<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 28, 1997
REGISTRATION NO. 333-31361
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ITC/\DELTACOM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 4813 58-2301135
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
206 WEST NINTH STREET
WEST POINT, GEORGIA 31833
(706) 645-8990
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
ANDREW M. WALKER
CHIEF EXECUTIVE OFFICER
ITC/\DELTACOM, INC.
206 WEST NINTH STREET
WEST POINT, GEORGIA 31833
(706) 645-8990
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
NANCY J. KELLNER, ESQ.
RICHARD J. PARRINO, ESQ.
HOGAN & HARTSON L.L.P.
555 THIRTEENTH STREET, N.W.
WASHINGTON, D.C. 20004
(202) 637-5600
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
----------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE(1) REGISTRATION FEE(2)
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<S> <C> <C> <C> <C>
11% Senior Notes Due
June 1, 2007.......... $200,000,000 100% $200,000,000 $60,606
</TABLE>
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(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(f).
(2) Previously paid. ----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS
SUBJECT TO COMPLETION
DATED AUGUST 28, 1997
[LOGO OF ITC/\DELTACOM APPEARS HERE]
$200,000,000
OFFER TO EXCHANGE ALL OUTSTANDING 11% SENIOR NOTES DUE
JUNE 1, 2007
FOR
11% SENIOR NOTES DUE JUNE 1, 2007
OF
ITC/\DELTACOM, INC.
-----------
INTEREST PAYABLE JUNE 1 AND DECEMBER 1,
COMMENCING DECEMBER 1, 1997
-----------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED.
ITC/\DeltaCom, Inc. (the "Company") hereby offers, upon the terms and subject
to the conditions set forth in this Prospectus (as the same may be amended or
supplemented from time to time) and in the accompanying Letter of Transmittal
(the "Letter of Transmittal") (which together constitute the "Exchange Offer"),
to exchange $1,000 principal amount of its 11% Senior Notes due June 1, 2007
(the "Exchange Notes") which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), for each $1,000 principal amount of
its outstanding unregistered 11% Senior Notes due June 1, 2007, of which $200
million in aggregate principal amount is outstanding as of the date hereof (the
"Senior Notes" and, together with the Exchange Notes, the "Notes").
The form and terms of the Exchange Notes will be identical in all material
respects to the form and terms of the Senior Notes, except that (i) the
Exchange Notes will have been registered under the Securities Act and therefore
will not be subject to certain restrictions on transfer applicable to the
Senior Notes and (ii) holders of the Exchange Notes will not be entitled to
certain rights of holders of the Senior Notes under the Registration Rights
Agreement dated June 3, 1997 (the "Registration Rights Agreement") among the
Company and Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner &
Smith Incorporated, First Union Capital Markets Corp. and NationsBanc Capital
Markets, Inc. (collectively, the "Placement Agents"). The Exchange Notes will
evidence the same indebtedness as the Senior Notes (which they will replace)
and will be issued pursuant to, and entitled to the benefits of, an indenture
dated as of June 3, 1997 between the Company and the United States Trust
Company of New York, as trustee (the "Trustee"), governing the Senior Notes and
the Exchange Notes (the "Indenture").
(Continued on next page.)
-----------
SEE "RISK FACTORS" COMMENCING ON PAGE 15 FOR A DISCUSSION OF CERTAIN FACTORS
WHICH INVESTORS SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER AND AN
INVESTMENT IN THE EXCHANGE NOTES.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
-----------
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE>
The Exchange Notes are redeemable at the option of the Company, in whole or
in part, at any time on or after June 1, 2002, initially at 105.5% of their
principal amount, plus accrued interest, declining ratably to 100% of their
principal amount, plus accrued interest, on or after June 1, 2004. In
addition, at any time prior to June 1, 2000, the Company may redeem up to 35%
of the aggregate principal amount of the Senior Notes and the Exchange Notes
from the proceeds of one or more Public Equity Offerings (as defined herein)
at 111% of their principal amount, plus accrued interest; provided that after
any such redemption at least $130.0 million aggregate principal amount of the
Senior Notes and the Exchange Notes remains outstanding. See "Description of
the Exchange Notes--Certain Definitions."
