1
[CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL
PORTIONS OF THIS DOCUMENT HAVE BEEN REDACTED
AND HAVE BEEN SEPARATELY FILED WITH
THE COMMISSION.]
Exhibit 10.36
April 5, 1999
Via Facsimile
000-000-0000
Xx. Xxxxxx Xxxxxxx, Xx.
CEO
HSA Corp.
0000 X. Xxxxxxxxxxx
Xxxxx 0000
Xxxxxx, XX, 00000
Dear Xx. Xxxxxxx:
This letter of intent sets forth preliminary terms and conditions of a
proposed agreement in principle between HSA Corp. ("HSAC") and SERVICECO LLC
("Road Runner") for the purpose of delivering the Road Runner service to cable
operators through turn-key solutions installed, operated and maintained by HSAC
and/or Road Runner. The parties agree to negotiate in good faith, as soon as
reasonably practicable, a definitive contract (the "Definitive Agreement") which
incorporates the terms and conditions set forth herein. It is anticipated that
execution of the Definitive Agreement will occur not later than June 1, 1999.
This letter and the Summary of Proposed Principle Terms attached hereto
as Schedule A describes the terms and conditions upon which Road Runner and HSAC
would accomplish this objective, subject to the execution of the Definitive
Agreement.
Each party acknowledges and agrees that nothing in this letter of
intent represents a binding legal obligation of either of them, including
without limitation any binding obligation to reach and execute a Definitive
Agreement, and that no such binding legal obligation shall arise unless and
until the Definitive Agreement is executed by the parties.
2
Each party further understands and acknowledges that additional
negotiation shall be necessary before the terms of the Definitive Agreement are
reached, that this letter of intent represents only a broad outline of certain
terms of the parties' understanding, and that this letter of intent neither
covers all items that will be included in the Definitive Agreement nor obligates
the parties, or either of them, to reach and execute a Definitive Agreement.
This Letter of Intent shall expire on June 1, 1999 if a Definitive
Agreement has not been executed by the parties by such date. In the event of
such expiration, each party agrees to bear its own costs which it may have
incurred in connection with this Letter of Intent or the preparation or
negotiation of the Definitive Agreement.
Nothing in this Letter of Intent is intended or shall be construed or
interpreted to give any person or entity other than the parties hereto any legal
or equitable right, remedy or claim under or in respect of this Letter of Intent
or any provision contained herein. This Letter of Intent may be executed in
counterparts, each of which shall be deemed to be an original, but both of which
together shall constitute one and the same instrument.
If the foregoing preliminary terms and conditions are acceptable to
HSAC, kindly signify by executing and dating a copy of this letter of intent on
behalf of HSAC and returning such executed and dated copy to Xxx Xxxxx at your
earliest convenience.
Very truly yours,
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Title: Xxxxxx X. Xxxxx
Date: Vice President, Business
Development
Accepted on behalf of HSA Corp.
By: HIGH SPEED ACCESS CORP.
Title:
-------------------------
Date:
--------------------------
3
SUMMARY OF PROPOSED PRINCIPAL TERMS
-----------------------------------
The following summarizes key terms of a proposed agreement between ServiceCo LLC
("Road Runner") and HSA Corp. ("HSAC") for the deployment of high-speed Internet
access and related services to multiple system operators ("MSO").
Road Runner is in the business of providing, among other things, a branded
online broadband delivered, IP-based service (the "Road Runner Service")
comprised of content and applications optimized for full screen display on
personal computers and aggregated from third-party sources or created by Road
Runner or its affiliates, such as, by way of example and not limitation, primary
user interfaces, navigational links, branded applications, one or more custom
browsers and electronic program guides to such content and applications.
HSAC is in the business of providing turn-key solutions to MSOs to install,
operate and maintain high-speed internet access.
Each of HSAC and Road Runner desire to designate certain cable operators (each a
"Designated Cable Operator") to receive the Road Runner Service through a
turn-key solutions installed, operated and maintained by HSAC and/or Road
Runner.
HSAC SERVICES
HSAC will provide turn-key systems, including operational
support, sales and marketing, engineering, capital equipment,
and other support and resources, necessary to deliver the Road
Runner Service to each Designated Cable Operator. HSAC will be
responsible for the components of the turn-key systems
described as HSAC responsibilities in each of the
Configurations set forth below.
ROAD RUNNER SERVICE
Road Runner will make available the Road Runner Service to
Designated Cable Operators. Road Runner will be responsible
for the components of the turn-key systems described as Road
Runner responsibilities in each of the Configurations set
forth below.
