Report on Form 10-Q dated May 3, 1996, File No. 0-27890, and
incorporated herein by reference.)
3(b) - Amended and Restated Bylaws of MindSpring Enterprises, Inc. (Filed as Exhibit 3(b) to
Quarterly
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<TABLE>
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Report on Form 10-Q/A dated August 30, 1996, File No. 0-27890, and incorporated
herein by reference.)
10(a) -- Asset Purchase Agreement dated June 28, 1996 by and between MindSpring Enterprises, Inc. and
PSINet, Inc. (Filed as Exhibit 10.1 to Current Report on Form 8-K dated June 28, 1996, File
No. 0-27890, and incorporated herein by reference.)
10(b) -- Amendment No. 1 to Asset Purchase Agreement and Network Services Agreement dated August 23,
1996 by and between PSINet Inc. and MindSpring Enterprises, Inc., effective as of June 28,
1996. (Filed as Exhibit 10.3 to Current Report on Form 8-K/A dated August 23, 1996, File No.
0-27890, and incorporated herein by reference.)
10(c) -- Amendment No. 2 to Asset Purchase Agreement dated as of September 1, 1996 by and between
PSINet Inc. and MindSpring Enterprises, Inc. (Filed as Exhibit 10.3 to Current Report on Form
8-K dated October 8, 1996, File No. 0-27890, and incorporated herein by reference.)
10(d) -- Amendment No. 3 to Asset Purchase Agreement, dated as of January 24, 1997. (Filed as Exhibit
10.5 to Current Report on Form 8-K dated March 3, 1997, File No. 0-27890, and incorporated
herein by reference.)
10(e) -- Amended and Restated Asset Purchase Agreement by and between MindSpring Enterprises, Inc. and
The News and Observer Publishing Company dated as of September 11, 1996. (Filed as Exhibit
2(c) to the Company's Registration Statement on Form S-1, File No. 333-10779 (the "October
1996 S-1"), and incorporated herein by reference.)
10(f) -- Lease and Service Agreement dated as of January 1, 1995 between AvData Systems, Inc. and
MindSpring Enterprises, Inc. (Filed as Exhibit 10(i) to the Company's Registration Statement
on Form S-1, File No. 333-00108 ("Initial Form S-1"), and incorporated herein by reference.)
10(g) -- Lease Agreement commencing on November 1, 1995 between West Peachtree Point Partners, L.P. and
MindSpring Enterprises, Inc. (Filed as Exhibit 10(j) to Initial Form S-1, and incorporated
herein by reference.)
10(h) -- First Amendment dated February 6, 1996 to Lease Agreement dated November 1, 1995 between John
Marshall Law School, Inc. (assignee of West Peachtree Point Partners, L.P.) and MindSpring
Enterprises, Inc. (Filed as Exhibit 10(cc) to Initial Form S-1, and incorporated herein by
reference.)
10(i) -- Agreement dated January 31, 1995 between Agis Net99 and MindSpring Enterprises, Inc. (Filed
as Exhibit 10(k) to Initial Form S-1, and incorporated herein by reference.)
10(j) -- MindSpring Enterprises, Inc. 1995 Stock Option Plan. (Filed as Exhibit 10(u) to Initial Form
S-1, and incorporated herein by reference.)
10(k) -- Form of Stock Option Agreement. (Filed as Exhibit 10(v) to Initial Form S-1, and
incorporated herein by reference.)
10(l) -- MindSpring Enterprises, Inc. 1995 Directors Stock Option Plan. (Filed as Exhibit 10(w) to
Initial Form S-1, and incorporated herein by reference.)
10(m) -- Form of Director Stock Option Agreement. (Filed as Exhibit 10(x) to Initial Form S-1, and
incorporated herein by reference.)
10(n) -- Form of MindSpring Service Agreement. (Filed as Exhibit 10(y) to Initial Form S-1, and
incorporated herein by reference.)
10(o) -- Service Provider Agreement dated December 13, 1995 between BBN Planet Corporation and
MindSpring Enterprises, Inc. (Filed as Exhibit 10(z) to Initial Form S-1, and incorporated
herein by reference.)
10(p) -- Form of MindSpring Director or Officer Indemnity Agreement. (Filed as Exhibit 10(dd) to
Initial Form S-1, and incorporated herein by reference.)
10(q) -- Network Services Agreement dated June 28, 1996 by and between MindSpring Enterprises, Inc. and
PSINet Inc. (Filed as Exhibit 10.2 to Current Report on Form 8-K dated June 28, 1996, File
No. 0-27890, and incorporated herein by reference.)
10(r) -- Amendment No. 2 to Services Agreement, dated as of January 1, 1997. (Filed as Exhibit 10.6 to
Quarterly Report on Form 10-Q dated March 3, 1997, File No. 0-27890, and incorporated herein
by reference.)
