Master Services Agreement

MASTER SERVICES AGREEMENT



U S WEST Communications Services, Inc.("Customer") and Critical Path, Inc. ("Supplier") agree as follows: - --------------------------------------------------------------------------------



1. Scope: This Master Services Agreement ("Agreement") provides the general terms and conditions that shall apply to the services (the "Services") and the deliverables developed specifically for Customer at Customer's request (the "Deliverables") to be provided by Supplier to Customer under this Agreement. The Services and Deliverables will be provided pursuant to statements of work and other addenda (collectively, "Statements of Work") attached to and made a part of this Agreement, each of which shall describe the functional specifications ("Specifications"), other requirements and additional terms and conditions relating to the Services and/or Deliverables. In the event of a conflict between a provision or provisions of this Agreement and a provision or provisions of a Statement of Work, the Statement of Work shall apply with respect to the Services and/or Deliverables specified in such Statement of Work. Customer's Affiliates may purchase Services and Deliverables under the terms and conditions of this Agreement. "Affiliate" means any entity which directly or indirectly controls, or is controlled by, or is under common control with, Customer. "Control" means (i) for corporate entities, direct or indirect ownership of fifty percent (50%) or more of the stock or shares entitled to vote for the election of the board of directors or other governing body of the entity; and (ii) for non-corporate entities, direct or indirect ownership of fifty percent (50%) or greater of the equity interest.



2. Term: This Agreement shall be effective on December 10th, 1998 and shall expire on December 31st, 1999. The Agreement may be extended by the parties by executing a separate written agreement of extension prior to the expiration of the term.



3. Invoices and Payments: Supplier will issue invoices within thirty (30) days following completion of Services or on a monthly basis for ongoing Services, unless otherwise specified in the Statement of Work. Invoices will contain an itemized description of Services performed, expenses, charges, costs, and all state, federal, sales, or other applicable taxes separately. Undisputed invoices will be paid within thirty (30) days of receipt. Payment shall not constitute acceptance or approval of Services. All late payments shall bear interest at the rate of one and one-half percent (1-1/2 percent) per month or, if lower, the maximum amount allowable under applicable law, with interested accruing from the date due until the amount due is paid.



4. Warranty: Services shall be performed in a professional manner, consistent with industry standards. With respect to each Deliverables, unless otherwise specified in the Statement of Work, Supplier warrants that, for a period of six weeks commencing on the acceptance of the Deliverable (the "Warranty Period"), the Deliverable under normal use will operate substantially in accordance with the functional Specifications during the Warranty Period. Customer acknowledges that the development of computer software is not an exact science and the Supplier does not warrant that the Deliverables will operate at all times without interruption or will be error-free. Supplier's entire liability and the Customer's exclusive remedy for any breach of the foregoing remedy shall be that Supplier, at Supplier's own expense, shall exercise commercially reasonable efforts to repair any reproducible defect in the Deliverable reported to Supplier by the Customer during the Warranty Period that causes the Deliverable not to operate substantially in accordance with the functional Specifications. If Supplier is unable to so repair the Deliverable within thirty (30) days of notice by Customer of such defect, Customer shall be entitled to a refund of the development fees paid under this Agreement to Supplier, in an amount that Customer and Supplier reasonably determine is the amount by which the value of the Deliverable is reduced due to its defects.



OTHER THAN THE FOREGOING, THE SERVICES AND ALL DELIVERABLES ARE PROVIDED BY SUPPLIER TO CUSTOMER AND CUSTOMER'S USERS "AS IS" AND SUPPLIER AND ITS SUPPLIERS MAKE NO WARRANTY OF ANY KIND, WHETHER EXPRESS OR IMPLIED, REGARDING THE SERVICES OR THE DELIVERABLES AND SPECIFICALLY DISCLAIM THE WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND AGAINST INFRINGEMENT, TO THE MAXIMUM EXTENT POSSIBLE BY LAW.