4
DESIGNATED CABLE OPERATORS
Road Runner and HSAC will each identify cable operators for
consideration to receive services. The parties will mutually
agree upon (1) whether each such cable operator shall be a
Designated Cable Operator, (2) the Configuration to be
deployment for such Designated Cable Operator and (3) the
schedule for such deployment. HSAC will deploy Road Runner
Service in all Designated Cable Operator systems. For
Designated Cable Operator systems for which HSAC provides
local content, HSAC will link and blend the local content to
the Road Runner start page upon terms to be mutually agreed
upon in the Definitive Agreement. With the exception of cable
operators subject to pre-existing commitments for content,
HSAC shall also discuss with Road Runner the possibility of
extending Road Runner Services in a configuration to be
mutually agreed upon to cable operators (other than Road
Runner Affiliates) whose geographic service area is contiguous
to, or subject to clustering with, existing deployments of the
Road Runner Service. The initial Designated Cable Operators,
deployment Configurations and deployment schedule will be
attached to the Definitive Agreement. The Definitive Agreement
will also contain a list of cable operators that HSAC and Road
Runner will commit to jointly and exclusively solicit each
such cable operator for purposes of creating and delivering a
high speed data solution which includes the Road Runner
Service.
CONFIGURATIONS
The Configurations will set forth the roles and
responsibilities of HSAC, Road Runner and the Designated Cable
Operator. Initially there will be three example
Configurations, which are described in Attachment A hereto.
The Configurations in Attachment A are subject to mutually
agreeable changes in the roles, responsibilities and revenue
splits of HSAC, Road Runner and the Designated Cable Operator.
REVENUES
Revenues will be divided between HSAC and Road Runner
according to the Configurations selected for a Designated
Cable Operator. The revenue splits for each of the
Configurations is set forth in Attachment A
5
WARRANTS
During the term of the Definitive Agreement, HSAC will grant
to Road Runner one (1) warrant to purchase one registered
share of HSAC's common stock at a strike price equal to Five
Dollars ($5.00) for each home passed for each Designated Cable
Operator as of the date Road Runner enters into an applicable
agreement with such Designated Cable Operator, up to a maximum
of 5,000,000 homes passed.
TERM
The term of the Definitive Agreement will be for 60 months.
For each Designated Cable Operator, Road Runner will enter
into a separate Affiliation Agreement to provide the Road
Runner Services and the HSAC Services. Road Runner would enter
into a Subcontract Agreement with Road Runner for HSAC to
perform the responsibilities assigned to HSAC under the agreed
upon Configuration. The term of the Affiliation Agreement and
the Subcontract Agreement will be for a minimum of 60 months.
OTHER
The foregoing is not intended to be an exhaustive summary of
the terms of any definitive agreement for the matters
described herein. Any such definitive agreement is expected to
embody the provisions contained herein with such supplementary
provisions as the parties may mutually agree.
6
ATTACHMENT A
CONFIGURATIONS and REVENUE
Configuration A:
FULL TURNKEY
FINANCIAL DEAL
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION
-------------------------------------------------------------------------------------------------------------
Homes Passed [*] [*] [*]
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
MSO [*]% [*]% [*]%
-------------------------------------------------------------------------------------------------------------
HSAC [*]% [*]% [*]%
-------------------------------------------------------------------------------------------------------------
Road Runner [*]% [*]% [*]%
-------------------------------------------------------------------------------------------------------------
TASKING
-------------------------------------------------------------------------------------------------------------
ELEMENT RR TEAM MSO NOTES
--------------------
RR HSAC
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Backbone - National X HSAC Will install, maintain and operate
-------------------------------------------------------------------------------------------------------------
Backbone - Regional X HSAC will install, maintain and operate
-------------------------------------------------------------------------------------------------------------
Xxxxxxx XXX & WAN H/W X HSAC will purchase and install
-------------------------------------------------------------------------------------------------------------
CMTS X HSAC will purchase and install
-------------------------------------------------------------------------------------------------------------
Modems X HSAC is responsible for modems. MSO will
have options to do it themselves.
-------------------------------------------------------------------------------------------------------------
Local Sales X HSAC will bear costs of planning,
coordination and production.
-------------------------------------------------------------------------------------------------------------
Marketing X HSAC with Road Runner support will provide
marketing programs
-------------------------------------------------------------------------------------------------------------
Tier 1 Customer Care X HSAC will perform all Tier 1 services
using both local staff and their national
call center.
-------------------------------------------------------------------------------------------------------------
Tier 2 and 3 Customer Care X Road Runner will perform
-------------------------------------------------------------------------------------------------------------
Billing X
-------------------------------------------------------------------------------------------------------------
Customer installs X HSAC is responsible for installation and
service to end customers.
-------------------------------------------------------------------------------------------------------------
National NOC X Road Runner will monitor and manage the
network.
-------------------------------------------------------------------------------------------------------------
Local NOC X HSAC will monitor local network
-------------------------------------------------------------------------------------------------------------
MSO Training/Tier 1 Support X HSAC will be responsible for coordination
with MSO.
-------------------------------------------------------------------------------------------------------------
Train the trainer X Road Runner will train HSAC regional staff.
-------------------------------------------------------------------------------------------------------------
Local Content X HSAC will implement and blend into Road
Runner as appropriate.
