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EXHIBIT 10.7
M C I
SPECIAL CUSTOMER ARRANGEMENT
This MCI Special Customer Arrangement together with all Attachments hereto (this
"Agreement") is made by and between MCI TELECOMMUNICATIONS CORPORATION ("MCI")
and DIGITAL GENERATION SYSTEMS, INC. ("Customer") and will be binding only upon
signature of both parties. The rates, discounts and certain other provisions
applicable to MCI tariffed services (the "Services") as set forth in this
Agreement will be effective one (1) month from Completed the first day of the
next billing cycle following Customer's signature date (the "Effective Date") if
Customer promptly delivers the signed Agreement to MCI. All capitalized terms
used in this Agreement and not defined herein will have the meaning ascribed to
them in the Tariff(as defined below).
1. SERVICE PROVISIONING AND RECEIPT. MCI will provide to Customer
international, or interstate, intrastate and local telecommunications
"service(s)" as hereinafter defined) pursuant to the applicable tariffs and
price lists of MCI and its U.S. based affiliates (individually, a "Tariff'
and collectively, the "Tariffs"), each as supplemented by this Agreement to
the extent permitted by law. This Agreement incorporates by reference the
terms of each such Tariff. MCI may modify its Tariff from time to time in
accordance with law and thereby affect the services furnished to Customer.
This Agreement is a "Specialized Customer Arrangement" as defined in
Section B-17.03 of the Tariff.
If prior to the expiration of the "Term" (as hereinafter defined) of this
Agreement, MCI voluntarily or involuntarily as a result of government or
judicial action cancels, in whole or in part, any tariff on file with the
Federal Communications Commission ("FCC"), where the affected provisions
prior to such cancellation applied to any service(s) MCI provides under
this Agreement, then effective on such cancellation and for the remainder
of the Termthis Agreement shall consist of the following. in order of
precedence from (a) through (c):
(a) MCI Tariff provisions that remain effect ("Effective Tariffs"), as
MCI may amend from time to time in accordance with law; and
(b) Specific provisions contained in this Agreement that expressly apply
in lieu of, or that apply in addition to, provisions contained in
Effective Tariffs and/or in MCI's standard Guide to Services and
Pricing ("Price Guide"); and
(c) Provisions contained in the Price Guide to the extent that (a) and
(b) above are not applicable. MCI may amend the Price Guide from time
to time and will maintain the Price Guide open for public inspection
at one or more offices during normal business hours. Immediately
prior to the cancellation of any tariff provisions applicable to
service(s) provided under this Agreement, MCI shall incorporate such
provisions into the Price Guide and if MCI fails to incorporate any
such provisions, such provisions shall be deemed incorporated into
this Agreement as if MCI had so incorporated such provisions in the
Price Guide.
In all events, the applicable rates and rate schedules shall continue to be
subject to any discounts, waivers, credits, or restrictions on rate changes
that may be contained in this Agreement. Where rate and/or discount
adjustments would have been made by reference to any canceled , tariff
rate, rate schedule, discount and/or discount schedule, these adjustments
shall instead be made by reference to the Price Guide. To the extent that
any adjustment to tariffed rates, rate schedules, discounts and/or discount
schedules is permitted under this Agreement, such adjustment may be made by
MCI to its Price Guide
2. TARIFF OPTION. MCI shall, if required, file a Tariff option (a "Tariff
Option") consistent with the terms of Attachment A, which is incorporated
into this Agreement by this reference, and applicable regulatory authority.
3. CONFIDENTIAL INFORMATION. Customer will not disclose to any third party
during the Term, or
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during the three in (3) year period after expiration or termination of this
Agreement, any of the terms and conditions of this Agreement unless such
disclosure is lawfully required by any federal governmental agency or is
otherwise required to be disclosed by law or isnecessary in any legal
proceeding establishing rights and obligations under this Agreement.
reserves the right to terminate this Agreement by giving written notice to
Customer the event of any unpermitted disclosure hereunder.
4. GOVERNING LAW. This Agreement, and all causes of action arising out of this
Agreement, will be subject to the Communications Act of 1934, as (the
"Act"), or, if any part of this Agreement is not governed by the Act, by
the domestic law of the State of New York without regard to its choice of
law principles.
5. WAIVER. No waiver of any of the provisions of this Agreement shall be
binding unless it is in writing and signed by the party making the waiver.
No waiver shall be deemed, shall constitute, a waiver of any other
provision, whether or not similar, and no waiver shall be deemed, or shall
constitute, a continuing waiver.
