<PAGE>
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, 1999
[_] 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 000-21091
ADVANCED RADIO TELECOM CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 52-1869023
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
500 108th Avenue, NE, Suite 2600
Bellevue, Washington 98004
(Address of principal executive offices)
(425) 688-8700
(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
filing requirements for the past 90 days: Yes [X] No [_].
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date: 27,304,389 shares of common
stock, $.001 par value, at August 13, 1999.
<PAGE>
PART 1 - FINANCIAL INFORMATION
ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS June 30, December 31,
1999 1998
-------------- -------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................... $ 53,800,204 $ 11,864,218
Pledged securities........................................... 18,494,443 18,504,263
Restricted cash.............................................. 32,060 32,060
Accounts receivable.......................................... 273,567 125,976
Other current assets......................................... 84,607 681,468
------------- -------------
Total current assets...................................... 72,684,881 31,207,985
Pledged securities........................................... 8,854,569
Property and equipment, net.................................. 25,074,442 33,202,310
FCC licenses, net............................................ 183,182,056 186,513,591
Deferred financing costs, net................................ 11,624,646 5,503,172
Other assets................................................. 456,798 439,664
------------- -------------
Total assets............................................... $ 293,022,823 $ 265,721,291
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Working Capital Facility..................................... $ 25,000,000 $ 16,229,121
Bridge Financing............................................. 50,000,000
Trade accounts payable....................................... 3,925,258 2,533,612
Accrued compensation and benefits............................ 1,978,701 2,936,454
Other accrued liabilities.................................... 12,334,841 4,759,689
Accrued interest payable..................................... 8,017,491 7,154,224
Current portion of long-term debt............................ 420,780 525,313
------------- -------------
Total current liabilities.................................. 101,677,071 34,138,413
Long-term debt, net of current portion.......................... 118,495,754 117,845,932
Deferred income tax liability................................... 30,438,898 31,382,026
------------- -------------
Total liabilities.......................................... 250,611,723 183,366,371
------------- -------------
Commitments and contingencies
Stockholders' equity:
Common stock, $.001 par value, 100,000,000 shares authorized,
27,269,850 and 26,707,036 shares issued and outstanding...... 27,270 26,707
Additional paid-in capital..................................... 229,031,459 225,967,684
Note receivable from stockholder............................... (887,500) (887,500)
Accumulated deficit............................................ (185,760,129) (142,751,971)
------------- -------------
Total stockholders' equity.................................. 42,411,100 82,354,920
------------- -------------
Total liabilities and stockholders' equity.......... $ 293,022,823 $ 265,721,291
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE>
ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -------------------------------
1999 1998 1999 1998
------------ ----------- ------------ ------------
(as restated) (as restated)
<S> <C> <C> <C> <C>
Service revenue....................................... $ 339,163 $ 205,770 $ 565,125 $ 442,327
------------ ----------- ------------ ------------
Total revenue........................................ 339,163 205,770 565,125 442,327
Costs and expenses:
Technical and network operations..................... 4,315,658 1,573,663 7,855,966 3,184,915
Sales and marketing.................................. 1,452,984 1,380,791 2,918,543 2,892,869
General and administrative........................... 3,446,961 2,802,001 6,092,996 5,200,089
Equipment impairment and other....................... 73,923 6,375,996 213,397
Depreciation and amortization........................ 3,654,076 1,539,953 6,784,060 2,968,921
------------ ----------- ------------ ------------
Total operating costs and expenses................. 12,869,679 7,370,331 30,027,561 14,460,191
Loss from operations.................................. (12,530,516) (7,164,561) (29,462,436) (14,017,864)
Interest and other:
Interest expense..................................... 8,093,850 5,100,148 14,773,515 10,221,849
Financing commitment expense......................... 647,884 1,304,766
Other................................................ (544,695) 406,740 (550,454) 406,740
Interest income...................................... (493,751) (892,788) (920,060) (1,715,208)
------------ ----------- ------------ ------------
Loss before income taxes........................... (20,233,804) (11,778,661) (44,070,203) (22,931,245)
Deferred income tax benefits.......................... 757,031 2,207,090 1,062,045 4,258,879
------------ ----------- ------------ ------------
Net loss............................................. $(19,476,773) $(9,571,571) $(43,008,158) $(18,672,366)
============ =========== ============ ============
Basic and diluted net loss per common share........... $ (0.72) $ (0.39) $ (1.59) $ (0.81)
Weighted average common shares........................ 27,211,300 24,332,349 27,123,747 23,041,744
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
For the six months ended June 30, 1999
<TABLE>
<CAPTION>
Note
Additional Receivable
Common Stock Paid-in from Accumulated
-----------------------
Shares Par Value Capital Stockholder Deficit Total
------------ --------- -------------- ------------ --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 26,707,036 $26,707 $225,967,684 $(887,500) $(142,751,971) $ 82,354,920
Common stock issued in exchange
for certain FCC licenses 154,114 154 847,473 847,627
Value ascribed to warrants issued in
connection with the Working
Capital Facility 1,241,710 1,241,710
Warrants exercised 322,374 323 2,902 3,225
Stock options exercised 82,378 82 515,881 515,963
Stock compensation expense 455,813 455,813
Common stock issued under
employment agreements 3,948 4 (4)
Net loss (43,008,158) (43, 008,158)
---------- ------- ------------ ----------- -------------- -------------
Balance, June 30, 1999 27,269,850 $27,270 $229,031,459 $(887,500) $(185,760,129) $ 42,411,100
========== ======= ============ =========== ============== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------
1999 1998
------------ -------------
(as restated)
<S> <C> <C>
Cash flows from operating activities:
Net loss........................................................ $(43,008,158) $(18,672,366)
Adjustment to reconcile net loss to net cash used in operating
activities:
Gain on sale of FCC licenses................................... (744,049)
Non-cash compensation expense.................................. 455,813 795,214
Non-cash equipment impairment charges.......................... 6,375,996
Depreciation and amortization.................................. 6,783,971 2,968,921
Non-cash interest and financing commitment expense............. 4,658,039 777,209
Deferred income tax benefit.................................... (1,062,045) (4,258,879)
Changes in operating assets and liabilities:
Accrued interest payable..................................... 863,267 (77,672)
Accounts receivable.......................................... (147,591) 5,302
Accrued interest on pledged securities....................... (585,611) (1,308,390)
Accounts payable and accrued liabilities..................... 7,934,045 (2,022,783)
Prepaid expenses and other current assets.................... 596,861 24,229
Other assets................................................. (17,134) 55,665
------------ ------------
Net cash used in operating activities........................ (17,896,596) (21,713,550)
------------ ------------
Cash flows from investing activities:
Capital expenditures for property and equipment................ (2,970,623) (2,760,412)
Proceeds from sale of FCC licenses............................. 6,871,896
Proceeds from sales of property and equipment.................. 548,000
Additions to FCC licenses...................................... (4,310,878) (423,004)
Purchases of short-term investments............................ (5,127,663)
Proceeds from sale of short-term investments................... 20,562,000
Proceeds from maturities of pledged securities................. 9,450,000 9,180,000
Proceeds from restricted cash.................................. 1,000,000
------------ ------------
Net cash provided by investing activities................... 9,588,395 22,430,921
------------ ------------
Cash flows from financing activities:
Book overdraft................................................. (3,055,759)
Proceeds from Bridge Financing................................. 50,000,000
Proceeds from Working Capital Facility......................... 7,500,000
Proceeds from stock option and warrant exercises............... 519,188 111,963
Principal payments of long-term debt........................... (228,924) (1,167,711)
Additions to deferred financing costs.......................... (7,546,077)
------------ ------------
Net cash provided by (used in) financing activities.......... 50,244,187 (4,111,507)
------------ ------------
Net increase (decrease) in cash and cash equivalents............. 41,935,986 (3,394,136)
Cash and cash equivalents, beginning of period................... 11,864,218 7,135,427
------------ ------------
Cash and cash equivalents, end of period......................... $ 53,800,204 $ 3,741,291
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
ADVANCED RADIO TELECOM CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The Company and Basis of Presentation
Advanced Radio Telecom Corp. ("ART" or the "Company") provides wireless
broadband telecommunications services in the 38 GHz band of the radio spectrum.
During the year ended December 31, 1998, ART began offering internet data
services in the Seattle, Washington, Portland, Oregon and Phoenix, Arizona areas
and, as such, revenues to date have been limited.
The unaudited condensed consolidated financial statements included herein
have been prepared by the Company. The financial statements contain all
adjustments, consisting only of normal recurring adjustments which are, in the
opinion of the Company's management, necessary to present fairly the
consolidated financial position of the Company as of June 30, 1999, the
consolidated results of its operations for the six months ended June 30, 1999
and 1998 and its cash flows for the six months ended June 30, 1999 and 1998.
The Company currently estimates that it will require in excess of $1
billion over the next several years to fund capital expenditures, working
capital and operations. In June 1999, the Company entered into a preferred stock
purchase agreement (the "Stock Purchase Agreement") with a group of investors
(the "Investors"). Subject to the terms of the Stock Purchase Agreement, the
Company agreed to sell the Investors preferred stock in exchange for an
aggregate of $251 million (the "Investment"). Closing of the Investment is
subject to the Company obtaining shareholder approval of the Investment and
other matters, as well as other customary conditions. The Company's
shareholders will vote on the Investment at the Company's annual meeting, which
is scheduled to be held on September 8, 1999. The Investors have provided the
Company with $50 million in bridge financing (the "Bridge Financing") through
11% short-term senior notes, which mature on the earliest of the closing of the
Investment, the date the ART shareholders fail to approve the Investment or
October 29, 1999.
The Company and Lucent Technologies Inc. ("Lucent") amended the working
capital facility under which Lucent agreed to provide the Company with $25
million in revolving loans (the "Working Capital Facility") in May 1999 to
provide that loans made pursuant to the Working Capital Facility will be due on
the earlier of the date of the Company's shareholders' final vote on the
Investment or October 29, 1999. During 1998, the Company and Lucent also
entered into a purchase money credit facility (the "Purchase Money Facility"),
which the parties amended in May 1999, setting forth the terms and conditions
under which Lucent has agreed to provide purchase money financing of up to $200
million, to be used to finance the purchase the Company's broadband data network
from Lucent. Lucent has made available $10 million in initial purchase money
loans and the availability of the balance is subject to other conditions,
including the Company's ability to raise at least $50 million of certain debt or
equity capital. The closing of the Investment would make this additional funding
available to the Company. However, there can be no assurance that the
Investment will close or that the funding will become available to the Company.
The consolidated financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates the realization of
assets and liquidation of liabilities in the ordinary course of business. The
Company has limited financial resources, has incurred recurring losses from
operations since inception and does not expect to generate significant operating
revenues in the near term. The Company's ability to continue as a going concern
at least through December 31, 1999, which includes funding of its operations and
business plan, the repayment of the Working Capital Facility and Bridge
Financing, and funding of its contractual commitments, is dependent upon its
ability to consummate the Investment or raise additional financing. There can
be no assurance that the Company will be able to consummate the Investment or
that it will be able to obtain additional financing, or, if available, that it
will be able to obtain such additional financing on acceptable terms. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of this
-6-
<PAGE>
uncertainty.
Certain information and footnote disclosures normally included in financial
statements have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. The year-end condensed consolidated
balance sheet was derived from audited financial statements but does not include
all disclosures required by generally accepted accounting principles. The
unaudited condensed consolidated financial statements should be read in
conjunction with the Company's December 31, 1998, audited consolidated financial
statements and notes thereto contained in the 1998 Form 10-K on file with the
Securities and Exchange Commission.
Restatement of 1998 Comparative Financial Information
The Company has restated its interim financial results for the first,
second and third quarters of fiscal 1998 as a result of a change in Federal
income tax law that was not previously considered, which increased the net
operating loss carryforward period from 15 to 20 years. The effect of the
restatement on the six months ended June 30, 1998 comparative financial
information increased the deferred income tax benefit by approximately $2.5
million and decreased the net loss by approximately $2.5 million. The effect of
the restatement on the three months ended June 30, 1998 comparative financial
information increased the deferred income tax benefit by approximately $743,000
and decreased the net loss by approximately $743,000.
Property and Equipment
As of June 30, 1999, substantially all of the Company's property and
equipment, excluding certain wireless equipment held for disposal, had been
placed in service.
During the first quarter of 1999, the Company recorded a non-cash equipment
impairment charge of approximately $6.4 million to write down the carrying value
of certain equipment that management determined in March 1999 would be disposed
of and not used in its future broadband network buildout. The amount of the
write-down was based on the estimated salvage value.
During the six months ended June 30, 1999, the Company disposed of certain
wireless equipment resulting in cash proceeds of approximately $548,000, which
approximated its carrying value. At June 30, 1999 the carrying value of certain
wireless equipment to be disposed of was approximately $1.5 million.
FCC Licenses
In January 1999, the Company consummated acquisitions of certain 38 GHz
licenses for $4.3 million in cash and certain other licenses for 154,114 shares
of common stock valued at approximately $990,000, including related deferred
taxes and acquisition costs.
In June 1997, a shareholder of Commco CCC exercised an option to purchase
from the Company certain 38 GHz FCC licenses in specified markets, in which the
Company has more than one license and certain wireless transmission equipment.
The sale was consummated in May 1999 with 11 licenses being purchased for
approximately $7 million. The Company recorded a gain of approximately $700,000
related to this sale, which has been included in Other Income/Expense.
-7-
<PAGE>
Working Capital Facility
During the first quarter of 1999, the Company drew the remaining funds
available under the $25 million Working Capital Facility and, in conjunction,
issued warrants to purchase 191,988 shares of the Company's common stock. The
aggregate value ascribed to the warrants was approximately $1,242,000.
During the second quarter of 1999, the Working Capital Facility was amended
to extend the maturity date of loans made pursuant to the Working Capital
Facility to the earlier of October 29, 1999 or the date of the final vote of the
Company's stockholders on the transaction. In addition, the Company has
obtained waivers from Lucent for certain debt covenants related to the Working
Capital Facility and the Purchase Money Facility, which are effective until
October 31, 1999. At June 30, 1999, the Company would have been in violation of
such debt covenants if it had not obtained such waivers. Also during the second
quarter, certain provisions of the Working Capital Facility and the Purchase
Money Facility agreements were amended to facilitate conditions of the Stock
Purchase Agreement.
Purchase Money Facility
At December 31, 1998, the Company had utilized the entire $10 million of
initial purchase money loans made available by Lucent. The amount has been
included in long-term debt.
Convertible Preferred Stock
On June 1, 1999, the Company entered into the Stock Purchase Agreement with
the Investors. Subject to terms of the Stock Purchase Agreement, the Company
has agreed to sell 2,635,908 chares of Series A convertible preferred stock and
501,592 shares of Series B non-voting convertible preferred stock, each at $80
per share, to the Investors in exchange for an aggregate of $251 million. The
Series A shares vote on an as-converted basis with the common stock and
represent approximately 45% of the Company's outstanding common stock.
Consummation of the Investment is subject to shareholder approval, and other
customary closing conditions.
Additionally, in connection with the Investment, the Company issued five
year warrants to the Investors to purchase an aggregate of 1,000,000 shares of
common stock at $.01 per share. The warrants are exercisable only if the Stock
Purchase Agreement is terminated for specified reasons.
In July 1999, the holders of the Company's $135 million Senior Notes
consented to amendment of the Senior Note indenture, which is a condition to the
Investment. Upon closing of the Investment, the Company would be required to
pay consent fees of approximately $4 million. The Company also incurred other
expenses of approximately $500,000.