Approximately $62.7 million of the net proceeds from the Offering (as
defined herein) have been used to purchase a portfolio of U.S. government
securities that have been pledged to secure and fund the first six scheduled
interest payments on the Senior Notes and the Exchange Notes.
The Exchange Notes will be unsubordinated indebtedness of the Company,
ranking pari passu in right of payment with the Senior Notes and all other
existing and future unsubordinated indebtedness of the Company and senior in
right of payment to all subordinated indebtedness of the Company. After giving
pro forma effect to the Reorganization (as defined herein), as of June 30,
1997, the Company would have had (on an unconsolidated basis) no indebtedness
other than the Senior Notes and the Exchange Notes. However, the Company is a
holding company and the Senior Notes are, and the Exchange Notes will be,
effectively subordinated to all existing and future liabilities (including
trade payables) of the Company's subsidiaries. On June 30, 1997, on the same
pro forma basis, the Company's subsidiaries would have had approximately $37.7
million of liabilities (excluding intercompany payables), including
approximately $14.4 million of indebtedness (including capital leases).
The Senior Notes were originally issued and sold on June 3, 1997 in a
transaction not registered under the Securities Act (the "Offering").
Accordingly, the Senior Notes may not be offered for resale, resold or
otherwise transferred unless so registered or unless an applicable exemption
from the registration requirements of the Securities Act is available. Based
on interpretations by the staff of the Securities and Exchange Commission (the
"Commission"), as set forth in no-action letters issued to third parties
unrelated to the Company, the Company believes that the Exchange Notes issued
pursuant to the Exchange Offer may be offered for resale, resold or otherwise
transferred by holders thereof (other than any holder that is (i) a broker-
dealer that acquired Senior Notes as a result of market-making activities or
other trading activities or (ii) an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration or prospectus delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business and such holders have no arrangement or understanding with any person
to participate in a distribution (within the meaning of the Securities Act) of
such Exchange Notes. Any holder who tenders Senior Notes in the Exchange Offer
with the intention to participate, or for the purpose of participating, in a
distribution of the Exchange Notes or who is an affiliate of the Company may
not rely upon such interpretations by the staff of the Commission and, in the
absence of an exemption therefrom, must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
secondary resale transaction. Failure to comply with such requirements in such
instance may result in such holder incurring liabilities under the Securities
Act for which the holder is not indemnified by the Company. The staff of the
Commission has not considered the Exchange Offer in the context of a no-action
letter, and there can be no assurance that the staff of the Commission would
make a similar determination with respect to the Exchange Offer as in such
other circumstances.
By tendering Senior Notes in exchange for Exchange Notes, each holder will
represent to the Company, among other things, that: (i) any Exchange Notes to
be received by such holder will be acquired in the ordinary course of such
holder's business; (ii) such holder has no arrangement or understanding with
any person to participate in a distribution (within the meaning of the
Securities Act) of the Exchange Notes; and (iii) such holder is not an
"affiliate" of the Company (within the meaning of Rule 405 under the
Securities Act), or if such holder is an affiliate, that such holder will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Senior Notes, where such
Senior Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver
a prospectus in
2
<PAGE>
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Senior Notes where
such Senior Notes were acquired by such broker-dealer as a result of market-
making activities or other trading activities. The Company has agreed that,
for a period not to exceed 180 days after the Expiration Date (as defined
herein), it will furnish additional copies of this Prospectus, as amended or
supplemented, to any broker-dealer that reasonably requests such documents for
use in connection with any such resale. See "Plan of Distribution."
