<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1997 Commission File No. 0-21579
SMARTALK TELESERVICES, INC.
--------------------------
Incorporated under the laws IRS Employer Identification
of California No. 95-4502740
1640 S. Sepulveda Boulevard
Suite 500
Los Angeles, California 90025
Telephone: 310-444-8800
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 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 issuer's classes of
common stock at July 30, 1997:
Voting, No par value: 16,283,498
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SMARTALK TELESERVICES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1997 1996
----------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 32,092,782 $ 44,830,487
Trade accounts receivable, net 10,940,418 2,254,192
Inventories 1,390,349 601,020
Prepaid expenses 438,223 327,696
Other current assets 4,712,611 1,682,768
----------------- -----------------
Total current assets 49,574,383 49,696,163
Non-current assets:
Property and equipment, net 3,640,955 744,748
Goodwill, net 96,575,986 --
Other non-current assets 519,803 90,509
----------------- -----------------
Total assets $ 150,311,127 $ 50,531,420
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,485,929 $ 3,527,192
Deferred revenue 18,083,322 2,699,640
Accrued marketing costs -- 136,931
Other accrued expenses 2,091,644 352,226
Deposit from customer 4,060,958 --
Excise and sales tax payable 2,927,113 --
Current portion of leases 103,164 --
----------------- -----------------
Total current liabilities 35,752,130 6,715,989
Long-term debt less current portion 26,921,111 --
----------------- -----------------
Total liabilities 62,673,241 6,715,989
Shareholders' equity:
Preferred stock, no par value; authorized 10,000,000 shares;
no shares issued and outstanding -- --
Common stock, no par value; authorized 100,000,000 shares;
issued and outstanding 16,259,847 and 12,829,459 shares, 95,585,878 50,786,781
respectively
Accumulated deficit (7,947,992) (6,971,350)
----------------- -----------------
Total shareholders' equity 87,637,886 43,815,431
----------------- -----------------
Total liabilities and shareholders' equity $ 150,311,127 $ 50,531,420
================= =================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
2
<PAGE>
SMARTALK TELESERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
----------------------------- -----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue $ 11,796,890 $ 2,538,655 $ 19,165,223 $ 3,678,020
Cost of revenue 7,204,054 1,929,238 11,964,802 2,742,115
------------ ------------ ------------ ------------
Gross profit 4,592,836 609,417 7,200,421 935,905
Sales and marketing 2,996,050 986,321 5,541,464 1,643,426
General and administrative 2,619,144 758,051 3,520,375 1,459,293
------------ ------------ ------------ ------------
Operating loss (1,022,358) (1,134,955) (1,861,418) (2,166,814)
Interest income 580,761 -- 1,109,524 --
Interest expense 224,748 59,559 224,748 104,372
------------ ------------ ------------ ------------
Loss before income taxes (666,345) (1,194,514) (976,642) (2,271,186)
Provision for income taxes -- -- -- --
------------ ------------ ------------ ------------
Net loss $ (666,345) $ (1,194,514) $ (976,642) $ (2,271,186)
============ ============ ============ ============
Net loss per share $ (.05) $ (.13) $ (.07) $ (.24)
============ ============ ============ ============
Weighted average number of shares 13,940,285 9,335,348 13,421,860 9,335,348
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
SMARTALK TELESERVICES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) (UNAUDITED)
<TABLE>
<CAPTION>
Common Stock
----------------------------- Stock Accumulated
Shares Amount Subscription Deficit Total
---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
December 31, 1995 8,824,834 $ 315,000 $ (300,000) $ (1,394,774) $ (1,379,774)
Issuance of subscribed shares -- -- 300,000 -- 300,000
Purchase of assets of related entity -- -- -- (2,464,028) (2,464,028)
Compensation under stock options
issued -- 24,000 -- -- 24,000
Proceeds from sale of stock, net of
costs 4,000,000 50,439,595 -- -- 50,439,595
Stock options exercised 4,625 8,186 -- -- 8,186
Net loss -- -- -- (3,112,548) (3,112,548)
---------- ------------ ------------ ------------ ------------
December 31, 1996 12,829,459 50,786,781 -- (6,971,350) 43,815,431
Stock options exercised 136,101 594,093 -- -- 594,093
GTI Telecom acquisition 2,580,001 34,830,000 -- -- 34,830,000
Smartel Telecommunication acquisition 714,286 9,375,004 -- -- 9,375,004
Net Loss -- -- -- (976,642) (976,642)
---------- ------------ ------------ ------------ ------------
June 30, 1997 16,259,847 $ 95,585,878 -- $ (7,947,992) $ 87,637,886
========== ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
SMARTALK TELESERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (976,642) $ (2,271,186)
Adjustments to reconcile net loss to net cash provided
from (used by) operating activities:
Depreciation 158,342 18,186
Amortization 395,715 --
Provision for bad debt 276 78,264
Sublease termination fee (325,810) --
Changes in assets and liabilities
which increase (decrease) cash:
Accounts receivable (2,140,172) (1,768,260)
Inventories (130,114) 88,145
Prepaid expenses (1,721,609) (49,709)
Other current assets 748,843 63,714
Other non-current assets (362,879) (106,354)
Accounts payable (738,997) 1,057,544
Deferred revenue 51,240 431,404
Accrued marketing costs (136,931) (216,532)
Other accrued expenses 329,155 278,868
------------ ------------
Net cash used by operating activities (4,849,583) (2,395,916)
Cash flows from investing activities:
Capital expenditures (475,182) (456,357)
Acquisitions costs (1,623,342) --
------------ ------------
Net cash used by investing activities (2,098,524) (456,357)
------------ ------------
Cash flows from financing activities:
Common stock proceeds, net -- 300,000
Stock options exercised 594,093 --
Note payable to related party -- 1,200,000
Revolving line of credit with related party -- 500,000
Payment to LCN -- (500,000)
Payment of note payable to Worldcom (6,383,691) --
------------ ------------
Net cash, provided from financing activities (5,789,598) 1,500,000
------------ ------------
Decrease in cash and cash equivalents (12,737,705) (1,352,273)
Cash and cash equivalents at beginning of period 44,830,487 2,115,351
------------ ------------
Cash and cash equivalents at end of period $ 32,092,782 $ 763,078
============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 3,915 $ 129,444
============ ============
Note payable for LCN purchase $ -- $ 2,000,000
============ ============
Issuance of stock for acquisitions $ 44,205,004 $ --
============ ============
Issuance of debt for acquisitions $ 26,500,000 $ --
============ ============
Purchase of Voice Choice Platform through issuance of note payable $ -- $ 125,000
============ ============
Debt assumed at acquisition $ 6,383,691 $ --
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
SMARTALK TELESERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF INTERIM PRESENTATION
The accompanying interim period financial statements are unaudited, pursuant to
certain rules and regulations of the Securities and Exchange Commission, and
include, in the opinion of management, all adjustments (consisting of only
normal recurring accruals) necessary for a fair statement of the results for the
periods indicated; which, however, are not necessarily indicative of results
which may be expected for the full year. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The financial statements should be
read in conjunction with the financial statements and the notes thereto for the
year ended December 31, 1996 and other information included in the Company's
Form 10-K and Forms 8-K as filed with the Securities and Exchange Commission.
2. ACQUISITIONS
On May 28, 1997 the Company acquired SmarTel Communications Inc., a Boston based
prepaid promotions phone card company, for 714,286 shares of common stock. On
May 31, 1997 the Company acquired GTI Telecom, Inc., a Florida based prepaid
phone card company for 2,580,001 shares of common stock and $26,500,000 in
subordinated debt. Both of these acquisitions have been accounted for using the
purchase method of accounting. Accordingly, the results of operations of the
acquired businesses are included in the Company's consolidated results of
operations from the date of acquisition.
3. LONG TERM DEBT
In connection with the acquisition of GTI Telecom, Inc. the Company incurred
$26,500,000 of 10% per annum term notes which mature on June 1, 2001. Interest
payments on the note are due quarterly beginning September 1, 1997.
4. DIVIDENDS
There were no dividends declared or paid for the six months ended June 30,
1997 or 1996.
SMARTALK TELESERVICES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
GENERAL
SmarTalk provides convenient, easy to use, "cost-effective"
telecommunications products and services to individuals and businesses primarily
through its SmarTalk Card. The SmarTalk Card provides customers with a single
point of access to prepaid telecommunications services at a fixed rate charge
per minute regardless of the time of day or, in the case of domestic calls, the
distance of the call. The Company's services currently include domestic
calling, inbound and outbound international long distance calling as well as
enhanced features such as sequential calling, content delivery, speed dial and
message delivery. The SmarTalk Card may also be recharged on-line with a major
credit card, allowing the user to add minutes as needed.
SmarTalk services are delivered through proprietary switching,
application and database access software which run on interactive call
processing platforms. The SmarTalk platforms and the Company's proprietary
software allow users in the system to access SmarTalk services, and provide the
Company with the flexibility to customize and add features to SmarTalk services
on a platform-wide basis.
SmarTalk's revenue originates from (i) Company and co-branded phone card
sales through retailers, (ii) recharges of existing phone cards, (iii) cards
sold for promotional marketing campaigns, (iv) corporate sales to businesses and
(v) prepaid phone card services provided to one of the Company's strategic
partners.
Under sales agreements with the majority of retailers, the Company sells
cards to the retailer at a set price with normal credit terms. The Company
generally invoices the retailer upon shipment, recognizing deferred revenue.
The Company recognizes revenue and reduces the deferred revenue account as the
customer utilizes calling time or upon expiration of cards containing unused
calling time. The Company also recognizes deferred revenue upon recharge of
existing phone cards and recognizes the revenue upon the usage or expiration of
the recharge minutes.
6
<PAGE>
The Company was formed in October 1994 and had limited operations until
June 1995. On October 23, 1996, the Company completed the sale of 4,000,000
shares of its stock in a public offering on the NASDAQ national stock market.
The Company raised proceeds of $50,471,781 after deducting the underwriting
discount and other related costs. A portion of the proceeds were used to repay
all of the Company's non-acquisition indebtedness.
The Company purchased GTI Telecom, Inc. and SmarTel Communications, Inc.
(collectively "the Acquisitions") on May 31, 1997 and May 28, 1997,
respectively. Both of these companies are in the same business as the Company.
The Acquisitions have been accounted for using the purchase method of
accounting. Accordingly, the results of operations of the Acquisitions are
included in the Company's consolidated results of operations from the date of
acquisition. Financial comparisons to prior periods are not necessarily
meaningful due to the impact of the Acquisitions.
A significant portion of the Company's business strategy is to pursue
additional distribution opportunities through the retail and alternate
distribution channels and through strategic acquisitions.
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1997 COMPARED WITH QUARTER ENDED JUNE 30, 1996
Revenue. Revenue increased to $11,796,890 for the quarter ended June 30,
1997 from $2,538,655 for the quarter ended June 30, 1996. The substantial
increase in revenue reflects an increase in usage of SmarTalk services by users
of the SmarTalk Card, an increase in the number of retail storefronts in which
the Company's product is distributed, greater brand awareness, consumer
acceptance, the Acquisitions, and revenue attributable to a distribution and
processing agreement entered into on June 1, 1996 with West Interactive
Corporation. Revenue attributable to the distribution and processing agreement
was $4,769,342 in the second quarter of 1997 and $460,000 for the same period
last year. In addition, approximately 8.9% of total revenue for the quarter
ended June 30, 1997 consisted of revenue recognized on the unused portion of
expired cards (breakage revenue) as compared to 0% for the quarter ended June
30, 1996. Excluding the revenue from the distribution and processing agreement
and from breakage revenue, the recharge percentage is 13.7% and 17.3% for the
quarters ended June 30, 1997 and 1996, respectively. This percentage decreased
year over year as the Company significantly increased its credit card fraud
detection procedures.
Cost of Revenue. Cost of revenue increased to $4,592,836 for the quarter
ended June 30, 1997 from $1,929,238 for the quarter ended June 30, 1996. The
increase was primarily attributable to greater use of the Company's services and
the Acquisitions. The gross profit percentage for the quarter ended June 30,
1997 was 38.9% as compared to 24.0% for the quarter ended June 30, 1996. The
gross margin percentage increased due to lower transport costs associated with
operating the Company's own platforms and the Company's ability to recognize
breakage revenue.
Sales and Marketing Expenses. Sales and marketing expenses increased to
$2,996,050 (or 25.4% of revenue) for the quarter ended June 30, 1997 from
$986,321 (or 38.8% of revenue) for the quarter ended June 30, 1996. The decrease
as a percentage of revenue was due to revenue growth in 1997. The increased
dollar amount was primarily due to the Acquisitions and continued expansion of
the Company's marketing activities, which include co-op advertising,
manufacturers development funds and promotional goods. Additionally, commission
expense was higher in 1997 than in 1996 due to increased sales activity.
General and Administrative Expenses. General and administrative expenses
increased to $2,619,144 (or 22.2% of revenue) for the quarter ended June 30,
1997 from $758,051 (or 29.9% of revenue) for the quarter ended June 30, 1996.
The increase in dollar amount was primarily due to the Acquisitions, the
addition of personnel and costs associated with the growth in the Company's
business. The decrease as a percentage of revenue was due to increased revenue
growth in 1997. General and administrative costs for the quarter ended June 30,
1997 included rent associated with the Company's move into a new office on March
1, 1996, credit card processing fees associated with the Company's on-line
recharge feature, as well as increased general operating expenses.
Interest Income (Expense). Interest income, net of interest expense for
the quarter ended June 30, 1997 was $356,013 as compared to $(59,559) for the
quarter ended June 30, 1996. This increase was primarily due to the interest
earned on the Company's cash investments, net of interest expense on acquisition
indebtedness, and the subsequent repayment of all of the Company's
non-acquisition debt in November 1996.
Income Tax. The Company had losses for the quarters ended June 30, 1997
and 1996. Accordingly, there was no provision for income taxes.
Net Loss. As a result of the above items, the net loss decreased to
$666,345 for the quarter ended June 30, 1997 from $1,194,514 for the quarter
ended June 30, 1996.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1996
Revenue. Revenue increased to $19,165,223 for the six months ended June
30, 1997 from $3,678,020 for the six months ended June 30, 1996. The substantial
increase in revenue reflects an increase in usage of SmarTalk services by users
of the SmarTalk Card, an increase in the number of retail storefronts in which
the Company's product is distributed, greater brand awareness, consumer
acceptance, the acquisitions and revenue attributable to a distribution and
processing agreement entered into on June 1, 1996 with West Interactive
Corporation. Revenue attributable to the distribution and processing agreement
was $8,619,391 and $460,000 for the six months ended June 30, 1997 and 1996,
respectively. Revenue generated from recharges comprised approximately 6.0% of
total revenue for the six months ended June 30, 1997 compared to 13.4% for the
comparable period in 1996. Excluding the revenue from the distribution and
processing agreement and from breakage revenue, the recharge percentage is 13.2%
and 15.9% for the six months ended June 30, 1997 and 1996, respectively. This
percentage decreased year over year as the Company significantly increased its
credit card fraud detection procedures.
Cost of Revenue. Cost of revenue increased to $11,964,802 for the six
months ended June 30, 1997 from $2,742,115 for the six months ended June 30,
1996. The increase was primarily attributable to greater use of the Company's
services and the Acquisitions. The gross profit percentage for the six months
ended June 30, 1997 was 37.6% as compared to 25.4% for the six months ended June
30, 1996. The gross margin percentage increased due to lower transport costs
associated with operating the Company's own platforms and the Company's ability
to recognize breakage revenue.