Supplemental Cash Flow Information:
Supplemental disclosure of cash flow information is summarized below for
the six months ended June 30:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Non-cash financing and investing activities:
Issuance of shares for FCC licenses................ $ 847,627 $48,347,798
Value ascribed to warrants......................... 1,241,710
Additions to property & equipment.................. 128,366
Interest paid........................................ $10,682,536 $ 9,526,224
</TABLE>
-8-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Advanced Radio Telecom Corp. ("ART" or the "Company") provides wireless
broadband telecommunications services in the 38 GHz band of the radio spectrum.
The Company's initial business was selling connectivity to various
telecommunications companies as a wholesale carriers' carrier, which the Company
commenced in the fourth quarter of 1996. Following the establishment of a new
core management team, the Company altered its strategy in the first quarter of
1998 and focused on selling a variety of broadband internet services to end-user
customers and deploying a broadband data network. During the year ended
December 31, 1998, ART began offering internet data services in the Seattle,
Washington, Portland, Oregon and Phoenix, Arizona areas and, as such, revenues
to date have been limited.
Results of Operations
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
Revenue for the six months ended June 30, 1999, was approximately $565,000
compared to approximately $442,000 for the same period in 1998. The Company's
revenue from the first six months of 1999 consisted of approximately $350,000 of
service revenue from its remaining carriers' carrier operations and $215,000 of
fees charged for the Company's internet services in Seattle, Portland and
Phoenix. The Company's revenue from the first six months of 1998 consisted
primarily of revenue from the Company's carrier's carrier operations.
Operating costs and expenses were approximately $30 million for the six
months ended June 30, 1999, compared to approximately $14.5 million in 1998.
In future periods the Company expects increases in cash expenses for network
operations and sales and marketing as the Company implements its business plan.
In the six months ended June 30, 1999, the Company recorded a charge of
approximately $6.4 million to write down the carrying value of certain equipment
that management determined in March 1999 would be disposed of and not used in
the future buildout of the Company's broadband data network. Depreciation and
amortization was approximately $6.8 million for the six months ended June 30,
1999, compared to approximately $3 million in 1998. The increase was primarily
due to increased depreciation resulting from the deployment of network equipment
and the acquisition of certain FCC licenses during 1998. Excluding these non-
cash and non-recurring items, operating costs and expenses for the six months
ended June 30, 1999 were approximately $16.9 million compared to approximately
$11.5 million during the same period in 1998. The increase was primarily due to
the increase in technical and network operating expenses, which were
attributable to the Company's buildout of its broadband data network, a trial
network in San Jose and the commencement of operations in Seattle, Portland, and
Phoenix in the third and fourth quarters of 1998.
Net interest and other expenses were approximately $14.6 million for the
six months ended June 30, 1999 compared to approximately $8.9 million in 1998.
The increase was primarily due to amortization of the value ascribed to warrants
issued in conjunction with borrowings under the financings obtained during 1998,
described below, as well as cash interest due on the increased principal amounts
of these borrowings.
Deferred income tax benefit was approximately $1.1 million for the six
months ending June 30, 1999 compared to approximately $4.3 million for the same
period in 1998 as a result of a change in tax law effective January 1, 1998,
which increased the net operating loss carryforward period from 15 to 20 years.
Three Months Ended June 30, 1999 Compared to Three Months Ended June 30,
1998
Revenue for the three months ended June 30, 1999, was approximately
$339,000 compared to $205,000 for
-9-
<PAGE>
the same period in 1998. The Company's revenue from the three months ended June
30, 1999 consisted of approximately $173,000 of service revenue from its
remaining carriers' carrier operations and $166,000 of fees charged for the
Company's internet services in Seattle, Portland and Phoenix. The Company's
revenue from the three months ended June 30, 1998 consisted primarily of revenue
from the Company's carrier's carrier operations.
Operating costs and expenses were approximately $12.9 million for the three
months ended June 30, 1999, compared to approximately $7.4 million for the same
period in 1998. In future periods the Company expects increases in cash
expenses for network operations and sales and marketing as the Company
implements its business plan. Depreciation and amortization was approximately
$3.7 million for the three months ended June 30, 1999, compared to approximately
$1.5 million in 1998. The increase was primarily due to increased depreciation
resulting from the deployment of network equipment and the acquisition of
certain FCC licenses during 1998. Excluding this non-cash item, operating costs
and expenses for the three months ended June 30, 1999 were approximately $9.2
million compared to approximately $5.8 million during the same period in 1998.
The increase was primarily due to the increase in technical and network
operating expenses, which were attributable to the Company's buildout of its
broadband data network, a trial network in San Jose and the commencement of
operations in Seattle, Portland, and Phoenix in the third and fourth quarters of
1998.
Net interest and other expenses were approximately $7.7 million for the
three months ended June 30, 1999 compared to approximately $4.6 million in 1998.
The increase was primarily due to amortization of the value ascribed to warrants
issued in conjunction with borrowings under the financings obtained during 1998,
described below, as well as cash interest due on the increased principal amounts
of these borrowings.
Deferred income tax benefit was approximately $757,000 for the three months
ending June 30, 1999 compared to approximately $2.2 million for the same period
in 1998 as a result of a change in tax law effective January 1, 1998, which
increased the net operating loss carryforward period from 15 to 20 years.
Liquidity and Capital Resources
Through June 30, 1999, funding for the Company's acquisitions, capital
expenditures and net operating losses has been provided from private placements
of equity and bridge financings in 1994 through 1996, the Company's initial
public offering in November 1996, the Company's public offering of units
consisting of its senior notes and warrants in February 1997, the borrowings
from Lucent Technologies Inc. ("Lucent") and the Bridge Financing described
below. Approximately $51 million of the approximately $130 million net proceeds
from the sale of the units of senior notes and warrants was used to purchase a
portfolio of U.S. Treasury securities that will provide for interest payments on
the senior notes through February 2000. Because the senior notes have
"significant original issue discount" for tax purposes, the Company will not be
able to deduct the interest expense related to the accretion of this original
issue discount for tax purposes.
In June 1999, the Company entered into a preferred stock purchase agreement
(the "Stock Purchase Agreement") with a group of investors (the "Investors").
Subject to the terms of the Stock Purchase Agreement, the Company agreed to sell
the Investors preferred stock in exchange for an aggregate of $251,000,000 (the
"Investment"). Closing of the Investment is subject to the Company obtaining
shareholder approval of the Investment and other matters, as well as other
customary conditions. The Company's shareholders will vote on the Investment at
the Company's annual meeting, which is scheduled to be held on September 8,
1999. The Investors have provided the Company with $50 million in bridge
financing (the "Bridge Financing"), which matures on the earliest of the closing
of the Investment, the date the ART shareholders fail to approve the Investment
and October 29, 1999.
One of the Investors is a subsidiary of Qwest Communications International
Inc. Since execution of the Stock Purchase Agreement, Qwest has agreed to merge
with U S WEST, Inc. with Qwest as the surviving corporation. Upon consummation
of the merger expected by Qwest in mid-2000, Qwest and the Company will be
subject to some restrictions under the federal communications law imposed on
Bell Operating Companies and their affiliates including a prohibition on Qwest
providing long distance services to ART's customers in the U S WEST region. The
Company does not believe that these restrictions will have any material adverse
effect on the Company.
-10-
<PAGE>
During the six months ended June 30, 1999, the Company consummated the
acquisition of certain FCC licenses for approximately $4.3 million in cash, and
other FCC licenses for approximately 154,000 shares of common stock. The
Company may continue to acquire additional licenses in exchange for common stock
or cash.
In June 1997, an option was exercised to acquire from the Company certain
38 GHz licenses in specified markets in which the Company has more than one
license. The sale was consummated in May 1999 with 11 licenses being purchased
for approximately $7 million.
As of June 30, 1999, the Company had drawn the entire $25 million of
unsecured revolving loans available under its credit facility with Lucent (the
"Working Capital Facility"). The Company and Lucent amended the Working Capital
Facility in May 1999 to provide that loans made pursuant to the Working Capital
Facility will be due on the earlier of the date of the Company's shareholders'
final vote on the Investment or October 29, 1999.
The Company has borrowed $10 million in initial purchase money loans (the
"Initial Purchase Money Loans") under its purchase money credit facility with
Lucent (the "Purchase Money Facility") under which Lucent has agreed to provide
an aggregate of up to $200 million in purchase money financing to the Company
for Lucent products and services. No additional amounts are currently
available to the Company under the Purchase Money Facility. Subject to certain
conditions, including the Company's ability to raise at least $50 million of
certain debt or equity capital, Lucent will make available purchase money loans
equal to 200% of the aggregate capital raised, not to exceed $200 million
(including the $10 million Initial Purchase Money Loans). The closing of the
Investment would make this additional funding available to the Company for
Lucent products and services. However, there can be no assurance that the
Investment will close or that the funding contemplated by the Purchase Money
Facility will become available to ART, or if available, will be utilized by the
Company.
In May 1999, the Company and Lucent amended their definitive purchase
agreement under which Lucent agreed to design, engineer and construct the
Company's wireless broadband data network. Under the amended purchase agreement
the Company has no minimum purchase obligations.
In July 1999, the Company, with the consent of the holders of its senior
notes, amended certain covenants of the indenture relating to the senior notes
to provide the Company with greater flexibility to implement its business plan.
Obtaining these consents is a condition to the Investment. The amendments to
the indenture will become operative upon the closing of the Investment. When
the amendments become operative, ART will pay a consent fee of approximately $4
million.
The Company will require significant additional capital to fully fund its
operations and its long-term broadband data network buildout and business plan.
The Company currently estimates that it will require in excess of $1 billion
over the next several years to fund capital expenditures, working capital and
operations. The Company has limited financial resources, has incurred recurring
losses from operations since inception and does not expect to
-11-
<PAGE>
generate significant operating revenues in the near term. The Company's ability
to continue as a going concern at least through December 31, 1999, which
includes funding of its operations and business plan, the repayment of the $25
million Working Capital Facility and the Bridge Financing and funding of its
contractual commitments, is dependent upon receiving shareholder approval for
and closing the Investment or receiving alternative financing. However, there
can be no assurance that the Investment will close or that alternative financing
will be available. These conditions raise substantial doubt about the Company's
ability to continue as a going concern or that such alternative financing can be
obtained.
Inflation
Management does not believe that its business has been affected by
inflation to a significantly different extent than has the general economy.
Year 2000 Disclosure
Many existing computer programs use only two digits, rather than four, to
represent a year. Date-sensitive software or hardware written or developed in
this fashion may not be able to distinguish between 1900 and 2000, and programs
written in this manner that perform arithmetic operations, comparisons or
sorting of date fields may yield incorrect results when processing a Year 2000
date. This Year 2000 problem could potentially cause system failures or
miscalculations that could disrupt operations.
The Company's State of Readiness
The Company has implemented a survey to identify Year 2000 issues in three
areas: (i) financial and information technology systems (ii) non-IT network
equipment and (iii) third-party vendors and suppliers. The Company believes its
financial and information technology systems and its non-IT equipment will be
Year 2000 compliant by the end of 1999.
The Company completed its survey of financial and information technology
systems in the first quarter of 1999. As a result of the survey, the Company
does not believe there are any material noncompliant systems. However, the
Company is conducting detailed verification testing for business critical
systems to confirm the results of its survey. If Year 2000 issues are
discovered, the Company will evaluate and prioritize the problems. The Company
expects to coordinate any Year 2000 problems with the vendors that supplied the
noncompliant systems. The Company expects that any remediation efforts would
continue through the third quarter of 1999 to ensure that technology introduced
in mid-1999 is fully compliant across the network. However, there can be no
assurance that the Company's survey will identify all Year 2000 problems in
these systems or that the necessary corrective actions will be completed in a
timely manner.
The Company has received warranties from its network equipment suppliers
and integrators, that the Company's non-IT network equipment is Year 2000
compliant. In addition, the tests conducted by the Company before accepting
delivery of such network equipment are designed to confirm whether the equipment
is Year 2000 compliant. Based on these warranties and acceptance tests, the
Company does not plan to take further action to ascertain whether its network
equipment is Year 2000 compliant. However, there can be no assurance that this
equipment will be Year 2000 compliant as warranted or that the acceptance tests
will identify all Year 2000 problems. In addition, the Year 2000 warranties
that the Company has received limit the damages that the Company would be able
to recover if such systems were not Year 2000 compliant. The Company is also
reviewing the Year 2000 compatibility of its network management software. If
the Company discovers that this software is not Year 2000 compliant, it expects
to coordinate its remediation efforts with the software provider to remediate
the system. The Company expects that these remediation efforts, if any, will
continue through third quarter of 1999 to ensure that network management
software introduced in mid-1999 is fully compliant.
-12-
<PAGE>
The Company is also assessing its vulnerability to the Year 2000 problems
of third-party service suppliers and is communicating with suppliers regarding
the problem. The Company relies on third-party suppliers to deliver fiber
telecommunications links, internet access, network equipment, banking services
and payroll services. The Company also intends to develop new relationships
with several providers of fiber-optic telecommunications service, internet
service providers, telecommunications resellers and other companies in the
telecommunications industry. The Company intends to continuously identify and
prioritize critical suppliers and communicate with them about their plans and
progress in addressing the Year 2000 problem.
The Company's Year 2000 Risk
Based on the efforts described above, the Company currently believes that
its systems will be Year 2000 compliant in a timely manner. The Company
completed its survey of financial and information technology systems and non-IT
systems in the first quarter of 1999 and expects to complete any remediation
efforts by the end of the third quarter 1999. However, there can be no
assurance that all Year 2000 problems will be successfully identified, or that
the necessary corrective actions will be completed in a timely manner. Failure
to successfully identify and remediate such Year 2000 problems in a timely
manner could have a material adverse effect on the Company's results of
operations, financial position or cash flow.
In addition, the Company believes that there is a risk relating to
significant service suppliers' failure to remediate their Year 2000 issues in a
timely manner. Although the Company is communicating with its suppliers
regarding the Year 2000 problem, the Company does not know whether these
suppliers' systems will be Year 2000 compliant in a timely manner. Like most
telecommunications providers, the Company's ability to provide service is
dependent on key suppliers and equipment vendors. If one or more significant
suppliers are not Year 2000 compliant, this could have a material adverse effect
on the Company's results of operations, financial position or cash flow.
The Company's Contingency Plans
The Company has not created a formal contingency plan for Year 2000
problems. The Company intends to take appropriate actions to mitigate the
effects of third parties' failures to remediate their Year 2000 issues and for
unexpected failures in its own systems. Such actions may include having
arrangements for alternate suppliers and using manual intervention where
necessary. If it becomes necessary for the Company to take these corrective
actions, it is uncertain whether this would result in significant interruptions
in service or delays in business operations or whether it would have a material
adverse effect on the Company's results of operations, financial position or
cash flow.
Costs of Year 2000 Remediation
As of June 30, 1999, the Company has not incurred material costs related to
the Year 2000 problem, and does not expect to in the future. The Company has
not deferred other information technology projects due to Year 2000 expenses,
and does not expect to defer such projects in the future. However, there can be
no assurance that the costs associated with the Year 2000 problem will not be
greater than anticipated.
Readers are cautioned that forward-looking statements contained in the Year
2000 Disclosure should be read in conjunction with the Company's disclosures
under the heading: "Cautionary Statement" below.
