<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
OR
[_} TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________ TO ___________
COMMISSION FILE NUMBER: 000-22575
CONCENTRIC NETWORK CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 65-0257497
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
10590 NORTH TANTAU AVENUE
CUPERTINO, CALIFORNIA 95014
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(408) 342-2800
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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 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
requirements for the past 90 days.
YES [_] NO [X]
The number of issued and outstanding shares of the Registrant's Common
Stock, $0.001 par value, as of June 30, 1997, was 7,720,264.
================================================================================
<PAGE>
CONCENTRIC NETWORK CORPORATION
PART I-FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Item 1. Financial Statements:
Condensed Balance Sheets at June 30, 1997 and December 31, 1996................. 3
Condensed Statements of Operations for the three and six month
periods ended June 30, 1997 and 1996............................................ 4
Condensed Statements of Cash Flows for the six month periods ended
June 30, 1997 and 1996.......................................................... 5
Notes to Unaudited Condensed Financial Statements............................... 6-10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................................... 11-17
PART II-OTHER INFORMATION
Item 1. Legal Proceedings............................................................... 18
Item 2. Changes in Securities........................................................... 18
Item 3. Defaults Upon Senior Securities................................................. 18
Item 4. Submission of Matters to a Vote of Security Holders............................. 18
Item 5. Other Information............................................................... 18
Item 6. Exhibits and Reports on Form 8-K................................................ 19-23
Signatures............................................................................... 24
</TABLE>
-2-
<PAGE>
PART I-FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONCENTRIC NETWORK CORPORATION
CONDENSED BALANCE SHEETS
UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
EQUITY
DECEMBER 31, JUNE 30, (DEFICIT) AT
1996 1997 JUNE 30, 1997
------------ ------------ -------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 17,657 $ 3,464
Accounts receivable, net............................ 1,849 3,838
Prepaid expenses.................................... 950 4,024
Other current assets................................ 772 2,611
------------ ---------
Total current assets...................... 21,228 13,937
Property and equipment, net............................ 47,927 58,556
Other assets........................................... 1,567 3,874
------------ ---------
Total assets........................................... $ 70,722 $ 76,367
============ =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.................................... $ 16,723 $ 20,927
Accrued expenses.................................... 2,877 6,789
Current portion of capital lease obligations........ 11,258 16,397
Notes payable....................................... -- 5,000
Deferred revenue.................................... 1,238 1,449
------------ ---------
Total current liabilities................. 32,096 50,562
Capital lease obligations, net of current portion...... 30,551 38,734
Commitments and contingencies
Class A common stock subject to rescission............. 5,150 1,400
Stockholders' equity (deficit):
Preferred stock..................................... 95,215 99,604 $ ---
Common stock........................................ 1,850 8,443 108,047
Accumulated deficit.................................... (93,952) (121,537) (121,537)
Deferred compensation.................................. (188) (839) (839)
------------ --------- --------------
Total stockholders' equity (deficit)................... 2,925 (14,329) $ (14,329)
------------ --------- ==============
Total liabilities and stockholders' equity (deficit)... $ 70,722 $ 76,367
============ =========
</TABLE>
See accompanying notes.
-3-
<PAGE>
CONCENTRIC NETWORK CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------- ---------------------
1996 1997 1996 1997
--------- -------- -------- ---------
<S> <C> <C> <C> <C>
Revenue........................................ $ 2,489 $ 10,814 $ 4,022 $ 19,968
Costs and expenses:
Cost of revenue............................. 11,782 14,913 19,038 30,657
Development................................. 571 1,200 911 2,225
Marketing and sales......................... 3,868 6,094 6,988 11,030
General and administrative.................. 1,036 1,127 1,772 2,187
-------- -------- -------- ---------
Total costs and expenses....................... 17,257 23,334 28,709 46,099
-------- -------- -------- ---------
Loss from operations........................... (14,768) (12,520) (24,687) (26,131)
Other income................................... - (1,395) - (1,395)
Net interest expense........................... 652 1,779 1,113 2,849
Net loss....................................... $(15,420) $(12,904) $(25,800) $ (27,585)
======== ======== ======== =========
Net loss per share............................. $ (7.55) $ (5.84) $ (12.64) $ (12.96)
======== ======== ======== =========
Shares used in computing net loss per share.... 2,042 2,209 2,042 2,128
======== ======== ======== =========
</TABLE>
See accompanying notes.
-4-
<PAGE>
CONCENTRIC NETWORK CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
--------------------
1996 1997
-------- ---------
<S> <C> <C>
Operating activities
Net loss........................................................................ $(25,800) $(27,585)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization................................................ 2,992 7,961
Amortization of deferred interest and marketing and sales related to
issuance of warrants..................................................... 130 593
Amortization of deferred compensation........................................ -- 45
Changes in current assets and liabilities:
Prepaid expenses............................................................. (139) (3,074)
Other current assets......................................................... -- (1,100)
Accounts receivable.......................................................... (483) (1,989)
Accounts payable............................................................. 2,389 3,496
Accrued expenses............................................................. 646 3,912
Deferred revenue............................................................. 625 211
-------- --------
Net cash used in operating activities........................................ (19,640) (17,530)
INVESTING ACTIVITIES
Additions of property and equipment............................................. (963) (4,494)
-------- --------
Net cash used in investing activities........................................... (963) (4,494)
FINANCING ACTIVITIES
Proceeds from notes payable..................................................... 5,000 5,000
Repayment of lease obligations.................................................. (1,843) (2,775)
Proceeds from issuances of stock and warrants................................... (41) 5,606
-------- --------
Net cash provided by (used in) financing activities............................. 3,116 7,831
-------- --------
Increase (decrease) in cash and cash equivalents................................ (17,489) (14,193)
Cash and cash equivalents at beginning of period................................ 19,054 17,657
-------- --------
Cash and cash equivalents at end of period...................................... $ 1,565 $ 3,464
======== ========
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES
Series C Convertible Preferred Stock exchanged for notes payable, including..... $ 3,010 $ --
accrued interest
Capital lease obligations incurred.............................................. $ 7,389 $ 14,097
Reduction of accounts payable through capital lease obligations incurred........ $ -- $ 2,000
Issuance of warrants in connection with bridge financing........................ $ -- $ 930
</TABLE>
See accompanying notes.
-5-
<PAGE>
CONCENTRIC NETWORK CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
These unaudited condensed financial statements and the related footnote
information have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. In the opinion of the Company's
management, the accompanying unaudited interim condensed financial statements
include all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the information for the periods presented.
The results for the interim period ended June 30, 1997 are not necessarily
indicative of results to be expected for the entire year ending December 31,
1997 or future operating periods.
2. NET LOSS PER SHARE (HISTORICAL) AND UNAUDITED PRO FORMA STOCKHOLDERS' EQUITY
(DEFICIT)
Net Loss Per Share (Historical)
Except as noted below, net loss per share is computed using the weighted
average number of shares of common stock outstanding excluding common stock
subject to rescission. Common stock equivalent shares from convertible preferred
stock and from stock options and warrants are not included as the effect is
antidilutive. Pursuant to the Securities and Exchange Commission Staff
Accounting Bulletins, common and common equivalent shares issued by the Company
at prices below the initial public offering price during the twelve-month period
prior to the August 1, 1997 initial public offering (see Note 9) have been
included in the calculation as if they were outstanding for all periods
presented (using the treasury stock method and the public offering
price in calculating equivalent shares).
Per share information calculated on the above noted basis is as follows (in
thousands, except for per share amounts):
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
-------------------- -------------------
1996 1997 1996 1997
-------- -------- ------- --------
<S> <C> <C> <C> <C>
Net loss......................................... $(15,420) $(12,904) $(25,800) $(27,585)
======== ======== ======== ========
Net loss per share............................... $ (7.55) $ (5.84) $ (12.64) $ (12.96)
======== ======== ======== ========
Weighted average shares of common stock.......... 1,389 1,396 1,389 1,396
outstanding
Shares related to Staff Accounting Bulletins..... 653 813 653 732
-------- -------- ------- --------
Shares used in net loss per share calculation.... 2,042 2,209 2,042 2,128
======== ======== ======== ========
</TABLE>
Pro Forma Net Loss Per Share
Pro forma net loss per share has been computed as described above and also
gives effect, even if antidilutive, to common equivalent shares from convertible
preferred stock that automatically converted upon the closing of the Company's
initial
-6-
<PAGE>
CONCENTRIC NETWORK CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
public offering (the "Public Offering") (using the if-converted method). Pro
forma per share information calculated on the above basis is as follows (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30 1997 JUNE 30 1997
------------ ------------
<S> <C> <C>
Net loss........................................................ $ (12,904) $ (27,585)
============ ============
Net loss per share.............................................. $ (1.67) $ (3.64)
============ ============
Shares used in calculating historical net loss per share........ 2,209 2,128
Adjustment to reflect the effect of the assumed conversion of
convertible preferred stock from the date of issuance.......... 5,535 5,455
------------ ------------
Shares used in net loss per share calculation................... 7,744 7,582
============ ============
</TABLE>
Unaudited Pro Forma Stockholders' Equity (Deficit)
In August 1997, the Company consummated an initial public offering of its
Common Stock. All of the convertible preferred stock outstanding as of the
effective date of the offering converted into shares of common stock. The
unaudited pro forma stockholders' equity (deficit) at June 30, 1997 reflects
the actual stockholders' equity at such date, as adjusted to reflect the
conversion of preferred stock as if such conversion had occurred at June 30,
1997.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings Per Share" (FAS 128), which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per share,
the dilutive effect of stock options will be excluded. The impact of FAS 128 on
the calculation of primary and fully diluted earnings per share is not expected
to be material.
3. STOCKHOLDERS' EQUITY
In March 1997, the Company issued warrants to purchase an aggregate of
184,934 shares of Common Stock (after giving effect to the conversion of
Preferred Stock into Common Stock in connection with the Company's initial
public offering) for a net consideration of $1,108,000 in March 1997. These
warrants will expire in March 2000 and are exercisable at $20.40 per share.
On April 18, 1997, certain preferred stockholders holding warrants to
purchase an aggregate number of 181,876 shares of Class A common stock and
66,688 shares of Series B convertible preferred stock at $11.00 per share,
exercised such warrants at a discounted price of $6.60 per share in
consideration of their early exercise. Additionally, certain preferred
stockholders exercised warrants to purchase an aggregate number of 233,660
shares of Series D convertible preferred stock at a price of $12.24, discounted
from the original price of $20.40. The Company received total consideration of
approximately $4.5 million related to the exercise of these warrants.
-7-
<PAGE>
CONCENTRIC NETWORK CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
4. INCOME TAXES
The Company accounts for income taxes using the liability method in
accordance with Financial Accounting Standards Board Statement No. 109,
"Accounting for Income Taxes" ("FAS 109"). No provision for income taxes is
expected for 1997 as the Company expects to incur a net loss for the year and
does not meet the criteria for recognizing an income tax benefit under the
provisions of FAS 109.
5. COMMON STOCK SUBJECT TO RESCISSION
Beginning in August 1993 and continuing through May 31, 1995, the Company
sold convertible debentures aggregating $4,260,000 and issued common stock
aggregating $890,000. Although at the time the Company believed the sale and
conversion of debentures into common stock, if applicable, was exempt from
provisions of the Securities Act of 1933 and applicable State Blue Sky Laws, it
appears that the appropriate exemptions may not have been available. As a
result, the Company will conduct a rescission offer (the "Rescission Offer")
and purchasers of these securities will be entitled to a return of the
consideration paid for their stock or debentures. As such, these shares have
been classified as common stock subject to rescission in the accompanying
financial statements. Additionally, options issued pursuant to the Company's
1995 Stock Incentive Plan to Employees and Consultants and non-plan options
were issued in various states for which the Company may not have had an
available exemption under state laws. Such options are potentially subject to
rescission and the Company intends to include them in the rescission offer. As
of June 30, 1997, there have been no claims asserted against the Company. As
of June 30, 1997, a number of statutes of limitations under federal and state
securities laws applicable to the shares which may have been issued without
securities laws exemptions have lapsed. Pursuant to the Rescission Offer, the
Company will offer to rescind the issuance of shares and options as to which
the applicable statute of limitations has not run, but there can be no
assurances that the Company will not otherwise be subject to additional
liabilities with respect to such issuances. If the Rescission Offer were
accepted in full, the Company would be required to pay approximately $1.4
million plus interest thereon totaling approximately $300,000 related to the
issuance of the stock and an amount equal to approximately $940,000 with
respect to options.
6. LITIGATION
On April 22, 1997, a complaint was filed in the Los Angeles County,
California Superior Court against the Company and other unnamed defendants by
Sattel Communications LLC (Sattel). Sattel's complaint alleged that the Company
was in breach of an agreement to pay for up to $4.3 million of DSS Switches from
Sattel for use in the Company's network and also sought unspecified
consequential and punitive damages. On July 11, 1997, the Company settled the
complaint with Sattel in the amount of $4.4 million. The Company also agreed to
purchase, at the election of Sattel, up to 25% of the Company's common stock
held by Sattel on the day after the closing of the offering at the initial
public offering price. During the three months ended June 30, 1997, the Company
recorded $970,000 of other income relating to the reversal of reserves which had
previously been established for such litigation.
In late April and early May, 1997, three putative securities class action
complaints were filed in the United States District Court, Central District by
certain stockholders of Diana Corporation (Diana), the parent corporation of
Sattel, alleging securities fraud related to plaintiffs' purchase of shares of
Diana Common Stock in reliance upon allegedly misleading statements made by
defendants, Diana, Sattel and certain of their respective affiliates, officers
and directors. Concentric was named as a defendant in the complaint in
connection with certain statements made by Diana and officers of Diana related
to Concentric's purchase of network switching equipment from Diana's Sattel
subsidiary. The complaints do not appear to allege that Concentric made any
false or misleading statements. The plaintiffs seek unspecified compensatory
damages. The Company is currently unable to estimate a range of possible losses
associated with such lawsuits. While the ultimate outcome
-8-
<PAGE>
CONCENTRIC NETWORK CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
of such litigation is uncertain, the Company believes it has meritorious
defenses to the claims and intends to conduct a vigorous defense. An unfavorable
outcome in this matter could have a material adverse effect on the Company's
financial condition. In addition, even if the ultimate outcome is resolved in
favor of the Company, the defense of such litigation could entail considerable
cost and the diversion of efforts of management, either of which could have a
material adverse effect on the Company's results of operations.
7. BRIDGE LOANS
In June 1997, the Company borrowed $3 million from a third-party in the form
of a 10% convertible secured promissory note (the Secured Note). The Secured
Note automatically converted into 253,403 shares of Common Stock
upon the closing of the initial public offering at a per share conversion price
equal to the initial public offering price of $12.00. In connection with the
Secured Note, the Company issued a warrant to purchase 63,351 shares of
Common Stock at an exercise price of $6.00 per share. This warrant
will expire five years from the date of grant.
In June 1997, the Company borrowed $2 million from a stockholder in the
form of a 10% unsecured promissory note (the Unsecured Note). The Unsecured
Note was repaid in August 1997. In connection with the Unsecured Note, the
Company issued a warrant to purchase 83,333 shares of Common Stock at an
exercise price of $6.00 per share. This warrant will expire five years from
the date of grant.
The Company deemed the fair value of the warrants issued in connection with
the Secured Note and the Unsecured Note, using the Black-Scholes method, to be
approximately $930,000 of which approximately $191,000 was amortized as
interest expense in the three months ended June 30, 1997. The remaining balance
will be amortized to interest expense in the third quarter of 1997 as a result
of the cancellation and conversion of the indebtedness in conjunction with the
initial public offering.
8. COMMITMENT
Effective in August 1997, the Company entered into a five-year service and
equipment agreement under which a third-party will provide telecommunication
services and equipment. The agreement provides for minimum payments as follows:
$1.2 million in 1998, $2.5 million in 1999, $7.0 million in 2000, $6.5 million
in 2001 and $4.0 million in 2002. At the election of the third party, $2.0
million of the minimum payments may be paid by the issuance of Common Stock of
the Company at the then-current fair market value.
9. SUBSEQUENT EVENTS
On August 1, 1997, the Company effected its Public Offering of Common
Stock. The Public Offering consisted of 4,300,000 shares of Common Stock issued
to the public at $12.00 per share. Additionally, the underwriters have been
granted an option to purchase up to an additional 645,000 shares of
Common Stock at the Public Offering price of $12.00 per share. Concurrent with
the closing of the Company's Public Offering, certain strategic investors
purchased directly from the Company 1,499,236 shares of Common Stock having an
aggregate purchase price of approximately $18,000,000 (including the
cancellation of approximately $3,000,000 in indebtedness). Such shares are
unregistered shares and were purchased at the Public Offering price of $12.00
per share. In connection with the direct purchase, the Company issued warrants
to one of the strategic investors to purchase 291,667 shares of the Company's
Common Stock at $6.00 per share. These warrants will expire five years from the
date of grant.
-9-
<PAGE>
CONCENTRIC NETWORK CORPORATION
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
Effective July 30, 1997, the Company reincorporated under the laws of the
state of Delaware, at which time a one for 15 reverse stock split took effect.
Upon closing of the initial public offering, all outstanding shares of Series
A, B, C, and D convertible preferred stock were converted into Common Stock.
All share and per share data in these financial statements have been
retroactively restated to reflect the reverse stock split.
-10-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the unaudited
interim condensed financial statements and related notes thereto included in
Part 1- Item 1 of this Quarterly Report.
IMPORTANT NOTE ABOUT FORWARD LOOKING STATEMENTS
This quarterly report on Form 10-Q contains forward looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Predictions of future events are inherently
uncertain. Actual events could differ materially from those predicted in the
forward looking statements due to a number of factors including but not limited
to the risks set forth in the following discussion, and in particular, the risks
discussed below under the caption "Additional Factors that Could Affect
Operating Results."
OVERVIEW
The Company was founded in 1991. From 1991 to mid-1993, the Company conducted
development and network services planning activities and realized no revenues.
Initially, the Company was focused on providing consumers with direct dial-up
connectivity to bulletin board services. On-line gaming and entertainment
services for consumers were commenced in July 1993 through the utilization of a
third party network infrastructure. The Company commenced operation of its own
network in late 1994. In May 1995, new management led by Henry R. Nothhaft
redefined and broadened the Company's strategy to provide a range of Internet
and tailored, value-added Internet Protocol-based network services to consumers
and businesses.
The Company's revenue prior to 1996 has been primarily generated from
providing Internet access to consumers. The Company's current focus is on
developing and deploying Virtual Private Networks and providing network access
and Web hosting services for enterprise customers. Contracts with enterprise
customers typically have a term ranging from one to three years. The Company
expects enterprise-related revenue to represent an increasing portion of total
revenue in future periods. The foregoing expectation is a forward-looking
statement that involves risks and uncertainties, and actual results could vary
as a result of a number of factors including the Company's operating results,
the results and timing of the Company's launch of new products and services,
governmental or regulatory changes, the ability of the Company to meet product
and project demands, the success of the Company's marketing efforts, competition
and acquisitions of complementary businesses, technologies or products.
The Company has incurred net losses and experienced negative cash flow from
operations since inception and expects to continue to operate at a net loss and
experience negative cash flow at least through 1998, although the Company's
ability to achieve profitability and positive cash flow from operations is
dependent upon the Company's ability to substantially grow its revenue base and
achieve other operating efficiencies. The Company experienced net losses of
approximately $4.3 million, $22.0 million and $66.4 million for the years ended
December 31, 1994, 1995 and 1996, respectively and $27.6 million for the six
months ended June 30, 1997. There can be no assurance that the Company will be
able to achieve or sustain revenue growth, profitability or positive cash flow
on either a quarterly or an annual basis.
Management believes that period-to-period comparisons of its financial results
should not be relied upon as an indication of future performance. The Company
may experience significant period-to-period fluctuations in operating results
depending upon factors such as the success of the Company's efforts to expand
and retain its subscriber and third party partnership base, changes in pricing
and mix of services offered by the Company or its competitors, market acceptance
of new or enhanced services offered by the Company and changes in, and the
timing of, expenses relating to development and sales and marketing. Other
factors that may contribute to variability of operating results include the
timely deployment and implementation of expansion of the Concentric network and
new network architectures, the Company's ability to obtain sufficient supplies
of sole- or limited-source components, user demand for network and Internet
access services and balancing of network usage
-11-
<PAGE>
over a 24-hour period. Additionally, the Company's expense levels are relatively
fixed in the short term and are based, in part, upon the Company's estimates of
growth of its business.
The Company expects to focus in the near term on building and increasing its
revenue base, which will require it to significantly increase its expenses for
personnel, marketing, network infrastructure and the development of new
services, and may adversely impact short term operating results. As a result,
the Company believes that it will incur losses in the near term and there can
be no assurance that the Company will be profitable in the future.
Revenue. Revenue totaled approximately $10.8 million for the three months
ended June 30, 1997, an $8.3 million increase over revenue of approximately $2.5
million for the three months ended June 30, 1996. This increased revenue
reflects growth in revenue from the Company's broadened product offerings to its
enterprise customers and through the Company's leveraged marketing arrangements
with its strategic partners, as well as continued growth in revenue derived from
Internet access customers. For the three months ended June 30, 1997, revenue
from WebTV Networks, Inc. (''WNI'') accounted for 37.8% of the Company's
revenue. No other customer accounted for more than 10% of the Company's revenue
during the period. Revenue for the six months ended June 30, 1997 totaled
approximately $20.0 million, an increase of $16.0 million over revenue of $4.0
million for the six month period ended June 30, 1996. WNI accounted for
approximately 35.5% of total revenue for the six months ended June 30, 1997. The
Company expects revenue from WNI to decrease as a percentage of revenue. The
foregoing expectation is a forward looking statement that involves risks and
uncertainties and the actual results could vary materially as a result of a
number of factors. See "Additional Factors That Could Affect Operating
Results."
Cost of Revenue. Cost of revenue consists primarily of personnel costs to
maintain and operate the Company's network, access charges from local exchange
carriers, backbone and Internet access costs, depreciation of network equipment
and amortization of related assets. Cost of revenue for the three month period
ended June 30, 1997 was approximately $14.9 million, an increase of $3.1 million
from cost of revenue of $11.8 million in the second quarter of 1996. This
increase is attributable to the overall growth in the size of the network. As a
percentage of revenue, such costs declined to 137.9% of revenue in the three
months ended June 30, 1997 from 473.3% of revenue in the year earlier period,
due to increased network utilization associated with the Company's revenue
growth and lower per port costs of the Company's SuperPOP network architecture
deployed in the second half of 1996. Cost of revenue for the six months ended
June 30, 1997 totaled approximately $30.7 million compared with $19.0 million
for the six months ended June 30, 1996. As a percent of revenue for the same
periods, these amounts represented 153.5% and 473.3%, respectively. The Company
expects its cost of revenue to continue to increase in dollar amount, while
declining as a percentage of revenue as the Company expands its customer base.
The foregoing expectation is a forward looking statement that involves risks and
uncertainties and the actual results could vary materially as a result of a
number of factors. See "Additional Factors That Could Affect Operating
Results."
Development. Development expense consists primarily of personnel and equipment
related expenses associated with the development of products and services of the
Company. Development expense was approximately $1.2 million and $571,000 for the
three months ended June 30, 1997 and 1996, respectively. This higher level of
development expense reflects an overall increase in personnel to develop new
product offerings and to manage the overall growth in the network. Development
expense as a percentage of revenue declined to 11.1% for the three months ended
June 30, 1997 from 22.9% in the year earlier period as a result of the Company's
increased revenue. Development expense for the six month periods ending June 30,
1997 and 1996 was approximately $2.2 million and $911,000, respectively. As a
percent of revenue, development expense declined to 11.1% for the six months
ended June 30, 1997 from 22.7% for the six months ended June 30, 1996. The
Company expects its development spending to continue to increase in dollar
amount, but to decline as a percentage of revenue. The foregoing expectation is
a forward looking statement that involves risks and uncertainties and the actual
results could vary materially as a result of a number of factors.
Marketing and Sales. Marketing and sales expense consists primarily of
personnel expenses, including salary and commissions, costs of marketing
programs and the cost of 800 number circuits utilized by the Company for
customer support functions. Marketing and sales expense was approximately $6.1
million and $3.9 million for the three months ended June
-12-
<PAGE>
30, 1997 and 1996, respectively. The $2.2 million increase in 1997 reflects a
substantial investment in the customer support, marketing and sales
organizations necessary to support the Company's expanded customer base. This
increase also reflects a growth in subscriber acquisition costs, related to both
increased direct marketing efforts as well as commissions paid to distribution
partners. Additionally, the increase reflects the ramp-up of marketing efforts
related to the introduction of enterprise products and services. Marketing and
sales expense as a percentage of revenue declined to 56.4% for the three months
ended June 30, 1997 from 155.4% in the year earlier period as a result of the
Company's increased revenue. For the six months ended June 30, 1997 and 1996,
marketing and sales expense was approximately $11.0 million and $7.0 million,
representing 55.2% and 173.7% of revenue, respectively. The Company expects
marketing and sales expenditures to continue to increase in dollar amount, but
to decline as a percentage of revenue. The foregoing expectation is a forward
looking statement that involves risks and uncertainties and the actual results
could vary materially as a result of a number of factors. See "Additional
Factors That Could Affect Operating Results."
General and Administrative. General and administrative expense consists
primarily of personnel expense and professional fees. General and administrative
expense was approximately $1.1 million and $1.0 million for the three months
ended June 30, 1997 and 1996, respectively. For the six months ended June 30,
1997 and 1996, general and administrative expenses were approximately $2.2
million and $1.8 million, respectively. This higher level of expense reflects an
increase in personnel and professional fees necessary to manage the financial,
legal and administrative aspects of the business. General and administrative
expense as a percentage of revenue declined to 10.4% for the three months ended
June 30, 1997 from 41.6% in the year earlier period as a result of the Company's
increased revenue. For the six months ended June 30, 1997, general and
administrative expense declined to 11.0% from 44.1% for the six months ended
June 30, 1996. The Company expects general and administrative expense to
increase in dollar amount, reflecting its growth in operations and costs
associated with being a publicly held entity, but to decline as a percentage of
revenue. The foregoing expectation is a forward looking statement that involves
risks and uncertainties and the actual results could vary materially as a result
of a number of factors. See "Additional Factors That Could Affect Operating
Results."
Net Interest Expense. Net interest expense was approximately $1.8 million and
$652,000 for the quarters ending June 30, 1997 and 1996, respectively. The
increase is primarily due to an increase of $35.5 million in principal amount of
capitalized lease obligations from June 30, 1996 to June 30, 1997. The three
month period ended June 30, 1997 also includes a cost of financing charge of
$191,000 associated with the value of warrants issued in connection with $5.0
million of bridge loans received in June 1997. Net interest expense for the six
months ended June 30, 1997 and 1996 was $2.8 million and $1.1 million,
respectively.
Other income. During the three months ended June 30, 1997, upon settlement of
the Sattel litigation, the Company recorded $970,000 of other income related to
the reversal of previously established reserves.
Net Loss. The Company's net loss declined to approximately $12.9 million for
the quarter ended June 30, 1997 as compared to approximately $15.4 million for
the same quarter of 1996. For the six months ended June 30, 1997 the net loss
totaled $27.6 million as compared to $25.8 for the six months ended June 30,
1996.
LIQUIDITY AND CAPITAL RESOURCES
To date, the Company has satisfied its cash requirements primarily through
capitalized lease financings and the sale of capital stock. The Company's
principal uses of cash are to fund working capital requirements and capital
expenditures and to service its capital lease financing obligations. Net cash
used in operating activities for the six months ended June 30, 1997 and 1996 was
approximately $17.5 million and $19.6 million, respectively. Cash used in
operating activities in both periods was primarily affected by the net losses,
caused by increased costs relating to the expansion of the Company's network and
organizational infrastructure.
Net cash used in investing activities for the six months ended June 30, 1997
and 1996 was approximately $4.5 million and $963,000, respectively. Investing
activities were comprised entirely of purchases of capital equipment to support
the growing infrastructure.
-13-
<PAGE>
For the six months ended June 30, 1997 cash of approximately $7.8 million was
generated from financing activities. Included in this amount was $5.0 million of
debt financing received in June 1997, of which $2.0 million will be repaid and
$3.0 million was converted into Common Stock, respectively, upon closing of the
Company's initial public offering. The Company also received approximately $4.5
million from the exercise of warrants in April 1997 and another $1.1 million as
consideration for warrants issued. The remainder of financing activities is
comprised of $2.8 million used for repayment of capital lease obligations. For
the six months ended June 30, 1996 cash of approximately $3.1 million was
generated from financing activities, which reflects receipt of a $5.0 million
bridge loan which was later converted into Series D Convertible Preferred Stock,
and $1.8 million used for repayment of capital lease obligations.
The net cash decrease for the six month periods ended June 30, 1997 and 1996
was $14.2 million and $17.5 million, respectively. At June 30, 1997, the
Company had cash and cash equivalents of approximately $3.5 million and a
working capital deficit of $36.6 million.
For the six months ended June 30, 1997, the Company added approximately $14.1
million of network equipment through additional capital lease obligations under
its network equipment financing arrangement, and reduced accounts payable by
$2.0 million under a sale leaseback arrangement. The Company expects to make
additional investments in capital equipment to expand and enhance its network,
with approximately $5.0 million of anticipated purchases of capital equipment
throughout the remainder of 1997. The foregoing expectation with respect to
additional capital investments is a forward-looking statement that involves
risks and uncertainties and the actual amount of capital investment could vary
materially as a result of a number of factors.
On August 1, 1997, the Company effected its initial public offering of Common
Stock. The offering consisted of 4,300,000 shares of Common Stock issued to the
public at $12.00 per share. Additionally, the underwriters hold an
overallotment option to exercise up to an additional 645,000 shares at the
initial public offering price of $12.00 per share. Concurrent with the closing
of this offering, certain strategic investors purchased directly from the
Company shares of Common Stock having an aggregate purchase price of
approximately $18,000,000 (including the cancellation of approximately
$3,000,000 in indebtedness). Such shares totaling 1,499,236 are unregistered
shares and were purchased at the initial public offering price of $12.00.
The Company expects to incur additional operating losses and will rely
primarily on the net proceeds from the initial public offering and the Direct
Placements, and financing availability under a network equipment lease agreement
that currently has no maximum borrowing limit. The Company believes that such
financing will be sufficient to meet its anticipated cash needs for working
capital and for the acquisition of capital equipment at least for the next 12
months. However, there can be no assurance that the Company will not require
additional financing within this time frame. The Company's forecast of the
period of time through which its financial resources will be adequate to support
its operations is a forward-looking statement that involves risks and
uncertainties, and actual results could vary. The Company may be required to
raise additional funds through public or private financing, strategic
relationships or other arrangements. There can be no assurance that such
additional funding, if needed, will be available on terms attractive to the
Company, or at all.
ADDITIONAL FACTORS THAT COULD AFFECT OPERATING RESULTS
The following factors, together with other risk factors discussed in the
"Overview" section of Management's Discussion and Analysis of Financial
Condition and Results of Operations and other information contained elsewhere
herein, should be considered carefully in evaluating the Company and its
business.
Limited Operating History; Continuing Operating Losses. The Company was
incorporated in 1991, commenced network operations in 1994 and completed initial
deployment of its current network architecture and use of an advanced ATM
backbone network in late 1996. Accordingly, the Company has a limited operating
history upon which an evaluation of the Company and its prospects can be based.
In addition, a majority of the Company's senior management team have been
working together at the Company for less than two years. The Company's prospects
must be considered in light of the risks, expenses and difficulties frequently
encountered by companies in their early stages of development, particularly
companies
-14-
<PAGE>
in new and rapidly evolving markets. To address these risks, the Company must,
among other things, respond to competitive developments, continue to attract,
retain and motivate qualified persons, and continue to upgrade its technologies
and commercialize its network services incorporating such technologies. There
can be no assurance that the Company will be successful in addressing such risks
and the failure to do so could have a material adverse effect on the Company's
business, financial condition and results of operations.
Customer Concentration. The Company currently derives a substantial portion of
its total revenue from a single customer. For the three and six months ended
June 30, 1997, revenue from WebTV Networks, Inc. ("WNI") represented
approximately 37.8% and 35.5%, respectively, of the Company's revenue. The
Company's current agreement to provide services to WNI expires on December 1,
1997. After such date, the agreement continues in effect until terminated by
either party, which may occur at any time on or after September 30, 1997 upon
one hundred twenty (120) days' notice. Although the Company currently is
negotiating a new agreement with WNI, there can be no assurance such
negotiations will be successfully concluded. While the Company expects revenue
from WNI to decrease as a percentage of revenue in future periods, the Company
believes that revenue derived from a limited number of current and future
customers may continue to represent a significant portion of its revenue. As a
result, the loss of one or more of the Company's major customers or a decline in
revenue from such customers could have a material adverse effect on the
Company's business, financial condition and results of operations.
Management of Potential Growth and Expansion and Dependence upon Key
Personnel. The growth and expansion of the Company's business and its service
offerings have placed, and are expected to continue to place, a significant
strain on the Company's management, operational and financial resources. The
Company plans to continue to substantially expand its network in the future.
There can be no assurance that the Company will be able to add services at the
rate or according to the schedule presently planned by the Company.
To manage its growth, the Company must, among other things, (i) continue to
implement and improve its operational, financial and management information
systems; (ii) hire and train additional qualified personnel; and (iii) continue
to expand and upgrade its network infrastructure. As the Company strives to
increase total network utilization and to optimize this utilization by targeting
both business and consumer users to balance the network's usage throughout a 24-
hour period, there will be additional demands on the Company's customer support,
sales and marketing resources. Any failure of the Company to manage its growth
effectively could have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company's success will depend upon the continued service of members of its
senior management team and technical, marketing and sales personnel. The Company
does not have employment agreements with any of its employees, including the
senior officers. The Company's success depends upon its ability to attract and
retain additional highly qualified management, technical, sales and marketing
and customer support personnel. The loss of the services of key personnel, or
the inability to attract additional qualified personnel, could have a material
adverse effect upon the Company's results of operations, development efforts and
ability to complete the expansion of its network infrastructure. Any such event
could have a material adverse effect on the Company's business, financial
condition and results of operations
Dependence upon New and Uncertain Markets. The markets for tailored, value-
added network services for businesses and consumers offered by the Company,
including Internet access, are in the early stages of development. Since these
markets are relatively new and because current and future competitors are likely
to introduce competing services or products, it is difficult to predict the rate
at which the market will grow, if at all, or whether new or increased
competition will result in market saturation. Certain critical issues concerning
commercial use of tailored value-added services and Internet services, including
security, reliability, ease and cost of access and quality of service, remain
unresolved and may impact the growth of such services. If the markets for the
services offered by the Company, including Internet access, fail to grow, grow
more slowly than anticipated, or become saturated with competitors, the
Company's business, financial condition and results of operations would be
materially adversely affected.
-15-
<PAGE>
Dependence upon New and Enhanced Services. The Company has recently
introduced new enterprise service offerings, including the introduction of
value-added, IP-based communication services to enterprises. The failure of
these services to gain market acceptance in a timely manner or at all could have
a material adverse effect on the business, financial condition and results of
operations of the Company. Introduction by the Company of new or enhanced
services with reliability, quality or compatibility problems could significantly
delay or hinder market acceptance of such services, which could adversely affect
the Company's ability to attract new customers and subscribers. Any such event
could have a material adverse effect on the Company's business, financial
condition and results of operations. Additionally, if the Company is unable to
achieve balanced network utilization over a 24-hour period, the Concentric
network could become overburdened at certain periods during the day, which could
adversely affect the quality of service provided by the Company. Conversely, due
to the high fixed cost nature of Concentric's infrastructure, under-utilization
of the Concentric network during certain periods of the day could adversely
affect the Company's ability to provide cost-efficient services at other times.
The failure of the Company to achieve balanced network utilization, because of
either over- or under-utilization, could have a material adverse effect on the
Company's business, financial condition and results of operations.
Dependence upon Suppliers; Sole and Limited Sources of Supply. The Company
relies on other companies to supply certain key components of its network
infrastructure, including telecommunications services and networking equipment,
which, in the quantities and quality demanded by the Company, are available only
from sole or limited sources. The Company from time to time has experienced
delays in receiving telecommunications services, and there can be no assurance
that the Company will be able to obtain such services on the scale and within
the time frames required by the Company at an affordable cost, or at all. Any
failure to obtain such services on a timely basis at an affordable cost would
have a material adverse effect on the Company's business, financial condition
and results of operations. Additionally, the Company purchases network
equipment pursuant to purchase orders placed from time to time, does not carry
significant inventories of these components and has no guaranteed supply
arrangements for such components. The Company's suppliers also sell products to
the Company's competitors and may in the future themselves become competitors of
the Company. There can be no assurance that the Company's suppliers will not
enter into exclusive arrangements with the Company's competitors or stop selling
their products or components to the Company at commercially reasonable prices or
at all.
Expansion of network infrastructures by the Company and others is placing, and
will continue to place, a significant demand on the Company's suppliers, some of
which have limited resources and production capacity. In addition, certain of
the Company's suppliers, in turn, rely on sole or limited sources of supply of
components included in their products. Failure of the Company's suppliers to
adjust to meet such increasing demand may prevent them from continuing to supply
components and products in the quantities and quality and at the times required
by the Company, or at all. The Company's inability to obtain sufficient
quantities of sole- or limited-source components or to develop alternative
sources if required could result in delays and increased costs in expanding, and
overburdening of, the Company's network infrastructure. Additionally, any
failure of the Company's sole- or limited-source suppliers to provide products
or components that comply with Internet standards or that interoperate with
other products or components used by the Company in its network infrastructure
would also have a material adverse effect on the Company's business, financial
condition and results of operations.
Dependence upon Network Infrastructure. The Company's success will depend
upon the capacity, reliability and security of its network infrastructure. The
Company must continue to expand and adapt its network infrastructure as the
number of users and the amount of information they wish to transfer increase,
and as customer requirements change. The expansion and adaptation of the
Company's network infrastructure will require substantial financial, operational
and management resources. There can be no assurance that the Company will be
able to expand or adapt its network infrastructure to meet additional demand or
its customers' changing requirements on a timely basis, at a commercially
reasonable cost, or at all. In addition, if demand for usage of the Concentric
network were to increase faster than projected or were to exceed the Company's
current forecasts, the network could experience capacity constraints, which
would adversely affect the performance of the system. Any failure of the Company
to expand its network infrastructure on a timely basis or adapt it to either
changing customer requirements or evolving industry standards, or capacity
constraints experienced by the Concentric network for any reason, could have a
material adverse effect on the Company's business, financial condition and
results of operations.
-16-
<PAGE>
As the Company expands its network and usage grows, increased stress will be
placed upon network hardware and traffic management systems. While the Company's
network has been designed with redundant backbone circuits to allow traffic re-
routing, there can be no assurance that the Company will not experience
failures, occurrence of natural disasters or other problems relating to any
link in the delivery chain or even catastrophic failure of the entire network.
Any damage or failure that causes interruptions in the Company's operations
could have a material adverse effect on the Company's business, financial
condition and results of operations.
Despite the implementation of network security measures, the core of the
Company's network infrastructure is vulnerable to computer viruses, break-ins
and similar disruptive problems caused by its customers or Internet users.
Computer viruses, break-ins or other problems caused by third parties could lead
to interruptions, delays or cessation in service to the Company's customers and
subscribers. Furthermore, such inappropriate use of the network by third parties
could also potentially jeopardize the security of confidential information
stored in the computer systems of the Company and its customers, which may
result in liability to the Company and also may deter potential subscribers.
Although the Company intends to continue to implement industry-standard security
measures, such measures occasionally have been circumvented in the past, and
there can be no assurance that measures implemented by the Company will not be
circumvented in the future. The costs and resources required to eliminate
computer viruses and alleviate other security problems may result in
interruptions, delays or cessation of service to the Company's customers that
could have a material adverse effect on the Company's business, financial
condition and results of operations.
Competition. The market for tailored value-added network services is
extremely competitive. There are no substantial barriers to entry, and the
Company expects that competition will intensify in the future. Many of the
Company's current and prospective competitors have greater market presence,
engineering and marketing capabilities, and financial, technological and
personnel resources than those available to the Company. As a result, they may
be able to develop and expand their communications and network infrastructures
more quickly, adapt more swiftly to new or emerging technologies and changes in
customer requirements, take advantage of acquisition and other opportunities
more readily, and devote greater resources to the marketing and sale of their
products and services than can the Company. Increased price or other
competition could result in erosion of the Company's market share and could have
a material adverse effect on the Company's business, financial condition and
results of operations. There can be no assurance that the Company will have the
financial resources, technical expertise or marketing and support capabilities
to continue to compete successfully.
Risks of Technological Change and Evolving Industry Standards. The markets
for the Company's services are characterized by rapidly changing technology,
evolving industry standards, changes in customer needs, emerging competition and
frequent new product and service introductions. The Company's future success
will depend, in part, on its ability to effectively use leading technologies; to
continue to develop its technical expertise; to enhance its current networking
services; to develop new services that meet changing customer needs; to
advertise and market its services; and to influence and respond to emerging
industry standards and other technological changes in a timely and cost-
effective basis. There can be no assurance that the Company will be successful
in effectively using new technologies, developing new services or enhancing its
existing services on a timely basis, or that such new technologies or
enhancements will achieve market acceptance.
-17-
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On April 22, 1997, a complaint was filed in the Los Angeles County,
California Superior Court against the Company and other unnamed defendants by
Sattel Communications LLC (Sattel). Sattel's complaint alleged that the Company
was in breach of an agreement to pay for up to $4.3 million of DSS Switches from
Sattel for use in the Company's network and also sought unspecified
consequential and punitive damages. On July 11, 1997, the Company settled the
complaint with Sattel in the amount of $4.4 million. The Company also agreed to
purchase, at the election of Sattel, up to 25% of the Company's common stock
held by Sattel on the day after the closing of the offering at the initial
public offering price. During the three months ended June 30, 1997, the Company
recorded $970,000 of other income relating to the reversal of reserves which had
previously been established for such litigation.
In late April and early May, 1997, three putative securities class action
complaints were filed in the United States District Court, Central District by
certain stockholders of Diana Corporation (Diana), the parent corporation of
Sattel, alleging securities fraud related to plaintiffs' purchase of shares of
Diana Common Stock in reliance upon allegedly misleading statements made by
defendants, Diana, Sattel and certain of their respective affiliates, officers
and directors. Concentric was named as a defendant in the complaint in
connection with certain statements made by Diana and officers of Diana related
to Concentric's purchase of network switching equipment from Diana's Sattel
subsidiary. The complaints do not appear to allege that Concentric made any
false or misleading statements. The plaintiffs seek unspecified compensatory
damages. The Company is currently unable to estimate a range of possible losses
associated with such lawsuits. While the ultimate outcome of such litigation is
uncertain, the Company believes it has meritorious defenses to the claims and
intends to conduct a vigorous defense. An unfavorable outcome in this matter
could have a material adverse effect on the Company's financial condition. In
addition, even if the ultimate outcome is resolved in favor of the Company, the
defense of such litigation could entail considerable cost and the diversion of
efforts of management, either of which could have a material adverse effect on
the Company's results of operations.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 30, 1997, at the annual stockholder's meeting, a quorum of
stockholders of the Company approved the following proposals: (1) the re-
election of the Board of Directors; (2) the amendment and restatement of the
Company's Certificate of Incorporation; (3) the designation of a new Series E
Preferred Stock to be designated solely in the event that the Company did not
affect an initial public offering of Common Stock by August 31, 1997; (4) the
reincorporation of the Company from the state of Florida into the state of
Delaware; (5) adoption of the Company's Amended and Restated 1996 Stock Plan and
the reservation of up to 1,100,000 shares of Common Stock for issuance
thereunder; (6) adoption of the Company's 1997 Stock Plan and the reservation of
1,500,000 shares of Common Stock for issuance thereunder; (7) adoption of the
Company's 1997 Employee Stock Purchase Plan and the reservation of 500,000
shares of Common Stock for issuance thereunder; (8) allowing the Company to
exceed the 30% limit for outstanding options and warrants of the Company as set
forth in Section 260.140.45 and related sections of the California Code of
Regulations and allowing for a 36% limit instead; and (9) ratification of the
appointment of Ernst & Young LLP to serve as the Company's independent auditors
for the ensuing year.