10(s) -- Master Services Agreement dated July 15, 1996 between BellSouth Telecommunications, Inc. and
MindSpring Enterprises, Inc. (Filed as Exhibit 10(cc) to the October 1996 S-1, and
incorporated herein by reference.)
10(t) -- Assignment and Assumption of Contracts and Leases by and between MindSpring Enterprises, Inc.
and PSINet, Inc. dated as of September 1, 1996. (Filed as Exhibit 10(ee) to the October 1996
S-1, and incorporated herein by reference.)
10(u) -- Service Provider Agreement dated December 13, 1995 between BBN Planet Corporation and
MindSpring Enterprises, Inc. (Filed as Exhibit 10(ff) to the October 1996 S-1, and
incorporated herein by reference.)
10(v) -- Reseller Agreement, dated as of October 14, 1996, by and between Monorail Inc. and MindSpring
Enterprises, Inc. (Filed as Exhibit 10 to Quarterly Report on Form 10-Q dated November 14,
1996, File No. 0-27890, and incorporated herein by reference.)
10(w) -- Lease Agreement effective as of January 1, 1997 by and between CMS Peachtree, L.P. and
MindSpring Enterprises, Inc. (Filed as Exhibit 10(hh) to Annual Report on Form 10-K dated
March 26, 1997, File No. 0-27890, and incorporated herein by reference.)
10(x) -- Amendment dated June 6, 1997 to Master Services Agreement dated July 15, 1996 between
BellSouth
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Telecommunications, Inc. and MindSpring Enterprises, Inc. (Filed as Exhibit 10.1 to
Quarterly Report on Form 10-Q dated August 14, 1997, File No. 0-27890, and incorporated herein
by reference).
+10(y) -- Special Service Arrangement Agreement dated June 1997 between BellSouth Telecommunications,
Inc. and MindSpring Enterprises, Inc. (a substantially identical contract has been executed
for each of Alabama, Florida, Kentucky, North Carolina, South Carolina and Tennessee) (Filed
as Exhibit 10.2 to Quarterly Report on Form 10-Q dated August 14, 1997, File No. 0-27890, and
incorporated herein by reference).
*10(z) -- Data Communications Products and Services Agreement dated April 30, 1997, and amended March 4,
1998, by and between MindSpring Enterprises, Inc. and GridNet International, L.L.C.
**11 -- Statement regarding Computation of Per Share Earnings.
**23 -- Consent of Arthur Andersen LLP.
**27 -- Financial Data Schedule (for SEC use only)
</TABLE>
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+ Confidential treatment has been granted with respect to certain terms
contained in this exhibit. The copy filed as an exhibit omits the information
subject to the confidential treatment grant.
* Confidential treatment has been requested with respect to certain terms
contained in this exhibit. The copy filed as an exhibit omits the information
subject to the confidential treatment request.
** Previously filed.
(b) No current reports on Form 8-K were filed by the Company with the
Securities and Exchange Commission during the fourth quarter of
1997.
<PAGE> 6
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized as of the 15th day
of May, 1998.
MINDSPRING ENTERPRISES, INC.
By /s/ Michael S. McQuary
------------------------------
Michael S. McQuary
President and Chief Operating
Officer
3
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***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[ ]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.***
EXHIBIT 10(z)
GRIDNET INTERNATIONAL
DATA COMMUNICATIONS
PRODUCTS AND SERVICES AGREEMENT
THESE DATA COMMUNICATIONS PRODUCTS AND SERVICES TERMS AND CONDITIONS are
made this 1st day of May 1997 (the "Effective Date"), by and between GridNet
International, L.L.C. ("GridNet") and MindSpring Enterprises, Inc. ("Customer")
and are part of their agreement for Data Communication Products or Services
(the "Agreement"). These Terms and Conditions apply when GridNet agrees to
provide and Customer agrees to accept enhanced network services and/or other
associated services (collectively the "Services") which are accepted
hereunder. In accordance with the Agreement, charges to Customer for Service
obtained thereunder shall be subject to the rates set forth below and the
Agreement shall also be subject to the terms and conditions set forth herein.
The purpose of this Agreement is to provide a means whereby GridNet may
offer local dial access origination and Internet enhanced data network services
to Customer's customers ("End Users") in consideration of the terms set forth
herein. End Users whose default Internet access is provided over GridNet's
dial access network under this agreement shall be defined as "Subscribers".
End Users whose default Internet access is provided over some network other
than GridNet but who incidentally access the Internet through GridNet's dial
access network shall be defined as "Roamers".
1. Term
(A) Effective Date. This Agreement shall be effective between the parties
as of the first day of the month following execution by both parties
(the "Effective Date") and shall continue for three years (the "Term").
Upon the expiration of the Term, the Agreement shall automatically
renew for successive one hundred twenty (120) day periods, subject to
termination by either party upon thirty (30) days prior written notice
to the other party. Customer shall be liable for all charges
associated with actual usage of the Services during the Term and any
extension thereof.