-13-
<PAGE>
Cautionary Statement
This quarterly report includes "forward-looking" information, as that term
is defined in the Private Securities Litigation Reform Act of 1995 or by the
Securities and Exchange Commission in its rules, regulations and releases,
regarding the Company's financial and business prospects, the deployment of the
Company's network and the future impact of regulatory restrictions. The Company
cautions investors that any such statements made by the Company are not
guarantees of future performance and that known and unknown risks, uncertainties
and other factors may cause actual results to differ materially from those in
the forward-looking statements. These risks include, without limitation, failure
to consummate the Investment, ability to achieve the benefits contemplated by
the Investment and the commercial agreements, effect of the Qwest-U S WEST
merger, and capital requirements and other financial risks, customer demand,
technological risks, the ability to meet financing conditions, management of
growth, ability to achieve Year 2000 compliance, competition and government
regulation, as described in Exhibit 99 to the Company's Report on Form 10-K for
the year ended December 31, 1998. The Company does not undertake to update or
revise its forward-looking statements publicly even if experience or future
changes make it clear that any projected results expressed or implied herein
will not be realized.
PART II -- OTHER INFORMATION
Item 4. Submissions of Matters to a Vote of Securityholders.
No matters were submitted for a vote of the stockholders in the
quarter ending June 30, 1999.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.1 Broadband Services Agreement dated June 1, 1999 between the
Company and Qwest.*
10.2 Private Line Services Agreement dated June 1, 1999 between
the Company and Qwest.*
27 Financial Data Schedule.
* Confidential treatment requested for certain portions. The
terms "confidential treatment" and the mark "*" as used
throughout this exhibit means that the material has been
omitted and separately filed with the Commission.
(b) Reports on Form 8-K:
The Company filed a current report on Form 8-K on June 8, 1999
reporting the execution of the Stock Purchase Agreement dated June 1, 1999
between the Company and the Investors.
-14-
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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 on this 16th day of
August, 1999.
ADVANCED RADIO TELECOM CORP.
By: /s/ R. S. McCambridge
--------------------------------
R. S. McCambridge
Executive Vice President
and Chief Financial Officer
(Duly Authorized Officer and
Principal Financial and Accounting Officer)
-15-
<PAGE>
EXHIBIT INDEX
Exhibit
Index Title
- ------- -----
10.1 Broadband Services Agreement dated June 1, 1999 between the Company
and Qwest.*
10.2 Private Line Services Agreement dated June 1, 1999 between the Company
and Qwest.*
27 Financial Data Schedule
* Confidential treatment requested for certain portions. The terms
"confidential treatment" and the mark "*" as used throughout this
exhibit means that the material has been omitted and separately filed
with the Commission.
<PAGE>
EXHIBIT 10.1
ADVANCED RADIO TELECOM
BROADBAND SERVICES AGREEMENT
This Broadband Services Agreement, is entered into as of June 1, 1999 (the
"Effective Date"), by and between Advanced Radio Telecom Corp., a Delaware
corporation ("ART"), and Qwest Communications Corporation, a Delaware
corporation ("Customer").
1. INCORPORATION OF DOCUMENTS AND CONTROLLING PROVISIONS
-----------------------------------------------------
1.1 This Broadband Services Agreement, together with (a) Service Orders (as
defined in Section 2.1 of this Service Agreement) accepted by ART pursuant
to the terms hereof, and (b) schedules and exhibits incorporated herein by
reference ("Exhibits"), shall be referred to collectively herein as this
"Agreement." In the event of any conflict between the provisions of this
Agreement and the terms of any Service Order(s) and/or Exhibit(s), the
conflict shall be resolved by reference to said documents in the following
order of priority of interpretation: (a) this Agreement; (b) any
Exhibit(s), with reference to the same in order of attachment to this
Agreement; and (c) any Service Order(s). Notwithstanding the foregoing, no
provision or term of any Service Order shall be a part of this Agreement or
binding on ART unless and until such Service Order has been executed by an
authorized representative of ART.
1.2 If any provision of this Agreement and any applicable tariff cannot be
reasonably construed or interpreted to avoid conflict, the provision
contained in this Agreement shall prevail. The fact that a condition,
right, obligation, or other term appears in this Agreement but not in any
such tariff shall not be interpreted as, or be deemed grounds for finding
of a conflict for purposes of this Section 1.2. In addition, if any
provision of this Agreement conflicts with any statute, rule or order of
any governmental unit or regulatory body, then, if required by law, this
Agreement should remain in effect but shall be automatically modified by
such conflicting law, statute, rule or order, subject to the termination
rights granted under Section 8.
2. SERVICES TO BE PROVIDED BY ART
------------------------------
2.1 Telecommunications capacity, and related ancillary services (the "Facility"
or "Facilities") available from ART are identified in the Service and
Pricing Exhibit attached hereto as "Exhibit A", which is incorporated by
this reference (the "Service and
1
<PAGE>
Pricing Exhibit"). Facilities requested by Customer shall be requested on
ART's service order forms in effect from time to time (hereafter, any such
order is a "Service Order(s)"). Each Service Order shall reference this
Agreement and shall become a part of this Agreement when executed by a duly
authorized representative of ART. ART reserves the right to reject any
Service Order in areas where facilities or capacity are unavailable or the
provision of service would be otherwise technically unreasonable.
2.2 Upon acceptance by ART of a duly executed Service Order during the Term (as
defined in Section 4.3 of this Agreement) of this Agreement, ART shall
provide to Customer those Facilities identified in the Service Order.
3. OBLIGATIONS OF CUSTOMER
-----------------------
3.1 Customer shall perform those duties outlined in the Service and Pricing
Exhibit in addition to those described herein and in any Service Order(s).
3.2 Customer shall have sole responsibility for installation, testing and
operation of the Interconnection Facilities (as defined in Section 1.4 of
the Service and Pricing Exhibit), and any services and equipment other than
those Facilities specifically provided by ART under this Agreement.
4. TERM
----
4.1 This Agreement shall be effective between the parties as of the Effective
Date. The initial term (the "Initial Term") of this Agreement shall expire
seven (7) years from the Effective Date unless either party earlier
terminates this Agreement in accordance with Section 8.
4.2 Upon the expiration of the Initial Term, if Customer is not then in default
hereunder, the term of this Agreement shall be renewed automatically on a
month-to-month basis (hereafter, the "Renewal Term") unless and until an
Amendment is executed by both parties extending the Renewal Term, or either
party terminates this Agreement in accordance with Section 8.
4.3 The Initial Term and Renewal Term are sometimes referred to together herein
as the "Term."
4.4 Notwithstanding anything to the contrary in this Section 4, if the Facility
Minimum Service Term (as set forth in the Service and Pricing Exhibit or
any Service Order) for a Facility or Facilities extends beyond the
expiration of the Term of this Agreement, then this Agreement shall
continue in effect until the expiration or termination of the
2
<PAGE>
applicable Facility Minimum Service Term, but only as to the Facility or
Facilities so affected, and subject to the termination rights of ART and
Customer under Section 8 of this Agreement.
5. CHARGES AND PAYMENT
-------------------
5.1 Charges for the Facilities shall be determined according to the Service and
Pricing Exhibit except as otherwise specifically provided in this
Agreement.
5.2 Recurring charges shall be invoiced by ART on a monthly basis in advance
and non-recurring charges shall be invoiced in arrears. If the Start of
Service Date (as defined in Section 2.1 of the Service and Pricing Exhibit)
for any Facility falls on other than the first day of any month, the first
invoice to Customer shall consist of: (1) the pro-rata portion of the
applicable monthly charge covering the period from the Start of Service
Date to the first day of the subsequent month, and (2) the monthly charge
for the following month. ART may, in its sole discretion, prior to
delivering the first invoice to Customer, elect to require that Customer
make a security deposit amount equal to one (1) month's recurring charges
for the Facility or Facilities. If a deposit is made, it shall be held by
ART until termination of this Agreement, at which time ART may apply the
deposit, at its option, either against the last month of charges due
hereunder prior to termination of this Agreement, or against any other
amounts owing to ART under this Agreement.
5.3 Customer shall make all payments due hereunder within thirty (30) days
after the date of ART's invoice. If any amount due under this Agreement is
not received by the due date, in addition to its other remedies available
hereunder, ART may in its sole discretion impose a late payment charge of
the lower of 1.5% per month or the highest rate legally permissable (such
late charge shall be payable upon demand by ART). ART agrees that Customer
may offset against all amounts payable by Customer to ART under this
Agreement, all past due amounts payable to Customer by ART pursuant to any
other agreement between Customer and ART.
5.4 All disputes or requests for billing adjustments must be submitted in
writing and submitted with payment of undisputed amounts due, or
alternatively, if Customer has paid an invoice amount in full, Customer
shall have one hundred eighty (180) days from the date of invoice to give
notice of a dispute regarding amounts invoiced therein. Any amounts which
are determined by ART to be in error or not in compliance with this
Agreement shall be adjusted on the next month's invoice. Any disputed
amounts which reasonably, in good faith and supported by reasonable
documentation are deemed by ART to be correct as billed and in compliance
with this Agreement, shall be due and payable
3
<PAGE>
by Customer (if not previously paid), upon notification and demand by ART,
along with any late payment charges which ART may impose pursuant to
Section 5.3 above. Disputes shall not be cause for Customer to delay
payment of the undisputed balance to ART according to the terms outlined in
Section 5.3 above. Subject to the payment obligations described in this
Section 5, Customer may pursue arbitration of any dispute not resolved
hereunder pursuant to Section 16.
5.5 Invoices submitted to Customer by ART shall conform to ART's standard
billing format and content, as modified by ART from time to time.
5.6 Any applicable federal, state, or local taxes, and all use, sales,
commercial, gross receipts, privilege or other similar taxes or license
fees, whether charged to or against ART or Customer, with respect to the
Facilities provided by ART (except taxes on ART's income or gains), as well
as any other imposition by any governmental authority which has the effect
of increasing ART's cost of providing the Facilities, shall be payable by
Customer in addition to the other charges set forth in this Agreement.
6. EVENTS OF DEFAULT
-----------------
6.1 A "Default" shall occur if: (a) Customer fails to make any payment
required to be made by it under this Agreement and any such failure remains
uncorrected for five (5) business days after receipt of written notice that
such payment is past due; (b) either party fails to perform or observe any
material term or obligation (other than making payment) contained in this
Agreement, and any such failure remains uncorrected for thirty (30)
calendar days after written notice from the non-defaulting party informing
the defaulting party of such failure; or (c) there is an Adverse Material
Change (as defined in Section 6.2 of this Agreement) in Customer's
creditworthiness.
6.2 For purposes of Section 6.1 of this Agreement, an Adverse Material Change
in Customer's creditworthiness shall include, but not be limited to: (a)
failure of Customer to make full payment of charges due hereunder on or
before the date due on three (3) or more occasions during any period of
twelve (12) months, or Customer's failure to make such payment on or before
the date due in any two (2) consecutive months; (b) acquisition of Customer
(whether in whole or by majority or controlling interest) by an entity
which is insolvent, which is subject to bankruptcy or insolvency
proceedings, or which presents a materially greater credit risk than
Customer; or (c) Customer being subject to or having filed for bankruptcy
or insolvency proceedings, or the legal insolvency of Customer.
6.3 Notwithstanding Section 6.1 of this Agreement, the failure of any
particular circuit or number of circuits to comply with the Specifications
(as described in the Service and
4
<PAGE>
Pricing Exhibit) shall not be deemed a Default by ART, but may obligate ART
to provide Customer with Outage Credits, as provided in Section 5 of the
Service and Pricing Exhibit.
7. REMEDIES FOLLOWING DEFAULT
--------------------------
7.1 If Customer is in Default, ART may, in addition to any other remedies it
has under this Agreement or under the law: (a) suspend its performance
under this Agreement without the requirement of any further notice to
Customer, until Customer has remedied all breaches of this Agreement and
paid in full all charges then due, including any late fees specified herein
plus; (b) condition provision of Facilities or acceptance of a Service
Order on Customer's assurance of payment and compliance with this
Agreement, which may be in the form of a deposit/prepayment or such other
means as is required by ART to establish assurance of payment and
compliance; or (c) terminate this Agreement by providing written notice to
Customer in the manner provided in Section 8.2 of this Agreement.
7.2 If ART is in Default, Customer may terminate this Agreement in the manner
provided for in Section 8.1 of this Agreement, but may not withhold or
suspend its own performance.
8. TERMINATION
-----------
8.1 Customer may terminate this Agreement without liability (other than charges
accrued but unpaid as of the termination date): (a) effective upon written
notice to ART, if ART is in Default; (b) effective upon thirty (30)
calendar days prior written notice, if any material rate or term contained
herein and relevant to all or substantially all of the affected Facilities
is materially changed by order of the highest court of competent
jurisdiction to which the matter is appealed, the Federal Communications
Commission, or other local, state or federal government authority; (c)
following a Default by ART under Section 9.2 of this Agreement affecting
all or substantially all of the Facilities; (d) if ART makes an
unauthorized transfer under Section 12 of this Agreement; or (e) effective
upon thirty (30) calendar days prior written notice, with or without cause,
following the expiration of the Initial Term.
8.2 ART may terminate this Agreement: (a) effective upon written notice to
Customer, if Customer is in Default; (b) effective upon thirty (30) days
prior written notice, with or without cause, following the expiration of
the Initial Term; or (c) effective immediately and without any advance
written notice: (i) if ART loses any required regulatory or other
governmental authorizations to provide all or substantially all of the
Facilities (as described in Section 9.1 of this Agreement); (ii) following
a default by Customer under
5
<PAGE>
Section 9.2 of this Agreement affecting all or substantially all of the
Facilities; or (iii) if Customer makes an unauthorized Transfer under
Section 12 of this Agreement.
8.3 In the event of any termination pursuant to Section 8.1 hereof as a result
of ART's breach of its obligations under this Agreement, ART agrees to
cooperate with Customer, on a commercially reasonable efforts basis, to
transition existing services and Facilities used by Customer to serve end
users to another network operator; except, that ART shall be obligated to
assist this transition only if Customer is and remains in compliance with
its payment obligations to ART under this Agreement. ART's obligation to
assist under this Section 8.3 shall not include payments to Customer or any
third party in connection with such transition.
9. GOVERNMENTAL AUTHORITY
----------------------
9.1 Customer acknowledges that the obligation of ART to provide the Facilities
to Customer is subject to the receipt by ART of any required regulatory or
other governmental authorizations. ART reserves the right to terminate
this Agreement pursuant to Section 8.2 of this Agreement if at any time ART
loses the required regulatory or other governmental authorizations to
provide the Facilities (a "Regulatory Change"). To the extent required by
law, this Agreement may be superseded and/or supplemented by a tariff filed
with the appropriate regulatory agency, which tariff may contain such
modifications of the provisions of this Agreement as ART deems appropriate,
all of which shall become automatically binding on Customer. Such a tariff
shall be filed only if required by applicable law, and, in such event,
Customer shall be entitled to terminate this Agreement immediately as to
the affected Service Order(s) in the event a material term of this
Agreement is superseded by said tariff filing.
9.2 Each party represents and warrants that: (a) it has received all necessary
permits, licenses, approvals, grants, and charters of whatsoever kind
necessary to carry out the business in which it is engaged hereunder; and
(b) it has complied and is in material compliance with all laws,
regulations, orders, and statutes which may be applicable to it, whether
local, State or Federal. From the date of this Agreement until the
termination hereof, each party agrees to operate in accordance with and to
maintain current all such certifications, permits, licenses, approvals,
grants, charters, and to materially comply with all applicable laws,
regulations, orders and statutes, whether local, State or Federal. A
failure to cure a breach by either party of any of the representations,
warranties or covenants of this Section 9.2 within thirty (30) calendar
days of receipt of written notice from the other party shall be deemed a
Default hereunder, and shall allow the other party to terminate the
affected portion of the Facilities, or in the case of all or substantially
all of the Facilities being affected, this Agreement in the manner
described in Section 8 of this Agreement. A Regulatory Change not within
ART's reasonable control shall not
6
<PAGE>
constitute a default under this Section 9.2. In addition, ART reserves the
right to suspend its performance under this Agreement, during the pendency
of Customer's cure efforts.