5. Confidential Information and Property: "Confidential Information" shall mean any and all business, technical or third-party information (including but not limited to marketing plans, financial data, specifications, drawings sketches, models, samples, computer programs, or documentation) marked or otherwise designated as confidential or proprietary and provided, disclosed or made available under this Agreement. All Confidential Information shall remain the property of the disclosing party. The parties shall restrict access to the Confidential Information to employees or agents who have a "need to know". The parties, employees or agents, shall not disclose the Confidential Information to any third party and shall treat the Confidential Information in the same way it treats its own Confidential Information of like kind. This provision will not apply to information which is in the public domain, is previously known to the receiving party without obligation of confidentiality, is independently developed by the receiving party or is obtained by the receiving party from a third party that does not have an obligation to keep the information confidential. The parties will not make any copies of the Confidential Information and Supplier will not remove any property from Customer's premises without prior approval.



6. Work Product: Unless otherwise specified in the Statement of Work, and subject to Supplier's ownership of the Background Technology (as defined below), all Deliverables, in any medium, that are specifically identified in a Statement of Work and prepared or originated specifically for Customer at Customer's request under this Agreement shall be the property of Customer and are deemed works for hire, and to the extent they may not be works for hire, Supplier assigns to Customer all rights, title and interest in and to such Deliverables ("Work Product"), including rights to copyright. If the Deliverables include any code, data, modules, components, designs, utilities, subsets, objects, processes, tools, features, functionality, interfaces, technology or other items (a) previously developed, owned, copyrighted or otherwise used by Supplier or its subcontractors, or (b) that are not specifically identified as a Deliverable in the





[**] CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO CERTAIN

INFORMATION CONTAINED IN THIS EXHIBIT. THROUGHOUT THIS EXHIBIT

CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THE PUBLIC FILING AND HAVE

BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. Statement of Work and prepared or originated specifically for Customer at Customer's request, such items ("Background Technology") shall be and remain the property of Supplier and its subcontractors or suppliers. Supplier grants to Customer a royalty-free, non-transferable, non-exclusive license to copy and use the Background Technology only in connection with use of the Deliverables for their intended purpose as specified in the Statement of Work.



7. Independent Contractor: Supplier certifies that it is engaged in an independent business and will perform its obligations under this Agreement as an independent contractor and not as the agent or employee of Customer; that it has no authority to act for or bind Customer; that Supplier may and does work for other customers; that any persons provided by Supplier shall be solely the employees or agents of Supplier under its sole and exclusive direction and control. Supplier is solely responsible for the hours of work, methods of performance and payment of its employees and agents. Supplier is solely responsible for providing worker's compensation, unemployment, disability insurance and social security withholding for its employees and agents, and shall comply with all other federal, state and local, rules and regulations. Supplier is responsible for and shall pay all assessable federal and state income tax on amounts paid under this Agreement.



8. Indemnification: Each party (the "Indemnitor") shall indemnify, hold harmless and defend, the other party, its officers, directors, Affiliates, agents and employees (the "Indemnitees") from any and all claims, demands, litigation, expenses and liabilities (including costs and attorneys' fees) ("Liabilities") arising from or incident to any act, omission, negligence or performance under this Agreement by the Indemnitor, its customers, agents or representatives. This indemnity shall not apply to the extent the Liability is the result of the negligence or misconduct of the Indemnitee, its customers, agents or representatives, or to the extent liability is disclaimed or limited by either party under this Agreement. The indemnity obligations set forth in this Article are contingent upon: (a) the Indemnitee giving prompt written notice to the Indemnitor of any such claim(s); (b) the Indemnitor having sole control of the defense or settlement of the claim; and (c) at the Indemnitor's request and expense, the Indemnitee cooperating in the investigation and defense of such claim(s).



9. Infringement: If the Services or Deliverables are held to be infringing, or where Supplier believes any Services or Deliverables may be infringing, or where Customer's use of Services or Deliverables is restricted as a result of a claim of infringement, then Customer's sole and exclusive remedy and Supplier's sole and exclusive liability, shall be, at Supplier's expense, to either obtain the right for Customer to continue using the Services or Deliverables or replace or modify the Services or Deliverables with a non-infringing service or deliverable of equivalent functionality. If neither of the alternatives is reasonably possible, then with respect to infringing Deliverables, Supplier shall refund a pro-rata portion of the fees paid by Customer to Supplier for the Deliverables out of which the claim arose, and with respect to infringing Services, this Agreement or the applicable Statement of Work may be terminated by either party.