Sales and Marketing Expenses. Sales and marketing expenses increased to
$5,541,464 or (28.9% of revenue) for the six months ended June 30, 1997 from
$1,643,426 (or 44.7% of revenue) for the six months ended June 30, 1996. The
increase in dollar amount was primarily due to the Acquisitions, commissions
paid to sales representatives generally and to retailers for recharges, as well
as the continued expansion of the Company's marketing activities, which include
co-op advertising, manufacturers development funds, free promotional goods and
the Acquisitions. The decrease as a percentage of revenue was due to increased
revenue growth in 1997. Additionally, expense was reduced as the Company
received enhanced feature equipment with a net fair-value of $325,810 in
exchange for early termination of a facility sublease with a strategic partner.
General and Administrative Expenses. General and administrative expenses
increased to $3,520,375 (or 18.4% of revenue) for the six months ended June 30,
1997 from $1,459,293 (or 39.7% of revenue) for the six months ended June 30,
1996. The increase in dollar amount was primarily due to the Acquisitions,
general and administrative expense, amortization of purchase goodwill, and the
addition of personnel and costs associated with the growth in the Company's
business. The decrease as a percentage of revenue was due to increased revenue
growth in 1997. Additionally, expense was reduced as the Company received
enhanced feature equipment, with a net fair value of $325,810, in exchange for
early termination of a facility sublease with a strategic partner.
Interest Income (Expense). Interest income, net of interest expense for the
six months ended June 30, 1997 was $884,776 as compared to $(104,372) for the
six months ended June 30, 1996. This increase was primarily due to the interest
earned on the Company's cash investments, net of interest expense on acquisition
indebtedness, and the subsequent repayment of all of the Company's non-
acquisition debt in November 1996.
Income Taxes. The Company had losses for the six months ended June 30, 1997
and 1996. Accordingly, there was no provision for income taxes.
Net Loss. As a result of the above items, net loss decreased to $976,642
for the six months ended June 30, 1997 from $2,271,186 for the six months ended
June 30, 1996.
7
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
On October 23, 1996, the Company completed the sale of 4,000,000 shares
of its stock in a public offering (the "Offering"), pursuant to which the Common
Stock is now listed on the NASDAQ national stock market. The Company raised
proceeds of $50,471,781 after deducting the underwriting discount and other
related offering costs. A portion of the proceeds were used to repay all of the
Company's non-acquisition indebtedness.
From inception through December 31, 1996, the Company has funded
operations primarily from cash generated by operations, borrowings under its
debt agreements and the sale of its stock. The Company's operating activities
used net cash of $(4,849,583) for the six months ended June 30, 1997. The cash
used by operating activities is primarily attributable to the Company's
continued efforts to increase its penetration of the retail and alternate
distribution channels.
On May 28, 1997 the Company issued 714,286 shares of common stock to
purchase SmarTel Communications, Inc.
On May 31, 1997 the Company issued 2,580,001 shares of Common Stock and
$26,500,000 in subordinated 10% per annum term notes which mature May 31, 2001
to purchase GTI Telecom, Inc. Interest payments on the note are due quarterly
beginning September 1, 1997.
In December 1996, the Company entered into a revolving credit facility
with Southern California Bank ("SCB Line of Credit"). Pursuant to the terms of
the SCB Line of Credit, the Company can borrow up to $1,000,000 secured by an
assignment of a deposit account with SCB. Interest on the outstanding principal
balance, calculated from the date of each advance to the repayment of each
advance is at a fixed rate of 7.12%. The credit facility was undrawn at June
30, 1997.
The Company believes that the proceeds from the Offering, together with
the funds anticipated to be generated from operations, will be sufficient to
finance the Company's operations for the next 12 months.
8
<PAGE>
SMARTALK TELESERVICES, INC.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K.
10.1 Employment agreement of Erich L. Spangenberg dated
April 14, 1997.
10.2 Telecommunications Services Agreement dated December 1,
1996 by and between WorldCom Network Services, Inc. and
GTI Telecom, Inc.*
27.1 Financial Data Schedule
(b) Reports on Form 8-K
SmarTalk filed a Form 8-K on June 12, 1997 pertaining to the
acquisition of SmarTel Communications, Inc. containing item
number 2 and item number 7(c) exhibits 2.1, 4.1 and 99.1.
SmarTalk filed a Form 8-K on June 12, 1997 pertaining to the
acquisition of GTI Telecom, Inc. containing item number 2 and
item number 7(c) exhibits 2.1, 4.1 and 99.1.
* Confidentiality treatment has been requested and certain sections have been
redacted.
9
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SmarTalk TeleServices, Inc.
---------------------------
(Registrant)
Date: August 14, 1997 By: /s/ Andrew Folck
---------------------------
Andrew Folck
Chief Financial Officer
10
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made this 14th day of
April, 1997 between SMARTALK TELESERVICES, INC., a California corporation (the
"Company") and ERICH L. SPANGENBERG (the "Executive").
WHEREAS, the parties hereto wish to enter into an employment agreement
to employ the Executive as the President and Chief Operating Officer of the
Company and to set forth certain additional agreements between the Executive and
the Company.
NOW, THEREFORE, in consideration of the mutual covenants and
representations contained herein, the parties hereto agree as follows:
1. Term.
----
The Company will employ the Executive, and the Executive will serve
the Company, under the terms of this Agreement for an initial term of three
years, commencing on April 14, 1997. Effective as of the expiration of such
initial three-year term and as of each anniversary date thereof, the term of
this Agreement shall be extended for an additional one-year period unless, not
later than six months prior to each such respective date, either party hereto
shall have given notice to the other that the term shall not be so extended.
Notwithstanding the foregoing, the Executive's employment hereunder may be
earlier terminated, as provided in Section 4 hereof. The term of this Agreement,
as in effect from time to time in accordance with the foregoing, shall be
referred to herein as the "Term". The period of time between the commencement
and the termination of the Executive's employment hereunder shall be referred to
herein as the "Employment Period."
2. Employment.
----------
(a) Positions and Reporting. The Company hereby employs the Executive
-----------------------
for the Employment Period as its President and Chief Operating Officer on the
terms and conditions set forth in this Agreement. During the Employment Period,
the Executive shall report directly to the Chief Executive Officer of the
Company.
(b) Authority and Duties. The Executive shall exercise such
--------------------
authority, perform such executive duties and functions and discharge such
responsibilities as are reasonably associated with the Executive's positions,
commensurate with the authority vested in the Executive pursuant to this
Agreement and consistent with the By-Laws of the Company as in effect on the
date hereof. During the Employment Period, the Executive shall devote full
business time, skill and efforts to the business of the Company. Notwithstanding
the
1
<PAGE>
foregoing, the Executive may (i) make and manage personal business investments
of his choice and serve in any capacity with any civic, educational or
charitable organization, or any trade association, without seeking or obtaining
approval by the Board of Directors of the Company (the "Board"), provided such
activities and service do not materially interfere or conflict with the
performance of his duties hereunder and (ii) with the approval of the Board,
serve on the boards of directors of other corporations.
3. Compensation and Benefits.
-------------------------
(a) Salary. During the Employment Period, the Company shall pay to
------
the Executive, as compensation for the performance of his duties and obligations
under this Agreement, a base salary at the rate of $195,000 per annum, payable
in arrears not less frequently than monthly in accordance with the normal
payroll practices of the Company (the "Base Salary"). Such Base Salary shall be
subject to review each year for possible increase by the Board in its sole
discretion, but shall in no event be decreased from its then-existing level
during the Employment Period.
(b) Annual Bonus. The Executive shall earn bonus amounts in the form
------------
of cash and stock awards, to be paid to the Executive within sixty (60) days
following the year-end audit, based upon the satisfaction of performance
criteria that will be established by a committee of the Board (the "Compensation
Committee") in its discretion and upon consultation with the Executive at the
beginning of each year, but in no case after January 31, subject to the approval
of the Board. Such performance criteria will include corporate performance goals
consistent with the Company's business plan for the year, as well as individual
objectives for the Executive's performance that are separate from, but are
consistent with, the Company's business plan. The final determinations as to the
actual corporate and individual performance against the pre-established goals
and objectives, and the amounts of any additional bonus payout in relationship
to such performance, shall be made by the Compensation Committee in its sole
discretion. The cash and stock components of the Executive's bonus awards shall
be in the same average proportion as the awards granted to the other senior
management of the Company. For purposes of this Agreement, senior management of
the Company shall be the chief executive officer, the executive vice president,
the chief financial officer and the general counsel.
(c) Car Allowance. Employer shall pay to Executive as an automobile
-------------
allowance the sum of $1000 per month during the Employment Period in lieu of any
other provision for an automobile, insurance, maintenance, gasoline and
expenses.
(d) Insurance Policies. The Company shall pay to the Executive the
------------------
premium amount of $7,000 per year for Executive to maintain in force during the
Employment Period, life and disability insurance on the Executive, the
beneficiary of which shall be designated by the Executive (the "Executive
Policies"). The Company may also purchase "key-person" life insurance policies
on the Executive's life in such amounts and of such types as is determined by
the Board. The Executive shall cooperate fully with the Company in obtaining
such insurance and shall submit to such physical examinations and provide such
information as is
2
<PAGE>
reasonably required to obtain and maintain such policies. Neither the Executive
nor his successor-in-interest or estate shall have any interest in any such key-
person policies so obtained.
(e) Other Benefits. During the Employment Period, the Executive shall
--------------
receive such other life insurance, pension, disability insurance, health
insurance, holiday, vacation and sick pay benefits and other benefits which the
Company extends, as a matter of policy, to its executive employees and, except
as otherwise provided herein, shall be entitled to participate in all deferred
compensation and other incentive plans of the Company on the same basis as other
like employees of the Company. Without limiting the generality of the foregoing,
the Executive shall be entitled to three (3) weeks vacation during each year of
the Employment Period, which shall be scheduled in the Executive's discretion,
subject to and taking into account the business exigencies of the Company.
Unused vacation may be accrued up to a maximum of six (6) weeks of unused
vacation, and thereafter the Executive shall cease to accrue vacation thereafter
until used.
(f) Business Expenses. During the Employment Period, the Company
-----------------
shall promptly reimburse the Executive for all documented reasonable business
expenses incurred by the Executive in the performance of his duties under this
Agreement, in accordance with the Company's policies and standards of similar or
comparable companies.
(g) Stock Options. Concurrently with the execution of this Agreement,
-------------
the Company and Executive will enter into a Stock Option Agreement, attached
hereto as Exhibit A, pursuant to which the Company shall grant to the Executive
an option to purchase up to 300,000 shares of common stock of the Company on the
terms and conditions set forth therein.
(h) Signing Bonus. The Company shall pay to the Executive upon the
-------------
execution of this Agreement thirty-five thousand dollars ($35,000) as a signing
bonus which amount shall be earned by Executive pro rata over the first year of
the Employment Period. Should Executive cease to be employed during the first
year of the Employment Period, Executive shall promptly remit any unearned
portion of this signing bonus.
4. Termination of Employment.
-------------------------
(a) Termination for Cause. The Company may terminate the Executive's
---------------------
employment hereunder for cause. For purposes of this Agreement and subject to
the Executive's opportunity to cure as provided in Section 4(c) hereof, the
Company shall have "cause" to terminate the Executive's employment hereunder if:
(i) The Executive has materially breached a material provision
of this Agreement, and, if such breach is curable, it has not been cured or
reasonably commenced being cured within thirty (30) days after written
notice from the Company;
(ii) The Executive is convicted of or pleads guilty to a felony
involving financial misconduct or moral turpitude.
3
<PAGE>
(b) Termination for Good Reason. The Executive shall have the right
---------------------------
at any time to terminate his employment with the Company for any reason. For
purposes of this Agreement and subject to the Company's opportunity to cure as
provided in Section 4(c) hereof, the Executive shall have "good reason" to
terminate his employment hereunder if such termination shall be the result of:
(i) a material diminution during the Employment Period in the
Executive's duties or responsibilities as set forth in Section 2 hereof;
(ii) a breach by the Company of the compensation and benefits
provisions set forth in Section 3 hereof;
(iii) termination by the Executive for any reason within 12
months following the occurrence of a Change in Control (as defined in
Section 4(e) hereof);
(iv) a material breach by the Company of any material terms of
this Agreement.
(c) Notice and Opportunity to Cure. Notwithstanding the foregoing, it
------------------------------
shall be a condition precedent to the Company's right to terminate the
Executive's employment for "cause" and the Executive's right to terminate his
employment for "good reason" that (1) the party seeking the termination shall
first have given the other party written notice stating with specificity the
reason for the termination ("breach") and (2) if such breach is susceptible of
cure or remedy, a period of 30 days from and after the giving of such notice
shall have elapsed without the breaching party having effectively cured or
remedied such breach during such 30-day period, unless such breach cannot be
cured or remedied within 30 days, in which case the period for remedy or cure
shall be extended for a reasonable time (not to exceed 30 days) provided the
breaching party has made and continues to make a diligent effort to effect such
remedy or cure.
(d) Termination Upon Death or Permanent and Total Disability. The
--------------------------------------------------------
Employment Period shall be terminated by the death of the Executive. The
Employment Period may be terminated by the Company if the Executive shall be
rendered incapable of performing his duties to the Company by reason of any
medically determined physical or mental impairment that can be expected to
result in death or that can be expected to last for a period of six or more
consecutive months from the first date of the disability ("Disability"). If the
Employment Period is terminated by reason of Disability of the Executive, the
Company shall give 30-days' advance written notice to that effect to the
Executive.
(e) Definition of Change in Control. A "Change in Control" shall be
-------------------------------
deemed to have taken place if:
(i) there shall be consummated any consolidation or merger of
the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's capital stock are
converted into cash,
4
<PAGE>
securities or other property (other than a consolidation or merger of the
Company in which the holders of the Company's voting stock immediately
prior to the consolidation or merger shall, upon consummation of the
consolidation or merger, own at least 50% of the voting stock) or any sale,
lease, exchange or other transfer (in one transaction or a series of
transactions contemplated or arranged by any party as a single plan) of all
or substantially all of the assets of the Company; or
(ii) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) shall, after the date hereof, become the beneficial owner (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, of securities of the Company representing 35% or more of the
voting power of all of the then outstanding securities of the Company
having the right under ordinary circumstances to vote in an election of the
Board (including, without limitation, any securities of the Company that
any such person has the right to acquire pursuant to any agreement, or upon
exercise of conversion rights, warrants or options, or otherwise, shall be
deemed beneficially owned by such person); or
(iii) individuals who as of the date hereof constitute the entire
Board and any new directors whose election by the Company's shareholders,
or whose nomination for election by the Company's board, shall have been
approved by a vote of at least a majority of the directors then in office
who either were directors at the date hereof or whose election or
nomination for election shall have been so approved (the "Continuing
Directors") shall cease for any reason to constitute a majority of the
members of the Board.
5. Consequences of Termination.
---------------------------
(a) Termination Without Cause or for Good Reason. In the event of
--------------------------------------------
termination of the Executive's employment hereunder by the Company without
"cause" (other than upon death or Disability) or by the Executive for "good
reason" (each as defined in Section 4 hereof), the Executive shall be entitled
to the following severance pay and benefits:
(i) Severance Pay - a lump sum amount equal to three (3) times
-------------
the Executive's Base Salary as in effect immediately prior to such
termination and the highest bonus paid to the Executive during the
Employment Period.