10. FORCE MAJEURE
-------------
10.1 Except as is provided in Section 10.2 below, ART shall not be liable for
any failure of performance hereunder due to causes beyond its reasonable
control, including, but not limited to: acts of God, fire, explosion,
vandalism, fiber optic cable cut, storm, extreme temperatures or other
similar catastrophes; any law, order, regulation, direction, action or
request of the United States government, or of any other government,
including state and local governments having jurisdiction over either of
the parties, 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; national emergencies, insurrections,
riots, wars, or strikes, lock-outs, work stoppages or other labor
difficulties; actions or inactions of a third party provider or operator of
facilities employed in provision of the Facilities; or any other conditions
or circumstances beyond the reasonable control of ART which impede or
affect the Facilities or the transmission of telecommunications services.
10.2 If any failure of performance on the part of ART described in Section 10.1
of this Agreement shall be: (a) for thirty (30) calendar days or less,
then this Agreement shall remain in effect, but Customer shall be relieved
of its obligation to pay for that portion of the Facilities affected for
the period of such failure of performance; or (b) for more than thirty (30)
days, then Customer may terminate without liability (other than charges
accrued but unpaid applicable to the terminated Service Order(s)) only that
portion of any Service Order or Service Orders related to the Facilities so
affected, upon ten (10) calendar days prior written notice to ART following
the failure of performance.
10.3 If the Facilities are unavailable to Customer as a result of any events
described in Section 10.1, Customer will be entitled to an Outage Credit as
specified in the Service and Pricing Exhibit.
11. YEAR 2000
---------
ART shall use commercially reasonable efforts to ensure that its internal
operating and network systems are designed to operate during calendar year
2000 A.D. without material error or interruption relating to date data
(including, without limitation, date data which represents or references
different centuries or more than one century or leap year) in any level of
the systems assuming, in each case, that all systems and products used in
combination with them properly exchange data (hereinafter referred to as
"Year 2000
7
<PAGE>
Compliant"). If ART's system causes an outage due to the system's failure
to be Year 2000 Compliant, ("Year 2000 Outage") Customer shall receive
outage credits in accordance with the terms of the Service and Pricing
Exhibit. If the Year 2000 Outage continues for thirty (30) days, Customer
may (a) terminate this Agreement provided that such Year 2000 Outage
affects all or substantially all Facilities provided by ART under this
Agreement; or (b) terminate any affected Service Order(s). Termination
under this Section 11 shall be effected without liability for early
termination charges or shortfall charges, and such termination shall be
Customer's sole and exclusive remedy.
12. ASSIGNMENT
----------
Neither party may sell, assign, sublet, encumber or transfer this Agreement
or any of its rights or obligations hereunder, except to a direct or
indirect wholly owned subsidiary of such party, by operation of law or
otherwise (hereafter, a "Transfer"), without the prior written consent of
other party hereto, which consent shall not be unreasonably withheld. Any
Transfer by either party without the other party's prior written consent
shall entitle the non-transferring party, at its option, to: (a) consider
the Transfer void; (b) consent to the Transfer, and hold the transferring
party and any transferee(s) liable hereunder; or (c) terminate this
Agreement upon delivering written notice to the transferring party.
Subject to the foregoing, this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors or
assigns.
13. TITLE
-----
Customer expressly disclaims any right, title, perpetual right of use or
any other interest in or to any equipment or property provisioned or
supplied by ART under this Agreement.
14. WARRANTIES AND LIMITATION OF LIABILITY
--------------------------------------
14.1 ART warrants that the Facilities shall be provided to Customer and shall
operate in accordance with the then current prevailing telecommunications
industry and data communication standards (hereinafter the "Technical
Standards"). If ART determines that the Facilities are not being provided
in accordance with the Technical Standards (hereinafter, a "Defect" or
"Defects"), ART shall use reasonable efforts to conform the Facilities to
the Technical Standards.
14.2 THE WARRANTIES CONTAINED IN SECTION 14.1 OF THIS AGREEMENT ARE EXCLUSIVE
AND IN LIEU OF ALL OTHER WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY,
INCLUDING WITHOUT LIMITATION IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE. ART HEREBY SPECIFICALLY DISCLAIMS ANY
LIABILITY TO
8
<PAGE>
CUSTOMER FOR INTERRUPTIONS AFFECTING THE FACILITIES FURNISHED HEREUNDER
WHICH ARE ATTRIBUTABLE TO CUSTOMER'S INTERCONNECTION FACILITIES (AS DEFINED
IN SECTION 1.4 OF THE SERVICE AND PRICING EXHIBIT) OR TO CUSTOMER'S
EQUIPMENT FAILURES, OR TO CUSTOMER'S BREACH OF THIS AGREEMENT.
14.3 IN NO EVENT SHALL ART OR ANY OF ITS AFFILIATES BE LIABLE TO CUSTOMER OR ANY
OF ITS AFFILIATES OR EMPLOYEES OR TO ANY THIRD PARTY FOR: (a) ANY LOSS OF
PROFIT OR REVENUE, OR FOR ANY INDIRECT, CONSEQUENTIAL, INCIDENTAL, PUNITIVE
OR SIMILAR OR ADDITIONAL DAMAGES, WHETHER INCURRED OR SUFFERED AS A RESULT
OF UNAVAILABILITY OF FACILITIES, PERFORMANCE, NON-PERFORMANCE, TERMINATION,
BREACH, OR OTHER ACTION OR INACTION UNDER THIS AGREEMENT, OR FOR ANY OTHER
REASON, EVEN IF CUSTOMER ADVISES ART OF THE POSSIBILITY OF SUCH LOSS OR
DAMAGE; OR (b) FOR ANY OUTAGE OR INCORRECT OR DEFECTIVE TRANSMISSIONS, OR
ANY DIRECT OR INDIRECT CONSEQUENCES THEREOF, EXCEPT AS SPECIFICALLY
PROVIDED IN THE TERMS OF THE SERVICE AND PRICING EXHIBIT REGARDING OUTAGE
CREDITS.
14.4 NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY: (a) CUSTOMER
AGREES THAT ITS SOLE REMEDY IN THE EVENT OF ANY BREACH OF THE WARRANTIES
DESCRIBED IN SECTION 14.1 OF THIS AGREEMENT SHALL BE THE OUTAGE CREDITS
DESCRIBED IN THE SERVICE AND PRICING EXHIBIT; AND, (b) IN NO EVENT SHALL
THE CUMULATIVE LIABILITY OF ART UNDER THIS AGREEMENT, INCLUDING ANY OUTAGE
CREDITS, EXCEED THE TOTAL PAYMENTS PAID BY CUSTOMER TO ART HEREUNDER.
15. NON-DISCLOSURE AND PUBLICITY
----------------------------
15.1 The parties agree that this Agreement is and shall be kept confidential.
Neither party shall divulge or otherwise disclose any of the provisions of
this Agreement to any third party without the prior written consent of the
other party, except that either party may make disclosure to those required
for the implementation of this Agreement, and to purchasers and prospective
purchasers of their respective companies, auditors, attorneys, financial
advisors, lenders and prospective lenders, investors and prospective
investors, provided that in each case the recipient agrees in writing to be
bound by the confidentiality provisions set forth in this section. In
addition, either party may make disclosure as required by a court order or
as otherwise required by law, securities exchange or SEC rules or
regulations, or in any legal or arbitration proceeding relating to
9
<PAGE>
this Agreement. If either party is required by law or by interrogatories,
requests for information or documents, subpoena, civil investigative demand
or similar process to disclose the provisions of this Agreement, it will
provide the other party with prompt prior notice of such request or
requirement so that such party may seek an appropriate protective order
and/or waive compliance with this Section. The party whose consent to
disclose information is requested shall respond to such request, in
writing, within five (5) business days of the request by either authorizing
the disclosure or advising the other party of its election to seek a
protective order, or if such party fails to respond within the prescribed
period the disclosure shall be deemed approved.
15.2 Each party shall submit to the other party all news releases, advertising
and other publicity material related to this Agreement wherein the second
party's name is mentioned or language is used from which a connection to
such second party's name therein may, in such second party's judgment, be
inferred or implied. Neither party shall publish or use such material or
use the other party's name, without the prior written consent of such
second party.
16. ARBITRATION
-----------
16.1 All disputes which involve amounts reasonably anticipated to be in excess
of Twenty-Five Thousand Dollars ($25,000.00) arising out of or related to
this Agreement, shall be determined and resolved by arbitration in San
Francisco, California in accordance with the rules of the American
Arbitration Association ("AAA"). The arbitrators shall be appointed in
accordance with the rules then prevailing of the AAA.
16.2 The award rendered by the arbitrator(s) shall be final and binding upon the
parties hereto. Neither party shall have the right to further appeal or
redress the matters arbitrated except for the purposes of obtaining the
judgment rendered by the arbitrator(s). Judgment upon any arbitration
award may be entered and enforced in any court of competent jurisdiction.
16.3 The parties hereto agree that a prevailing party shall be entitled to
recover all reasonable costs and expenses (including all reasonable
attorneys' fees and disbursements) of such arbitration proceeding. Such
prevailing party shall also be entitled to reasonable attorneys' fees and
costs incurred in enforcing a judgment of the arbitrators separately from
and in addition to any other amount included in such judgment. This
Section 16.3 shall be severable from the other provisions of this Agreement
and shall survive and not be merged into any such judgment.
17. USE OF FACILITIES
-----------------
10
<PAGE>
17.1 ART's obligation to provide the Facilities specified herein is conditioned
upon Customer not allowing the Facilities to be used for any unlawful
purpose; or in violation of any governmental regulations or authorizations
as outlined in Section 9 of this Agreement.
17.2 ART will indemnify, defend and hold Customer harmless from and against any
and all costs, liabilities, losses and expenses (including, without
limitation, reasonable attorneys' fees) resulting from any claim, suit,
action or proceeding (collectively, an "Action") brought against Customer
alleging that customary use of the services or Facilities by Customer or
Customer's end users infringes or contributes to the infringement of any
issued United States patent or letters patent. Customer shall promptly
notify ART of any Action, and ART shall have the right to control any such
Action and shall have the right to conclude a settlement of any such Action
which shall be binding upon Customer. ART shall have the right, in order
to avoid or settle any Action, to substitute at ART's expense non-
infringing equipment, material, processes or products, or to modify its
products or the equipment to become non-infringing, or to obtain necessary
licenses to use the infringing equipment, material, processes or products,
in each case consistent with ART's obligations under this Agreement. ART
shall not be liable for infringement claims based upon or resulting from
use, operation or combination of the services or Facilities with other
services or facilities not provided by ART, if this infringement would have
been avoided but for this use, operation or combination, unless this use,
operation or combination is integral to the functionality of the services
or Facilities provided by ART under this Agreement.
18. CHANGES TO SERVICES OR FACILITIES
---------------------------------
Although Facilities provided by ART hereunder are subject to its business
policies, practices, and procedures (which ART reserves the right to change
at any time and from time to time in its sole discretion upon advance
notice to Customer), ART will not materially adversely change the
Facilities provided to Customer hereunder except upon ninety (90) days
prior written notice to Customer (a "Notice of Change"). Upon delivery of
notice of a material adverse change to Facility, Customer shall promptly
notify ART of the end users that will be affected by such change (the
"Affected End Users") and the then existing remaining duration of each such
Affected End User's contract with Customer (excluding elective extensions)
relating to the Facilities subject to such changes (the "Affected
Duration"). ART shall have the option to either continue to provide the
existing Facility to the Affected End Users until the earlier of the
Affected Duration or one hundred eighty (180) days from the Notice of
Change or to upgrade or enhance the Facility to an Affected End User for
the Affected Duration of such Affected Users' existing contract with
Customer at ART's sole cost. Upon receipt of any Notice of Change,
Customer shall not thereafter market or submit orders for any Facilities
that are
11
<PAGE>
materially adversely changed by ART except as specified in the Notice of
Change. Except as set forth herein, if Customer otherwise elects to
continue to use Facilities after receiving a Notice of Change, those
changes will apply to Affected End Users commencing on the 91/st/ day after
the date it receives the Notice of Change. ART shall exercise commercially
reasonable efforts to avoid service degradation, interruption or material
cost to any Affected End Users as a result of such material adverse changes
in Facilities for a period of ninety (90) days after notice to Customer of
such Facility changes.
19. PROGRAM MANAGEMENT
------------------
ART shall designate an ART employee as the principal point of contact for
Customer and who shall be dedicated to and responsible for coordinating all
matters between ART and Customer in connection with the transactions
contemplated in this Agreement (the "Program Manager"). All complaints
that Customer may have with respect to the Facilities provided by ART
hereunder shall be reported to the Program Manager in the first instance
and the Program Manager will coordinate the review of, and the
implementation of necessary steps to address any such complaints within ART
promptly after they are reported by Customer. The parties shall use good
faith efforts to agree upon written escalation procedures
20. MISCELLANEOUS
-------------
20.1 Neither this Agreement, nor the provision of Facilities hereunder, shall
create a partnership or joint venture between the parties or result in a
joint communications service offering to any third parties.
20.2 The failure of either party to give notice of default or to enforce or
insist upon compliance with any of the terms or conditions of this
Agreement shall not constitute a waiver of any term or condition of this
Agreement.
20.3 Subject to Section 16 of this Agreement, in the event suit is brought or an
attorney is retained by either party to enforce the terms of this Agreement
or to collect any moneys due hereunder or to collect money damages for
breach hereof, the prevailing party shall be entitled to recover, in
addition to any other remedy, reimbursement for reasonable attorneys' fees,
court costs, costs of investigation and other related expenses incurred in
connection therewith.
20.4 This Agreement shall be construed under the laws of the State of New York
without regard to choice of law principles.
12
<PAGE>
20.5 No subsequent agreement concerning the Facilities or modification to this
Agreement shall be binding upon the parties unless it is made in writing by
an authorized representative of ART and an authorized representative of
Customer.
20.6 If any part of any provision of this Agreement shall be invalid or
unenforceable under applicable law, said part shall be ineffective to the
extent of such invalidity only, without in any way affecting the remaining
parts of said provision or the remaining provisions of this Agreement, and
the Customer and ART agree to negotiate with respect to any such invalid or
unenforceable part to the extent necessary to render such part valid and
enforceable.
20.7 The terms and provisions contained in this Agreement that by their sense
and context are intended to survive the performance thereof by the parties
hereto shall survive the completion of performance and termination of this
Agreement, including, without limitation, the making of any and all
payments due hereunder.
20.8 Words having well-known technical or trade meanings shall be so construed.
20.9 All notices, requests, demands and other communications required or
permitted hereunder shall be in writing and shall be given by: (a) hand
delivery; (b) first-class registered or certified mail with postage
prepaid; (c) overnight receipted courier service; or (d) telephonically
confirmed facsimile transmission, which notice is addressed to the party at
the address set forth below, or such other address as may hereafter be
designated in writing by the party. Notices given in accordance with this
Section shall be effective upon receipt or when receipt is refused.
13
<PAGE>
All notices to ART shall be addressed to:
Advanced Radio Telecom Corp.