6. NOTICES. All notices, requests, or other communications (excluding
invoices) hereunder will be in writing and either transmitted via
facsimile, overnight courier, hand delivery or certified or registered
mail, postage prepaid and return receipt requested to the parties at the
addresses below or such other addresses as may be specified by written
notice. All notices will be effective when received.
7. SEVERABILITY. All provisions of this Agreement are severable, and the
unenforceability or invalidity of any of the provisions will not affect the
validity or enforceability of the remaining provisionsamended , The
remaining provisions will be construed in such a manner as to carry out the
full intention of the parties. Section titles or references used in this
Agreement will not have substantive meaning or content and are not a part
of this Agreement.
8. ENTIRE AGREEMENT. This Agreement, together with the Tariffs, constitutes
the entire agreement between the parties with respect to its subject matter
and supersedes all other representations, understandings or agreements
which are not expressed herein, whether oral or written. No amendment to
this Agreement will be valid unless in writing and signed by both parties.
9. ACCEPTANCE DEADLINE. This Agreement shall be of no force and effect and the
offer contained herein shall be withdrawn unless this Agreement is executed
by Customer and delivered to MCI on or before April 22, 1997.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized representatives as of the dates set forth below.
MCI TELECOMMUNICATIONS CORPORATION
000 Xxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
By: /s/ Xxx XxXxxxx
----------------------------
Xxx XxXxxxx, Vice President, Finance
Date: 05/09/97
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DIGITAL GENERATION SYSTEMS, INC.
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
By: /s/ Xxxxx X. Xxxxxxxxx
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Name: Xxxxx X. Xxxxxxxxx
----------------------------
Title: President and CEO
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Date:per April 21, 1997
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ATTACHMENT A TO AGREEMENT
This Attachment A to the Agreement contains the rates, discounts and certain
other provisions applicable to the Services provided to Customer pursuant to the
Agreement.
1. Term; Ramp Period; Contract Year. The Term will begin on the Effective Date
and end fifty-four (54) months later (the "Term"). The first six (6) months
of the Term will constitute the "Ramp Period". Each consecutive twelve (12)
month period of the Term commencing on the expiration of the Ramp Period
MCI and on each anniversary of said expiration will be a "Contract Year".
Commencing with the Effective Date and at all times during the Ramp Period,
Customer will receive the rates, discounts, charges and credits set forth
herein and will not be subject to any minimum usage requirements.
2. Selected Definitions.
2.1 "Base Rates" shall mean the rates as reduced by the discounts (except
for the credits applied pursuant to paragraphs 5.4 and 5.5 below)
provided to Customer pursuant to this Agreement or for "Services" (as
hereinafter defined) not specifically set forth herein, the rates set
forth in the Tariffs following application of all applicable tariffed
discounts.
2.2 "Postalized Rates" shall refer to per minute rates for Services that
are not nondistance-sensitive.
2.3 "Services" shall refer to any one or more of those telecommunications
services provided to Customer pursuant to the Tariffs, including
MCI-provided domestic access.
2.4 "Usage Charges" shall mean Customer's recurring usage charges for the
Services calculated at Base Rates. Usage Charges do not include the
following: (i) taxes and tax related surcharges; (ii) charges for any
non-Tariffed services; (iii) charges for equipment and collocation;
and (iv) charges incurred where MCI or an MCI affiliate acts as agent
for Customer in the acquisition of goods or services.
3. Annual Minimum. During each Contract Year, Customer's Usage Charges must
equal or exceed a minimum volume amount depending on the Contract Year as
forth below (the "Annual Minimum")
Annual Minimum
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First Contract Year [XXXXXXXXXX]**
Second Contract Year [XXXXXXXXXX]**
Third Contract Year [XXXXXXXXXX]**
Fourth Contract Year [XXXXXXXXXX]**
3.1 Frame Relay Subminimum. During each Contract Year, Customer's Usage
Charges for MCI HyperStream Frame Relay Service must equal or exceed a
minimum volume amount depending on the Contract Year as forth below
(the "Frame Relay Subminimum").