2. Cancellation.
(A) Cancellation Charge. In the event Customer terminates this Agreement
prior to the end of the Term or ceases to use the Services to a
material extent, Customer acknowledges that GridNet's damages shall be
difficult or impossible to ascertain. Therefore, this provision is to
establish a reasonable Cancellation Charge and is not intended as a
penalty. The Cancellation Charge will be based on amount of the
initial three year term remaining and GridNet's average monthly
revenues for Services for the previous two months. The Cancellation
Charge shall be equal to the number of contract months remaining in
the initial three year contract term from the date of termination or
the date upon which Customer is deemed to no longer be using the
Services to a material extent, divided by six (6), multiplied by
GridNet's average monthly revenues for Services from the previous two
contract months.
(B) Cancellation Without Charge. Customer may cancel this Agreement
without incurring any cancellation charge if (i) GridNet fails to
provide the Services contracted for under this Agreement; or (ii)
GridNet fails to provide a network as warranted in Section 4(B) and
Section 9 (iii) Customer shall provide [ ] notice prior to
migrating Subscribers to newly deployed Customer owned and operated
POPs. Customer must, however, give GridNet written notice of any such
default as detailed in (i), (ii) or (iii) above and an opportunity to
cure such default within the Stated Interval of the notice. Default is
defined here as a problem with the service to be provided or with the
4
<PAGE> 2
network which is controllable by GridNet, and not as a result of a
force majeure occurrence. For local dial access port availability, the
Stated Interval shall be 30 working days. For all other defaults, the
Stated Interval shall be 24 hours. In the event GridNet fails to cure
any such default within the Stated Interval on more than three (3)
occasions within any six (6) month period. Customer may cancel this
Agreement without incurring any cancellation charge.
3. Customer's Responsibilities.
(A) Subscriber Customer Relationship. The Customer shall maintain the
vendor/customer relationship with the Subscribers and all associated
responsibilities, except as specified herein; including but not
limited to sales, marketing, fulfillment, first level customer
service, brand identity, billing, collections, accounts receivables,
and technical support.
(B) Subscriber Activation and Forecasting. As soon as practical, Customer
agrees that it intends to migrate [ ] of its End Users, within the
constraints of GridNet's available capacity and Customer's ability to
migrate End Users. GridNet and Customer agree to cooperate in
determining the distribution of the Subscribers over GridNet's
available local dial access cities. At the beginning of each contract
month, Customer agrees to provide a rolling forecast of Customer's
anticipated Subscribers by month by local dial market by retail service
for the next three month period. GridNet will apply Customer's
historical average usage profiles to estimate the expected usage load
for the purposes of deploying local dial access facilities necessary to
fulfill its Dial Service Level objective as specified in Section 4(B).
For the purposes of this Agreement, an Accurate Forecast is defined as
follows: actual subscribers plus 1) [ ] for local dial accessp
markets where the actual number of Subscribers is less than [ ] 2)
[ ] for markets where the actual number of Subscribers is between
[ ] OR 3) [ ] for markets where the actual number of
Subscribers is greater than [ ].
(C) Expedite Charges. In the event Customer requests expeditious Service
and/or changes to Service and GridNet agrees to such request, GridNet
will pass through the charges assessed by any supplying parties
involved at the same rate to Customer. GridNet may further condition
its performance of such request upon Customer's payment of additional
charges to GridNet.
(D) Fraudulent Transactions. Customer shall indemnify and hold GridNet
harmless from all costs, expenses, claims or actions arising from
fraudulent transactions or use of Services which may comprise a
portion of the Service to the extent that the party claiming the
transaction(s) or use of Services in question to be fraudulent is an
End User of the Service through Customer or an End User of the
Service through Customer's distribution channels. Customer shall not
be excused from paying GridNet for Services provided to Customer or
any portion thereof on the basis that fraudulent transactions or use
of Services comprised a corresponding portion of the Service. In the
event GridNet discovers fraudulent transactions or use of Services
occurring (or reasonably believes such), nothing contained herein
shall prohibit GridNet from taking immediate action (without notice
to Customer) that is reasonably necessary to prevent such fraudulent
use of Services from taking place, including without limitation,
denying or terminating Service to and from specific locations. In the
event Customer discovers fraudulent transactions or use of Services
occurring (or reasonably believes such) and informs GridNet of such
activity. GridNet shall be required to take immediate action as
reasonably necessary to prevent such fraudulent use of Services from
taking place, including without limitation, denying or terminating
Service to and from specific locations.
(E) Use of Equipment. Customer shall properly use Equipment provided by
GridNet and shall surrender the Equipment not purchased by the
customer to GridNet upon expiration or termination of the Agreement.
Except for purchased Equipment, Customer shall be liable for any and
all damage to or loss of Equipment located on Customer's premises.