-------------------------------------------------------------------------------------------------------------
Local Content Training X Road Runner will be train HSAC regional
staff
-------------------------------------------------------------------------------------------------------------
Regional Content X
-------------------------------------------------------------------------------------------------------------
National Content X Road Runner V2.0
-------------------------------------------------------------------------------------------------------------
Product Development X Road Runner will work with HSAC
-------------------------------------------------------------------------------------------------------------
CMA X Road Runner Content Management System
-------------------------------------------------------------------------------------------------------------
7
-------------------------------------------------------------------------------------------------------------
DATA CENTER RR TEAM MSO NOTES
--------------------
Element RR HSAC
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Billing X HSAC will provide
-------------------------------------------------------------------------------------------------------------
Mail X HSAC provides using RR domain name
-------------------------------------------------------------------------------------------------------------
News X
-------------------------------------------------------------------------------------------------------------
Internet Feed X
-------------------------------------------------------------------------------------------------------------
Web Services X From RR RDC
-------------------------------------------------------------------------------------------------------------
Personalization and new RR X After transition to RR infrastructure
servers
-------------------------------------------------------------------------------------------------------------
Local Content Server X HSAC Provides
-------------------------------------------------------------------------------------------------------------
Configuration B:
DESIGNATED SYSTEMS
FINANCIAL DEAL
CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE
COMMISSION
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
MSO [*]%
-------------------------------------------------------
HSAC [*]%
-------------------------------------------------------
Road Runner [*]%
-------------------------------------------------------
TASKING
-------------------------------------------------------------------------------------------------------------
ELEMENT RR TEAM MSO NOTES
--------------------
RR HSAC
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Backbone - National X HSAC will install, maintain and operate
-------------------------------------------------------------------------------------------------------------
Backbone - Regional X X HSAC will install, maintain and operate.
Road Runner will purchase and engineer
-------------------------------------------------------------------------------------------------------------
Xxxxxxx XXX & WAN H/W X X HSAC will install, maintain and operate.
Road Runner will purchase and engineer
-------------------------------------------------------------------------------------------------------------
CMTS X X HSAC will install, maintain and operate.
Road Runner will purchase and engineer
-------------------------------------------------------------------------------------------------------------
Modems X MSO is responsible for modems.
-------------------------------------------------------------------------------------------------------------
8
-------------------------------------------------------------------------------------------------------------
ELEMENT RR TEAM MSO NOTES
--------------------
RR HSAC
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Local Sales X MSO will bear costs
-------------------------------------------------------------------------------------------------------------
Marketing X Road Runner will provide marketing
campaigns to MSO
-------------------------------------------------------------------------------------------------------------
Local Marketing Coordination X MSO responsible
-------------------------------------------------------------------------------------------------------------
Tier 1 Customer Care X MSO will perform all Tier 1 services, Road
Runner will train
-------------------------------------------------------------------------------------------------------------
Tier 2 and 3 Customer Care X Road Runner will perform
-------------------------------------------------------------------------------------------------------------
Billing X
-------------------------------------------------------------------------------------------------------------
Customer installs X MSO is responsible for installation and
service to end customers.
-------------------------------------------------------------------------------------------------------------
National NOC X Road Runner will monitor and manage the
network.
-------------------------------------------------------------------------------------------------------------
Local NOC X HSAC will monitor local network
-------------------------------------------------------------------------------------------------------------
MSO Training/Tier 1 Support X Road Runner will be responsible for
coordination with MSO.
-------------------------------------------------------------------------------------------------------------
Train the trainer X Road Runner will train HSAC regional staff
-------------------------------------------------------------------------------------------------------------
Local Content X MSO will implement and blend into Road
Runner as appropriate.
-------------------------------------------------------------------------------------------------------------
Local Content Training X Road Runner will train MSO staff
-------------------------------------------------------------------------------------------------------------
National Content X Road Runner V2.0
-------------------------------------------------------------------------------------------------------------
Product Development X Road Runner will work with HSAC
-------------------------------------------------------------------------------------------------------------
CMA X Road Runner Content Management System
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
DATA CENTER RR TEAM MSO NOTES
ELEMENT --------------------
RR HSAC
-------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
Billing X HSAC will provide
-------------------------------------------------------------------------------------------------------------
Mail X HSAC provides using RR domain name
-------------------------------------------------------------------------------------------------------------
News X
-------------------------------------------------------------------------------------------------------------
Internet Feed X
-------------------------------------------------------------------------------------------------------------
Web Services X From RR RDC
-------------------------------------------------------------------------------------------------------------
Personalization and new RR X After transition to RR infrastructure
servers
-------------------------------------------------------------------------------------------------------------
Local Content Server X MSO buys and operates
-------------------------------------------------------------------------------------------------------------
Configuration C:
The parties will mutually agree on specific roles and responsibilities. HSAC
will perform its responsibilities on a time and materials basis.