<TABLE>
<CAPTION>
Proposal 1. Election of Directors:
- --------
DIRECTOR FOR AGAINST ABSTAIN
- ------------------------------------------------------------------------- --------- --------- -------
<S> <C> <C> <C>
Henry R. Nothhaft 2,278,689 145,890 666
Robert W. Doede 2,427,875 8,211 666
Randy A. Maslow 2,431,208 4,877 666
Terence M. O'Toole 2,386,026 0 0
Vinod Khosla 2,386,026 0 0
Franco Regis 2,746,529 0 0
Gary E. Rieschel 2,746,529 0 0
Louis P. Bender III 2,746,529 0 0
Proposal 2. Amendment and Restatement of the Company's Certificate of Incorporation:
- ----------
<CAPTION>
FOR AGAINST ABSTAIN
--------- --------- -------
7,994,662 6,622 5,411
Proposal 3. Designation of a new Series E Preferred Stock to be designated solely in the event that the Company did not affect an
- ----------
initial public offering of Common Stock by August 31, 1997:
<CAPTION>
FOR AGAINST ABSTAIN
--------- --------- -------
7,994,662 5,511 6,522
Proposal 4. Reincorporation of the Company from the state of Florida into the state of Delaware:
- ----------
<CAPTION>
FOR AGAINST ABSTAIN
--------- --------- -------
7,979,663 6,733 20,299
Proposal 5. Adoption of the Company's Amended and Restated 1996 Stock Plan and the reservation of up to 1,100,000 shares of
- ----------
Common Stock for issuance thereunder:
<CAPTION>
FOR AGAINST ABSTAIN
--------- --------- -------
7,962,781 33,103 10,812
Proposal 6. Adoption of the Company's 1997 Stock Plan and the reservation of 1,500,000 shares of Common Stock for issuance
- ----------
thereunder:
<CAPTION>
FOR AGAINST ABSTAIN
--------- --------- -------
7,796,852 197,476 12,233
Proposal 7. Adoption of the Company's 1997 Employee Stock Purchase Plan and the reservation of 500,000 shares of Common Stock
- ----------
for issuance thereunder:
<CAPTION>
FOR AGAINST ABSTAIN
--------- --------- -------
7,966,882 63,880 12,368
Proposal 8. Allowing the Company to exceed the 30% limit for outstanding options and warrants of the Company as set forth
- ----------
in Section 260.140.45 and related sections of the California Code of Regulations and allowing for a 36% limit instead:
<CAPTION>
FOR AGAINST ABSTAIN
--------- --------- -------
7,928,991 63,880 13,826
Proposal 9. Ratify the appointment of Ernst & Young LLP as the Company's certified public accountants:
- ----------
<CAPTION>
FOR AGAINST ABSTAIN
--------- --------- -------
7,993,262 3,288 10,145
</TABLE>
Note: The foregoing stockholder tally reflects the votes of the shareholders of
the Company's predecessor corporation prior to the reincorporation of the
Company into Delaware.
ITEM 5. OTHER INFORMATION
Not applicable.
-18-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT TITLE
--------------- ---------------------------------------------------------------
<C> <S>
3.1* Form of Amended and Restated Certificate of Incorporation of
Registrant prior to completion of this offering.
3.2* Form of Amended and Restated Certificate of Incorporation of
Registrant to be effective upon completion of this offering.
3.3* Amended and Restated Bylaws of Registrant prior to completion of
this offering.
3.4* Amended and Restated Bylaws of Registrant to be effective upon
completion of this offering.
4.1* Form of Registrant's Common Stock Certificate.
10.1* Amended and Restated Registration Rights Agreement, as amended
and restated as of August 21, 1996, by and among the Registrant,
GS Capital Partners, L.P., Kleiner Perkins Caufield & Byers VII,
Comdisco, Inc., Intuit, Inc., certain listed holders of Series C
Convertible Preferred Stock, certain listed holders of Common
Stock, certain listed holders of Series D Convertible Preferred
Stock, and Racal-Datacom, Inc.
10.2* Preferred Stock and Warrant Purchase Agreement, dated as of April
20, 1995, by and among the Registrant, GS Capital Partners, L.P.,
and Kleiner Perkins Caufield & Byers VII and KPCB Information
Sciences Zaibatsu Fund II, as amended.
10.3* Form of Director and Officer Indemnification Agreement.
10.4* 1995 Stock Incentive Plan for Employees and Consultants, as
amended February 21, 1996.
10.5* Amended and Restated 1996 Stock Plan.
10.6* 1997 Stock Plan.
10.7* 1997 Employee Stock Purchase Plan.
10.8* Termination of Services and Indemnification Agreement, dated as
of February 15, 1996, by and between the Registrant and Marc
Collins-Rector and Chad Shackley.
10.9* Agreement, dated as of February 15, 1996, by and between the
Registrant and Randy Maslow.
10.10* Governance Agreement, dated May 15, 1997, by and among the
Registrant, Marc Collins-Rector, Chad Shackley, GS Capital
Partners, L.P., Kleiner Perkins Caufield & Byers VII, KPCB VII
Founders Fund, KPCB Information Sciences Zaibatsu Fund II, and
Intuit, Inc.
</TABLE>
-19-
<PAGE>
<TABLE>
EXHIBIT NO. EXHIBIT TITLE
--------------- ---------------------------------------------------------------
<C> <S>
10.11+* Employee Services and Staffing Agreement, dated November 1,
1995, between the Registrant and Critical Technologies, Inc., as
amended on September 30, 1996, and October 23, 1996, including
Colocation Services Agreement, dated as of November 1, 1994,
between the Registrant and Critical Technologies, Inc. and
amendments thereto.
10.12+* Internet-Sign Up Wizard Referral and Microsoft Internet Explorer
License and Distribution Agreement, dated March 28, 1997,
between the Registrant and Microsoft Corporation.
10.13+* OEM License Agreement dated July 27, 1995, between the
Registrant and Netscape Communications Corporation, as amended
by First Amendment, dated January 2, 1996, Second Amendment,
effective January 2, 1996, and Third Amendment, dated May 21,
1996.
10.14+* "Dial up Client" Agreement, dated August 21, 1995, between the
Registrant and Netscape Communications Corporation.
10.15+* "Internet Account Server" Participation Agreement, dated as
of January 14, 1997, between the Registrant and Netscape
Communications Corporation.
10.16+* Special Customer Arrangement, dated May 17, 1996, between MCI
Telecommunications Corporation and Sattel Communications LLC,
as amended by First Amendment, dated July 2, 1996; assigned to
Registrant by Assignment and Novation Agreement #2, dated as of
August 7, 1996.
10.17+* Master Agreement for MCI Enhanced Services, effective November
1, 1996, between the Registrant and MCI Telecommunications
Corporation.
10.18+* Amended and Restated Employee Services and Staffing Agreement,
dated June 19, 1997, between the Registrant and Critical
Technologies, Inc., as amended on September 30, 1996, and
October 23, 1996, including Colocation Services Agreement, dated
as of November 1, 1994, between the Registrant and Critical
Technologies, Inc. and amendments thereto.
10.19+* Amendment No. 3 to Internet Access Services Agreement, dated
August 23, 1996, between the Registrant and Intuit Inc.
10.20+* Contract for Services, dated June 17, 1996, by and between the
Registrant and MFS Telephone, Inc.
10.21+* AT&T Contract Tariff Order, dated June 17, 1996, and Addendum
of even date therewith.
10.22+* Master Lease Agreement Number CONO1C Between Concentric
Research Corporation and Racal-Datacom, Inc. ("Racal"), dated
August 4, 1994, as Supplemented by Letter Agreement, dated
March 30, 1995, Between the Corporation and Racal.
</TABLE>
-20-
<PAGE>
<TABLE>
EXHIBIT NO. EXHIBIT TITLE
--------------- ---------------------------------------------------------------
<C> <S>
10.23+* Lease Agreement Number CON04C between Concentric Network
Corporation and Racal-Datacom, Inc., dated June 26, 1996.
10.24+* Master On-site Maintenance Plan Agreement Number CON02C
Between Concentric Research Corporation and Racal-Datacom,
Inc., dated August 24, 1994.
10.25* Lease Agreement, dated November 1, 1996, effective March 11,
1996, by and between the Registrant and Saginaw Video
Associates, d.b.a. Saginaw Conference Center.
10.26* Amended and Restated Lease Agreement, dated as of October 7,
1996, between the Registrant and Larry Shackley.
10.27* (Master) Lease, dated January 26, 1988, between Tandem
Computers Incorporated and Spieker-French #130, Limited
Partnership, as amended by Lease Amendment No. 1, effective
February 5, 1990, and Extension Agreement, dated March 23,
1993.
10.28* Sublease, dated June 22, 1995, between the Registrant and Tandem
Computers Incorporated.
10.29* Sublease, dated April 25, 1995, between Tandem Computers
Incorporated and Passage Systems, Inc.
10.30* Assignment Agreement, dated December 6, 1996, by and between
the Registrant and Passage Systems, Inc.
10.31+* Internet Access Service Agreement, dated December 11, 1995,
effective as of August 1, 1995, between the Registrant and Intuit,
Inc., as amended.
10.32+* Revised Virtual Private Network Services, dated February 1, 1997,
between the Registrant and WebTV Networks, Inc.
10.33+* Support Services Agreement, dated March 31, 1997, by and
between the Registrant and MCI Telecommunications Corporation.
10.34* Note and Warrant Purchase Agreement, dated June 19, 1997, by and
between the Registrant and Williams Communications Group, Inc.
("WCG")
10.35* Service Credits Letter Agreement, dated June 19, 1997, by and
between the Registrant and WCG.
10.36* $1,100,000 Obligation Letter Agreement, dated June 19, 1997,
between the Registrant and WCG.
10.37* Agency Agreement and Distribution Agreement, dated June 19,
1997, between the Registrant and WCG.
10.38+* Co-Marketing Service Agreement, dated June 23, 1997 between the
Registrant and Netscape Communications, Inc. ("Netscape")
</TABLE>
-21-
<PAGE>
<TABLE>
EXHIBIT NO. EXHIBIT TITLE
--------------- ---------------------------------------------------------------
<C> <S>
10.39+* Trademark License Agreement, dated June 23, 1997, between the
Registrant and Netscape.
10.40+* Software License Order Form, dated June 23, 1997, between the
Registrant and Netscape.
10.41* Note and Warrant Purchase Agreement, dated June 23, 1997,
between the Registrant, Kleiner Perkins, Caufield & Byers VII and
KPCB Information Science Zaibatsu Fund VII
10.42 Common Stock and Warrant Purchase Agreement, dated July 25,
1997, between the Registrant and WCG.
10.43 Common Stock Purchase Agreement, dated July 30, 1997, between
the Registrant and Bay Networks, Inc.
10.44 Amended and Restated Common Stock Purchase Warrant, dated as
of June 19, 1997, between the Registrant and WCG.
10.45 Agreement for Purchase and Sale of Services and Equipment,
effective as of August 6, 1997, between the Registrant and WCG.
10.46 Agency Agreement, effective as of August 6, 1997, between the
Registrant and WCG.
10.47 Reseller Agreement, effective as of August 6, 1997, between the
Registrant and WCG.
10.48 License Purchase Agreement, effective as of August 6, 1997,
between the Registrant and WCG.
11.1 Statement of computation of earnings per share.
27.1 Financial Data Schedule
</TABLE>
----------------------------------------
* Incorporated by reference to exhibits filed with the Company's
Registration Statement on Form S-1 (File No. 333-27241), in the form
declared effective on July 31, 1997.
+ Certain information in these exhibits has been omitted and filed
separately with the Securities and Exchange Commission pursuant to a
confidential treatment request under 17 C.F.R. (S)(S) 200.80(b)(4),
200.83 and 230.46.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter
ended June 30, 1997.
-22-
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
Date: August 14, 1997 CONCENTRIC NETWORK CORPORATION
By /s/ Henry R. Nothhaft
------------------------------
Henry R. Nothhaft,
President, Chief Executive
Officer and Director
By /s/ Michael F. Anthofer
------------------------------
Michael F. Anthofer,
Senior Vice President and
Chief Financial Officer
-23-
<PAGE>
EXHIBIT 10.42
CONCENTRIC NETWORK CORPORATION
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
JULY 25, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
1. AGREEMENT TO SELL AND PURCHASE........................................ 1
1.1 Authorization Of Shares.......................................... 1
1.2 Sale And Purchase Of Common Stock................................ 1
1.3 Sale and Purchase of Preferred Stock............................. 2
1.4 Warrant Coverage................................................. 2
1.5 Hart-Scott-Rodino Compliance..................................... 2
2. CLOSING, DELIVERY AND PAYMENt......................................... 2
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................... 3
3.1 Organization, Good Standing And Qualification.................... 3
3.2 Authorization; Binding Obligations............................... 3
3.3 Compliance With Other Instruments................................ 3
3.4 Securities Exemption............................................. 4
3.5 Full Disclosure.................................................. 4
3.6 Valid Issuance of Shares......................................... 4
3.7 Litigation, Etc.................................................. 5
3.8 Governmental Consent, etc........................................ 5
3.9 Termination of Employment........................................ 5
3.10 Intellectual Property Rights..................................... 5
3.11 Proprietary Information Agreements............................... 5
3.12 Lock-up Agreements............................................... 6
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER........................... 6
4.1 Requisite Power And Authority.................................... 6
4.2 Consents......................................................... 7
4.3 Investment Representations....................................... 7
(a) Purchaser Is An Accredited Investor......................... 7
(b) Purchaser Bears Economic Risk............................... 7
(c) Acquisition For Own Account................................. 7
(d) Purchaser Can Protect Its Interest.......................... 7
(e) Company Information......................................... 7
4.4 Legends.......................................................... 7
4.5 Removal of Legend and Transfer Restrictions...................... 8
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
5. CONDITIONS TO CLOSING..................................................... 8
5.1 Conditions To Purchaser's Obligations At The Closing................. 8
(a) Concurrent Closing of Financing Event........................... 8
(b) Other Investor Participation.................................... 8
(c) Representations And Warranties True; Performance Of Obligations. 9
(d) Legal Investment................................................ 9
(e) Consents, Permits, And Waivers.................................. 9
(f) Certificate Of Status........................................... 9
(g) Copies.......................................................... 9
(h) Proceedings and Documents....................................... 9
(i) Outstanding Preferred Stock..................................... 9
(j) Compliance Certificate.......................................... 9
(k) Legal Opinion................................................... 10
5.2 Conditions To Obligations Of The Company............................. 10
(a) Concurrent Closing of the Financing Event....................... 10
(b) Representations And Warranties True............................. 10
(c) Performance Of Obligations...................................... 10
6. COVENANTS OF THE COMPANY.................................................. 10
6.1 Board Seat........................................................... 10
6.2 Notice of Acquisition Offer.......................................... 10
6.3 Rule 144 Reporting................................................... 10
7. MISCELLANEOUS............................................................. 11
7.1 Governing Law........................................................ 11
7.2 Survival............................................................. 11
7.3 Successors And Assigns............................................... 11
7.4 Separability......................................................... 11
7.5 Amendment And Waiver................................................. 11
7.6 Notices.............................................................. 12
7.7 Expenses............................................................. 12
7.8 Attorneys' Fees...................................................... 12
7.9 Titles And Subtitles................................................. 12
7.10 Counterparts......................................................... 12
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
7.11 Broker's Fees........................................................ 12
7.12 Termination.......................................................... 13
7.13 Subsequent Consents, Permits and Waivers............................. 13
</TABLE>
-iii-
<PAGE>
CONCENTRIC NETWORK CORPORATION
COMMON STOCK AND WARRANT PURCHASE AGREEMENT
THIS COMMON STOCK AND WARRANT PURCHASE AGREEMENT (THE "AGREEMENT") IS
ENTERED INTO AS OF JULY 25, 1997, BY AND BETWEEN CONCENTRIC NETWORK CORPORATION,
A FLORIDA CORPORATION (THE "COMPANY") AND WILLIAMS COMMUNICATIONS GROUP, INC., A
DELAWARE CORPORATION ("PURCHASER").
RECITALS
WHEREAS, the Company intends to reincorporate in Delaware by merger into
Concentric Network Corporation, a Delaware corporation that was formed for the
purpose of the reincorporation and that will be the surviving entity (the
"Company" as used in this Agreement refers to, prior to such merger, the Florida
corporation and, after such merger, the Delaware Corporation); and
WHEREAS, Purchaser desires to purchase shares of the Company's common stock
("Common Stock"), such purchase to be made in a private placement to close
concurrently with, but not before, the closing of the initial public offering of
the Company having an aggregate price to the public of $40 million (the "IPO")
pursuant to the registration statement filed on Form S-1 (File No. 333-27241)
with the Securities and Exchange Commission (the "Commission") (such
registration statement, as amended, shall be referred to herein as the
"Registration Statement"); and
WHEREAS, the Company desires to issue and sell the Shares (as defined
below) to Purchaser on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 AUTHORIZATION OF SHARES. On or prior to the Closing (as defined in
Section 2 below), the Company shall have authorized the sale and issuance to
Purchaser of the Shares. Prior to the Closing the Company will have adopted and
filed a Certificate of Incorporation (the "Certificate of Incorporation") with
the Secretary of State of the State of Delaware authorizing sufficient shares of
Common Stock to cover the sale and issuance of the Shares to be purchased
hereunder.
1.2 SALE AND PURCHASE OF COMMON STOCK. Subject to the terms and conditions
hereof, the Company hereby agrees to issue and sell to Purchaser and Purchaser
agrees to purchase from the Company, at the Closing, a number of shares of
Common Stock of the Company equal to the Purchase Price (as hereafter defined)
divided by the Price to Public per share set forth on the cover
<PAGE>
page of the final Prospectus (as defined in Section 3.5 below), at an aggregate
purchase price of Eleven Million Nine Hundred Fifty Thousand Dollars
($11,950,000) (the "Purchase Price"). The shares of Common Stock to be purchased
hereunder are referred to as the "Shares." For purposes of this Agreement, the
$40 million aggregate price to the public of the IPO shall include: (i) the
$11,950,000 to be invested by Purchaser as provided in this Agreement, (ii) the
$3,000,000 principal amount of that certain note issued to the Purchaser by the
Company (the "Note"), and (iii) the value of certain services to be provided by
the Purchaser to the Company after Closing which will be valued for purposes of
this Agreement at $2,000,000.
1.3 SALE AND PURCHASE OF PREFERRED STOCK. In the event that an IPO does
not close prior to October 31, 1997, Purchaser agrees, in lieu of and not in
addition to its obligations under Section 1.2 above, to purchase $11,950,000 of
Preferred Stock in the Preferred Financing (as defined below) pursuant to a
separate purchase agreement according to terms negotiated by the lead investor
in the Preferred Financing which must be reasonably satisfactory to the
Purchaser. For purposes of this Agreement, the term "Preferred Financing" shall
mean the next Preferred Stock financing of the Company if any, after the date
hereof, but to be completed no later than October 31, 1997, in which at least
$40,000,000 is invested in such Preferred Stock (including: (i) the $11,950,000
to be invested by Purchaser as provided in this Agreement, (ii) the $3,000,000
principal amount of that certain note issued to the Purchaser by the Company and
(iii) the value of certain services to be provided by the Purchaser to the
Company which will be valued for purposes of this Agreement at $2,000,000). For
purposes of this Agreement, the IPO and the Preferred Financing shall be
referred to alternatively as the "Financing Event."
1.4 WARRANT COVERAGE. As an inducement to the Purchaser to participate in
the Financing Event, the Company shall issue at the closing to the Purchaser a
warrant to purchase up to the number of shares of Common Stock of the Company
set forth in the Common Stock Purchase Warrant in substantially the form
attached hereto as Exhibit A (the "Warrant").
1.5 HART-SCOTT-RODINO COMPLIANCE. Notwithstanding anything else in this
Agreement, if the sale and issuance of the Shares is subject to the premerger
notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), it shall be a condition to the Closing that
any waiting period under the HSR Act applicable to the purchase of the Shares
shall have expired or been terminated and any approvals required thereunder
shall have been obtained, and each of the parties hereby agree to cooperate in
promptly filing premerger reports and in taking all steps reasonably necessary
to obtain early termination of any applicable HSR Act waiting periods. If any
such waiting period shall not have expired or been subject to early termination
on or before the date ninety (90) days from the date of this Agreement, either
party may terminate this Agreement by giving written notice to the other.
2. CLOSING, DELIVERY AND PAYMENT.
Subject to the terms of Section 5, the closing of the sale and purchase of
the Shares under this Agreement (the "Closing") shall take place concurrently
with, but not before, the closing of the IPO at the offices of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, 650 Page Mill Road,
-2-
<PAGE>
Palo Alto, California 94304. The date of the Closing is referred to as the
"Closing Date." At the Closing, subject to the terms and conditions hereof, the
Company will deliver to Purchaser a certificate representing the number of
Shares to be purchased at the Closing against payment by or on behalf of
Purchaser of the Purchase Price therefor by cash, wire transfer, or by such
other means as shall be mutually agreeable to Purchaser and the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the Schedule of Exceptions attached hereto as Annex
1 or as otherwise disclosed in the Registration Statement on Form S-1 (File No.
333-27241) filed with the Securities and Exchange Commission (the "Registration
Statement"), the Company hereby represents and warrants to Purchaser as follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida, and will, as of the Closing Date, be a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has full power and authority to own and operate its
properties and assets, and to carry on its business as presently conducted. The
Company is duly qualified, is authorized to do business and is in good standing
as a foreign corporation in all jurisdictions in which the nature of its
activities and of its properties (both owned and leased) makes such
qualification necessary, except for those jurisdictions, in the aggregate, in
which failure to do so would not have a material adverse effect on the Company
or its business.
3.2 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the part
of the Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement and the Certificate of
Incorporation, for the sale and issuance of the Shares pursuant hereto and for
the performance of the Company's obligations hereunder has been taken or will be
taken prior to the Closing. This Agreement, when executed and delivered, will
be a valid and binding obligation of the Company enforceable in accordance with
its terms. The sale of the Shares is not and will not be subject to any
preemptive rights or rights of first refusal that have not been properly waived
or complied with. When issued in compliance with the provisions of this
Agreement and the Certificate of Incorporation, the Shares will be validly
issued, fully paid and nonassessable, and will be free of any liens or
encumbrances; provided, however, that the Shares may be subject to restrictions
on transfer under state and/or federal securities laws as set forth herein or as
otherwise required by such laws at the time a transfer is proposed.
3.3 COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery and
performance of and compliance with this Agreement and the issuance and sale of
the Shares pursuant hereto will not (i) materially conflict with, or result in a
material breach or violation of, or constitute a material default under, or
result in the creation or imposition of any material lien, (ii) violate,
conflict with or result in the breach of any material terms of, or result in the
material modification of, any material contract or otherwise give any other
contracting party the right to terminate a material contract, or constitute (or
with notice or lapse of time both constitute) a material default under any
material contract to which the Company is a party or by or to which it or any of
its assets or properties may
-3-
<PAGE>
be bound or subject or (iii) result in any violation, or be in conflict with or
constitute a default under any term, of its charter or bylaws..
3.4 SECURITIES EXEMPTION. Assuming the accuracy of the representations
and warranties of the Purchaser contained in Section 4.3 hereof, the offer, sale
and issuance of the Shares will be exempt from the registration requirements of
the Securities Act of 1933, as amended (the "Securities Act"), and will have
been registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws.
3.5 FULL DISCLOSURE.
(a) The Company has delivered to Purchaser a draft of the
Registration Statement substantially in the form to be filed with the
Commission.
(b) The Company shall deliver the finalized text of the preliminary
prospectus included in a pre-effective amendment to the Registration Statement
that is to be printed by the Company for distribution to prospective purchasers
(the "Preliminary Prospectus"). When so delivered, the Preliminary Prospectus
shall be appended to this Agreement as Exhibit B and incorporated herein as if
delivered at the time this Agreement was executed. The Preliminary Prospectus
will contain all statements that are required to be stated therein in accordance
with, and will comply as to form in all material respects with, the Securities
Act and will not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading.
(c) When the Registration Statement becomes effective, and at all
times subsequent thereto, up to the Closing Date, (1) the Registration Statement
and the Prospectus (as hereinafter defined) and any amendments or supplements
thereto will contain substantially all statements that are required to be stated
therein in accordance with the Securities Act and will comply as to form in all
material respects with to the requirements of the Securities Act, and (2)
neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, will include any untrue statement of a material fact or will
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading.
For purposes of this Agreement, "Prospectus" means the prospectus, as
amended, on file with the Commission at the time the Registration Statement
becomes effective, including the information deemed to be part of the
Registration Statement at the time of effectiveness pursuant to Rule 430A, if
applicable, except that if the Prospectus filed by the Company pursuant to Rule
424(b) differs from the prospectus on file at the time the Registration
Statement becomes effective, the term "Prospectus" shall refer to the Rule
424(b) Prospectus from and after the time it was filed with the Commission or
transmitted to the Commission for filing.
3.6 VALID ISSUANCE OF SHARES. The Shares which will be purchased by
Purchaser hereunder, when issued, sold and delivered in accordance with the
terms hereof for the consideration expressed herein, will be duly and validly
authorized and issued, fully paid and nonassessable.
-4-
<PAGE>
3.7 LITIGATION, ETC. There is no action, suit, proceeding nor, to the best
of the Company's knowledge, any investigation pending or currently threatened
against the Company, that questions the validity of this Agreement or the right
of the Company to enter into such agreements, or which might result, either
individually or in the aggregate, in any material adverse change in the assets,
condition, affairs or prospects of the Company, financial or otherwise.
3.8 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization of,
or designation, declaration or filing with, any governmental authority on the
part of the Company is required in connection with the valid execution,
delivery, and performance of this Agreement or the offer, sale or issuance of
the Shares, or the consummation of any other transaction contemplated by this
Agreement except certain filings as may be required under the Securities Act and
state securities laws and regulations, which filings will be made timely in
accordance with the applicable law or regulation.
3.9 TERMINATION OF EMPLOYMENT. The Company is not aware that any officer
or key employee, or that any group of key employees, intends to terminate their
employment with the Company, nor does the Company have a present intention to
terminate the employment of any of the foregoing. The employment of each
officer and employee of the Company is terminable at the will of the Company.
3.10 INTELLECTUAL PROPERTY RIGHTS. The Company (a) owns or has the right
to use, free and clear of all rights, liens, claims and restrictions, all
patents, trademarks, service marks, trade names, copyrights and other intangible
or intellectual property rights (and licenses with respect to the foregoing)
needed for or used in the conduct of its business as now conducted and as
proposed to be conducted without infringing upon or otherwise acting adversely
to the right or claimed right of any person under or with respect to any of the
foregoing and (b) does not and will not infringe any patents, copyrights,
trademarks or other intellectual property rights (including trade secrets),
privacy or similar rights of any third party, nor has any material claim
(whether embodied in an action, past or present) of such infringement been, to
the Company's knowledge, threatened or asserted nor is such a claim pending
against the Company. The Company owns or has the unrestricted right to use all
trade secrets, including know-how, inventions, designs, processes, and technical
data required for or incident to the development, manufacture, operation and
sale of all products and services sold or proposed to be sold by the Company and
all of the patents, trademarks, service marks, trade names, copyrights and trade
secrets of the Company are held by the Company free and clear of any rights,
liens or claims of others, including, without limitation, current and former
employees, former employers of all current and former employees, consultants,
officers, directors and shareholders of the Company. The Company has not
received any communications alleging that the Company has violated or, by
conducting its business as now conducted and as proposed to be conducted would
violate any of the patents, trademarks, service marks, trade names, copyrights
or trade secrets or other proprietary rights of any other person or entity.
3.11 PROPRIETARY INFORMATION AGREEMENTS. All employees and consultants whom
the Company considers to be key technical employees or consultants are parties
to a written agreement ("Proprietary Information and Inventions Agreement")
under which each such employee or consultant
-5-
<PAGE>
(i) is obligated to disclose and transfer to the Company, without the receipt by
such person of any additional value therefor (other than normal salary or fees
for consulting services), all inventions, developments and discoveries which,
during the period of employment with or performance of services for the Company,
he or she makes or conceives of either solely or jointly with others, that
relate to any subject matter which his or her work for the Company may be
concerned, or relate to or are connected with the business, products or projects
of the Company, or involve the use of the time, material or facilities of the
Company, and (ii) is obligated to maintain the confidentiality of proprietary
information of the Company. To the Company's knowledge, no Company employee or
consultant is in violation of the Proprietary Information and Inventions
Agreement to which such employee or consultant is a party. To the Company's
knowledge, no Company employee or consultant is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would conflict with their obligation to use their best efforts to
promote the interests of the Company or that would conflict with the Company's
business as conducted or as proposed to be conducted. Neither the execution nor
delivery of this Agreement nor the carrying on of the Company's business by the
employees and consultants of the Company, nor the conduct of the Company's
business as proposed, will, to the Company's knowledge, conflict with or result
in a breach of the terms, conditions or provisions of, or constitute a default
under, any contract, covenant or instrument under which any of such employees
and consultants is now obligated. The Company does not believe it is or will be
necessary to utilize any inventions of any of its employees and consultants (or
people it currently intends to hire) made prior to their employment by the
Company.
3.12 LOCK-UP AGREEMENTS. GS Capital Partners, L.P., Kleiner Perkins
Caufield & Byers VII, KPCB VII Founders Fund, KPCB Information Sciences Zaibatsu
Fund II and TMI Telemedia International Ltd. and the executive officers of the
Company have entered into 360 day lock-up agreements with the Company and/or the
underwriters of the IPO in substantially similar form to that entered into by
Purchaser and Racal Datacom Inc. will be, prior to the effectiveness of the
Registration Statement, subject to a 180 day lock-up restriction.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Except as set forth in the Williams Holdings of Delaware, Inc.'s annual
report on Form 10-K for the year ended December 31, 1996 and its quarterly
report on Form 10-Q for the quarter ended March 31, 1997, Purchaser hereby
represents and warrants to the Company as follows (such representations and
warranties do not lessen or obviate the representations and warranties of the
Company set forth in this Agreement):
4.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary power and
authority under all applicable provisions of law to execute and deliver this
Agreement and to carry out the provisions of this Agreement. All action on
Purchaser's part required for the lawful execution and delivery of this
Agreement has been or will be effectively taken prior to the Closing. This
Agreement, when executed and delivered, will be a valid and binding obligation
of Purchaser, enforceable in accordance with its terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization,
-6-
<PAGE>
moratorium or other laws of general application affecting enforcement of
creditors' rights and (ii) general principles of equity that restrict the
availability of equitable remedies.
4.2 CONSENTS. All consents, approvals, orders, authorizations,
registrations, qualifications, designations, declarations or filings with any
governmental or banking authority on the part of Purchaser required in
connection with the consummation of the transactions contemplated in this
Agreement have been or shall have been obtained prior to and be effective as of
the Closing.
4.3 INVESTMENT REPRESENTATIONS. Purchaser understands that the Shares
have not been registered under the Securities Act. Purchaser also understands
that the Shares are being offered and sold pursuant to an exemption from
registration contained in the Securities Act based in part upon Purchaser's
representations contained in the Agreement. Purchaser hereby represents and
warrants as follows:
(a) PURCHASER IS AN ACCREDITED INVESTOR. Purchaser represents that
Purchaser is an Accredited Investor within the meaning of Rule 501(a) of
Regulation D under the Securities Act.
(b) PURCHASER BEARS ECONOMIC RISK. Purchaser understands that it must
bear the economic risk of this investment indefinitely unless the Shares are
registered pursuant to the Securities Act, or an exemption from registration is
available. Purchaser understands that it has no registration rights with respect
to the Shares. Purchaser also understands that there is no assurance that any
exemption from registration under the Securities Act will be available and that,
even if available, such exemption may not allow Purchaser to transfer all or any
portion of the Shares under the circumstances, in the amounts or at the times
Purchaser might propose.
(c) ACQUISITION FOR OWN ACCOUNT. Purchaser is acquiring the Shares
for Purchaser's own account for investment only, and not with a view towards
their distribution within the meaning of the Securities Act.
(d) PURCHASER CAN PROTECT ITS INTEREST. Purchaser represents that by
reason of its, or of its management's, business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement. Purchaser is not a corporation,
trust or partnership specifically formed for the purpose of consummating these
transactions.
(e) COMPANY INFORMATION. Purchaser has had an opportunity to discuss
the Company's business, management and financial affairs with directors,
officers and management of the Company and has had the opportunity to review the
Company's operations and facilities. Purchaser has also had the opportunity to
ask questions of and receive answers from, the Company and its management
regarding the terms and conditions of this investment.
4.4 LEGENDS. Each certificate representing the Shares may be endorsed
with the following legends:
-7-
<PAGE>
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND ARE "RESTRICTED SECURITIES" AS DEFINED IN RULE 144 PROMULGATED
UNDER THE ACT. THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR
OTHERWISE DISTRIBUTED EXCEPT (I) IN CONJUNCTION WITH AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SHARES UNDER THE ACT, OR (II) IN
COMPLIANCE WITH RULE 144 OR (III) PURSUANT TO AN OPINION OF COUNSEL TO
THE CORPORATION THAT SUCH REGISTRATION OR COMPLIANCE IS NOT REQUIRED
AS TO SUCH SALE, OFFER OR DISTRIBUTION."
(b) Any other legends required by applicable federal or state blue
sky or securities laws.
The Company need not register a transfer of any Shares, and may also instruct
its transfer agent not to register the transfer of the Shares, unless the
conditions specified in the foregoing legends are satisfied.
4.5 REMOVAL OF LEGEND AND TRANSFER RESTRICTIONS.
(a) Any legend endorsed on a certificate pursuant to subsection
4.4(a) and the stop transfer instructions with respect to such Shares shall be
removed and the Company shall issue a certificate without such legend to the
holder thereof if such legend may be properly removed under the terms of Rule
144 promulgated under the Securities Act or if such holder provides the Company
with an opinion of counsel for such holder, reasonably satisfactory to legal
counsel for the Company, to the effect that a sale, transfer or assignment of
such Shares may be made without registration.
(b) Any legend endorsed on a certificate pursuant to subsection
4.4(b) and the stop transfer instructions with respect to such Shares shall be
removed upon receipt by the Company of an order of an appropriate state
securities authority authorizing such removal.
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO PURCHASER'S OBLIGATIONS AT THE CLOSING. Purchaser's
obligation to purchase the Shares identified in Section 1.2 of the Agreement at
the Closing are subject to the satisfaction, at or prior to the Closing, of the
following conditions:
(a) CONCURRENT CLOSING OF FINANCING EVENT. The Closing shall occur
concurrently with, and not before, the closing of the IPO.
(b) OTHER INVESTOR PARTICIPATION. The Company will have a binding
commitment by other investors willing to purchase an additional $3 million of
the Company's Common Stock in connection with the investment by the Purchaser
hereunder, pursuant to terms and conditions no
-8-
<PAGE>
more favorable to such investors than that offered to Purchaser. The closing of
this investment will occur concurrently with, and not before the closing of the
IPO.
(c) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF OBLIGATIONS.
The representations and warranties made by the Company in Section 3 (excepting
Section 3.5(b)) hereof shall be true and correct in all material respects as of
the Closing with the same force and effect as if they had been made as of the
Closing, and the Company shall have performed and complied with all obligations
and conditions herein required to be performed or complied with by it on or
prior to the Closing; provided, that the foregoing limitation as to "material
respects" shall not apply to those representations and warranties already
subject to a materiality qualifier.
(d) LEGAL INVESTMENT. At the time of the Closing, the sale and
issuance of the Shares shall be legally permitted by all laws and regulations to
which Purchaser and the Company are subject.
(e) CONSENTS, PERMITS, AND WAIVERS. The Company shall have obtained
any and all authorizations, approvals, consents, permits and waivers necessary
or appropriate for consummation of the transactions contemplated by this
Agreement (except for such as may be properly obtained subsequent to the
Closing, and such items shall be effective on and as of the Closing).
(f) CERTIFICATE OF STATUS. The Company shall have obtained a
Certificate of Status from the Delaware Secretary of State dated as of a recent
date prior to the Closing.
(g) COPIES. The Company shall have delivered to Purchaser a true and
complete copy of the Registration Statement and any amendments thereto, of each
exhibit filed therewith and of the Preliminary Prospectus and final form of
Prospectus.
(h) PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
and instruments incident to such transactions shall be reasonably satisfactory
in form and substance to counsel to Purchaser, and counsel to Purchaser shall
have received all such counterpart originals or certified or other copies of
such documents as they may reasonably request.
(i) OUTSTANDING PREFERRED STOCK. The shares of Preferred Stock of the
Company, issued and outstanding as of the date of this Agreement, will convert
into shares of Common Stock in connection with the IPO.
(j) COMPLIANCE CERTIFICATE. The Company shall have delivered to
Purchaser a Compliance Certificate, executed by the President and the Chief
Financial Officer of the Company, dated the Closing Date, to the effect that the
conditions specified in subparagraphs (a) through (i) of this Section 5.1 have
been satisfied.
-9-
<PAGE>
(k) LEGAL OPINION. The Company shall have delivered an opinion of
counsel to the Purchaser in substantially the form attached hereto as Exhibit C.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's obligation to
issue and sell the Shares at the Closing is subject to the satisfaction, on or
prior to the Closing, of the following conditions:
(a) CONCURRENT CLOSING OF THE FINANCING EVENT. The Closing shall
occur concurrently with, but not before, the closing of the Financing Event.
(b) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties made by Purchaser in Section 4 hereof shall be true and correct in
all material respects at the date of the Closing, with the same force and effect
as if they had been made on and as of said date.
(c) PERFORMANCE OF OBLIGATIONS. Purchaser shall have performed and
complied with all agreements and conditions herein required to be performed or
complied with by Purchaser on or before the Closing.
6. COVENANTS OF THE COMPANY.
6.1 BOARD SEAT. The Company will place a designee of the Purchaser on the
Board of Directors of the Company to fill the vacancy left by the resignation of
Randy Maslow, which resignation is to be effective as of the closing of the IPO,
and will nominate a designee of the Purchaser to sit on the Board of Directors
so long as Purchaser holds at least 5% of the issued and outstanding capital
stock of the Company.
6.2 NOTICE OF ACQUISITION OFFER. The Company will provide a copy to
Purchaser of any notice delivered or required to be delivered to TMI Telemedia
International Ltd. ("TMI") pursuant to Section 1.0 of Annex 6 of that certain
Network Deployment, Services Distribution and Network Provision Agreement
between the Company and TMI immediately after such notice is delivered to TMI.
6.3 RULE 144 REPORTING. With a view to making available to Purchaser the
benefits of certain rules and regulations of the SEC which may permit the sale
of the Shares to the public without registration, the Company agrees at all
times after ninety (90) days after the effective date of the Registration
Statement to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144.
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
-10-
<PAGE>
(c) So long as Purchaser owns any Shares, to furnish to Purchaser
within a reasonable time upon a written request by Purchaser, a written
statement by the Company as to its compliance with the reporting requirements of
said Rule 144 (at any time after ninety (90) days after the effective date of
the first registration statement filed by the Company for an offering of its
securities to the general public) and of the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
so filed by the Company as Purchaser may reasonably request in complying with
any rule or regulation of the SEC allowing Purchaser to sell any such securities
without registration.
7. MISCELLANEOUS
7.1 GOVERNING LAW. This Agreement shall be governed in all respects by the
laws of the State of California.
7.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by Purchaser and the closing of
the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument, except as
expressly provided otherwise in such certificate or instrument.
7.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each person who shall be
a holder of the Shares from time to time; provided, however, that prior to the
receipt by the Company of adequate written notice of the transfer of any Shares
specifying the full name and address of the transferee, the Company may deem and
treat the person listed as the holder of such Shares in its records as the
absolute owner and holder of such Shares for all purposes, including the payment
of any dividends or any redemption price.
7.4 SEPARABILITY. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, such provision shall, to the extent practicable, be
modified so as to make it valid, legal and enforceable and to maintain as nearly
as practicable the intent of the parties, and the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
7.5 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the written
consent of the parties hereto.
-11-
<PAGE>
(b) The obligations of the Company and the rights of the holder of
the Shares under this Agreement may be waived only with the written consent of
the parties hereto.
(c) Except to the extent provided in this Section 7.5, neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated, except by a statement in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought.
(d) Any amendment or waiver effected in accordance with this Section
7.5 shall be binding upon any future holder of some or all of the Shares.
7.6 NOTICES. All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed effectively given and received
(a) upon personal delivery, (b) on the fifth day following mailing sent by
registered or certified mail, return receipt requested, postage prepaid, (c)
upon confirmed delivery by means of a nationally recognized overnight courier
service or (d) upon confirmed transmission of facsimile addressed: (i) if to
Purchaser, at Purchaser's address as set forth on the Company's records, or at
such other address as Purchaser shall have furnished to the Company in writing
or (ii) if to the Company, at its address as set forth at the end of this
Agreement, or at such other address as the Company shall have furnished to
Purchaser in writing.
7.7 EXPENSES. The Company shall pay all costs and expenses that it incurs
with respect to the negotiation, execution, delivery and performance of the
Agreement, and Purchaser shall pay all costs and expenses that it incurs with
respect to the negotiation, execution, delivery and performance of this
Agreement.
7.8 ATTORNEYS' FEES. If legal action is brought to enforce or interpret
this Agreement, the prevailing party shall be entitled to recover its reasonable
attorneys' fees and legal costs in connection therewith.
7.9 TITLES AND SUBTITLES. The titles of the paragraphs and subparagraphs
of the Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
7.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
7.11 BROKER'S FEES. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 7.11 being untrue.
-12-
<PAGE>
7.12 TERMINATION. If the Registration Statement for the IPO has not become
effective or the Preferred Financing has not closed by October 31, 1997,
Purchaser in its discretion may elect to terminate this Agreement by providing
written notice to the Company by November 10, 1997.
7.13 SUBSEQUENT CONSENTS, PERMITS AND WAIVERS. The Company shall obtain
promptly after the Closing all authorizations, approvals, consents, permits and
waivers that are necessary or applicable for consummation of the transactions
contemplated by this Agreement and that were not obtained prior to the Closing
because they may be properly obtained subsequent to the Closing.
-13-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth in the first paragraph hereof.
COMPANY:
CONCENTRIC NETWORK CORPORATION
10590 N. Tantau Avenue
Cupertino, CA 95014
By: /s/ Henry R. Nothhaft
---------------------------------------
Henry R. Nothhaft
President and Chief Executive Officer
PURCHASER:
WILLIAMS COMMUNICATIONS GROUP, INC.
By: /s/ S. Miller Williams
---------------------------------------
S. Miller Williams
Its
---------------------------------------
-14-
<PAGE>
EXHIBIT 10.43
CONCENTRIC NETWORK CORPORATION
COMMON STOCK PURCHASE AGREEMENT
JULY 30, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
1. Agreement To Sell and Purchase.......................... 1
1.1 Authorization Of Shares........................... 1
1.2 Sale And Purchase Of Common Stock................. 1
1.3 Hart-Scott-Rodino Compliance...................... 1
2. Closing, Delivery And Payment........................... 1
3. Representations and Warranties Of The Company........... 2
3.1 Organization, Good Standing And Qualification..... 2
3.2 Authorization; Binding Obligations................ 3
3.3 Compliance With Other Instruments................. 3
3.4 Securities Exemption.............................. 3
3.5 Full Disclosure................................... 3
3.6 Valid Issuance of Shares.......................... 4
3.7 Litigation, Etc................................... 4
3.8 Governmental Consent, etc......................... 4
3.9 Termination of Employment......................... 5
3.10 Intellectual Property Rights...................... 5
3.11 Proprietary Information Agreements................ 5
3.12 Lock-up Agreements................................ 6
4. Representations And Warranties Of Purchaser............. 6
4.1 Requisite Power And Authority..................... 6
4.2 Consents.......................................... 6
4.3 Investment Representations........................ 6
4.4 Legends........................................... 7
4.5 Removal of Legend and Transfer Restrictions....... 8
5. Conditions To Closing................................... 8
5.1 Conditions To Purchaser's Obligations At
The Closing...................................... 8
5.2 Conditions To Obligations Of The Company.......... 9
6. Rule 144 Reporting...................................... 9
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
7. Miscellaneous.......................................... 10
7.1 Governing Law.................................... 10
7.2 Survival......................................... 10
7.3 Successors And Assigns........................... 10
7.4 Separability..................................... 10
7.5 Amendment And Waiver............................. 11
7.6 Notices.......................................... 11
7.7 Expenses......................................... 11
7.8 Attorneys' Fees.................................. 11
7.9 Titles And Subtitles............................. 11
7.10 Counterparts..................................... 11
7.11 Broker's Fees.................................... 12
7.12 Termination...................................... 12
7.13 Subsequent, Consents, Permits and Waivers........ 12
List of Exhibits:
Exhibit A - Preliminary Prospectus
Exhibit B - Legal Opinion
-ii-
<PAGE>
CONCENTRIC NETWORK CORPORATION
COMMON STOCK PURCHASE AGREEMENT
THIS COMMON STOCK PURCHASE AGREEMENT (THE "AGREEMENT") IS ENTERED INTO AS
OF JULY 30, 1997, BY AND BETWEEN CONCENTRIC NETWORK CORPORATION, A FLORIDA
CORPORATION (THE "COMPANY") AND BAY NETWORKS, INC., A DELAWARE CORPORATION
("PURCHASER").