10. Limitation of Liability; Except for breach of Article 5, entitled "Confidential Information and Property", and except for liability under Article 8, "Indemnification", neither party is liable to the other for consequential, incidental, indirect, punitive or special damages, including commercial loss and lost profits, however caused and regardless of legal theory or foreseeability, directly or indirectly arising under this Agreement, even if a party has been advised of the possibility of such damages.



11. Insurance: Supplier and any subcontractors, shall maintain insurance as follows: (a) Commercial General Liability covering claims for bodily injury, death, personal injury or property damage with minimum limits of $1 million each occurrence with a General Aggregate limit of $2 million and naming Customer as an additional insured as its interest may appear with respect to this Agreement; (b) Comprehensive Automobile Liability covering ownership, operation and maintenance of all owned, non-owned and hired automobiles used in connection with the performance of this Agreement, with minimum limits of $1 million each occurrence; (c) Worker's Compensation with statutory limits as required in the state where the Services are being provided and Employers' Liability or "Stop Gap" coverage with limits of $100,000 each accident. Customer shall be given thirty (30) days advance written notification of any cancellation or material change of the policy. Supplier shall forward certificate(s) of insurance to Customer prior to commencement of Services and upon renewal of insurance during the term of this Agreement.



12. Safety, Health and Accident Reports: The safety and health of Supplier's employees and agents brought on Customer's premises shall be the sole responsibility of Supplier. While on Customer's premises, Supplier shall comply with all local, state and federal environmental, health and safety requirements, including those relating to the use and handling of hazardous materials. Supplier shall report all accidents, injury-inducing occurrences or property damage arising from the performance of Services at Customer's premises. Supplier's employees and agents on Customer's premises shall comply with all plant rules and regulations provided by Customer to Supplier.



13. Compliance With Laws: Each party shall, at its expense, obtain all permits and licenses, pay all fees, and comply with all federal, state and local laws, ordinances, rules, regulations and orders applicable to the party's performance under this Agreement. Supplier acknowledges that any Services provided under this Agreement may be subject to The Telecommunications Act of



14. Termination for Convenience; Cancellation: Either party may terminate this Agreement, in whole or in part (unless otherwise provided in a Statement of Work), for its convenience upon thirty (30) days prior written notice. Supplier shall be entitled to payment for the Services and Deliverables completed in accordance with the terms and conditions herein as of the date of termination or cancellation. Customer shall be entitled to receive all Work Product in progress or completed as of the date of termination or cancellation. Customer shall have no other liability arising out of termination or cancellation of this Agreement. Either party may cancel this Agreement immediately, in whole or in part, for default, breach, insolvency, bankruptcy, inability to pay debts, or similar financial



circumstances by the other. If the default or breach is reasonably capable of cure, the non-defaulting party shall give the other party written notice and reasonable opportunity to cure. The provisions of the Articles on Confidential Information and Property, Work Product, Indemnification, Limitation of Liability, Compliance with Laws and Dispute Resolution, shall survive the termination or cancellation of this Agreement or any Statement of Work. In addition, if this Agreement is terminated prior to the termination of any Statement of Work, all applicable provisions of this Agreement shall survive until expiration or termination of the Statement of Work.



15. Dispute Resolution: Any dispute, controversy or claim concerning or relating to this Agreement shall be resolved in the following manner:



15.1 The parties agree to use all reasonable efforts to initially resolve

all claims, controversies and disputes ("Dispute") between the parties

through direct discussions. To that end, either party may give the

other party written notice of any dispute not resolved in the normal

course of business. Upon such notice, the parties shall attempt in

good faith to resolve the dispute promptly by negotiation between

executives who have authority to settle the controversy and who are at

a higher level of management than the persons with direct

responsibility for administration of this Agreement.



15.2 If the parties are unable to resolve the Dispute by such means within

30 days of the notice date, or such other time period as mutually

agreed, then either party may commence arbitration pursuant to the

then-current Rules of Commercial Arbitration of the American

Arbitration Association ("AAA"), as modified or supplemented under

this Section 15. The Federal Arbitration Act, 9 U.S.C. Sec. 1-16

shall govern the arbitrability of all Disputes. The arbitrator shall

not have authority to award punitive damages. All expedited

procedures prescribed by the AAA rules shall apply. The arbitrator's

decision and award shall be final and binding and judgment may be

entered in any court having jurisdiction thereof. Each party shall

bear its own costs and attorneys' fees, and shall share equally in the

fees and expenses of the arbitrator. If the arbitration of the

Dispute is initiated by Customer, the laws of the State of California

shall govern the construction and interpretation of this Agreement,

and the arbitration shall occur in San Francisco, California. If the

arbitration of the Dispute is initiated by Supplier, the laws of the

State of Colorado shall govern the construction and interpretation of

this Agreement, and the arbitration shall occur in Denver, Colorado.