<PAGE> 3
(F) Use of Products and Services. Customer shall not, nor shall it permit or
assist others to: (i) use Services for any purpose other than that for
which they are intended or in violation of the law or in aid of any
unlawful act; (ii) use Services so as to interfere with the use of the
GridNet network by other customers or authorized users; (iii) use Services
to access, alter, destroy or any attempt thereof any information of another
GridNet customer; (iv) fail to maintain a suitable environment specified by
GridNet; or (v) alter, tamper with, adjust or repair the Services. Upon the
occurrence of any of the above, GridNet shall be completely released from
any liability or obligation (including any warranty or indemnity
obligation) to Customer relative to the Services and this Agreement, and
Customer shall be liable to GridNet for costs or damages incurred by
GridNet resulting therefrom.
(G) Retail Price Plan Adjustments. If Customer determines that the prices for
its retail price should be adjusted or new plans added. Customer shall
provide written notice to GridNet with its proposed adjustments. The
parties agree to negotiate in good faith in order to reach agreement as to
the proposed price adjustment. If the parties fail to reach agreement
within 60 days after the date of the aforementioned written notice,
Customer has the right to impose its proposed retail price plan adjustments
and GridNet has the right to terminate this Agreement without incurring any
termination liabilities.
(H) Network Interconnection. Customer shall provide, at its own expense, a
telecommunications circuit for the connection of its network to GridNet's
network through the GridNet POP located in Atlanta, Georgia and from time
to time, in other locations. Customers shall provide to GridNet an estimate
of the traffic it expects between GridNet's network and Customer's network.
The parties will use these circuits only for traffic originating within one
party's network (or the networks of its customers) and destined only to the
other party's network (or the networks of its customers). GridNet shall
impose no additional fees or charges with respect to use by Customer or its
customers of these facilities (including, without limitation, access or
port charges).
4. GridNet Responsibilities.
(A) Enhanced Data Network Services. GridNet shall provide local dial access
origination and Internet interconnection services to Customer's Subscribers
and Roamers. GridNet shall allow access via any of its public analog V.34
and ISDN (64 Kbps and 128 Kbps) local dial IP access Points of Presence
(POPs), as available, supporting either PPP or SLIP Subscriber sessions.
GridNet shall route each session as appropriate to one of three diverse
Internet exchange points maintained on GridNet's backbone network.
(B) Performance. GridNet's Services shall meet reasonable commercial standards
with respect to accessibility, latency, packet loss, and throughput. The
commercial standard metrics shall be measured using an unbiased, mutually
agreed upon third party, such as Inverse Technologies. GridNet agrees to a
service level objective of [ ]. In the event GridNet fails to provide
[ ] to Customer's Subscribers, Customer may provide written notice to
GridNet of the specific local dial markets where the service level
objective is not being met. Upon notification, GridNet will have thirty
(30) working days to cure the situation. If GridNet fails to cure [ ]
within 30 working days of notification and Customer had previously provided
an Accurate Forecast for that market sixty days in advance of the month
where the service level objective was not met, Customer will be eligible
for a credit. The amount of the credit will be equal to [ ]
<PAGE> 4
[ ]
(C) Network Management. GridNet shall provide 24 x 7 network management and
monitoring from its Network Operation Center in Roswell, GA. GridNet shall
provide to Customer prompt notification of any GridNet network outages that
affect Subscribers. When possible, at least three days advance notice of
planned outages shall be given to Customer so that Subscribers may be
alerted.
(D) Virtual NOC Service Package. GridNet shall make available its Virtual NOC
Service Package as an optional service to Customer. The Virtual NOC Service
Package shall provide the Customer a custom PC application which provides
the ability to monitor, in real-time, the dial access activity of its
Subscribers, the total number of ports available, and the total number of
ports in use by Subscribers. The Service Package also includes a custom PC
application which provides Customer the capability to add, delete, or
otherwise modify the User IDs for Customer's Subscribers in GridNet Network
Access Control Systems on a real-time basis. The Service Package also
includes the ability to connect to GridNet's IP SNMP Network Management
Systems (read-only), including GridNet's HP Open View systems. The Service
Package also includes Alarm Feed Service and Denied Access Alarm service,
both of which provide alarms via SNMP from GridNet's Network Operations
Center.
(E) Customer Daily Call Detail Records. GridNet shall make Customer's call
detail records (CDDRs) available on a near real-time basis but no less than
daily basis from GridNet's secured ftp site. Each call record shall specify
the User Name, date, start time, duration, access type, and access city.
(F) Local Dial POP Notification. GridNet will provide a minimum of 90 days
written notice to Customer before closing a previously available local dial
access market.