(ii) Benefits Continuation - continuation for the longer of (A)
---------------------
the then remainder of the Term (as if a timely non-renewal notice has been
given) and (B) 24 months (the "Severance Period") of coverage under the
group medical care, disability and life insurance benefit plans or
arrangements in which the Executive is participating at the time of
termination; provided, however, that the Company's obligation to provide
-------- -------
such coverages shall be terminated if the Executive obtains comparable
substitute coverage from another employer at any time during the Severance
Period. The Executive shall be entitled, at the expiration of the Severance
Period, to elect continued medical coverage in accordance with Section
4980B of the
5
<PAGE>
Internal Revenue Code of 1986, as amended (or any successor provision
thereto).
(b) Termination Upon Disability. In the event of termination of the
---------------------------
Executive's employment hereunder by the Company on account of Disability, the
Executive shall be entitled to the following severance pay and benefits:
(i) Severance Pay - severance payments in the form of
-------------
continuation of the Executive's Base Salary as in effect immediately prior
to such termination for a period of the longer of 12 months following the
first date of Disability and the then remainder of the Term (as if a timely
non-renewal notice has been given);
(ii) Benefits Continuation - the same benefits as provided in
---------------------
Section 5(a)(ii) above, to be provided during the Employment Period while
the Executive is suffering from Disability and for a period of 12 months
following the effective date of termination of employment by reason of
Disability.
In addition to the foregoing, the Company shall remit to the Executive
any benefits received by the Company, as beneficiary, pursuant to any additional
disability insurance policy which was maintained by the Executive prior to his
employment with the Company.
(c) Termination Upon Death. In the event of termination of the
----------------------
Executive's employment hereunder on account of the Executive's death, the
Executive's heirs, estate or personal representatives under law, as applicable,
shall be entitled to the payment of the Executive's Base Salary as in effect
immediately prior to death for a period of three calendar months. The
Executive's beneficiary or estate shall not be required to remit to the Company
any payments received pursuant to any life insurance policy purchased or
maintained pursuant to Section 3(d) above.
(d) Other Terminations. In the event of termination of the
------------------
Executive's employment hereunder for any reason other than those specified in
subsection (a) through (c) of this Section 5, the Executive shall not be
entitled to any severance pay or benefits continuation contemplated by the
foregoing, except as may otherwise be provided under the applicable benefit
plans or award agreements relating to the Executive.
(e) Accrued Rights. Notwithstanding the foregoing provisions of this
--------------
Section 5, in the event of termination of the Executive's employment hereunder
for any reason, the Executive shall be entitled to payment of any unpaid portion
of his Base Salary through the effective date of termination, and payment of any
accrued but unpaid rights solely in accordance with the terms of any incentive
bonus or employee benefit plan or program of the Company.
(f) Conditions to Severance Benefits. (i) The Company shall have the
--------------------------------
right to seek repayment of the severance payments and benefits provided by this
Section 5 in the event that the Executive fails to honor in accordance with
their terms the provisions of Sections 6, 7 and 8 hereof.
6
<PAGE>
(ii) For purposes only of this Section, Employee shall be treated as
having failed to honor the provisions of Sections 6, 7 or 8 hereof only upon the
vote of two-thirds of the Board following notice of the alleged failure by the
Company to the Executive, an opportunity for the Executive to cure the alleged
failure for a period of 30 days from the date of such notice and the Executive's
opportunity to be heard on the issue by the Board.
6. Confidentiality. The Executive agrees that he will not at any
---------------
time during the Employment Period or at any time thereafter for any reason, in
any fashion, form or manner, either directly or indirectly, divulge, disclose or
communicate to any person, firm, corporation or other business entity, in any
manner whatsoever, any confidential information or trade secrets concerning the
business of the Company, including, without limiting the generality of the
foregoing, the techniques, methods or systems of its operation or management,
any information regarding its financial matters, or any other material
information concerning the business of the Company (including customer lists),
its manner of operation, its plans or other material data (the "Business"). The
provisions of this Section 6 shall not apply to (i) information disclosed in the
performance of the Executive's duties to the Company based on his good faith
belief that such a disclosure is in the best interests of Company; (ii)
information that is, at the time of the disclosure, public knowledge; (iii)
information disseminated by the Company to third parties in the ordinary course
of business; (iv) information lawfully received by the Executive from a third
party who, based upon inquiry by the Executive, is not bound by a confidential
relationship to the Company; or (v) information disclosed under a requirement of
law or as directed by applicable legal authority having jurisdiction over the
Executive.
7. Inventions. The Executive is hereby retained in a capacity such
----------
that the Executive's responsibilities may include the making of technical and
managerial contributions of value to Company. The Executive hereby assigns to
Company all rights, title and interest in such contributions and inventions made
or conceived by the Executive alone or jointly with others during the Employment
Period which relate to the Business. This assignment shall include (a) the right
to file and prosecute patent applications on such inventions in any and all
countries, (b) the patent applications filed and patents issuing thereon, and
(c) the right to obtain copyright, trademark or trade name protection for any
such work product. The Executive shall promptly and fully disclose all such
contributions and inventions to Company and assist Company in obtaining and
protecting the rights therein (including patents thereon), in any and all
countries; provided, however, that said contributions and inventions will be the
-------- -------
property of Company, whether or not patented or registered for copyright,
trademark or trade name protection, as the case may be. Inventions conceived by
the Executive which are not related to the Business, will remain the property of
the Executive.
8. Non-Competition. (i) The Executive agrees that he shall not
---------------
during the Employment Period and for a period of one (1) year thereafter,
without the approval of the Board, directly or indirectly, alone or as partner,
joint venturer, officer, director, employee, consultant, agent, independent
contractor or stockholder (other than as provided below) of any
7
<PAGE>
company or business, engage in any "Competitive Business" within the United
States. For purposes of the foregoing, the term "Competitive Business" shall
mean any business directly involved in prepaid telecommunications services
industry. Notwithstanding the foregoing, the Executive shall not be prohibited
during the noncompetition period applicable above from acting as a passive
investor where he owns not more than five percent (5%) of the issued and
outstanding capital stock of any publicly-held company. During the period that
the above noncompetition restriction applies, the Executive shall not, without
the written consent of the Company, solicit any employee who is under contract
with the Company or any current or future subsidiary or affiliate thereof to
terminate his or her employment; nor shall the Executive solicit employees for
any enterprise that competes with Company; but shall have the right to solicit
employees not under contract with the Company for an enterprise that does not
compete with the Company.
9. Breach of Restrictive Covenants. The parties agree that a breach
-------------------------------
or violation of Sections 6, 7 or 8 hereof will result in immediate and
irreparable injury and harm to the innocent party, and that such innocent party
shall have, in addition to any and all remedies of law and other consequences
under this Agreement, the right to seek an injunction, specific performance or
other equitable relief to prevent the violation of the obligations hereunder.
10. Notice. For the purposes of this Agreement, notices, demands and
------
all other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or (unless otherwise
specified) mailed by United States certified or registered mail, return receipt
requested, postage prepaid, addressed as follows:
(a) If to the Company, to:
Attn: David Hamburger
General Counsel
SmarTalk TeleServices, Inc.
1640 South Sepulveda Blvd., Suite 500
Los Angeles, CA 90025
(b) If to the Executive, to:
Erich L. Spangenberg
72687 Sundown Lane
Palm Desert, CA 92260
or to such other respective addresses as the parties hereto shall designate to
the other by like notice, provided that notice of a change of address shall be
effective only upon receipt thereof.
8
<PAGE>
11. Excise Tax Limit. Notwithstanding anything in this Agreement to
----------------
the contrary, in the event it shall be determined that any payment or
distribution by the Company or any other person or entity to or for the benefit
of the Executive is a "parachute payment" (within the meaning of Section 280G of
the Code, whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise (a "Payment") in connection with, or
arising out of, his employment with the Company or a change in ownership or
effective control of the Company (within the meaning of Section 280G of the
Code, and would be subject to the excise tax imposed by Section 4999 of the
Code) (the "Excise Tax"), the Payments shall be reduced to the extent necessary
so that such remaining Payment would not be subject to the excise tax imposed by
Section 4999 of the Code.
12. Arbitration; Legal Fees. Except as provided in Section 9 hereof,
-----------------------
any dispute or controversy arising under or in connection with this Agreement
shall be settled exclusively by arbitration in Los Angeles County, California in
accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction. The Company shall reimburse Executive for all reasonable legal
fees and costs and other fees and expenses which Executive may incur in respect
of any dispute or controversy arising under or in connection with this
Agreement; provided, however, that the Company shall not reimburse any such fees
-------- -------
costs and expenses if the fact finder determines that the action brought by the
Executive was frivolous.
13. Waiver of Breach. Any waiver of any breach of this Agreement
----------------
shall not be construed to be a continuing waiver or consent to any subsequent
breach on the part either of the Executive or of the Company.
14. Non-Assignment; Successors. Neither party hereto may assign his
--------------------------
or its rights or delegate his or its duties under this Agreement without the
prior written consent of the other party; provided, however, that: (i) this
-------- -------
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of the Company upon any sale of all or substantially all of the
Company's assets, or upon any merger, consolidation or reorganization of the
Company with or into any other corporation, all as though such successors and
assigns of the Company and their respective successors and assigns were the
Company; and (ii) this Agreement shall inure to the benefit of and be binding
upon the heirs, assigns or designees of the Executive to the extent of any
payments due to them hereunder. As used in this Agreement, the term "Company"
shall be deemed to refer to any such successor or assign of the Company referred
to in the preceding sentence.
15. Withholding of Taxes. All payments required to be made by the
--------------------
Company to the Executive under this Agreement shall be subject to the
withholding of such amounts, if any, relating to tax, and other payroll
deductions as the Company may reasonably determine it should withhold pursuant
to any applicable law or regulation.
9
<PAGE>
16. Severability. To the extent any provision of this Agreement or
------------
portion thereof shall be invalid or unenforceable, it shall be considered
deleted therefrom and the remainder of such provision and of this Agreement
shall be unaffected and shall continue in full force and effect.
17. Director and Officer Insurance. The Company shall use its best
------------------------------
efforts to obtain and maintain director's and officer's insurance for the
Executive (in such amounts as are appropriate for executives of businesses
comparable to that of the Company) pursuant to Board of Directors indemnity
agreements then in force and shall give timely notice to the Executive of
termination of any such insurance policy.
18. Payments; Mitigation. All amounts payable by the Company to the
--------------------
Executive under this Agreement shall be paid promptly on the dates required for
such payment in this Agreement without notice or demand. There shall be no right
of set-off or counterclaim in respect of any claim, debt or obligation against
any payment to the Executive, his dependents, beneficiaries or estate provided
for in this Agreement. Any salary, benefits or other amounts paid or to be paid
to Executive or provided to or in respect of the Executive pursuant to this
Agreement shall not be reduced by amounts owing from Executive to the Company.
Executive shall not be obligated to seek other employment in mitigation of the
amounts payable or the arrangements made under any provision of this Agreement.
19. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
20. Governing Law. This Agreement shall be construed, interpreted and
-------------
enforced in accordance with the laws of the State of California, without giving
effect to the choice of law principles thereof.
21. Entire Agreement. This Agreement constitutes the entire agreement
----------------
by the Company and the Executive with respect to the subject matter hereof and
supersedes any and all prior agreements or understandings between the Executive
and the Company with respect to the subject matter hereof, whether written or
oral. This Agreement may be amended or modified only by a written instrument
executed by the Executive and the Company.
10
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
April 10, 1997.
SMARTALK TELESERVICES, INC.
/s/ Robert H. Lorsch
------------------------------------------
By: Robert H. Lorsch
Its: Chairman and Chief Executive Officer
/s/ Erich L. Spangenberg
------------------------------------------
By: Erich L. Spangenberg
Its: President and Chief Operating Officer
11
<PAGE>
Portions of this exhibit for which confidential treatment
has been requested are marked by brackets [ ] and the
pages on which they appear contain an asterick (*) in the
upper right hand corner.
EXHIBIT 10.2
TRANSCEND(TM) TSA#__________
TELECOMMUNICATION SERVICES AGREEMENT
------------------------------------
This telecommunications Services Agreement (the "Agreement" or the "TSA")
is entered into as of the 1st day of December, 1996, by and between WORLDCOM
NETWORK SERVICES, INC. d/b/a WilTel, a Delaware corporation, with its principal
office at One Williams Center, Tulsa, Oklahoma 74172 ("WilTel") and GTI TELECOM,
INC. a ___________________ corporation, with its principal office at 507 N. New
York Ave., Winter Park, FL ("Customer").
WITNESSETH:
WilTel agrees to provide and Customer agrees to accept switched
telecommunications services and other associated services (collectively the
"Services"), (i) as described in the Service Schedules identified herewith,
(ii) subject to the terms and conditions contained in this Agreement, including
without limitation those terms and conditions contained in the Program
Enrollment Terms ("PET") which are attached hereto and incorporated herein by
reference, and (iii) in conformity with each Service Request (described below)
which is accepted hereunder.
In the event of a conflict between the terms of this Agreement, the PET,
the Service Schedule and the Service Request(s), the following order of
precedence will prevail: (1) PET, (2) Service Schedule, (3) this Agreement, and
(4) Service Request(s).
NOW, THEREFORE, in consideration of the above premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows;
1. Service Term.
------------
(A) Effective Date This Agreement shall commence as of the Effective Date
--------------
as described in the PET and shall continue for the period of time set forth
in the PET (the "Service Term"). Upon the expiration of the Service Term,
the Service in question will continue to be provided subject to termination
by either party upon thirty (30) days prior written notice to the other
party. Customer shall be liable for all charges associated with actual
usage of the Services in question during the Service Term and any extension
thereof.
(B) PET The PET, as subscribed to by the parties, shall set forth the
---
Discount Schedule applicable to charges for Switched Services due under
this Agreement, Customer's minimum monthly commitment, if any, and other
information necessary to provide the Services under this Agreement.
(C) Start of Service WilTel's obligation to provide and Customer's
----------------
obligation to accept and pay for non-usage sensitive charges for
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<PAGE>
*
Services shall be binding to the extent provided for in this Agreement upon
the submission of an acceptable Service Request to WilTel by Customer.
Customer's obligation to pay for usage sensitive charges for Switched
Services shall commence with respect to any Service as of the earlier of
(i) the "Requested Service Date" set forth in each Service Request, or (ii)
the date the Service in question is made available to Customer and used
("Start of Service"). Start of Service for particular Services shall be
further described in the Service Schedule relevant to the Switched Services
in question.
(D) Service Schedules Services to be provided under this Agreement shall
-----------------
be described in the WilTel Service Schedule which is subscribed to by an
authorized representative of WilTel and Customer (the "Service Schedule").
The Service Schedule shall become a part of this Agreement to the extent
that it describes the particular services therefor, specific terms and
other information necessary or appropriate for WilTel to provide such
Service to Customer.