The Company does not intend to apply for listing of the Exchange Notes for
trading on any securities exchange or for inclusion of the Exchange Notes in
any automated quotation system. The Senior Notes, however, have been
designated for trading in the Private Offerings, Resales and Trading through
Automatic Linkages ("PORTAL") Market of the National Association of Securities
Dealers, Inc. Any Senior Notes not tendered and accepted in the Exchange Offer
will remain outstanding. To the extent that Senior Notes are not tendered and
accepted in the Exchange Offer, a holder's ability to sell such Senior Notes
could be adversely affected. Following consummation of the Exchange Offer, the
holders of Senior Notes will continue to be subject to the existing
restrictions on transfer thereof and the Company will have no further
obligation to such holders to provide for the registration under the
Securities Act of the Senior Notes. See "Description of the Exchange Notes--
Exchange Offer; Registration Rights." No assurance can be given as to the
liquidity of either the Senior Notes or the Exchange Notes.
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF SENIOR NOTES ARE URGED TO READ THIS PROSPECTUS AND THE
RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER
THEIR SENIOR NOTES PURSUANT TO THE EXCHANGE OFFER.
Senior Notes may be tendered for exchange prior to 5:00 p.m., New York City
time, on , 1997 (such time on such date being hereinafter called the
"Expiration Date"), unless the Exchange Offer is extended by the Company (in
which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended). Tenders of Senior Notes may be
withdrawn at any time prior to the Expiration Date. The Exchange Offer is not
conditioned upon any minimum aggregate principal amount of Senior Notes being
tendered for exchange. The Exchange Offer is, however, subject to certain
events and conditions and to the terms of the Registration Rights Agreement.
Senior Notes may be tendered only in integral multiples of aggregate principal
amount of $1,000. The Company has agreed to pay all expenses of the Exchange
Offer. This Prospectus, together with the Letter of Transmittal, is being sent
to all registered holders of Senior Notes as of , 1997.
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. No underwriter is being used in connection with
the Exchange Offer. See "Use of Proceeds" and "Plan of Distribution."
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary................................................................ 4
Risk Factors........................................................... 15
The Exchange Offer..................................................... 26
History of the Company................................................. 34
Use of Proceeds........................................................ 35
Capitalization......................................................... 36
Selected Financial and Operating Data.................................. 37
Pro Forma Financial Data............................................... 39
Management's Discussion and Analysis
of Financial Condition and Results
of Operations......................................................... 43
Business............................................................... 60
Management............................................................. 75
Certain Transactions................................................... 80
Principal Stockholders................................................. 82
Description of Certain Indebtedness.................................... 83
Description of the Exchange Notes...................................... 85
Plan of Distribution................................................... 113
Legal Matters.......................................................... 114
Experts................................................................ 114
Available Information.................................................. 115
Glossary............................................................... G-1
Index to Financial Statements.......................................... F-1
</TABLE>
3
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, the notes thereto and the other financial
data contained elsewhere in this Prospectus. Potential participants in the
Exchange Offer should carefully consider the factors set forth herein under the
caption "Risk Factors" and are urged to read this Prospectus and the related
Letter of Transmittal in its entirety. Unless otherwise indicated, (i) the
information in this Prospectus, other than the historical financial
information, gives effect to the Reorganization (as defined herein) and the
Offering and (ii) references herein to the "Company" or "ITC/\DeltaCom" refer to
ITC/\DeltaCom, Inc. and its subsidiaries. Certain terms used in this Prospectus
are defined in the "Glossary" appearing elsewhere herein.
THE COMPANY
The Company provides retail long distance services to mid-sized and major
regional businesses in the southern United States and is a leading regional
provider of wholesale long-haul services to other telecommunications companies
using the Company's owned, operated and managed fiber optic network (the
"Carriers' Carrier Services"). The Company intends to become a leading regional
provider of integrated telecommunications services to mid-sized and major
regional businesses in the southern United States by offering such customers a
broad range of telecommunications services, including local exchange and long
distance data and voice, Internet and operator services, and the sale and
servicing of customer premise equipment (collectively, the "Retail Services"),
in a single package tailored to the business customer's specific needs. In
1996, the Company had pro forma revenues of approximately $85.4 million,
earnings before extraordinary item, preacquisition (earnings) losses, equity in
losses of unconsolidated subsidiaries, net interest, income taxes, depreciation
and amortization ("EBITDA") of approximately $18.9 million and net loss from
continuing operations of approximately $12.1 million. For the six months ended
June 30, 1997, the Company had pro forma revenues of approximately $54.3
million, EBITDA of approximately $11.7 million and net loss from continuing
operations of approximately $4.5 million.