Frame Relay Subminimum
----------------------
First Contract Year [XXXXXXXX]**
Second Contract Year [XXXXXXXX]**
Third Contract Year [XXXXXXXX]**
Fourth Contract Year [XXXXXXXX]**
4. Rates and Discounts for the Services. Except as expressly provided to the
contrary, the rates, charges, discounts and/or credits set forth herein are
in lieu of, and not in addition to, any other rates, charges, discounts
and/or credits (tariffed or otherwise). For Services not specifically set
forth herein, Customer will be charged MCI's
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standard Tariffed rates. References in this Attachment A to standard
Tariffed rates and/or discounts refer to the corresponding standard rates
and/or discounts set forth in the applicable Tariffs for such Service(s)
and in the event that MCI voluntarily or involuntarily as a result of
government or judicial action cancels in whole or in part any tariff on
file with the Federal Communications Commission, such references shall
refer to the corresponding rates and/or discounts set forth in the Price
Guide for such Service(s). All references to "intrastate" and "interstate"
contained herein shall refer to domestic Services only. "Peak" rates apply
during the Business Day or standard rate periods and "Off-Peak" rates apply
during all other times.
4.1 MCI Vnet Service/MCI Outbound Switched Digital Service (54/64kbps).
Customer will pay the following for MCI Vnet Service/MCl Outbound
Switched Digital Service (54/64 kbps):
4.1.1 Interstate MCI Vnet Service/MCI Outbound Switched Digital
Service (54/64 kbps). Customer will pay the following
Postalized Rates for interstate MCI Vnet Service/MCI Outbound
Switched Digital Service (54/64 kbps), including interstate
Vnet Card Service, based on the origination/termination of the
call. These Postalized Rates will fluctuate with changes in
the Tariffs. These Postalized Rates will be adjusted on the
first day of each January during each calendar year of the
Term by an amount equal to the same percentage by which
standard Tariffed interstate MCI Vnet Service/MCI Outbound
Switched Digital Service (54/64 kbps) rates were adjusted
during the immediately preceding calendar year up to a maximum
fluctuation of three percent (3%).
Origination/Termination Rate
----------------------- ----
Dedicated/Dedicated [XXXXX]**
Switched/Dedicated [XXXXX]**
Dedicated/Switched [XXXXX]**
Switched/Switched [XXXXX]**
4.1.2 International MCI Vnet Service. For international MCI Vnet
Service (Option 6, Vnet U.S. Originations, Section C-3.0739 of
MCI Tariff FCC No. 1), including international Vnet Card
Service, : Customer will pay standard networkMCI One Tariffed
rates less a thirty percent (30%) discount.
4.1.3 lntrastate MCI Vnet Service. For intrastate MCI Vnet Service,
including intrastate Vnet Card Service, Customer will pay
standard networkMCI One Tariffed rates without application of
any discounts (tariffed or otherwise).
4.1.4 Vnet Card Surcharge. Notwithstanding anything herein to the
contrary, Customer will pay the standard Tariffed per call
surcharge for all Vnet Card calls.
4.2 MCI Toll Free Service. Customer will pay the following rates for MCI
Toll Free Service:
4.2.1 Interstate MCI Toll Free Service. Customer will pay the
following Postalized Rates for MCI Toll Free Service, based on
termination type. These Postalized Rates will fluctuate with
changes in the Tariffs. These Postalized Rates will be
adjusted on the first day of each January of each calendar
year of the Term by an amount equal to the same percentage by
which standard Tariffed interstate MCI Toll Free Service rates
were adjusted during the immediately preceding calendar year
up to a maximum fluctuation of three percent (3%).
Termination Rate
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Dedicated Access Line [XXXXX]**
Business Line [XXXXX]**
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4.2.2 International MCI Toll Free Service. For international MCI
Toll Free Service, Customer will pay standard Tariffed rates
less a fixed thirty percent (in 30%) discount off standard
Tariffed rates.
4.2.3 Intrastate MCI Toll Free Service. For intrastate MCI Toll Free
Service, Customer will pay standard Tariffed rates without
application of any discounts (tariffed or otherwise).
4.3 Domestic networkMCI Audio Conferencing. For networkMCI Audio
Conferencing, the Customer will pay a per bridge port charge of
[XXXXXXXXXX]** minute of use, with rounding to the next higher full
minute for Unattended Meet-Me calls and [XXXXXXXXXX]** per minute of
use, with rounding to the next higher full minute for Dial-Out
networkMCl Conferencing calls. MCI will waive per bridge port set-up
fees.
4.4 Dedicated Access Services. Customer subscribes to and will receive
the discounts off local loop charges only for channelized and
unchannelized T-I access, DS0 access and DDS access and analog access
provided pursuant to MCI's five (5) year Access Pricing Plan ("APP").