(E) Service Requests Customer's requests to initiate or cancel Services
----------------
shall be described in an appropriate WilTel Service Request ("Service
Requests"). Service Requests may consist of machine readable tapes,
facsimiles or other means approved by WilTel. Further, Service Requests
shall specify all reasonable information, as determined by WilTel,
necessary or appropriate for WilTel to provide the Service(s) in question,
which shall include without limitation, the type, quantity and end point(s)
(when necessary) of circuits comprising a Service Interconnection as
described in the applicable Service Schedules, or automatic number
identification ("ANI") information relevant to the Service(s), the
Requested Service Date, and charges, if any, relevant to the Services
described in the Service Request. After WilTel's receipt and verification
of a valid Service Request for SWITCHED Service (as defined in the Service
Schedule) requiring a change in the primary interexchange carrier ("PIC"),
WilTel agrees to (i) submit the ANI(s) relevant to such Service Requests to
the following local exchange carriers ("LECs") (with which WilTel currently
has electronic interface capabilities) within ten (10) days: Ameritech,
Bell Atlantic, BellSouth, Nynex, Pacific Bell, Southwestern Bell, US West,
GTE and United, and (ii) submit the ANI(s) relevant to such Service
Requests to those LECs with which WilTel does not have electronic interface
capabilities within a reasonable time.
2. Cancellation.
------------
(A) Cancellation Charge At any time after the Effective Date, Customer
-------------------
may cancel this Agreement if Customer provides written notification thereof
to WilTel not less than thirty (30) days prior to the effective date of
cancellation. In such case (or in the event WilTel terminates this
Agreement as provided in Section 8), Customer shall pay to WilTel all
charges for Services provided through the effective date of such
cancellation plus a cancellation charge (the "Cancellation Charge") equal
to [ ] of
2 of 13
<PAGE>
Customer's commitment(s), if any, (as described in the PET) that would have
-----------------------
become due for the unexpired portion of the Service Term.
(B) Liquidated Damages It is agreed that WilTel's damages in the event
------------------
Customer cancels this Agreement shall be difficult or impossible to
ascertain. The provision for a cancellation charge in Subsection 2(A) above
is intended, therefore, to establish liquidated damages in the event of a
cancellation and is not intended as a penalty.
(C) Cancellation Without Charge Notwithstanding anything to the contrary
---------------------------
contained in Subsection 2(A) above, Customer may cancel this Agreement
without incurring any cancellation charge if (i) WilTel fails to provide a
network as warranted in Section 9 below; (ii) WilTels fails to deliver call
detail records promptly based on the frequency selected by Customer (i.e.,
monthly, weekly or daily); or (iii) WilTel fails to submit ANI(s) relevant
to such Service Requests to the LECs within the time period described in
Subsection 1(E) above. Provided, however, Customer must give WilTel written
notice of any such default and an opportunity to cure such default within
five (5) days of the notice. In the event WilTel fails to cure any such
default within the five-day period on more than three (3) occasions within
any six (6) month period, Customer may cancel this Agreement without
incurring any cancellation charge.
3. Customer's End Users.
--------------------
(A) End Users Customer will obtain and upon WilTel's request provide
---------
WilTel (within two (2) business days of the date of the request) a written
Letter of Agency ("LOA") acceptable to WilTel [or with any other means
approved by the Federal Communications Commission ("FCC")], for each ANI
indicating the consent of the end users of Customer ("End Users") to be
served by Customer and transferred (by way of change of such End User's
designated PIC) to the WilTel network prior to order processing. Each LOA
will provide, among other things, that the End Users have consented to the
transfer being performed by Customer or Customer's designee. When
applicable, Customer will be responsible for notifying End Users, in
writing (or by any other means approved by the FCC) that (i) a transfer
charge will be reflected on their LEC bill for effecting a change in their
primary interexchange carrier ("PIC"), (ii) the entity name under which
their interstate, intrastate and/or operator services will be billed (if
different from Customer), and (iii) the "primary" telephone number(s) to be
used for maintenance and questions concerning their long distance service
and/or billing. Customer agrees to send WilTel a copy of the documentation
Customer uses to satisfy the above requirements promptly upon request of
WilTel. WilTel may change the foregoing requirements for Customer's
confirming orders and/or for notifying End Users regarding the transfer
charge at any time in order to conform with applicable FCC and state
regulations. Provided, however, Customer will be solely responsible for
ensuring that the transfer of End Users to the WilTel network conforms with
applicable FCC and state regulations, including without limitation, the
regulations established by the FCC with respect to verification of
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<PAGE>
*
orders for long distance service generated by telemarketing as promulgated
in 47 C.F.R., Part 64, Subpart K, section 64.1100 or any successor
regulation(s).
(B) Transfer Charges/Disputed Transfers Customer agrees that it is
-----------------------------------
responsible for (i) all charges incurred by WilTel to change the PIC of End
Users to the WilTel network, (ii) all charges incurred by WilTel to change
End Users back to their previous PIC arising from disputed transfers to the
WilTel network plus an administrative charge equal [ ] of such charges,
and (iii) any other damages suffered by or awards against WilTel resulting
from disputed transfers.
(C) Excluded ANIs WilTel has the right to reject any ANI supplied by
-------------
Customer for any of the following reasons: (i) WilTel is not authorized to
provide or does not provide long distance services in the particular
jurisdiction in which the ANI is located, (ii) a particular ANI submitted
by Customer is not in proper form, (iii) Customer is not certified to
provide long distance services in the jurisdiction in which the ANI is
located, (iv) Customer is in default of this Agreement, (v) Customer fails
to cooperate with WilTel in implementing reasonable verification processes
determined by WilTel to be necessary or appropriate in the conduct of
business, or (vi) any other circumstance reasonably determined by WilTel
which could adversely affect WilTel's performance under this Agreement or
WilTel's general ability to transfer its other customers or other end users
to the WilTel network, including without limitation, WilTel's ability to
electronically effect PIC changes with the LECs. In the event WilTel
rejects an ANI, WilTel will notify Customer as soon as possible of its
decision specifically describing the rejected ANI and the reason(s) for
rejecting that ANI, and will not incur any further liability under this
Agreement with regard to that ANI. Further, any ANI requested by Customer
for Switched Services may be deactivated by WilTel if no Switched Services
billings relevant thereto are generated in any three (3) consecutive
calendar month/billing periods. WilTel will be under no obligation to
accept ANIs within the three (3) full calendar month period preceding the
scheduled expiration of the Service Term.
(D) Records Customer will maintain documents and records ("Records")
-------
supporting Customer's re-sale of Switched Services, including, but not
limited to, appropriate and valid LOAs from End Users for a period of not
less than (twelve) 12 months or such other longer period as may be required
by applicable law, rule or regulation. Customer shall indemnify WilTel for
any costs, charges or expenses incurred by WilTel arising from disputed PIC
selections involving Switched Services to be provided to Customer for which
Customer cannot produce an appropriate LOA relevant to the ANI and PIC
charge in question, or when WilTel is not reasonably satisfied that the
validity of a disputed LOA has been resolved.
(E) Customer Service Customer will be solely responsible for billing the
----------------
End Users and providing the End Users with customer service. Customer
agrees to immediately notify WilTel in the event an End User
4 of 13
<PAGE>
*
notifies Customer of problems associated with the Services, including
without limitation, excess noise, echo, or loss of Service.
4. Customer's Responsibilities.
---------------------------
(A) Expedite Charges In the event Customer requests expedited Services
----------------
and/or changes to Service Orders and WilTel agrees to such request, WilTel
will pass through the charges assessed by any supplying parties (e.g.,
local access providers) for such expedited charges and/or changes to
Service Orders involved at the same rate to Customer. WilTel may further
condition its performance of such request upon Customer's payment of such
additional charges to WilTel.
(B) Fraudulent Calls Customer shall indemnify and hold WilTel harmless
----------------
from all costs, expenses, claims or actions arising from fraudulent calls
of any nature which may comprise a portion of the Services to the extent
that the party claiming the call(s) in question to be fraudulent is (or had
been at the time of the call) an End User of the Services through Customer
or an end user of the Services through Customer's distribution channels.
Customer shall not be excused from paying WilTel for Services provided to
Customer or any portion thereof on the basis that fraudulent calls
comprised a corresponding portion of the Services. In the event WilTel
discovers fraudulent calls being made (or reasonably believes fraudulent
calls are being made), nothing contained herein shall prohibit WilTel from
taking immediate action (without notice to Customer) that is reasonably
necessary to prevent such fraudulent calls from taking place, including
without limitation, denying Services to particular ANIs or terminating
Services to or from specific locations.
5. Charges and Payment Terms.
-------------------------
(A) Payment WilTel billings for Services hereunder are made on a monthly
-------
basis (or such other basis as may be mutually agreed to by the parties)
following Start of Service. Subject to Subsection 5 (D) below, Services
shall be billed at the rates set forth in the PET and Service Requests, as
the case may be. Discounts, if any, applicable to the rates for certain
Services are set forth in the PET. Customer will pay all undisputed charges
relative to each WilTel invoice for Services within [ ] days of the
invoice date set forth on each WilTel invoice to Customer ("Due Date"). If
payment is not received by WilTel on or before the Due Date, Customer shall
also pay a late fee in the amount of the lesser of [ ] of the unpaid
balance of the charges for Services rendered per month or the maximum
lawful rate under applicable state law.
(B) Definitions Time of day rate periods (including WilTel Recognized
-----------
National Holidays) will be as described in WilTel's F.C.C. Tariff No. 5.
(C) Taxes Customer acknowledges and understands that WilTel computes
-----
all charges herein exclusive of any applicable federal, state or local
5 of 13
<PAGE>
*
use, excise, gross receipts, sales and privilege taxes, duties, fees or
similar liabilities (other than general income or property taxes), whether
charged to or against WilTel or Customer because of the Services furnished
to Customer ("Additional Charges"). Customer shall pay such Additional
Charges in addition to all other charges provided for herein.
(D) Modification of Charges WilTel reserves the right to eliminate
-----------------------
Services and/or modify charges for Services (which charge modifications
shall not exceed then-current generally available WilTel charges for
comparable services), upon not less than [ ] days prior notice to
Customer, which notice will state the effective date for the charge
modification. In the event WilTel notifies Customer of the elimination of a
particular Service and/or an increase in the charges, Customer may
terminate this Agreement, without incurring a cancellation charge only with
respect to the Services affected by the increase in charges. In order to
cancel such Services, Customer must notify WilTel, in writing, at least
[ ] days prior to the effective date of the increase in charges.
Further, in the event Customer cancels its subscription to a particular
Service as described in this Subsection 5(D), WilTel and Customer agree to
negotiate in good faith concerning Customer's minimum monthly commitment,
if any, described in the PET.
(E) Billing Disputes Notwithstanding the foregoing, late fees shall apply
----------------
(but shall not be due and payable for a period of [ ] days following
the Due date therefor) for amounts reasonably disputed by Customer,
provided Customer: (i) pays all undisputed charges on or before the Due
Date, (ii) presents a written statement of any billing discrepancies to
WilTel in reasonable detail on or before the Due Date of the invoice in
question, and (iii) negotiates in good faith with WilTel for the purpose of
resolving such dispute within said [ ] day period. In the event such
dispute is resolved in favor of WilTel, Customer agrees to pay WilTel the
disputed amounts together with any applicable late fees within [ ] of
the resolution. In the event such dispute is resolved in favor of Customer,
Customer will receive a credit for the disputed charges in question and the
applicable late fees. In the event the dispute can not be resolved within
such [ ] day period (unless WilTel has agreed in writing to extend
such period) all disputed amounts together with late fees shall become due
and payable, and this provision shall not be construed to prevent Customer
from pursuing any available legal remedies. WilTel shall not be obligated
to consider any Customer notice of billing discrepancies which are received
by WilTel more than [ ] days following the Due Date of the invoice
in question.
(F) Suspension of Service In the event all undisputed charges due
---------------------
pursuant to WilTel's invoice are not paid in full by the Due Date or
disputed charges owned by Customer, if any, are not paid in full by the
time specified as described in Subsection 5(E) above, WilTel shall have the
right, after giving Customer [ ] days prior notice and opportunity to
pay such charges, to suspend all or any portion of the Services to Customer
("Suspension Notice") until such time (designated
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<PAGE>
by WilTel in its Suspension Notice) as Customer has paid in full all
undisputed charges then due to WilTel, including any late fees. Following
such payment, WilTel shall reinstitute Services to Customer only when
Customer provides WilTel with satisfactory assurance of Customer's ability
to pay for Services (i.e., a deposit, letter of credit or other means
acceptable to WilTel) and Customer's advance payment of the cost of
reinstituting Services. If Customer fails to make the required payment by
the date set forth in the Suspension Notice, Customer will be deemed to
have canceled the Services suspended effective as of the date of
suspension. Such cancellation shall not relieve Customer for payment of
applicable cancellation charges as described in Section 2.
6. Credit: Customer's execution of this Agreement signifies Customer's
------
acceptance of WilTel's initial and continuing credit approval procedures and
policies. WilTel reserves the right to withhold initiation or full
implementation of Services under this Agreement pending WilTel's initial
satisfactory credit review and approval thereof which may be conditioned upon
terms specified by WilTel, including, but not limited to, security for payments
due hereunder in the form of a cash deposit or other means. WilTel reserves the
right to modify its requirements, if any, with respect to any security or other
assurances provided by Customer for payments due hereunder in light of
Customer's actual usage when compared to projected usage levels upon which any
security or assurance requirement was based.
7. Creditworthiness: If at any time there is a material adverse change in
----------------
Customer's creditworthiness, then in addition to any other remedies available to
WilTel, WilTel may elect, in its sole discretion, to exercise one or more of the
following remedies: (i) cause Start of Service for Services described in a
previously executed Service Request to be withheld; (ii) cease providing
Services pursuant to a Suspension Notice in accordance with Section 5(F); (iii)
decline to accept a Service Request or other requests from Customer to provide
Services which WilTel may otherwise be obligated to accept and/or (iv) condition
its provision of Services or acceptance of a Service Request on Customer's
assurance of payment which shall be a deposit or such other means to establish
reasonable assurance of payment. An adverse material change in Customer's
creditworthiness shall include, but not be limited to: (i) Customer's default of
its obligations to WilTel under this or any other agreement with WilTel; (ii)
failure of Customer to make full payment of all undisputed charges due hereunder
on or before the Due Date on three (3) or more occasions during any period of
twelve (12) or fewer months or Customer's failure to make such payment on or
before the Due Date in any two (2) consecutive months; (iii) 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,
which owes past due amounts to WilTel or any entity affiliated with WilTel or
which is a materially greater credit risk than Customer; or (iv), Customer's
being subject to or having filed for bankruptcy or insolvency proceedings or the
legal insolvency or Customer.
8. Remedies for Breach. In the event Customer is in material breach of this
-------------------
Agreement, including without limitation, failure to pay all undisputed
7 of 13
<PAGE>
charges due hereunder by thedate stated in the Suspension Notice described in
Subsection 5 (F), WilTel shall have the right, after giving Customer five (5)
days prior notice and opportunity to cure, and in addition to foreclosing any
security interest WilTel may have, to (i) terminate this Agreement; (ii)
withhold billing information from Customer; and/or (iii) contact the End Users
(for whom calls are originated and terminated solely over facilities comprising
the WilTel network) directly and bill such End Users directly until such time as
WilTel has been paid in full for the amount owned by Customer. If Customer fails
to make payment by the date stated in the Suspension Notice and WilTel, after
giving Customer five (5) days prior notice, terminates this Agreement as
provided in this Section 8, such termination shall not relieve Customer for
payment of applicable cancellation charges as described in Section 2 above.
9. Warranty. WilTel will use reasonable efforts under the circumstances to
--------
maintain its overall network quality. The quality of Services provided hereunder
shall be consistent with telecommunications common carrier industry standards,
government regulations and sound business practices. WILTEL MAKES NO OTHER
WARRANTIES ABOUT THE SERVICES PROVIDED HEREUNDER, EXPRESS OR IMPLIED, INCLUDING
BUT NOT LIMITED TO, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR USE.