15.3 The arbitration proceedings contemplated by this Section shall be as

confidential and private as permitted by law. To that end, the

parties shall not disclose the existence, contents or results of any

proceedings conducted in accordance with this Section, and materials

submitted in connection with such proceedings shall not be admissible

in any other proceedings, provided, however, that this confidentiality

provision shall not prevent a petition to vacate or enforce an

arbitral award, and shall not bar disclosures required by law. The

parties agree that any decision or award results from proceedings in

accordance with this Section shall have no preclusive effect in any

other matter involving third parties.



15.4 Notwithstanding any of the foregoing, either party may request

injunctive and/or equitable relief either from the arbitrators or from

a court in order to protect the rights or property of the party,

pending the resolution of the dispute by arbitration as provided



16. Force Majeure: Neither party is liable to the other party for any delay, error, failure in performance or interruption of performance resulting from causes beyond their control whether or not foreseeable or identified, including without limitation acts of God, strikes, lockouts, riots, acts of war, governmental regulations, fire, power failure, earthquakes, severe weather, floods or other natural disease or the other party's or any third party's hardware, software or communications equipment or facilities ("Force Majeure Event"). Upon the occurrence of a Force Majeure Event, the party whose performance is affected thereby ("affected party") shall promptly notify the other party of such Event, and the parties agree to work together to resolve any issues arising as a result of such Force Majeure Event. The affected party agrees to resume performance as soon as reasonably possible. Notwithstanding the foregoing, if the Force Majeure Event lasts for a continuous period of 90 days or more, either party may elect to terminate this Agreement and/or any Order affected by such Force Majeure Event upon written notice without penalty or other consideration.



17. Remedies: Subject to the Article on Dispute Resolution contained in this Agreement, the remedies stated in this agreement are cumulative and are in addition to any other rights available in law or in equity.



18. Records and Audits: With respect to any Deliverables developed under a Statement of Work for which Supplier is compensated on a time-and-materials basis or otherwise reimbursed for expenses (rather than paid on a flat fee basis for such development), Supplier shall maintain complete and accurate records of all charges for such expenses incurred by Customer ("Reimbursable Expense Records"), in accordance with generally accepted accounting principles, for a period of twenty-four (24) months from the date of termination, cancellation or expiration of this Agreement. Upon request, Supplier agrees to submit a copy of receipts or other documentation of such expenses and copies of invoices previously submitted to Customer. In addition, during Supplier's normal business hours or as otherwise mutually agreed, Customer, through an independent third-party auditor, may inspect and make copies of such Reimbursable Expense Records only upon no less than 10 days prior written notice.



In addition, each party shall submit with each of its payments to the other party a detailed report of the calculation of each such payment. Each party will retain records relevant to its calculations of the payments made to the other party during the term of this Agreement and for a two (2) year period thereafter. Each party shall have the right, at its expense, acting through an independent



third-party auditor, to examine and audit such records at all reasonable times, on at least ten (10) days notice to the other party, but no more than once every six (6) months.



19. Assignment and Delegation: Neither party shall assign this Agreement, in whole or in part without the prior written consent of the other party; and any attempted assignment by such party shall be void; provided, however, that a party may assign this Agreement to an affiliate, or to a successor to a majority of the party's voting stock or to an entity that acquires all or substantially all of the party's assets without having to obtain the other party's prior written consent; and provided, further, that Supplier may delegate or subcontract to a third party any or all of its obligations under this Agreement. This Agreement shall be binding upon and inure to the benefit of the parties, their successors and permitted assigns.



20. Notices: Any notices required under this Agreement shall be sent to the addresses of the parties stated below. Notice will be deemed given (1) as of the day they are deposited with an overnight courier, charges prepaid, return receipt requested, with a confirming telefax; or (2) as of the day of receipt if they are deposited in first class U.S. Mail, charges prepaid, return receipt requested; or (3) as of the day of receipt if they are hand delivered.