On a semi-annual basis, MCI will review the number of Customer's T-1
access circuits that are in service under this Agreement. On a
going-forward basis only, MCI will provide Customer with the
following discounts off local loop charges and credits toward AC/COC
charges per T-1 circuit depending on the number of T-I circuits as
follows:
Total T-I Circuits Local Loop Discoun Credit Per T- 1 Circuit
------------------ ------------------ -----------------------
less than 250 [XXXXXX]** [XXXXXXXXXXX]**
250 and greater [XXXXXX]** [XXXXXXXXXXX]**
*discount provided pursuant to the 5 year APP.
4.5 Dedicated Leased Line Services. For MCI Dedicated Leased Line
Services, Customer will pay standard Tariffed rates less the
discounts associated with the four (4) year and [XXXXXXXXXXXXXX]**
[XXXXXXXXXXX]** Network Pricing Plan as set forth in the Tariff. The
standard term and volume commitments set forth in the Tariff will not
apply.
4.6 Domestic MCI HyperStream Frame Relay Service. For MCI HyperStream
Frame Relay Service, the Customer will receive a [XXXXXXXXXXXXXX]**
discount on tariffed HyperStream Frame Relay Service recurring port
and PVC charges.
4.7 Charges Not Eligible for Discount. The rates and discounts set forth
in this Section 4 do not apply to the following: charges for MCI
Services other than those set forth in Section 4; non-Tariffed
products; access or egress (or related) charges imposed by third
parties; standard Tariffed non-recurring charges, calling card
surcharges and taxes or tax-like surcharges.
5. Credits.
5.1 Installation Credit. Customer shall receive a credit of up
[XXXXXXXXXXX]** for the one-time installation and other one-time,
non-recurring, standard (non-expedite) charges associated with the
implementation of domestic Services under this Agreement. Such
credits will be issued from time to time throughout the Term as MCI
services are installed by Customer and shall be applied following
application of all standard Tariffed installation promotions.
5.2 Completion Credit. Provided that Customer completes the Term,
Customer will receive a credit of [XXXXXXXXX]** which will be applied
against Customer's interstate Usage Charges in the fifty-fourth
(54th) month of the Term.
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5.3 Interstate Service Credits. Customer will receive a monthly recurring
credit (the "Interstate Service Credit") to be applied to Customer's
interstate Usage Charges of Services hereunder equal to the sum of
(i) the product of a fixed [XXXXXXXX]** discount multiplied by
Customer's intrastate Vnet Usage Charges for the immediately
preceding month at standard networkMCI One Tariffed rates plus (ii) a
fixed discount of [XXXXXX]**multiplied by Customer's intrastate MCI
Toll Free Usage Charges for the immediately preceding month at
standard Tariffed rates. Notwithstanding the foregoing, in no event
shall the amount of any such Interstate Service Credit exceed
Customer's interstate Usage Charges for the month in which such
credit is to be applied.
5.4 Achievement CreditAt the completion of any Contract Year, if the
Customer's Usage Charges during such Contract year equals or exceeds
the applicable revenue tier set forth below, the Customer will
receive a credit, equal to five percent (5%) of Customer's Usage
Charges for such Contract Year. Such credit will be applied against
the Customer's Usage Charges (exclusive of applicable taxes,
surcharges, non-recurring charges and pass through access/egress or
related charges). The Customer may receive only one of these credits
for any Contract Year.
Contract Year Qualifying Revenue Tier
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1 [XXXXXXXX]**
2 [XXXXXXXX]**
3 [XXXXXXXX]**
4 [XXXXXXXX]**
5.5 Off-Peak Achievement Credit: In any month of the Term after the Ramp
Period (each, a "Monthly Period"), if Customer's Off-Peak minutes of
MCI Vnet and MCI Outbound Switched Digital (54/64 kbps) Services
equals a percentage of Customer's total minutes of MCI Vnet and MCI
Outbound Switched Digital (54/64 kbps) Services, Customer will
receive a credit equal to a percentage of Customer's Usage Charges
for MCI Vnet and MCI Outbound Switched Digital (54/64 kbps) Services
as set forth below:
Percentage of Off-Peak Usage Discount Percentage
---------------------------- -------------------
40% [XXXX]**
50% [XXXX]**
60% [XXXX]**
70% [XXXX]**
80% [XXXX]**
6. Underutilization. If in any Contract Year, Customer's Usage Charges are
less than the applicable Annual Minimum, then Customer will pay: (1) all
accrued but unpaid usage and other charges incurred by Customer; and (2) an
underutilization charge (which Customer agrees is reasonable) equal to the
difference between Customer's Usage Charges during such Contract Year and
the applicable Annual Minimum.