500 - 108/th/ Ave NE, Suite 2600
Bellevue, WA 98004
Facsimile (425) 990-1642; Phone (425) 688-8700
Attn.: General Counsel
With an additional copy to:
ART
500 - 108/th/ Ave NE, Suite 2600
Bellevue, WA 98004
Facsimile (425) 990-1642; Phone (425) 688-8700
Attn.: President
All notices to Customer shall be addressed to:
Qwest Communications Corporation
555 17/th/ Street, Suite 100
Denver, Colorado, 80202
Facsimile (303) 992-1724; Phone (303) 992-1400
Attn: Carrier Contracts Administration
With an additional copy to:
Qwest Communications Corporation
555 17th Street, Suite 1000
Denver, Colorado 80202
Facsimile (303) 992-1044 Phone: (303) 992-1440
Attn.: Drake Tempest, Executive Vice President and General
Counsel
The addresses set forth may be changed by appropriate notice to the
other party.
20.10 [*
_________________
* This confidential portion has been omitted and filed separately with the
Commission.
14
<PAGE>
]
20.11 [*
]
20.12 This Agreement comprises the complete and exclusive statement of the
agreement of the parties concerning the subject matter hereof, and
supersedes all previous statements, representations, and agreements
concerning the subject matter hereof.
___________________
* This confidential portion has been omitted and filed separately with the
Commission.
15
<PAGE>
DATED as of the first date above written.
Advanced Radio Telecom Corp.
By: /s/ Henry C. Hirsch
----------------------------------
Name: Henry C. Hirsch
Title: Chairman and CEO
Date: June 1, 1999
Qwest Communications Corporation
By: /s/ Marc Weisberg
----------------------------------
Name: Marc Weisberg
Title: Senior Vice President
Date: June 1, 1999
16
<PAGE>
ART BROADBAND SERVICE DESCRIPTION
EXHIBIT A
TO
ART BROADBAND SERVICES AGREEMENT
SERVICE AND PRICING EXHIBIT
This Service and Pricing Exhibit (this "Service and Pricing Exhibit") is
made as of _______, 1999 by and between Advanced Radio Telecom Corp., a
Delaware corporation ("ART"), and Qwest Communications Corporation a
Delaware corporation ("Customer"), with respect to that certain Broadband
Services Agreement entered into by and between ART and Customer on ___,
1999 (the "Agreement").
1. ART SERVICES
------------
1.1 During the Term of the Agreement, ART will provide to Customer the Facility
or Facilities requested by Customer in a Service Order accepted by ART.
1.2 Upon acceptance of a Service Order, ART shall notify Customer of its target
date for the delivery of each Facility (the "Estimated Availability Date"). Any
Estimated Availability Date given by ART to Customer shall be subject to ART's
standard and expedited interval guidelines, as amended by ART from time to time.
ART shall use reasonable efforts to install each such Facility on or before the
Estimated Availability Date, but the inability of ART to deliver a Facility by
such date shall not be a Default under this Exhibit. If ART fails to make any
Facility available within ninety (90) days after acceptance by ART of the
Service Order with respect to such Facility (or such greater time as is set
forth in the accepted Service Orders), Customer's sole remedy shall be to cancel
the Service Order which pertains to such Facility by fifteen (15) calendar days
prior written notice to ART.
1.3 ART shall provide appropriate equipment at its in-building space necessary
to provide the connections listed in Section 3 of this Service and Pricing
Exhibit for use by Customer.
1.4 Customer agrees that Customer's Interconnection Facilities shall connect to
the Facilities provided by ART hereunder at the network interface points located
in the ART terminals and defined in the Specifications (as defined in Section
2.1 of this Service and Pricing Exhibit). As used herein, the term
"Interconnection Facilities" shall mean the wiring and equipment provided by
Customer or its third party supplier to extend the Facilities provided by ART
from an ART terminal to any other location.
2. START OF SERVICES
-----------------
2.1 Start of service for each Facility (the "Start of Service Date") shall
begin on the date on which Customer accepts delivery of such Facility. If
Customer fails to give written notice that the Facility is in material non-
compliance with the applicable standard ART network specifications, as modified
from time to time by ART (the "Specifications") within ten (10) business days
after notification to Customer by ART that the Facility is available, Customer
shall be deemed to have accepted such Facility, and the Start of Service Date
shall commence as of the
1
<PAGE>
ART BROADBAND SERVICE DESCRIPTION
fifth day following such notification by ART. Following notice by Customer of
material non-compliance as set forth above, ART shall promptly take such
reasonable action as is necessary to correct any such non-compliance in the
Facility and shall, upon correction, notify Customer of a new Start of Service
Date.
2.2 Notwithstanding anything in Section 2.1 of this Service and Pricing Exhibit
to the contrary, Customer may delay the Start of Service Date for any Facility
for up to thirty (30) days from ART's Estimated Availability Date by written
notice to ART at least three (3) business days prior to any applicable Estimated
Availability Date.
3. RATES
-----
3.1 ART shall provide the Facilities at the rates (the "Rates") to be set forth
in this Section 3 (exclusive of all sales, use, commercial or other taxes
or license fees) and as shown on the Circuit Listing attached as Schedule
A-1 to this Service and Pricing Exhibit. Customer shall be responsible for
all interconnection costs from the Interconnection Facilities to Customer's
end users. [*
]
3.2 Customer Connection Rates
As provided in Section 3.1, applicable rate elements shall be established by the
parties for each item identified in (a) and (b) below. Such rates will apply
for each connection from a customer premise to the ART termination equipment in
an ART wired building:
___________________
* This confidential portion has been omitted and filed separately with the
Commission.
2
<PAGE>
ART BROADBAND SERVICE DESCRIPTION
(a) 10BaseT ethernet connection.
[*
]
(b) 100BaseT ethernet connection.
[*
]
3.3 Point of Presence (POP) Interconnection Rates
As provided in Section 3.1, applicable rate elements shall be established by the
parties for each item identified in (a), (b) and (c) below. Such rates will
apply for each connection from ART's POP location to the Customer POP location.
(a) 100BaseT ethernet connection.
[*
]
(b) DS-3 connection
[*
]
(c) OC-3 Packet over Sonet connection
[*
]
__________________
* This confidential portion has been omitted and filed separately with the
Commission.
3
<PAGE>
ART BROADBAND SERVICE DESCRIPTION
3.4 Other Charges:
As provided in Section 3.1, applicable rate elements shall be established by the
parties for each item identified in (a) and (b) below. In addition to the
foregoing Facilities Rates for 10Base T and 100Base T, Customer shall pay to ART
the following additional charges, as applicable:
(a) Other Monthly Recurring Charges at POP
[*
]
(b) Other Non-Recurring Charges at POP
[*
]
3.5 ART reserves the right, upon thirty (30) days prior written notice to
Customer, to modify any of the Rates or charges described in this Service
and Pricing Exhibit applicable to any new Facility or Facilities ordered by
Customer, [*
].
4. FACILITY MINIMUM SERVICE TERM:
-----------------------------
4.1 Customer acknowledges that the Rates and charges described in Section 3 of
this Service and Pricing Exhibit are based on the commitment of Customer to
utilize the Facilities for a specified minimum period of time. Therefore,
notwithstanding anything in this Exhibit to the contrary, Customer shall be
liable for and shall pay to ART all rates, fees and charges which accrue under
this Exhibit for each Facility for the entire Facility Minimum Service Term (as
defined in Section 4.2 of this Service and Pricing Exhibit) applicable to each
such Facility, regardless of whether or not Customer utilizes all or any part of
such Facility during all or any part of the Facility Minimum Service Term
applicable to such Facility, except as is set forth in Section 4.3 of this
Service and Pricing Exhibit. As provided in Section 3.1, Facility Minimum
Service Terms shall be established by mutual agreement of the parties.
4.2 The "Facility Minimum Service Term" for each Facility, is defined as
follows:
Customer Connections
_______________
* This confidential portion has been omitted and filed separately with the
Commission.
4
<PAGE>
ART BROADBAND SERVICE DESCRIPTION
(a) [* ] from Start of Service
Date for 10BaseT ethernet connection.
(b) [* ] from Start of Service Date for
100BaseT ethernet connection.
POP Interconnection
(a) [* ] from Start of Service Date
for 100BaseT ethernet connection.
(b) [* ] from Start of Service Date
for DS-3 connection.
(c) [* ]from the Start of Service
Date for OC-3 Packet over Sonet connection
4.3 Notwithstanding anything in this Service and Pricing Exhibit to the
contrary, Customer's obligation to pay all rates, fees and charges, which accrue
under this Service and Pricing Exhibit for each Facility for the entire Facility
Minimum Service Term applicable to each such Facility, shall terminate as to
each Facility authorized to be terminated without penalty pursuant to the
Agreement. UPON TERMINATION OF THIS AGREEMENT FOR ANY OTHER REASON, THE TOTAL OF
ALL CHARGES REFERRED TO IN THIS SECTION 4 SHALL BE AT ONCE DUE AND PAYABLE,
REGARDLESS OF WHETHER OR NOT ALL OF THE FACILITIES MINIMUM SERVICE TERMS HAVE
EXPIRED, AND MAY BE COLLECTED BY ART FROM CUSTOMER AS A SINGLE AMOUNT.
5. OUTAGE CREDITS:
--------------
5.1 Customer acknowledges the possibility of an unscheduled, continuous and/or
interrupted period of time when a Facility or Facilities are "unavailable" (as
defined in the Specifications) (hereafter an "Outage"). In the event of an
Outage, Customer shall be entitled to a credit (the "Outage Credit") determined
according to the following formula:
[*
]
* This confidential portion has been omitted and filed separately with the
Commission.
5
<PAGE>
ART BROADBAND SERVICE DESCRIPTION
5.2 The length of each Outage shall be calculated in hours and shall include
fractional portions thereof. An Outage shall be deemed to have commenced upon
verifiable notification thereof by Customer to ART or when actually known to ART
personnel, whichever is earlier. Each Outage shall be deemed to terminate upon
restoration of the affected Facility as evidenced by appropriate network tests
by ART. ART shall give notice to Customer of any scheduled outage as early as is
practicable, and a scheduled outage shall under no circumstance be viewed as an
Outage hereunder.
5.3 Outage Credits shall not be granted if the malfunction of any end-to-end
circuit is due to an Outage or other Defect occurring in Customer's
Interconnection Facilities.
5.4 All Outage Credits shall be credited on the next monthly invoice for the
affected Facility after receipt of Customer's request for credit. The total of
all Outage Credits applicable to or accruing in any given month shall not exceed
the amount payable by Customer to ART for that same month for such Facility.
5.5 The Outage Credit described in this Section 5 of this Service and Pricing
Exhibit shall be the sole and exclusive remedy of Customer in the event of any
Outage, and under no circumstance shall an outage be deemed a Default under this
Exhibit.
6
<PAGE>
ART BROADBAND SERVICE DESCRIPTION
Schedule A-2 to Exhibit A
To
ART Broadband Service Agreement
TECHNICAL SPECIFICATIONS
1. Service Description
1.1 ART will provide transport Facilities based on native 10 megabit per second
and 100 megabit per second ethernet transport in any building to which ART has
connectivity and capacity.
1.2 The Facilities shall be provided utilizing a wireless architecture that
provides shared bi-directional 100 megabit transport based on the Fast Ethernet
industry standard.
1.3 [*
]
1.4 It is expected that the Customer will aggregate traffic from multiple end
users onto one or more Customer interfaces at ART's POP location.
2. IP Address Policy
Customer is responsible for supplying unique routable IP addresses. Should the
Customer's end user bring IP addresses from another provider, or from the
InterNIC, ART will route these addresses. ART cannot guarantee the routability
of these addresses beyond it's own backbone and to the Internet in general.
3. Interconnect Specifications
3.1 The customer interconnection point of 10BaseT & 100BaseT signals at the ART
end building and DS-3, 100BaseT & OC-3c at the ART POP location will be at an
industry standard digital cross-connect and will be referred to as ART Network
Interface in this document.
3.2 The DS-3 signals terminating at the ART digital cross-connect panels will
meet the specifications as defined in ANSI T1.103-1987. The 100BaseT signals
terminating at the ART
____________
* This confidential portion has been omitted and filed separately with the
Commission.
1
<PAGE>
ART BROADBAND SERVICE DESCRIPTION
digital cross-connect panels will meet the electrical specifications as defined
in IEEE 802.3. The OC-3c signals terminating at the ART digital cross-connect
panels will meet the specifications as defined in ANSI T1.105-1995 and RFC 1619
"PPP over SONET/SDH".
4. Performance Objectives
4.1 10/100BaseT performance will be measured using availability and delay using
the following assumptions:
. The packets originate and terminate on the ART 100BaseT network.
. Radio frequency path is engineered to [* ] availability based on
the Crane rain fade tables appropriate to the region in which a
facility is deployed.
. The network is configured in a ring topology with alternate routing.
. [* ]
. Capacity on the each ring is shared.
4.2 Availability is a measure of the relative amount of time during which the
network is available for use. The availability objective for all Customer
traffic on a twelve month basis between ART Network Interface points and the
Customer is [* ]. This excludes any Customer provided access links to
the ART digital network. All scheduled maintenance is excluded from
availability calculations.
4.3 Delay is a measure of the latency from when the first bit is transferred
from the Customer premise interface to when the first bit reaches the ART
Interface point. Delay performance objectives are [* ].
_________________
* This confidential portion has been omitted and filed separately with the
Commission.
2
<PAGE>
EXHIBIT 10.2
QWEST COMMUNICATIONS CORPORATION
PRIVATE LINE SERVICES AGREEMENT
This Private Line Services Agreement, is entered into as of June 1, 1999
(the "Effective Date"), by and between Qwest Communications Corporation, a
Delaware corporation ("Qwest"), and Advanced Radio Telecom Corp., a
Delaware corporation ("Customer").
1. INCORPORATION OF DOCUMENTS AND CONTROLLING PROVISIONS
-----------------------------------------------------
1.1 This Service Agreement, together with (a) Service Orders (as defined in
Section 2.1 of this Service Agreement) accepted by Qwest pursuant to the
terms hereof, and (b) schedules and exhibits incorporated herein by
reference ("Exhibits"), shall be referred to collectively herein as this
"Agreement." In the event of any conflict between the provisions of this
Agreement and the terms of any Service Order(s) and/or Exhibit(s), the
conflict shall be resolved by reference to said documents in the following
order of priority of interpretation: (a) this Agreement; (b) any
Exhibit(s), with reference to the same in order of attachment to this
Agreement; and (c) any Service Order(s). Notwithstanding the foregoing, no
provision or term of any Service Order shall be a part of this Agreement or
binding on Qwest unless and until such Service Order has been executed by
an authorized representative of Qwest.
1.2 If any provision of this Agreement and any applicable tariff cannot be
reasonably construed or interpreted to avoid conflict, the provision
contained in this Agreement shall prevail. The fact that a condition,
right, obligation, or other term appears in this Agreement but not in any
such tariff shall not be interpreted as, or be deemed grounds for finding
of a conflict for purposes of this Section 1.2. In addition, if any
provision of this Agreement conflicts with any statute, rule or order of
any governmental unit or regulatory body, then, if required by law, this
Agreement should remain in effect but shall be automatically modified by
such conflicting law, statute, rule or order, subject to the termination
rights granted herein under Section 8.
2. SERVICES TO BE PROVIDED BY QWEST
--------------------------------
2.1 Telecommunications capacity, and related ancillary services (the "Facility"
or "Facilities") available from Qwest are identified in the Service and
Pricing Exhibit attached hereto as "Exhibit A", which is incorporated by
this reference (the "Service and Pricing Exhibit"). Facilities requested
by Customer shall be requested on Qwest's service order forms in effect
from time to time (hereafter, any such order is a "Service Order(s)").