RECITALS
WHEREAS, the Company intends to reincorporate in Delaware by merger into
Concentric Network Corporation, a Delaware corporation that was formed for the
purpose of the reincorporation and that will be the surviving entity; the
"Company" as used in this Agreement refers to, prior to such merger, the Florida
corporation and, after such merger, the Delaware Corporation; and
WHEREAS, Purchaser desires to purchase shares of the Company's common
stock ("Common Stock"), such purchase to be made in a private placement to close
concurrently with, but not before, the closing of the initial public offering of
the Company having an aggregate price to the public of $40 million (the "IPO")
pursuant to the registration statement filed on Form S-1 (File No. 333-27241)
with the Securities and Exchange Commission (the "Commission") (such
registration statement, as amended, shall be referred to herein as the
"Registration Statement"); and
WHEREAS, the Company desires to issue and sell the Shares (as defined
below) to Purchaser on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 AUTHORIZATION OF SHARES. On or prior to the Closing (as defined in
Section 2 below), the Company shall have authorized the sale and issuance to
Purchaser of the Shares. Prior to the Closing the Company will have adopted and
filed a Certificate of Incorporation (the "Certificate of Incorporation") with
the Secretary of State of the State of Delaware authorizing sufficient shares of
Common Stock to cover the sale and issuance of the Shares to be purchased
hereunder.
1.2 SALE AND PURCHASE OF COMMON STOCK. Subject to the terms and
conditions hereof, the Company hereby agrees to issue and sell to Purchaser and
Purchaser agrees to purchase from the Company, at the Closing, a number of
shares of Common Stock of the Company equal to the Purchase Price (as hereafter
defined) divided by the Price to Public per share set forth on the cover
<PAGE>
page of the final Prospectus (as defined in Section 3.5 below) at an aggregate
purchase price of Three Million Dollars ($3,000,000) (the "Purchase Price"). The
shares of Common Stock to be purchased hereunder are referred to as the
"Shares." For purposes of this Agreement, the $40 million aggregate price to the
public of the IPO shall include: (i) the $3,000,000 to be invested by Purchaser
as provided in this Agreement, and (ii) an aggregate investment of approximately
$17 million to be made in the Company by Williams Communications Group, Inc.
("Williams").
1.3 HART-SCOTT-RODINO COMPLIANCE. Notwithstanding anything else in this
Agreement, if the sale and issuance of the Shares is subject to the premerger
notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), it shall be a condition to the Closing that
any waiting period under the HSR Act applicable to the purchase of the Shares
shall have expired or been terminated and any approvals required thereunder
shall have been obtained, and the parties shall cooperate in promptly filing
premerger reports and in taking all steps reasonably necessary to obtain early
termination of any applicable HSR Act waiting periods. If any such waiting
period shall not have expired or been subject to early termination on or before
the date ninety (90) days from the date of this Agreement, either party may
terminate this Agreement by giving written notice to the other.
2. CLOSING, DELIVERY AND PAYMENT.
Subject to the terms of Section 5, the closing of the sale and purchase of
the Shares under this Agreement (the "Closing") shall take place concurrently
with, but not before, the closing of the IPO at the offices of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, 650 Page Mill Road, Palo Alto,
California 94304. The date of the Closing is referred to as the "Closing Date."
At the Closing, subject to the terms and conditions hereof, the Company will
deliver to Purchaser a certificate representing the number of Shares to be
purchased at the Closing against payment by or on behalf of Purchaser of the
Purchase Price therefor by cash, wire transfer, or by such other means as shall
be mutually agreeable to Purchaser and the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth in the Schedule of Exceptions attached hereto as Annex
1 or as otherwise disclosed in the Registration Statement on Form S-1 (File No.
333-27241) filed with the Securities and Exchange Commission (the "Registration
Statement"), the Company hereby represents and warrants to Purchaser as
following:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida, and will, as of the Closing Date, be a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has full power and authority to own and operate its
properties and assets, and to carry on its business as presently conducted. The
Company is duly qualified, is authorized to do business and is in good standing
as a foreign corporation in all jurisdictions in which the nature of its
activities and of its properties (both owned and leased) makes
2
<PAGE>
such qualification necessary, except for those jurisdictions, in the aggregate,
in which failure to do so would not have a material adverse effect on the
Company or its business.
3.2 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the
part of the Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement and the Certificate of
Incorporation, for the sale and issuance of the Shares pursuant hereto and for
the performance of the Company's obligations hereunder has been taken or will be
taken prior to the Closing. This Agreement, when executed and delivered, will be
a valid and binding obligation of the Company enforceable in accordance with its
terms. The sale of the Shares is not and will not be subject to any preemptive
rights or rights of first refusal that have not been properly waived or complied
with. When issued in compliance with the provisions of this Agreement and the
Certificate of Incorporation, the Shares will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances; provided, however,
that the Shares may be subject to restrictions on transfer under state and/or
federal securities laws as set forth herein or as otherwise required by such
laws at the time a transfer is proposed.
3.3 COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery and
performance of and compliance with this Agreement and the issuance and sale of
the Shares pursuant hereto will not (i) materially conflict with, or result in a
material breach or violation of, or constitute a material default under, or
result in the creation or imposition of any material lien, (ii) violate,
conflict with or result in the breach of any material terms of, or result in the
material modification of, any material contract or otherwise give any other
contracting party the right to terminate a material contract, or constitute (or
with notice or lapse of time both constitute) a material default under any
material contract to which the Company is a party or by or to which it or any of
its assets or properties may be bound or subject or (iii) result in any
violation, or be in conflict with or constitute a default under any term, of its
charter or bylaws.
3.4 SECURITIES EXEMPTION. Assuming the accuracy of the representations
and warranties of the Purchaser contained in Section 4.3 hereof, the offer, sale
and issuance of the Shares will be exempt from the registration requirements of
the Securities Act of 1933, as amended (the "Securities Act"), and will have
been registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws.
3.5 FULL DISCLOSURE.
(a) The Company has delivered to Purchaser a draft of the
Registration Statement substantially in the form filed with the Commission.
(b) The Company shall deliver the finalized text of the
preliminary prospectus included in any pre-effective amendment to the
Registration Statement that is to be printed by the Company for distribution to
prospective purchasers (the "Preliminary Prospectus"). When so delivered, the
Preliminary Prospectus shall be appended to this Agreement as Exhibit A and
---------
incorporated herein as if delivered at the time this Agreement was executed. The
Preliminary
3
<PAGE>
Prospectus will contain all statements that are required to be stated therein in
accordance with, and will comply as to form in all material respects with, the
Securities Act and will not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading.
(c) When the Registration Statement becomes effective, and at all
times subsequent thereto, up to the Closing Date, (1) the Registration Statement
and the Prospectus (as hereinafter defined) and any amendments or supplements
thereto will contain substantially all statements that are required to be stated
therein in accordance with the Securities Act and will comply as to form in all
material respects with to the requirements of the Securities Act, and (2)
neither the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, will include any untrue statement of a material fact or will
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading.
For purposes of this Agreement, "Prospectus" means the prospectus, as
amended, on file with the Commission at the time the Registration Statement
becomes effective, including the information deemed to be part of the
Registration Statement at the time of effectiveness pursuant to Rule 430A, if
applicable, except that if the Prospectus filed by the Company pursuant to Rule
424(b) differs from the prospectus on file at the time the Registration
Statement becomes effective, the term "Prospectus" shall refer to the Rule
424(b) Prospectus from and after the time it was filed with the Commission or
transmitted to the Commission for filing.
3.6 VALID ISSUANCE OF SHARES. The Shares which will be purchased by
Purchaser hereunder, when issued, sold and delivered in accordance with the
terms hereof for the consideration expressed herein, will be duly and validly
authorized and issued, fully paid and nonassessable.
3.7 LITIGATION, ETC. There is no action, suit, proceeding nor, to the
best of the Company's knowledge, any investigation pending or currently
threatened against the Company, that questions the validity of this Agreement or
the right of the Company to enter into such agreements, or which might result,
either individually or in the aggregate, in any material adverse change in the
assets, condition, affairs or prospects of the Company, financial or otherwise.
3.8 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization
of, or designation, declaration or filing with, any governmental authority on
the part of the Company is required in connection with the valid execution,
delivery, and performance of this Agreement or the offer, sale or issuance of
the Shares, or the consummation of any other transaction contemplated by this
Agreement except certain filings as may be required under the Securities Act and
state securities laws and regulations, which filings will be made timely in
accordance with the applicable law or regulation.
3.9 TERMINATION OF EMPLOYMENT. The Company is not aware that any
officer or key employee, or that any group of key employees, intends to
terminate their employment with the Company, nor does the Company have a present
intention to terminate the employment of any of the
4
<PAGE>
foregoing. The employment of each officer and employee of the Company is
terminable at the will of the Company.
3.10 INTELLECTUAL PROPERTY RIGHTS. The Company (a) owns or has the right
to use, free and clear of all rights, liens, claims and restrictions, all
patents, trademarks, service marks, trade names, copyrights and other intangible
or intellectual property rights (and licenses with respect to the foregoing)
needed for or used in the conduct of its business as now conducted and as
proposed to be conducted without infringing upon or otherwise acting adversely
to the right or claimed right of any person under or with respect to any of the
foregoing and (b) does not and will not infringe any patents, copyrights,
trademarks or other intellectual property rights (including trade secrets),
privacy or similar rights of any third party, nor has any material claim
(whether embodied in an action, past or present) of such infringement been, to
the Company's knowledge, threatened or asserted nor is such a claim pending
against the Company. The Company owns or has the unrestricted right to use all
trade secrets, including know-how, inventions, designs, processes, and technical
data required for or incident to the development, manufacture, operation and
sale of all products and services sold or proposed to be sold by the Company and
all of the patents, trademarks, service marks, trade names, copyrights and trade
secrets of the Company are held by the Company free and clear of any rights,
liens or claims of others, including, without limitation, current and former
employees, former employers of all current and former employees, consultants,
officers, directors and shareholders of the Company. The Company has not
received any communications alleging that the Company has violated or, by
conducting its business as now conducted and as proposed to be conducted would
violate any of the patents, trademarks, service marks, trade names, copyrights
or trade secrets or other proprietary rights of any other person or entity.
3.11 PROPRIETARY INFORMATION AGREEMENTS. All employees and consultants
whom the Company considers to be key technical employees or consultants are
parties to a written agreement ("Proprietary Information and Inventions
Agreement") under which each such employee or consultant (i) is obligated to
disclose and transfer to the Company, without the receipt by such person of any
additional value therefor (other than normal salary or fees for consulting
services), all inventions, developments and discoveries which, during the period
of employment with or performance of services for the Company, he or she makes
or conceives of either solely or jointly with others, that relate to any subject
matter which his or her work for the Company may be concerned, or relate to or
are connected with the business, products or projects of the Company, or involve
the use of the time, material or facilities of the Company, and (ii) is
obligated to maintain the confidentiality of proprietary information of the
Company. To the Company's knowledge, no Company employee or consultant is in
violation of the Proprietary Information and Inventions Agreement to which such
employee or consultant is a party. To the Company's knowledge, no Company
employee or consultant is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
conflict with their obligation to use their best efforts to promote the
interests of the Company or that would conflict with the Company's business as
conducted or as proposed to be conducted. Neither the execution nor delivery of
this Agreement nor the carrying on of the Company's business by the employees
and consultants of the Company, nor the conduct of the Company's business as
proposed, will, to the Company's knowledge, conflict with
5
<PAGE>
or result in a breach of the terms, conditions or provisions of, or constitute a
default under, any contract, covenant or instrument under which any of such
employees and consultants is now obligated. The Company does not believe it is
or will be necessary to utilize any inventions of any of its employees and
consultants (or people it currently intends to hire) made prior to their
employment by the Company.
3.12 LOCK-UP AGREEMENTS. GS Capital Partners, L.P., Kleiner Perkins
Caufield & Byers VII, KPCB VII Founders Fund, KPCB Information Sciences Zaibatsu
Fund II and TMI Telemedia International Ltd. and the executive officers of the
Company have entered into 360 day lock-up agreements with the Company and/or the
underwriters of the IPO in substantially similar form to that entered into by
the shareholders at the request of the Company's underwriters, and Racal
Datacom, Inc. will be, prior to the effectiveness of the Registration Statement,
subject to a 180 day lock-up restriction.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Company as follows (such
representations and warranties do not lessen or obviate the representations and
warranties of the Company set forth in this Agreement):
4.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary power
and authority under all applicable provisions of law to execute and deliver this
Agreement and to carry out the provisions of this Agreement. All action on
Purchaser's part required for the lawful execution and delivery of this
Agreement has been or will be effectively taken prior to the Closing. This
Agreement, when executed and delivered, will be a valid and binding obligation
of Purchaser, enforceable in accordance with its terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights and (ii) general
principles of equity that restrict the availability of equitable remedies.
4.2 CONSENTS. All consents, approvals, orders, authorizations,
registrations, qualifications, designations, declarations or filings with any
governmental or banking authority on the part of Purchaser required in
connection with the consummation of the transactions contemplated in this
Agreement have been or shall have been obtained prior to and be effective as of
the Closing.
4.3 INVESTMENT REPRESENTATIONS. Purchaser understands that the Shares
have not been registered under the Securities Act. Purchaser also understands
that the Shares are being offered and sold pursuant to an exemption from
registration contained in the Securities Act based in part upon Purchaser's
representations contained in the Agreement. Purchaser hereby represents and
warrants as follows:
(a) PURCHASER IS AN ACCREDITED INVESTOR. Purchaser represents
that Purchaser is an Accredited Investor within the meaning of Rule 501(a) of
Regulation D under the Securities Act.
6
<PAGE>
(b) PURCHASER BEARS ECONOMIC RISK. Purchaser must bear the
economic risk of this investment indefinitely unless the Shares are registered
pursuant to the Securities Act, or an exemption from registration is available.
Purchaser understands that it has no registration rights with respect to the
Shares. Purchaser also understands that there is no assurance that any exemption
from registration under the Securities Act will be available and that, even if
available, such exemption may not allow Purchaser to transfer all or any portion
of the Shares under the circumstances, in the amounts or at the times Purchaser
might propose.
(c) ACQUISITION FOR OWN ACCOUNT. Purchaser is acquiring the
Shares for Purchaser's own account for investment only, and not with a view
towards their distribution within the meaning of the Securities Act.
(d) PURCHASER CAN PROTECT ITS INTEREST. Purchaser represents
that by reason of its, or of its management's, business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement. Purchaser is not a corporation,
trust or partnership specifically formed for the purpose of consummating these
transactions.
(e) COMPANY INFORMATION. Purchaser has had an opportunity to
discuss the Company's business, management and financial affairs with directors,
officers and management of the Company and has had the opportunity to review the
Company's operations and facilities. Purchaser has also had the opportunity to
ask questions of and receive answers from, the Company and its management
regarding the terms and conditions of this investment.
4.4 LEGENDS. Each certificate representing the Shares may be endorsed
with the following legends:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND ARE "RESTRICTED SECURITIES" AS DEFINED IN RULE 144 PROMULGATED
UNDER THE ACT. THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR
OTHERWISE DISTRIBUTED EXCEPT (I) IN CONJUNCTION WITH AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SHARES UNDER THE ACT, OR (II) IN
COMPLIANCE WITH RULE 144 OR (III) PURSUANT TO AN OPINION OF COUNSEL
TO THE CORPORATION THAT SUCH REGISTRATION OR COMPLIANCE IS NOT
REQUIRED AS TO SUCH SALE, OFFER OR DISTRIBUTION."
7
<PAGE>
The Company need not register a transfer of any Shares, and may also instruct
its transfer agent not to register the transfer of the Shares, unless the
conditions specified in the foregoing legends are satisfied.
4.5 REMOVAL OF LEGEND AND TRANSFER RESTRICTIONS. Any legend endorsed
on a certificate pursuant to subsection 4.4 and the stop transfer instructions
with respect to such Shares shall be removed and the Company shall issue a
certificate without such legend to the holder thereof if such legend may be
properly removed under the terms of Rule 144 promulgated under the Securities
Act or if such holder provides the Company with an opinion of counsel for such
holder, reasonably satisfactory to legal counsel for the Company, to the effect
that a sale, transfer or assignment of such Shares may be made without
registration.
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO PURCHASER'S OBLIGATIONS AT THE CLOSING. Purchaser's
obligation to purchase the Shares identified in Section 1.2 of the Agreement at
the Closing are subject to the satisfaction, at or prior to the Closing, of the
following conditions:
(a) CONCURRENT CLOSING OF IPO. The Closing shall occur
concurrently with, and not before, the closing of the IPO.
(b) OTHER INVESTOR PARTICIPATION. The Company will have a binding
commitment by Williams or other investors willing to purchase an additional
$11.95 million of the Company's Common Stock in connection with the investment
by the Purchaser hereunder, pursuant to terms and conditions no more favorable
to such investors (other than the warrant coverage, board seat and acquisition
notices provided to Williams) than that offered to Purchaser.
(c) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in Section 3
(excepting Section 3.5(b)) hereof shall be true and correct in all material
respects as of the Closing with the same force and effect as if they had been
made as of the Closing, and the Company shall have performed and complied with
all obligations and conditions herein required to be performed or complied with
by it on or prior to the Closing.
(d) LEGAL INVESTMENT. At the time of the Closing, the sale and
issuance of the Shares shall be legally permitted by all laws and regulations to
which Purchaser and the Company are subject.
(e) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all authorizations, approvals, consents, permits and waivers
necessary or appropriate for consummation of the transactions contemplated by
this Agreement (except for such as may be properly obtained subsequent to the
Closing, and such items shall be effective on and as of the Closing).
8
<PAGE>
(f) OUTSTANDING PREFERRED STOCK. The shares of Preferred Stock of
the Company, issued and outstanding as of the date of this Agreement, will
convert into shares of Common Stock in connection with the IPO.
(g) COPIES. The Company shall have delivered to Purchaser a true
and complete copy of the Registration Statement and any amendments thereto, of
each exhibit filed therewith and of the Preliminary Prospectus and final form of
Prospectus.
(h) LEGAL OPINION. The Company shall have delivered an opinion of
counsel to the Purchaser in substantially the form attached hereto as Exhibit B.
---------
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's obligation
to issue and sell the Shares at the Closing is subject to the satisfaction, on
or prior to the Closing. of the following conditions:
(a) CONCURRENT CLOSING OF IPO. The closing of the IPO shall occur
concurrently with, but not before, the Closing.
(b) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties made by Purchaser in Section 4 hereof shall be true and correct in
all material respects at the date of the Closing, with the same force and effect
as if they had been made on and as of said date.
(c) PERFORMANCE OF OBLIGATIONS. Purchaser shall have performed
and complied with all agreements and conditions herein required to be performed
or complied with by Purchaser on or before the Closing.
6. RULE 144 REPORTING.
With a view to making available to Purchaser the benefits of certain rules
and regulations of the SEC which may permit the sale of the Shares to the public
without registration, the Company agrees at all times after ninety (90) days
after the effective date of the Registration Statement to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144.
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
9
<PAGE>
(c) so long as Purchaser owns any Shares, to furnish to Purchaser
within a reasonable time upon a written request by Purchaser, a written
statement by the Company as to its compliance with the reporting requirements of
said Rule 144 (at any time after ninety (90) days after the effective date of
the first registration statement filed by the Company for an offering of its
securities to the general public) and of the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
so filed by the Company as Purchaser may reasonably request in complying with
any rule or regulation of the SEC allowing Purchaser to sell any such securities
without registration.
7. MISCELLANEOUS
7.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of California.
7.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by Purchaser and the closing of
the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument, except as
expressly provided otherwise in such certificate or instrument.
7.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time; provided, however,
that prior to the receipt by the Company of adequate written notice of the
transfer of any Shares specifying the full name and address of the transferee,
the Company may deem and treat the person listed as the holder of such Shares in
its records as the absolute owner and holder of such Shares for all purposes,
the payment of any dividends or any redemption price.
7.4 SEPARABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, such provision shall, to the extent
practicable, be modified so as to make it valid, legal and enforceable and to
maintain as nearly as practicable the intent of the parties, and the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
7.5 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the
written consent of the parties hereto.
10
<PAGE>
(b) The obligations of the Company and the rights of the holder of
the Shares under this Agreement may be waived only with the written consent of
the parties hereto.
(c) Except to the extent provided in this Section 7.5, neither
this Agreement nor any provision hereof may be changed, waived, discharged or
terminated, except by a statement in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought.
(d) Any amendment or waiver effected in accordance with this
Section 7.5 shall be binding upon any future holder of some or all of the
Shares.
7.6 NOTICES. All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed effectively given and received
(a) upon personal delivery, (b) on the fifth day following mailing sent by
registered or certified mail, return receipt requested, postage prepaid, (c)
upon confirmed delivery by means of a nationally recognized overnight courier
service or (d) upon confirmed transmission of facsimile addressed: (i) if to
Purchaser, at Purchaser's address as set forth on the Company's records, or at
such other address as Purchaser shall have furnished to the Company in writing
or (ii) if to the Company, at its address as set forth at the end of this
Agreement, or at such other address as the Company shall have furnished to
Purchaser in writing.
7.7 EXPENSES. The Company shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
the Agreement, and Purchaser shall pay all costs and expenses that it incurs
with respect to the negotiation, execution, delivery and performance of this
Agreement.
7.8 ATTORNEYS' FEES. If legal action is brought to enforce or interpret
this Agreement, the prevailing party shall be entitled to recover its reasonable
attorneys' fees and legal costs in connection therewith.
7.9 TITLES AND SUBTITLES. The titles of the paragraphs and
subparagraphs of the Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
7.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
7.11 BROKER'S FEES. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 7.11 being untrue.
11
<PAGE>
7.12 TERMINATION. If the Registration Statement for the IPO has not
become effective by October 31, 1997, Purchaser in its discretion may elect to
terminate this Agreement by providing written notice to the Company at any time
thereafter.
7.13 SUBSEQUENT, CONSENTS, PERMITS AND WAIVERS. The Company shall obtain
promptly after the Closing all authorizations, approvals, consents, permits and
waivers that are necessary or applicable for consummation of the transactions
contemplated by this Agreement and that were not obtained prior to the Closing
because they may be properly obtained subsequent to the Closing.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth in the first paragraph hereof.
COMPANY:
CONCENTRIC NETWORK CORPORATION
10590 N. Tantau Avenue
Cupertino, CA 95014
By: /s/ Henry R. Nothhaft
-----------------------------
Henry R. Nothhaft
President and Chief Executive Officer
PURCHASER:
BAY NETWORKS, INC.
By: /s/ David Rynne
-----------------------------
(Signature)
Its CFO
-----------------------------
13
<PAGE>
EXHIBIT 10.44
EXHIBIT B
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT (I) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (II) AN
OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY,
THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (III) RECEIPT OF NO-ACTION LETTERS
FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (IV) OTHERWISE COMPLYING WITH
THE PROVISIONS OF SECTION 7 OF THIS WARRANT.
As of June 19, 1997
No. CS-001
CONCENTRIC NETWORK CORPORATION
AMENDED AND RESTATED COMMON
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, Williams Communications Group,
Inc., a Delaware corporation, is entitled to subscribe for and purchase, subject
to the provisions and upon the terms and conditions hereinafter set forth, that
number of shares of the fully paid and nonassessable Common Stock of Concentric
Network Corporation, a Florida corporation (the "Company") equal to the quotient
obtained by dividing: (X) where X is the principal amount of the Note (as
defined below) held by the holder of this Warrant plus accrued interest thereon,
by (Y) where Y is the product of (i) 4 and (ii) (Z), where Z is the initial
price per share of the first to occur of the following: (a) the initial public
offering of the Company's Common Stock having an aggregate price to the public
of at least $40 million (the "IPO") or (b), the price per share of the Company's
Preferred Stock in a private financing (the "Private Financing") having an
aggregate price of at least $40 million (including for purposes of determining
the aggregate price of the IPO or the Private Financing: (i) the principal
amount of the Note, (ii) an $11.95 million equity investment to be made by the
holder hereof in connection with the IPO or the Private Financing and (iii)
services to be provided by the holder hereof to the Company, after the IPO or
Private Financing as the case may be, valued for purposes of this Warrant at $2
million). Each such Share (as defined below) shall be purchasable at a per
share purchase price equal to fifty percent of the initial Price to Public per
share or the Private Financing price per share, as the case may be, (such price
and such other price as shall result, from time to time, from the adjustments
specified in Section 6 hereof is herein referred to as the "Warrant Price"). As
used herein, (a) the term "Date of Grant" shall mean the date first set forth
above (b) the term "Other Warrants" shall mean any other warrants issued by the
Company in connection with the transaction with respect to which this Warrant
was issued, and any warrant issued upon transfer or partial exercise of this
Warrant, (c) the term "Shares" shall mean the Common Stock to be issued by the
Company hereunder and any stock into or for which any such Common
1
<PAGE>
Stock may hereafter be converted or exchanged, (d) the term "Warrant" as used
herein shall be deemed to include Other Warrants unless the context clearly
requires otherwise, (e) the term "Note" shall mean the note issued by the
Company to the holder of this Warrant pursuant to the Note and Warrant Purchase
Agreement dated June 19, 1997 (f) the term "Price to Public" shall mean the
price to public set forth on the cover page of the final prospectus prepared in
connection with the IPO, and (g) the term "Financing Event" shall mean either
the IPO or the Private Financing, as applicable..
1. Term. The purchase right represented by this Warrant is exercisable,
----
in whole or in part, at any time and from time to time from the closing of the
Financing Event through the earliest to occur of (i) five years after the Date
of Grant, or (ii) immediately prior to any consolidation or merger of the
Company with or into any entity, or any other corporate reorganization in which
the Company shall not be the continuing or surviving entity of such
consolidation, merger or reorganization or any transaction, any series of
related transactions in which in excess of 50% of Company's voting power is
transferred, or any sale of all or substantially all of the assets of the
Company, other than the proposed reincorporation of the Company into Delaware
through the merger of the Company with and into Concentric Network Corporation,
a Delaware Corporation; provided, however, that the Company shall provide prior
written notice of any proposed event referred to in subsection (ii) above (other
than the proposed reincorporation into Delaware) so as to allow sufficient time
for the parties to obtain Hart-Scott-Rodino compliance, if necessary, to
exercise the Warrant.
2. Method of Exercise; Payment; Issuance of New Warrant. During the term
----------------------------------------------------
of this Warrant and subject to Sections 3 and 4 below, the purchase right
represented by this Warrant may be exercised by the holder hereof, in whole or
in part and from time to time, at the election of the holder hereof, by (a) the
surrender of this Warrant (with the notice of exercise substantially in the form
attached hereto as Exhibit A-1 and the Investment Representation Statement
-----------
attached hereto as Exhibit A-2 duly completed and executed) at the principal
-----------
office of the Company and (b) by the payment to the Company, by certified or
bank check, or by wire transfer to an account designated by the Company (a "Wire
Transfer") of an amount equal to the then applicable Warrant Price multiplied by
the number of Shares then being purchased. The person or persons in whose
name(s) any certificate(s) representing the Shares shall be issuable upon
exercise of this Warrant shall be deemed to have become the holder(s) of record
of, and shall be treated for all purposes as the record holder(s) of, the Shares
represented thereby (and such Shares shall be deemed to have been issued)
immediately prior to the close of business on the date or dates upon which this
Warrant is exercised. In the event of any exercise of the rights represented by
this Warrant, certificates for the Shares of stock so purchased shall be
delivered to the holder hereof as soon as possible and in any event within
thirty (30) days after such exercise and, unless this Warrant has been fully
exercised or expired, a new Warrant representing the portion of the Shares, if
any, with respect to which this Warrant shall not then have been exercised shall
also be issued to the holder hereof as soon as possible and in any event within
such thirty-day period.
3. Right to Convert Warrant into Stock; Net Issuance.
-------------------------------------------------
(a) Right to Convert. In lieu of exercising this Warrant in the
----------------
manner provided above in Section 2, the holder hereof shall have the right to
convert this Warrant (the "Conversion
-2-
<PAGE>
Right"), in whole or in part, at any time and from time to time after the
closing of the Financing Event subject to the notice restrictions of Section 4
and prior to the expiration date of the Warrant, by the surrender of this
Warrant and the Notice of Exercise form and the Investment Representation
Statement attached hereto duly executed to the office of the Company at the
address set forth herein (or such other office or agency of the Company as it
may designate by notice in writing to the registered holder hereof at the
address of such holder appearing on the books of the Company), into Shares as
provided in this Section 3. Upon exercise of this Conversion Right, the holder
hereof shall be entitled to receive that number of Shares of the Company equal
to the quotient obtained by dividing [(A-B)(X)] by (A), where:
A = the initial price per share in the Financing Event.
B = the Warrant Price.
X = the number of Shares as to which this Warrant is being
converted.
If the above calculation results in a negative number, then no Shares shall
be issued or issuable upon conversion of this Warrant.
Upon conversion of this Warrant in accordance with this Section 3, the
registered holder hereof shall be entitled to receive a certificate for the
number of Shares determined in accordance with the foregoing, and a new Warrant
in substantially identical form and dated as of such conversion for the purchase
of that number of Shares equal to the difference, if any, between the number of
Shares subject to this Warrant and the number of Shares as to which this Warrant
is so converted.
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined). Shares issued
pursuant to this Section 3 shall be treated as if they were issued upon the
exercise of this Warrant.
(b) Method of Exercise. The Conversion Right may be exercised by the
------------------
holder by the surrender of this Warrant at the principal office of the Company
together with a written statement specifying that the holder thereby intends to
exercise the Conversion Right and indicating the number of Shares subject to
this Warrant which are being surrendered in exercise of the Conversion Right.
Such conversion shall be effective upon receipt by the Company of this Warrant
together with the aforesaid written statement, or on such later date as is
specified therein (the "Conversion Date"). Certificates for the Shares issuable
upon exercise of the Conversion Right and, if applicable, a new warrant
evidencing the balance of the Shares remaining subject to this Warrant, shall be
issued as of the Conversion Date and shall be delivered to the holder within
thirty (30) days following the Conversion Date.
4. Hart-Scott-Rodino Compliance. Notwithstanding anything else in this
----------------------------
Warrant, if the exercise or conversion of this Warrant is subject to the
premerger notification requirements of the
-3-
<PAGE>
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), it shall be a condition to such exercise or conversion that any waiting
period under the HSR Act applicable to the issuance of the Shares shall have
expired or been terminated and any approvals required thereunder shall have been
obtained, and each of the parties hereby agree to cooperate in promptly filing
premerger reports and in taking all steps reasonably necessary to obtain early
termination of any applicable HSR Act waiting periods.
5. Stock Fully Paid; Reservation of Shares. All Shares that may be
---------------------------------------
issued upon the exercise of the rights represented by this Warrant will, upon
issuance pursuant to the terms and conditions herein, be fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized, and
reserved for the purpose of the issue upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of shares of its capital stock to
provide for the exercise of the rights represented by this Warrant.
6. Adjustment of Warrant Price and Number of Shares. The number and kind
------------------------------------------------
of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) Reclassification. In case of any reclassification or change of
----------------
securities of the class issuable upon exercise of this Warrant (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), the Company shall
duly execute and deliver to the holder of this Warrant a new Warrant (in form
and substance reasonably satisfactory to the holder of this Warrant), so that
the holder of this Warrant shall have the right to receive, at a total purchase
price not to exceed that payable upon the exercise of the unexercised portion of
this Warrant, and in lieu of the Shares theretofore issuable upon exercise of
this Warrant, the kind and amount of shares of stock, other securities, money
and property receivable upon such reclassification or change by a holder of the
number of Shares then purchasable under this Warrant. Such new Warrant shall
provide for adjustments that shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Section 6. The provisions of this
subparagraph (a) shall similarly apply to successive reclassifications or
changes.
(b) Subdivision or Combination of Shares. If the Company at any time
------------------------------------
while this Warrant remains outstanding and unexpired shall subdivide or combine
its outstanding shares of capital stock into which this Warrant is exercisable,
the Warrant Price shall be proportionately decreased in the case of a
subdivision or increased in the case of a combination, effective at the close of
business on the date the subdivision or combination becomes effective.
(c) Stock Dividends and Other Distributions. If the Company at any
---------------------------------------
time while this Warrant is outstanding and unexpired shall (i) pay a dividend
with respect to its capital stock issuable hereunder payable in the same class
or series of capital stock, or (ii) make any other distribution of capital stock
with respect to its capital stock (except any distribution specifically provided
for in Sections 6(a) and 6(b)), then the Warrant Price shall be adjusted, from
and after the date of determination of shareholders entitled to receive such
dividend or distribution, to that price
-4-
<PAGE>
determined by multiplying the Warrant Price in effect immediately prior to such
date of determination by a fraction (i) the numerator of which shall be the
total number of shares of the applicable class or series of capital stock
outstanding immediately prior to such dividend or distribution, and (ii) the
denominator of which shall be the total number of shares of such class or series
of capital stock outstanding immediately after such dividend or distribution.
(d) Adjustment of Number of Shares. Upon each adjustment in the
------------------------------
Warrant Price, the number of Shares purchasable hereunder shall be adjusted, to
the nearest whole share, to the product obtained by multiplying the number of
Shares purchasable immediately prior to such adjustment in the Warrant Price by
a fraction, the numerator of which shall be the Warrant Price immediately prior
to such adjustment and the denominator of which shall be the Warrant Price
immediately thereafter.
7. Notice of Adjustments. Whenever the Warrant Price or the number of
---------------------
Shares purchasable hereunder shall be adjusted pursuant to Section 6 hereof, the
Company shall make a certificate signed by its chief financial officer setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Warrant Price and the number of Shares purchasable hereunder after giving effect
to such adjustment, and shall cause copies of such certificate to be mailed
(without regard to Section 13 hereof, by first class mail, postage prepaid) to
the holder of this Warrant at such holder's last known address.
8. Fractional Shares. No fractional Shares will be issued in connection
-----------------
with any exercise hereunder, but in lieu of such fractional shares the Company
shall make a cash payment therefor based on the fair market value of the Shares
on the date of exercise as reasonably determined in good faith by the Company's
Board of Directors.
9. Compliance with Act; Disposition of Warrant or Shares.
-----------------------------------------------------
(a) Compliance with Act. The holder of this Warrant, by acceptance
-------------------
hereof, agrees that this Warrant, and the Shares to be issued upon exercise
hereof are being acquired for investment and that such holder will not offer,
sell or otherwise dispose of this Warrant, or any Shares except under
circumstances which will not result in a violation of the Act or any applicable
state securities laws. Upon exercise of this Warrant, unless the Shares being
acquired are registered under the Act and any applicable state securities laws
or an exemption from such registration is available, the holder hereof shall
confirm in writing that the Shares so purchased are being acquired for
investment and not with a view toward distribution or resale in violation of the
Act and shall confirm such other matters related thereto as may be reasonably
requested by the Company. This Warrant and all Shares issued upon exercise of
this Warrant (unless registered under the Act and any applicable state
securities laws) shall be stamped or imprinted with a legend in substantially
the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
-5-
<PAGE>
SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i)
EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF
COUNSEL OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, THAT
SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS
FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING
WITH THE PROVISIONS OF SECTION 9 OF THE WARRANT UNDER WHICH THESE
SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY."
Said legend shall be removed by the Company, upon the request of a holder,
at such time as the restrictions on the transfer of the applicable security
shall have terminated. In addition, in connection with the issuance of this
Warrant, the holder specifically represents to the Company by acceptance of this
Warrant as follows:
1) The holder is aware of the Company's business affairs and
financial condition, and has acquired information about the Company
sufficient to reach an informed and knowledgeable decision to acquire this
Warrant. The holder is acquiring this Warrant for its own account for
investment purposes only and not with a view to, or for the resale in
connection with, any "distribution" thereof in violation of the Act.
2) The holder understands that this Warrant has not been
registered under the Act in reliance upon a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of
the holder's investment intent as expressed herein.
3) The holder further understands that this Warrant must be held
indefinitely unless subsequently registered under the Act and qualified
under any applicable state securities laws, or unless exemptions from
registration and qualification are otherwise available. The holder is
aware of the provisions of Rule 144, promulgated under the Act.
(b) Disposition of Warrant or Shares. With respect to any offer, sale
--------------------------------
or other disposition of this Warrant or any Shares acquired pursuant to the
exercise of this Warrant prior to registration of such Warrant or Shares, the
holder hereof agrees to give written notice to the Company prior thereto,
describing briefly the manner thereof, together with a written opinion of such
holder's counsel, or other evidence, if reasonably requested by the Company, to
the effect that such offer, sale or other disposition may be effected without
registration or qualification (under the Act as then in effect or any federal or
state securities law then in effect) of this Warrant or the Shares and
indicating whether or not under the Act certificates for this Warrant or the
Shares to be sold or otherwise disposed of require any restrictive legend as to
applicable restrictions on transferability in order to ensure compliance with
such law. Promptly upon receiving such written notice and reasonably
satisfactory opinion or other evidence, if so requested, the Company, as
promptly as practicable but no later than fifteen (15) days after receipt of the
written notice, shall notify such holder that such holder may sell or otherwise
dispose of this Warrant or such Shares, all in accordance with the terms of the
notice delivered to the Company. If a determination has been made pursuant to
this Section 9(b) that the opinion of counsel for the holder or other evidence
is not
-6-
<PAGE>
reasonably satisfactory to the Company, the Company shall so notify the holder
promptly with details thereof after such determination has been made.
Notwithstanding the foregoing, this Warrant or such Shares may, as to such
federal laws, be offered, sold or otherwise disposed of in accordance with Rule
144 or 144A under the Act, provided that the Company shall have been furnished
with such information as the Company may reasonably request to provide a
reasonable assurance that the provisions of Rule 144 or 144A have been
satisfied. Each certificate representing this Warrant or the Shares thus
transferred (except a transfer pursuant to Rule 144 or 144A) shall bear a legend
as to the applicable restrictions on transferability in order to ensure
compliance with such laws, unless in the aforesaid opinion of counsel for the
holder, such legend is not required in order to ensure compliance with such
laws. The Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions.
(c) Applicability of Restrictions. Neither any restrictions of any
-----------------------------
legend described in this Warrant nor the requirements of Section 9(b) above
shall apply to any transfer or grant of a security interest in, this Warrant (or
the Shares obtainable upon exercise thereof) or any part hereof (i) to a partner
of the holder if the holder is a partnership, (ii) to a partnership of which the
holder is partner or (iii) to an affiliated company of the holder; provided,
--------
however, in any such transfer, if applicable, the transferee shall agree in
- -------
writing to be bound by the terms of this Warrant as if an original signatory
hereto.
10. Rights as Shareholders; Information. No holder of this Warrant, as
-----------------------------------
such, shall be entitled to vote or receive dividends or be deemed the holder of
Shares, nor shall anything contained herein be construed to confer upon the
holder of this Warrant, as such, any of the rights of a shareholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to shareholders at any meeting thereof, or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until this
Warrant shall have been exercised and the Shares purchasable upon the exercise
hereof shall have become deliverable, as provided herein. Notwithstanding the
foregoing, the Company will transmit to the holder of this Warrant such
information, documents and reports as are generally distributed to the holders
of any class or series of the securities of the Company concurrently with the
distribution thereof to the shareholders.
11. Representations and Warranties. Except as set forth in the section
------------------------------
captioned "Business--Legal Proceedings" of the Registration Statement on form S-
1 (File No. 333-27241) filed with the Securities and Exchange Commission by the
Company, the Company hereby represents and warrants to the holder of this
Warrant as follows:
(a) This Warrant has been duly authorized and executed by the Company
and is a valid and binding obligation of the Company enforceable in accordance
with its terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and the rules of law or principles at
equity governing specific performance, injunctive relief and other equitable
remedies;
(b) The Shares have been, or will be upon the closing of the IPO or
Private Financing, duly authorized and reserved for issuance by the Company and,
when issued in accordance with the terms hereof will be validly issued, fully
paid and non-assessable;
-7-
<PAGE>
(c) The rights, preferences, privileges and restrictions granted to or
imposed upon the Shares and the holders thereof are as set forth in the Amended
and Restated Articles of Incorporation of the Company as they have been and may
be amended from time to time.
(d) The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Second Amended and
Restated Articles of Incorporation or Bylaws, as they may be amended from time
to time do not and will not contravene any law, governmental rule or regulation,
judgment or order applicable to the Company, and do not and will not conflict
with or contravene any provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument of which the Company is a
party or by which it is bound or require the consent or approval of, the giving
of notice to, the registration or filing with or the taking of any action in
respect of or by, any Federal, state or local government authority or agency or
other person, except for the filing of notices pursuant to federal and state
securities laws, which filings will be effected by the time required thereby;
and
(e) There are no actions, suits, audits, investigations or proceedings
pending or, to the knowledge of the Company, threatened against the Company in
any court or before any governmental commission, board or authority which, if
adversely determined, will have a material adverse effect on the ability of the
Company to perform its obligations under this Warrant.
12. Modification and Waiver. This Warrant and any provision hereof may be
-----------------------
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
13. Notices. Any notice, request, communication or other document
-------
required or permitted to be given or delivered to the holder hereof or the
Company shall be delivered, or shall be sent by certified or registered mail,
postage prepaid, to each such holder at its address as shown on the books of the
Company or to the Company at the address indicated therefor on the signature
page of this Warrant.
14. Lost Warrants or Stock Certificates. The Company covenants to the
-----------------------------------
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
15. Descriptive Headings. The descriptive headings of the several
--------------------
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The language in this Warrant shall be
construed as to its fair meaning without regard to which party drafted this
Warrant.
-8-
<PAGE>
16. Governing Law. This Warrant shall be construed and enforced in
-------------
accordance with, and the rights of the parties shall be governed by, the laws of
the State of California.
17. Severability. The invalidity or unenforceability of any provision of
------------
this Warrant in any jurisdiction shall not affect the validity or enforceability
of such provision in any other jurisdiction, or affect any other provision of
this Warrant, which shall remain in full force and effect.
18. Entire Agreement; Modification. This Warrant constitutes the entire
------------------------------
agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations, and
undertakings of the parties, whether oral or written, with respect to such
subject matter.
CONCENTRIC NETWORK CORPORATION
a Florida corporation
/s/ Henry R. Nothhaft
By:________________________________________
Henry R. Nothhaft
President and Chief Executive Officer
Address: 10590 N. Tantau Avenue
Cupertino, CA 94303
-9-
<PAGE>
EXHIBIT A-1
NOTICE OF EXERCISE
------------------
To: CONCENTRIC NETWORK CORPORATION (the "Company")
1. The undersigned hereby:
[_] elects to purchase __________ shares of Common Stock of the Company
pursuant to the terms of the attached Warrant, and tenders herewith
payment of the purchase price of such shares in full; or
[_] elects to exercise its net issuance rights pursuant to Section 3 of
the attached Warrant with respect to __________ shares of Common
Stock.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below:
________________________________________
(Name)
________________________________________
(Address)
________________________________________
(Address)
<PAGE>
EXHIBIT A-2
-----------
INVESTMENT REPRESENTATION STATEMENT
Shares of the Securities
(as defined in the attached Warrant) of
CONCENTRIC NETWORK CORPORATION
In connection with the purchase of the above listed securities, the
undersigned hereby represents to Concentric Network Corporation (the "Company")
as follows:
(1) The securities to be received upon the exercise of the Warrant (the
"Securities") will be acquired for investment for its own account, not
as a nominee or agent, and not with a view to the sale or distribution
of any part thereof, and the undersigned has no present intention of
selling, granting participation in or otherwise distributing the same,
but subject, nevertheless, to any requirement of law that the
disposition of its property shall at all times be within its control.
By executing this Statement, the undersigned further represents that it
does not have any contract, undertaking, agreement or arrangement with
any person to sell, transfer, or grant participations to such person or
to any third person, with respect to any Securities issuable upon
exercise of the Warrant.
(2) The undersigned understands that the Securities issuable upon exercise
of the Warrant at the time of issuance may not be registered under the
Securities Act of 1933, as amended (the "Act"), and applicable state
securities laws, on the ground that the issuance of such securities is
exempt pursuant to Section 4(2) of the Act and state law exemptions
relating to offers and sales not by means of a public offering and that
the Company's reliance on such exemptions is predicated on the
undersigned's representation set forth herein.
(3) The undersigned agrees that in no event will it make a disposition of
any Securities acquired upon the exercise of the Warrant unless and
until (i) it shall have notified the Company of the proposed disposition
and shall have furnished the Company with a statement of the
circumstances surrounding the proposed disposition, and (ii) it shall
have furnished the Company with an opinion of counsel satisfactory to
the Company and Company's counsel to the effect that (A) appropriate
action necessary for compliance with the Act and any applicable state
securities laws has been taken or an exemption from the registration
requirements of the Act and such laws is available, and (B) the proposed
transfer will not violate any of said laws.