21. Advertising, Publicity: Neither party shall use the other party's names, marks, codes, drawings or Specifications in any advertising, promotional efforts or publicity of any kind without the prior written permission of the other party, which permission shall not be unreasonably withheld, conditioned or delayed.



22. Waivers: No waiver of any provision of this Agreement or any right or obligation of a party shall be effective unless in writing, signed by the parities. The failure of either party to enforce a right shall not constitute a waiver.



23. Modifications or Amendments: Modifications and amendments to this Agreement shall be in writing and signed by the parties.



24. Nonexclusive Agreement: This Agreement is nonexclusive and Customer does not make any commitment or guarantee for any minimum or maximum amount of purchases.



25. Severability: Any term of this Agreement which is held to be invalid, illegal, unenforceable or void will in no way affect any other provision.



26. Several Liability: If more than one party is referred to as Customer, then their obligations and liabilities shall be several, not joint.



27. M/WBE Subcontracting Plan: Support of Minority and Women Businesses is part of Customer's ongoing business strategy. If required by Customer, Supplier agrees and commits to use reasonable efforts to subcontract in accordance with its subcontracting plan mutually agreed-upon by the parties, and such subcontracting plan shall be incorporated herein as an attachment to the Agreement entitled "M/WBE Subcontracting Plan."



28. Electronic Data Interchange ("EDI"): It is Customer's objective to procure Services utilizing EDI. If Supplier is EDI capable, Customer and Supplier shall enter into a Trading Partner Arrangement to implement EDI transactions and such arrangement will be incorporated herein as an attachment to the Agreement entitled "Electronic Data Interchange."



29. Year 2000 Compliance. Supplier warrants that Supplier's provision of Services to Customer, and any related Deliverables provided to Customer under this Agreement, will not be adversely affected by the occurrence or use of dates before, on, or after January 1, 2000 A.D., including dates and leap years between the twentieth and twenty-first centuries ("Millennial Dates"). Any deliverables (including any software, hardware or firmware product(s) delivered by Supplier to Customer) will without error or omission, create, receive, store, process and output (collectively, "Compute") information related to Millennial Dates. This warranty includes, without limitation, that the deliverables will accurately, and without performance degradation, compute Millennial Dates, date- dependent data, date-related interfaces, or other date-related functions (including, without limitation, calculating, comparing, and sequencing such functions). At Customer's request, Supplier will provide written evidence sufficient to demonstrate adequate testing and conversion of the deliverable to meet the foregoing requirements. The foregoing warranty is conditioned upon the software, hardware, network and systems (other than Supplier's) with which the Services and deliverables interface or interoperate also being unaffected by Millennial Dates.



30. Entire Agreement: This Agreement and all Statements of Work hereunder constitutes the entire agreement between the parties for the Services and Deliverables to be provided. Any prior oral or written communications or agreements of the parties with respect to the Services or Deliverables not expressly set forth in this Agreement or any Statement of Work are of no force or effect. Any additional or inconsistent terms in any acknowledgment or acceptance of an order, or any other document not in compliance with Article 23, are of no effect.



- -------------------------------------------------------------------------------- The Parties, intending to be legally bound, have caused this Agreement to be executed by their authorized representatives on the dates set forth below.



U S WEST Communications Services, Inc. Critical Path, Inc.

- ------------------------------------ ----------------------------------- (Authorized Signature) (Authorized Signature)



Joseph R. Zell - ------------------------------------ ----------------------------------- (Print or Type Name of Signatory) (Print or Type Name of Signatory)



President, U S WEST !NTERPRISE - ------------------------------------ ----------------------------------- (Title) (Title)



December 9, 1998 - ------------------------------------ ----------------------------------- (Execution Date) (Execution Date)



Address for Purposes of Notices: Address for Purposes of Notices: 700 W. Mineral Ave. - ------------------------------------ ----------------------------------- Mailstop: CO H6 320 First Street - ------------------------------------ ----------------------------------- Littleton, Colorado 80120 San Francisco, California 94105 - ------------------------------------ -----------------------------------





STATEMENT OF WORK #1 DATED DECEMBER 7, 1998

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To the

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MASTER SERVICES AGREEMENT DATED DECEMBER 7, 1998

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