10. Liability; General Indemnity; Reimbursement.
-------------------------------------------
(A) Limited Liability IN NO EVENT WILL EITHER PARTY HERETO BE LIABLE TO
-----------------
THE OTHER PARTY FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL
LOSSES OR DAMAGES, INCLUDING WITHOUT LIMITATION, LOSS OF REVENUE, LOSS OF
CUSTOMERS OR CLIENTS, LOSS OF GOODWILL OR LOSS OF PROFITS ARISING IN ANY
MANNER FROM THIS AGREEMENT AND THE PERFORMANCE OR NONPERFORMANCE OF
OBLIGATIONS HEREUNDER.
(B) General Indemnity In the event parties other than Customer (e.g.,
-----------------
Customer's End Users) shall have use of the Services through Customer,
then Customer agrees to forever indemnify and hold WilTel, its affiliated
companies and any third-party provider or operator of facilities employed
in provision of the Services harmless from and against any and all claims,
demands, suits, actions, losses, damages, assessments or payments which
those parties may assert arising out of or relating to any defect in the
Services.
(C) Reimbursement Customer agrees to reimburse WilTel for all reasonable
-------------
costs and expenses incurred by WilTel due to WilTel's direct participation
(either as a party or witness) in any administrative, regulatory or
criminal proceeding concerning Customer if WilTel's involvement in said
proceeding is based solely on WilTel's provision of Services to Customer.
11. Force Majeure. If WilTel's performance of this Agreement or any obligation
-------------
hereunder is prevented, restricted or interfered with by causes beyond its
reasonable control including, but not limited to, acts of God, fire, explosion,
vandalism, cable cut, storm or other similar occurrence, any law, order,
regulation, direction, action or request of the United
8 of 13
<PAGE>
States government, or state or local governments, or of any department, agency,
commission, court, bureau, corporation or other instrumentality of any one or
more such governments, or of any civil or military authority, or by national
emergency, insurrection, riot, war, strike, lockout or work stoppage or other
labor difficulties, or supplier failure, shortage, breach or delay, then WilTel
shall be excused from such performance on a day-to-day basis to the extent of
such restriction or interference. WilTel shall use reasonable efforts under the
circumstances to avoid or remove such causes or nonperformance and shall proceed
to perform with reasonable dispatch whenever such causes are removed or cease.
12. State Certification. Customer warrants that in all jurisdictions in
-------------------
which it provides long distance services that require certification, it has
obtained the necessary certification from the appropriate governmental
authority. Further, if required by WilTel, Customer agrees to provide proof of
such certification acceptable to WilTel. In the event Customer is prohibited,
either on a temporary or permanent basis, from continuing to conduct its
telecommunications operations in a given state, Customer shall (i) immediately
notify WilTel by facsimile, and (ii) send written notice to WilTel within
twenty-four (24) hours of such prohibition.
13. Interstate/Intrastate Service. Except with respect to Services
-----------------------------
specifically designated as intrastate Services or international Services, the
rates provided to Customer in a Service Schedule are applicable only to Services
if such Services are used for carrying interstate telecommunications (i.e.,
Services subject to FCC jurisdiction). WilTel shall not be obligated to provide
Services with end points within a single state or Services which
originate/terminate at points both of which are situated within a single state.
In those states where WilTel is authorized to provide intrastate service (i.e.,
telecommunications transmission services subject to the jurisdiction of state
regulatory authorities), WilTel will, at its option, provide intrastate Services
pursuant to applicable state laws, regulations and applicable tariff, if any,
filed by WilTel with state regulatory authorities as required by applicable law.
14. Authorized Use of WilTel Name. Without WilTel's prior written consent,
-----------------------------
Customer shall not (i) refer to itself as an authorized representative of WilTel
whenever it refers to the Services in promotional, advertising or other
materials, or (ii) use WilTel's logos, trade marks, service marks, or any
variations thereof in any of its promotional, advertising or other materials.
Additionally, Customer shall provide to WilTel for its prior review and written
approval, all promotions, advertising or other materials or activity using or
displaying WilTel's name or the Services to be provided by WilTel. Customer
agrees to change or correct, at Customer's expense, any such material or
activity which WilTel, in its sole judgment, determines to be inaccurate,
misleading or otherwise objectionable. Customer is explicitly authorized to only
use the following statements in its sales literature or if in response to the
inquiry by Customer's end user: (i) "Customer utilizes the WilTel network", (ii)
"Customer utilizes WilTel's facilities", (iii) "WilTel provides only the network
facilities", and (iv) "WilTel is our network services provider".
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<PAGE>
15. Notices. Notices under this Agreement shall be in writing and delivered to
-------
the person identified below at the offices of the parties as they appear below
or as otherwise provided for by proper notice hereunder. Customer shall notify
WilTel in writing if Customer's billing address is different than the address
shown below. The effective date for any notice under this Agreement shall be the
date of actual receipt of such notice by the appropriate party, notwithstanding
the date of mailing or transmittal via hand delivery or facsimile.
If to WilTel: WorldCom Network Services, Inc.
One Williams Center, 28th Floor
Tulsa, OK 74172
Attn: Carrier Sales Dept.
If to Customer: GTI Telecom, Inc.
507 N. New York Ave.
Winter Park, FL
Attn:
Telephone No.
Fax No.:
16. No-Waiver. No term or provision of this Agreement shall be deemed waived
---------
and no breach or default shall be deemed excused unless such waiver or consent
shall be in writing and signed by the party claimed to have waived or consented.
A consent to waiver of or excuse for a breach or default by either party,
whether express or implied, shall not constitute a consent to, waiver of, or
excuse for any different or subsequent breach or default.
17. Partial Invalidity: Government Action.
--------------------------------------
(A) Partial Invalidity If any part of any provision of this Agreement or
------------------
any other agreement, document or writing given pursuant to or in connection
with this Agreement shall be invalid or unenforceable under applicable law,
rule or regulation, that part shall be ineffective to the extent of such
invalidity only, without in any way affecting the remaining parts of that
provision or the remaining provisions of this Agreement. In such event,
Customer and WilTel will negotiate in good faith with respect to any such
invalid or unenforceable part to the extent necessary to render such part
valid and enforceable.
(B) Government Action Upon thirty (30) days prior notice, either party
-----------------
shall have the right, without liability to the other, to cancel an affected
portion of the Service if any material rate or term contained herein and
relevant to the affected Service is substantially changed (to the detriment
of the terminating party) or found to be unlawful or the relationship
between the parties hereunder is found to be unlawful by order of the
highest court of competent jurisdiction to which the matter is appealed,
the FCC, or other local, state or federal government authority of competent
jurisdiction.
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<PAGE>
18. Exclusive Remedies. Except as otherwise specifically provided for herein,
------------------
the remedies set forth in this Agreement comprise the exclusive remedies
available to either party at law or in equity.
19. Use of Service. Upon WilTel's acceptance of a Service Request hereunder,
--------------
WilTel will provide the Services specified therein to Customer upon condition
that the Services shall not be used for any unlawful purpose. The provision of
Services will not create a partnership or joint venture between the parties or
result in a joint communications service offering to any third parties, and
WilTel and Customer agree that this Agreement, to the extent it is subject to
FCC regulation, is an inter-carrier agreement which is not subject to the filing
requirements of Section 211(a) of the Communications Act of 1934 (47 U.S.C.
(S) 211 (a)) as implemented in 47 C.F.R. section 43.51.
20. Choice of Law; Forum.
--------------------
(A) Law This Agreement shall be construed under the laws of the State
---
of Oklahoma without regard to choice of law principles.
(B) Forum Any legal action or proceeding with respect to this Agreement
-----
may be brought in the Courts of the State of Oklahoma in and for the County
of Tulsa or the United States of America for the Northern District of
Oklahoma. By execution of this Agreement, both Customer and WilTel hereby
submit to such jurisdiction, hereby expressly waiving whatever rights may
correspond to either of them by reason of their present or future domicile.
In furtherance of the foregoing, Customer and WilTel hereby agree to
service by U.S. Mail at the notice addresses referenced in Section 15. Such
service shall be deemed effective upon the earlier of actual receipt or
seven (7) days following the date of posting.
21. Proprietary Information.
-----------------------
(A) Confidential Information The parties understand and agree that the
------------------------
terms and conditions of this Agreement (but not the existence thereof), all
documents referenced herein (including invoices to Customer for Services
provided hereunder), communications between the parties regarding this
Agreement or the Services to be provided hereunder (including price quotes
to Customer for any Services proposed to be provided or actually provided
hereunder), as well as such information relevant to any other agreement
between the parties (collectively "Confidential Information"), are
confidential as between Customer and WilTel.
(B) Limited Disclosure A party shall not disclose Confidential
------------------
Information unless subject to discovery or disclosure pursuant to legal
process, or to any other party other than the directors, officers, and
employees of a party or a party's agents including their respective
attorneys, consultants, brokers, lenders, insurance carriers or bona fide
prospective purchasers who have specifically agreed in writing to
nondisclosure of the terms and conditions hereof. Any disclosure
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<PAGE>
hereof required by legal process shall only be made after providing the
non-disclosing party with notice thereof in order to permit the non-
disclosing party to seek an appropriate protective order or exemption.
Violation by a party or its agents of the foregoing provisions shall
entitle the non-disclosing party, at its option, to obtain injunctive
relief without a showing of irreparable harm or injury and without bond.
(C) Press Releases Except as provided in Section 14 below, the parties
--------------
further agree that any press release, advertisement or publication
generated by a party regarding this Agreement, the Services provided
hereunder or in which a party desires to mention the name of the other
party or the other party's parent or affiliated company(ies), will be
submitted to the non-publishing party for its written approval prior to
publication.
(D) Survival of Confidentiality The provisions of this Section 21 will be
---------------------------
effective as of the date of this Agreement and remain in full force and
effect for a period which will be the longer of (i) one (1) year following
the date of this Agreement, or (ii) one (1) year from the termination of
all Services hereunder.
22. Successors and Assignment. This Agreement shall be binding upon and
-------------------------
inure to the benefit of the parties hereto and their respective successors or
assigns, provided, however, that Customer shall not assign or transfer its
rights or obligations under this Agreement without the prior written consent of
WilTel, which consent shall not be unreasonably withheld or delayed, and further
provided that any assignment or transfer without such consent shall be void.
23. General.
-------
(A) Survival of Terms 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 so survive the completion of performance
and termination of this Agreement, including, without limitation, provisions
for indemnification and the making of any and all payments due hereunder.
(B) Headings Descriptive headings in this Agreement are for convenience
--------
only and shall not affect the construction of this Agreement.
(C) Industry Terms Words having well-known technical or trade meanings
--------------
shall be so construed, and all listings of items shall not be taken to be
exclusive, but shall include other items, whether similar or dissimilar to
those listed, as the context reasonably requires.
(D) Rule of Construction No rule of construction requiring interpretation
--------------------
against the drafting party hereof shall apply in the interpretation of this
Agreement.
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<PAGE>
24. Entire Agreement. This Agreement consists of (i) all the terms and
----------------
conditions contained herein, and, (ii) all documents incorporated herein
specifically by reference. This Agreement constitutes the complete and exclusive
statement of the understandings between the parties and supersedes all proposals
and prior agreements (oral or written) between the parties relating to Service
provided hereunder. No subsequent agreement between the parties concerning the
Services shall be effective or binding unless it is made in writing and
subscribed to by authorized representatives of Customer and WilTel.
IN WITNESS WHEREOF, the parties have executed this Telecommunications
Services Agreement on the date first written above.
WORLDCOM NETWORK SERVICES, INC. GTI TELECOM, INC.
d/b/a WilTel
By: /s/ Greg Frikor By: /s/ William R. Harger
-------------------------------- --------------------------------
(Signature) (Signature)
Greg Frikor William R. Harger
- ------------------------------------ ------------------------------------
(Print Name) (Print Name)
Regional Sales Manager President
- ------------------------------------ ------------------------------------
(Title) (Title)
13 of 13
<PAGE>
Portions of this exhibit for which confidential treatment
has been requested are marked by brackets [ ] and the
pages on which they appear contain an asterick (*) in the
upper right hand corner.
*
TRANSCEND(TM)
PROGRAM ENROLLMENT TERMS
------------------------
These Program Enrollment Terms ("PET") are made by and between WorldCom
Network Services, Inc. d/b/a WilTel ("WilTel") and GTI Telecom, Inc.
("Customer") and are a part of their agreement for switched services, more
particularly identified as TSA#_____ - __________ (the "TSA"). In accordance
with the TSA, charges to Customer for Service obtained thereunder shall be
subject to the charges and discounts set forth below and the TSA shall be deemed
to include all of the terms and conditions set forth herein. The TSA, this PET
and the Service Schedule are collectively referred to as the "Agreement".
1. SERVICE TERM: [ ] months. For purposes of this Agreement (i)
if Customer has an existing switched services agreement with a member of
the WilTel Group (as defined in Section 5 below), the "Effective Date" will
be the 1st day of the month following twenty-one (21) days after this
Agreement has been fully executed by both parties and Customer has received
a satisfactory credit review and approval from WilTel's Credit Department
pursuant to Section 6 of the TSA, and all security documentation, if any,
required by WilTel has been properly executed and delivered to WilTel
(collectively, the "Credit Review"), and (ii) if Customer does not have an
existing switched services agreement with a member of the WilTel Group, the
"Effective Date" will be the date this Agreement has been fully executed by
both parties and the Credit Review has been completed. WilTel will not be
obligated to accept any Service Request under this Agreement if Customer's
initial Service Request is (i) not submitted by Customer within thirty (30)
days of the date of this PET, and (ii) not subject to a Requested Service
Date within ninety (90) days of the Effective Date.
2. RATES: Rates for Services hereunder will be generally comprised of the
following charges, if applicable: (i) local exchange company ("LEC") charges
(including without limitation, access charges, egress charges, SMS 800
queries, etc.), (ii) domestic transport charges (i.e., transport within the
continental United States), (iii) if applicable Non-Mainland transport
charges or International transport charges, and (iv) applicable surcharges
(e.g., directory assistance).
(A) DOMESTIC TRANPORT CHARGES.
(1) "Domestic Transport Charges" are based on the location (i.e., Tier
A, Tier B or Tier C) of the originating and terminating local access
transport areas ("LATAs") (excluding TRAVEL CARD Service). A list of
the LATAs comprising Tier A,
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<PAGE>
*
Tier B and Tier C LATAs is shown on Schedule "1" attached hereto and
incorporated herein by reference which Schedule "1" may be amended from
time to time by WilTel. The Domestic Transport Charge will be assessed
on all completed or answered calls and will be based upon the number of
originating seconds. Transport Charges will be billed in [ ]
increments and will be subject to a [ ] minimum charge. The
Transport Charge for each Tier (the "Tier Charge") relative to each
Service is shown below:
(2) The Tier Charges for SWITCHED ACCESS Service and DEDICATED ACCESS
Service calls (regardless of jurisdiction or time of day) within the
continental United States are shown below. With respect to SWITCHED
ACCESS Service and DEDICATED ACCESS Service calls within the
continental United States, the Domestic Transport Charge will be
comprised of an originating Tier Charge and a terminating Tier Charge.
<TABLE>
<S> <C>
Tier A [ ]
Tier B [ ]
Tier C [ ]
</TABLE>
Example: Assume a call originated in a Tier A LATA and terminates in
a Tier B LATA. The Transport Charge will be [ ] comprised of the
originating Tier Charge [ ] and the terminating Tier Charge
[ ].