5. Charges and Payment terms.
(A) Charges. At the end of each contract month, Customer will pay to GridNet
fees as shown in the table below. The total number of subscribers for the
month shall be considered as subscribers of record on the first of that
month. Customer will not incur charges for usage incurred by Roamers
provided that the total hours of usage generated by Roamers does not exceed
[ ]. In the event that the total hours of usage generated by Roamers
does exceed [ ], Customer will pay to GridNet [ ] per hour for
each hour of usage in excess of the [ ] generated by Roamers, in
addition to all other charges. Additionally, 800 dial access to GridNet's
network within the 48 contiguous US states will be charged on a per hour
basis at a rate of [ ] per hour; 800 dial access to GridNet's network
from Canada, Alaska, Hawaii, Puerto Rico, and the US Virgin Islands, will
be charged on a per hour basis at a rate of [ ] per hour. If Customer
elects to purchase the Virtual NOC Service Package, Customer will be
charged [ ] per month for GridNet's Virtual NOC Service Package, as
specified in Section 4(C).
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Customer Retail Plan Base Charge Charge per Unit
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Light [ ] [ ]
Standard [ ] [ ]
Unlimited Access [ ] [ ]
The Works [ ] [ ]
Complimentary [ ] [ ]
</TABLE>
(B) Charge Adjustments. Should Customer's overall average usage per Subscriber
(total monthly hours--roamers hours divided by total month end subscribers.
Subscriber numbers to not include roamers.) exceed [ ] hours per month
for [ ] consecutive billing periods, GridNet may propose an
<PAGE> 5
adjustment to the charges specified in Section 5(A). GridNet shall
provide Customer written notice of its proposed changes and the parties
agree to negotiate in good faith in order to reach agreement on any and
all proposed adjustments. If the parties fail to reach agreement
within 60 days after the date of the aforementioned written notice,
GridNet has the right to impose its proposed adjustments and Customer
has the right to terminate this Agreement without incurring any
termination liabilities.
(C) Payment. Payment for all charges for a contract month during which
the Service is provided is due within thirty (30) days from the receipt
of invoice. Customer agrees to remit payment to GridNet at the notice
address indicated on the signature page of this Agreement. In the event
Customer fails to pay GridNet's invoice in full or remit payment to the
proper address on or before thirty (30) days after the due date,
Customer shall also pay a late fee in the amount of the lesser of one
and one-quarter percent (1 1/4%) of the unpaid balance per month or the
maximum lawful rate under applicable state law. Notwithstanding the
foregoing, late fees shall apply to, but shall not be due and payable
for, amounts reasonably disputed by Customer for a period of ninety (90)
days following the due date therefor, provided: (i) Customer notifies
GridNet of the basis for such dispute in writing on or before thirty
(30) days after the due date; and (ii) negotiates in good faith with
GridNet for the purpose of resolving such dispute within said ninety
(90) day period. In the event, such dispute is resolved in favor of
GridNet, Customer will pay to GridNet the once disputed amounts together
with the applicable late fees within (10) business days of the
resolution. In the event such dispute is resolved in favor of the
Customer, Customer will receive a credit for the amounts determined not
to be owed together with a credit for the applicable fees. In the event
dispute cannot be resolved within such ninety (90) day period, all
disputed amounts together with late fees shall become due and payable,
and this provision shall not be construed as preventing Customer from
pursuing any available legal remedies.
(D) Suspension of Service. In the event payment in full is not received
from Customer on or before thirty (30) days following the due date with
respect to undisputed amounts or on or before ninety (90) days following
the due date with respect to amounts reasonably disputed in accordance
with the prescriptions of Subsection 4(A), GridNet shall have the right
after giving Customer ten (10) days notice ("Suspension Notice") and
opportunity to cure to suspend all or any portion of the Service to
Customer, or upon subsequent notice, all or any additional portions of
the Service to Customer; and, in either event, until such time as
Customer has paid in full all charges then due, including any late fees
as specified herein. Following such payment, GridNet shall be required
to reinstitute Service to Customer only upon the provision by Customer
to GridNet of satisfactory assurance (such as a deposit) of Customer's
ability to pay for Service and Customer's advance payment of the cost of
reinstituting Service. If Customer fails to make such payment by a date
determined by and acceptable to GridNet, Customer will be deemed to have
canceled the Service suspended effective the date of such suspension.
Such cancellation shall not relieve Customer for payment of applicable
cancellation charges as described in Section 2.
6. Credit. Customer's execution of this Agreement signifies Customer's
acceptance of GridNet's initial and continuing credit approval
procedures and policies. GridNet reserves the right to withhold
initiation or full implementation of Service under this Agreement
pending GridNet's initial satisfactory credit review and approval
thereof which may be conditioned upon terms specified by GridNet,
including but not limited to, security for payments due hereunder in the
form of cash deposit or other means. GridNet reserves the right to
modify its requirements, if any, with respect to any security or other
assurance provided by Customer for payments due hereunder in light of
Customer's actual usage when compared to projected usage levels upon
which any security or assurance requirement was based.