Each Service Order shall reference this Agreement and shall become a part
of this Agreement when executed by a duly authorized representative of
Qwest. Qwest reserves the right to reject any Service Order in areas where
facilities or capacity are unavailable or the provision of service would be
otherwise technically unreasonable.
1
<PAGE>
2.2 Upon acceptance by Qwest of a duly executed Service Order during the Term
(as defined in Section 4.3 of this Agreement) of this Agreement, Qwest
shall provide to Customer those Facilities identified in the Service Order.
3. OBLIGATIONS OF CUSTOMER
-----------------------
3.1 Customer shall perform those duties outlined in the Service and Pricing
Exhibit in addition to those described herein and in any Service Order(s).
3.2 Customer shall have sole responsibility for installation, testing and
operation of the Interconnection Facilities (as defined in Section 1.4 of
the Service and Pricing Exhibit), and any services and equipment other than
those Facilities specifically provided by Qwest under this Agreement.
4. TERM
----
4.1 This Agreement shall be effective between the parties as of the Effective
Date. The initial term (the "Initial Term") of this Agreement shall
expire seven (7) years from the Effective Date unless either party earlier
terminates this Agreement in accordance with Section 8.
4.2 Upon the expiration of the Initial Term, if Customer is not then in default
hereunder, the term of this Agreement shall be renewed automatically on a
month-to-month basis (hereafter, the "Renewal Term") unless and until an
Amendment is executed by both parties extending the Renewal Term, or either
party terminates this Agreement in accordance with Section 8.
4.3 The Initial Term and Renewal Term are sometimes referred to together herein
as the "Term."
4.4 Notwithstanding anything to the contrary in this Section 4, if the Facility
Minimum Service Term (as set forth in Section 4.2 of the Service and
Pricing Exhibit) for a Facility or Facilities extends beyond the expiration
of the Term of this Agreement, then this Agreement shall continue in effect
until the expiration or termination of the applicable Facility Minimum
Service Term, but only as to the Facility or Facilities so affected, and
subject to the termination rights of Qwest and Customer under Section 8 of
this Agreement.
5. CHARGES AND PAYMENT
-------------------
5.1 Charges for the Facilities shall be determined according to the Service and
Pricing Exhibit except as otherwise specifically provided in this
Agreement.
5.2 Recurring charges shall be invoiced by Qwest on a monthly basis in advance
and non-recurring charges shall be invoiced in arrears. If the Start of
Service Date (as defined in Section 2.1 of the Service and Pricing Exhibit)
for any Facility falls on other than the first
2
<PAGE>
day of any month, the first invoice to Customer shall consist of: (1) the
pro-rata portion of the applicable monthly charge covering the period from
the Start of Service Date to the first day of the subsequent month, and (2)
the monthly charge for the following month. Qwest may, in its sole
discretion, prior to delivering the first invoice to Customer, elect to
require that Customer make a security deposit amount equal to one (1)
month's recurring charges for the Facility or Facilities. If a deposit is
made, it shall be held by Qwest until termination of this Agreement, at
which time Qwest may apply the deposit, at its option, either against the
last month of charges due hereunder prior to termination of this Agreement,
or against any other amounts owing to Qwest under this Agreement.
5.3 Customer shall make all payments due hereunder within thirty (30) days
after the date of Qwest's invoice. If any amount due under this Agreement
is not received by the due date, in addition to its other remedies
available hereunder, Qwest may in its sole discretion impose a late payment
charge of the lower of 1.5% per month or the highest rate legally
permissable (such late charge shall be payable upon demand by Qwest).
Notwithstanding anything in this Agreement to the contrary, no payment due
hereunder is subject to reduction, set-off or adjustment of any nature by
Customer, except as is specifically provided in Section 5 of the Service
and Pricing Exhibit regarding Outage Credits. In no event shall the
malfunction or non-operation of Customer's Interconnection Facilities
(including local access when Customer is responsible therefor) relieve
Customer of its obligation to pay for the Facilities.
5.4 All disputes or requests for billing adjustments must be submitted in
writing and submitted with payment of undisputed amounts due, or
alternatively, if Customer has paid an invoice amount in full, Customer
shall have one hundred eighty (180) days from the date of invoice to give
notice of a dispute regarding amounts invoiced therein. Any amounts which
are determined by Qwest to be in error or not in compliance with this
Agreement shall be adjusted on the next month's invoice. Any disputed
amounts which reasonably, in good faith and supported by reasonable
documentation are deemed by Qwest to be correct as billed and in compliance
with this Agreement, shall be due and payable by Customer (if not
previously paid), upon notification and demand by Qwest, along with any
late payment charges which Qwest may impose pursuant to Section 5.3 above.
Disputes shall not be cause for Customer to delay payment of the undisputed
balance to Qwest according to the terms outlined in Section 5.3 above.
Subject to the payment obligations described in this Section 5, Customer
may pursue arbitration of any dispute not resolved hereunder pursuant to
Section 16.
5.5 Invoices submitted to Customer by Qwest shall conform to Qwest's standard
billing format and content, as modified by Qwest from time to time.
5.6 Any applicable federal, state, or local taxes, and all use, sales,
commercial, gross receipts, privilege or other similar taxes or license
fees, whether charged to or against Qwest or Customer, with respect to the
Facilities provided by Qwest (except taxes on Qwest's income or gains), as
well as any other imposition by any governmental authority which
3
<PAGE>
has the effect of increasing Qwest's cost of providing the Facilities,
shall be payable by Customer in addition to the other charges set forth in
this Agreement.
6. EVENTS OF DEFAULT
-----------------
6.1 A "Default" shall occur if: (a) Customer fails to make any payment
required to be made by it under this Agreement and any such failure remains
uncorrected for five (5) business days after receipt of written notice that
such payment is past due; (b) either party fails to perform or observe any
material term or obligation (other than making payment) contained in this
Agreement, and any such failure remains uncorrected for thirty (30)
calendar days after written notice from the non-defaulting party informing
the defaulting party of such failure; or (c) there is an Adverse Material
Change (as defined in Section 6.2 of this Agreement) in Customer's
creditworthiness.
6.2 For purposes of Section 6.1 of this Agreement, an Adverse Material Change
in Customer's creditworthiness shall include, but not be limited to: (a)
failure of Customer to make full payment of charges due hereunder on or
before the date due on three (3) or more occasions during any period of
twelve (12) months, or Customer's failure to make such payment on or before
the date due in any two (2) consecutive months; (b) acquisition of Customer
(whether in whole or by majority or controlling interest) by an entity
which is insolvent, which is subject to bankruptcy or insolvency
proceedings, or which presents a materially greater credit risk than
Customer; or (c) Customer being subject to or having filed for bankruptcy
or insolvency proceedings, or the legal insolvency of Customer.
6.3 Notwithstanding Section 6.1 of this Agreement, the failure of any
particular circuit or number of circuits to comply with the Specifications
(as that term is defined in Section 2.1 of the Service and Pricing Exhibit)
shall not be deemed a Default by Qwest, but may obligate Qwest to provide
Customer with Outage Credits, as provided in Section 5 of the Service and
Pricing Exhibit.
7. REMEDIES FOLLOWING DEFAULT
--------------------------
7.1 If Customer is in Default, Qwest may, in addition to any other remedies it
has under this Agreement or under the law: (a) suspend its performance
under this Agreement without the requirement of any further notice to
Customer, until Customer has remedied all breaches of this Agreement and
paid in full all charges then due, including any late fees specified herein
plus; (b) condition provision of Facilities or acceptance of a Service
Order on Customer's assurance of payment and compliance with this
Agreement, which may be in the form of a deposit/prepayment or such other
means as is required by Qwest to establish assurance of payment and
compliance; or (c) terminate this Agreement by providing written notice to
Customer in the manner provided in Section 8.2 of this Agreement.
7.2 If Qwest is in Default, Customer may terminate this Agreement pursuant to
Section 8.1 below, but may not withhold or suspend its own performance.
4
<PAGE>
8. TERMINATION
-----------
8.1 Customer may terminate this Agreement without liability (other than charges
accrued but unpaid as of the termination date): (a) effective upon written
notice to Qwest, if Qwest is in Default; (b) effective upon thirty (30)
calendar days prior written notice, if any material rate or term contained
herein and relevant to all or substantially all of the Facilities is
materially changed by order of the highest court of competent jurisdiction
to which the matter is appealed, the Federal Communications Commission, or
other local, state or federal government authority; (c) following a Default
by Qwest under Section 9.2 of this Agreement affecting all or
substantially all of the Facilities; (d) if Qwest makes an unauthorized
transfer under Section 12 of this Agreement; or (e) effective upon thirty
(30) calendar days prior written notice, with or without cause, following
the expiration of the Initial Term.
8.2 Qwest may terminate this Agreement: (a) effective upon written notice to
Customer, if Customer is in Default; (b) effective upon thirty (30) days
prior written notice, with or without cause, following the expiration of
the Initial Term; or (c) effective immediately and without any advance
written notice: (i) if Qwest loses any required regulatory or other
governmental authorizations to provide all or substantially all of the
Facilities (as described in Section 9.1 of this Agreement); (ii) following
a default by Customer under Section 9.2 of this Agreement affecting all or
substantially all of the Facilities; or (iii) if Customer makes an
unauthorized Transfer under Section 12 of this Agreement.
8.3 In the event of any termination pursuant to Section 8.1 hereof as a result
of Qwest's breach of its obligations under this Agreement, Qwest agrees to
cooperate with Customer, on a commercially reasonable efforts basis, to
transition existing services and Facilities used by Customer to serve end
users to another network operator; except, that Qwest shall be obligated to
assist this transition only if Customer is and remains in compliance with
its payment obligations to Qwest under this Agreement. Qwest's obligation
to assist under this Section 8.3 shall not include payments to Customer or
any third party in connection with such transition.
9. GOVERNMENTAL AUTHORITY
----------------------
9.1 Customer acknowledges that the obligation of Qwest to provide the
Facilities to Customer is subject to the receipt by Qwest of any required
regulatory or other governmental authorizations. Qwest reserves the right
to terminate this Agreement pursuant to Section 8.2 of this Agreement if at
any time Qwest loses the required regulatory or other governmental
authorizations to provide the Facilities (a "Regulatory Change"). To the
extent required by law, this Agreement may be superseded and/or
supplemented by a tariff filed with the appropriate regulatory agency,
which tariff may contain such modifications of the provisions of this
Agreement as Qwest deems appropriate, all of which shall become
automatically binding on Customer. Such a tariff shall be filed only if
required by applicable law, and, in such event, Customer shall be
5
<PAGE>
entitled to terminate this Agreement immediately as to the affected Service
Order(s) in the event a material term of this Agreement is superseded by
said tariff filing.
9.2 Each party represents and warrants that: (a) it has received all
necessary permits, licenses, approvals, grants, and charters of whatsoever
kind necessary to carry out the business in which it is engaged hereunder;
and (b) it has complied and is in material compliance with all laws,
regulations, orders, and statutes which may be applicable to it, whether
local, State or Federal. From the date of this Agreement until the
termination hereof, each party agrees to operate in accordance with and to
maintain current all such certifications, permits, licenses, approvals,
grants, charters, and to materially comply with all applicable laws,
regulations, orders and statutes, whether local, State or Federal. A
failure to cure a breach by either Party of any of the representations,
warranties or covenants of this Section 9.2 within thirty (30) calendar
days of receipt of written notice from the other party shall be deemed a
Default hereunder, and shall allow the other party to terminate the
affected portion of the Facilities, or in the case of all or substantially
all of the Facilities being affected, this Agreement, in the manner
described in Section 8 of this Agreement. A Regulatory Change not within
Qwest's reasonable control shall not constitute a default under this
Section 9.2. In addition, Qwest reserves the right to suspend its
performance under this Agreement during the pendency of Customer's cure
efforts.
10. FORCE MAJEURE
-------------
10.1 Except as is provided in Section 10.2 below, Qwest shall not be liable for
any failure of performance hereunder due to causes beyond its reasonable
control, including, but not limited to: acts of God, fire, explosion,
vandalism, fiber optic cable cut, storm, extreme temperatures or other
similar catastrophes; any law, order, regulation, direction, action or
request of the United States government, or of any other government,
including state and local governments having jurisdiction over either of
the parties, 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; national emergencies, insurrections,
riots, wars, or strikes, lock-outs, work stoppages or other labor
difficulties; actions or inactions of a third party provider or operator of
facilities employed in provision of the Facilities; or any other conditions
or circumstances beyond the reasonable control of Qwest which impede or
affect the Facilities or the transmission of telecommunications services.
10.2 If any failure of performance on the part of Qwest described in Section
10.1 of this Agreement shall be: (a) for thirty (30) calendar days or
less, then this Agreement shall remain in effect, but Customer shall be
relieved of its obligation to pay for that portion of the Facilities
affected for the period of such failure of performance; or (b) for more
than thirty (30) days, then Customer may terminate without liability (other
than charges accrued but unpaid applicable to the terminated Service
Order(s)) only that portion of any Service Order or Service Orders related
to the Facilities so affected, upon ten (10) calendar days prior written
notice to Qwest following the failure of performance.
6
<PAGE>
10.3 If the Facilities are unavailable to Customer as a result of any events
described in Section 10.1, Customer will be entitled to an Outage Credit
under Section 5 of the Service and Pricing Exhibit.
11. YEAR 2000
---------
Qwest shall use commercially reasonable efforts to ensure that its internal
operating and network systems are designed to operate during calendar year
2000 A.D. without material error or interruption relating to date data
(including, without limitation, date data which represents or references
different centuries or more than one century or leap year) in any level of
the systems assuming, in each case, that all systems and products used in
combination with them properly exchange data (hereinafter referred to as
"Year 2000 Compliant"). If Qwest's system causes an outage due to the
system's failure to be Year 2000 Compliant, ("Year 2000 Outage") Customer
shall receive credits in accordance with Section 5 of the Service and
Pricing Exhibit. If the Year 2000 Outage continues for thirty (30) days,
Customer may (a) terminate this Agreement provided that such Year 2000
Outage affects all or substantially all Facilities provided by Qwest under
this Agreement; or (b) terminate any affected Service Order(s).
Termination under this Section 11 shall be effected without liability for
early termination charges or shortfall charges, and such termination shall
be Customer's sole and exclusive remedy.
12. ASSIGNMENT
----------
Neither party may sell, assign, sublet, encumber or transfer this Agreement
or any of its rights or obligations hereunder, except to a direct or
indirect wholly owned subsidiary of such party, by operation of law or
otherwise (hereafter, a "Transfer"), without the prior written consent of
other party hereto, which consent shall not be unreasonably withheld. Any
Transfer by either party without the other party's prior written consent
shall entitle the non-transferring party, at its option, to: (a) consider
the Transfer void; (b) consent to the Transfer, and hold the transferring
party and any transferee(s) liable hereunder; or (c) terminate this
Agreement upon delivering written notice to the transferring party.
Subject to the foregoing, this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors or
assigns.
13. TITLE
-----
Customer expressly disclaims any right, title, perpetual right of use or
any other interest in or to any equipment or property provisioned or
supplied by Qwest under this Agreement.