With respect to calls from the continental United States to Alaska,
Hawaii, Puerto Rico, the United States Virgin Islands and Canada ("Non-
Mainland"), or to an International location, the Domestic Transport
Charger will be comprised of the applicable originating Tier Charge and
the terminating Tier Charge which will be deemed to be Tier A. With
respect to 800 calls (and 1 + calls from Hawaii only) from a
Non-Mainland location to the continental United States, the Domestic
Transport Charge will be comprised of the originating Tier Charge which
will be deemed to be Tier A and the applicable terminating Tier Charge.
(3) The Tier charges for Carrier TERMINATION Service calls (regardless
of jurisdiction or time of day) within the continental United States or
from the continental United States to an International location are
shown below. The Domestic Transport Charge will be comprised of the
applicable Tier Charge based on the Tier to which the call is
terminated.
<TABLE>
<CAPTION>
<S> <C>
Tier A [ ]
Tier B [ ]
Tier C [ ]
</TABLE>
(4) The Tier Charges for Carrier 800 ORIGINATION Service calls
(regardless of jurisdiction or time of day) within the
2 of 14
<PAGE>
*
continental United States are shown below. The Domestic Transport
Charge will be comprised of the applicable Tier Charge based on the
Tier from which the call is originated.
<TABLE>
<S> <C>
Tier A [ ]
Tier B [ ]
Tier C [ ]
</TABLE>
(5) With respect to Directory Assistance calls within the continental
United States and to Canada, the Domestic Transport Charge will be
comprised of the applicable originating Tier Charge and the terminating
Tier Charge which will be deemed to be Tier A.
(B) NON-MAINLAND TRANSPORT CHARGES.
(1) With respect to calls originating in the continental United States
and terminating to a Non-Mainland location (including directory
assistance calls to Canada), the following "Non-Mainland Transport
Charges" will apply in addition to any applicable Domestic Transport
Charge as described in Subsection 2(A) above:
<TABLE>
<CAPTION>
Non-Mainland Location Non-Mainland Transport Charge
--------------------- -----------------------------
<S> <C>
Alaska [ ]
Hawaii [ ]
Puerto Rico [ ]
US Virgin Islands [ ]
Canada [ ]
</TABLE>
(2) With respect to 800 calls (and 1 + calls from Hawaii only)
originating from a Non-Mainland location and terminating to the
continental United States, the following Non-Mainland Transport Charges
will apply in addition to any applicable Domestic Transport Charge as
described in Subsection 2(A) above:
<TABLE>
<CAPTION>
Non-Mainland Location Non-Mainland Transport Charge
--------------------- -----------------------------
<S> <C>
Alaska [ ]
Hawaii [ ]
Puerto Rico [ ]
US Virgin Islands [ ]
Canada [ ]
</TABLE>
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(C) INTERNATIONAL TRASPORT CHARGES.
(1) Commencing with the Effective Date describe in Section 1 above,
with respect to calls originating in the continental United States and
terminating to an International location (i.e., other than a Non-
Mainland location), subject to Subpart (2) below, the "International
Transport Charge" will be deemed to correspond with the level of
applicable charges shown on Schedule "2" attached hereto and
incorporated herein by reference based on [ ] of Customer's
Commitment described in Subsection 4(A) below (rounded down to the
nearest International Revenue Level). In the event (i) Customer elects
a Month-to-Month Service Term, or (ii) Customer's Commitment is less
than [ ], Customer's International Transport Charge will
correspond with the applicable level of "Base International Charges"
shown on Schedule "2".
Example: Assume Customer's Commitment is [ ]. Customer's
applicable International Transport Charge would be deemed to correspond
with the [ ] level [ ], rounded down to the nearest level).
(2) Subject to modification as described in Subpart (3) below,
Customer may elect at any time during the Service Term to designate one
of the International Monthly Revenue Levels described on Schedule "2"
("Customer's International Sub-Commitment") which Customer agrees to
maintain on a take-or-pay basis for the remainder of the Service Term
("International Commitment Period"). For purposes of this Agreement,
the "International Monthly Revenue Level" will be comprised of
Customer's gross (i.e., prior to the application of discounts) (i)
Transport Charges (i.e., Domestic, Non-Mainland and International)
associated with a call to an International location (i.e., other than a
Non-Mainland location and specifically excluding Mexico and Canada),
(ii) LEC Charges, if any, associated with a call to an International
location, and (iii) TRAVEL CARD Service charges associated with a call
to an International location. In the event Customer selects an
International Sub-Commitment, Customer's International Transport Charge
will correspond with the application charges shown on Schedule "2"
based on Customer's International Sub-Commitment.
(3) At any time during the Service Term of this Agreement, Customer
may modify Customer's International Sub-Commitment ("Customer's
Modified International Sub-Commitment") for the remainder of the
International Commitment Period by notifying WilTel in writing.
Commencing with the first day of the month following at least thirty
(30) days after WilTel receives the notice described herein,
(i) Customer's Modified International Sub-Commitment will be effective,
and (ii) Customer's International Transport Charge will correspond with
the
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applicable charges shown on Schedule "2" based on Customer's Modified
International Sub-Commitment.
(4) In the event Customer does not maintain Customer's International
Sub-Commitment (or Customer's Modified International Sub-commitment, if
applicable) in any month during the International Commitment Period,
then for those month(s) only, Customer will pay WilTel the difference
between Customer's International Sub-Commitment (or Customer's Modified
International Sub-Commitment) and Customer's actual International
Monthly Revenue Level as defined above (the "International Deficiency
Charge"). The International Deficiency Charge is in addition to the
Deficiency Charge described in Subsection 4(B) below, if any, and will
be due at the same time payment is due for Service provided to
Customer, or immediately in an amount equal to Customer's International
Sub-Commitment for the unexpired portion of the International
Commitment Period if WilTel terminates this Agreement based on
Customer's default.
(D) LEC CHARGES.
(1) "LEC Charges" include Access Charges, Egress Charges and SMS 800
queries. "Access Charges" and "Egress Charges" are per minute costs
determined by WilTel between the applicable WilTel point of presence
and the terminating or originating point, and rated at the applicable
end office (NPA-NXX) level using switched tandem access rates and
charges (excluding TRAVEL CARD Service). Directory Assistance calls
will only be assessed the applicable Access Charge. Customer will also
pay WilTel a [ ] administrative charge which is assessed
on the total of Customer's monthly LEC Charges. The NPA-NXX is
generally identified by the end user's automated number identification
("ANI"); provided, however, in the event there is not an identified
originating ANI, the NPA-NXX will be assigned based on WilTel's
originating trunk group. The terminating NPA-NXX will be identified by
the dialed number; provided, however, in the event there is not an
identified dialed number, the NPA-NXX will be assigned based on
WilTel's terminating trunk group.
(2) The per minute rates utilized by WilTel in determining the
applicable Access Charges and Egress Charges are described in the local
exchange carrier's ("LECs") applicable tariffs and are exclusive of any
discounts based on minute or term commitments. The Access Charges and
Egress Charges may include, without limitation, the components and
elements described below; provided, however, the terminology with
respect to these components and elements may vary among LECs. The
Access Charges and Egress Charges will be calculated taking into effect
whether the call is interstate, intrastate or intraLATA, the direction
of
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the call (i.e., whether originating or terminating), whether the call
is premium or nonpremium (if applicable), the mileage, the meet point
(if applicable) and the call type (i.e., 1 + or 800). WilTel may also
apply any other rating elements which are assessed by the LECs or third
parties (e.g., regulatory fee assessments or non-standard LEC access
components) whether such charges are based per access line, per
business line, per market share, per call, etc. (e.g., the Arkansas
Carrier Common Line charge which is assessed by a regulatory body and
allocated to the LECs). With respect to those LECs utilizing a "time of
day" differential (i.e., Day/Nonday, Day/Evening/Night, etc.) WilTel
will only use the "Day" rate provided by the LECs.
<TABLE>
<CAPTION>
Component Elements
--------- --------
<S> <C>
Carrier Common Line Originating
Terminating
End Office Local Switching
Equal Access Recovery
Information Surcharge
Local Transport Termination
Tandem Switching
Facility
Interconnection
Entrance Facility DS-3 (month-to-month electrical)
Multiplexer (3/1 month-to-month)
</TABLE>
(3) The Access Charges and Egress Charges are generally applied on a
per minute basis except for (i) the Local Transport Facility charge
which is based on minutes and mileage, and (ii) the Entrance Facility
rate and Multiplexer rate which are flat monthly rates which are
converted by WilTel to a cost per minute basis by dividing the
applicable DS-3 flat rate or the multiplexer rate as found in the
applicable LEC tariff by [ ] WilTel reserves the right to convert
any other flat rates assessed by the LECs into per minute charges. Upon
thirty (30) days' prior written notice, WilTel may also charge Customer
for other charges it is assessed by any LEC or the SMS 800 database
administrator for 800 number service (e.g., National Exchange Carrier
Association (NECA) charges, etc.).
Example: Assume the applicable LEC tariffed rate (i) for entrance facility
charges is [ ] per DS-3, and (ii) for muxing is [ ] per 3/1 mux. The
Entrance Facility rate will be
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[ ] and the Multiplexer rate will be [ ].
(4) Access charges will commence when the call is originated and will
end when the call is disconnected. Customer will be assessed Access
Charges even if a call is not completed. Egress Charges will commence
when the call is answered and will end when the call is disconnected.
Access Charges and Egress Charges will not apply with respect to
dedicated access originations or terminations, respectively.
(E) TRANSCEND(TM) MANAGER:
WilTel agrees to provide Customer, at no cost to Customer, a windows-
based software program entitled "Transcend(TM) Manager" which will
include, among other things, the Transcend(TM) Database (as described
herein) and various management reports. The "Transcend(TM) Database"
will contain the applicable Access Charges and Egress Charges
determined by WilTel at each LEC end office. The Database will be
updated periodically to take into account any tariff changes by the
various LECs ("Tariff Changes"). Tariff Changes received by WilTel on
or before the fifteenth (15th) day of a month and effective as of the
first day of the following month or thereafter, will be incorporated
into the TranscendTM Database by the first day of the month following
WilTel's receipt thereof or the date such Tariff Changes are effective,
whichever is later.
(F) DIRECTORY ASSISTANCE SURCHARGE:
Directory assistance calls in the continental United States will be
assessed a surcharge of [ ] in addition to any applicable Domestic
Transport Charge as described in Subsection 2(A) above. Directory
assistance calls to Canada will be assessed a surcharge of [ ] in
addition to any applicable Domestic Transport Charge as described in
Subsection 2(A) above and the applicable Non-Mainland Transport Charge
as described in Subsection 2(B) above.
(G) TRAVEL CARD SERVICE RATES:
(1) Basic Interstate TRAVEL CARD Service Rates Per Minute: [ ]
Day, [ ] Nonday.
(2) Basic Intrastate TRAVEL CARD Service Rates Per Minute [NOT SUBJECT
TO DISCOUNT]: SEE ATTAHCED INTRASTATE SWITCHED ACCESS RATE SCHEDULE FOR
BASIC TRAVEL CARD SERVICE.
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(3) International TRAVEL CARD Service Rates Per Minute [NOT SUBJECT TO
DISCOUNT]: SEE ATTAHCED INTERNATIONAL SWITCHED ACCESS RATE SCHEDULE FOR
BASIC TRAVEL CARD SERVICE. International TRAVEL CARD Service calls from
the domestic United States to International locations (other than
Canada) are subject to a surcharge of [ ] per call.
(4) TRAVEL CARD Service Rate Per Minute from the domestic United
States to Canada [NOT SUBJECT TO DISCOUNT]: [ ] Day, [ ]
Nonday. TRAVEL CARD Service calls form the domestic United States to
Canada are subject to a surcharge of [ ] per call.
(5) TRAVEL CARD Service Rates Per Minute from Canada to the domestic
United States [NOT SUBJECT TO DISCOUNT]: [ ] Day, [ ] Nonday.
TRAVEL CARD Service calls from Canada to the domestic United States are
subject to a surcharge of [ ] per call.
(6) Enhanced TRAVEL CARD Service Pricing [NOT SUBJECT TO DISCOUNT]:
Enhanced features to the TRAVEL CARD Service are available as described
in the attached schedule for Enhanced TRAVEL CARD Service Pricing.
(7) TRAVEL CARD Service Discount Schedule:
SERVICE TERM
<TABLE>
<CAPTION>
[ ]
<S> <C> <C> <C> <C>
[ ]
[ ]
[ ]
[ ]
[ ]
</TABLE>
(a) As defined in Subsection 3(A) above.
(8) If Customer's Commitment as described herein is at least [ ],
the percentages shown in the TRAVEL CARD Service Discount Schedule
above will be increased by [ ]; if Customer's commitment as
described herein is at least [ ], the percentages shown in the
TRAVEL CARDS Service Discount Schedule above will be increased by
[ ]; if Customer's commitment as described herein is at least
[ ], the percentages shown in the TRAVEL CARD Service Discount
Schedule above will be increased by [ ]; if Customer's Commitment
as described herein is at least [ ], the percentages shown in the
TRAVEL CARD Service Discount Schedule above will be increased by
[ ].
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*
2. DISCOUNTS:
(A) For purposes of this Agreement Customer "Monthly Revenue Level"
will be comprised of Customer's gross (i.e., prior to the application
of any discounts) (i) Transport Charges (i.e., Domestic, Non-Mainland
and International); (ii) LEC charges; (iii) Directory Assistance
surcharges; (iv) TRAVEL CARD Service charges; (v) [ ] times
Customer's first [ ] of monthly recurring private line
interexchange service charges (including both domestic and
international) from WilTel; (vi) [ ] times Customer's second
[ ] of monthly recurring private line interexchange service
charges (including both domestic and international) from WilTel; and,
(vii) Customer's monthly recurring private line interexchange service
charges (including both domestic and international) from WilTel in
excess of [ ]. Customer's Monthly Revenue Level will not include
any pro rata charges, ancillary or special feature charges, such as,
Authorization codes or CDR Tapes, or any other charges other than those
identified by the relevant WilTel invoice as monthly recurring private
line interexchange service charges or the switched service charges
specifically mentioned in this Subsection (A).
(B) Commencing with the Effective Date and continuing through the end
of the Service Term (the "Commitment Period"), Customer will receive
the applicable discount percentage (the "Discount") as determined by
the applicable Discount Schedules shown in Subsections (C) and (D)
below. The Discount will only be applied to Customer's Domestic
Transport Charges as described in Subsection 2(A) above and Customer's
Non-Mainland Transport Charges to Non-Mainland locations (excluding
Canada). The Discount will be determined by dividing the number of
months in the Service Term divided by twelve (12). [ ]
Customer will automatically receive the next higher discount when Customer's
eligible Monthly Revenue Level reaches the next level.
(C) DISCOUNT SCHEDULE - TERMINATION Service, 800 ORIGINATION
Service, SWITCHED ACCESS Service and DEDICATED ACCESS Service to
Non-Mainland locations only (excluding Canada).
<TABLE>
<CAPTION>
[ ]
<S> <C> <C> <C> <C>
[ ]
[ ]
[ ]
[ ]
[ ]
[ ]
[ ]
</TABLE>
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*
* Requires at least one (1) DS-1 circuit comprising a Service
Interconnection as defined in the Service Schedule with respect to
TERMINATION Service and/or 800 ORIGINATION Service.