7. Creditworthiness. If at anytime there is a material adverse change in
Customer creditworthiness, then in addition to any other remedies available
to GridNet, GridNet may elect, in its sole discretion, to exercise one or
more of the following remedies: (i) cease providing Service pursuant to a
Suspension Notice; (iii) decline to accept a Service request or other
requests from Customer to provide service unless Customer's gives an
assurance of payment which shall be a deposit or such other means to
<PAGE> 6
establish reasonable assurance of payment. An adverse material change in
Customer's creditworthiness shall include, but not be limited to: (a) Customer's
default of its obligations to GridNet under this or any other agreement with
GridNet; (b) failure of Customer to make full payment of charges due hereunder
on or before the Due Date on three (3) or more occasions during any period of
twelve (12) or fewer months or Customer's failure to make such payment on or
before the Due Date in any two (2) consecutive months; (c) acquisition of
Customer (whether in whole or by majority or controlling interest) by an entity
which is insolvent, which is subject to bankruptcy or insolvency proceedings,
which owes past due amounts to GridNet or any entity affiliated with Gridnet or
which is a materially greater credit risk than Customer; or, (d) Customer's
being subject to or having filed for bankruptcy or insolvency proceedings or the
legal insolvency of Customer.
8. Remedies for Breach. In the event Customer is in breach of this Agreement,
including without limitation, failure to pay charges due hereunder by the
date stated in the Suspension Notice described in Subsection 4(F), GridNet
shall have the right, after giving Customer five (5) days prior notice, and
in addition to foreclosing any security interest GridNet may have, to (i)
terminate this Agreement; (ii) withhold billing information from Customer;
(iii) retake possession of any and all Products and Services; and/or, if
applicable (iv) contact the Subscribers (for whom calls are originated and
terminated solely over facilities comprising the GridNet network and with
information provided by Customer at GridNet's request) directly and bill
such Subscribers directly until such time as GridNet has been paid in full
for the amount owed by Customer. If Customer fails to make payment by the
date stated in the Suspension Notice and GridNet, after giving Customer
five (5) days prior notice, terminates this Agreement as provided in this
Section 8, such termination shall not relieve Customer from payment of
applicable cancellation charges as described in Section 2 above.
9. Warranty. GridNet warrants to provide, install, operate and maintain
Products and Services as required herein. GridNet shall not be responsible
for cabling to connect equipment not provided by Gridnet to GridNet's
Products and Services. GridNet warrants that all Products and Services
will be in good working order and ready for use on the day installed, and
will conform to industry standards. Customer's sole remedy for performance
or non-performance of Products and Services pursuant to a breach of
standards shall be replacement or repair of Products and Services. GRIDNET
MAKES NO OTHER WARRANTIES ABOUT THE SERVICE PROVIDED HEREUNDER EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO, ANY WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR USE.
10. Limitation of Liability
(A) Limited Liability. In no event shall GridNet be liable, either in
contract or in tort, for protection from unauthorized access of
Customer's transmission facilities or Customer premise equipment; or
from unauthorized access to or alteration, theft or destruction of
Customer's data files, programs, procedure or information through
accident, fraudulent means or devices, or any other method. Whether
caused by GridNet or otherwise, GridNet will use reasonable efforts
under the circumstances to remedy any delays, interruptions,
omissions, mistakes, accidents, or errors in the Service (hereinafter
"Defect" or "Defects") and restore the Service. EXCEPT AS DEFINED
IN SECTION 4(B), GRIDNET SHALL NOT BE LIABLE FOR ANY INDIRECT,
CONSEQUENTIAL, SPECIAL, PUNITIVE OR ANY OTHER DAMAGES, OR FOR ANY LOST
PROFITS OF ANY KIND OR NATURE WHATSOEVER WHETHER IN CONTRACT OR IN
TORT, AND CUSTOMER'S SOLE EXCLUSIVE REMEDY SHALL BE AS FOLLOWS:
Following Start of Service, if Customer reports a Defect to GridNet at
GridNet's Operations Center and GridNet is unable to restore the
Service as warranted within four (4) hours of such report, in the case
of non-usage sensitive charges, Customer shall, upon request directed
to Customer's designated Customer Service Representative, receive a
credit at the rate of 1/720th of the monthly charges applicable to the
affected Service for each hour or major fraction thereof in excess of
the first eight (8) hours that the affected Service fails to conform
to the Technical Standards. In the
<PAGE> 7
case of usage sensitive charges, the provisions of Section 4(B) shall
be the Customer's sole and exclusive remedy.
(B) Negligence. Except to the extent caused by the negligence of
GridNet, GridNet shall not be liable for claims or damages resulting
from or caused by: (i) Customer's fault, negligence or failure to
perform Customer's responsibility; (ii) claims against Customer by
any other party; (iii) any act or omission of any other party; or
(iv) equipment or services furnished by any other party.