14. WARRANTIES AND LIMITATION OF LIABILITY
--------------------------------------
14.1 Qwest warrants that the Facilities shall be provided to Customer and shall
operate in accordance with the then current prevailing telecommunications
industry standards (hereinafter the "Technical Standards"). If Qwest
determines that the Facilities are not being provided in accordance with
the Technical Standards (hereinafter, a "Defect" or
7
<PAGE>
"Defects"), Qwest shall use reasonable efforts to conform the Facilities to
the Technical Standards.
14.2 THE WARRANTIES CONTAINED IN SECTION 14.1 OF THIS AGREEMENT ARE EXCLUSIVE
AND IN LIEU OF ALL OTHER WARRANTIES, WHETHER EXPRESS, IMPLIED OR STATUTORY,
INCLUDING WITHOUT LIMITATION IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE. QWEST HEREBY SPECIFICALLY DISCLAIMS ANY
LIABILITY TO CUSTOMER FOR INTERRUPTIONS AFFECTING THE FACILITIES FURNISHED
HEREUNDER WHICH ARE ATTRIBUTABLE TO CUSTOMER'S INTERCONNECTION FACILITIES
(AS DEFINED IN SECTION 1.4 OF THE SERVICE AND PRICING EXHIBIT) OR TO
CUSTOMER'S EQUIPMENT FAILURES, OR TO CUSTOMER'S BREACH OF THIS AGREEMENT.
14.3 IN NO EVENT SHALL QWEST OR ANY OF ITS AFFILIATES BE LIABLE TO CUSTOMER OR
ANY OF ITS AFFILIATES OR EMPLOYEES OR TO ANY THIRD PARTY FOR: (a) ANY LOSS
OF PROFIT OR REVENUE, OR FOR ANY INDIRECT, CONSEQUENTIAL, INCIDENTAL,
PUNITIVE OR SIMILAR OR ADDITIONAL DAMAGES, WHETHER INCURRED OR SUFFERED AS
A RESULT OF UNAVAILABILITY OF FACILITIES, PERFORMANCE, NON-PERFORMANCE,
TERMINATION, BREACH, OR OTHER ACTION OR INACTION UNDER THIS AGREEMENT, OR
FOR ANY OTHER REASON, EVEN IF CUSTOMER ADVISES QWEST OF THE POSSIBILITY OF
SUCH LOSS OR DAMAGE; OR (b) FOR ANY OUTAGE OR INCORRECT OR DEFECTIVE
TRANSMISSIONS, OR ANY DIRECT OR INDIRECT CONSEQUENCES THEREOF, EXCEPT AS IS
SPECIFICALLY PROVIDED IN SECTION 5 OF THE SERVICE AND PRICING EXHIBIT
REGARDING OUTAGE CREDITS.
14.4 NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY: (a) CUSTOMER
AGREES THAT ITS SOLE REMEDY IN THE EVENT OF ANY BREACH OF THE WARRANTIES
DESCRIBED IN SECTION 14.1 OF THIS AGREEMENT SHALL BE THE OUTAGE CREDITS
DESCRIBED IN SECTION 5 OF THE SERVICE AND PRICING EXHIBIT; AND, (b) IN NO
EVENT SHALL THE CUMULATIVE LIABILITY OF QWEST UNDER THIS AGREEMENT,
INCLUDING ANY OUTAGE CREDITS, EXCEED THE TOTAL PAYMENTS PAID BY CUSTOMER TO
QWEST HEREUNDER.
14.5 Customer acknowledges that Qwest has no ability to independently test or
maintain Facilities between two off net cities. Consequently, if Qwest
provides such Facilities, then notwithstanding anything in this Agreement
to the contrary, Qwest's entire duty with respect to such Facilities shall
be to use its best efforts to test and maintain such Facilities in
accordance with Qwest's Specifications.
15. NON-DISCLOSURE AND PUBLICITY
----------------------------
8
<PAGE>
15.1 The parties agree that this Agreement is and shall be kept confidential.
Neither party shall divulge or otherwise disclose any of the provisions of
this Agreement to any third party without the prior written consent of the
other party, except that either party may make disclosure to those required
for the implementation of this Agreement, and to purchasers and prospective
purchasers of their respective companies, auditors, attorneys, financial
advisors, lenders and prospective lenders, investors and prospective
investors, provided that in each case the recipient agrees in writing to be
bound by the confidentiality provisions set forth in this section. In
addition, either party may make disclosure as required by a court order or
as otherwise required by law, securities exchange or SEC rules or
regulations, or in any legal or arbitration proceeding relating to this
Agreement. If either party is required by law or by interrogatories,
requests for information or documents, subpoena, civil investigative demand
or similar process to disclose the provisions of this Agreement, it will
provide the other party with prompt prior notice of such request or
requirement so that such party may seek an appropriate protective order
and/or waive compliance with this Section. The party whose consent to
disclose information is requested shall respond to such request, in
writing, within five (5) business days of the request by either authorizing
the disclosure or advising the other party of its election to seek a
protective order, or if such party fails to respond within the prescribed
period the disclosure shall be deemed approved.
15.2 Each party shall submit to the other party all news releases, advertising
and other publicity material related to this Agreement wherein the second
party's name is mentioned or language is used from which a connection to
such second party's name therein may, in such second party's judgment, be
inferred or implied. Neither party shall publish or use such material or
use the other party's name, without the prior written consent of such
second party.
16. ARBITRATION
-----------
16.1 All disputes which involve amounts reasonably anticipated to be in excess
of Twenty-Five Thousand Dollars ($25,000.00) arising out of or related to
this Agreement, shall be determined and resolved by arbitration in San
Francisco, California, in accordance with the rules of the American
Arbitration Association ("AAA"). The arbitrators shall be appointed in
accordance with the rules then prevailing of the AAA.
16.2 The award rendered by the arbitrator(s) shall be final and binding upon the
parties hereto. Neither party shall have the right to further appeal or
redress the matters arbitrated except for the purposes of obtaining the
judgment rendered by the arbitrator(s). Judgment upon any arbitration
award may be entered and enforced in any court of competent jurisdiction.
16.3 The parties hereto agree that a prevailing party shall be entitled to
recover all reasonable costs and expenses (including all reasonable
attorneys' fees and disbursements) of such arbitration proceeding. Such
prevailing party shall also be entitled to reasonable attorneys' fees and
costs incurred in enforcing a judgment of the arbitrators separately from
and in addition to any other amount included in such judgment. This
Section 16.3
9
<PAGE>
shall be severable from the other provisions of this Agreement and shall
survive and not be merged into any such judgment.
17. USE OF FACILITIES
-----------------
Qwest's obligation to provide the Facilities specified herein is
conditioned upon Customer not allowing the Facilities to be used for any
unlawful purpose; or in violation of any governmental regulations or
authorizations as outlined in Section 9 of this Agreement.
18. EXCLUSIVITY
-----------
Pursuant to this Agreement, Customer agrees to use Qwest as its exclusive
carrier for all fiber optic, private line and backbone transport service
("Backbone Service") during the Term (the "Exclusivity Requirement"). [*
]
19. PROGRAM MANAGEMENT
------------------
QWEST shall designate a QWEST employee as the principal point of contact
for Customer and who shall be dedicated to and responsible for coordinating
all matters between QWEST and Customer in connection with the transactions
contemplated in this Agreement (the "Program Manager"). All complaints that
Customer may have with respect to the Facilities provided by QWEST
hereunder shall be reported to the Program Manager in the first instance
and the Program Manager will coordinate the review of, and the
implementation of necessary steps to address any such complaints within
QWEST promptly after they are reported by Customer. The parties shall use
good faith efforts to agree upon written escalation procedures.
_____________________
* This confidential portion has been omitted and filed separately with the
Commission.
10
<PAGE>
20. MISCELLANEOUS
-------------
20.1 Neither this Agreement, nor the provision of Facilities hereunder, shall
create a partnership or joint venture between the parties or result in a
joint communications service offering to any third parties.
20.2 The failure of either party to give notice of default or to enforce or
insist upon compliance with any of the terms or conditions of this
Agreement shall not constitute a waiver of any term or condition of this
Agreement.
20.3 Subject to Section 16 of this Agreement, in the event suit is brought or an
attorney is retained by either party to enforce the terms of this Agreement
or to collect any moneys due hereunder or to collect money damages for
breach hereof, the prevailing party shall be entitled to recover, in
addition to any other remedy, reimbursement for reasonable attorneys' fees,
court costs, costs of investigation and other related expenses incurred in
connection therewith.
20.4 This Agreement shall be construed under the laws of the State of New York
without regard to choice of law principles.
20.5 No subsequent agreement concerning the Facilities or modification to this
Agreement shall be binding upon the parties unless it is made in writing by
an authorized representative of Customer and an authorized representative
of Qwest.
20.6 If any part of any provision of this Agreement shall be invalid or
unenforceable under applicable law, said part shall be ineffective to the
extent of such invalidity only, without in any way affecting the remaining
parts of said provision or the remaining provisions of this Agreement, and
the Customer and Qwest agree to negotiate with respect to any such invalid
or unenforceable part to the extent necessary to render such part valid and
enforceable.
20.7 The terms and provisions contained in this Agreement that by their sense
and context are intended to survive the performance thereof by the parties
hereto shall survive the completion of performance and termination of this
Agreement, including, without limitation, the making of any and all
payments due hereunder.
20.8 Words having well-known technical or trade meanings shall be so construed.
20.9 All notices, requests, demands and other communications required or
permitted hereunder shall be in writing and shall be given by: (a) hand
delivery; (b) first-class registered or certified mail with postage
prepaid; (c) overnight receipted courier service; or (d) telephonically
confirmed facsimile transmission, which notice is addressed to the party at
the address set forth below, or such other address as may hereafter be
designated in writing by the party. Notices given in accordance with this
Section shall be effective upon receipt or when receipt is refused.
11
<PAGE>
All notices to Qwest shall be addressed to:
Qwest Communications Corporation
555 17th Street
Denver, Colorado 80202
Facsimile (303) 992-1724; Phone: (303) 992-1400
Attn.: Carrier Contracts Admin.
with an additional copy to:
Qwest Communications Corporation
555 17th Street
Denver, Colorado 80202
Facsimile (303) 992-1724; Phone: (303) 992-1400
Attn.: Drake Tempest, Executive Vice President & General Counsel
All notices to Customer shall be addressed to:
Advanced Radio Telecom Corp.
500-108/th/ Avenue NE, Suite 2600
Bellevue, WA 98004
Facsimile (425) 990-1642; Phone: (425)688-8700
Attn.: General Counsel
With an additional copy to:
Advanced Radio Telecom Corp.
500-108/th/ Avenue NE, Suite 2600
Bellevue, WA 98004
Facsimile (425) 990-1642; Phone: (425)688-8700
Attn.: President
The addresses set forth may be changed by appropriate notice to the
other party.
20.10 This Agreement comprises the complete and exclusive statement of the
agreement of the parties concerning the subject matter hereof, and
supersedes all previous statements, representations, and agreements
concerning the subject matter hereof.
12
<PAGE>
DATED as of the first date above written.
Advanced Radio Telecom Corp.:
By: /s/ Henry C. Hirsch
-----------------------------
Name: Henry C. Hirsch
Title: Chairman and CEO
Date: June 1, 1999
Qwest Communications Corporation:
By: /s/ Marc Weisberg
-----------------------------
Name: Marc Weisberg
Title: Senior Vice President
Date: June 1, 1999
13
<PAGE>
EXHIBIT A
TO
QWEST COMMUNICATIONS
PRIVATE LINE SERVICES AGREEMENT
SERVICE AND PRICING EXHIBIT
---------------------------
This Service and Pricing Exhibit (this "Service and Pricing Exhibit") is
made as of June 1, 1999 by and between Qwest Communications Corporation, a
Delaware corporation ("Qwest"), and Advanced Radio Telecom Corp., a
Delaware corporation ("Customer"), with respect to that certain Private
Line Services Agreement entered into by and between Qwest and Customer on
June 1, 1999 (the "Agreement").
1. QWEST SERVICES:
--------------
1.1 During the Term of the Agreement, Qwest will provide to Customer the
Facility or Facilities requested by Customer in a Service Order accepted by
Qwest.
1.2 Upon acceptance of a Service Order, Qwest shall notify Customer of its
target date for the delivery of each Facility (the "Estimated Availability
Date"). Any Estimated Availability Date given by Qwest to Customer shall be
subject to Qwest's standard and expedited interval guidelines, as amended by
Qwest from time to time. Qwest shall use reasonable efforts to install each such
Facility on or before the Estimated Availability Date, but the inability of
Qwest to deliver a Facility by such date shall not be a Default under this
Exhibit. If Qwest fails to make any Facility available within ninety (90) days
after acceptance by Qwest of the Service Order with respect to such Facility (or
such greater time as is set forth in the accepted Service Order(s)), Customer's
sole remedy shall be to cancel the Service Order which pertains to such Facility
by fifteen (15) calendar days prior written notice to Qwest.
1.3 At each end of the city pairs (the "City Pairs") on which Customer orders
Facilities, Qwest shall provide appropriate equipment in its terminal locations
necessary to connect the Facilities to Customer's Interconnection Facilities (as
defined in Section 1.4 of this Service and Pricing Exhibit). If Customer desires
to install its own equipment in one or more of Qwest's terminals, and Qwest, in
its sole discretion, agrees to such installation, the parties shall execute the
Collocation Exhibit.
1.4 Customer agrees that Customer's Interconnection Facilities shall connect to
the Facilities provided by Qwest hereunder at the network interface points
located in the Qwest terminals and defined in the Specifications (as defined in
Section 2.1 of this Service and Pricing Exhibit). As used herein, the term
"Interconnection Facilities" shall mean transmission capacity provided by
Customer or its third party supplier to extend the Facilities provided by Qwest
from a Qwest terminal to any other location (e.g., a local access telephone
service provided by a local telephone company).
1.5 For DS-3 Facilities and above, if requested by Customer, Qwest shall use
reasonable efforts to order Interconnection Facilities on behalf of Customer
from Customer's designated supplier, provided that Customer furnishes Qwest with
an acceptable letter of agency. Customer
1
<PAGE>
shall be billed directly by the supplier of such Interconnection Facilities, and
shall hold harmless and indemnify Qwest from any loss or liability incurred by
Qwest as a result of Qwest's ordering such Interconnection Facilities from any
third party. Customer may, at its election, but subject to Qwest's prior written
approval, order its own Interconnection Facilities. If any party other than
Qwest provides Interconnection Facilities, then unavailability, incompatibility,
delay in installation, or other impairment of Interconnection Facilities shall
not excuse Customer's obligation to pay Qwest all Rates or charges applicable to
the Facilities, whether or not such Facilities are useable by Customer.
2. START OF SERVICES:
-----------------
2.1 Start of service for each Facility (the "Start of Service Date") shall
begin on the date on which Customer accepts delivery of such Facility. If
Customer fails to give written notice that the Facility is in material
non-compliance with the applicable standard Qwest network specifications, as
modified from time to time by Qwest (the "Specifications") within ten (10)
business days after notification to Customer by Qwest that the Facility is
available, Customer shall be deemed to have accepted such Facility, and the
Start of Service Date shall commence as of the fifth day following such
notification by Qwest. Following notice by Customer of material non-compliance
as set forth above, Qwest shall promptly take such reasonable action as is
necessary to correct any such non-compliance in the Facility and shall, upon
correction, notify Customer of a new Start of Service Date.
2.2 Notwithstanding anything in Section 2.1 of this Service and Pricing Exhibit
to the contrary, Customer may delay the Start of Service Date for any Facility
for up to thirty (30) days from Qwest's Estimated Availability Date by written
notice to Qwest at least three (3) business days prior to any applicable
Estimated Availability Date.