(4) The undersigned acknowledges that an investment in the Company is
highly speculative and represents that it is able to fend for itself in
the transactions contemplated by this Statement, has such knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risks of its investments, and has the ability
to bear the economic risks (including the risk of a total loss) of its
investment. The
<PAGE>
undersigned represents that it has had the opportunity to ask questions
of the Company concerning the Company's business and assets and to
obtain any additional information which it considered necessary to
verify the accuracy of or to amplify the Company's Disclosures, and has
had all questions which have been asked by it satisfactorily answered to
the Company.
(5) The undersigned acknowledges that the Securities issuable upon
exercise of the Warrant must be held indefinitely unless subsequently
registered under the Act or an exemption from such registration is
available. The undersigned is aware of the provisions of Rule 144
promulgated under the Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, the existence of a public
market for the shares, the availability of certain current public
information about the Company, the resale occurring not less than one
year after a party has purchased and paid for the security to be sold,
the sale being through a "broker's transaction" or in transactions
directly with a "market makers" (as provided by Rule 144(f)) and the
number of shares being sold during any three-month period not exceeding
specified limitations.
Dated:___________
WILLIAMS COMMUNICATIONS GROUP, INC.
By:_______________________________
(Signature)
_______________________________
(Title)
-2-
<PAGE>
EXHIBIT 10.45
AGREEMENT FOR PURCHASE AND SALE OF SERVICES AND EQUIPMENT
This AGREEMENT FOR PURCHASE AND SALE OF SERVICES AND EQUIPMENT (this
"Agreement") is made this 25th day of July, 1997, by and between Williams
Communications Group, Inc. and Concentric Network Corporation ("CNC").
WHEREAS, in connection with certain transactions between WCG (as defined
below) and CNC more particularly described in that certain Common Stock and
Warrant Purchase Agreement between the parties of even date herewith (the "Stock
and Warrant Purchase Agreement"), CNC has agreed to purchase from WCG, and WCG
has agreed to sell to CNC, certain Services (as defined below) and Equipment (as
defined below) pursuant and subject to the terms and conditions of this
Agreement;
NOW, THEREFORE, for and in consideration of the mutual promises set forth
herein, the sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Certain Definitions.
-------------------
"Affiliate" shall mean any entity which (a) is at least 50% owned by WCG,
---------
or (b) owns at least 50% of WCG.
"Equipment" shall mean the telecommunications equipment, and installation,
---------
maintenance and other incidental services relating thereto, set forth in
Exhibit A attached hereto and incorporated herein by this reference, as such
Exhibit may be amended from time to time by WCG.
"Services" shall mean the inter-exchange multimedia telecommunications
--------
carrier services and other services set forth in Exhibit B attached hereto and
incorporated herein by this reference, as such Exhibit may be amended from
time to time by WCG; provided, however, that in no event shall "Services"
-------- -------
include any services (a) the provision of which by WCG would violate any
applicable contractual or regulatory restrictions, or (b) provided to CNC by
Critical Technologies, Inc. ("CTI"), an Affiliate, pursuant to the Amended and
Restated Employee Services and Staffing Agreement between CNC and CTI dated
June 19, 1997 or the Colocation Services Agreement dated November 1, 1994, as
amended.
"WCG" shall mean Williams Communications Group, Inc. and all Affiliates
---
unless otherwise indicated by the context.
2. Purchase and Sale of Services CNC shall purchase Services from WCG, and
-----------------------------
WCG shall sell Services to CNC, in each case subject to availability,
pursuant and subject to the terms and conditions of (a) this Agreement, and
(b) a Master Services Agreement substantially in the form of Exhibit C
attached hereto and incorporated herein by this reference or, with respect
to Services to be provided by Affiliates other than WCG's
<PAGE>
network service group, the standard form of purchase agreement pertaining
to such Services then in effect for such Affiliate, as such standard form
may be modified by mutual agreement of the parties. In the event of any
conflict, the order of precedence shall be this Agreement and then Exhibit
C or, if applicable, the standard form of the contracting WCG Affiliate.
3. Purchase and Sale of Equipment. CNC shall purchase Equipment from WCG, and
------------------------------
WCG shall sell Equipment to CNC, in each case subject to availability,
pursuant and subject to the terms and conditions of (a) this Agreement, and
(b) a Purchase Agreement and/or Service Agreement substantially in the form
of Exhibit D attached hereto and incorporated herein by this reference or,
if such agreements are inapplicable, the standard form of purchase
agreement pertaining to such Equipment then in effect for WilTel
Communications, LLC, as such standard form may be modified by mutual
agreement of the parties. In the event of any conflict, the order of
precedence shall be this Agreement and then Exhibit D or, if applicable,
the standard form of the contracting WCG Affiliate.
4. Contingency; Term Notwithstanding any other provision of this Agreement,
-----------------
this Agreement shall not be effective unless and until the issuance of CNC
common stock to WCG pursuant to the Stock and Warrant Purchase Agreement.
The term of this Agreement shall commence on the date such CNC common stock
is issued to WCG pursuant to the Stock and Warrant Purchase Agreement and
shall end on the latter of the tenth (10th) anniversary of this Agreement,
when the Section 5 take-or-pay obligation has been fully satisfied or when
WCG ceases to own at least 5% of the common stock of CNC.
5. Take-or-Pay Commitment. Subject to the provisions of Sections 6, 7 and 8
----------------------
below, prior to December 31, 2002 CNC shall purchase aggregate Services and
Equipment amounting to at least $21,200,000, comprised of at least
$16,200,000 of Services and no more than $5,000,000 of Equipment, in
accordance with the schedule set forth below. CNC shall not be subject to
a minimum purchase commitment under this Agreement once it has satisfied
its take-or-pay obligations. All dollar amounts in this Agreement shall be
determined in accordance with WCG's prices in effect at the time such
Services and Equipment are ordered by CNC, inclusive of any discounts
applicable to CNC but exclusive of any credits (including, without
limitation, Service credits available under Section 8) to which CNC may be
entitled, late payment penalties, taxes and other government-imposed
surcharges. CNC's purchases of Services and Equipment shall not include
payments made by CNC to WCG to reimburse WCG for third party costs paid to
unaffiliated entities, including but not limited to, local access charges,
taxes, installation charges, off-network charges, one time fees and other
similar costs.
Page 2
<PAGE>
<TABLE>
<CAPTION>
Minimum Aggregate
-----------------
Purchases
---------
Year of Services and Equipment
---- -------------------------
(Take-or-Pay Obligation)
- --------------------------------------------------------------
<S> <C>
1 $1,200,000
(1/1/98 - 12/31/98)
- --------------------------------------------------------------
2 $2,500,000
(1/1/99 - 12/31/99)
- --------------------------------------------------------------
3 $7,000,000
(1/1/2000 - 12/31/2000)
- --------------------------------------------------------------
4 $6,500,000
(1/1/2001 - 12/31/2001)
- --------------------------------------------------------------
5 $4,000,000
(1/1/2002 - 12/31/2002)
- --------------------------------------------------------------
</TABLE>
To the extent that CNC exceeds the Minimum Aggregate Purchases of Services
and Equipment in any year as set forth in the schedule above, the amount of
such excess shall be offset against CNC's remaining take-or-pay obligation.
The offset shall be applied to CNC's take-or-pay obligation beginning with
the next subsequent year's take-or-pay obligation and shall reduce CNC's
take-or-pay obligation for that year until such obligation is satisfied.
If any offset remains, it then shall be applied to the next subsequent
year's take-or-pay obligation continuing through the year 5 (December 31,
2002) take-or-pay obligation or until the offset is fully utilized. To the
extent that CNC has any offset remaining after satisfying its entire take-
or-pay obligation of $21,200,000 under this section, such offset will
expire and will have no further use or value under this Agreement.
6. Inability to Meet Minimum Commitment. To the extent that, in any year
------------------------------------
during the term hereof (as measured at the end of each of the one year
periods set forth in the Schedule in Section 5 above and taking into
account any credit for excess purchases from another period), CNC fails to
purchase Services and Equipment from WCG greater than or equal to the take-
or-pay obligations for such year set forth in Section 5 above, then, within
thirty (30) days after the completion of such year, CNC shall pay to WCG,
as liquidated damages for such failure, cash in an amount equal to the
difference between the take-or-pay obligation for such year and the
aggregate amount of Services and Equipment actually purchased by CNC from
WCG during such year.
7. Inability to Provide Services and Equipment. If, for any reason except to
-------------------------------------------
the extent due to the actions of CNC, WCG is unable to provide Services or
Equipment ordered by CNC by the due date established in accordance with the
terms and conditions of this Agreement, then CNC shall have the right to
give WCG thirty (30) days prior written notice to complete performance
("CNC Performance Notice"). If WCG continues to be
Page 3
<PAGE>
unable to perform after the expiration of the thirty (30) day notice
period, then the dollar amount of the unfulfilled CNC order shall be
withdrawn from the remaining take-or-pay obligation in the year the order
was received by WCG and the take-or-pay obligation for such year shall be
reduced. The absolute amount of such withdrawal shall then be added to
CNC's take-or-pay obligation over the remaining years of CNC's take-or-pay
obligation, as the parties shall mutually agree. If WCG's inability to
provide Services or Equipment occurs in the final year of the take-or-pay
commitment, then the withdrawn take-or-pay obligation shall be satisfied
over the remaining term of the Agreement as the parties shall mutually
agree. For example, if CNC places an order for $100,000 of Services in the
first year of its take-or-pay obligation, and WCG cannot provide the
Services within thirty (30) days of the CNC Performance Notice, then
$100,000 shall be withdrawn from CNC's first year's take-or-pay obligation
and be added to CNC's take-or-pay obligation over the remaining four (4)
years as the parties mutually agree. It is understood by the parties that
WCG's inability or failure to provide the Services or Equipment in a year
shall not reduce CNC's aggregate take-or-pay obligation of $21,200,000, but
rather the take-or-pay obligation with respect to the unprovided Services
or Equipment shall be allocated over the remaining term of the Agreement.
To the extent that WCG's failure to provide the Services or Equipment is
due to the actions of CNC, then the take-or-pay obligation shall not be
modified or reduced for such year. The foregoing remedy shall be CNC's sole
and exclusive remedy for WCG's inability to provide Services or Equipment
ordered by CNC.
8. Application of Certain Credits. The parties acknowledge that, in
------------------------------
connection with the issuance of CNC common stock to WCG pursuant to Section
9 below and pursuant to that certain Services Credit--Letter Agreement
between CNC and WCG dated June 19, 1997 (the "Letter Agreement"), WCG has
granted and may grant in the future to CNC certain credits which may be
applied against the purchases of inter-exchange multimedia
telecommunications Services. Such credits may be utilized by CNC with
respect to purchases of inter-exchange multimedia telecommunications
Services under this Agreement but only as set forth in the Letter Agreement
(attached as Exhibit E), except that purchases of Services using Services
credits may not be used to satisfy, in whole or part, the Section 5 take-
or-pay commitment. The "Master Agreement" referenced in the Letter
Agreement is this Agreement.
9. CNC Common Stock for Services. At the option of and as elected by WCG, CNC
-----------------------------
shall pay for up to $2,000,000 of Services rendered by WCG either (i)
through the issuance of CNC common stock valued by using the then "Current
Market Value" of the stock or (ii) through a combination of CNC common
stock and cash if the election to obtain CNC common stock for the total
amount of the invoice would exceed the $2,000,000 aggregate limit for CNC
common stock. The "Current Market Value" of CNC common stock shall be
calculated by taking the arithmetic average of the NASDAQ closing prices of
the common stock of CNC for each trading day during the entire calendar
month prior to the date of WCG's invoice. WCG shall be required to
exercise its option and make its election each month contemporaneously with
the issuance of its invoice to CNC. If WCG
Page 4
<PAGE>
fails to make an affirmative election to be paid in CNC common stock at the
time its invoice is issued, then CNC will be required to pay WCG in cash,
less any available Section 8 credits, for the Services. If WCG exercises
its option to be paid in CNC common stock, then WCG will send with its
invoice the Concentric Network Corporation Common Stock Purchase Agreement
("SPA") executed by WCG pertaining to such Services. The SPA shall be in
the form attached as Exhibit F. The CNC common stock will be issued and
delivered to WCG as of the due date of the invoice and CNC shall
contemporaneously send WCG the fully executed SPA. No fractional shares
will be issued and instead the value of any fractional share will be paid
in cash. Section 8 credits may not be used to offset CNC's obligation to
issue CNC common stock under this provision. WCG's option to obtain CNC
common stock under this provision will expire upon the earlier of (i) WCG's
receipt of $2,000,000 of CNC common stock under this provision or (ii) the
expiration of the term of this Agreement.
10. Preferred Provider. In addition to the take-or-pay obligation in Section 5,
------------------
it is the express intent and agreement of the parties that WCG shall be the
preferred provider of all Services and Equipment or their commercial
equivalents (i.e., Competitive Services and Competitive Equipment as
defined in Section 11) to CNC during the term hereof. In this regard, WCG
shall have the right of last refusal with respect to any Equipment or
Service requirements (or their commercial equivalents) of CNC. The right of
last refusal shall allow WCG to match the bid of any prospective provider
of Competitive Services or Competitive Equipment to CNC and secure the
order from CNC. Notwithstanding the foregoing, CNC need not award WCG the
order under any of the following circumstances: (a) the Service or item of
Equipment offered by WCG does not reasonably satisfy the feature, function,
performance, timeliness of service delivery or quality specifications of
CNC previously provided to WCG, (b) the Service or item of Equipment is not
available from WCG at the same or a lower price, (c) the purchase of such
Services or Equipment from WCG would violate a Third Party Contract or a
New Third Party Contract (as defined below), or (d) CNC's customer has
expressly requested redundancy or diversity and the use of WCG Services or
Equipment would not satisfy the customers requirement. If CNC determines
that any of subsections (a) through (d) apply, CNC shall promptly provide
WCG reasonably satisfactory evidence that such circumstances exist. It is
understood and agreed by the parties that existence of the circumstances
set forth in subsections (a) through (d) shall not in any way reduce or
otherwise affect the take-or-pay obligation set forth in Section 5 which
exists independently of WCG's Preferred Provider status.
11. Third Party Contracts of CNC. CNC represents to WCG (a) that the contracts
----------------------------
described in Exhibit G ("Third Party Contracts") are the only contracts CNC
has with third parties which require CNC to purchase any services identical
or commercially similar to the Services ("Competitive Services") or any
equipment identical or commercially similar to the Equipment ("Competitive
Equipment") from any party other than WCG or which would otherwise restrict
in any manner CNC's purchase of Services or Equipment from WCG pursuant to
this Agreement and (b) that said Exhibit G sets forth the annual
Page 5
<PAGE>
aggregate minimum commitments of CNC to purchase Competitive Services and
Competitive Equipment for each year in which Third Party Contracts remain
in effect. CNC covenants that it will not, without WCG's prior written
consent enter into any new contract ("New Third Party Contract") which
would constitute a Third Party Contract if in existence as of the date
hereof. CNC shall, upon written notice to WCG, have the right to amend,
extend or modify any Third Party Contract or any New Third Party Contract
but only in the ordinary course of business and in order to achieve cost
savings or other efficiencies.
12. Provision of Services and Equipment. WCG shall provide Services and
-----------------------------------
Equipment to CNC in accordance with the following provisions:
(a) All Services and Equipment shall be priced based on a "most favored
customer" basis, which means that for so long as, in each year during the
term of this Agreement, CNC's total payments to WCG pursuant to this
Agreement exceed CNC's take-or-pay commitment for such year as set forth in
Section 5 above, the prices to CNC shall be no greater than charges by WCG
for substantially similar Equipment and Services provided to any comparable
or lesser customer (including carrier customers such as MCI, Sprint or
AT&T) of WCG and pursuant to a similar or lesser economic arrangement for
the same periods of time. The determination of whether another WCG
customer is comparable or lesser and whether another transaction is similar
or lesser shall include, but not be limited to, the relative
creditworthiness and payment history of the other customer; whether the
transaction with such customer is similar as to the term of such other
customer's commitment; and the total annualized charges by WCG to such
customer. This subsection (a) shall not apply with respect to any lower
charges by WCG to: (i) entities, business organizations or enterprises
affiliated with WCG (i.e., entities in which WCG has a 20% or greater
ownership interest); or (ii) any department, branch or agency of a federal,
state or provincial government. For purposes of comparing CNC to other
customers, the parties agree that CNC's aggregate spending commitment with
WCG and its Affiliates during the term of this Agreement shall be used to
determine CNC's comparability with other WCG customers.
(b) WCG shall assign to CNC's account a national account team ("Account
Team") of sufficient experience and skill to reasonably manage CNC's
purchases of Services and Equipment and to participate in WCG's decision-
making process with respect to Service/Equipment functionality, quality,
performance and pricing, which Account Team shall provide account support,
including, but not limited to, account management of all Services and
Equipment purchased by CNC, ordering and provision of Services and
Equipment, billing, operations support and systems/network engineering of
Services and Equipment, that is consistent with that provided by other
industry leaders.
(c) Services shall be provided to CNC in accordance with the Service level
objectives for each type of Service which shall be established by the
parties at the time the specific Services and Equipment are ordered by CNC.
Page 6
<PAGE>
(d) WCG shall reasonably assist CNC in minimizing the cost of any
transitions from existing service providers to WCG Services with the
objective of eliminating or reducing duplicate charges and any other
charges or penalties to move Services from an existing provider to WCG
during any transition periods.
(e) Each month the Account Team shall review with and report to CNC
concerning (i) a comparison of WCG's actual performance against applicable
Service level objectives, (ii) relevant forecasts and capacity plans of
WCG, and (iii) any other operational or business matters relevant to CNC.
13. Estimates. Upon the effective date of this Agreement and thereafter on the
---------
first day of each quarter during the term of this Agreement, CNC shall
provide WCG with a good faith written estimate of CNC's purchases of
Services and Equipment from WCG pursuant to this Agreement for such quarter
and for the six month period beginning on the date of such estimate.
14. Late Payments. CNC shall process any payments to WCG in a manner that is as
-------------
favorable as it processes payments to any other CNC carrier. Only in the
event that CNC does not raise at least thirty-eight million dollars
($38,000,000) from its anticipated Initial Public Offering (which amount
shall be the gross amount raised exclusive any amounts from WCG and Bay
Networks), CNC shall permit and cooperate (without cost to WCG) with WCG in
order to allow WCG to obtain a security interest in unencumbered tangible
CNC assets having a market value of at least one million dollars
($1,000,000) which WCG may access for the sole purpose of securing and
receiving payment for those amounts that CNC fails to pay WCG hereunder
within ninety (90) days after the due date therefor. The conditional
remedy set forth in the immediately preceding sentence shall be conditioned
on CNC having received from WCG a valid invoice for the amount due in a
timely manner, and further conditioned on CNC receiving written notice of
non-payment from WCG for the corresponding amount within thirty (30) days
after the payable amount becomes overdue.
15. Mutual Covenants.
----------------
(a) WCG and CNC each agrees to exercise commercially reasonable efforts to
utilize the other party's products and services to support video
conferencing demonstrations and collaboration activities within and
between their respective companies and where feasible to demonstrate
the other party's products and services.
(b) WCG and CNC each agrees to cooperate and exercise commercially
reasonable efforts to develop new, advanced Internet protocol products
and services.
Page 7
<PAGE>
(c) Notwithstanding any agreement between the parties to the contrary,
each party agrees that all technology, code, inventions, algorithms,
know-how, ideas and all other business, technical and financial
information (which in all the foregoing examples is marked as
confidential) each party obtains from the other are the confidential
property of the disclosing party ("Proprietary Information" of the
disclosing party). The terms of this Agreement shall also be
considered Proprietary Information of both parties. Except as
expressly and unambiguously allowed herein, the receiving party will
hold in confidence and not use or disclose any Proprietary Information
of the disclosing party and shall similarly bind its employees. The
receiving party shall not be obligated under this Section with respect
to information the receiving party can document:
i. is or has become readily publicly available without restriction
through no fault of the receiving party or its employees or
agents;
ii. is received without restriction from a third party lawfully in
possession of such information and lawfully empowered to disclose
such information;
iii. was rightfully in the possession of the receiving party without
restriction prior to its disclosure by the other party; or
iv. was independently developed by employees or consultants of the
receiving party without use of or reference or access to such
Proprietary Information.
Each receiving party acknowledges and agrees that due to the
unique nature of the disclosing party's Proprietary Information,
there can be no adequate remedy at law for any breach of its
obligations hereunder, that any such breach may allow the
receiving party or third parties to unfairly compete with the
disclosing party resulting in irreparable harm to the disclosing
party and, therefore, that upon any such breach or threat
thereof, the disclosing party shall be entitled to seek
injunctive relieve and other appropriate equitable relief in
addition to whatever remedies it may have at law, and to be
indemnified by the receiving party from any loss or harm
(including, without limitation, attorneys' fees) in connection
with any breach or enforcement of the receiving party's
obligations hereunder or the unauthorized use or release of any
Proprietary Information. The receiving party will notify the
disclosing party in writing immediately upon the occurrence of
any such unauthorized release or other breach of which it is
aware.
(d) Except as otherwise set forth in this Agreement, neither party shall
be liable to the other party with respect to any subject matter of
this Agreement under any contract, negligence, strict liability or
other legal or equitable theory for (i) any
Page 8
<PAGE>
exemplary, incidental, indirect, special or consequential damages of
any kind, including without limitation, loss of profit, savings or
revenue, lost data, or the claims of third parties, whether or not such
party has been or is advised of the possibility of such damages however
caused and on any theory of liability, arising out of this Agreement,
or (ii) cost of procurement of substitute goods, technology or
services.
16. Resolution of Disagreements Among Parties. No party to this Agreement
-----------------------------------------
shall be entitled to take legal action with respect to any dispute relating
to this Agreement until it has complied in good faith with the following
alternative dispute resolution procedures. If a dispute, claim or
controversy arises with respect to or relates to any Section of this
Agreement, then the following dispute resolution procedures shall govern
the parties' conduct:
(a) The parties shall attempt promptly and in good faith to resolve any
dispute arising out of or relating to this Agreement through
negotiations between representatives who have authority to settle the
controversy. Any party may give the other party written notice of any
such dispute not resolved in the normal course of business.
Negotiations extending ten (10) days after the disputing party's
notice shall be deemed at an impasse, unless otherwise agreed by the
parties. If a negotiator intends to be accompanied at a meeting by an
attorney, the other negotiator(s) shall be given at least two (2)
working days notice of such intention and may also be accompanied by
an attorney. All negotiations pursuant to this clause are
confidential and shall be treated as compromise and settlement
negotiations for purposes of the Federal and state Rules of Evidence.
(b) If a dispute is at an impasse (i.e., it has not been resolved within
ten (10) days of the disputing party's notice), the dispute shall be
settled by arbitration in Kansas City, Missouri, administered by the
American Arbitration Association in accordance with the Commercial
Arbitration Rules of the American Arbitration Association in effect on
the date that such notice is given. If the parties are unable to agree
on a single arbitrator within ten (10) days from the date of an
impasse as set forth in Subsection (a), then CNC and WCG shall each
select one arbitrator within ten (10) days and the two (2) arbitrators
shall select a third arbitrator within ten (10) days. If a party does
not designate an arbitrator or if the two appointed arbitrators cannot
agree on the final arbitrator within the foregoing time periods, then
the American Arbitration Association shall select the arbitrator(s)
upon request of either party. The decision of the arbitrator(s) shall
be final and binding upon the parties and shall include written
findings of law and fact, and judgment may be obtained thereon by
either party in a court of competent jurisdiction. Each party shall
bear the cost of preparing and presenting its own case. The cost of
the arbitration, including the fees and expenses of the arbitrator(s),
shall be shared equally by the parties hereto unless the award
otherwise provides. The arbitrator(s) shall be instructed by the
parties to establish
Page 9
<PAGE>
procedures such that a decision can be rendered by the arbitrator(s)
within sixty (60) days of the date that the last arbitrator is
selected.
(c) The obligation herein to arbitrate shall not be binding upon any party
with respect to requests for preliminary injunctions, temporary
restraining orders, specific performance or other procedures in a
court of competent jurisdiction to obtain interim relief when deemed
necessary by such court to preserve the status quo or prevent
irreparable injury pending resolution by arbitration of the actual
dispute.
17. Miscellaneous.
-------------
(a) This Agreement may not be assigned by either party without the prior
written consent of the other party, except that WCG may assign, in
whole or in part, its rights and obligations under this Agreement to
an Affiliate upon written notice to CNC. Notwithstanding the
foregoing, CNC shall have the right to reincorporate under the laws of
any state without the prior written consent of WCG.
(b) The waiver by either party of any breach, default or remedy hereunder
will not operate as a waiver of any subsequent breach, default or
remedy.
(c) This Agreement supersedes all prior or contemporaneous proposals,
communications and negotiations, both oral and written, and
constitutes the entire agreement between WCG and CNC with respect to
(but only with respect to) the subject matter hereof.
(d) If any court holds any portion of this Agreement unenforceable, the
remaining language shall not be affected and the parties agree to
negotiate an amendment to the Agreement so that the parties' intent
embodied in the now unenforceable language will be restored through
the amendment to the Agreement to the extent legally permissible.
(e) Except as otherwise provided herein, any amendments or modifications
to this Agreement must be in writing and executed by an authorized
representative of each party.
(f) This Agreement is deemed made and GOVERNED BY THE LAWS OF THE STATE OF
OKLAHOMA except for its rules regarding the conflict of laws.
(g) Nothing contained in this Agreement will be interpreted or construed
as to characterize the relationship between CNC and WCG as a joint
venture, partnership or franchise for any purpose. Neither party has
the authority to, and neither party shall, make any representation,
prepare documents or statements on behalf of, or in the name of the
other party, give any warranties, accept any orders, enter into a
contract on behalf of the other party, or obligate the other party
Page 10
<PAGE>
in any manner, unless expressly authorized to do so by this Agreement
or in writing by the other party.
(h) Any notice or report herein required or permitted to be given shall be
in writing and given by depositing the same in the United States mail,
postage prepaid and addressed or confirmed facsimile transmission to
the parties as follows:
(a) To CNC:
Concentric Network Corporation
10590 N. Tantau Avenue
Cupertino, CA 95014
Attn: Michael F. Anthofer
(b) To WCG:
Williams Communications Group, Inc.
111 East 1st Street
Tulsa, OK 74103
Attn: Vice President - Finance
or to such place or places as any of the parties shall designate by
written notice to the others.
(i) To the extent, but only to the extent, that the terms and conditions
in this Agreement are in conflict with the terms and conditions of any
Exhibit, the terms and conditions of this Agreement shall govern and
have precedence.
Page 11
<PAGE>
THIS AGREEMENT is executed by the parties as of the date first set
forth above, but is effective for all purposes only as set forth herein.
CONCENTRIC NETWORK CORPORATION WILLIAMS COMMUNICATIONS GROUP, INC.
/s/ Henry R. Nothhaft /s/ S. Miller Williams
By:_______________________ By:_______________________
Name:_____________________ Name:_____________________
Title:____________________ Title:____________________
Page 12
<PAGE>
EXHIBITS
--------
Exhibit A List of Equipment
Exhibit B List of Services
Exhibit C Master Services Agreement
Exhibit D Purchase Agreement/ Service Agreement (WilTel)
Exhibit E Services Credit - Letter Agreement
Exhibit F Concentric Network Corporation Common Stock Purchase Agreement
Exhibit G Third Party Contracts/Minimum Commitments
Page 13
<PAGE>
EXHIBIT A
List of Equipment
- -----------------
PBX Equipment
Routers
Bridges
Servers
Switches
Page 14
<PAGE>
EXHIBIT B
List of Services
- ----------------
Multimedia Wide Area ATM Services
Multimedia Private Line Services
Multimedia Frame Relay Services
Collocation Services
WCG Agency Services
Private Labeling Services
Call Center Services
Multimedia Storage Services
Page 15
<PAGE>
MASTER SERVICES AGREEMENT
This Master Services Agreement (this "Agreement") is made this ____ day of
_________________, 1997, by and between __________, a Delaware corporation
("Seller"), with its principal place of business at Tulsa Union Depot, 111 East
First Street, Tulsa, Oklahoma 74103 and Concentric Network Corporation, a
Florida corporation ("Customer"), with its principal place of business at 10590
Tantau Avenue, Cupertino, California 95014, for the provision of multimedia
telecommunications services, subject to this Agreement set forth in this
Agreement.
1.0. DESCRIPTION OF SERVICES AND PRICING.
-----------------------------------
Customer may order from Seller multimedia transmission services ("Services"),
the terms and conditions of which and the charges for which are set forth in
Seller's currently prevailing Multimedia Transmission Service Schedule relating
to such Services (the "Service Schedule"). The current Service Schedule is
attached to this Agreement as Schedule A and is incorporated herein by this
reference. Seller offers such Services, as defined in the Service Schedule,
upon the terms and conditions set forth in the Service Schedule, this Agreement,
and any applicable tariff (the "Tariff") filed by Seller with the Federal
Communications Commission. The terms and conditions of this Agreement
(including the Service Schedule) are subject to change in accordance with and to
the extent of any changes made in such Tariff, if applicable, or as such changes
are generally applicable Seller's other customers ordering similar services.
All Services are subject to availability.
2.0 EFFECTIVE DATE AND TERM
-----------------------
This Agreement shall become effective on the _____ day of ________________, 1997
(the "Effective Date") and shall continue through the _____ day of
___________________, ______ (the "Term"). Thereafter, this Agreement shall
automatically renew for successive one-year periods (the "Renewal Term(s)")
unless canceled by either party by giving notice of such cancellation not less
than thirty (30) days before the beginning of any Renewal Term.
3.0. SERVICE ORDERS.
--------------
Services requested by Customer hereunder shall be requested on Seller's Service
Order forms in effect from time to time or on Customer's forms accepted in
writing by Seller ("Service Orders"). Each Service Order shall reference this
Agreement.
This Agreement shall apply to all Services provided by Seller to the Customer
whether pursuant to a Service Order or otherwise.
Any conflicting, different or additional terms and conditions contained in
Customer's acknowledgment or Service Order or elsewhere are objected to by
Seller and shall not constitute part of this Agreement. No action by Seller
(including, without limitation, provision of Services to Customer pursuant to
such Service Order) shall be construed as binding or estopping Seller with
respect to such term or condition, unless the Service Order containing said
specific term or condition has been signed by Seller.
4.0. LOCAL ACCESS.
------------
Customer shall be solely responsible for obtaining any necessary local access
services necessary for the provision of Services.
-1-
<PAGE>
5.0. CHANGES IN SERVICE PARAMETERS.
-----------------------------
5.1. Cancellation of Services. Customer may cancel any Service provided
------------------------
hereunder by providing written notification to Seller thereof sixty (60) days in
advance of the effective date of cancellation. In the event of such
cancellation, Customer shall pay to Seller a cancellation charge in an amount
equal to the monthly charge for such canceled Service multiplied by the number
of months in the relevant term for such Service, less the charges for such
Service actually provided to Customer through the effective date of cancellation
(but in no event less than zero). Customer agrees that damages in the event of
such cancellation would be difficult or impossible to ascertain, and that the
cancellation charge in this Section 5.1 is intended, therefore, to establish
liquidated damages and is not intended as a penalty. Notwithstanding the
foregoing, and upon thirty (30) day's prior written notice to the other party,
either Customer or Seller shall have the right, without cancellation charge or
other liability to the other party, to cancel the affected portion of any
Service, if Seller is prohibited by governmental authority from furnishing such
portion, or if any material rate or term contained herein and relevant to the
affected Service is substantially changed by order of the highest court of
competent jurisdiction to adjudicate the matter, the Federal Communications
Commission, or other local, state or federal government authority.
5.2. Outage Credits/Exclusive Remedy. Failure of equipment or transmission
-------------------------------
services involving Seller's Services, including failure due to force majeure
events as set forth in Section 7.4, or failure to provide Services for any
reason ("Outage"), shall result in a pro rata reduction of the service charges
for the Service involved ("Credit"). In the event of an occurrence causing
failure of Service which is beyond the control of Seller, the unaffected portion
of the Service may be subject to interruption as Seller deems necessary in order
to mitigate the effect of such occurrence with respect to Seller's network.
Seller shall not be liable for such interruption except in the form of a Credit.
The applicable Credit shall be determined by dividing such Outage time (in
minutes) by the total minutes in the month, and multiplying by the normal
monthly charge for such Service. The foregoing remedy is exclusive and no other
remedy is provided to Customer.
6.0. PAYMENT TERMS.
-------------
6.1. Invoice. Customer agrees to remit payment to Seller at the remittance
-------
address and on the due date indicated on Seller's invoices to Customer ("Due
Date"). In the event Customer fails to make full payment to the proper address
within thirty (30) days after the Due Date, Customer shall also pay a late fee
in the amount of the lesser of one and one-half percent (1 1/2%) of the unpaid
balance per month or the maximum lawful rate under applicable state law.
Customer acknowledges and understands that all charges are computed exclusive of
any applicable federal, state or local use, excise, gross receipts, sales and
privilege taxes, duties, fees or similar liabilities (other than general income
or property taxes), whether charged to or against Seller, its suppliers or
affiliates or Customer for the Service provided to Customer ("Additional
Charges"). Such Additional Charges shall be paid by Customer in addition to all
other charges provided for herein.
Payment for all prorated monthly recurring charges (charges for monthly Service
provided for less than a calendar month), installation and other non-recurring
charges shall be billed following the receipt of any such Services. Payment for
all monthly recurring charges for full months during which Service are to be
provided following the date such Services begin shall be due in advance.
6.2. Suspension of Service. In the event payment in full is not received from
---------------------
Customer on or before sixty (60) days following the Due Date, Seller shall have
the right, after giving Customer ten (10) days notice, to suspend all or any
portion of the Services to Customer. If only a portion of the Services are
suspended and Customer does not cure, Seller may suspend, after giving Customer
ten (10) days notice, all or any additional portion of the Services to
-2-
<PAGE>
Customer. Seller may continue suspension until such time as Customer has paid in
full all charges then due, including any late fees as specified herein. If
Customer fails to make such payment by a date determined by and acceptable to
Seller, Customer shall be deemed to have canceled the Services provided under
this Agreement effective on the date of such suspension and shall remain liable
for all cancellation charges set forth in the Service Schedule.
6.3. International Service. Rates for any international Services are priced to
---------------------
Customer based on the exchange rate published on the most recent business day
in the Wall Street Journal at the time Service is contracted for, subject to
monthly adjustments to reflect changes in the applicable published exchange rate
on the first day of each month. If the carrier of non-U.S. Services modifies
its tariff or the technical parameters for Services during the Term of this
Agreement or any Service ordered, Seller shall have the right to modify
correspondingly this Agreement upon which such Service is provided to Customer.
International Services will be available only to the extent Seller has received
all necessary regulatory approvals to provide Services in a given jurisdiction.
6.4. Taxes. If any sales taxes or similar charges or impositions are asserted
-----
against Seller after, or as a result of, Customer's use of Services by any
local, state, national, international, public or quasi-public governmental
entity or foreign government or its political subdivision including without
limitation, any tax or charge levied to support the Universal Service Fund
contemplated by the Telecommunications Act of 1996, Customer shall be solely
responsible for such taxes, charges or impositions. Customer agrees to pay any
such taxes.
7.0. GENERAL AGREEMENT.
-----------------
7.1. Warranty and Disclaimer of Warranty. Seller warrants that Services shall
-----------------------------------
be provided to Customer in accordance with the technical parameters set forth in
the Service Schedule. Seller shall use reasonable efforts under the
circumstances to remedy any delays, interruptions, omissions, mistakes,
accidents or errors in the Services and restore such Services to comply with the
terms hereof. THE FOREGOING WARRANTY AND THE REMEDY PROVIDED TO CUSTOMER WITH
RESPECT TO OUTAGE CREDITS ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES OR
REMEDIES, WHETHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING WITHOUT LIMITATION,
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
7.2. Limitation of Liability. IN THE EVENT OF ANY BREACH OF THIS AGREEMENT OR
-----------------------
ANY FAILURE OF THE SERVICES, WHATSOEVER, NO PROVIDER (AS DEFINED IN SECTION 7.3)
SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL, SPECIAL, ACTUAL,
INCIDENTAL, PUNITIVE OR ANY OTHER DAMAGES, OR FOR ANY LOST PROFITS OF ANY KIND
OR NATURE WHATSOEVER AND, WITH RESPECT TO PARTIES OTHER THAN CUSTOMER THAT USE
THE SERVICES THROUGH CUSTOMER, CUSTOMER SHALL INDEMNIFY PROVIDERS AGAINST ANY
CLAIMS FOR SUCH DAMAGES BROUGHT AGAINST THEM BY THIRD PARTIES.
7.3. Customer Content and Indemnity. Customer shall make all arrangements with
------------------------------
copyright holders, music licensing organizations, performers' representatives or
other parties for necessary authorizations, clearances or consents with respect
to transmission contents ("Consents"). Customer shall indemnify and hold
harmless Seller and any third party provider or operator of facilities employed
in the provision of Services (all of which shall be referred to as "Providers")
against and from any court, administrative or agency action, suit or similar
proceeding, whether civil or criminal, private or public, brought against
Providers arising out of or related to the contents transmitted hereunder (over
Seller's network or otherwise) including, but not limited to, claims, actual or
alleged, relating to any violation of copyright law, export control laws,
failure to procure Consents, failure to meet governmental or other technical
broadcast standards, or that such transmission contents are libelous,
slanderous, an invasion of privacy, pornographic, or otherwise unauthorized or
illegal. Seller may terminate or restrict any transmissions over the
-3-
<PAGE>
network if, in its judgment, (a) such actions are reasonably appropriate to
avoid violation of applicable law; or (b) there is a reasonable risk that
criminal, civil or administrative proceedings or investigations based upon the
transmission contents shall be instituted against Providers. Customer agrees not
to use Services for any unlawful purpose, including without limitation any use
which constitutes or may constitute a violation of any local, state or federal
obscenity law. Customer and Seller shall indemnify and hold harmless the other
against and from any and all claims for physical property damage, physical
personal injury or wrongful death to the extent that such arises out of the
negligence or willful misconduct of the respective indemnifying party, its
employees, agents, or contractors in connection with the provision of Services
or other performance. With respect to third parties that use Services through
Customer, Customer shall indemnify Providers against any claims by such third
parties for damages arising or resulting from any defect in or failure to
provide Services. The indemnifying party agrees to defend the other against the
claims as set forth above and to pay all reasonable litigation costs, attorneys'
fees, court costs, settlement payments, and any damages awarded or resulting
from any such claims. The indemnified party shall promptly notify the
indemnifying party in writing of any such claims.
7.4. Force Majeure. If either party's performance of this Agreement or any
-------------
obligation (other than the obligation to make payments) 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 cut, storm or
other similar occurrence including rain fade or other atmospheric conditions,
any law, order, regulation, direction, action or request of the United States
Government or state or local governments, or of any department, agency,
commission, court, bureau, corporation or other instrumentality of any one or
more said governments, or of any civil or military authority, or by national
emergencies, insurrections, riots, wars, acts of terrorism, strikes, lockouts or
work stoppages or other labor difficulties, supplier failures, shortages,
breaches or delays, then the affected party shall be excused from such
performance on a day-to-day basis to the extent of such prevention, restriction
or interference. The affected party shall use reasonable efforts under the
circumstances to avoid and remove such causes of non-performance and shall
proceed to perform with reasonable dispatch whenever such causes cease.
7.5. Events of Default. With respect to any particular Service ordered
-----------------
hereunder, Customer may terminate that Service, upon written notice to Seller
and following a five-day period in which Seller may cure such default, if the
quality of transmission provided under such Service falls consistently below the
level of quality set forth in the technical parameters applicable to such
Service set forth in the Service Schedule.
Either party may terminate this Agreement if the other is in default of any
material obligation contained herein, which default has not been cured within
fifteen (15) days following notice of such default.
7.6. Use of Services. Seller's obligation to provide Services to Customer is
---------------
subject to the following conditions: (a) Services shall not be used for any
unlawful purpose, (b) Services may not be resold by Customer to any third party
as a private-line service, and (c) Services may be used only for multimedia
transmissions.
7.7 Proprietary Information. Customer understands and agrees that the terms
-----------------------
and conditions of this Agreement and all documents referenced herein (including
invoices to Customer for Services provided hereunder) are confidential as
between Customer, Seller and its affiliates and shall not be disclosed by
Customer to any party other than the directors, officers, and employees of
Customer or agent's of Customer who have specifically agreed to nondisclosure of
the terms and conditions hereof. Violation by Customer or its agents of the
foregoing provision shall entitle Seller, at its option, to discontinue Services
to Customer without further obligation or liability to Customer. Customer
further agrees that any Customer generated press release, advertisement or
publication regarding this Agreement, Services provided hereunder or in which
Seller, or its affiliates are to be mentioned, will be submitted to Seller for
its written approval prior to publication. Customer understands and agrees that
Seller may disclose such information as may be required under applicable law
including, without limitation, filing of tariffs.
-4-
<PAGE>
7.8. Intrastate Interexchange Services. Customer may use any interexchange
---------------------------------
Service provided under this Agreement only if such interexchange Service is used
for carrying interstate telecommunications (i.e., telecommunications subject to
the jurisdiction of the Federal Communications Commission). Seller and its
affiliates shall not be obligated to make available interexchange Service on a
circuit with end points within a single state or service on a circuit which
originates/terminates at points both of which are situated within a single state
unless Customer represents in writing that such interexchange Service or
circuits shall be used to carry interstate telecommunications. If it is
determined at any time that such interexchange Service or circuit is subject to
state regulation, the interexchange Service or circuit may be provided by Seller
or its affiliates pursuant to applicable state laws, regulations and applicable
tariffs, or Seller and its affiliates may discontinue provision of the affected
interexchange Service or circuit.
8.0. MISCELLANEOUS PROVISIONS.
------------------------
8.1. Title to Equipment. This Agreement shall not, and shall not be deemed to,
------------------
convey to Customer title of any kind to any of the transmission facilities,
digital encoder/decoders, telephone lines, microwave facilities or other
facilities utilized in connection with the Services. Any equipment provided by
Customer must be itemized on a schedule listing all such Customer-provided
equipment and appended to the Service Order to which use of that equipment
relates ("Customer Equipment Inventory"). Seller shall not be obligated to
provide any Services for Customer if Customer will be providing any of its own
equipment unless and until such equipment is itemized on the applicable Customer
Equipment Inventory.
8.2. Notice. Notices under this Agreement shall be in writing and delivered
------
either via U.S. mail, certified with return receipt requested, or via Federal
Express priority next-day delivery, to the person identified in this Section at
the Full Business Addresses of the parties as they appear herein. The effective
date for any notice under this Agreement shall be the date of delivery of such
notice, not the date of mailing.
The Full Business Address for purposes of notice under this Section as well as
telephone voice and facsimile numbers for reservation of services and
troubleshooting shall be:
- ---------------------
111 East 1st Street
Tulsa, Oklahoma 74103-2807
Telephone: (918) 588-5760 or 1-800-888-6771
Fax: (918) 588-5761
Attention: Vice President-Finance and Administration
With a copy to:
General Counsel
Williams Communications Group, Inc.
One Williams Center, Suite 4100
Tulsa, Oklahoma 74172
CONCENTRIC NETWORK CORPORATION
10590 Tantau Avenue
Cupertino, California 95014
Telephone: (408) 342-2800
Fax: (408) 342-2876
-5-
<PAGE>
8.3. Merger/Integration. This Agreement (including the attached Service
------------------
Schedule, as it may be modified from time to time) consists of all the terms and
conditions contained herein and in documents incorporated herein specifically by
reference. This Agreement constitutes the complete and exclusive statement of
the understanding between the parties and supersedes all proposals and prior
agreements (oral or written) between the parties relating to Services provided
hereunder.
8.4. Written Amendment. Customer agrees that any addition, deletion or
-----------------
modification to this Agreement shall not be binding on Seller except by written
agreement executed by Seller.
8.5. No Venture. The provision of Services shall not create a partnership or
----------
joint venture between the parties.
8.6. Conflict of Law. In addition to the nonpayment of any sum due hereunder,
---------------
Seller may immediately suspend Services in whole or part if Seller determines
that such Services violate the Communications Act of 1934, as amended (including
the Telecommunications Act of 1996), or that the imposition of any state or
federal statute, or promulgation of any rule, regulation, or order of the
Federal Communications Commission ("FCC") or other governing body makes Seller's
performance commercially impracticable.
8.7. Assignment. Customer shall not assign or transfer its rights or
----------
obligations under this Agreement without the prior written consent of Seller,
provided that Customer may reincorporate in any state without the prior written
consent of Seller. Any such assignment or transfer of Customer's rights or
obligations without such consent shall entitle Seller to terminate the Services
provided hereunder at its option upon ten (10) days' prior written notice to
Customer. A change in control shall be deemed to be an assignment or transfer.