(D) DISCOUNT SCHEDULE-SWITCHED ACCESS Service and DEDICATED
ACCESS Service (1+ and 800) within the continental United States.
<TABLE>
<CAPTION>
[ ]
<S> <C> <C> <C> <C>
[ ]
[ ]
[ ]
[ ]
[ ]
[ ]
[ ]
</TABLE>
* Requires a minimum of one (1) DS-1 circuit comprising a Service
Interconnection as defined in the Service Schedule with respect to
TERMINATION Service and/or 800 ORIGINATION Service.
(E) If Customer's Minimum Commitment (as described in Section 4 below)
is at least the amount shown in the Schedule below, all of the
respective percentages in the applicable Discount Schedules (depending
on the Service Term selected by Customer) will be increased by the
respective amounts shown below. Customer will receive the percentage
shown in the Discount Schedule associated with Customer's Minimum
Commitment and Service Term commencing with the Effective Date
regardless of Customer's actual Monthly Revenue Level.
(1) DISCOUNT SCHEDULE - TERMINATION Service, 800 ORIGINATION
Service, SWITCHED ACCESS Service and DEDICATED ACCESS Service
to Non-Mainland locations only (excluding Canada).
<TABLE>
<CAPTION>
Minimum Increase In
Commitment Discount %
---------- ----------
<S> <C>
[ ]
[ ]
[ ]
[ ]
[ ]
[ ]
</TABLE>
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*
(2) DISCOUNT SCHEDULE - SWITCHED ACCESS Service and DEDICATED
ACCESS Service (1+ and 800).
<TABLE>
<CAPTION>
Minimum Increase In
Commitment Discount %
---------- -----------
<S> <C>
[ ]
[ ]
[ ]
[ ]
[ ]
[ ]
</TABLE>
Example: Customer's Commitment as described in Section 4 below is [ ]
for a [ ] Service Term. Customer's Discount percentage for the Services
described in Subsection (C) above will be [ ] and Customer's
Discount percentage for the Services described in Subsection (D) above will
be [ ]. If Customer's actual Monthly Revenue Level is [ ].
Customer's Discount percentage for the Services described in Subsection (C)
above will be [ ] and Customer's Discount percentage for the
Services described in Subsection (D) above will be [ ].
F) During the Service Term of the Agreement, accumulated credits derived
from the applicable Discounts will be applied in arrears commencing with
the first day of the month following the Effective Date, that is, the
Discount will be applied so those charges as described in Subsection 3(B)
above for the preceding month (the "Discount Period"). The initial Discount
Period shall include any partial calendar month following Start of Service,
or such other time basis as may be mutually determined by the parties.
G) Each Discount will result in the application of a credit obtained during
the Discount Period to the WilTel invoice to Customer relevant to the billed
measured Switched Service for the calendar month next following the
completion of each Discount Period, provided Customer has paid undisputed
--------
charges (including any late fees, if applicable) for that month and has not
otherwise been subject to a Suspension Notice in accordance with the
Agreement. Failure of Customer to comply with the foregoing provision shall
result in no credit for the Discount Period in question.
4. CUSTOMER'S COMMITMENT/DEFICIENCY CHARGE:
A) Commencing as of the Effective Date and continuing through the end of
the Service Term or any extension thereof (the "Commitment Period"),
Customer agrees to maintain, on a take-or pay-basis, Monthly Revenue of at
least [ ] ("Customer's Commitment"). If Customer's Commitment is less
than [ ], Customer must maintain a minimum of (1) DS-1 circuit
comprising a Service Interconnection as defined in the Service Schedule
with respect to TERMINATION Service and/or 800 ORIGINATION Service.
B) In the event Customer does not maintain Customer's Commitment in any
month during the Commitment Period, then for those month(s) only, Customer
will pay WilTel the difference between Customer's Commitment and
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*
Customer's actual Monthly Revenue Level as described in Subsection 3 (A)
(the "Deficiency Charge"). The Deficiency Charge will be due at the same
time payment is due for Service provided to Customer, or immediately in an
amount equal to Customer's Commitment for the unexpired portion of the Term
if WilTel terminates the Agreement based on Customer's default.
C) Notwithstanding anything to the contrary contained herein, as soon as
the total of Customer's aggregate Monthly Revenue equals at least
[ ] commencing with charges incurred by Customer on or after the
Effective Date, Customer may elect to terminate Customer's Commitment, by
notifying WilTel, in writing, which notice shall state the effective date of
such termination which shall not be less than ninety (90) days from the date
of such notice and in all cases shall be the first day of a calendar month.
Commencing with the effective date of Customer's termination as provided in
this Subsection (C) and continuing thereafter through the scheduled
expiration of the Service Term and any extensions thereof, (i) Customer will
not be subject to any Deficiency charge as described in Subsection 4(B)
above and (ii) Customer's discount will be determined in accordance with the
Discount Schedules shown in subsections 3(C) and 3(D) above based on a
Service Term of [ ] months and a Customer Commitment of [ ].
5. OTHER AGREEMENTS: In consideration of the rates and discounts offered
hereunder to Customer as well as the unique and special pricing elements,
Customer acknowledges and agrees that this Agreement and the Services
described herein may not be combined with any other products or services
offered by WilTel, WilTel's parent company or WilTel's affiliates.
Therefore, Customer acknowledges and agrees that:
(A) As of the Effective Date of this Agreement, (i) all switched
telecommunications services ("Existing Services") offered by WilTel
(formerly WilTel, Inc.), WilTel's parent company, WorldCom, Inc. (formerly
LDDS Communications, Inc.) or any of WilTel's affiliates, including without
limitation, IDB WorldCom Services, Inc. (hereinafter referred to as the
"WilTel Group"), which are currently being provided Customer (which for
purposes of this Section 5 will include Customer's parent company,
Customer's subsidiaries and any other entities under common control with
Customer; hereinafter referred to as the "Customer Group") pursuant to
existing service agreements ("Existing Agreements") will be canceled and no
longer in force or effect except for charges or credits due for Existing
Services rendered as of the Effective Date of this Agreement and provisions
intended to survive termination, such as limitation of liability,
indemnification and confidentiality, and (ii) all Existing Services provided
a member of the Customer Group by a member of the WilTel Group will be
provisioned under the terms and conditions of this Agreement. Simultaneous
with the execution of this Agreement, if applicable, Customer shall cause
all members of the Customer Group to agree to the cancellation of such
Existing Agreements and the provision of Existing Services under the terms
and conditions
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of this Agreement and Customer agrees to provide WilTel with reasonable
documentation evidencing such agreement.
(B) If Customer acquires or merges or combines with a third party after the
Effective Date of this Agreement, and such third party has existing
agreement(s) with a member of the WilTel Group (collectively referred to as
the "Third Party Agreements") for the provision of switched
telecommunications services ("Third Party Existing Services"), then ninety
(90) days following the date of such acquisition, merger or combination (or
such earlier date contained in a written notice from Customer to WilTel)
(the "Transfer Date"), (i) the Third Party Agreements will be canceled and
no longer in force or effect except for commitments, if any, contained in
such Third Party Agreements and charges and credits due for Services
rendered prior to the Transfer Date, (ii) Third Party Existing Services will
be provisioned under this Agreement, and (iii) the aggregate commitment(s)
(e.g., revenue, volume, minute, etc.) remaining under such Third Party
Agreements, if any, shall be added on a pro rata basis to the commitment(s),
if any, existing under this Agreement. Simultaneous with the closing of such
acquisition, combination or merger, Customer will cause such third party and
all of its affiliates who are parties to such Third Party Agreements, to
agree to the cancellation of such Third Party Agreements and the provision
of Third Party Existing Services under the terms and conditions of this
Agreement and Customer agrees to provide WilTel with reasonable
documentation evidencing such agreement.
Example: Assume (i) Customer's Commitment as described in Subsection 4(A)
above is [ ], (ii) there are [ ] months remaining in the
Service Term of this Agreement, and (iii) Customer acquires a third party
who has an existing switched telecommunications services agreement with a
member of the WilTel Group which contains a minimum monthly revenue
commitment of [ ] and has [ ] months remaining in the term of such
agreement. Customer's "new" Commitment as described in Subsection 4(A) will
be [ ] for the remaining [ ] months in the Service Term determined
as follows:
[
]
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6. CHARGES AND PAYMENT TERMS: The parties agree that Subsection 5(A) of
the TSA will be deleted in its entirety and replaced by the following:
"(A) Payment WilTel billings for Services hereunder are made on a monthly
-------
basis (or such other basis as may be mutually agreed to by the
parties) following Start of Service. Subject to Subsection 5 (D)
below, Services shall be billed at the rates set forth in the PET and
Service Requests, as the case may be. Discounts, if any, applicable to
the rates for certain Services are set forth in the PET. Customer will
pay all undisputed charges relative to each WilTel invoice for
Services within [ ] days of the invoice date set forth on
each WilTel invoice to Customer ("Due Date"). If payment is not
received by WilTel on or before the Due Date, Customer shall also pay
a late fee in the amount of the lesser of [ ] of the unpaid
balance of the charges for Services rendered per month or the
maximum lawful rate under applicable state law."
IN WITNESS WHEREOF, the parties have executed these Program Enrollment
Terms on the date first written above.
WORLDCOM NETWORK SERVICES, INC. GTI TELCOM, INC.
d/b/a WilTel
By: /s/ Greg Frikor By: /s/ William R. Harger
- ------------------------------- ----------------------------------
(Signature) (Signature)
Greg Frikor William R. Harger
- ------------------------------- ----------------------------------
(Print Name) (Print Name)
Regional Sales Manager President
- ------------------------------- ----------------------------------
(Title) (Title)
11/7/96 11/4/96
- ------------------------------- ----------------------------------
(Date) (Date)
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Portions of this exhibit for which confidential treatment
has been requested are marked by brackets [ ] and the
pages on which they appear contain an asterick (*) in the
upper right hand corner.
TRANSCEND(TM)
SERVICE SCHEDULE
----------------
This Service Schedule is made as of the _____ day of __________, 1996, by
and between WorldCom Network Services, Inc. d/b/a WilTel ("WilTel") and GTI
Telecom, Inc. ("Customer") and is a part of their agreement for switched
services, identified as TSA#___-_____ (the "Agreement"). Neither Customer nor
WilTel shall be obligated with respect to the Service described below, nor any
other condition of Service until Customer has submitted and WilTel has accepted
a Service Request with respect to the particular Services.
1. TRANSCEND(TM) SERVICES: During the Service Term of the Agreement, WilTel
will provide the following Services (all as more particularly described herein),
(i) to and from the locations below, (ii) for the charges and discount(s), if
any, set forth in the Program Enrollment Terms dated concurrently herewith.
(a) Transcend(TM) Termination Service ("TERMINATION Service") which is
WilTel's termination of calls received from Customer's Service
Interconnection(s).
(b) Transcend(TM) 800 Origination Service ("800 ORIGINATION Service")
which is the origination of calls by WilTel and the termination of such calls to
Customer's Service Interconnection(s).
(c) Transcend(TM) Switched Access Service ("SWITCHED ACCESS Service")
which is the origination and termination of calls solely over facilities
comprising the WilTel network.
(d) Transcend(TM) Dedicated Access Service ("DEDICATED ACCESS Service")
which is the origination and termination of calls solely over facilities
comprising the WilTel network.
(e) Transcend(TM) Travel Card Service ("TRAVEL CARD Service") which is
the origination and termination of calls solely over facilities comprising the
WilTel network. Further, the inbound service portion of a TRAVEL CARD Service
call (i.e., the 800 Service) must be provided by WilTel.
2. START OF SERVICE:
(a) Start of Service for TERMINATION Service will occur concurrently
with the activation of each circuit comprising Service Interconnections relevant
to WilTel TERMINATION Service.
(b) Start of Service for 800 ORIGINATION Service will occur
concurrently with the activation of each curcuit comprising Service
Interconnections relevant to 800 ORIGINATION Service.
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<PAGE>
(c) Start of Service for SWITCHED ACCESS Service will occur on (i) an
ANI by ANI basis concurrently with the activation of each ANI to be served, and
(ii) an 800 Number by 800 Number basis concurrently with the activation of each
800 Number.
(d) Start of Service for DEDICATED ACCESS Service will occur
concurrently with the activation of each circuit comprising Service
Interconnections relevant to DEDICATED ACCESS Service.
(e) Start of Service for TRAVEL CARD Service will occur on a
Authorization Code by Authorization Code basis concurrently with the activation
of each Authorization Code.
3. SERVICE INTERCONNECTIONS - TERMINATION SERVICE AND 800 ORIGINATION SERVICE:
(a) In order to utilize TERMINATION Service and 800 ORIGINATION
Service, one or more full time dedicated connections between Customer's network
and the WilTel network at one or more WilTel designated locations ("WilTel POP")
must be established ("Service Interconnection(s)"). Each Service Interconnection
shall be comprised of one or more DS-1 circuits.
(b) The circuit(s) comprising each Service Interconnection to a WilTel
POP shall be requested by Customer on the appropriate WilTel Service Request.
Each Service Request for TERMINATION Service or 800 Origination Service will
describe (among other things) the WilTel POP to which a Service Interconnection
is to be established, the Requested Service Date therefor, the type and quantity
of circuits comprising the Service Interconnection and any charges and other
information relevant thereto, such as, Customer's terminating or originating
switch location, as the case may be. Such additional information may be obtained
from Customer or gathered by WilTel and recorded in Technical Information Sheets
provided by WilTel.
(c) Once ordered, and unless otherwise provided for in this Agreement,
Service Interconnections or the circuits comprising each Service Interconnection
may only be canceled by Customer upon not less than thirty (30) days prior
written notice to WilTel.
(d) Absent the automatic number identification ("ANI") of the calling
party, Customer shall provide WilTel with a written certification (the
"Certification") of the percentage of interstate (including international) and
intrastate minutes of use relevant to the minutes of traffic to be terminated in
the same state in which the WilTel POP is located to which the Service
Interconnection is made. This Certification shall be provided by Customer prior
to Start of Service for any Service Interconnection and may be modified from
time to time by Customer and subject to recertification upon the request of
WilTel which requests shall not be made unilaterally by WilTel more than once
each calendar quarter.
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Any such modification(s) or Certification(s) shall be effective as of the first
day of any calendar month and following at least forty-five (45) days notice
from Customer. In the event Customer fails to make such Certification, the
relevant minutes of use will be deemed to be subject to the Intrastate Rates
provided for in the Pricing Exhibit. In the event WilTel or any other third
party requires an audit of WilTel's interstate/intrastate minutes of traffic,
Customer agrees to cooperate in such audit at its expense and make its call
detail records, billing systems and other necessary information reasonably
available to WilTel or any third party solely for the purpose of verifying
Customer's interstate/intrastate minutes of traffic. Customer agrees to
indemnify WilTel for any liability WilTel incurs in the event Customer's
Certification is different than that determined by the audit.
(e) Customer shall be solely responsible for establishing and
maintaining each Service Interconnection over facilities subject to WilTel's
approval. Service Interconnections shall only be comprised of DS-1 facilities
unless otherwise provided for in the Service Request and agreed to in writing by
WilTel. If a Service Interconnection is proposed to be made via a local exchange
carrier, WilTel will have the authority to direct Customer to utilize WilTel's
entrance facilities or local serving arrangement ("LSA") with the relevant local
telephone operating company, and Customer will be subject to a non-
discriminatory charge therefor from WilTel. The monthly recurring charge
relevant to Customer's use of LSA capacity shall be subject to upward adjustment
by WilTel from time to time. Such adjustment, if any, shall not exceed the rate
that otherwise would be charged for the equivalent switched access capacity
between the same points by the relevant local telephone operating company
pursuant to its published charges for the type of service in question.
