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In the past 18 months there has been a rush to get on the Internet. Businesses from the local deli, to the dentist, to the local bank, now all have a Web presence. We can pay our bills, find a new mortgage or plan a vacation online. These new services would not be possible without Web hosting — an industry that is, itself, still in its infancy. This article will discuss some basic Web-hosting issues and guidelines for attorneys negotiating Web site-hosting deals. Part of the difficulty attorneys face in Web-hosting negotiations is knowing what, exactly, is involved. “Web hosting” encompasses a variety of services that are not clearly defined in the industry, and that vary from vendor to vendor and from deal to deal. Among them are co-location services, server management, network services, disaster recovery services; and telecom management services, Internet connection services, bandwidth services, server/equipment management services, support and help desk services. UNDERSTANDING THE DEAL First, it is important to understand the multitude of issues involved in this type of business deal. It may be wise to draw a diagram of the deal in order to understand the interconnectivity involved. Some questions and issues to consider: Equipment and Access Issues �Where will equipment be located? �Will the customer have any of its own equipment at the vendor’s location? �Will any equipment be located at the customer’s location? �Will additional equipment be added? �Who will manage the equipment, perform back-up, restores, and fix equipment problems? �Will the customer need physical access to the equipment? �How will equipment connect to other equipment and the Internet? �Who is responsible for these connections? �What measures are in place to prevent either physical or virtual security breaches? �Which party is responsible for each of these? �How will the customer access the data on the equipment? �What will happen to that data upon termination of the agreement? Traffic and Maintenance Issues �What will the vendor do when a Web site goes down? �How will changes in traffic to the Web site be handled? �What about the quality of service? �Are there any small disruptions in service which don’t rise to the level of a Web site being down, but which may still cause problems for customers of the Web site? �What if other customers of the vendor are having problems and this causes your customer’s Web site to go down? �When is maintenance performed? �Is maintenance done according to a schedule, or does it vary? �What are the parties’ respective obligation regarding maintenance? In one recent circumstance, a Web site was taken down for routine maintenance. The firewall was taken down by mistake and not put back up until a hacker had stolen the credit card information for thousands of Web site customers. Who is responsible? Also, if the target audience of the site is truly global, there will be times during the week when maintenance downtime is less critical than if the Web site were solely targeted at U.S. users. MAKE SURE THE DOCUMENTS REFLECT THE DEAL Be aware of any technical jargon that either party tries to put into the agreement, and make sure both sides have the same understanding of such jargon. Try to use a compromise definition instead. Don’t be afraid to admit you don’t understand what something means, and seek clarification where terms are unclear. E-language can change at “e-speed” and be very “e-confusing”! �Is there a schematic diagram of the Web site? �Can that be attached as an exhibit to the agreement upon the signing of the contract? If not, assess the feasibility that the parties will agree on a schematic diagram within a reasonable period of time after the contract signing. If the parties cannot agree upon a schematic, more discussion of the business deal may be needed. RISKS ISSUES INHERENT IN THE DEAL Both vendors and customers will face business and legal risks in entering into the transaction. Some questions and issues to consider: LEGAL RISK ISSUES �Is the Web site likely to attract Internet users from other countries, especially EU countries? �To what extent will each party be responsible for compliance with laws of non-U.S. countries which may apply to the Web site? Consider what level of compliance is needed. �How knowledgeable is the Web site host vendor with respect to the reach of non-U.S. laws? �To what extent will each party bear responsibility for data privacy? �How can the vendor be protected against claims by Web site users? �How can the customer be protected against damages caused by other customers of the vendor? BUSINESS RISK ISSUES �What are the Web host vendor’s own disaster recovery plans and procedures? How are recovery issues prioritized? �What constitutes an “emergency”? Some vendors want the ability to shut down a Web site for any reason, in their sole discretion. BALANCING THE RISKS Because the vendor provides a critical link to the Web site’s customers, merely having the right to terminate may not be a helpful option. It is better for both parties to have a continuum of remedies. This benefits the vendor as well as the customer for the following important reason: If the customer has options short of termination, the customer will have an incentive to stay with the vendor even if the vendor has a few problems, rather than going through the potential disruption brought about by termination. AUDIT RIGHTS While audit rights do not remedy risk, they do help balance the risks inherent in the transaction. Audits provide a mechanism for the customer to ensure that the vendor is complying with its obligations and for the vendor to demonstrate that it is. Vendors may wish to consider granting audit rights, as it again provides an incentive to the customer to work out problems with the vendor. If a customer terminates and litigates, the discovery process may allow the customer access to the same or more information than under an audit provision. Audits rights may be limited or broad. SERVICE LEVEL AGREEMENTS (SLAS) From the customer’s perspective, a Web-hosting arrangement must have, at a minimum, service levels and credits for performance, procedures and reporting. Some customers are willing to do without SLAs in the rush to “get on the Net.” They should be made aware that if a Web site is unavailable to Internet users, then the Web site owner cannot conduct business. Vendors will want to guard against taking responsibility for things outside their control. Customers, however, must make sure the vendor takes responsibility for what is within the vendor’s control. PERFORMANCE SLAS Performance SLAs should clearly and unambiguously define outages and downtime. Issues include: �Are the telecommunication links included? �Where does the vendor’s responsibility begin and end? �Is maintenance downtime excluded from the SLA calculation? �Is emergency maintenance excluded? PROCEDURAL SLAS Procedural SLAs should address how problems will be prioritized and escalated. Which party will decide the classification and escalation of problems? Reporting SLAs should address all of the other SLAs and any other reports which are essential to determining how well the vendor is performing its obligations. TRANSITION SERVICES The parties should address what happens upon termination. �Will the vendor turn off the Web site immediately? �Will it offer any assistance in the transition to another vendor? �What will be the cost of that assistance? CONCLUSION In conclusion, the Internet is a tool for making efficient use of resources for “traditional” businesses. Over time, more uses for the Internet will be explored and discovered. The recent technology stock crash has created opportunities for traditional companies that have not yet made the “e-plunge.” Cash-strapped dot-coms offer more for less than they did a year ago. The Web-hosting industry will continue to change and evolve with the Internet. Each deal will be different and counsel must fully explore the multitude of issues inherent in each transaction. Kevin Taylor is an associate in the New York office of Brown Raysman Millstein Felder & Steiner LLP.

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