8.8. Choice of Law. This Agreement shall be governed by the laws of the State
-------------
of Oklahoma without regard to choice of law principles. Customer hereby
consents to the jurisdiction of the federal and state courts having a situs in
Tulsa County, Oklahoma over any proceeding initiated with respect to the
enforcement or interpretation of this Agreement.
8.9. Interpretation. No rule of construction requiring interpretation against
--------------
the draftsman hereof shall apply in the interpretation of this Agreement.
8.10. No Third Party Beneficiary. The provisions of this Agreement are for the
--------------------------
benefit only of the parties hereto, and no third party may seek to enforce or
benefit from these provisions.
8.11. Attorneys' Fees. If a proceeding is brought for the enforcement of this
---------------
Agreement or because of any alleged or actual dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the prevailing party shall be entitled to recover reasonable attorneys' fees and
other costs and expenses incurred in such action or proceeding in addition to
any other relief to which such party may be entitled.
8.12. Severability. In the event any provision of this Agreement conflicts
------------
with any statute, rule or order of any governmental unit or regulatory body, or
tariff then, if required by law, such statute, rule, order or tariff shall
control.
8.13. No Waiver. The failure of either party to enforce any provision hereof
---------
shall not constitute the permanent waiver of such provision.
_______________________________________ CONCENTRIC NETWORK CORPORATION
-6-
<PAGE>
By: By:
----------------------------- ------------------------------
Name: Name:
--------------------------- ----------------------------
Title: Title:
--------------------------- ---------------------------
Date: Date:
f:\cnc\networ~2.doc
-7-
<PAGE>
SERVICE SCHEDULE (SAMPLE FOR IXC SERVICES)
to be negotiated
-8-
<PAGE>
WILTEL - NSI PURCHASE AGREEMENT
- --------------------------------------------------------------------------------
This Agreement is made as of ________________, 19__, between WILTEL
COMMUNICATIONS, LLC, a Delaware limited liability company, 2800 Post Oak
Boulevard, Houston, Texas 77056, ("WilTel") and ___________________________ a(n)
____________________ corporation/partnership/sole proprietorship ("Customer"):
AGREEMENT. WilTel will sell, deliver and install the data communications and
internetworking equipment and sublicense the associated software (together, the
"System") listed on the WilTel Quotation (the "Quotation"), a copy of which is
attached hereto and incorporated herein and Customer will purchase such System.
The System will be installed at the locations specified in the Quotation (the
"Premises").
PRICE, PAYMENT TERMS, AND SCHEDULING. The total price, including the equipment,
software and installation as detailed on the Quotation, but not including
maintenance, is $_________________, (the "Cash Price") plus all sales, use,
property or applicable taxes imposed on the System or the purchase thereof
(except for WilTel income taxes). No other item is included unless specifically
stated in this Agreement or its attachments. CUSTOMER WILL PROVIDE EVIDENCE OF
ITS TAX EXEMPT STATUS IF IT CLAIMS SUCH STATUS. Unless stated otherwise on the
Quotation, Customer will invoiced and will pay all WilTel invoices within thirty
(30) days of the date of invoice. All payments will be subject to a late
payment service charge of 1-1/2% per month (or as limited by applicable law) on
payments in arrears for more than thirty (30) days after invoice date.
INDEMNIFICATION; LIMITATION OF LIABILITY. Both WilTel and Customer will defend,
indemnify and hold the other harmless, from and against any and all claims,
demands, losses, orders, judgments or decrees (collectively the "Loss") arising
out of personal injury (including death) or damage to tangible, physical
property only to the extent the Loss is caused by the negligence of the
indemnitor and reported to the indemnitor in writing within sixty (60) days of
the incident. IN NO EVENT, HOWEVER, SHALL EITHER PARTY (OR WILTEL'S SUPPLIERS
OR SUBCONTRACTORS) BE LIABLE FOR (i) ANY SPECIAL, INCIDENTAL, EXEMPLARY, OR
CONSEQUENTIAL DAMAGES, (ii) COMMERCIAL LOSS OF ANY KIND (INCLUDING LOSS OF
BUSINESS OR PROFITS), NOR SHALL WILTEL OR ITS SUPPLIERS OR SUBCONTRACTORS BE
LIABLE FOR ANY DAMAGES OF ANY KIND RESULTING FROM UNAUTHORIZED USE OF THE
SYSTEM, INTERRUPTION OF SERVICE OR LOSS OF DATA. THIS LIMITATION APPLIES TO ALL
CLAIMS WHETHER BASED UPON BREACH OF WARRANTY, BREACH OF CONTRACT, NEGLIGENCE,
STRICT LIABILITY IN TORT OR ANY OTHER LEGAL THEORY, AND WHETHER WILTEL OR ITS
SUPPLIERS OR ITS SUBCONTRACTORS HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGE OR LOSS.
SOFTWARE LICENSE; INTELLECTUAL PROPERTY INFRINGEMENT. Certain manufacturers
issue their own software license with the Equipment and a copy of such license
shall be given to Customer upon installation of the System. If no such license
is issued by the manufacturer, then to the extent authorized by the
manufacturers of the System, WilTel grants Customer a non-exclusive, non-
assignable, non-transferable license for the useful life of the System to use
the software (including related documentation) solely to maintain and operate
the System, provided Customer: (i) does not allow any aspect of the software to
be disclosed to a third party without WilTel's written consent and makes
reasonable efforts to ensure that its employees are aware of this obligation;
(ii) uses the System solely for Customer's internal business purposes; (iii)
does not copy any part of the software or related documentation without WilTel's
consent and does not attempt to develop any source code from the software; and
(iv) returns to WilTel or erases or destroys any software or related
documentation on any media being recycled or discarded and so certifies to
WilTel. The Customer has no right, title or interest in the software other than
as set forth in this section. Should the System or any portion thereof become,
or be likely to become, the subject of a claim of infringement of a United
States patent or copyright, WilTel shall pass through to Customer the
infringement indemnification which is provided to WilTel by the manufacturer
and, in addition, shall, in the following order and at no cost to Customer, use
commercially reasonable efforts to: (i) obtain for Customer the right to use
such System; (ii) replace or modify such System so that it becomes non-
infringing but materially equivalent in function and performance; or (iii) if
unable to perform (i) or (ii) above, refund to Customer an amount equal to the
then present value of the cost of the infringing System as amortized over the
customary use expectancy of the affected item.
RISK OF LOSS, TITLE AND SECURITY INTEREST. Customer assumes the risk of loss
to the System from the Installation Date (as defined below) and Customer shall
assume all risks of loss and responsibility for obtaining and paying for
insurance in the event of loss or damage commencing on the Installation Date.
Title in the System will pass on full payment of the Cash Price plus all taxes
set forth above. Until Customer's full payment of the Cash Price plus all taxes
set forth above, WilTel reserves and Customer grants WilTel a security interest
in the System in the amount of the purchase price. At WilTel's option, Customer
will execute appropriate financing statements to fully protect WilTel's interest
hereunder in accordance with the Uniform Commercial Code.
LIMITED WARRANTY. WILTEL WARRANTS THAT WORK PERFORMED UNDER THIS AGREEMENT SHALL
BE DONE IN
<PAGE>
A GOOD AND WORKMANLIKE MANNER AND BE FREE FROM MATERIAL DEFECTS FOR A PERIOD OF
THIRTY(30) DAYS FROM DATE OF PERFORMANCE. CUSTOMER'S SOLE AND EXCLUSIVE REMEDY
FOR BREACH OF SUCH WARRANTY SHALL BE CORRECTION OF THE DEFECT BY WILTEL AT
WILTEL'S EXPENSE. THIS AGREEMENT EXCLUDES ALL OTHER EXPRESS WARRANTIES AND ALL
IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, THE WARRANTIES OF FITNESS FOR
A PARTICULAR PURPOSE AND MERCHANTABILITY. WILTEL DISCLAIMS ANY WARRANTY TO
PREVENT UNAUTHORIZED USE OF THE EQUIPMENT.
THIS AGREEMENT INCLUDES THE PROVISIONS SET FORTH ON THE REVERSE SIDE OF THIS
PAGE. Customer acknowledges that it has reviewed this Agreement, including any
and all documents referenced in it, understands it, and is bound by its terms.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
WILTEL COMMUNICATIONS, LLC CUSTOMER:
- --------------------------------------------------------------------------------
BY: BY:
- --------------------------------------------------------------------------------
NAME: NAME:
- --------------------------------------------------------------------------------
TITLE: TITLE:
- --------------------------------------------------------------------------------
</TABLE>
INSTALLATION (a) Delivery Date occurs when WilTel delivers the networking
equipment for delivery to the Premises. Installation Date occurs when the
equipment is connected to the network, activated and functioning substantially
to provide basic service, excepting minor variances which do not materially
affect performance. (b) Customer shall, at its own expense, provide and be
responsible for all proper environmental conditions at the installation site and
for a suitable operating environment per manufacturer's specifications, a copy
of which shall be provided to Customer upon request. Customer shall hold WilTel
harmless from any and all liability for injury to wires, conduits, pipes mains,
sewers or other similar property that is not accurately detailed or accounted
for in Customer supplied prints. If any unexpected obstruction is found that
alters routine installation, Customer shall be billed for any additional expense
related thereto at WilTel's then prevailing time and material rates. (b)
Customer agrees to permit and arrange full access to the Premises necessary for
WilTel's representatives to perform the installation services set forth in this
Agreement. Installation of the Equipment will be performed during the normal
working hours of 8:00 a.m.-5:00 p.m., Monday through Friday, excluding WilTel
holidays. Any delay or downtime resulting from Customer act or omission shall
be the responsibility of Customer and shall be billed at WilTel's prevailing
rate. (c) Customer represents and warrants that the conditions to be
encountered by WilTel in all areas where work is to be performed on the Premises
shall (i) be in compliance with all applicable federal, state and local laws and
regulations, (ii) be safe and non-hazardous, (iii) not contain, present, or
expose WilTel representatives to hazardous materials or hazardous substances.
In the event of breach of the foregoing, WilTel may, in addition to all other
remedies, immediately suspend work until Customer has promptly corrected such
condition(s) at Customer's expense. If Customer cannot or does not correct such
condition, it will be WilTel's option as to whether to enter the area in which
the unsafe condition exists. WilTel's refusal to enter such a location on the
basis of safety will not be deemed a breach of this Agreement or a default under
it and no liability for such a decision will attach.
CHANGES. Any move, addition\deletion or change ("MAC") to the System shall be
made by mutual agreement through a written change order or quotation which is
executed by an authorized representative of Customer and the terms of this
Agreement will apply to the equipment or services purchased thereunder. The
Cash Price of the System, Delivery Date and Installation Date shall be subject
to adjustment for any mutually agreeable MAC.
ACCEPTANCE When the System is installed and has operated in accordance with
the manufacturer's specifications for a period of fourteen (14) calendar days,
it will be deemed Accepted by Customer unless Customer has provided WilTel with
written notice setting forth deficiencies in operation. If Customer has
provided such notice, WilTel will promptly correct the listed deficiencies, at
WilTel's sole expense. Upon WilTel's correction of the listed deficiencies to
Customer's reasonable satisfaction, Customer shall promptly certify in writing
its acceptance of the System.
CLAIMS, QUERIES AND RETURNS. (a) No claims with regard to shortages,
discrepancies, or damage to components of the System will be accepted by WilTel
unless Customer notifies WilTel in writing within 10 working days of delivery.
(b) WilTel shall have no liability in respect of damage or shortages to the
extent caused by the acts or omissions of the Customer or of others. (c) No
claim in respect of any invoice as to inaccuracies in price, discount, terms of
payment or any other commercial terms will be accepted by WilTel unless Customer
notifies WilTel in writing within 14 days of Customer's receipt of a valid
invoice. (d) No claim by the Customer that it has not received an invoice
will be accepted unless Customer notifies WilTel in writing within 7 days from
the date of the first statement of account from WilTel identifying such invoice.
(e) If a claim is validly made under this Section which may entitle the
Customer to return a System component, WilTel shall not be bound to accept such
return or exchange component unless the Customer complies with all material and
reasonable WilTel return procedures as set forth in subsection (f) below, which
may be modified by WilTel from time to time on reasonable, advance written
<PAGE>
notice. (f) In order to return a component, a Return Merchandise Authorization
number must first be obtained from WilTel and must appear on all shipping labels
of components to be returned. Components must be returned in the same condition
as originally delivered, ordinary wear and tear excepted, and in original
box/carton.
DEFAULT. If, prior to Acceptance, Customer cancels, without cause, an equipment
order placed pursuant to this Agreement or rejects, without cause, equipment
already installed, WilTel, in addition to the remedies set forth below, shall
be entitled to retain all monies paid by Customer and recover additional monies,
if necessary, to cover costs incurred by WilTel in preparation for and any
actual performance under this Agreement. If Customer fails to pay any sums
within thirty (30) days after such sums become due, or otherwise fails to
perform any material obligation, WilTel, in addition to other remedies available
to it at law or in equity, may: (i) cease installing the System; and\or (ii)
enter Customer's premises upon reasonable notice and take possession of and
remove the System, retaining all sums paid.
FORCE MAJEURE. Except for Customer's payment obligation, either party's
performance shall be adjusted or suspended to the extent performance is beyond
its reasonable control for reasons including, without limitation, the following:
strikes, work stoppages, fire, water, flood, lightning, governmental action,
acts of God or public enemy, delays of suppliers, subcontractors, power company,
local exchange company, or other carrier.
MISCELLANEOUS. (a) If Customer issues a purchase order for its own internal
purposes, Customer agrees that only the terms and conditions of this Agreement
apply. (b) WilTel reserves the right to subcontract any and all of the work
to be performed by it under this Agreement. (c) This Agreement is not
assignable by Customer without the prior written consent of WilTel, provided
that Customer shall have the right to reincorporate under the laws of any State
without the prior written consent of WilTel. (d) The waiver by either party of
any default will not operate as a waiver of any subsequent default. (e) The
non-prevailing party will pay all of the prevailing party's costs or expenses,
including reasonable attorney's and collection fees, incurred in enforcing this
Agreement. (f) This Agreement supersedes all prior or contemporaneous
proposals, communications and negotiations, both oral and written, and
constitutes the entire agreement between WilTel and Customer with respect to the
purchase of the System. Any representations made by an employee, salesperson or
agent of either party and not expressed in this Agreement are not binding upon
the respective party. (g) If any court holds any portion of this Agreement
unenforceable, the remaining language shall not be affected. (h) Any
modifications must be in writing and executed by an authorized representative of
the party against whom enforcement is sought. (i) No action, regardless of
form, arising out of this Agreement may be brought by either party more than one
year after the cause of action has accrued. (j) This Agreement is deemed made
and GOVERNED BY THE LAWS OF THE STATE OF OKLAHOMA except for its rules regarding
the conflict of laws. (k) Customer agrees that neither it nor any of its
affiliates will solicit any of the WilTel employees providing services pursuant
to this Agreement with offers of employment during the term of this Agreement
and for a period of one year after its expiration.
<PAGE>
WILTEL - NSI SERVICE AGREEMENT
- --------------------------------------------------------------------------------
This Agreement is made as of _______________________, 19____ between WILTEL
COMMUNICATIONS, LLC, a Delaware limited liability company, 2800 Post Oak Road,
Houston, Texas 77056, ("WilTel") and ___________________________________ a(n)
___________________ corporation/partnership/sole proprietorship ("Customer"):
SERVICE PLAN. Customer owns or leases certain data communications and
internetworking electronic equipment and software ( collectively, the "System").
Customer orders from WilTel the Service Plan described in this Agreement and the
Service Plan Attachment, which is attached hereto and incorporated herein and
WilTel agrees to furnish such requested service. The System and its location(s)
(the "Premises") are described on the Service Plan Attachment.
TERM. The initial term of this Agreement shall be for a period of ____ months
commencing ____________________, 19__ (the "Commencement Date"). At the
conclusion of the initial term, this Agreement may be renewed for successive one
year periods thereafter by mutual consent of WilTel and Customer upon the same
terms and conditions contained herein, except that the Service Fee shall be
annually adjusted. Such mutual consent of WilTel and Customer shall be
evidenced by (i) WilTel's issuance to the Customer, not less than thirty (30)
days prior to the expiration of the initial term or of any successive renewal
term, of a Service Fee invoice ("the Invoice") for an additional one year of
service at the stated Service Fee and (ii) Customer's payment of the invoice
prior to the expiration of the then current term or renewal period. Either
party may terminate maintenance service at any time with respect to particular
component of the System or particular geographic locations covered under this
Agreement by giving the other party thirty (30) days written notice.
SERVICE FEE. Customer agrees to pay an annual plan service fee of $____________
to be paid annually in advance for maintenance of the System (the "Service Fee")
plus all applicable taxes when due. CUSTOMER WILL PROVIDE EVIDENCE OF ITS TAX
EXEMPT STATUS IF IT CLAIMS SUCH STATUS. Service Fees received more than thirty
(30) days after Customer's receipt of a valid invoice are subject to a late
payment charge of one and one half percent (1 1/2%) for each 30 day period that
they remain unpaid.
MAINTENANCE OBLIGATIONS. (A) The Service Plan Attachment sets forth the hours
of the principal Service Period and the service request response times.
Maintenance service extending more than one-half (1/2) hour beyond the Service
Period or performed entirely outside the Service Period will be performed upon
Customer's request. Customer agrees to pay WilTel, at WilTel's then current time
and materials rates, at a minimum increment of two (2) hours initially with
subsequent increments of one-half (1/2) hour. (B) For the purposes of this
Agreement, "Emergency Service" refers to service for a major outage resulting
from a System failure that adversely affects 50% or more of the System. The
terms "Non-Emergency Service" refers to service required for all other System
failures. (C) Maintenance service for hardware shall consist of furnishing all
parts and labor necessary to maintain the System in good operating condition as
a result of Customer's normal use. WilTel shall provide replacement parts, at no
additional cost to Customer, on an exchange basis as a result of normal use. The
replacement parts may be refurbished or contain refurbished materials. Any parts
replaced by WilTel will become the property of WilTel. Customer have access to
WilTel's technical answering/dispatch service during the hours of the Service
Period. Maintenance service for software will include provision of all
maintenance releases and patches to correct performance of the software, at no
additional cost to Customer, provided such patches and releases are provided to
WilTel by the manufacturer at no charge.
ADDITIONS TO SYSTEM. New or relocated equipment added to the System
("Additions") may be included in the service coverage provided by this
Agreement only by written amendment to this Agreement; such amendment shall
state the location of additional items of equipment quantity, description,
serial number and part number and the necessary adjustment to the Service Fee,
if any. The inspection and repair charges for such additional equipment shall
be at the hourly service rates of WilTel then in effect and Customer agrees to
pay such charges. Maintenance service for such Additions shall be subject to the
terms and conditions of this Agreement and be co-terminous with the term of this
Agreement Any Additions purchased from or installed by WilTel require a
separate agreement between the parties.
INDEMNIFICATION; LIMITATION OF LIABILITY. Both WilTel and Customer will defend,
indemnify and hold the other harmless, from and against any and all claims,
demands, losses, orders, judgments or decrees (collectively the "Loss") arising
out of personal injury (including death) or damage to tangible, physical
property (other than the System) to the extent the Loss is caused by the
negligence of the indemnitor and reported to the indemnitor in writing within
sixty (60) days of the incident. WilTel shall be liable for any physical damage
it causes to the System; this liability is limited to repairing or replacing the
System or components thereof. IN NO EVENT, HOWEVER, SHALL EITHER PARTY (OR
WILTEL'S SUPPLIERS OR SUBCONTRACTORS) BE LIABLE FOR (I) ANY SPECIAL, INCIDENTAL,
EXEMPLARY, OR CONSEQUENTIAL DAMAGES, (II) COMMERCIAL LOSS OF ANY KIND (INCLUDING
LOSS OF BUSINESS OR PROFITS), NOR SHALL WILTEL OR ITS SUPPLIERS OR
SUBCONTRACTORS BE LIABLE FOR ANY DAMAGES OF ANY KIND RESULTING FROM UNAUTHORIZED
USE OF THE SYSTEM, INTERRUPTION OF SERVICE OR LOSS OF DATA. THIS PROVISION
APPLIES TO ALL CLAIMS WHETHER BASED UPON BREACH OF WARRANTY, BREACH OF CONTRACT,
NEGLIGENCE, STRICT LIABILITY
<PAGE>
IN TORT OR ANY OTHER LEGAL THEORY, AND WHETHER WILTEL OR ITS SUPPLIERS OR ITS
SUBCONTRACTORS HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE OR LOSS.
THIS AGREEMENT INCLUDES THE PROVISIONS SET FORTH ON THE REVERSE SIDE OF THIS
PAGE. Customer acknowledges that it has reviewed this Agreement, including all
documents referenced in it, understands it, and is bound by its terms.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
WILTEL COMMUNICATIONS, LLC CUSTOMER:
- --------------------------------------------------------------------------------
BY: BY:
- --------------------------------------------------------------------------------
NAME: NAME:
- --------------------------------------------------------------------------------
TITLE: TITLE:
- --------------------------------------------------------------------------------
</TABLE>
SERVICE EXCLUSIONS. (A) WilTel maintenance service provided hereunder does not
include: (i) electrical work external to the System; (ii) repair of damage
resulting from accident, transportation, neglect or misuse, operation of the
System outside the manufacturer's environmental specifications, failure of
electrical power, air conditioning or humidity control or causes other than
ordinary use; (iii) furnishing supplies or accessories, painting or refinishing
the System or furnishing material therefore, making specification changes or
performing services connected with relocation of System; or adding or removing
accessories, attachments or other devices; (iv) such service which is
impractical to WilTel service representatives to render because of alterations
to the equipment or its connection by mechanical or electrical means to other
devices; or alterations to operating systems; (v) systems engineering services,
programming, and operations procedures of any sort; (vi) service required
because of system operation failure due to other manufacturer's equipment and/or
other vendor malfunctions; (vii) circuit and carrier problems and malfunctions;
and (viii) damage caused or required by or resulting from the fault, misuse, or
negligence of the Customer, including service calls which result in "no trouble
found" in System. Service for such damage resulting from excluded causes will be
billed to Customer at WilTel's then prevailing Time and Materials rates. (B)
When WilTel shall reasonably determine that a System component can no longer be
effectively maintained for any reason, including but not limited to, usage,
environmental conditions, or lack of readily available parts, WilTel shall
inform Customer that the component must be refurbished. Refurbishment when
required shall be performed at the option of WilTel with the Customer's signed
approval, at WilTel's service rates and costs of parts then in effect. Should
the customer elect not to have refurbishment work performed when required,
maintenance coverage under this Agreement shall immediately be terminated for
that specific piece of equipment. Maintenance after such termination shall be
provided only on Time and Materials basis at WilTel's rates then prevailing
rates.
ACCESS. Customer agrees to permit and arrange full access to the Premises
necessary for WilTel's employees to perform the services set forth in this
Agreement. Customer represents and warrants that the conditions to be
encountered by WilTel at the Premises and in areas where work is to be performed
shall (i) be in compliance with all applicable federal, state and local laws,
rules and regulations, (ii) be safe and non-hazardous, and (iii) not contain,
present, or expose WilTel representatives to hazardous materials or hazardous
substances. In the event of breach of the foregoing, in addition to all other
remedies, WilTel may immediately suspend work until Customer has promptly
corrected such condition(s) at Customer's expense. If Customer cannot or does
not correct such condition, it will be WilTel's option as to whether to enter
the area in which the unsafe condition exists. WilTel's reasonable refusal to
enter such a location on the basis of safety will not be deemed a breach of this
Agreement or a default under it, and no liability for such a decision will
attach.
LIMITED WARRANTY WILTEL WARRANTS THAT WORK PERFORMED UNDER THIS AGREEMENT SHALL
BE DONE IN A GOOD AND WORKMANLIKE MANNER AND BE FREE FROM MATERIAL DEFECTS FOR A
PERIOD OF THIRTY (30) DAYS FROM DATE OF PERFORMANCE. CUSTOMER'S SOLE AND
EXCLUSIVE REMEDY FOR BREACH OF SUCH WARRANTY SHALL BE CORRECTION OF THE DEFECT
BY WILTEL AT WILTEL'S EXPENSE. THIS AGREEMENT EXCLUDES ALL OTHER EXPRESS
WARRANTIES AND ALL IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, THE
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. WILTEL
DISCLAIMS ANY WARRANTY TO PREVENT UNAUTHORIZED USE OF THE SYSTEM.
DEFAULT. If Customer (i) fails to pay the amounts due under this Agreement
within thirty (30) days after such amounts are due or any other agreement with
WilTel, or (ii) materially breaches this Agreement, WilTel may, in addition to
all other remedies available to it at law or in equity, suspend its service
obligations, and terminate this Agreement or furnish service on a time and
materials basis, C.O.D. In the
<PAGE>
event of WilTel's material non-performance of this Agreement, Customer may
cancel this Agreement and receive a refund for the unused portion of the Service
Fee, which shall be Customer's exclusive remedy.
FORCE MAJEURE. Except for Customer's payment obligation, either party's
performance shall be adjusted or suspended to the extent performance is beyond
its reasonable control for reasons including, without limitation, the following:
strikes, work stoppages, fire, water, flood, lightning, governmental action,
acts of God or public enemy, delays of suppliers, subcontractors, power company,
local exchange company, or other carrier.
MISCELLANEOUS. (A) If Customer issues a purchase order for its own internal
purposes, Customer agrees that only the terms and conditions of this Agreement
apply. (B) WilTel reserves the right to subcontract any and all of the work to
be performed by it under this Agreement. (C) This Agreement is not assignable by
Customer without the prior written consent of WilTel, provided that Customer
shall have the right to reincorporate under the laws of any State without the
prior written consent of WilTel. (D) The waiver by either party of any default
will not operate as a waiver of any subsequent default. (E) The non-prevailing
party will pay all of the prevailing party's costs or expenses, including
reasonable attorney's and collection fees, incurred in enforcing this Agreement.
(F) This Agreement supersedes all prior or contemporaneous proposals,
communications and negotiations, both oral and written, and constitutes the
entire agreement between WilTel and Customer with respect to the purchase of the
System. Any representations made by an employee, salesperson or agent of either
party and not expressed in this Agreement are not binding upon the respective
party. (G) If any court holds any portion of this Agreement unenforceable, the
remaining language shall not be affected. (H) Any modifications must be in
writing and executed by an authorized representative of the party against whom
enforcement is sought. (I) No action, regardless of form, arising out of this
Agreement may be brought by either party more than one year after the cause of
action has accrued. (J) This Agreement is deemed made and GOVERNED BY THE LAWS
OF THE STATE OF OKLAHOMA except for its rules regarding the conflict of laws.
(K) Customer agrees that neither it nor any of its affiliates will solicit any
of the WilTel employees providing services pursuant to this Agreement with
offers of employment during the term of this Agreement and for a period of one
year after its expiration.
<PAGE>
CONCENTRIC NETWORK CORPORATION
COMMON STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of ___________________, 199__, between Concentric
Network Corporation, a Delaware corporation (the "Company"), and Williams
Communications Group, Inc., a Delaware corporation ("Purchaser").
WHEREAS, the Company and Purchaser have entered into that certain
Agreement for Purchase and Sale of Services and Equipment dated July ___, 1997
(the "Services Agreement") which provides, among other things, that, at
Purchaser's option, the Company will pay for $2 million in services by issuing
common stock of equivalent value to the Purchaser when such services are
rendered; and
WHEREAS, Purchaser has delivered services and equipment to the Company
having a value of ____________.
NOW, THEREFORE, the parties agree as follows:
1. PURCHASE AND SALE OF STOCK. Subject to the terms and conditions of
--------------------------
this Agreement, the Company hereby sells to Purchaser and Purchaser purchases
from the Company ______ shares (_________ shares) of the Company's Common Stock
(the "Stock") at a price of $______ per share, for an aggregate purchase price
(the "Purchase Price") of ____________ Dollars ($_________). The Purchase Price
has been paid in the form of services and equipment delivered by the purchaser
to the Company having a value of ____________, receipt of which is hereby
acknowledged by the Company.
2. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
---------------------------------------------
(a) LEGENDS. The share certificate evidencing the Stock issued
--------
hereunder shall be endorsed with the following legend (in addition to any
legends required under the applicable state securities laws):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN
OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED."
(b) STOP-TRANSFER NOTICES. Purchaser agrees that, in order to ensure
----------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer"
<PAGE>
instructions to its transfer agent, if any, and that, if the Company transfers
its own securities, it may make appropriate notations to the same effect in its
own records.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth in
----------------------------------------------
the Schedule of Exceptions attached hereto as Annex I, the Company hereby
represents and warrants to Purchaser as follows:
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
----------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has full power and authority to own and
operate its properties and assets, and to carry on its business as presently
conducted. The Company is duly qualified, is authorized to do business and is
in good standing as a foreign corporation in all jurisdictions in which the
nature of its activities and of its properties (both owned and leased) makes
such qualification necessary, except for those jurisdictions, in the aggregate,
in which failure to do so would not have a material adverse effect on the
Company or its business.
(b) AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the
-----------------------------------
party of the Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement and the Certificate of
Incorporation, for the sale and issuance of the Stock pursuant hereto and for
the performance of the Company's obligations hereunder has been taken. This
Agreement, when executed and delivered, will be a valid and binding obligation
of the Company enforceable in accordance with its terms. The sale of the Stock
is not and will not be subject to any preemptive rights or rights of first
refusal that have not been properly waived or complied with. When issued in
compliance with the provisions of this Agreement and the Certificate of
Incorporation, the Stock will be validly issued, fully paid and nonassessable,
and will be free of any liens or encumbrances; provided, however, that the
Stock may be subject to restrictions on transfer under state and/or federal
securities laws as set forth herein or as otherwise required by such laws at the
time a transfer is proposed.
(c) COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery and
----------------------------------
performance of and compliance with this Agreement and the issuance and sale of
the Stock pursuant hereto will not (i) materially conflict with, or result in a
material breach or violation of, or constitute a material default under, or
result in the creation or imposition of any material lien, (ii) violate,
conflict with or result in the breach of any material terms of, or result in the
material modification of, any material contract or otherwise give any other
contracting party the right to terminate a material contract, or constitute (or
with notice or lapse of time both constitute) a material default under any
material contract to which the Company is a party or by or to which it or any of
its assets or properties may be bound or subject or (iii) result in any
violation, or be in conflict with or constitute a default under any term, of its
charter or bylaws.
(d) SECURITIES EXEMPTION. Assuming the accuracy of the
---------------------
representations and warranties of the Purchaser contained in Section 4 hereof,
the offer, sale and issuance of the Stock will be exempt from the registration
requirements of the Securities Act of 1933, as amended (the
2
<PAGE>
"Securities Act"), and will have been registered or qualified (or are exempt
from registration and qualification) under the registration, permit or
qualification requirements of all applicable state securities laws.
(e) VALID ISSUANCE OF STOCK. The Stock which will be purchased by
------------------------
Purchaser hereunder, when issued, sold and delivered in accordance with the
terms hereof for the consideration expressed herein, will be duly and validly
authorized and issued, fully paid and nonassessable.
(f) LITIGATION, ETC. There is no action, suit, proceeding nor, to the
----------------
best of the Company's knowledge, any investigation pending or currently
threatened against the Company, that questions the validity of this Agreement or
the right of the Company to enter into such agreements, or which might result,
either individually or in the aggregate, in any material adverse change in the
assets, condition, affairs or prospects of the Company, financial or otherwise.
(g) GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization
--------------------------
of, or designation, declaration or filing with, any governmental authority on
the part of the Company is required in connection with the valid execution,
delivery, and performance of this Agreement or the offer, sale or issuance of
the Stock, or the consummation of any other transaction contemplated by this
Agreement except certain filings as may be required under the Securities Act and
state securities laws and regulations, which filings will be made timely in
accordance with the applicable law or regulation.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser hereby
--------------------------------------------
represents and warrants to the Company as follows:
(a) REQUISITE POWER AND AUTHORITY. Purchaser has all necessary power
------------------------------
and authority under all applicable provisions of law to execute and deliver this
Agreement and to carry out the provisions of this Agreement. This Agreement,
when executed and delivered, will be a valid and binding obligation of
Purchaser, enforceable in accordance with its terms, except as limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights and (ii) general
principles of equity that restrict the availability of equitable remedies.
(b) CONSENTS. All consents, approvals, orders, authorizations,
---------
registrations, qualifications, designations, declarations or filings with any
governmental or banking authority on the party of Purchaser required in
connection with the consummation of the transactions contemplated in this
Agreement have been obtained.
(c) INVESTMENT REPRESENTATIONS. Purchaser understands that the Stock
---------------------------
has not been registered under the Securities Act. Purchaser also understands
that the Stock is being offered and sold pursuant to an exemption from
registration contained in the Securities Act based in part upon Purchaser's
representations contained in the Agreement. Purchaser hereby represents and
warrants to the Company as follows:
3
<PAGE>
(i) PURCHASER IS AN ACCREDITED INVESTOR. Purchaser represents that
Purchaser is an Accredited Investor within the meaning of Rule 501(a) of
Regulation D under the Securities Act.
(ii) PURCHASER BEARS ECONOMIC RISK. Purchaser understands that it
must bear the economic risk of this investment indefinitely unless the Stock is
registered pursuant to the Securities Act or an exemption from registration is
available. Purchaser understands that it has no registration rights with
respect to the Stocks. Purchaser also understands that there is no assurance
that any exemption from registration under the Securities Act will be available
and that, even if available, such exemption may not allow Purchaser to transfer
all or any portion of the Stock under the circumstances, in the amounts or at
the times Purchaser might propose.
(iii) ACQUISITION FOR OWN ACCOUNT. Purchaser is acquiring
the Stock for Purchaser's own account for investment only, and not with a view
towards their distribution within the meaning of the Securities Act.
(iv) PURCHASER CAN PROTECT ITS INTEREST. Purchaser represents that by
reason of its, or of its management's, business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement. Purchaser is not a corporation,
trust or partnership specifically formed for the purpose of consummating these
transactions.
(v) COMPANY INFORMATION. Purchaser has had an opportunity to discuss
the Company's business, management and financial affairs with directors,
officers and management of the Company and has had the opportunity to review the
Company's operations and facilities. Purchaser has also had the opportunity to
ask questions of and receive answers from, the Company and its management
regarding the terms and conditions of this investment.
(d) DISPOSITION UNDER RULE 144. Purchaser understands that:
---------------------------
(i) The shares of Stock are restricted securities within the meaning
of Rule 144 promulgated under the Securities Act; that the exemption from
registration under Rule 144 will not be available in any event for at least one
(1) year from the date of purchase and payment of the Stock, and even then will
not be available unless (i) a public trading market then exists for the Common
Stock of the Company, (ii) adequate information concerning the Company is then
available to the public, and (iii) other terms and conditions of Rule 144 are
complied with; and that any sale of the Stock may be made only in limited
amounts in accordance with such terms and conditions of Rule 144;
(ii) At the time Purchaser wishes to sell the Stock there may be no
public market upon which to make such a sale; that, even if such a public market
then exists, the Company may not be satisfying the current public information
requirements of Rule 144; and that, in such event,
4
<PAGE>
Purchaser would be precluded from selling the Stock under Rule 144 even if the
minimum holding period had been satisfied; and
(iii) In the event all of the requirements of Rule 144 are
not satisfied, registration under the Securities Act or compliance with
Regulation A or another registration exemption will be required prior to any
disposition of the Stock by Purchaser; that, notwithstanding the fact that Rule
144 is not exclusive, the staff of the SEC has expressed its opinion that
persons proposing to sell private placement securities other than in a
registered offering or pursuant to Rule 144 will have a substantial burden of
proof in establishing that an exemption from registration is available for such
offers or sales; and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
(e) FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
-----------------------------------
Purchaser's representations set forth above, Purchaser further agrees that
Purchaser shall in no event make any disposition of all or any portion of the
Stock unless and until either:
(i) There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition, and such disposition is made
in accordance with said Registration Statement; or
--
(ii) (1) Purchaser shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (2) Purchaser shall
have furnished the Company with an opinion of Purchaser's counsel, reasonably
satisfactory to the Company, to the effect that such disposition will not
require registration of such shares under the Securities Act.
5. HART-SCOTT-RODINO COMPLIANCE. Notwithstanding anything else in this
-----------------------------
Agreement, if the sale and issuance of the Stock is subject to the premerger
notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), it shall be a condition to the purchase of the
Stock that any waiting period under the HSR Act applicable to the purchase of
the Stock shall have expired or been terminated and any approvals required
thereunder shall have been obtained, and the parties shall cooperate in promptly
filing premerger reports and in taking all steps reasonably necessary to obtain
early termination of any applicable HSR Act waiting periods. If any such
waiting period shall not have expired or been subject to early termination on or
before the date ninety (90) days from the date of this Agreement, either party
may terminate this Agreement by giving written notice to the other.
6. COVENANTS OF THE COMPANY
6.1 RULE 144 REPORTING. With a view to making available to Purchaser the
benefits of certain rules and regulations of the SEC which may permit the sale
of the Stock to the public without registration, the Company agrees at all times
after ninety (90) days after the effective date of the Registration Statement
to:
5
<PAGE>
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144,
(b) use its best efforts to file with the SEC in a timely manner all
reports and other documents required of the Company under the Securities Act
and the Securities Exchange Act of 1934, as amended (the "Exchange Act),
(c) so long as Purchaser owns any Stock, to furnish to Purchaser
within a reasonable time upon a written request by Purchaser, a written
statement by the Company as to its compliance with the reporting engagements of
said Rule 144 (at any time after ninety (90) days after the effective date of
the first registration statement filed by the Company for an offering of its
securities to the general public) and of the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
so filed by the Company as Purchaser may reasonably request in complying with
any rule or regulation of the SEC allowing Purchaser to sell any such securities
without registration.
7. GOVERNING LAW. This Agreement shall be governed and construed by the
--------------
laws of the State of California as applied to agreements made and performed in
California by residents of the State of California.
8. MISCELLANEOUS.
--------------
(a) RIGHTS AS SHAREHOLDER. Subject to the provisions and limitations
----------------------
hereof, Purchaser may exercise all rights and privileges of a shareholder of the
Company with respect to the Stock.
(b) FURTHER ASSURANCES. The parties agree to execute such further
-------------------
instruments and to take such further action as may reasonably be necessary to
carry out the intent of this Agreement.
(c) NOTICES. Any notice required or permitted hereunder shall be
--------
given in writing and shall be deemed effectively given upon personal delivery
(including by express courier) or upon deposit in the United States Post Office,
by First Class mail with postage and fees prepaid, addressed to Purchaser at its
address shown on the Company's records and to the Company at the address of its
principal corporate offices (attention: Secretary) or at such other address as
such party may designate by ten (10) days advance written notice to the other
party.
(d) ASSIGNMENT. This Agreement shall inure to the benefit of the
-----------
successors and assigns of the Purchaser and, subject to the restrictions on
transfer herein set forth, be binding upon Purchaser, its heirs, executors,
administrators, successors and assigns. The rights of Purchaser under this
Agreement may be assigned only with the prior written consent of the Company,
which shall not be unreasonably withheld.
6
<PAGE>
(e) WAIVER. Either party's failure to enforce any provision or
-------
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions, nor prevent that party thereafter from
enforcing each and every other provision of this Agreement. The rights granted
both parties herein are cumulative and shall not constitute a waiver of either
party's right to assert all other legal remedies available to it under the
circumstances.
(f) COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original and all of which together shall
constitute one instrument.
(g) ENTIRE AGREEMENT. This Agreement represents the entire agreement
-----------------
between the parties with respect to the purchase of Stock by Purchaser, may be
modified or amended only in a writing signed by both parties, and satisfies all
of the Company's obligations to Purchaser with regard to the issuance or sale of
Stock.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth in the first paragraph hereof.
COMPANY:
CONCENTRIC NETWORK CORPORATION
10590 N. Tantau Avenue
Cupertino, CA 95014
By:__________________________
Henry R. Nothhaft
President and Chief Executive Officer
PURCHASER:
WILLIAMS COMMUNICATIONS GROUP, INC.
By:__________________________
(Signature)
Its__________________________
8
<PAGE>
6/4/97
Concentric Network Corporation
MCI Contract Commitments
From: Amy Warr
<TABLE>
<CAPTION>
MCI
- --- EFFECTIVE TERM MINIMUM PER WHAT
<S> <C> <C> <C> <C> <C>
ENHANCED SERVICES 1/1/97 36 MONTHS $1.2M ANNUAL PORTS/PVC/ACCESS
AGREEMENT (ATM)
ACTUALS 1/1/97-5/31/97 1,005,186
SPECIAL CUSTOMER 11/1/96 6/6/98
ARRANGEMENT $3.6M 11/1/96-4/30/97 All Services
includes several
standard tariffed ACTUALS 11/1/96-12/31/96 3,670,613
MCI services, like 1/1/97-4/30/97 3,330,745
800 service and
Dedicated Access $4.915M 5/1/97-6/6/98 All Services
ACTUALS 5/1/97-5/31/97 589,869
$1.315M 11/1/96-6/6/98 Dedicated Access
Sub minimum
ACTUALS 11/1/96-12-31-96 397,157
1/1/97-5/31/97 1,000,303
</TABLE>
<PAGE>
6/4/97
Concentric Network Corporation
AT&T Contract Commitments
From: Amy Warr
Contract begin 21-Jun-96
Contract ends 21-Jun-99
---------
Contract Terminates 01-Jun-99
---------
Term of contract 36 months
<TABLE>
<CAPTION>
COMMITMENT TOTAL YEARLY
PRODUCT PER MONTH COMMITMENT COMMITMENT ACTUALS FRAME RELAY PRIVATE LINE T45
- ------- --------- ---------- ---------- --------------- ----------- ------------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
7/1/96-12/31/96 1,526,256 2,384,086 240,828
Frame Relay 210,000 7,560,000 2,520,000 1/1/97-5/31/97 1,602,309 1,298,536 188,190
----------------------------------------
Private Line 50,000 1,800,000 600,000 Total To Date 3,128,565 3,682,622 429,018
Local Channels -- Avg/11 months 284,415 334,784 39,002
T-45 37,638 1,354,968 451,656 CURRENT MONTHLY
RUN RATE 284,000 220,000 38,000
----------------------
Total Potential 10,714,968 3,571,656
Less: 36% discount (3,857,388) (1,285,796)
-----------------------
Out of pocket Cash 6,857,580 2,285,860
</TABLE>
<PAGE>
CONCENTRIC NETWORK CORPORATION
RACAL CURRENT STATUS:
- ---------------------
Lease Obligation as of 6/30/97: $51,468,478
Monthly Lease Payment as of 7/1/97: $1,387,243
<PAGE>
Concentric Network Corporation
10690 N. Tantau Avenue
Cupertino, CA 95014
October 31, 1996
Racal-Datacom, Inc.
1601 North Harrison Parkway
Sunrise, Florida 33323-2899
ATTENTION: MR. PAUL KOSLOWSKI, CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Ladies and Gentlemen:
In order to induce Racal-Datacom, Inc. ("RDI") to enter into the
Series D Preferred Stock Purchase Agreement dated the date hereof, to take the
actions required thereby and to purchase $10,000,000 and negotiate for the
possible acquisition of up to an additional $10,000,000 of Series D Preferred
Stock, and in consideration of the payment of $10 by RDI to Concentric Network
Corporation ("CNC") the receipt of which is hereby acknowledged, CNC hereby
undertakes, until the fifth anniversary of the date of this letter agreement
to the extent that RDI can provide equipment and services on a commercially
competitive basis, to purchase in all circumstances all of such equipment and
service from RDI.
This undertaking is being delivered subsequent to the execution of the
Series D Preferred Stock Purchase Agreement, the Amended and Restated
Registration Rights Agreement, the Shareholder Agreement and the Warrants to
Purchase Shares of Series D Preferred Stock of CNC issued by CNC to RDI, and
is expressly not integrated with or superseded by such agreements or any other
agreements required or contemplated thereby.
Very truly yours,
CONCENTRIC NETWORK CORPORATION
/s/ Henry R. Nothhaft
-------------------------------
Henry R. Nothhaft
Chief Executive Officer
<PAGE>
EXHIBIT 10.46
AGENCY AGREEMENT
THIS AGENCY AGREEMENT (the "Agreement") is entered into as of the 25th day of
July, 1997, to be effective as of the Effective Date, hereinafter defined,
between Concentric Network Corporation, a Florida corporation with offices at
10590 N. Tantau Avenue, Cupertino, CA 95014 ("CNC") and Williams Communications
Group, a Delaware corporation with offices at One Williams Center 17th Floor,
Tulsa, Oklahoma 74172 ("WCG").