3. RATES:
-----
3.1 Except as otherwise provided in a special rate exhibit attached to the
Agreement, Qwest shall provide the Facilities at the rates (the "Rates") set
forth in this Section 3 (exclusive of all sales, use, commercial or other taxes
or license fees) and as shown on the Circuit Listing attached as Schedule A-1 to
this Service and Pricing Exhibit. The Rates for the Facilities apply to the
Inter-Office Channel ("IOC") of the On-Net circuit specified from the nearest
originating Qwest owned Point of Presence ("POP") to the nearest terminating
Qwest owned POP. Customer shall be responsible for all interconnection costs
from the customer location indicated by the Originating NPA/NXX and the
Terminating NPA/NXX to the corresponding Qwest owned POP. A circuit shall be
considered "On-Net" when a dedicated leased line IOC circuit is provisioned (i)
entirely between two Qwest owned Domestic U.S. POPs lying on Qwest owned fiber
optic lines, and (ii) utilizes only Qwest owned fiber optic lines. The Rates
vary depending on whether the Facilities are DS-1 or DS-3 or OC-n. The Rates,
Monthly Recurring Charges ("MRCs") and Non-Recurring Charges ("NRCs") for Qwest
On-Net Domestic US dedicated leased line service are as follows:
(a) DS-1 Facilities Rates for IXC:
-----------------------------
2
<PAGE>
(i) Base IXC Rates: [*
--------------
]
(ii) DS-1 Monthly Recurring Charges:
------------------------------
[* ]
(iii) DS-1 Non-Recurring Charges:
--------------------------
[* ]
(b) DS-3 Facilities Rates for IXC:
-----------------------------
(i) Base IXC Rates: [*
--------------
]
(ii) DS-3 Monthly Recurring Charges:
------------------------------
[* ]
(iii) DS-3 Non-Recurring Charges:
--------------------------
[* ]
(c) OC-n Facilities Rates for IXC:
-----------------------------
(i) Base IXC Rates:
--------------
[*
]
(ii) OC-n Monthly Recurring Charges:
------------------------------
Minimum charges per OC-n per month:
Facility Minimum MRC
-------- -----------
OC-3 [* ]
OC-12 [* ]
OC-48 [* ]
(iii) OC-n Non-Recurring Charges:
--------------------------
Installation charge per OC-n for all services and equipment:
Facility Minimum NRC
-------- -----------
OC-3 [* ]
OC-12 [* ]
OC-48 [* ]
(d) Other Charges:
-------------
In addition to the foregoing Facilities Rates for DS-1, DS-3 and OC-n
Facilities for IXC, Customer shall pay to Qwest the following additional
charges, as applicable, [*
_________________________
* This confidential portion has been omitted and filed separately with the
Commission.
3
<PAGE>
]
(i) Other Monthly Recurring Charges:
-------------------------------
[*
]
(ii) Other Non-Recurring Charges:
---------------------------
[*
]
3.2 Qwest reserves the right, upon thirty (30) days prior written notice to
Customer, to modify any of the Rates or charges described in this Service
and Pricing Exhibit applicable to any new Facility or Facilities ordered by
Customer.
4. FACILITY MINIMUM SERVICE TERM:
-----------------------------
4.1 Customer acknowledges that the Rates and charges described in Section 3
of this Service and Pricing Exhibit are based on the commitment of Customer to
utilize the Facilities for a specified minimum period of time. Therefore,
notwithstanding anything in this Exhibit to the contrary, Customer shall be
liable for and shall pay to Qwest all Rates, fees and charges which accrue under
this Exhibit for each Facility for the entire Facility Minimum Service Term (as
defined in Section 4.2 of this Service and Pricing Exhibit) applicable to each
such Facility, regardless of whether or not Customer utilizes all or any part of
such Facility during all or any part of the Facility Minimum Service Term
applicable to such Facility, except as is set forth in Section 4.3 of this
Service and Pricing Exhibit.
4.2 The "Facility Minimum Service Term" for each Facility, is defined as
follows:
(a) [* ] from Start of Service Date for DS-1 Facilities.
(b) [* ] from Start of Service Date for DS-3 Facilities.
(c) [* ] from Start of Service Date for OC-3 and above Facilities.
__________________
* This confidential portion has been omitted and filed separately with the
Commission.
4
<PAGE>
4.3 Notwithstanding anything in this Service and Pricing Exhibit to the
contrary, Customer's obligation to pay all Rates, fees and charges applicable to
any particular Facility, including but not limited to any obligation to pay the
applicable MRC [*
] associated with said Facility hereunder shall terminate as to each
Facility authorized to be terminated without penalty pursuant to the Agreement.
UPON TERMINATION OF THIS AGREEMENT FOR ANY OTHER REASON, THE TOTAL OF ALL
CHARGES REFERRED TO IN THIS SECTION 4 SHALL BE AT ONCE DUE AND PAYABLE,
REGARDLESS OF WHETHER OR NOT ALL OF THE FACILITIES MINIMUM SERVICE TERMS HAVE
EXPIRED, AND MAY BE COLLECTED BY QWEST FROM CUSTOMER AS A SINGLE AMOUNT.
5. OUTAGE CREDITS:
--------------
5.1 Customer acknowledges the possibility of an unscheduled, continuous
and/or interrupted period of time when a Facility or Facilities are
"unavailable" (as defined in the Specifications) (hereafter an "Outage"). In
the event of an Outage, Customer shall be entitled to a credit (the "Outage
Credit") determined according to the following formula:
[*
]
5.2 The Outage Credit shall apply to the charges for the total mileage between
end terminals of any Facility affected by an Outage; provided, however, that if
any portion of the affected Facility remains beneficially used or useable by
Customer between any intermediate terminals (where Customer has installed drop
and insert capability) or end terminals, the Outage Credit shall not apply to
that pro-rata portion of the mileage. The length of each Outage shall be
calculated in hours and shall include fractional portions thereof. An Outage
shall be deemed to have commenced upon verifiable notification thereof by
Customer to Qwest, or, when indicated by network control information actually
known to Qwest network personnel, whichever is earlier. Each Outage shall be
deemed to terminate upon restoration of the affected Facility as evidenced by
appropriate network tests by Qwest. Qwest shall give reasonable notice to
Customer of any scheduled outage, and a scheduled outage shall under no
circumstance be viewed as an Outage hereunder.
5.3 Outage Credits shall not be granted if the malfunction of any end-to-end
circuit is due to an Outage or other Defect occurring in Customer's
Interconnection Facilities.
5.4 All Outage Credits shall be credited on the next monthly invoice for the
affected Facility after receipt of Customer's request for credit. The total of
all Outage Credits applicable to or accruing in any given month shall not exceed
the amount payable by Customer to Qwest for that same month for such Facility.
___________________
* This confidential portion has been omitted and filed separately with the
Commission.
5
<PAGE>
5.5 The Outage Credit described in this Section 5 of this Service and Pricing
Exhibit shall be the sole and exclusive remedy of Customer in the event of any
Outage, and under no circumstance shall an outage be deemed a Default under this
Exhibit.
6
<PAGE>
Schedule A-1
Circuit Listing
---------------
(See Attached Schedule Report or Service Order)
(If the above is not present, waiting on Customer to send Service order.)
1
<PAGE>
QWEST PRIVATE LINE SERVICE DESCRIPTION
Schedule A-2 to Exhibit A
To
Qwest Communications Private Line Service Agreement
TECHNICAL SPECIFICATIONS
1. Interconnect Specifications:
1.1 The customer interconnection point of DS-1 & DS-3 signals at the Qwest
(SPT) location will be at an industry standard (DSX-1) & (DSX-3) digital
cross-connect panels and will be referred to as Qwest Network Interface in this
document.
1.2 The DS-1 & DS-3 signals terminating at the Qwest digital cross-connect
panels will meet the electrical specifications as defined in AT&T Compatibility
Bulletin (CB) No. 119, Issue 3, October, 1979.
1.3 The Qwest Digital Network will be compatible with the Bell System
hierarchical clock synchronization methods and stratum levels as described in
Bellcore Technical Advisory (GR436-Core).
1.4 Customer equipment must also meet the interconnect specifications listed
above and shall comply with jitter requirements of AT&T Technical Reference PUB
63411.
2. Performance Objectives:
2.1 DS1, DS3, OC-3, OC-12, OC-48, OC-3c, OC-12c, and OC-48c circuit performance
will be measured using two parameters: Availability and Error-Free Seconds.
The following assumptions apply to the derived data:
. The circuits originate and terminate on the SONET OC-48 backbone
. High speed protection switching: 1 for N, where N=2
. MTTR for SONET equipment: 2 hours
. MTTR for fiber optic cable: 12 hours (Bellcore Standard)
. Cable cut rate: 4.39 /year/1,000 sheath miles (Bellcore Standard)
The system includes three (3) DCS in Los Angeles, Sacramento, and San Jose
(although not all circuits are routed through the DCS, they are included in all
the calculations)
2.2 Availability is a measure of the relative amount of time during which the
circuit is available for use. According to CCITT and ANSI definitions,
unavailability begins when the Bit Error Ratio (BER) in each second is worse
than 1.0 E-3 for a period of 10 consecutive seconds.
1
<PAGE>
QWEST PRIVATE LINE SERVICE DESCRIPTION
Inter Office Channel (IOC) : An Inter Office Channel refers to the Qwest
Communications network between the points of presence (POP).
Optical Carrier level 1 (OC-1) : The optical signal that results from an
optical conversion of an electrical STS-1 signal (51.840 Mb/s). This signal
forms the basis of the interface.
OC-3: Optical Carrier level 3 signal operating at 155.520 Mb/s.
OC-12: Optical Carrier level 12 signal transmitting at 622.080 Mb/s.
OC-48: Optical Carrier level 48 signal transmitting at 2488.32 Mb/s.
Point of Presence (POP): A physical location where a long distance carrier
terminates lines before connecting to the local exchange carrier, another
carrier, or directly to a customer.
2.3 The availability objective for all circuits between Qwest Network Interface
points specified above is to provide performance levels over a 12 month period
as follows:
- -------------------------------------------------------------
V&H Miles DS1, DS3, OC-3, OC-12, OC-48,
OC-3c, OC-12c, and OC-48c
- -------------------------------------------------------------
0-2500 [* ]
- -------------------------------------------------------------
2501-4000 [* ]
- -------------------------------------------------------------
This excludes any customer provided access links to the Qwest digital
network.
2.4 Outages attributable to incidental damage to or severage of outside fiber
optic cable plant, or scheduled maintenance is excluded from the performance
objective stated above.
2.5 Error-Free Seconds (EFS) and Error Seconds (ES) are the primary measure of
error performance. An Error-Free Second is defined as any second in which no
bit errors are received. Conversely, an Error Second is any second in which one
or more bit errors are received.
3. SONET : Synchronous Optical Network is a family of optical transmission
rates and interface standards allowing internetworking of products from
different vendors. Base optical rate is 51.840 Mb/s. Higher rates are direct
multiples.
SONET Transport : Facilities associated with carrying OC-1 or higher level
signals.
_______________________
* This confidential portion has been omitted and filed separately with the
Commission.
2
<PAGE>
QWEST PRIVATE LINE SERVICE DESCRIPTION
Synchronous Transport Signal level 1 (STS-1) : The basic logical building block
electrical signal with a rate of 51.840 Mb/s.
Synchronous Transport Signal level N (STS-N) : This electrical signal is
obtained by byte interleaving N STS-1 signals together. The rate of the STS-N
is N times 51.840 Mb/s.
Terminating Multiplex (TM) : Provides the multiplex functions for multiplexing
and demultiplexing between the DS1 or higher signal level and the SONET OC-N
level.
4. Acceptance Criteria. The acceptance criteria for DS1, DS3, OC-3, OC-12, OC-
48, OC-3c, OC-12c, and OC-48c circuits between Qwest Network Interface points is
to provide the performance levels shown below during a 60 minute test period. If
no errors are observed during the first 15 minutes of the test, the facility may
be considered acceptable. Access connections to customer location will be tested
in accordance with Bell Publication 62508.
. The tables below are based on QCC owned fiber optic network only and on the
Bellcore Specifications of the SONET delivery of DS1, DS3, OC-3, OC-12, OC-48,
OC-3c, OC-12c, and OC-48c directly off the SONET Backbone.
. If the DS1, DS3, OC-3, OC-12, OC-48, OC-3c, OC-12c, and OC-48c service is
delivered at the STS1 level then the general performance objectives fall into
the industry standard.
DS1, DS3
The table below defines the general performance objectives for DS1 service
operating at 1.544 Mb/s, and the general performance objectives for DS3 service
operating at 45 Mb/s.
-------------------------------------------------------------
V&H Miles EFS BER
-------------------------------------------------------------
0 - 250 [* ] 10/-15/
-------------------------------------------------------------
251 - 500 [* ] 10/-15/
-------------------------------------------------------------
501 - 1000 [* ] 10/-15/
-------------------------------------------------------------
1001 - 1500 [* ] 10/-15/
-------------------------------------------------------------
1501 - 2000 [* ] 10/-15/
-------------------------------------------------------------
_______________________
* This confidential portion has been omitted and filed separately with the
Commission.
3
<PAGE>
QWEST PRIVATE LINE SERVICE DESCRIPTION
-------------------------------------------------------------
V&H Miles EFS BER
-------------------------------------------------------------
2001 - 2500 [* ] 10/-15/
-------------------------------------------------------------
2501 - 3000 [* ] 10/-15/
-------------------------------------------------------------
3001 - 3500 [* ] 10/-15/
-------------------------------------------------------------
3501 - 4000 [* ] 10/-15/
-------------------------------------------------------------
OC-3, 12, 48; OC-3c, 12c, 48c
The table below defines the general performance objectives for OC-3, OC-12, OC-
48, OC-3c, OC-12c, and OC-48c.
--------------------------------------------------------------
V&H Miles EFS BER
--------------------------------------------------------------
0 - 250 [* ] 10/-15/
--------------------------------------------------------------
251 - 500 [* ] 10/-15/
--------------------------------------------------------------
501 - 1000 [* ] 10/-15/
--------------------------------------------------------------
1001 - 1500 [* ] 10/-15/
--------------------------------------------------------------
1501 - 2000 [* ] 10/-15/
--------------------------------------------------------------
2001 - 2500 [* ] 10/-15/
--------------------------------------------------------------
2501 - 3000 [* ] 10/-15/
--------------------------------------------------------------
3000 - 3500 [* ] 10/-15/
--------------------------------------------------------------
3501 - 4000 [* ] 10/-15/
--------------------------------------------------------------
__________________
* This confidential portion has been omitted and filed separately with the
Commission.
4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 0
<SECURITIES> 53,800,204
<RECEIVABLES> 273,567
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 72,684,881
<PP&E> 34,403,610
<DEPRECIATION> (9,329,168)
<TOTAL-ASSETS> 293,022,823
<CURRENT-LIABILITIES> 101,677,071
<BONDS> 108,184,485
0
0
<COMMON> 27,270
<OTHER-SE> 42,383,830
<TOTAL-LIABILITY-AND-EQUITY> 293,022,823
<SALES> 565,125
<TOTAL-REVENUES> 565,125
<CGS> 0
<TOTAL-COSTS> 30,027,561
<OTHER-EXPENSES> 754,312
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,853,455
<INCOME-PRETAX> (44,070,203)
<INCOME-TAX> 1,062,045
<INCOME-CONTINUING> (43,008,158)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (43,008,158)
<EPS-BASIC> (1.59)
<EPS-DILUTED> (1.59)
</TABLE>