(C) Indemnity. Customer agrees to indemnify, hold harmless, and defend
GridNet, its directors, officers, agents, employees and/or
representatives from and against any and all claims, demands, causes
of action, losses, expenses or liabilities, including reasonable
attorney's fees, on account of injury or death of any person or loss
of or damage to any and all property arising, directly or
indirectly, out of the negligent acts or omissions of Customer, any
subcontractor, director, officer, agent, employee and/or
representative of each of them, in the performance of any work under
this Agreement, except to the extent such cause of action, loss,
expense or liability is caused by the sole negligence of GridNet.
(D) Exclusive Remedy. Except as otherwise specifically provided for
herein, the remedies set forth in this Agreement comprise the
exclusive remedies available to either party at law or in equity.
11. Force Majeure. If GridNet's performance of this Agreement or any
obligation hereunder is prevented, restricted or interfered with by causes
beyond its reasonable control including, but not limited to, acts of God,
fire, explosion, vandalism, cable out, terrorism, storm or other similar
occurrence, any law, order, regulation, direction, action or request of the
United States government, or state or local governments, or of any agency,
commission, court, bureau, corporation or other instrumentality of any one
or more such governments, or of any civil or military authority, or by
national emergency, insurrection, riot, war, strike, lockout or work
stoppage or other labor difficulties, or supplier failure, shortage, breach
or delay, then GridNet shall be excused from such performance on a
day-to-day basis to the extent of such restriction or interference. GridNet
shall use reasonable efforts under the circumstances to avoid or remove
such causes of nonperformance and shall proceed to perform with reasonable
dispatch whenever such cases are removed or cease.
12. Notices. Notices under this Agreement shall be in writing and delivered by
certified mail, return receipt requested, to the person identified in the
Service Request at the offices of the parties or as otherwise provided for
by proper notice hereunder. Customer shall notify GridNet in writing if
Customer's billing address is different from the address shown on the
Service Request. The effective date for any notice under this Agreement
shall be the date of actual receipt of such notice by the appropriate
party, notwithstanding the date of mailing.
13. No-Waiver. No term or provision of this Agreement shall be deemed waived
and no breach or default shall be deemed excused unless such waiver or
consent shall be in writing and signed by the party claimed to have waived
or consented. A consent to waiver of or excuse for a breach or default by
either party, whether express or implied, shall not constitute a consent
to, waiver of, or excuse for any different or subsequent breach or default.
14. Partial Invalidity: Government Action.
(A) Partial Invalidity. If any part of any provision of this Agreement or
any other agreement, document or writing given pursuant to or in
connection with this Agreement shall be invalid or unenforceable
under applicable law, rule or regulation, that part shall be
ineffective to the extent of such invalidity only, without in any way
affecting the remaining parts of that provision or the remaining
provisions of this Agreement. In such event, Customer and GridNet
will negotiate in good faith with respect to any such invalid or
unenforceable part to the extent necessary to render such part valid
and enforceable.
<PAGE> 8
(B) Government Action. Upon thirty (30) days prior notice, either party
shall have the right, without liability to the other, to cancel an
affected portion of the Service if any material rate or term
contained herein and relevant to the affected Service is
substantially changed (to the detriment of the terminating party) or
found to be unlawful or the relationship between the parties
hereunder is found to be unlawful by the highest court of competent
jurisdiction to which the matter is appealed, the FCC, (if it has
jurisdiction), or other local, state or federal government authority
of competent jurisdiction.
15. Use of Service. GridNet will provide the Service specified therein to
Customer upon condition that the Service shall not be used for any
unlawful purpose. The provision of Service will not create a
partnership or joint venture between the parties or result in a joint
communications service offering to any third parties. Only upon
express written consent shall Customer be permitted to use GridNet's
name, trademarks, tradename, service marks or any other tangible
property owned by GridNet for the promotion of Customer's use of the
Service.
16. Choice of Law: Forum: Limitation.
(A) Law. This Agreement shall be construed under the laws of the State of
Georgia without regard to choice of law principles.
(B) Forum. Any legal action or proceeding with respect to this Agreement
may be brought in the Courts of the State of Georgia in and for the
County of Fulton or the United States of America for the Northern
District of Georgia. By execution of this Agreement, both Customer
and GridNet hereby submit to such jurisdiction, hereby expressly
waiving whatever rights may correspond to either of them by reason of
their present or future domicile. In furtherance of the foregoing,
Customer and GridNet hereby agree to service by U.S. Mail at the
notice addresses referenced in Section 12. Such service shall be
deemed effective upon the earlier of actual receipt or seven (7) days
following the date of posting.
(C) Limitation of Action. Any legal action rising out of failure,
malfunction or defect in Products or Services shall be brought within
one (1) year of the occurrence.
17. Proprietary Information.
(A) Confidential Information. The parties understand and agree that the
terms and conditions of this Agreement, all documents referenced
(including invoices to Customer for Service provided hereunder)
herein, communications between the parties regarding this Agreement
or the Service to be provided hereunder (including price quotes to
Customer for any Service proposed to be provided or actually provided
hereunder), as well as such information relevant to any other
agreement between the parties (collectively "Confidential
Information"), are confidential as between Customer and GridNet.