In consideration of the mutual promises contained herein, CNC and WCG
(collectively the "PARTIES") agree as follows:
1. Definitions. For the purpose of this Agreement, the following terms and all
-----------
terms defined elsewhere in this Agreement shall have the meanings so defined. A
term defined in the singular shall include the plural and vice versa when the
context so indicates.
"Customer" shall mean a school, government entity, individual, organization,
business, or institution that has contracted through WCG with CNC to purchase
Services, as delivered from CNC or as part of a value-added package offered by
WCG.
"Dispute Resolution Procedures" shall mean the dispute resolution procedures set
forth in Section 22 of this Agreement.
"Effective Date" shall be the Closing Date described in that certain Common
Stock and Warrant Purchase Agreement between the Parties entered into
concurrently with the execution of this Agreement.
"Services" shall mean CNC's products and services provided to WCG for which
--------
orders from CNC's Customers may be procured by WCG as a sales agent for CNC
under this Agreement, which Services shall be described in Exhibit A, as amended
---------
from time to time. Services shall include all current or future CNC products and
services, including without limitation all network and server/host based
products and services and all international products and services, that CNC
commercializes and makes generally available, except those which CNC is
contractually or legally prohibited from making available to WCG or those which
are reasonably determined by CNC to be technically infeasible for CNC..
"Services" shall include but not be limited to CNC RemoteLink,ConcentricHost
Shared Web Services and ConcentricHost Dedicated Co-location. Subject to the
foregoing, updates to the current Exhibit A (includinginformation similar to
---------
that which is provided in the current Exhibit A, such as Service descriptions,
costs to Customers and WCG's commissions) shall be made to this document as they
become available . CNC will use commercially reasonable efforts to provide WCG
the ability to be a sales agent via CNC for Telecom Italia International network
services that are being deployed as part of the CNC/Telecom Italia relationship.
1
<PAGE>
"Subsidiary" shall mean any entity which WCG owns, directly or indirectly, fifty
percent (50%) or more of the equity securities or other equity interest granting
WCG voting rights exercisable in electing the management of such entity, but
only for so long as such ownership exists.
2. Non-Exclusive CNC Sales Agent.
-----------------------------
a) Subject to the terms contained herein, CNC hereby appoints WCG as CNC's non-
exclusive sales agent for the sale of Services in accordance with the terms
set forth in Exhibit B, and WCG hereby accepts such appointment. By acting
---------
as a sales agent, WCG shall not accept an order from a Customer for Services
unless and until CNC has provided WCG with a written quote for such Services.
Except as may be expressly set forth in CNC's quote for Services, WCG shall
not have the authority to make any commitments whatsoever on behalf of CNC.
b) CNC warrants and represents that it is the owner of, or has sufficient rights
to, the products that comprise the Services, including the software portions
thereof, that it has the right to provide the Services to Customers, that it
has the right to grant the agency rights stated in the preceding paragraph
and that such grant does not conflict with any prior agency agreement or
other agreement entered into by CNC, and CNC agrees that it shall not enter
into any agency agreement or other agreement in the future which conflicts
with this Agreement.
c) CNC and WCG shall meet no less frequently than once per quarter to discuss
all Services that have been developed or are in the process of being
developed by CNC. WCG will advise CNC of the current or developing Services
for which WCG desires to serve as CNC's sales agent under the terms of this
Agreement. For the designated Services that are immediately available, the
Parties will attach to this Agreement information in the forms of Exhibit A
---------
and Exhibit B with respect to those Services (including the applicable
---------
financial accounting practices for each product) so that WCG can begin
soliciting orders for those Services as CNC's agent. For the designated
Services that are in the process of being developed, CNC will develop and
attach to this Agreement information in the forms of Exhibit A and Exhibit B
--------- ---------
with respect to those Services as soon as the development of the subject
Services allows, so that WCG can begin soliciting orders for those Services
as CNC's agent immediately upon their availability to the public and without
regard to the timing of the availability of those Services to other agents,
provided, however, that CNC makes no representation or warranty that any
Services in development will be completed, commercialized and made generally
available. The availability of designated Services that are in the process of
being developed are also subject to the absence of special requirements or
modifications necessary for WCG. Without limitation as to other instances
wherein the Dispute Resolution Procedures apply, if the Parties disagree as
to which of CNC's products or services constitute "Services" under this
Agreement and must therefore be offered on an agency basis to WCG hereunder,
or if CNC otherwise refuses to offer to WCG the current or developing
Services designated by WCG under this paragraph, or the Parties otherwise
disagree as to either Party's compliance
2
<PAGE>
with the requirements of this paragraph, then the Parties agree to resolve
such disputes in accordance with the Dispute Resolution Procedures.
3. Scope of Agency; Employees. This Agreement appoints WCG as a non-
--------------------------
exclusive agent for the purposes expressly stated herein and does not appoint
WCG as CNC's general or special agent and does not create a joint venture or
apply to confer any status, power or authority upon WCG other than as expressly
set forth herein. All persons employed by WCG to perform WCG's duties under
this Agreement are, and will remain, the employees and agents of WCG and are not
employees or agents of CNC. WCG shall have sole responsibility for its
employees' supervision, direction and control. Nothing contained in this
Agreement shall be construed to give either Party the power to direct and
control the day-to-day activities of the other.
4. Commission.
----------
a) Most Favored Nation Status. Commission rates, terms, and conditions of this
--------------------------
Agreement shall be provided to WCG on a "Most Favored Nation" basis. As used
in this Agreement, "Most Favored Nation" status means that, taken as a whole
and not individually, the commission rates, terms, and conditions offered to
WCG under this Agreement are no less favorable than the commission rates,
terms, and conditions, taken as a whole and not individually, provided to any
other CNC agent. CNC will provide a nationally recognized independent third
party auditor retained by WCG access upon fifteen (15) days prior notice, at
WCG's expense, to other active agency agreements with CNC as a means by which
WCG can ensure to its satisfaction that it is receiving "Most Favored Nation"
status. If such auditor determines that another agent has more favorable
commission rates, terms and conditions, then CNC will give WCG the
opportunity to substitute all of the commission rates, terms and conditions
that apply to such other agent for the commission rates, terms and conditions
of this Agreement. . Remuneration will be in the form of credit going forward
and will not be adjusted on past financial statements. Remuneration will
applied if the material amount is greater than 10%.Said auditor shall be
limited to one (1) audit per year for no longer than five (5) days and shall
conduct the audit during normal business hours in a manner which will not
unduly disrupt CNC's operations. The results of the audit shall be deemed
Confidential Information.
b) Calculation of Commission. Subject to the terms of Section 4(a), as the
-------------------------
sole, exclusive and entire compensation for performing WCG's obligations
under and during the term of this Agreement, CNC shall pay WCG a commission
based on the billing of the Services sold by WCG in the percent specified and
calculated according to Exhibit A attached hereto. Commission payments made
---------
under this Agreement shall accrue on the first day of billing on an order
received for the Services following the Effective Date. Commissions shall not
be paid on non-CNC originated Services including without limitation local
loops between Customer and CNC, 800 services, customer premises equipment,
third party software, etc.
c) Payment of Commission. The entire commission amount on an individual order
---------------------
shall be payable to WCG thirty (30) days from the date CNC receives the
initial payment from the
3
<PAGE>
Customer for the Services purchased by the Customer. The commission amount
will be based on the contract value of the agreement with the Customer as
determined by CNC financial accounting practices as defined in Exhibits A and
B. In the event that CNC extends its Customer agreement upon expiration, WCG
shall continue to receive commission payments on such agreement as set forth
herein. In the event the actual billings of a Customer are greater than the
initial contract value due to variable usage charges and/or purchase of
additional Services, WCG shall receive additional commissions on the
additional billings at the rates set forth in Exhibit A. In the event that a
---------
Customer cancels its agreement prior to its term commitment, its billings are
uncollectible, or adjustments are made to the billings then commission
chargebacks to WCG will be made accordingly. Additional commission payments
netted off by chargebacks will be performed two times per year. Payment of
commissions shall be in United States dollars and shall be subject to all
applicable governmental regulations and rulings, including withholding of any
taxes required by law
d) Adjustments. The commission rates, terms, and conditions of this Agreement
-----------
will be reviewed annually and adjusted, if necessary, to reflect WCG's "Most
Favored Nation" status, current market conditions, and the economics of CNC's
business. Without limitation as to other instances wherein the Dispute
Resolution Procedures apply, if the Parties cannot agree on the items to be
adjusted in accordance with the preceding sentence, then the Parties agree to
resolve the dispute in accordance with the Dispute Resolution Procedures.
e) Taxes. CNC shall be solely responsible to pay all applicable state or
-----
federal taxes, including state sales tax and use taxes, with respect to the
Services. WCG shall be responsible for payment of taxes on income received by
WCG hereunder.
5. Quotas. Subsequent to a reasonable amount of time following initial
------
training, WCG shall assign quota's to the WCG sales force designated by WCG to
solicit orders for the Services covered herein. WCG shall be solely responsible
for establishing quota levels and otherwise administering the quota program.
The requirement of establishing quotas shall not be deemed to create or imply
any minimum order requirements by WCG hereunder, and the failure to meet any
quotas shall not constitute a breach of this Agreement or otherwise affect any
Party's rights or obligations hereunder.
6. Prices and Terms of Sale. CNC shall provide WCG with copies of its
------------------------
current price lists, its availability schedules, and its standard terms and
conditions of sale, as established from time to time. The standard terms and
conditions that apply to each Service shall be added to Exhibit B from time to
---------
time as they become available. WCG shall quote to the Customers CNC's current
prices and shall sell the Services as delivered from CNC. If deviations are
required, WCG and CNC must mutually agree to accept such provisions. CNC will
be paid for the Services based upon current or contracted price lists, from the
Customer. CNC may alter the prices, availability schedules, and terms and
conditions for all new quotations upon thirty (30) days prior written notice to
WCG, such new pricing to take effect thirty (30) days after the date of such
written
4
<PAGE>
notice. The corresponding sections of Exhibit A and Exhibit B shall be revised
--------- ---------
accordingly. If a written quotation has been issued by CNC pursuant to Section
2.a.to a Customer, CNC shall honor that quote for the length of time as
specified by the quotation itself, provided such quotation has not expired.
7. Training and Sales Support. CNC will provide, at its expense, a
--------------------------
designated point-of-contact for sales and/or technical support questions shared
by other channel organizations. Additional sales and/or technical support will
be provided to WCG at WCG's expense and subject to mutual agreement. However,
CNC will credit WCG 2% of the monthly revenue (net of commissions payable to
WCG) in excess of $500,000 towards the cost of these resources. CNC will
provide initial training (e.g., one day of training per product unless
additional training is mutually agreed upon) on CNC Services as they are made
available to WCG. WCG will reimburse CNC for its out-of-pocket expenses to
perform such training. Such training will be designed to be a "train-the-
trainer" program, which will be held at a location to be mutually agreed to by
the Parties. Additional training may be performed by CNC for WCG, at WCG's
request and expense, if both CNC and WCG deem it necessary. From time-to-time,
and subject to mutual agreement, CNC may participate in cooperative sales calls
with WCG sales representatives for the purpose of enhancing the ability for WCG
representatives to become self-sufficient and productive in closing business on
behalf of CNC. CNC will provide either camera-ready copy or , at WCG's expense,
quantities of sales promotion literature and materials.
8. Acceptance; Performance by CNC. All requests for quotations for
------------------------------
Services shall be made in writing via E-mail, fax and/or letter by WCG to CNC
and subject to acceptance by CNC at its principal office currently located at
the address listed herein. Upon acceptance by Customer of a quotation for
Services that has been accepted by CNC as described in the preceding sentence,
WCG shall provide a written commitment for all Services from the Customer. This
shall be in the form of a Purchase Order ("P.O.") from the Customer and CNC's
Services Contract for Services for the Customer. Such Services will not be
ordered until each P.O. and Services Agreement are received by CNC. WCG shall
have no authority to make any acceptance or commitments to Customers, including
delivery dates, without CNC's prior written approval. CNC shall have the sole
right of credit approval or credit refusal for the Customer in all cases. CNC
shall perform all Services subscribed to by Customers in accordance the
applicable Services Contract, and shall be responsible for all facets of Service
delivery, revenue collection (customer billing), warranty fulfillment and
customer service. CNC shall render all invoices directly to the Customer. The
Customer shall make payments directly to CNC. CNC shall undertake commercially
reasonable collection efforts for the Services sold through WCG hereunder.
9. Trademarks, Service Marks, Logos and Tradenames. CNC grants to WCG
-----------------------------------------------
the non-exclusive, non-transferable right to use CNC's trademarks, service
marks, logos, and trade names that CNC may adopt from time to time ("CNC's
Trademarks") in connection with WCG's sale, advertisement or promotion of
Services, and shall provide WCG with such Trademarks within thirty (30) days of
the Effective Date. During the term of this Agreement, WCG shall have the
5
<PAGE>
right to indicate to the public that it is an authorized sales agent of CNC's
Services and to advertise such Services under the Trademarks according to CNC
style guides referenced in Exhibit C. Nothing herein shall grant WCG any right,
title or interest in CNC's Trademarks. All representations of CNC's Trademarks
that WCG intends to use shall be exact copies of those used by CNC or shall
first be submitted to CNC for approval of design, color, and other details
thirty (30) days prior to duplication and/or distribution.
10. Infringement Indemnity. The following terms apply to any infringement
----------------------
or claim alleging infringement by WCG in any country in which CNC provides the
Services of any patent, trademark, copyright, trade secret or other legally
protected proprietary right of any third party relating to the Services
(including WCG's use of the Trademarks in accordance with Section 9 hereof).
CNC shall indemnify, defend and hold harmless WCG, its owners, and the
directors, agents, officers and employees of each of them, from and against any
loss, damages, claim, suit or proceeding, expense or liability, including but
not limited to, costs of defense and reasonable attorney's fees, that may result
by reason of any such infringement or claim of infringement. WCG shall notify
CNC promptly of any such claim of infringement for which CNC is responsible
hereunder and shall cooperate with CNC (at CNC's expense) in every reasonable
way to facilitate the defense of any such claim. The indemnity obligations in
this Section shall survive the termination or expiration of this Agreement. This
Section sets forth CNC's entire liability and WCG's sole and exclusive remedy
with respect to the infringement of intellectual property rights.
11. Non-exclusive Agency Rights. This Agreement does not grant CNC an
---------------------------
exclusive privilege to furnish to WCG any or all of the types of products and
services which are the subject of this Agreement which WCG may require. WCG
expressly reserves the right to serve as the agent for others for the sale of
products or services of the types which are the subject of this Agreement.
12. Indemnification. Each Party (the "Indemnifying Party") shall
---------------
indemnify, defend and hold harmless the other Party, its owners, and the
directors, agents, officers, and employees of each of them (collectively, the
"Indemnified Party"), from and against any fine, penalty, loss, damages, claim,
suit or proceeding, expense or liability, including but not limited to, costs of
defense and reasonable attorney's fees, (i) for injury to or death of persons or
damage to or loss or destruction of property arising out of or resulting from or
in connection with the performance of this Agreement and caused by the acts or
omissions of Indemnifying Party, its contractors or agents, or an employee of
any of them, or (ii) arising out of or resulting from or in connection with any
material inaccuracy within, or breach of, a representation or warranty contained
in this Agreement. The Indemnified Party shall notify the Indemnifying Party
promptly of any such claim for which Indemnifying Party is responsible hereunder
and shall cooperate with the Indemnifying Party (at the Indemnifying Party's
expense) in every reasonable way to facilitate the defense of any such claim.
The indemnity obligations under this Section shall survive the termination or
expiration of this Agreement.
6
<PAGE>
13. Facilities. WCG shall provide itself with, and be solely responsible
----------
for, (i) such facilities, employees, and business organization, and (ii) such
permits, licenses, and other forms of clearance from governmental or regulatory
agencies, if any, as it deems necessary for the conduct of its business
operations in accordance with this Agreement.
14. Books, Records, and Audits: WCG and CNC shall maintain accurate,
---------------------------
complete, and well organized records with respect to the Services subject to
this Agreement, at all times during this Agreement. During the term of this
Agreement each Party shall, upon fifteen (15) days written notice from the
other Party, make available to a nationally recognized independent third party
auditor retained by the requesting Party accurate books, records, and accounts
relating to the business of WCG and CNC with respect to the Services supplied by
CNC, for examination at the place of business where such books, records and
accounts are kept, during normal business hours and subject to the disclosing
party's reasonable security and confidentiality requirements WCG shall also
maintain a record of any customer complaints regarding either the Services or
CNC and promptly forward to CNC the information regarding those complaints.
15. Reporting. Each Customer, total charges per Customer, and commission
---------
per Customer shall be detailed on the commission statement to be provided by CNC
to WCG on a monthly basis in a form suitable to both parties, written or
electronic.
16. Publicity. The Parties agree to cooperate in developing joint press
---------
releases from time-to-time related to activities and accomplishments
contemplated by this Agreement. All press releases mentioning the other Party
must be approved in advance by both Parties prior to release. Such approval
will be completed within three (3) business days and shall not be unreasonably
withheld.
17. WCG Network Facilities; Peering Route Agreements; Telecom Italia.
----------------------------------------------------------------
a) For so long as this Agreement is in effect, CNC shall use its best reasonable
efforts to groom traffic generated by WCG onto network facilities provided by
WCG.
b) CNC shall contract with WCG so that WCG and its affiliates can participate in
CNC's current and future private or public, peering or transit, or any other
special arrangement established to provide Internet connectivity solutions.
CNC shall provide said connectivity to WCG at cost, and will bill any direct
incremental expenses separately including administrative, network
engineering, & network operation costs, necessary to allow WCG such
participation. WCG shall reimburse CNC for these costs & expenses.
c) CNC and WCG agree to exercise commercially reasonable efforts to establish a
professional services, field services and other related services agreement
between WCG and Telecom Italia for support of the Telecom Italia,
International Network roll out. The parties further agree to propose the
CNOP's organization as the entity to perform network management, network
engineering, and network administration for the Telecom Italia International
Network. Any cost benefits to CNOP's (e.g., due to increased economies of
7
<PAGE>
scale) from the Telecom Italia agreement will accrue to CNC in the form of a
reduction in CNOP's costs to CNC. WCG's pricing for all of the services
described in this paragraph shall be established by WCG at its sole
discretion.
18. Term. This Agreement shall be for a period of two (2) years
----
commencing upon the Effective Date (the "Initial Period") subject to the right
of either party to terminate as provided in Section 19 (Termination).
Thereafter, this Agreement shall automatically renew for additional twelve (12)
month period(s) unless either party notifies the other of its intention to
terminate or modify this Agreement. Such notification (the "Notice of
Nonrenewal") shall be provided in writing sixty (60) days prior to expiration of
the then current term. Notwithstanding the foregoing, and unless (a) CNC
terminates this agreement for 'just cause' as defined in Section 19
(Termination), or (b) WCG's ownership of CNC's outstanding common or preferred
stock, as the case may be, falls below 5%, WCG shall have the right to renew
this Agreement under prices, terms, and conditions agreed to at the annual
review period described in Section 4.
19. Termination. Either party may terminate this Agreement upon the
-----------
occurrence of "just cause" for termination, as defined below. Termination for
just cause shall become effective immediately as of the date on which such just
cause occurred (which date, in the case of paragraph (a) below, shall be day
following the end of the referenced cure period), unless otherwise provided for
in this Agreement. Just cause for termination by a Party shall consist of the
following:
a) Failure to Comply with Obligations. Failure by the other Party (the
----------------------------------
"Noncomplying Party") to comply with any of its obligations hereunder within
thirty (30) calendar days from its receipt of written notice to that effect from
the other Party or, if the failure to comply is of such a nature that it cannot
reasonably be expected to be remedied within thirty (30) days, the Noncomplying
Party's failure to exert substantial efforts to correct such failure within such
thirty-day time period.
b) Dissolution. Dissolution or any assignment by the other Party for the
-----------
benefit of its creditors, the appointment of a receiver for, or any execution
levied upon, all or substantially all of the other Party's business or assets,
or the filing of any petition for voluntary or involuntary bankruptcy or similar
proceeding for or against the other Party.
The termination of this Agreement shall not affect any accrued rights or
obligations of either Party as of the effective date of such termination, nor
shall it affect any rights or obligations of either Party which are intended by
the Parties to survive any such termination, including without limitation those
contained in Section 10 (Infringement Indemnity), Section 12 (Indemnification),
Section 21 (Confidential Information), and CNC's obligations to pay commissions
pursuant to Section 4.
20. Transition Period. In the event this Agreement is terminated by WCG
-----------------
for "just cause", then , at WCG's request, CNC will waive any remaining term
commitments for CNC Customer's
8
<PAGE>
acquired through WCG under this Agreement in order to enable WCG to migrate
those Customers to WCG services in a timely manner. The time period between the
date of a Notice of Nonrenewal and the end of the term in which such notice is
provided shall hereinafter be referred to as the "Transition Period". CNC and
WCG agree to utilize commercially reasonable efforts to effectuate a smooth and
orderly change during the Transition Period in order to satisfy the best
interests of CNC's Customers.
21. Confidential Information: Each party agrees to maintain all
-------------------------
Confidential Information (as hereinafter defined) in confidence to the same
extent that it protects its own similar Confidential Information and to use such
Confidential Information only as permitted under this Agreement. For purposes of
this Agreement "Confidential Information" shall mean information including,
without limitation, computer programs, code, algorithms, names and expertise of
employees and consultants, know-how, formulas, processes, ideas, inventions
(whether patentable or not), schematics and other technical, business, financial
and product development plans, forecasts, strategies and information marked
"Confidential", or if disclosed verbally, is identified as confidential at the
time of disclosure and reduced to a confidential writing within thirty (30) days
after such disclosure. Each party agrees to take all reasonable precautions to
prevent any unauthorized disclosure or use of Confidential Information
including, without limitation, disclosing Confidential Information only to its
directors, officers, employees and/or professional advisors (a) with a need to
know to further permitted uses of such information; (b) who are parties to
appropriate agreements sufficient to comply with this Section; and (c) who are
informed of the nondisclosure/ non-use obligations imposed by this Section; and
both parties shall take appropriate steps to implement and enforce such non-
disclosure/non-use obligations. The foregoing restrictions on disclosure and use
shall survive for three (3) years following termination of this Agreement but
shall not apply with respect to any Confidential Information which: (i) was or
becomes publicly known through no fault of the receiving party; (ii) was
rightfully known or becomes rightfully known to the receiving party without
confidential or proprietary restriction from a source other than the disclosing
party; (iii) is independently developed by the receiving party without the
participation of individuals who have had access to the Confidential
Information; (iv) is approved by the disclosing party for disclosure without
restriction in a written document which is signed by a duly authorized officer
of such disclosing party; or (v) the receiving party is legally compelled to
disclose; provided, however, that prior to any such compelled disclosure, the
receiving party will (a) assert the privileged and confidential nature of the
Confidential Information against the third party seeking disclosure and (b)
cooperate fully with the disclosing party in protecting against any such
disclosure and/or obtaining a protective order narrowing the scope of such
disclosure and/or use of the Confidential Information. In the event that such
protection against disclosure is not obtained, the receiving party will be
entitled to disclose the Confidential Information, but only as, and to the
extent, necessary to legally comply with such compelled disclosure. Each of the
Parties hereto agrees not to disclose to any third party the terms of this
Agreement without the prior written consent of the other party hereto, except to
advisors, investors and others on a need-to-know basis under circumstances that
reasonably ensure the confidentiality thereof, or to the extent required by law.
9
<PAGE>
23. LIMITATION ON LIABILITY. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO
-----------------------
THE OTHER OR TO ANY OTHER ENTITY FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, OR
INDIRECT DAMAGES, HOWEVER CAUSED ON ANY THEORY OF LIABILITY. NOTWITHSTANDING
ANYTHING HEREIN TO THE CONTRARY, NEITHER PARTY'S LIABILITY TO TO THE OTHER SHALL
IN ANY EVENT EXCEED THE AMOUNT OF AGGREGATE NET REVENUE RECEIVED BY CNC LESS WCG
COMMISSIONS FROM CNC CUSTOMERS PROCURED BY WCG AS A SALES AGENT FOR CNC DURING
THE PREVIOUS TWELVE (12) MONTHS; PROVIDED, HOWEVER, THAT THE FOREGOING
LIMITATION SHALL NOT APPLY TO LIMIT LIABILITY AMOUNTS ARISING FROM SECTIONS 10
AND 12
24. Governing Law and Jurisdiction. This Agreement shall be governed by
------------------------------
and construed under the laws of the state of California, without reference to
conflict of law principles.
25. Entire Agreement. This Agreement, including any Exhibits and
----------------
attachments that may be added from time to time, sets forth the entire agreement
and understanding of the parties relating to the subject matter herein and
merges all prior discussions between them. No modification of or amendment to
this Agreement, nor any waiver of any rights under this Agreement, shall be
effective unless in writing signed by the party to be charged.
26. Notices. Any notice required or permitted by this Agreement shall be
-------
in writing and shall be deemed given (a) upon personal delivery, (b) on the
third day following mailing sent by registered or certified mail, return receipt
requested, postage prepaid, (c) upon confirmed delivery by means of a nationally
recognized overnight courier service or (d) upon confirmed transmission of
facsimile, addressed to the other party at the address shown at the beginning of
this Agreement or at such other address for which such party gives notice
hereunder.
27. Force Majeure. Neither Party shall be deemed in default of this
-------------
Agreement to the extent that any delay or failure in the performance of its
obligations results from an Act of God, act of civil or military authority,
embargo, epidemic, war, riot, insurrection, fire, explosion, earthquake, flood,
unusually severe weather conditions or any other cause beyond such Party's
reasonable control which cannot be overcome by due diligence, provided that such
Party (the "Affected Party") gives the other Party (the "Unaffected Party')
prompt notice of such condition.
If either Party's performance is so excused, the Unaffected Party may either:
a) require the Affected Party to continue performance as soon as practicable
after the delay has ended; or
b) terminate without penalty any affected obligation (or portion thereof) of the
Unaffected Party hereunder by giving written notice to the Affected Party.
10
<PAGE>
The Unaffected Party may select option (a) as to certain obligations hereunder
or parts thereof and option (b) as to other affected obligations or parts
thereof. In the absence of notice of selection of any option with respect to a
particular affected obligation, option (a) will be deemed selected.
28. Non-Assignability and Binding Effect. Neither Party shall assign its
------------------------------------
rights or delegate its duties under this Agreement without the prior written
consent of the other Party, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing a. WCG may, with written notice to CNC, assign
this Agreement to a Subsidiary; and
CNC may, with written notice to WCG, assign this Agreement to an entity that is
formed for CNC's reincorporation as a Delaware corporation. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
parties hereto, their successors and assigns.
29. Legal Expenses. The prevailing party in any legal action brought by
--------------
one Party against the other and arising out of this Agreement shall be entitled
to reimbursement for its expenses, including court costs and reasonable
attorneys' fees.
30. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original.
31. Headings. The section headings contained in this Agreement are for
--------
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
32. Severability. If any provision or part of a provision of this
------------
Agreement shall be invalid or unenforceable, such invalidity or unenforceability
shall not invalidate or render unenforceable the entire Agreement or provision
but rather the entire Agreement or provision shall be construed as if not
containing the particular invalid or unenforceable provision or portion thereof,
and the rights and obligations of CNC and WCG shall be construed and enforced
accordingly.
33. Resolution of Disagreements Between Parties. No Party to this
-------------------------------------------
Agreement shall be entitled to take legal action with respect to any dispute
relating hereto until it has complied in good faith with the following
alternative dispute resolution procedures. If a dispute, claim or controversy
arises with respect to or relates to any Section of this Agreement, then the
following dispute resolution procedures shall govern the parties' conduct:
a) The Parties shall attempt promptly and in good faith to resolve any
dispute arising out of or relating to this Agreement through
negotiations between representatives who have authority to settle the
controversy. Either Party may give the other Party written notice of
any such dispute not resolved in the normal course of business.
Negotiations extending ten (10) days after the disputing Party's
notice shall be
11
<PAGE>
deemed at an impasse, unless otherwise agreed by the Parties. If a
negotiator intends to be accompanied at a meeting by an attorney, the
other negotiator(s) shall be given at least two (2) working days
notice of such intention and may also be accompanied by an attorney.
All negotiations pursuant to this clause are confidential and shall be
treated as compromise and settlement negotiations for purposes of the
Federal and State Rules of Evidence.
b) If a dispute is at an impasse (i.e., it has not been resolved within
ten (10) days of the disputing Party's notice), the dispute shall be
settled by arbitration in a mutually convenient location, in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association in effect on the date that such notice is
given. If the parties are unable to agree on a single arbitrator
within ten (10) days from the date of an impasse as set forth in
Subsection (a), then the CNC and WCG shall each select one arbitrator
within ten (10) days and the two (2) arbitrators shall select a third
arbitrator within ten (10) days. If a Party does not designate an
arbitrator or if the two appointed arbitrators cannot agree on the
final arbitrator within the foregoing time periods, then the American
Arbitration Association shall select the arbitrator(s) upon request of
either Party. The decision of the arbitrator(s) shall be final and
binding upon the parties and shall include written findings of law and
fact, and judgment may be obtained thereon by either Party in a court
of competent jurisdiction. Each Party shall bear the cost of preparing
and presenting its own case. The cost of the arbitration, including
the fees and expenses of the arbitrator(s), shall be shared equally by
the Parties hereto unless the award otherwise provides. The
arbitrator(s) shall be instructed by the Parties to establish
procedures such that a decision can be rendered by the arbitrator(s)
within sixty (60) days of the date that the last arbitrator is
selected.
c) The obligation herein to arbitrate shall not be binding upon either
Party with respect to requests for preliminary injunctions, temporary
restraining orders, specific performance or other procedures in a
court of competent jurisdiction to obtain interim relief when deemed
necessary by such court to preserve the status quo or prevent
irreparable injury pending resolution by arbitration of the actual
dispute.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the day
and year first above written, to be effective as of the Effective Date.
CONCENTRIC NETWORK CORPORATION("CNC") WILLIAMS COMMUNICATIONS GROUP, INC.
("WCG")
By: /s/Henry R. Nothhaft By: /s/Miller Williams
--------------------------------- --------------------------------
Printed Name: Henry R. Nothhaft Printed Name: Miller Williams
----------------------- ---------------------
12
<PAGE>
Title: President and CEO Title: Senior Vice President
------------------------------ -----------------------------
13
<PAGE>
EXHIBIT A
---------
COMMISSION PRICING FOR WCG
<TABLE>
<CAPTION>
REMOTELINK/TM/
- ------------------------------------------------------------------------------------------------------------------------------------
NON-RECURRING CHARGES (NRC) DESCRIPTION LIST PRICE COMMISSIONABLE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CPE router Bay Networks AN $ 1,895 NO
(optional, customer may Router
supply if desired) 2 ethernet ports,
1 sync port
CSU Racal 5311 T-1 CSU $ 995 NO
(REQUIRED, FOR EFFECTIVE
CIRCUIT MAINTENANCE AND
TROUBLESHOOTING)
DAF Installation & Setup Installation of telco circuit from $ 3,000 YES
Concentric to customer site, provisioning
of service, and onsite installation and
testing of connectivity through CSU and
router
NT Server Compaq Proliant 800 6/180 $10,000 NO
(optional, customer may 180 megahertz Pentium Pro 4.6
supply if desired) gigabyte hard disk,
64 megabytes RAM, 10BaseT ethernet card,
8x CD-ROM, NT 4.0, 5 user license
RADIUS Server Software Steel Belted RADIUS Server $ 4,000 NO
(optional, customer may software, for NT or Netware
supply if desired) (specify which platform is desired)
On Site Installation 1 SE day, onsite installation of $1,250 + NO
support and Network RADIUS server, training on use, actual travel
Management Training Course and training on use of ConcentricView. expenses
Oriented to customer network
management personnel
End User Training Course 1 SE day, onsite training class $1,250 + NO
oriented to end users- how to set actual travel
up access to RemoteLink, and expenses
use the service
Help Desk Training Course 1 day training course for customers $500 per NO
help desk personnel, training them to attendee,class
perform 1/st/ tier support of end given in our
users dialing in through Concentric. Saginaw, Michigan
This is oriented to customers support center
wanting to do 1/st/ tier support
themselves.
MONTHLY RECURRING CHARGES DESCRIPTION PRICE
(MRC)
RemoteLink/TM/ usage price usage charges for remote user see table below YES
activity
Monthly DAF fees Charge for the FullChannel/TM/, see table below YES
FlexChannel/TM/, or LEC Frame Relay
dedicated connection to Concentric
Tier 1 customer support, Concentric help desk support, 3 $1/minute of use, NO
Virtual CSR, minute average speed to answer actual amounts
3 minute ASA using virtual CSR's billed monthly- SEE
(Fixed response time BELOW FOR ADDITIONAL
option, costs will vary) IMPORTANT INFORMATION
Tier 1 customer support, Concentric help desk support, 1 $3/minute of NO
Virtual CSR, minute average speed to answer use, actual
1 minute ASA using virtual CSR's amounts billed
(Fixed response time monthly- SEE BELOW
option, costs will vary) FOR ADDITIONAL
IMPORTANT INFORMATION
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Tier 1 customer support, Concentric help desk support, $300 per shift, NO
1 shift seat one physical CSR, 8 hrs. $1,500 per week,
(Fixed cost option, per day, 5 days per week, $78,000 per year
response times to answer annual basis billed monthly- SEE
users will vary depending BELOW FOR ADDITIONAL
on call load and peak IMPORTANT INFORMATION
periods)
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
REMOTELINK USAGE PRICING*
- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF HOURS CONSUMED DOLLARS PER 18% WCG DOLLARS PER 18% WCG DOLLARS PER 18% WCG
PER MONTH HOUR: NO COMMISSION HOUR: COMMISSION HOUR: COMMISSION
CONTRACT TERM 1 YEAR CONTRACT 2 YEAR CONTRACT
COMMITMENT COMMITMENT COMMITMENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
0 - 25,000 $2.55 $ .46 $ 2.30 $ .41 $ 2.17 $ .39
25,001 - 50,000 $2.42 $ .44 $ 2.19 $ .39 $ 2.07 $ .37
50,001 - 75,000 $2.35 $ .42 $ 2.12 $ .38 $ 1.99 $ .36
75,001 - 100,000 $2.30 $ .41 $ 2.07 $ .37 $ 1.94 $ .35
100,001 - 125,000 $2.27 $.405 $ 2.04 $ .365 $ 1.91 $ .34
125,000 + $2.24 $ .40 $ 2.01 $ .36 $ 1.88 $ .335
MINIMUM MONTHLY PAYMENT NONE NA $10,000 $1,800 $10,000 $1,800
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*PRICES ARE BASED UPON LOCAL (I.E. NO TOLL CHARGE) ANALOG DIAL-UP ACCESS.
1-800 ANALOG DIAL-UP ACCESS IS BILLED AT THE FLAT RATE OF $6 PER HOUR.
REMOTELINK DAF MONTHLY RECURRING CHARGES
Several options are available for connection of the customers network to
Concentric. These options, and their pricing, are listed below. In addition to
the charges noted, there will be a local loop fee from the Local Exchange
Carrier, which is variable depending on distance between their POP and the
Customer data center. Call for a specific local loop quote from Concentric.
FullChannel/TM/ T1 Usage Pricing
FullChannel/TM/ T1 offers a full T1 (1.54 Mbps) of bandwidth over a non-shared,
non-fractional leased line. Monthly billing is based on traffic samples taken
every five minutes, 24 hours a day, 7 days a week. Your monthly charge is
determined by the average of these samples.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
AVERAGE USAGE LEVEL MONTHLY FEE(1) 15% WCG COMMISSION
- ----------------------------------------------------------------------
<S> <C> <C>
- -64Kbps $1,095.00 $164.25
64-128Kbps $1,595.00 $239.25
128-256Kbps $2,095.00 $314.25
256-384Kbps $2,395.00 $359.25
over 384Kbps $2,695.00 $404.25
</TABLE>
FullChannel T1 Protected Pricing
Protected pricing is not usage based. It is simply billed at the flat monthly
rate shown, and requires a RemoteLink contract term of 1 year or more.
<TABLE>
<CAPTION>
- ---------------------------------------------------------
SUSTAINED LEVEL MONTHLY FEE 15% WCG COMMISSION
- ---------------------------------------------------------
<S> <C> <C>
64Kbps to over 384Kbps $2,095.00 $314.25
</TABLE>
16
<PAGE>
FlexChannel/TM/ T1 Pricing
FlexChannel/TM/ T1 offers you a predetermined level (128Kbps - 512Kbps) of
bandwidth on a fractional T-1 line, for a fixed monthly fee. You can always
upgrade to the full T1 later.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
FRACTIONAL T1 BANDWIDTH MONTHLY FEE(1) 15% WCG COMMISSION
- -----------------------------------------------------------------
<S> <C> <C>
128Kbps $ 895.00 $134.25
256Kbps $1,295.00 $194.25
384Kbps $1,595.00 $239.25
512Kbps $1,895.00 $284.25
</TABLE>
LEC Frame Relay Pricing (2)
LEC Frame Relay service offers reliable, cost-effective Internet access from
56Kbps - 512Kbps* at a lower cost than traditional leased lines. While we can't
guarantee the throughput of the LEC's frame cloud, we will not over subscribe
the entrance facility. The committed information rate (CIR) over the Concentric
Network is guaranteed.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FRAME RELAY CIRCUIT/CIR MONTHLY FEE(1) 15% WCG COMMISSION
- --------------------------------------------------------------------------------
<S> <C> <C>
56Kbps/32Kbps $ 395.00 $ 59.25
128Kbps/64Kbps $ 795.00 $119.25
256Kbps/128Kbps $ 995.00 $149.25
512Kbps/256Kbps $1,095.00 $164.25
</TABLE>
(1) Monthly billing based on average usage.
(2) Offer varies by region, call for exact quote.
<TABLE>
<CAPTION>
CONCENTRICHOST
- --------------
- --------------------------------------------------------------------------------------------------
PRODUCT NAME DESCRIPTION NUMBER OF WEB MONTHLY 15%
EMAIL SITE RECURRING WCG
ACCTS STORAGE CHARGES COMMISSION
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
HomeOffice Shared service 5 5MB $29.95 $4.49
with customized
sub-domain
SmallBusiness Shared service 5 10MB $39.95 $5.99
with full domain
name service and
dial-up account
Premium Shared service 10 1000MB $59.95 $8.99
with full domain
name service and
dedicated IP
address
</TABLE>
ConcentricHost is a high performance shared web server service that give the End
User an inexpensive web presence. All Web servers reside at one of CNC's data
centers.
17
<PAGE>
<TABLE>
<CAPTION>
CONCENTRICHOST-COLOCATION
- -------------------------
- -----------------------------------------------------------------------------------------------------------------
DESCRIPTION BANDWIDTH MONTHLY RECURRING CHARGES (1) 15% WCG COMMISSION
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Server on shared Ethernet segment 1Mbps $1,500 $255
Server on shared Ethernet segment 2Mbps $2,500 $375
Server on shared Ethernet segment 4Mbps $4,000 $600
Server on dedicated Ethernet segment 10Mbps $6,000 $900
Install & Setup Per server $1,000 $150
Additional rack space 8" x 19" Space $ 500 $ 75
Installation of extra rack space $500 - NRC $ 75
Engineering assistance Scheduled $100/Hr. NA
Engineering assistance Emergency $250/Hr. NA
</TABLE>
ConcentricHost-Colocation is a service that allows CNC customers to put their
own dedicated Web servers in one of our data centers. The following is a list
of CNC co-location services that are currently offered. Each connection comes
with an 8" rack space based Future services are being defined and will be
introduced as they are developed.
CUSTOMER SUPPORT
FIRST TIER END USER SUPPORT
Concentric offers two types of First Tier End User Support. Customer may select
from the following two options.
Shift Seat Customer Support Representative (CSR):
- ------------------------------------------------
- - One (1) Support Representative Shift Increment is $300.00 . A Support
Representative Shift Increment is an eight (8) hour increment of time, provided
for 5 out of 7 days in each week, not including Holidays, during which one (1)
Customer Support Representative will be dedicated to answering support calls of
the Customer's Customer End Users.
- - The minimum purchase amount is one (1) shift for a five (5) day week for one
year for $78,000.00
- - Shift seats may be purchased in 8 or greater hour increments, and will be
prorated. Start of shift times may be supplied by Customer according to their
requirements.
- - When shift seats are purchased, there are no Average Speed to Answer (ASA)
guarantees. The actual time to answer will vary depending on incoming call
traffic, and peak flows.
Virtual Customer Support Representative (CSR):
- ---------------------------------------------
- - Utilizes the Concentric pool of CSR's
- - Automatic Call Distributor system prioritizes incoming calls to deliver a
guaranteed ASA*
- - ASA guaranteed at 3 minutes is billed out at $1 per actual minute used
- - ASA guaranteed at 1 minute is billed out at $3 per actual minute used
IT IS IMPORTANT TO NOTE THAT BY PURCHASING SHIFT SEATS, COSTS ARE FIXED, BUT
RESPONSE TIMES WILL VARY. BY UTILIZING THE VIRTUAL CSR OPTION, RESPONSE TIMES
ARE FIXED, BUT COSTS WILL VARY.
SECOND TIER END USER SUPPORT
Included at no extra charge for so long as Customer is purchasing Concentric
RemoteLink. Second Tier support is provided by
18
<PAGE>
Concentric to up to five (5) identified Customer help desk personnel.
19
<PAGE>
EXHIBIT B
---------
DESCRIPTION OF SERVICES
with attachments for each Service setting forth the terms, conditions,
service level agreements and pricing relating thereto
CNC REMOTELINK/TM/ SERVICES AGREEMENT
This agreement ("Agreement") is made and entered into on this ___
day of _______, 199 ("Effective Date") by and between Concentric Network
_
Corporation ("Concentric"), a Florida corporation with a principal place of
business at 10590 N. Tantau Ave., Cupertino CA 95014, and
________________________( "Customer") a ______________ corporation with a
principal place of business at ________________________________.
WHEREAS, Customer would like to outsource the operation of remote
access to Customer's LANs and Intranets;
WHEREAS, Customer wishes to obtain remote access service from
Concentric, and Concentric wishes to provide this service to Customer,
NOW THEREFORE, the parties agree as follows:
1.0 DEFINITIONS
1.1 "CityFind" shall mean the object code of the software application
which allows Customer End Users to locate their nearest Concentric
Point of Presence.
1.2 "Concentric Network" shall mean the collection of network
equipment, access lines, data centers and network management tools
which Concentric operates to deliver network services to customers.
1.3 "Concentric RemoteLink/TM/" shall mean the network service
offered by Concentric that allows Customer End Users to access the
Customer's internal corporate network, local area network(s) or
intranet via a connection from the Concentric Network to the
Customer's home gateway.
1.4 "ConcentricView/TM/" shall mean the web-based desktop network
monitoring application developed by Concentric, for the purpose of
monitoring vital network data on the performance of the Concentric
Network such as user activity and router and firewall statistics.
1.5 "Customer End User(s)" shall mean those employees, consultants,
contractors, and other individuals or entities outside the Customer's
firewall that the Customer has
20
<PAGE>
authorized to use personal computers running Windows to use the
Concentric RemoteLink/TM/ service and who have accepted the end user
license agreement accompanying the CityFind software, but only so long
as Customer has authorized such employees, consultants, contractors,
and other individuals or entities.
1.6 "DAF" shall mean the dedicated access facilities and provisioning
selected by Customer to connect the Customer's home gateway to the
Concentric Network.
1.7 "Fees" shall mean all amounts due hereunder including amounts due
for One Time Items and Monthly Recurring Items as set forth in Exhibit
A, and as such items are selected by Customer in Exhibit C.
1.8 "First Tier End User Support" shall mean the provision of direct
telephone based support to Customer End Users for connectivity
problems directly associated with connecting a personal computer with
an analog modem running Windows to the Concentric Network. First Tier
End User Support includes troubleshooting to verify that data
transmitted by the user is being delivered to the Concentric router
interface which provides connection to the Customer network.
1.9 "RADIUS Server" shall mean a server that contains a database
which operates per the Remote Authentication Dial In User Service
protocol as defined in IETF RFC 2058.
1.10 "Second Tier End User Support" shall mean the provision of direct
telephone based support by Concentric to up to five (5) designated
members of the in-house support desk of Customer so that the in-house
support desk of Customer can directly support Customer End Users in
connectivity to the Concentric RemoteLink/TM/ service. Second Tier End
User Support does not include direct telephone based support of end
users.
1.11 "Term" shall mean the period during which this Agreement is in
effect as determined by the Customer's selection in Exhibit C.