(f) If other private line interexchange facilities are necessary to
establish a Service Interconnection, and such facilities are requested from
WilTel, such facilities will be provided on an individual case basis.
(g) Commencing with the first full calendar month following Start of
Service for each circuit comprising a Service Interconnection and thereafter,
Customer will maintain an average loading of traffic per DS-1 (or DS-1
equivalent circuit) of not less than [ ] minutes of use per calendar
month/billing period ("Minimum Monthly Usage"). In the event Customer fails to
obtain the required Minimum Monthly Usage level for the circuits comprising each
Service Interconnection, WilTel will charge and Customer will pay [ ]
multiplied by the difference between the Minimum Monthly Usage and the actual
minutes of use for the circuit(s) comprising the Service Interconnection in
question ("Minimum Usage Charge"). WilTel TERMINATION Service and 800
ORIGINATION Service minutes carried over the same Service Interconnection, if
any, shall be included in determining if Customer has met the Minimum Monthly
Usage requirement.
Example: Customer's actual monthly usage for 2 DS-1s comprising
Customer's Service Interconnection at WilTel POP A is [ ]
minutes and Customer's actual monthly usage for 2
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DS-1s comprising Customer's Service Interconnection at WilTel POP B
is [ ] minutes. Customer would be subject to a Minimum Usage
charge of [ ] since Customer's Minimum Monthly Usage at WilTel
POP A was below [ ] and no Minimum Monthly Usage Charge for the
Service Interconnection at WilTel POP B, because Customer exceeded
the required minimum of [ ] in actual minutes of use for the 2
DS-1s comprising the Service Interconnection at WilTel POP B.
(h) Customer may cancel circuits comprising the Service
Interconnection(s) at any time without liability to WilTel for cancellation
charges. In the event Customer does not have a Minimum Commitment and Customer
cancels all circuits comprising all Service Interconnections at any time during
the Service Term, the Cancellation Charge described in Subsection 2(A) of the
Agreement shall not apply. Provided, however, Customer shall nevertheless be
liable to pay WilTel a cancellation charge (regardless of the number of DS-1 or
DS-1 equivalent circuits comprising the Service Interconnection(s) in question)
of [ ] multiplied by the number of months (or pro rata portion thereof)
remaining in the Service Term ("Carrier Service Cancellation Charge").
(i) Because the damages to WilTel from Customer's cancellation or
termination of all circuits comprising all Service Interconnections prior to
completion of the Service Term is difficult if not impossible to determine, the
Carrier Service Cancellation Charge due to WilTel in accordance with this
Subsection is intended by the parties to establish liquidated damages payable to
Customer to WilTel and not as a penalty of any kind.
4. SERVICE INTERCONNECTIONS - DEDICATED ACCESS:
(a) In order to utilize DEDICATED ACCESS Service, one or more
full time dedicated connections between an End User's private branch exchange
("PBX") or other customer premise equipment and the WilTel network at one or
more WilTel designated locations ("WilTel POP") must be established ("Dedicated
Service Interconnection(s)"). Each Dedicated Service Interconnection shall be
comprised of one or more DS-1 circuits or DS-3 circuits.
(b) The circuits(s) comprising each Dedicated Service
Interconnection to a WilTel POP shall be requested by Customer on the
appropriate WilTel Service Request. Each Service Request for DEDICATED ACCESS
Service will describe (among other things) the WilTel POP to which a Dedicated
Service Interconnection is to be established, the Requested Service Date
therefor, the type and quantity of circuits comprising the Dedicated Service
Interconnection and any charges and other information relevant thereto, such as,
the location of the end user's originating or
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terminating location, as the case may be. Such additional information may be
obtained from Customer or gathered by WilTel and recorded in Technical
Information Sheets provided by WilTel.
(c) Once ordered, and unless otherwise provided for in this
Agreement, Dedicated Service Interconnections or the circuits comprising each
Dedicated Service Interconnection may only be canceled by Customer upon not less
than thirty (30) days prior written notice to WilTel.
(d) WilTel will provision and maintain local access facilities
between the End User Location and the WilTel POP, subject to any LEC charges
plus other applicable terms and charges set forth in WilTel's F.C.C. Tariff
No. 5. If other private line interexchange facilities are necessary to establish
a Dedicated Service Interconnection, such facilities will be provided on an
individual case basis .
(e) Customer may elect to be responsible for establishing each
Dedicated Service Interconnection over facilities subject to WilTel's approval.
Dedicated Service Interconnections shall only be comprised of DS-1 facilities
unless otherwise provided for in the Service Request. If a Dedicated Service
Interconnection is proposed to be made via a local exchange carrier, WilTel will
have the authority to direct Customer to utilize WilTel's entrance facilities or
local serving arrangement ("LSA") with the relevant local telephone operating
company, and Customer will be subject to a non-discriminatory charge therefor
from WilTel. The recurring charge relevant to Customer's use of LSA capacity
shall be stated in the corresponding Service Request subject, however, to upward
adjustment by WilTel. Such adjustment if any, shall not exceed the rate that
otherwise would be charged for the equivalent capacity between the same points
by the relevant local telephone operating company pursuant to its published
charges for the type of service in question.
(f) DEDICATED ACCESS SERVICE MINUTES OF USE ARE NOT SUBJECT TO
AGGREGATION FOR THE PURPOSE OF DETERMINING IF CUSTOMER HAS MET ITS MINIMUM
MONTHLY USAGE FOR TERMINATION OR 800 ORIGINATION SERVICE.
5. BILLING INCREMENTS: U.S. Domestic (including Alaska, Hawaii, United
States Virgin Islands and Puerto Rico) Service calls will be billed in [ ]
increments and subject to a [ ] minimum charge (i) utilizing Hardware Answer
Supervision where available, and (ii) with respect to 800 Services, commencing
with Customer's switch wink or answer back. If Customer is found to be non-
compliant in passing back appropriate answer supervision, i.e., answer back,
WilTel reserves the right to suspend 800 Service or deny requests by Customer
for additional Service until appropriate compliance is established. All
international calls will be billed in [ ] increments and subject to a
[ ] minimum charge.
6. FORECASTS: Before Customer's initial order for Service, Customer shall
provide WilTel with a forecast regarding the number of minutes expected to be
terminated or originated in various LATAs and/or Tandems, so
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as to enable WilTel to configure optimum network arrangements. In the event
Customer's Service traffic volumes result in a lower than industry standard
completion rate or otherwise adversely affect the WilTel Network, WilTel
reserves the right to block the source of such adverse traffic at any time.
Customer will provide WilTel with additional forecasts from time to time upon
WilTel's request which shall not be more frequent than once every three (3)
months.
7. SERVICE INTERCONNECTION INSTALLATION:
(a) DS-1 circuits comprising all Service Interconnections
(including Dedicated Service Interconnections) will be subject to a nonrecurring
[ ] per DS-1 switch port installation charge.
(b) DS-3 circuits comprising all Service Interconnections
(including Dedicated Service Interconnections) will be subject to a nonrecurring
per DS-3 switch port installation charge as determined on an individual case
basis.
8. CDR TAPES: WilTel will provide Call Detail Records for WilTel's
Services in machine readable form ("CDR Tapes") subject to the provisions set
forth below.
(a) WilTel will provide Customer one (1) CDR Tape once each
month in a Fixed Rate Detail Record (FRDR) format which WilTel currently is then
making available to its Customers. Monthly CDR Tapes under this Subsection are
provided at [ ]. Weekly CDR Tapes under this Subsection are subject to a
recurring monthly charge of [ ].
(b) Customer may request and WilTel may provide Customer with
daily Call Detail Records electronically ("Daily CDR"). Daily CDR under this
Subsection is subject to a nonrecurring charge of [ ]. All leased-line and
equipment costs necessary to implement Daily CDR will be determined on an
individual case basis depending on Customer's specific configuration.
9. 800 NUMBERS:
(a) 800 numbers will be issued to Customer (i.e., issuance
equates to activation or reservation, whichever occurs first) on a random basis.
Customer requests for specific numbers will be considered by WilTel, and if
provided, will be subject to additional charges as set forth below and WilTel's
then current reservation policy which shall also apply to any randomly selected
and reserved 800 number. At any time preceding three (3) months from the
scheduled expiration of the Service Term, Customer may only reserve 800 numbers
in an amount equal to the greater of (i) [ ], or (ii) [ ] of the total
number of 800 numbers activated by WilTel for Customer (unless another
allocation method is required by the FCC or other regulatory authority).
Customer requests for 800 numbers inconsistent
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with the above stated conditions may be considered by WilTel on an individual
case basis. 800 numbers reserved for Customer will be activated upon Customer's
request, however, each 800 number will be subject to reversion to WilTel without
notice to Customer after sixty (60) days from issuance to Customer in the event
WilTel records no level of measured charges associated with such a number as of
the expiration or after said sixty (60) day period.
(b) Customer Request for Specific Numbers - [ ] per
individual number.
(c) Customer specifically agrees that regardless of the method
in which an 800 number is reserved for or otherwise assigned to Customer, that
Customer will not seek any remedy from WilTel under a theory of detrimental
reliance or otherwise that such 800 number(s) are found not to be available for
Customer's use until such 800 number is put in service for the benefit of
Customer, and that such 800 number(s) shall not be sold, bartered, brokered or
otherwise released by Customer for a fee ("800 Number Trafficking"). Any attempt
by Customer to engage in 800 Number Trafficking shall be grounds for reclamation
by WilTel for reassignment of the 800 number(s) reserved for or assigned to
Customer.
10. ENHANCED 800 SERVICES: The following 800 identification services and
routing options (collectively, "Enhanced 800 Services") are available from
WilTel:
IDENTIFICATION SERVICES:
------------------------
i. Dialed Number Identification Service - identification of specific
800 number dialed .
ii. Real-Time ANI - receipt of telephone number of calling party.
800 ROUTING OPTIONS:
--------------------
i. Message Referral - recording (up to six (6) months) that informs
callers that the 800 number has been disconnected or refers callers
to new number.
ii. Call Area Selection - selection or blockage of locations where 800
numbers can be received from (i.e., State, NPA, LATA or NXX
level).
iii. Call Distributor Routing - distribution of 800 traffic evenly over
dedicated access lines in a trunk group (e.g., ascending,
descending, most idle, least idle).
iv. Route Completion (Overflow) - overflow of 800 dedicated access
traffic only to up to five (5) pre-defined alternate
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routing groups (e.g., dedicated access, WATs access lines or
switched access lines).
v. Geographic Routing - termination of calls to a single 800 number
from two or more originating routing groups to different
locations.
vi. Time-of-Day Routing - routing of calls to single 800 number based
on time of day (up to forty-eight (48) time slots of 15-minute
increments in a 24-hour period).
vii. Day-of-Week Routing - routing of calls to single 800 number
based on each day of the week.
viii. Day-of-Year Routing - routing of calls to single 800 number based
on up to fifteen (15) customer-specified holidays.
ix. Percent Allocation Routing - routing of calls for each
originating routing group to two (2) or more terminating
locations based on customer-specified percentage.
Customer will receive the Identification Services described above at no charge.
The minutes of use rates for 800 Routing Options described above (in addition to
the "800 Routing Option Feature Charges" described below) will be the same rates
for SWITCHED ACCESS Service (800) and DEDICATED ACCESS Service (800), whichever
is applicable, as described in the PET excluding Route Completion (Overflow).
If Customer selects Route Completion (Overflow) and Customer's traffic overflows
from DEDICATED ACCESS Service (800) to SWITCHED ACCESS Service (800), Customer's
minute of use rate will be the rate associated with SWITCHED ACCESS Service
(800). The 800 Routing Option Feature Charges are as follows:
Installation Charge: [ ] per feature; maximum of [ ]
------------------- ---
per 800 number.
Change Order Charge: [ ] per feature; maximum of [ ]
-------------------- ---
per 800 number.
Monthly Recurring Charge: [ ] per feature; maximum of
------------------------- ---
[ ] per 800 number.
Expedite Charge: [ ] (i.e., outside normal interval
---------------- time of four (4) business days).
Note: More than then (10) points of termination for a single
feature will be treated as two (2) features. Further, every
additional ten (10) points of termination will be treated as a
separate feature.
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11. RESPORG SERVICES: Responsible Organization Services (relevant to 800
numbers) if provided by WilTel are provided pursuant to WilTel's F.C.C. Tariff
No. 5.
12. LIMITATION OF ORIGINATION OR TERMINATION LOCATIONS:
(a) TERMINATION Service: (i) origination is available from any
WilTel POP; and (ii) termination is to any direct dialable location worldwide.
(b) 800 ORIGINATION Service: (i) origination is available from
locations in the 50 United States, the United States Virgin Islands, Puerto Rico
and Canada; and (ii) termination is to any Customer designated Service
Interconnection.
(c) SWITCHED Service (1+): (i) origination is available from
all equal access exchanges in the 48 contiguous United States except in LATA 921
(Fishers Island, NY) and Hawaii; and (ii) termination is to any direct dialable
location worldwide.
(d) SWITCHED Service (800): (i) origination is available from
locations in the 50 United States, the United States Virgin Islands, Puerto Rico
and Canada and (ii) termination is available to locations in the 48 contiguous
United States.
(e) DEDICATED ACCESS Service (1+): (i) origination is available
from locations in the 48 contiguous United States; and (ii) termination is
available to any direct dialable location worldwide.
(f) DEDICATED ACCESS Service (800): origination is available
from locations in the 50 United States, the United States Virgin Islands, Puerto
Rico and Canada; and (ii) termination is available to any Customer designated
Dedicated Service Interconnection.
(g) TRAVEL CARD Service: (i) origination is available from
locations in the 50 United States, the United States Virgin Islands, Puerto Rico
and Canada; (ii) termination is available to locations in the 48 contiguous
United States for calls from locations in the 50 United States, the United
States Virgin Islands, Puerto Rico and Canada; (iii) termination is available to
locations in the 50 United States, the United States Virgin Islands, Puerto Rico
and Canada for calls from locations in the 48 contiguous United States; and (iv)
International Origination is available from select locations for termination
within the 48 contiguous states.
13. AUTHORIZATION CODES-TRAVEL CARD SERVICE: WilTel will supply Customer
with authorization codes ("Codes") containing nine (9) digits for use with a
corresponding 800 Service number for origination and termination of TRAVEL CARD
Service calls. The Codes may be obtained by Customer in
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blocks of ten (10) not to exceed a total of 1000 Codes at any one time. WilTel
reserves the right to deny access to any Code at any time.
14. ACCOUNTING CODES: For every billed telephone number (BTN) requested by
Customer, whether verified or non-verified, Customer shall pay a monthly
recurring charge of [ ].
IN WITNESS OF WHEREOF, the parties have executed this Service
Schedule on the date first written above.
WORLDCOM NETWORK SERVICES, INC. GTI TELECOM, INC.
d/b/a WilTel
By: /s/ Greg Frikor By: /s/ William R. Harger
------------------------- -----------------------------
(Signature) (Signature)
Greg Frikor William R. Harger
- ------------------------------- ----------------------------------
(Print Name) (Print Name)
Regional Sales Manager President
- ------------------------------- ----------------------------------
(Title) (Title)
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