(B) Limited Disclosure. A party shall not disclose Confidential
Information unless subject to discovery or disclosure pursuant to
legal process, or to any other party other than the directors,
officers, and employees of a party; or a party's agents including
their respective brokers, lenders, insurance carriers or bona fide
prospective purchasers who have specifically agreed in writing to
nondisclosure of the terms and conditions hereof. Any disclosure
hereof required by legal process shall only be made after providing
the non-disclosing party with notice thereof in order to permit the
non-disclosing party to seek an appropriate protective order or
exemption. Violation by a party or its agents of the foregoing
provisions shall entitle the non-disclosing party, at its option, to
obtain injunctive relief without a showing of irreparable harm or
injury and without bond.
<PAGE> 9
(C) Survival of Confidentially. The provisions of this Section 16 will be
effective as of the date of this Agreement and remain in full force and
effect for a period which will be the longer of (i) one (1) year
following the date of this Agreement, or (ii) one (1) year from the
termination of all Service hereunder.
18. Successors and Assignment. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors
or assigns, provided, however, that Customer shall not assign or transfer
its rights or obligations under this Agreement without the prior written
consent of GridNet, which consent shall not be reasonably withheld, and
further provided that any assignment or transfer without such consent shall
be void.
19. General.
(A) Survival of Terms. The terms and provisions contained in this
Agreement that by their sense and contest are intended to survive the
performance thereof by the parties hereto shall so survive the
completion of performance and termination of this Agreement, including,
without limitation, provisions for Indemnification and the making of
any and all payments due hereunder.
(B) Headings. Descriptive headings in this Agreement are for convenience
only and shall not affect the construction of this Agreement.
(C) Industry Terms. Words having well-known technical or trade meanings
shall be so construed, and all listings of items shall not be taken
to be exclusive, but shall include other items, whether similar or
dissimilar to those listed, as the context reasonably requires.
(D) Rules of Construction. No rule of construction requiring
interpretation against the drafting party hereof shall apply in the
interpretation of this Agreement.
20. Entire Agreement. This Agreement consists of (i) all the terms and
conditions contained herein, and, (ii) all documents incorporated herein
specifically by reference. This Agreement constitutes the complete and
exclusive statement of the understandings between the parties and supersedes
all proposals and prior agreements (oral or written) between the parties
relating to Service provided hereunder. No subsequent agreement between the
parties concerning the Service shall be effective or binding unless it is
made in writing and subscribed to by authorized representatives of Customer
and GridNet.
Any notices required to be given in conjunction with this Agreement as detailed
herein shall be sent to the addresses listed following the parties' hereto
signatures.
IN WITNESS WHEREOF, the parties have executed these Data Communications Product
and Services Agreement on the date first written above.
GRIDNET INTERNATIONAL, L.L.C. MINDSPRING ENTERPRISES, INC.
By: /s/ [SIGNATURE] By: /s/ Michael S. McQuary
-------------------------- -------------------------
(Signature) (Signature)
Lee Provow, Vice President Michael S. McQuary
-------------------------- -------------------------
(Printed Name, Title) (Printed Name, Title)
Address: Address:
<PAGE> 10
GRIDNET INTERNATIONAL
DATA COMMUNICATIONS
PRODUCTS AND SERVICES AGREEMENT
EXTENSION
THIS DATA COMMUNICATIONS PRODUCTS AND SERVICES AGREEMENT EXTENSION is made and
entered into this fourth day of March, 1998, by and between Gridnet
International, Inc. ("GridNet") and MindSpring Enterprises, Inc.
("MindSpring").
WHEREAS, GridNet and MindSpring entered into an Agreement for services dated
May 1, 1997.
WHEREAS, that Agreement had an initial term of three years and was to expire
unless automatically renewed on April 30, 2000.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
set forth and other good and valuable consideration, the receipt and
sufficiency of which the parties hereby acknowledge, the parties hereto herby
agree as follows:
The Term of the GridNet International Data Communications Products and Services
Agreement will be extended from its initial due date of April 30, 2000 until
April 30, 2001.
Upon Expiration of the new Term, the Agreement will automatically extend for
successive one hundred twenty (120) day periods, subject to termination by
either party upon thirty (30) days prior written notice to the other party.
IN WITNESS WHEREOF, the parties have executed this Data Communications Products
And Services Agreement Extension on the date first written above.
GRIDNET INTERNATIONAL, INC. MINDSPRING ENTERPRISES, INC.
By: /s/ LEE PROVOW By: /s/ MICHAEL S. MCQUARY
--------------------- ------------------------
Lee Provow Michael S. McQuary
Executive Vice President President and CEO
- ------------------------ ------------------------
(Printed Name: Title) (Printed Name: Title)