2.0 NETWORK SERVICES PROVIDED BY CONCENTRIC
2.1 Subject to the terms and conditions herein, Concentric shall
make available access to the Concentric Network via the Concentric
RemoteLink service to Customer End Users using a personal computer
running Windows equipped with an analog modem with a PPP connection
over a local dial-up telephone access line.
2.2 Subject to the terms and conditions herein, Concentric will
deliver IP data network traffic from the Customer End User's personal
computer through the dial up access portion of the Concentric Network
(at speeds currently up to 28.8 kbps), to the
21
<PAGE>
router or termination equipment at the Customer's home gateway.
Concentric will interconnect the Concentric Network to the Customer's
home gateway via the DAF.
2.3 Concentric shall use commercially reasonable efforts to operate
and monitor the Concentric Network on a seven (7) days a week, twenty-
four (24) hours a day, three hundred sixty-five (365) days a year
basis, with scheduled maintenance downtimes.
2.4 Concentric will deliver ConcentricView /TM/ to Customer upon
installation of the DAF.
2.5 Concentric Network Corporation guarantees throughput and latency
for the dedicated access connection to the Concentric Network. Latency
is guaranteed to be 200 milliseconds or less between any two points on
the Concentric Network. Throughput is guaranteed at the data rate
selected for the DAF connection.
3.0 LICENSE GRANT AND RESTRICTIONS
3.1 Subject to the terms and conditions herein, Concentric hereby
grants and Customer hereby accepts a nonexclusive, nontransferable
license to: (a) use the CityFind software in accordance with the
license grant contained in the end user license agreement that
accompanies the CityFind software; (b) reproduce, without change, only
that quantity of the CityFind software necessary for Customer End
Users and members of Customer's in house support desk; and (c)
distribute the CityFind software to Customer End Users and members of
Customer's in house support desk.
3.2 Subject to the terms and conditions herein, Concentric hereby
grants and Customer hereby accepts a nonexclusive, nontransferable
license to access the server(s) on the Concentric Network containing
ConcentricView and use ConcentricView solely for Customer's internal
use in monitoring Customer End User usage by members of Customer's in
house support desk and network system administrator(s).
3.3 Customer's license to use the NT Server software and/or RADIUS
Server software, and any other third party software, if Customer had
elected to obtain such software from Concentric, is as set forth in
the license agreement accompanying such software.
3.4 Customer agrees not to alter, amend, remove or disable any
proprietary notice, legend or license agreement contained in or on any
software provided to Customer by Concentric. Customer agrees not to
reproduce (except as expressly permitted herein), modify, translate,
transform, de-compile, reverse engineer, disassemble, or otherwise
determine or attempt to determine source code from the executable code
of, the CityFind
22
<PAGE>
or to permit or authorize a third party to do so. Title to the
CityFind software, ConcentricView, and all related technical know-how
and intellectual property rights therein and in the Concentric Network
and Concentric RemoteLink are and shall remain the exclusive property
of Concentric and/or its suppliers. Customer shall not take any action
to jeopardize, limit or interfere in any manner with Concentric and
its suppliers' ownership of and rights with respect to the CityFind
software, ConcentricView, the Concentric Network and Concentric
RemoteLink.
3.5 Customer shall use commercially reasonable efforts to: (a)
enforce each end user license agreement for CityFind with each
Customer End User; (b) require the return or destruction of the
CityFind software from a Customer End User when no longer authorized
by Customer to use Concentric RemoteLink (e.g. employee leaves
Customer's employment, consultant completes assignment); and (c)
cooperate with Concentric to prevent or stop the unauthorized use,
reproduction or distribution of the CityFind software.
3.6 Customer shall fully comply with all then current applicable
laws, rules and regulations relating to the export of technical data,
including, but not limited to any regulations of the United States
Office of Export Administration and other applicable governmental
agencies. Customer hereby assures Concentric that it will not export
directly or indirectly (including via remote access, FTP or other
means) any part of CityFind or technical data to any country for which
a validated license is required under US law without first obtaining a
validated license.
4.0 INSTALLATION AND SUPPORT
4.1 Concentric and Customer will cooperate and use commercially
reasonable efforts to do all things necessary to perform and complete
the implementation plan tasks set forth in Exhibit B within ninety
(90) days of the Effective Date.
4.2 Unless Customer selects and pays for Concentric to provide First
Tier End User Support, Customer shall be solely responsible for
providing First Tier End User Support. If Customer selects and pays
for Concentric to provide First Tier End User Support, and Customer
supplies Concentric with a RADIUS test account, Concentric shall also
provide troubleshooting on verification of the operational status of
the RADIUS server as appropriate.
4.3 If Customer is providing First Tier End User Support, Customer
must select and pay for the Help Desk Training Course described in
Exhibit A. In the event that Concentric's Support Center is being
contacted by Customer End Users for First Tier End User Support,
Customer agrees to: (a) cooperate with Concentric to minimize such
contact; and (b) pay Concentric its then current support charges for
support provided by Concentric to such Customer End Users.
23
<PAGE>
4.4 Concentric shall provide Second Tier End User Support for so long
as Customer is paying Concentric for the Concentric RemoteLink
service.
5.0 CUSTOMER RESPONSIBILITIES
5.1 Customer is solely responsible for maintaining the integrity and
ongoing operation of the RADIUS Server which the Concentric Network
queries for the purpose of authenticating Customer End Users as valid
and allowing access to the Concentric Network via Concentric
RemoteLink. Customer is solely responsible for ensuring that the
RADIUS Server operates and conforms to the specifications outlined in
Exhibit D.
5.2 Customer understands and agrees that if the RADIUS Server is not
operational or accessible by the Concentric Network, or does not
operate and conform to the specifications outlined in Exhibit D, that
access to the Concentric RemoteLink service by Customer End Users may
be severely impaired and/or cease entirely.
5.3 Customer, at its sole discretion, may add or delete Customer End
Users to or from the RADIUS Server. Customer, and not Concentric,
controls who can be authenticated to have access to the Concentric
RemoteLink/TM/ service. Customer, and not Concentric, is solely
responsible for maintaining adequate network security practices,
including establishment of appropriate firewalls, managing assignment
of Customer End Users and the frequency of changes in login ID's and
passwords.
5.4 Customer is solely responsible for the operation of its home
gateway and its internal corporate network including all routers,
servers, applications and leased lines which interconnect with the
Concentric RemoteLink/TM/ service.
5.5 In the event that Customer selects and pays for Concentric to
provide First Tier End User Support, Customer may provide Concentric
---
with a RADIUS test account ID/password if Customer desires Concentric
help desk personnel to assist in the verification of the operation of
Customer's RADIUS server.
5.6 Customer is solely responsible for ensuring that: (a) Customer
End Users have the necessary client software to access the Concentric
RemoteLink service (e.g. stack and dialer software); and (b)
Customer's designated in-house support personnel and network system
administrators have the necessary client software to access
ConcentricView, and /(COPYRIGHT)/ End Users are given valid ID's and
passwords for access into the Customer's network. Concentric will hand
off any first tier support calls to Customer's help desk, which appear
to be related to invalid ID's or password s.
5.7 In the event that Customer End Users use IP and PPP stack and
dialer software other than the standard Windows '95 provided stack and
dialer, and if Concentric is to
24
<PAGE>
provide First Tier support of Customer End Users, then Customer is
required to provide a copy of each stack and dialer to be supported to
Concentric Customer Support.
5.8 Customer is solely responsible for ensuring that End Users are
given valid ID's and passwords for access into the Customer's network.
If Concentric is performing First Tier support, Concentric will
escalate any support calls which appear to be related to invalid ID's
or passwords, to the Customer's help desk for resolution.
6.0 FEES AND BILLING
6.1 Customer will pay Concentric all Fees for One Time Fees and
Monthly Recurring Items selected by Customer in Exhibit C in
accordance with the price schedule in Exhibit A.
6.2 All Fees shall be paid at Concentric's option: (a) at
Concentric's address as indicated in this Agreement or at such other
address as Concentric may from time to time indicate by proper notice
hereunder; or (b) by wire transfer to a bank and account number
designated by Concentric. All invoices are due and payable within
thirty (30) days of Concentric's date of invoice. Interest shall be
payable at the rate of one percent (1%) per month or at the maximum
rate permitted by law, whichever is less, on all overdue and unpaid
invoices until paid in full.
6.3 All Fees are in U.S. Dollars and are exclusive of any applicable
taxes. Customer shall pay, indemnify and hold Concentric harmless from
all sales, use, value added or other taxes of any nature, other than
taxes on Concentric's net income, including penalties and interest,
and all government permit or license fees assessed upon or with
respect to any Fees (except to the extent Customer provides Concentric
with a valid tax exemption certificate). If any applicable law
requires Customer to withhold amounts from any payments to Concentric
hereunder: (a) Customer shall effect such withholding, remit such
amounts to the appropriate taxing authorities and promptly furnish
Concentric with tax receipts evidencing the payments of such amounts;
and (b) the sum payable by Customer upon which the deduction or
withholding is based shall be increased to the extent necessary to
ensure that, after such deduction or withholding, Concentric receives
and retains, free from liability for such deduction or withholding, a
net amount equal to the amount Concentric would have received and
retained in the absence of such required deduction or withholding.
6.4 The "Service Order Date" refers to the date Concentric receives
and processes Customer's completed order, which results in activity by
Concentric such as consultation, training and telco circuit ordering.
The Service's Actual Startup date is three (3) business days after the
day in which the telco circuit between Customer's site and the
Concentric point-of-presence (POP) used for the Service is turned up
(completed and activated by the
25
<PAGE>
telco) and Customer is notified of such availability by Concentric.
The "Anniversary Date" shall be the first day of the month following
the Service's Actual Startup Date. Billing for the interim period
between the Service's Actual Startup Date and the Anniversary Date
shall be the daily pro-rata amount times the number of days between
these two events plus the service's Actual Startup Date and shall be
based on the estimated costs provided to Customer before the Service's
order. This Interim Billing Period amount will be calculated and
included on a subsequent Customer invoice. The first invoice will be
generated shortly after the Service Order Date and is payable by
Customer prior to the Actual Startup date of the Service. It will
include: (i) estimated initial telco circuit installation fee; (ii)
Concentric Service setup fee; (iii) initial month's Concentric Service
fee (including any options selected by Customer on the Order Form);
(iv) initial month's estimated telco circuit lease; (v) any equipment
and/or software costs (if applicable). Subsequent monthly invoices
will be for the specified month of Service and are payable upon the
invoice due date. They will include subsequent month's Concentric
Service fees and estimated or actual telco circuit lease. Any prorated
fees incurred as part of the Interim Billing Period will be invoiced
to and payable by Customer. Based on the actual telco circuit
installation and monthly lease fees billed to Concentric by the telco,
Concentric will pass-through any additional telco fees to Customer in
the invoice following receipt of such telco's invoice. Concentric
reserves the right to change the billing intervals upon written notice
to Customer.
6.5 Late Payments. Invoices not paid by their due date shall be
subject to a 1.5% per month interest fee, or the maximum extent
allowed by applicable laws, whichever is less, on all past-due
balances. In the event Concentric incurs additional fees as a result
of any collection activity, such as collection agencies or legal fees,
Customer shall reimburse Concentric for all such fees.
6.6 Any upgrades of an existing Dedicated Access Service at a sub-
rate of T1 to T1 or other higher T1 sub-rate Service shall incur the
additional monthly Service fees seven (7) days after the upgrade
Service Order Date, but this upgrade shall not incur any Concentric
Service setup fees and the Anniversary Date shall become the first day
of the month following the upgrade's Actual Startup Date as defined
above with the new Interim Billing Period being calculated on a pro-
rata basis and added to the next invoice. Upgrades shall cause this
Agreement to automatically renew for a one (1) year term from the new
Anniversary Date.
6.7 All fees are in U.S. Dollars and are exclusive of any applicable
taxes. Customer shall pay, indemnify and hold Concentric harmless from
all sales, use, value added or other taxes of any nature, other than
taxes on Concentric's net income, including penalties and interest,
and all government permit or license fees assessed upon or with
respect to any fees (except to the extent Customer provides Concentric
with a valid tax exemption certificate). If any applicable law
requires Customer to withhold amounts from any payments to Concentric
hereunder: (a) Customer shall effect such withholding, remit such
26
<PAGE>
amounts to the appropriate taxing authorities and promptly furnish
Concentric with tax receipts evidencing the payments of such amounts;
and (b) the sum payable by Customer upon which the deduction or
withholding is based shall be increased to the extent necessary to
ensure that, after such deduction or withholding, Concentric receives
and retains, free from liability for such deduction or withholding, a
net amount equal to the amount Concentric would have received and
retained in the absence of such required deduction or withholding.
7.0 REPRESENTATIONS AND WARRANTIES.
7.1 Each party represents and warrants that it has the right and
authority to enter into this Agreement, and that by entering into this
Agreement, it will not violate, conflict with or result in a material
default under any other contract, agreement, indenture, decree,
judgment, undertaking, conveyance, lien or encumbrance to which it is
a party or by which it or any of its property is or may become subject
or bound. Each party shall not grant any rights under any future
agreement, nor will it permit or suffer any lien, obligation or
encumbrances that will conflict with the full enjoyment of either
party of its rights under this Agreement.
7.2 Customer represents and warrants that it will, at its own expense
comply with all laws, regulations and other legal requirements that
apply to this Agreement, including copyright and communications
decency laws; advise Concentric of any legislation, rule, regulation
or other law which is in effect or which may come into effect after
the Effective Date and which affects the Customer's internal corporate
network, local area network(s) or intranet, or the use of the
Concentric RemoteLink/TM/ service in conjunction therewith, or
which has a material effect on any provision of this Agreement.
Customer will provide Concentric with the assurances and official
documents that Concentric periodically may request to verify
Customer's compliance with this Section.
7.3 Customer represents and warrants that no consent, approval or
authorization of or designation, declaration or filing with any
governmental authority is required in connection with the valid
execution, delivery and performance of this Agreement.
7.4 THE WARRANTY SET FORTH IN SECTION 7.1 IS THE SOLE AND EXCLUSIVE
WARRANTY MADE BY CONCENTRIC. CONCENTRIC MAKES NO OTHER WARRANTY OF ANY
KIND, EXPRESS OR IMPLIED, WITH RESPECT TO THE CONCENTRIC NETWORK,
CONCENTRIC REMOTELINK, CONCENTRICVIEW AND THE CITYFIND SOFTWARE OR ANY
RELATED NETWORK OR INTERNET SERVICES OR SOFTWARE. CONCENTRIC EXPRESSLY
DISCLAIMS ANY: (a) WARRANTY OF DESIGN, MERCHANTABILITY,
NONINFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE, EVEN IF
CONCENTRIC HAS BEEN INFORMED OF SUCH PURPOSE;
27
<PAGE>
OR (b) WARRANTY THAT THE CONCENTRIC NETWORK, CONCENTRIC REMOTELINK,
CONCENTRICVIEW, AND THE CITYFIND SOFTWARE OR ANY RELATED NETWORK OR
INTERNET SERVICES OR SOFTWARE WILL BE ERROR-FREE, SECURE OR WITHOUT
INTERRUPTION AND ALL LIABILITY ON ACCOUNT THEREOF.
8.0 LIMITATION OF LIABILITY.
Except for a breach of Section 3.4, 9 or obligations arising under
11.5, in no event shall a party shall be liable for special,
incidental, consequential or punitive damages of any nature, for any
reason, including without limitation any termination of this
Agreement, whether such liability is asserted on the basis of
contract, tort (including negligence or strict liability) or
otherwise, even if a party has been warned of the possibility of such
damages, and notwithstanding any failure of essential purpose of any
limited remedy. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE
CONTRARY, CONCENTRIC'S ENTIRE LIABILITY TO CUSTOMER CONCERNING
PERFORMANCE OR NONPERFORMANCE BY CONCENTRIC OR IN ANY WAY RELATED TO
THE SUBJECT MATTER OF THIS AGREEMENT, AND REGARDLESS OF WHETHER A
CLAIM IS BASED IN CONTRACT, NEGLIGENCE OR IN TORT, SHALL NOT EXCEED
THE AMOUNT RECEIVED BY CONCENTRIC FROM CUSTOMER DURING THE PREVIOUS
TWELVE (12) MONTHS.
9.0 CONFIDENTIAL INFORMATION
Each party agrees to maintain all Confidential Information in
confidence to the same extent that it protects its own similar
Confidential Information and to use such Confidential Information only
as permitted under this Agreement. For purposes of this Agreement
"Confidential Information" shall mean information including, without
limitation, computer programs, code, algorithms, names and expertise
of employees and consultants, know-how, formulas, processes, ideas,
inventions (whether patentable or not), schematics and other
technical, business, financial and product development plans,
forecasts, strategies and information marked "Confidential", or if
disclosed verbally, is identified as confidential at the time of
disclosure and reduced to a confidential writing within thirty (30)
days after such disclosure. Each party agrees to take all reasonable
precautions to prevent any unauthorized disclosure or use of
Confidential Information including, without limitations disclosing
Confidential Information only to its employees: (a) with a need to
know to further permitted uses of such information; (b) who are
parties to appropriate agreements sufficient to comply with this
Section 9; and (c) who are informed of the nondisclosure/ non-use
obligations imposed by this Section 9; and both parties shall take
appropriate steps to implement and enforce such non-disclosure/non-use
obligations. The foregoing restrictions on disclosure and use shall
survive for three (3) years following termination of this Agreement
but shall not apply with respect to any
28
<PAGE>
Confidential Information which: (i) was or becomes publicly known
through no fault of the receiving party; (ii) was rightfully known or
becomes rightfully known to the receiving party without confidential
or proprietary restriction from a source other than the disclosing
party; (iii) is independently developed by the receiving party without
the participation of individuals who have had access to the
Confidential Information; (iv) is approved by the disclosing party for
disclosure without restriction in a written document which is signed
by a duly authorized officer of such disclosing party; and (v) the
receiving party is legally compelled to disclose; provided, however,
that prior to any such compelled disclosure, the receiving party will:
(d) assert the privileged and confidential nature of the Confidential
Information against the third party seeking disclosure; and (e)
cooperate fully with the disclosing party in protecting against any
such disclosure and/or obtaining a protective order narrowing the
scope of such disclosure and/or use of the Confidential Information.
In the event that such protection against disclosure is not obtained,
the receiving party will be entitled to disclose the Confidential
Information, but only as, and to the extent, necessary to legally
comply with such compelled disclosure. Each of the parties hereto
agrees not to disclose to any third party the terms of this Agreement
without the prior written consent of the other party hereto, except to
advisors, investors and others on a need-to-know basis under
circumstances that reasonably ensure the confidentiality thereof, or
to the extent required by law.
10.0 TERM AND TERMINATION
10.1 The term of this Agreement shall commence on the Effective Date
and continue until the term elected by Customer as set forth in
Exhibit C. At the expiration of this initial term, this Agreement
shall automatically renew for a term of one (1) year subject to
Customer's acceptance of Concentric's then current Fees, unless notice
of non-renewal is sent by either party no less than ninety (90) days
before expiration of the term.
10.2 Concentric may terminate this Agreement upon written notice: (a)
for any material breach of this Agreement, which Customer fails to
cure within thirty (30) days following written notice by Concentric of
such breach; or (b) upon Customer's insolvency or liquidation as a
result of which Customer ceases to do business for a continuous period
of at least three (3) months. Customer may terminate this Agreement
upon written notice: (a) for any material breach of this Agreement
which Concentric fails to cure within thirty (30) days following
written notice by Customer of such breach; or (b) upon Concentric's
insolvency or liquidation as a result of which Concentric ceases to do
business for a continuous period of at least three (3) months.
10.3 Notwithstanding the expiration or termination of this Agreement,
or anything to the contrary set forth herein, all TCP/IP addresses
that are part of the Concentric Network remain the sole and exclusive
property of Concentric.
11.0 OTHER PROVISIONS
29
<PAGE>
11.1 NON-ASSIGNMENT. This Agreement shall be binding upon, and inure
to the benefit of, the parties hereto and their respective successors
and assigns. Notwithstanding the above, this Agreement may not be
assigned in whole or in part by a party, without the written consent
of the other party, which shall not be unreasonably withheld. Any
assignment in violation of this paragraph shall be null and void.
11.2 INDEPENDENT CONTRACTORS. The parties shall have the status of
independent contractors, and nothing in this Agreement shall be deemed
to place the parties in the relationship of employer-employee,
principal-agent, or partners or in a joint venture.
11.3 NON-WAIVER. Failure of either party to enforce any of its rights
hereunder shall not be deemed to constitute a waiver of its future
enforcement of such rights or any other rights.
11.4 SEVERABILITY. If any provision of this Agreement is held to be
invalid, illegal, or unenforceable under present or future laws, such
item shall be struck from the Agreement; however, such invalidity or
enforceability shall not affect the remaining provisions or conditions
of this Agreement. The parties shall remain legally bound by the
remaining terms of this Agreement, and shall strive to reform the
Agreement in a manner consistent with the original intent of the
parties.
11.5 CONTENT AND BREACH OF 3RD PARTY AGREEMENT INDEMNITY. Customer
agrees to indemnify, hold harmless and upon request, defend
Concentric, from and against any and all claims, liability, losses,
damages, expenses and costs (including attorneys' fees) arising out of
or in connection with: (a) information or content provided, accessed
or made available by Customer on the Concentric Network; and; (b) any
breach of any agreement for software, hardware or other products from
third parties provided by Concentric hereunder.
11.6 FORCE MAJEURE. Either party shall be excused from any delay or
failure in performance hereunder caused by reason of any occurrence or
contingency beyond its reasonable control, including but not limited
to, acts of God, earthquake, labor disputes and strikes, riots, war or
other unanticipated occurrences or problems, and governmental
requirements. The obligations and rights of the party so excused shall
be extended on a day-to-day basis for the period of time equal to that
of the underlying cause of the delay.
11.7 GOVERNING LAW. This Agreement shall be deemed to have been made
in the State of California, and the provisions and conditions of this
Agreement shall be governed by and interpreted in accordance with the
substantive laws of the State of California, without regard to
conflict of laws provisions.
30
<PAGE>
11.8 ARBITRATION. Any dispute or claim arising out of or in connection
with this Agreement or the performance, breach or termination thereof,
shall be finally settled by binding arbitration in San Jose,
California under the Rules of Arbitration of the American Arbitration
Association by an arbitrator appointed in accordance with those rules.
Judgment on the award rendered by the arbitrators may be entered in
any court having jurisdiction thereof. Notwithstanding the foregoing,
either party may apply to any court of competent jurisdiction for
equitable relief without breach of this arbitration provision.
11.9 INTEGRATION. This Agreement expresses the complete and final
understanding of the parties with respect to the subject matter
hereof, and supersedes all prior communications between the parties,
whether written or oral with respect to the subject matter hereof. No
modification of this Agreement shall be binding upon the parties
hereto, unless evidenced by a writing duly signed by authorized
representatives of the respective parties hereto.
11.10 NOTICES. Any required notices hereunder shall be given in
writing by certified mail or overnight express delivery service (such
as DHL) at the address of each party below, or to such other address
as either party may from time to time substitute by written notice.
Notice shall be deemed served when delivered or, if delivery is not
accomplished by reason or some fault of the addressee, when tendered.
If to Concentric: If to Customer:
RemoteLink Programs Manager
Concentric Network Corporation
10590 N. Tantau Ave.
Cupertino, CA 95014
408 342 2800
AGREED AND ACCEPTED:
Concentric Network Corporation ("Concentric") ("Customer")
-------------------
By: By:
----------------------------- ----------------------------
(Authorized Signature) (Authorized Signature)
Name: Name:
---------------------------- --------------------------
31
<PAGE>
Title: Title:
--------------------------- -------------------------
Date: Date:
--------------------------- -------------------------
32
<PAGE>
<TABLE>
<CAPTION>
IMPLEMENTATION PLAN
<C> <S>
__________ ORDER DAF
__________ ORDER RADIUS SERVER & SOFTWARE
__________ IDENTIFY IP ADDRESS RANGE
__________ PROVIDE CITYFIND SOFTWARE
__________ DELIVER ONE DAY FIRST TIER TRAINING SESSION FOR CUSTOMER (IF CUSTOMER PERFORMING FIRST TIER SUPPORT
__________ CONFIGURE CONCENTRIC ROUTER INTERFACE
__________ CONFIGURE TUNNEL MANAGEMENT SERVER WITH CUSTOMER INFORMATION
__________ DELIVER END USER DOCUMENTATION
__________ SET UP CUSTOMER ACCESS TO FRONTLINE SUPPORT TOOL (IF CUSTOMER TO PERFORM FIRST TIER SUPPORT)
__________ INSTALL CONCENTRICVIEW
__________ TURN UP SERVICE, TEST CONNECTIONS
</TABLE>
33
<PAGE>
CUSTOMER SELECTIONS
THE CONTRACT TERM SELECTED IS:__________.
THE SUPPORT OPTION SELECTED IS:
SECOND TIER SUPPORT ONLY: ________________
FIRST TIER SUPPORT, 1 MINUTE ASA: ________________
FIRST TIER SUPPORT, 3 MINUTE ASA: ________________
FIRST TIER SUPPORT, __________ SHIFT SEATS, TO BE STAFFED DURING THE HOURS OF:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DAF CONNECTION TYPE DESIRED: _________________________
DAF ONE TIME CHARGES: _________________________
DAF MONTHLY CHARGES: _________________________
DAF INSTALLATION CHARGES: $3,000
ONE TIME OPTIONS DESIRED:
NT SERVER: _______ RADIUS SOFTWARE: ______
ROUTER: _______ CSU: ______
ON SITE INSTALL SUPPORT &
NETWORK MANAGEMENT TRAINING: _________________________
END USER TRAINING COURSE: _________________________
HELP DESK TRAINING COURSE: _________________________
34
<PAGE>
INITIALS, CONCENTRIC:_________________ CUSTOMER:____________________
35
<PAGE>
SPECIFICATIONS FOR RADIUS SERVER
RADIUS SERVER SOFTWARE, IF PROVIDED BY THE CUSTOMER, SHALL CONFORM TO THE
CURRENT IETF SPECIFICATION, RFC 2058.
36
<PAGE>
EXHIBIT C
CNC TRADEMARK GUIDELINES
To Be Determined within 15 days
37
<PAGE>
EXHIBIT 10.47
RESELLER AGREEMENT
THIS RESELLER AGREEMENT (the "Agreement") is entered into as the 25th day of
July, 1997, to be effective as of the Effective Date, hereinafter defined,
between Concentric Network Corporation, a Florida corporation with offices at
10590 N. Tantau Avenue, Cupertino, CA 95014 ("CNC") and Williams
Communications Group, Inc., a Delaware corporation with offices at One
Williams Center, 17/th/ Floor, Tulsa, Oklahoma 74172 ("WCG"").
In consideration of the mutual promises contained herein, CNC and WCG
(collectively the "PARTIES") agree as follows:
1. Definitions. For the purpose of this Agreement, the following terms and all
-----------
terms defined elsewhere in this Agreement shall have the meanings so defined. A
term defined in the singular shall include the plural and vice versa when the
context so indicates.
"Customer" shall mean a school, government entity, individual, organization,
--------
business, or institution that has contracted with WCG to purchase Services,
either as originally sold by CNC to WCG hereunder and resold to such Customer,
or as sold by CNC to WCG hereunder and resold to such Customer as part of a
value-added package offered by WCG.
"Dispute Resolution Procedures" shall mean the dispute resolution procedures set
-----------------------------
forth in Section 33 of this Agreement.
"Effective Date" shall be the Closing Date described in that certain Common
--------------
Stock and Warrant Purchase Agreement between the Parties entered into
concurrently with the execution of this Agreement.
"Services" shall mean CNC's products and services provided to WCG for resale
--------
under this Agreement, which Services shall be described in Exhibit A, as amended
---------
from time to time. Services shall include all current or future CNC products and
services, including without limitation all network and server/host based
products and services and all international products and services, that CNC
commercializes and makes generally available, except those which CNC is
contractually or legally prohibited from making available to WCG or those which
are reasonably determined by CNC to be technically infeasible or commercially
unreasonable for CNC to offer under the WCG name in which case they shall be
made available to WCG on an agency basis. "Services" shall include, but not be
limited to CNC Dedicated Access Facilities, Internet Dial Access, and
ConcentricHost Shared Web Services. Subject to the foregoing, updates to the
current Exhibit A (including descriptions of the Services and the terms,
---------
conditions and service level agreements relating thereto as required under
Section 2) shall be made to this document as they become available . CNC will
use commercially reasonable efforts to provide WCG the ability to be a reseller
via CNC for Telecom Italia International network services that are being
deployed as part of the CNC/Telecom Italia relationship.
<PAGE>
"Subsidiary" shall mean any entity which WCG owns, directly or indirectly, fifty
percent (50%) or more of the equity securities or other equity interest granting
WCG voting rights exercisable in electing the management of such entity, but
only for so long as such ownership exists. Current Subsidiaries are referenced
in Exhibit D.
2. Non-Exclusive CNC Reseller.
--------------------------
a) Subject to the terms contained herein, CNC hereby grants to WCG during the
term of this Agreement the non-exclusive, non-transferable right to
purchase Services from CNC, with such purchases being in the name of WCG
or any Subsidiaries (as amended (a current list of which shall be provided
on a quarterly basis to CNC), and to resell such Services to Customers
under the name of WCG or any of said Subsidiaries, including the right to
grant non-exclusive, non-transferable sublicenses to Customers to use the
software portions of the Services under the same software licensing terms
that CNC utilizes, a copy of which as it pertains to CNC as of the
Effective Date set forth in Exhibit Bor under substantially similar
software licensing terms. Except as may be expressly set forth in writing
by an authorized officer of CNC, WCG shall not have the authority to make
any commitments whatsoever on behalf of CNC. WCG shall cooperate with CNC
to avoid, and respond to, issues that arise relating to channel conflict.
b) CNC warrants and represents that it is the owner of, or has sufficient
rights to, the products that comprise the Services, including the software
portions thereof, and that it has the right to grant the reseller and
sublicensing rights stated in the preceding paragraph and that such grant
of reseller and sublicensing rights does not conflict with any prior
license or other agreement entered into by CNC, and CNC agrees that it
shall not enter into any license or other agreement in the future which
conflicts with this Agreement.
c) The respective terms and conditions and service level agreements for each
Service purchased from CNC by WCG hereunder shall be attached to the
portion of Exhibit A in which such Service is described as and when they
---------
are mutually agreed upon by the Parties.
d) WCG shall be responsible for establishing its own Customer pricing, terms
and conditions of service, and service level agreements (collectively, the
"Customer Terms"). In the event that Customer Terms are in conflict with
the terms and conditions and service level agreements that CNC has with
WCG, WCG acknowledges that any such conflicting Customer Terms will
neither create additional obligations of CNC under this Agreement, lessen
any obligations of WCG to CNC under this Agreement, nor otherwise affect
the terms, conditions or service level agreements between CNC and WCG. WCG
shall indemnify and hold CNC harmless from any claim, loss, damage or
expense arising out of WCG's use of Customer Terms that are in conflict
with the terms and conditions and service level agreements that CNC has
with WCG.
<PAGE>
e) CNC and WCG shall meet no less frequently than once per quarter to discuss
all Services that have been developed or are in the process of being
developed by CNC and review the list of Subsidiaries of WCG. WCG will
notify CNC of the current or developing Services from CNC that WCG desires
to resell under the terms of this Agreement. For the designated Services
that are currently available for resale, the Parties will on an expedited
basis commence the development and implementation of the terms,
conditions, service level agreements and pricing relating thereto (as
provided in Sections 2(c) above and 4(b) below) so that WCG can begin
representing CNC as a reseller for those Services. For the designated
Services that are in the process of being developed, the Parties will
develop and implement the terms, conditions, service level agreements and
pricing relating thereto as soon as the development of the subject
Services allows, so that WCG can begin representing CNC as a reseller for
those Services immediately upon their availability to the public and
without regard to the timing of the availability of those Services to
other resellers, provided, however, that CNC makes no representation or
warranty that any Services in development will be completed,
commercialized and made generally available. The availability of
designated Services that are in the process of being developed are also
subject to the absence of special requirements or modifications necessary
for WCG. Without limitation as to other instances wherein the Dispute
Resolution Procedures apply, if the Parties disagree as to which of CNC's
products or services constitute "Services" under this Agreement and must
therefore be offered to WCG for resale hereunder, or if CNC otherwise
refuses to offer to WCG the current or developing Services designated by
WCG under this paragraph, or the Parties otherwise disagree as to either
Party's compliance with the requirements of this paragraph, then the
Parties agree to resolve such disputes in accordance with the Dispute
Resolution Procedures.
f) It is WCG's desire to utilize WCG assets (e.g., circuits and computers)
wherever and whenever technically and operationally feasible in support of
CNC Services to be resold hereunder. WCG shall have the option of
provisioning any part or all components required for product delivery,
revenue collection (customer billing) and customer service, where
technically and operationally feasible. Also, to the extent technically
and operationally feasible with CNC's current support systems, CNC shall
grant WCG access to the applications and control systems necessary for WCG
to configure, maintain and support WCG's Customers. If necessary to enable
any of the foregoing, and if technically and operationally feasible, and
commercially feasible in light of CNC's then current engineering
resources, CNC shall develop the necessary systems or make changes to CNC
Services, and WCG shall reimburse CNC therefor on a fully-allocated basis.
The price paid by WCG to CNC for Services will be dependent on which
components of each of the various Services WCG provides. CNC and WCG shall
mutually agree upon development objectives, schedules and costs before
initiating any WCG-funded development projects.
g) WCG shall provide CNC with WCG's requirements for dial-up services. CNC
shall use commercially reasonable efforts to assist WCG on an expedited
basis so as to enable WCG to resell the CNC Dial Access Service within 30
days of the Effective Date.
<PAGE>
3. Independent Contractors. The relationship of CNC and WCG established
-----------------------
by this Agreement is that of independent contractors, and nothing contained in
this Agreement shall be construed to give either party the power to direct and
control the day-to-day activities of the other or be construed to create or
imply a joint venture, partnership, principal-agent, or employment relationship.
WCG shall not have the authority to make any commitments whatsoever on behalf of
CNC. All financial and other obligations associated with WCG's business as a
reseller are the sole responsibility of WCG.
4. Pricing to WCG.
--------------
a) Most Favored Nation Status. Discounts, rates, terms, and conditions of this
--------------------------
Agreement shall be provided to WCG on a "Most Favored Nation" basis. As
used in this Agreement, "Most Favored Nation" status means that, taken as
a whole and not individually, the prices, terms, and conditions offered to
WCG under this Agreement are no less favorable than the prices, terms, and
conditions, taken as a whole and not individually, provided to any other
CNC reseller. CNC will provide a nationally recognized independent third
party auditor retained by WCG access upon thirty (15) days prior notice,
at WCG's expense, to other active reseller agreements with CNC as a means
by which WCG can ensure to its satisfaction that it is receiving "Most
Favored Nation" status. If such auditor determines that another reseller
has more favorable prices, terms and conditions, then CNC will give WCG
the opportunity to substitute all of the prices, terms and conditions that
apply to such other reseller for the prices, terms and conditions of this
Agreement. Remuneration will be in the form of credit going forward and
will not be adjusted on past financial statements. Remuneration will
applied if the material amount is greater than 10%.Said auditor shall be
limited to one (1) audit per year for no longer than five (5) days and
shall conduct the audit during normal business hours in a manner which
will not unduly disrupt CNC's operations. The results of the audit shall
be deemed Confidential Information
b) Cost Plus Status. Subject to the terms of Section 4(a), CNC is offering
----------------
Services to WCG under this Agreement on a Cost Plus basis. The principal
of Cost Plus is that all Direct Costs of providing service including,
without limitation, capital, labor, telecommunications services, etc. will
be marked-up by a factor that will cover CNC's target Operating Expenses
(Engineering, Sustaining Sales & Marketing, product management and G&A) as
well as a target Profit Before Tax. For illustrative purposes only, a
fictional product (code name IMPACT) has been used for Exhibit C1. The
----------
Direct Costs, Operating Expenses, and Profit Before Tax targets will be
jointly developed and agreed upon by the Parties for each product to be
resold in the manner described in Exhibit C1, and the pricing ultimately
----------
developed for each Service will be set forth in the attachment to Exhibit
-------
A that relates to the Service being priced. In developing these cost
-
estimates and targets, the following principles will apply:
i. Direct costs of capital include lease (Depreciation & Interest),
installation, and maintenance expenses.
ii. Labor costs are fully burdened by benefits/taxes and departmental
overhead.
iii. Telecommunications services expense includes non-recurring and
recurring monthly expenses and all applicable taxes.
iv. An appropriate "capacity utilization" factor will be applied to
Capital and Telecommunications expenses to account for the fact that
capacity must be installed in advance of demand and that capacity
cannot be utilized at 100% efficiency levels.
v. Engineering and G&A Operating Expense will be targeted at levels
consistent with CNC's next twelve month budget as a percent of
revenue.
<PAGE>
vi. Sales & Marketing expense will include the direct costs of any
dedicated staff assigned to support WCG from a sales, marketing,
and/or systems engineering level plus X% to cover allocated
sustaining Sales & Marketing expense. The parties will jointly agree
on "X", but it is estimated to be in the 2-4% of revenue range.
vii. Target Profit Before Tax will be set at a level to reflect the
steady-state Profit Target expected of CNC by analysts and
investors. The parties will jointly agree on this target, but it is
estimated to be in the 10-15% of revenue range.
c) Adjustments. The discounts, rates, terms, and conditions of this
-----------
Agreement will be reviewed annually and adjusted, if necessary, to reflect
WCG's "Most Favored Nation" status, current market conditions, and the
economics of CNC's business. Also, the costing metrics and the related
terms and conditions of this Agreement described in Section 4(b) will be
reviewed annually and updated as appropriate for the subsequent twelve
month period of this Agreement. Without limitation as to other instances
wherein the Dispute Resolution Procedures apply, if the Parties cannot
agree on the items to be adjusted in accordance with the preceding
sentences, then the Parties agree to resolve the dispute in accordance
with the Dispute Resolution Procedures.
5. Invoicing and Payment. Unless otherwise provided in the terms and
---------------------
conditions set forth in Exhibit A with respect to a particular Service, CNC will
invoice WCG at the beginning of each month for all Services rendered (or
products delivered, as the case may be) during the preceding month. Terms of
payment for Services shall be net 30 days from date of the applicable invoice.
WCG is responsible for billing and collection from its Customers. Payments to
CNC by WCG will not be conditioned upon or delayed by WCG's attempts to collect
from its Customers nor will CNC be liable for any service credits that WCG may
elect to provide to its Customers.
6. Taxes. Except as otherwise provided herein, CNC shall bear all taxes,
-----
import and export duties, and other governmental fees of whatever nature imposed
on transactions hereunder, except federal, state or local sales and use taxes
applicable to the sale of Services, which sales and use taxes shall be added to
the prices as applicable and stated as separate items on each invoice applicable
to each order for Services, unless WCG provides CNC with evidence of a resale
certificate acceptable to the taxing authority in question.
7. Quotas. Subsequent to a reasonable amount of time following initial
------
training, WCG shall assign quota's to the WCG sales force designated by WCG to
solicit orders for the Services covered herein. WCG shall be solely responsible
for establishing quota levels and otherwise administering the quota program.
The requirement of establishing quotas shall not be deemed to create or imply
any minimum purchase requirements by WCG hereunder, and the failure to meet any
quotas shall not constitute a breach of this Agreement or otherwise affect any
Party's rights or obligations hereunder.
<PAGE>
8. Training and Sales Support. CNC will provide, at its expense, a
--------------------------
designated point-of-contact for sales and/or technical support questions that
will be shared with other CNC channel organizations. Additional sales and/or
technical support will be provided to WCG at WCG's expense and subject to mutual
agreement. CNC will provide initial training (e.g., one day of training per
product unless additional training is mutually agreed upon) on CNC Services as
they are made available to WCG. WCG will reimburse CNC for its reasonable out-
of-pocket expenses to perform such training. Such training will be designed to
be a "train-the-trainer" program, which will be held at a location to be
mutually agreed to by the Parties. Additional training may be performed by CNC
for WCG, at WCG's request and expense, if both CNC and WCG deem it necessary.
CNC will provide either camera-ready copy or, at WCG's expense, quantities of
sales promotion literature and materials.
9. Infringement Indemnity. The following terms apply to any infringement
----------------------
or claim alleging infringement by WCG or its Customers in any country in which
CNC provides the Services of any patent, trademark, copyright, trade secret or
other legally protected proprietary right of any third party relating to the
Services. CNC shall indemnify, defend and hold harmlessWCG, its owners or
Customers, and the directors, agents, officers and employees of each of them,
from and against any loss, damages, claim, suit or proceeding, expense or
liability, including but not limited to, costs of defense and reasonable
attorney's fees, that may result by reason of any such infringement or claim of
infringement. WCG shall notify CNC promptly of any such claim of infringement
for which CNC is responsible hereunder and shall cooperate with CNC (at CNC's
expense) in every reasonable way to facilitate the defense of any such claim.
In addition, if in such action or suit WCG or any of its Customers' use of the
Services or any component thereof is held to constitute an infringement and such
use is enjoined, CNC shall promptly at its expense, either (1) procure for WCG
and its Customers the right to continue using the Services or the affected
portion thereof, or (2) after consultation with WCG, replace or modify the
affected portion of the Services to make them substantially similar,
functionally equivalent, non-infringing Services. If CNC is unable or
determines that it is commercially impractical to do either (1) or (2) within a
commercially reasonable time, CNC shall at its own expense take back the
infringing product or discontinue providing the infringing service, as the case
may be, and promptly refund the price paid for same by WCG as depreciated using
generally accepted accounting practices.
The indemnity obligations in this Section shall survive the termination or
expiration of this Agreement. This Section sets forth CNC's entire liability and
WCG's sole and exclusive remedy with respect to the infringement of
intellectual property rights.
10. Non-exclusive Reseller Rights. This Agreement does not grant CNC an
-----------------------------
exclusive privilege to furnish to WCG any or all of the types of products and
services which are the subject of this Agreement which WCG may require. WCG
expressly reserves the right to contract with others for the purchase of
products or services of the types which are the subject of this Agreement.
<PAGE>
11. Indemnification. Each Party (the "Indemnifying Party") shall
---------------
indemnify, defend and hold harmless the other Party, its owners, and the
directors, agents, officers, and employees of each of them (collectively, the
"Indemnified Party"), from and against any fine, penalty, loss, damages, claim,
suit or proceeding, expense or liability, including but not limited to, costs of
defense and reasonable attorney's fees, (i) for injury to or death of persons or
damage to or loss or destruction of property arising out of or resulting from or
in connection with the performance of this Agreement and caused by the acts or
omissions of Indemnifying Party, its contractors or agents, or an employee of
any of them, or (ii) arising out of or resulting from or in connection with any
material inaccuracy within, or breach of, a representation or warranty contained
in this Agreement. The Indemnified Party shall notify the Indemnifying Party
promptly of any such claim for which Indemnifying Party is responsible hereunder
and shall cooperate with the Indemnifying Party (at the Indemnifying Party's
expense) in every reasonable way to facilitate the defense of any such claim.
The indemnity obligations under this Section shall survive the termination or
expiration of this Agreement.
12. Orders and Provisioning. WCG and CNC will jointly develop, at WCG's
-----------------------
expense, order entry and provisioning processes for each product to be resold
under the terms of this Agreement. Such processes will be designed to minimize
the total cost of order processing and provisioning while minimizing cycle-time
and maximizing customer satisfaction.
13. Facilities. WCG shall provide itself with, and be solely responsible
----------
for, (i) such facilities, employees, and business organization, and (ii) such
permits, licenses, and other forms of clearance from governmental or regulatory
agencies, if any, as it deems necessary for the conduct of its business
operations in accordance with this Agreement.
14. Trademarks, Service Marks, Logos and Tradenames. CNC grants to WCG
-----------------------------------------------
the non-exclusive, non-transferable right to use CNC's trademarks, service
marks, logos, and trade names that CNC may adopt from time to time
("Trademarks") in connection with WCG's sale, advertisement or promotion of
Services, and shall provide WCG with such Trademarks within thirty (30) days of
the Effective Date. During the term of this Agreement, WCG shall have the right
to indicate to the public that it is an authorized reseller of CNC's Services
and to advertise such Services under the Trademarks according to CNC style
guides referenced in Exhibit D. Nothing herein shall grant WCG any right, title
---------
or interest in CNC's Trademarks. All representations of CNC's Trademarks that
WCG intends to use shall be exact copies of those used by CNC or shall first be
submitted to CNC for approval of design, color, and other details thirty (30)
days prior to duplication and/or distribution.