6.1 If in any Contract Year, Customer's Usage Charges for MCI HyperStream
Frame Relay Service are less than the applicable Frame Relay
Subminimum, then Customer will pay:
[XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX]**
6.2 Change in Technology: The Customer shall not be liable for the
underutilization charges to the extent that the Customer has failed
to satisfy the Annual Minimum or Frame Relay Subminimum solely as a
result of a New Technology Change, provided that in any case the
Customer shall use its best reasonable efforts to: (1) direct to MCI
new traffic or traffic not currently carried by MCI in order to
satisfy the
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Annual Minimum and Frame Relay Subminimum; and (2) retain MCI as the
provider of the services required pursuant to and/or as a result of
the New Technology Change. "New Technology Change" means a change by
Customer to a new technology which is not offered by MCI as a tariffed
service at the time of, or within six (6) months of, the Customer's
notice to MCI that the Customer intends to change to a new technology.
7. Termination Liability. If (1) Customer terminates this Agreement during the
Term, for reasons other than (i) for "Cause" (as hereinafter defined) or
(ii) to take service under another arrangement with MCI having equal or
greater term and volume requirements or (2) MCI terminates this Agreement
for Cause, Customer will pay within thirty (30) days after such
termination: (a) all accrued but unpaid usage and other charges incurred
through the date of such termination (b) an amount equal to one hundred and
ten percent (110%) of the aggregate of the Annual Minimum(s), (or pro rata
portion thereof for partial Contract Year) that would have been applicable
for the remaining unexpired portion of the Term on the date of such
termination. As used herein, "Cause" shall mean a failure of the other
Party to perform a material obligation under this Agreement which failure
is not remedied by the defaulting party within thirty (30) days after
receipt of written notice thereof.
8. Payment Arrangements. Customer is required to pay MCI for Services within
twenty-five (25) days after Customer's receipt of MCl's invoice.
9. Exclusivity Requirement.
9.1 Customer agrees it shall use MCI exclusively as its interexchange
carrier ("IXC) during the Term hereof for one hundred percent (100%)
of all IXC services for which Customer is not contractually committed
at the execution of this Agreement including, without limitation,
inbound toll free services, outbound voice services, conference
calling services, domestic and international outbound, and domestic
and international data services. Compliance with the foregoing
exclusivity covenant shall be measured on a monthly basis based on
Customer's dollar usage of all IXC services.
9.2 After the Effective Date of this Agreement, but not more than once
annually, MCI may request, and Customer shall provide to MCI in
writing, Customer records, data and invoices pertaining to its total
IXC service usage for the most recent twelve (12) month period
preceding the request. MCI may review this information for the sole
purpose of determining Customer's compliance with the exclusivity
covenant set forth in Section 9.1 hereof. In the event that Customer
breaches the covenant set forth in Section 9.1 above, Customer agrees
to pay standard Tariffed rates for all Services received hereunder
during the period of non-compliance with said covenants.
9.3 The exclusivity covenant set forth in Section 9.1 hereof shall not
apply to Customer's current satellite services. However, in the event
that Customer's places its satellite service requirements under a
competitive bidding process, Customer agrees to grant MCI the
opportunity to provide a bid to contract for such satellite services.
10. Monitoring Conditions. Customer must satisfy the following conditions
during each Contract Year. If Customer fails to satisfy any of the
following conditions during any Contract Year, Customer will be billed and
required to pay an additional Two Cents ($0.02) for each minute of usage of
Services hereunder during such Contract Year that fails to satisfy the
conditions below. Any additional charges assessed pursuant to this
provision will be billed as a lump sum charge to one Customer account
number.
10.1 [XXXXXXXXXXXXXXXXX]** of Customer's total outbound traffic with
dedicated origination and termination usage (as measured in minutes of
use) must be MCI Outbound Switched Digital Service (54/64 kbps) usage;
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10.2 [XXXXXXXXXXXXXX]** of Customer's total outbound traffic with
dedicated origination and switched termination usage (as measured in
minutes of use) must be MCI Outbound Switched Digital Service (54/64
kbps) usage;
10.3 [XXXXXXXXXXXXXX]** of Customer's total MCI Vnet and Outbound Switched
Digital Service (54/64 kbps) usage (as measured in minutes of use)
must be Off-Peak usage.
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