15. Books, Records, and Audits: WCG and CNC shall maintain accurate,
---------------------------
complete, and well organized records with respect to the Services subject to
this Agreement, at all times during this Agreement. During the term of this
Agreement each Party shall, upon thirty (15) days written notice from the other
Party, make available to a nationally recognized independent third party auditor
retained by the requesting Party accurate books, records, and accounts relating
to the business of WCG and CNC with respect to the Services supplied by CNC, for
examination at the place of business where such books, records and accounts are
kept, during normal business hours and subject to the disclosing party's
reasonable security and confidentiality requirements WCG shall also maintain a
record of any customer complaints regarding either the Services or CNC and
promptly forward to CNC the information regarding those complaints.
16. Reporting. CNC shall provide WCG with monthly detail reports on the
---------
Services and
<PAGE>
service elements that WCG has purchased from CNC and resold to WCG's Customers
in a form suitable to both Parties, written or electronic.
17. Publicity. The Parties agree to cooperate in developing joint press
---------
releases from time-to-time related to activities and accomplishments
contemplated by this Agreement. All press releases mentioning the other Party
must be approved in advance by both Parties prior to release. Such approval
will be completed within three (3) business days and shall not be unreasonably
withheld.
18. WCG Network Facilities; Peering Route Agreements; Telecom Italia
----------------------------------------------------------------
a) For so long as this Agreement is in effect, CNC shall use its best
reasonable efforts to groom traffic generated by WCG, or its Customers,
onto network facilities provided by WCG.
b) CNC shall contract with WCG so that WCG and its affiliates can participate
in CNC's current and future private or public, peering or transit, or any
other special arrangement established to provide Internet connectivity
solutions. CNC shall provide said connectivity to WCG at cost, and will
bill any direct incremental expenses separately including administrative,
network engineering, & network operation costs, necessary to allow WCG
such participation. WCG shall reimburse CNC for these costs & expenses.
c) CNC and WCG agree to exercise commercially reasonable efforts to establish
a professional services, field services and other related services
agreement between WCG and Telecom Italia for support of the Telecom
Italia, International Network roll out. The parties further agree to
propose the CNOP's organization as the entity to perform network
management, network engineering, and network administration for the
Telecom Italia International Network. Any cost benefits to CNOP's (e.g.,
due to increased economies of scale) from the Telecom Italia agreement
will accrue to CNC in the form of a reduction in CNOP's costs to CNC.
WCG's pricing for all of the services described in this paragraph shall be
established by WCG at its sole discretion.
19. Term. This Agreement shall be for a period of two (2) years commencing
----
upon the Effective Date (the "Initial Period") subject to the right of either
party to terminate as provided in Section 20 (Termination). Thereafter, this
Agreement shall automatically renew for additional twelve (12) month period(s)
unless either party notifies the other of its intention to terminate or modify
this Agreement. Such notification (the "Notice of Nonrenewal") shall be
provided in writing sixty (60) days prior to expiration of the then current
term. Notwithstanding the foregoing, and unless (a) CNC terminates this
agreement for 'just cause' as defined in Section 20 (Termination), or (b)
WCG's ownership of CNC's outstanding common or preferred stock, as the case
may be, falls below 5%, WCG shall have the right to renew this Agreement under
prices, terms, and conditions agreed to at the annual review period described
in Section 4.
20. Termination. Either party may terminate this Agreement upon the
-----------
occurrence of "just cause" for termination, as defined below. Termination for
just cause shall become effective immediately as of the date on which such just
cause occurred (which date, in the case of paragraph (a) below, shall be day
following the end of the referenced cure period), unless otherwise provided for
in this Agreement. Just cause for termination by a Party shall consist of the
following:
a) Failure to Comply with Obligations. Failure by the other Party (the
----------------------------------
"Noncomplying Party") to comply with any of its obligations hereunder
within thirty (30) calendar days from its
<PAGE>
receipt of written notice to that effect from the other Party or, if the
failure to comply is of such a nature that it cannot reasonably be
expected to be remedied within thirty (30) days, the Noncomplying Party's
failure to exert substantial efforts to correct such failure within such
thirty-day time period.
b) Dissolution. Dissolution or any assignment by the other Party for the
-----------
benefit of its creditors, the appointment of a receiver for, or any
execution levied upon, all or substantially all of the other Party's
business or assets, or the filing of any petition for voluntary or
involuntary bankruptcy or similar proceeding for or against the other
Party.
The termination of this Agreement shall not affect any accrued rights or
obligations of either Party as of the effective date of such termination, nor
shall it affect any rights or obligations of either Party which are intended by
the Parties to survive any such termination, including without limitation those
contained in Section 9 (Infringement Indemnity), Section 11 (Indemnification),
and Section 22 (Confidential Information)
21. Transition Period. The time period between the date of a Notice of
-----------------
Nonrenewal and the end of the term in which such notice is provided shall
hereinafter be referred to as the "Transition Period". CNC and WCG agree to
utilize commercially reasonable efforts to effectuate a smooth and orderly
change during the Transition Period in order to satisfy the best interests of
Customers.
22. Confidential Information: Each party agrees to maintain all
-------------------------
Confidential Information (as hereinafter defined) in confidence to the same
extent that it protects its own similar Confidential Information and to use such
Confidential Information only as permitted under this Agreement. For purposes of
this Agreement "Confidential Information" shall mean information including,
without limitation, computer programs, code, algorithms, names and expertise of
employees and consultants, know-how, formulas, processes, ideas, inventions
(whether patentable or not), schematics and other technical, business, financial
and product development plans, forecasts, strategies and information marked
"Confidential", or if disclosed verbally, is identified as confidential at the
time of disclosure and reduced to a confidential writing within thirty (30) days
after such disclosure. Each party agrees to take all reasonable precautions to
prevent any unauthorized disclosure or use of Confidential Information
including, without limitation, disclosing Confidential Information only to its
directors, officers, employees and/or professional advisors (a) with a need to
know to further permitted uses of such information; (b) who are parties to
appropriate agreements sufficient to comply with this Section; and (c) who are
informed of the nondisclosure/ non-use obligations imposed by this Section; and
both parties shall take appropriate steps to implement and enforce such non-
disclosure/non-use obligations. The foregoing restrictions on disclosure and use
shall survive for three (3) years following termination of this Agreement but
shall not apply with respect to any Confidential Information which: (i) was or
becomes publicly known through no fault of the receiving party; (ii) was
rightfully known or becomes rightfully known to the receiving party without
confidential or proprietary restriction from a source other than the disclosing
party; (iii) is independently developed by the receiving party without the
participation of individuals who have had access to the Confidential
Information; (iv) is approved by the disclosing party for disclosure without
restriction in a written document which is signed by a duly authorized officer
of such disclosing party; or (v) the receiving party is legally compelled to
disclose; provided, however, that prior to any such compelled disclosure, the
receiving party will (a) assert the privileged and confidential nature of the
Confidential Information against the third party seeking disclosure and (b)
cooperate fully with the disclosing party in protecting against any such
disclosure and/or
<PAGE>
obtaining a protective order narrowing the scope of such disclosure and/or use
of the Confidential Information. In the event that such protection against
disclosure is not obtained, the receiving party will be entitled to disclose
the Confidential Information, but only as, and to the extent, necessary to
legally comply with such compelled disclosure. Each of the Parties hereto
agrees not to disclose to any third party the terms of this Agreement without
the prior written consent of the other party hereto, except to advisors,
investors and others on a need-to-know basis under circumstances that
reasonably ensure the confidentiality thereof, or to the extent required by
law.
23. LIMITATION ON LIABILITY. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO
-----------------------
THE OTHER OR TO ANY OTHER ENTITY FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, OR
INDIRECT DAMAGES, HOWEVER CAUSED ON ANY THEORY OF LIABILITY. NOTWITHSTANDING
ANYTHING HEREIN TO THE CONTRARY, NEITHER PARTY'S LIABILITY TO THE OTHER SHALL
IN ANY EVENT EXCEED THE AMOUNT RECEIVED BY CNC FROM WCG DURING THE PREVIOUS
TWELVE (12) MONTHS; PROVIDED, HOWEVER, THAT THE FOREGOING LIMITATION SHALL NOT
APPLY TO LIMIT LIABILITY AMOUNTS ARISING FROM SECTIONS 9 AND 11
24. Governing Law and Jurisdiction. This Agreement shall be governed by
------------------------------
and construed under the laws of the state of California, without reference to
conflict of law principles.
25. Entire Agreement. This Agreement, including any Exhibits and
----------------
attachments that may be added from time to time, sets forth the entire agreement
and understanding of the parties relating to the subject matter herein and
merges all prior discussions between them. No modification of or amendment to
this Agreement, nor any waiver of any rights under this Agreement, shall be
effective unless in writing signed by the party to be charged.
26. Notices. Any notice required or permitted by this Agreement shall be
-------
in writing and shall be deemed given (a) upon personal delivery, (b) on the
third day following mailing sent by registered or certified mail, return receipt
requested, postage prepaid, (c) upon confirmed delivery by means of a nationally
recognized overnight courier service or (d) upon confirmed transmission of
facsimile, addressed to the other party at the address shown at the beginning of
this Agreement or at such other address for which such party gives notice
hereunder.
27. Force Majeure. Neither Party shall be deemed in default of this
-------------
Agreement to the extent that any delay or failure in the performance of its
obligations results from an Act of God, act of civil or military authority,
embargo, epidemic, war, riot, insurrection, fire, explosion, earthquake, flood,
unusually severe weather conditions or any other cause beyond such Party's
reasonable control which cannot be overcome by due diligence, provided that such
Party gives the other Party prompt notice of such condition.
If either Party's performance is so excused, the other Party may either:
a. require the Party experiencing the delay to continue performance as
soon as practicable after the delay has ended; or
<PAGE>
b. terminate without penalty any affected order for Services or portion
thereof by giving written notice to the Party experiencing the delay.
Such other Party may select option (a) as to certain orders for Services or
parts thereof and option (b) as to other affected orders for Services or parts
thereof. In the absence of notice of selection of any option with respect to a
particular affected order for Services, option (a) will be deemed selected.
28. Non-Assignability and Binding Effect. Neither Party shall assign its
------------------------------------
rights or delegate its duties under this Agreement without the prior written
consent of the other Party, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing:
a. WCG may, with written notice to CNC, assign this Agreement to a Subsidiary;
and
b. CNC may, with written notice to WCG, assign this Agreement to an entity that
is formed for CNC's reincorporation as a Delaware corporation.. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
parties hereto, their successors and assigns.
29. Legal Expenses. The prevailing party in any legal action brought by
--------------
one Party against the other and arising out of this Agreement shall be entitled
to reimbursement for its expenses, including court costs and reasonable
attorneys' fees.
30. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original.
31. Headings. The section headings contained in this Agreement are for
--------
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
32. Severability. If any provision or part of a provision of this
------------
Agreement shall be invalid or unenforceable, such invalidity or unenforceability
shall not invalidate or render unenforceable the entire Agreement or provision
but rather the entire Agreement or provision shall be construed as if not
containing the particular invalid or unenforceable provision or portion thereof,
and the rights and obligations of CNC and WCG shall be construed and enforced
accordingly.
33. Resolution of Disagreements Between Parties. No Party to this
-------------------------------------------
Agreement shall be entitled to take legal action with respect to any dispute
relating hereto until it has complied in good faith with the following
alternative dispute resolution procedures. If a dispute, claim or controversy
arises with respect to or relates to any Section of this Agreement, then the
following dispute resolution procedures shall govern the parties' conduct:
a) The Parties shall attempt promptly and in good faith to resolve any
dispute arising out of or relating to this Agreement through negotiations
between representatives who have authority to settle the controversy.
Either Party may give the other Party written notice of any such dispute
not resolved in the normal course of business. Negotiations extending ten
(10) days after the disputing Party's notice shall be deemed at an
impasse, unless otherwise agreed by the Parties. If a negotiator intends
to be accompanied at a meeting by an attorney, the other negotiator(s)
shall be given at least two (2) working days notice of such intention and
may also be accompanied by an attorney. All negotiations pursuant to this
clause are confidential and shall be treated as compromise and settlement
negotiations for purposes of the Federal
<PAGE>
and State Rules of Evidence.
b) If a dispute is at an impasse (i.e., it has not been resolved within ten
(10) days of the disputing Party's notice), the dispute shall be settled
by arbitration in a mutually convenient location, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association in
effect on the date that such notice is given. If the parties are unable to
agree on a single arbitrator within ten (10) days from the date of an
impasse as set forth in Subsection (a), then the CNC and WCG shall each
select one arbitrator within ten (10) days and the two (2) arbitrators
shall select a third arbitrator within ten (10) days. If a Party does not
designate an arbitrator or if the two appointed arbitrators cannot agree
on the final arbitrator within the foregoing time periods, then the
American Arbitration Association shall select the arbitrator(s) upon
request of either Party. The decision of the arbitrator(s) shall be final
and binding upon the parties and shall include written findings of law and
fact, and judgment may be obtained thereon by either Party in a court of
competent jurisdiction. Each Party shall bear the cost of preparing and
presenting its own case. The cost of the arbitration, including the fees
and expenses of the arbitrator(s), shall be shared equally by the Parties
hereto unless the award otherwise provides. The arbitrator(s) shall be
instructed by the Parties to establish procedures such that a decision can
be rendered by the arbitrator(s) within sixty (60) days of the date that
the last arbitrator is selected.
c) The obligation herein to arbitrate shall not be binding upon either Party
with respect to requests for preliminary injunctions, temporary
restraining orders, specific performance or other procedures in a court of
competent jurisdiction to obtain interim relief when deemed necessary by
such court to preserve the status quo or prevent irreparable injury
pending resolution by arbitration of the actual dispute.
IN WITNESS WHEREOF the Parties hereto have executed this Agreement as of the day
and year first above written, to be effective as of the Effective Date.
CONCENTRIC NETWORK CORPORATION WILLIAMS COMMUNICATIONS GROUP, INC.
("CNC") ("WCG")
By: /s/ Henry R. Nothhaft By: /s/ S. Miller Williams
__________________________________ __________________________________
Printed Name: Henry R. Nothhaft Printed Name: /s/ S. Miller Williams
_________________________ _________________________
Title: President & CEO Title: Sr. Vice President
________________________________ ________________________________
<PAGE>
EXHIBIT A
---------
DESCRIPTION OF SERVICES
-----------------------
Placeholder for attachments of each Service setting forth the terms, conditions,
service level agreements and pricing relating thereto.
WCG PRICING
-----------
<TABLE>
<CAPTION>
PRODUCT CNC LIST WCG PRICE
<S> <C> <C>
Full T-1 $2,095 $1,375
Full T-1 Usage based $1,095 $ 725
Flex 512K $1,895 $1,030
Flex 128K $ 895 $ 645
Frame 56K $ 395 $ 325
DAF Startup $3,000 $1,995
RemoteLink $2.55/Hr. $ 1.79
Internet Dail Access $19.95/Mo. $14.95
</TABLE>
Notes:
1. These prices will be in effect until the parties conduct cost studies and
agree on cost-plus pricing for these services in accordance with paragraph
4(b) of this Agreement. The parties agree to work in good faith to complete
these analyses by August 30, 1997.
2. WCG is responsible for all sales, sales support, marketing, first tier
customer support, and end-Customer billing
<PAGE>
EXHIBIT B
---------
SOFTWARE SUBLICENSING TERMS
---------------------------
Replace with the license agreement we use and are required to use.
END USER LICENSE AGREEMENT FOR CITYFIND SOFTWARE
IMPORTANT NOTICE - READ CAREFULLY! This End User License Agreement for CityFind
Software ("EULA") is a legal agreement between you and Concentric Network
Corporation ("CONCENTRIC") for the CityFind software and any associated
documentation. By installing or using the CityFind software, you are agreeing to
be bound by the terms of this EULA. If you do not agree to the terms of this
EULA, do not install or use the CityFind software. Use of the CityFind Software
is contingent on your agreement to the following terms:
1. GRANT OF LICENSE AND LICENSE RESTRICTIONS.
CONCENTRIC grants to you a limited, non-exclusive, nontransferable, royalty-free
license to use one copy of the executable code of the CityFind software on a
single CPU if you have been authorized to use the CONCENTRIC RemoteLink(TM)
remote access service. The CityFind software may only be used in conjunction
with the Concentric RemoteLink outsourced remote access service. The CityFind
software is protected by copyright laws and international copyright treaties, as
well as other intellectual property laws and treaties. You may not rent, lease,
sell, sublicense, assign, or otherwise transfer the CityFind software, including
any accompanying printed materials. You may not reverse engineer, decompile or
disassemble the CityFind software except to the extent that this restriction is
expressly prohibited by applicable law. CONCENTRIC and its suppliers shall
retain title and all ownership rights to the CityFind software.
2. CITYFIND SOFTWARE MAINTENANCE.
CONCENTRIC is not obligated to provide maintenance or updates to you for
the CityFind software. However, any maintenance or updates provided by
CONCENTRIC are licensed to you under the terms of this Agreement.
3. DISCLAIMER OF WARRANTY.
CityFind software is deemed accepted by you. The CITYFIND SOFTWARE is provided
"AS IS" WITHOUT WARRANTY OF ANY KIND. TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, CONCENTRIC DISCLAIMS ALL WARRANTIES, INCLUDING WITHOUT
LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, AND NONINFRINGEMENT. THE ENTIRE RISK ARISING OUT OF THE USE OR
PERFORMANCE OF THE CITYFIND SOFTWARE AND DOCUMENTATION REMAINS WITH YOU.
4. LIMITATION OF LIABILITY.
TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, IN NO EVENT
<PAGE>
SHALL CONCENTRIC OR ITS SUPPLIERS BE LIABLE FOR ANY CONSEQUENTIAL, INCIDENTAL,
DIRECT, INDIRECT, SPECIAL, PUNITIVE, OR OTHER DAMAGES WHATSOEVER (INCLUDING,
WITHOUT LIMITATION, DAMAGES FOR LOSS OF BUSINESS PROFITS, BUSINESS
INTERRUPTION, LOSS OF BUSINESS INFORMATION, OR OTHER PECUNIARY LOSS) ARISING
OUT OF THIS AGREEMENT OR THE USE OF OR INABILITY TO USE THE CITYFIND SOFTWARE,
EVEN IF CONCENTRIC HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
BECAUSE SOME STATES DO NOT ALLOW THE EXCLUSION OR LIMITATION OF LIABILITY FOR
CONSEQUENTIAL OR INCIDENTAL DAMAGES, THE ABOVE LIMITATION MAY NOT APPLY TO
YOU.
5. U.S. GOVERNMENT RESTRICTED RIGHTS AND EXPORT RESTRICTIONS.
The CityFind software is provided with RESTRICTED RIGHTS. Use, duplication, or
disclosure by the Government is subject to restrictions as set forth in
subparagraph (c)(1)(ii) of The Rights in Technical Data and Computer Software
clause of DFARS 252.227-7013 or subparagraphs (c)(i) and (2) of the Commercial
Computer Software-Restricted Rights at 48 CFR 52.227-19, as applicable.
Manufacturer is Concentric Network Corporation, 10590 N. Tantau Ave., Cupertino,
CA 95014. You agree that you will not export or re-export the CityFind
software, directly or indirectly to: (i) any countries that are subject to
U.S.A. export restrictions (currently including, but not necessarily limited to,
Cuba, Iran, Iraq, Libya, North Korea, and Syria); or (iii) any end user who is
listed on the Table of Denial Orders. You further acknowledge that the CityFind
software may include technical data subject to export and re-export
restrictions imposed by U.S.A. law.
6. TERMINATION.
This EULA terminates when you are no longer authorized to use the Concentric
RemoteLink outsourced remote access service. Without prejudice to any other
rights, CONCENTRIC may terminate this EULA if you fail to comply with the terms
and conditions of this EULA. Upon termination of this EULA, you must destroy all
copies of the CityFind software.
7. GOVERNING LAW; ATTORNEYS FEES.
This Agreement shall be governed by the laws of the State of California and you
consent to jurisdiction by the state and federal courts in the State of
California. If either CONCENTRIC or you employs attorneys to enforce any rights
arising out of or relating to this Agreement, the prevailing party shall be
entitled to recover reasonable attorneys' fees.
8. ENTIRE AGREEMENT.
This Agreement constitutes the complete and exclusive agreement between
CONCENTRIC and you with respect to the subject matter hereof, and supersedes all
prior oral or written understandings, communications or agreements not
specifically incorporated herein. This Agreement may not be modified except in
a writing duly signed by an authorized representative of CONCENTRIC.
Copyright 1996, 1997 Concentric Networks Corporation
http://home.concentric.net
<PAGE>
NETSCAPE NAVIGATOR END USER LICENSE AGREEMENT
REDISTRIBUTION NOT PERMITTED
This Agreement has 3 parts. Part I applies if you have not purchased a license
to the accompanying software (the "Software"). Part II applies if you have
purchased a license to the Software. Part III applies to all license grants.
If you initially acquired a copy of the Software without purchasing a license
and you wish to purchase a license, contact Netscape Communications
Corporation ("Netscape") on the Internet at http://www.netscape.com.
PART I -- TERMS APPLICABLE WHEN LICENSE FEES NOT (YET) PAID (LIMITED TO
EVALUATION, EDUCATIONAL AND NON-PROFIT USE) GRANT.
Netscape grants you a non-exclusive license to use the Software free of charge
if (a) you are a student, faculty member or staff member of an educational
institution (K-12, junior college, college or library), a staff member of a
religious organization, or an employee of an organization which meets
Netscape's criteria for a charitable non-profit organization; or (b) your use
of the Software is for the purpose of evaluating whether to purchase an
ongoing license to the Software. The evaluation period for use by or on behalf
of a commercial entity is limited to 90 days; evaluation use by others is not
subject to this 90 day limit. Government agencies (other than public
libraries) are not considered educational, religious, or charitable non-profit
organizations for purposes of this Agreement. If you are using the Software
free of charge, you are not entitled to hard-copy documentation, support or
telephone assistance. If you fit within the description above, you may use the
Software in the manner described in Part III below under "Scope of Grant."
DISCLAIMER OF WARRANTY.
Free of charge Software is provided on an "AS IS" basis, without warranty of
any kind, including without limitation the warranties of merchantability,
fitness for a particular purpose and non-infringement. The entire risk as to
the quality and performance of the Software is borne by you. Should the
Software prove defective, you and not Netscape assume the entire cost of any
service and repair. In addition, the security mechanisms implemented by
Netscape software have inherent limitations, and you must determine that the
Software sufficiently meets your requirements. This disclaimer of warranty
constitutes an essential part of the agreement. SOME JURISDICTIONS DO NOT
ALLOW EXCLUSIONS OF AN IMPLIED WARRANTY, SO THIS DISCLAIMER MAY NOT APPLY TO
YOU AND YOU MAY HAVE OTHER LEGAL RIGHTS THAT VARY BY JURISDICTION.
PART II -- TERMS APPLICABLE WHEN LICENSE FEES PAID
GRANT. Subject to payment of applicable license fees, Netscape grants to you a
non-exclusive license to use the
<PAGE>
Software and accompanying documentation ("Documentation") in the manner
described in Part III below under "Scope of Grant."
LIMITED WARRANTY.
Netscape warrants that for a period of ninety (90) days from the date of
acquisition, the Software, if operated as directed, will substantially achieve
the functionality described in the Documentation. Netscape does not warrant,
however, that your use of the Software will be uninterrupted or that the
operation of the Software will be error-free or secure. In addition, the
security mechanisms implemented by Netscape software have inherent
limitations, and you must determine that the Software sufficiently meets your
requirements. Netscape also warrants that the media containing the Software,
if provided by Netscape, is free from defects in material and workmanship and
will so remain for ninety (90) days from the date you acquired the Software.
Netscape's sole liability for any breach of this warranty shall be, in
Netscape's sole discretion: (i) to replace your defective media; or (ii) to
advise you how to achieve substantially the same functionality with the
Software as described in the Documentation through a procedure different from
that set forth in the Documentation; or (iii) if the above remedies are
impracticable, to refund the license fee you paid for the Software. Repaired,
corrected, or replaced Software and Documentation shall be covered by this
limited warranty for the period remaining under the warranty that covered the
original Software, or if longer, for thirty (30) days after the date (a) of
shipment to you of the repaired or replaced Software, or (b) Netscape advised
you how to operate the Software so as to achieve the functionality described
in the Documentation. Only if you inform Netscape of your problem with the
Software during the applicable warranty period and provide evidence of the
date you purchased a license to the Software will Netscape be obligated to
honor this warranty. Netscape will use reasonable commercial efforts to
repair, replace, advise or, for individual consumers, refund pursuant to the
foregoing warranty within 30 days of being so notified.
THIS IS A LIMITED WARRANTY AND IT IS THE ONLY WARRANTY MADE BY NETSCAPE.
NETSCAPE MAKES NO OTHER EXPRESS WARRANTY AND NO WARRANTY OF NONINFRINGEMENT OF
THIRD PARTIES' RIGHTS. THE DURATION OF IMPLIED WARRANTIES, INCLUDING WITHOUT
LIMITATION, WARRANTIES OF MERCHANTABILITY AND OF FITNESS FOR A PARTICULAR
PURPOSE, IS LIMITED TO THE ABOVE LIMITED WARRANTY PERIOD; SOME JURISDICTIONS
DO NOT ALLOW LIMITATIONS ON HOW LONG AN IMPLIED WARRANTY LASTS, SO LIMITATIONS
MAY NOT APPLY TO YOU. NO NETSCAPE DEALER, AGENT, OR EMPLOYEE IS AUTHORIZED TO
MAKE ANY MODIFICATIONS, EXTENSIONS, OR ADDITIONS TO THIS WARRANTY. If any
modifications are made to the Software by you during the warranty period; if
the media is subjected to accident, abuse, or improper use; or if you violate
the terms of this Agreement, then this warranty shall immediately be
terminated.
<PAGE>
This warranty shall not apply if the Software is used on or in conjunction
with hardware or software other than the unmodified version of hardware and
software with which the software was designed to be used as described in the
Documentation. THIS WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS, AND YOU MAY HAVE
OTHER LEGAL RIGHTS THAT VARY BY JURISDICTION.
PART III -- TERMS APPLICABLE TO ALL LICENSE GRANTS
SCOPE OF GRANT.
You may:
* use the Software on any single computer;
* use the Software on a network, provided that each person accessing the
Software through the network must have a copy licensed to that person;
* use the Software on a second computer so long as only one copy is used at a
time;
* copy the Software for archival purposes, provided any copy must contain all
of the original Software's proprietary notices; or
* if you have purchased licenses for a 10 Pack or a 50 Pack, make up to 10 or
50 copies, respectively, of the Software (but not the Documentation),
provided any copy must contain all of the original Software's proprietary
notices. The number of copies is the total number of copies that may be made
for all platforms. Additional copies of Documentation may be purchased.
You may not:
* permit other individuals to use the Software except under the terms listed
above;
* permit concurrent use of the Software;
* modify, translate, reverse engineer, decompile, disassemble (except to the
extent applicable laws specifically prohibit such restriction), or create
derivative works based on the Software;
* copy the Software other than as specified above;
* rent, lease, grant a security interest in, or otherwise transfer rights to
the Software; or
* remove any proprietary notices or labels on the Software.
TITLE.
Title, ownership rights, and intellectual property rights in the Software
shall remain in Netscape and/or its suppliers. The Software is protected by
the copyright laws and treaties. Title and related rights in the content
accessed through the Software is the property of the applicable content owner
and may be protected by applicable law. This License gives you no rights to
such content.
TERMINATION.
The license will terminate automatically if you fail to comply with the
limitations described herein. On
<PAGE>
termination, you must destroy all copies of the Software and Documentation.
EXPORT CONTROLS.
None of the Software or underlying information or technology may be downloaded
or otherwise exported or reexported (i) into (or to a national or resident of)
Cuba, Iraq, Libya, Yugoslavia, North Korea, Iran, Syria or any other country
to which the U.S. has embargoed goods; or (ii) to anyone on the U.S. Treasury
Department's list of Specially Designated Nationals or the U.S. Commerce
Department's Table of Denial Orders. By downloading or using the Software, you
are agreeing to the foregoing and you are representing and warranting that you
are not located in, under the control of, or a national or resident of any
such country or on any such list.
In addition, if the licensed Software is identified as a not-for-export
product (for example, on the box, media or in the installation process), then
the following applies: EXCEPT FOR EXPORT TO CANADA FOR USE IN CANADA BY
CANADIAN CITIZENS, THE SOFTWARE AND ANY UNDERLYING TECHNOLOGY MAY NOT BE
EXPORTED OUTSIDE THE UNITED STATES OR TO ANY FOREIGN ENTITY OR "FOREIGN
PERSON" AS DEFINED BY U.S. GOVERNMENT REGULATIONS, INCLUDING WITHOUT
LIMITATION, ANYONE WHO IS NOT A CITIZEN, NATIONAL OR LAWFUL PERMANENT RESIDENT
OF THE UNITED STATES. BY DOWNLOADING OR USING THE SOFTWARE, YOU ARE AGREEING
TO THE FOREGOING AND YOU ARE WARRANTING THAT YOU ARE NOT A "FOREIGN PERSON" OR
UNDER THE CONTROL OF A FOREIGN PERSON.
LIMITATION OF LIABILITY. UNDER NO CIRCUMSTANCES AND UNDER NO LEGAL THEORY,
TORT, CONTRACT, OR OTHERWISE, SHALL NETSCAPE OR ITS SUPPLIERS OR RESELLERS BE
LIABLE TO YOU OR ANY OTHER PERSON FOR ANY INDIRECT, SPECIAL, INCIDENTAL, OR
CONSEQUENTIAL DAMAGES OF ANY CHARACTER INCLUDING, WITHOUT LIMITATION, DAMAGES
FOR LOSS OF GOODWILL, WORK STOPPAGE, COMPUTER FAILURE OR MALFUNCTION, OR ANY
AND ALL OTHER COMMERCIAL DAMAGES OR LOSSES. IN NO EVENT WILL NETSCAPE BE
LIABLE FOR ANY DAMAGES IN EXCESS OF THE AMOUNT NETSCAPE RECEIVED FROM YOU FOR
A LICENSE TO THE SOFTWARE, EVEN IF NETSCAPE SHALL HAVE BEEN INFORMED OF THE
POSSIBILITY OF SUCH DAMAGES, OR FOR ANY CLAIM BY ANY OTHER PARTY. THIS
LIMITATION OF LIABILITY SHALL NOT APPLY TO LIABILITY FOR DEATH OR PERSONAL
INJURY TO THE EXTENT APPLICABLE LAW PROHIBITS SUCH LIMITATION. FURTHERMORE,
SOME JURISDICTIONS DO NOT ALLOW THE EXCLUSION OR LIMITATION OF INCIDENTAL OR
CONSEQUENTIAL DAMAGES, SO THIS LIMITATION AND EXCLUSION MAY NOT APPLY TO YOU.
HIGH RISK ACTIVITIES.
The Software is not fault-tolerant and is not designed, manufactured or
intended for use or resale as on-line control equipment in hazardous
environments requiring fail-safe performance, such as in the operation of
nuclear facilities, aircraft navigation or communication
<PAGE>
systems, air traffic control, direct life support machines, or weapons
systems, in which the failure of the Software could lead directly to death,
personal injury, or severe physical or environmental damage ("High Risk
Activities"). Netscape and its suppliers specifically disclaim any express or
implied warranty of fitness for High Risk Activities.
MISCELLANEOUS.
If the copy of the Software you received was accompanied by a printed or other
form of "hard-copy" End User License Agreement whose terms vary from this
Agreement, then the hard-copy End User License Agreement governs your use of
the Software. This Agreement represents the complete agreement concerning this
license and may amended only by a writing executed by both parties. THE
ACCEPTANCE OF ANY PURCHASE ORDER PLACED BY YOU IS EXPRESSLY MADE CONDITIONAL
ON YOUR ASSENT TO THE TERMS SET FORTH HEREIN, AND NOT THOSE IN YOUR PURCHASE
ORDER. If any provision of this Agreement is held to be unenforceable, such
provision shall be reformed only to the extent necessary to make it
enforceable. This Agreement shall be governed by California law (except for
conflict of law provisions). The application the United Nations Convention of
Contracts for the International Sale of Goods is expressly excluded.
U.S. GOVERNMENT RESTRICTED RIGHTS. Use, duplication or disclosure by the
Government is subject to restrictions set forth in subparagraphs (a) through
(d) of the Commercial Computer-Restricted Rights clause at FAR 52.227-19 when
applicable, or in subparagraph (c)(1)(ii) of the Rights in Technical Data and
Computer Software clause at DFARS 252.227-7013, or at 252.211-7015, or to
Netscape's standard commercial license, as applicable, and in similar clauses
in the NASA FAR Supplement. Contractor/manufacturer is Netscape Communications
Corporation, 501 East Middlefield Road, Mountain View, CA 94043.
<PAGE>
EXHIBIT C
---------
WCG COST PLUS PRICING MODEL
- ----------------------------
FOR ILLUSTRATIVE PURPOSES ONLY
------------------------------
PRODUCT: IMPACT
- ----------------
LINE ITEM DESCRIPTIONS PRICING PERCENTAGES
- ---------------------- ------- -----------
WCG PRICE (CNC REVENUE) $478 100%
Backbone (8:1 usage) $100 21%
Hardware (assumes 4% lease rate) $100 21%
Network Management $ 50 10.5%
Customer Service $ 50 10.5%
Billing $ 25 5%
- ------- ---- ----
TOTAL CNC COGS $325 68%
GROSS MARGIN $153 32%
R & D $ 33 7%
Sales & Marketing $ 19 4%
G & A $ 29 6%
- ----- ---- ----
OPERATING EXPENSES $ 81 17%
PBT $ 72 15%
=== ==== ====
FOR ILLUSTRATIVE PURPOSES ONLY
------------------------------
<PAGE>
EXHIBIT D
---------
CNC TRADEMARK GUIDELINES
------------------------
To be provided
--------------
<PAGE>
EXHIBIT 10.48
LICENSE PURCHASE AGREEMENT
THIS LICENSE PURCHASE AGREEMENT (the "Agreement") is entered into as of the
__ day of July, 1997, to be effective as of the Effective Date, hereinafter
defined, between Concentric Network Corporation, a Florida corporation with
offices at 10590 N. Tantau Avenue, Cupertino, CA 95014 ("CNC") and Williams
Communications Group, a Delaware corporation with offices at One Williams Center
17th Floor, Tulsa, Oklahoma 74172 ("WCG").
In consideration of the mutual promises contained herein, CNC and WCG
(collectively the "PARTIES") agree as follows:
1. Definitions. For the purpose of this Agreement, the following terms and
-----------
all terms defined elsewhere in this Agreement shall have the meanings so
defined. A term defined in the singular shall include the plural and vice versa
when the context so indicates.
"Affiliate" shall mean any Person that directly or indirectly, through one or
more intermediaries, controls or is controlled by, or is under common control
with, the Person involved.
"Dispute Resolution Procedures" shall mean the dispute resolution procedures set
forth in Section 12 of this Agreement.
"Effective Date" shall be the Closing Date described in that certain Common
Stock and Warrant Purchase Agreement between the Parties entered into
concurrently with the execution of this Agreement.
"Change of Control" shall mean (i) any transaction in which CNC, or any direct
or indirect parent corporation of CNC, is, directly or indirectly, acquired by,
merged with or into or consolidated with, or reorganized into, another
corporation or other legal entity, and as a result of such acquisition, merger,
consolidation or reorganization less than a majority of the combined voting
power of the then-outstanding securities of CNC, or any direct or indirect
parent corporation of CNC, as the case may be, immediately after the transaction
are held in the aggregate by the persons holding such securities immediately
prior to the event; or (ii) any transaction in which CNC, or any direct or
indirect parent corporation of CNC, sells or otherwise transfers all or
substantially all of its assets to any other corporation or other person, if
less than a majority of the combined voting power of the then-outstanding
securities of such other person is held in the aggregate by the holders of
voting stock of CNC, or any direct or indirect parent corporation of CNC, as the
case may be; provided, however, that any such transactions will not include a
transaction where the other party to the transaction is a CNC Affiliate prior to
the transaction in question.
"Person" shall mean any natural person, firm, partnership, limited liability
company, association, corporation, company, trust, business trust, governmental
authority or other entity.
"WCG Competitor" shall mean any of the following companies and their successors
and assigns, and the Affiliates thereof: Qwest Communications Corporation, IXC
Communications Inc., MCI Communications Corporation, Sprint Corporation, AT&T
Corporation, WorldCom, Inc., GTE Corporation, and Ameritech Corporation.
"Intellectual Property" shall mean the copyrights, patents, trademarks or trade
secrets underlying the Concentric Host, Concentric View, CityFind, Concentric
Internet Access Kit and Registration Service, Web University, FrontLine,
Adaptive Call Processing and Billing software programs, SMTP Server, POP3
Server, Web Server, News Server, IRC Server, Authentication Server, Registration
Servers, Internet Shell Server, Billing Server, Latency Tool, replacements,
updates and modifications of any of the foregoing, and other copyrights,
patents,
<PAGE>
trademarks or trade secrets which Concentric owns or obtains the right to
assign, license or to otherwise transfer to a third party
2. Agreement for Sale and Purchase. In the event of a Change of Control to a
-------------------------------
WCG Competitor, WCG shall have the right to purchase at the then current market
value for a license of this type from CNC, or from the entity succeeding to
CNC's rights to the Intellectual Property as a result of the Change in Control,
a non-exclusive, perpetual, fully-paid-up license to use, reproduce, distribute,
and create derivative works of the Intellectual Property as it exists on the
date of the Change of Control at a price to be mutually determined. CNC shall
notify WCG of any Change of Control within thirty (30) days thereof. In the
event the parties cannot agree upon a price within ninety (90) days of the
Change of Control the issue of the price of the fully-paid-up license shall be
determined in accordance with the Dispute Resolution Procedures.
3. Term. This Agreement shall continue in effect for so long as WCG owns at
----
least five percent (5%) of the outstanding common or preferred stock of CNC;
provided, however, that this Agreement shall not be caused to terminate by this
section if the reduction in WCG's ownership percentage below five percent (5%)
is caused by or occurs in connection with the subject Change of Control.
4. LIMITATION ON LIABILITY. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE
-----------------------
OTHER OR TO ANY OTHER ENTITY FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, OR
INDIRECT DAMAGES, HOWEVER CAUSED ON ANY THEORY OF LIABILITY.
5. Governing Law and Jurisdiction. This Agreement shall be governed by and
------------------------------
construed under the laws of the state of California, without reference to
conflict of law principles.
6. Entire Agreement. This Agreement sets forth the entire agreement and
----------------
understanding of the parties relating to the subject matter herein and merges
all prior discussions between them. No modification of or amendment to this
Agreement, nor any waiver of any rights under this Agreement, shall be effective
unless in writing signed by the party to be charged.
7. Notices. Any notice required or permitted by this Agreement shall be in
-------
writing and shall be deemed given (a) upon personal deliver, (b) on the third
day following mailing sent by registered or certified mail, return receipt
requested, postage prepaid, (c) upon confirmed delivery by means of a nationally
recognized overnight courier service or (d) upon confirmed transmission of
facsimile, addressed to the other party at the address shown at the beginning of
this Agreement or at such other address for which such party gives notice
hereunder.
8. Non-Assignability and Binding Effect. Neither party shall assign its
------------------------------------
rights or delegate its duties under this Agreement without the prior written
consent of the other party, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, WCG may, with written notice to CNC, assign this
Agreement to a direct or indirect subsidiary or other Affiliate of WCG. Subject
to the foregoing, this Agreement shall be binding upon and inure to the benefit
of the parties hereto, their successors and assigns.
9. Counterparts. This Agreement may be executed in two or more counterparts,
------------
each of which shall be deemed an original.
10. Headings. The section headings contained in this Agreement are for
--------
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
11. Severability. If any provision or part of a provision of this Agreement
------------
shall be invalid or unenforceable,
2
<PAGE>
such invalidity or unenforceability shall not invalidate or render unenforceable
the entire Agreement or provision but rather the entire Agreement or provision
shall be construed as if not containing the particular invalid or unenforceable
provision or portion thereof, and the rights and obligations of CNC and WCG
shall be construed and enforced accordingly.
12. Resolution of Disagreements Between Parties. No party to this Agreement
-------------------------------------------
shall be entitled to take legal action with respect to any dispute relating
hereto until it has complied in good faith with the following alternative
dispute resolution procedures. If a dispute, claim or controversy arises with
respect to or relates to any Section of this Agreement, then the following
dispute resolution procedures shall govern the parties' conduct:
a. The parties shall attempt promptly and in good faith to resolve any
dispute arising out of or relating to this Agreement through negotiations
between representatives who have authority to settle the controversy. Either
party may give the other party written notice of any such dispute not resolved
in the normal course of business. Negotiations extending ten (10) days after
the disputing party's notice shall be deemed at an impasse, unless otherwise
agreed by the parties. If a negotiator intends to be accompanied at a meeting
by an attorney, the other negotiator(s) shall be given at least two (2) working
days notice of such intention and may also be accompanied by an attorney. All
negotiations pursuant to this clause are confidential and shall be treated as
compromise and settlement negotiations for purposes of the Federal and State
Rules of Evidence.
b. If a dispute is at an impasse (i.e., it has not been resolved within
ten (10) days of the disputing party's notice), the dispute shall be settled by
arbitration administered by the American Arbitration Association in a mutually
convenient location, in accordance with the Commercial Arbitration Rules of the
American Arbitration Association in effect on the date that such notice is
given. If the parties are unable to agree on a single arbitrator within ten
(10) days from the date of an impasse as set forth in Subsection (a), then the
CNC and WCG shall each select one arbitrator within ten (10) days and the two
(2) arbitrators shall select a third arbitrator within ten (10) days. If a
party does not designate an arbitrator or if the two appointed arbitrators
cannot agree on the final arbitrator within the foregoing time periods, then the
American Arbitration Association shall select the arbitrator(s) upon request of
either party. The arbitrator(s) shall not reach a decision which is different
than either of the positions taken by the parties. In the event the
arbitrator(s) decide that neither party's position reflects the correct decision
according to the requirements for reaching a decision, then the arbitrator(s)
shall adopt the position of the party which the arbitrator(s) believe comes the
closest to representing what the arbitrator(s) believe is the correct decision
as the decision of the arbitrator(s). The decision of the arbitrator(s) shall be
final and binding upon the parties and shall include written findings of law and
fact, and judgment may be obtained thereon by either party in a court of
competent jurisdiction. Each party shall bear the cost of preparing and
presenting its own case. The cost of the arbitration, including the fees and
expenses of the arbitrator(s), shall be shared equally by the parties hereto
unless the award otherwise provides. The arbitrator(s) shall be instructed by
the parties to establish procedures such that a decision can be rendered by the
arbitrator(s) within sixty (60) days of the date that the last arbitrator is
selected.
3
<PAGE>
c. The obligation herein to arbitrate shall not be binding upon either
party with respect to requests for preliminary injunctions, temporary
restraining orders, specific performance or other procedures in a court of
competent jurisdiction to obtain interim relief when deemed necessary by such
court to preserve the status quo or prevent irreparable injury pending
resolution by arbitration of the actual dispute.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the day
and year first above written, to be effective as of the Effective Date.
CONCENTRIC NETWORK WILLIAMS COMMUNICATIONS
CORPORATION GROUP, INC.
("CNC") ("WCG")
/s/ Henry R. Nothhaft /s/ S. Miller Williams
By:__________________________ By:_________________________________
Printed Name:________________ Printed Name:_______________________
Title:_______________________ Title:______________________________
4
<PAGE>
EXHIBIT 11.1
A statement regarding computation of earnings per share is included in notes
to condensed financial statements included in page 6.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997 JAN-01-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997 JUN-30-1997
<CASH> 17,657 2,841 3,464
<SECURITIES> 0 0 0
<RECEIVABLES> 1,769 2,022 1,876
<ALLOWANCES> 0 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 21,228 6,853 13,937
<PP&E> 37,804 64,328 72,978
<DEPRECIATION> 9,877 11,101 14,422
<TOTAL-ASSETS> 70,722 61,438 58,556
<CURRENT-LIABILITIES> 32,896 31,558 50,562
<BONDS> 0 0 0
5,150 5,150 1,400
95,215 96,323 99,604
<COMMON> 1,850 1,958 8,443
<OTHER-SE> (94,140) (108,900) (122,376)
<TOTAL-LIABILITY-AND-EQUITY> 70,722 61,438 76,367
<SALES> 0 0 0
<TOTAL-REVENUES> 15,648 9,156 19,968
<CGS> 0 0 0
<TOTAL-COSTS> 56,266 15,744 30,657
<OTHER-EXPENSES> 22,503 7,021 15,442
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 3,260 1,070 2,849
<INCOME-PRETAX> (66,381) (14,681) (27,585)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (66,381) (14,681) (27,585)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (66,381) (14,681) (27,585)
<EPS-PRIMARY> (11.92) (1.98) (12.96)
<EPS-DILUTED> 0 0 0
</TABLE>