The Company provides Carriers' Carrier Services to other telecommunications
carriers, including AT&T, MCI, Sprint, WorldCom, Cable & Wireless, LCI,
Frontier and IXC. The Company's fiber optic network reaches over 60 points of
presence ("POPs") in ten southern states (Alabama, Arkansas, Florida, Georgia,
Louisiana, Mississippi, North Carolina, South Carolina, Tennessee and Texas)
and extends approximately 5,400 route miles, of which approximately 2,500 miles
are Company-owned and approximately 2,900 miles are owned and operated by three
public utilities (Duke Power Company, Florida Power & Light Company and Entergy
Technology Company) and managed and marketed by the Company. The Company
expects to add approximately 700 owned and operated route miles to its fiber
network by the end of 1997 and add approximately 100 owned and operated route
miles in early 1998 through long-term dark fiber leases. In 1996, the Company's
Carriers' Carrier Services business generated pro forma revenues of
approximately $20.2 million, EBITDA of approximately $11.5 million and net loss
from continuing operations of approximately $1.8 million. For the six months
ended June 30, 1997, the Company's Carriers' Carrier Services business
generated pro forma revenues of approximately $14.3 million, EBITDA of
approximately $8.5 million and net income from continuing operations of less
than $0.1 million. As of June 30, 1997, on a pro forma basis, the Company had
remaining future long-term contract commitments totaling approximately $75.8
million. These contracts expire on various dates through 2006 and are expected
to generate approximately $56.0 million in revenues to the Company through
2001, of which approximately $14.5 million are expected to be realized in 1998.
The Company currently provides a variety of Retail Services, including retail
long distance services such as traditional switched and dedicated long
distance, 800/888 calling, calling card and operator services, Asynchronous
Transfer Mode ("ATM"), frame relay, high capacity broadband private line
services, as well as Internet, Intranet and Web page hosting and development
services, and customer premise equipment installation and repair. As of June
30, 1997, the Company provided services to over 6,600 business customers. The
Company currently offers Retail Services, other than local exchange services
(which are provided in two markets), in 12
4
<PAGE>
metropolitan areas in Alabama, Florida, Georgia, Louisiana, North Carolina and
South Carolina and intends to provide a full range of Retail Services
(including local exchange services) in approximately 15 additional metropolitan
areas throughout the southern United States over the next five years. In 1996,
the Retail Services business generated pro forma revenues of approximately
$65.2 million, EBITDA of approximately $7.4 million and net loss from
continuing operations of approximately $3.7 million. For the six months ended
June 30, 1997, the Retail Services business generated pro forma revenues of
approximately $39.9 million, EBITDA of approximately $3.2 million and net loss
from continuing operations of approximately $2.2 million.
In July 1997, the Company began offering local services on a limited, resale
basis in Birmingham and Montgomery, Alabama, and commenced a general sales
effort of services on a resale basis in those markets in August 1997. Also in
August 1997, the Company initiated a limited offering in Birmingham and
Montgomery of facilities-based local services, and expects that general
marketing of such services will commence in September 1997. Although the
Company's local exchange services offerings in such markets are in the very
early stages, initial expressions of customer interest in such services have
been positive, consistent with management's expectations. However, there can be
no assurance that demand for the Company's local services will match such
preliminary indications of customer interest. The Company expects to offer
local exchange services as part of its Retail Services in six to nine markets
(including Birmingham and Montgomery) by the end of 1997, initially by
reselling the services of incumbent local exchange carriers and, where market
conditions warrant, by using its own local switching facilities.
In connection with offering local exchange services, the Company has entered
into an Interconnection Agreement (the "Interconnection Agreement") with
BellSouth Telecommunications, Inc. ("BellSouth") to (i) resell BellSouth's
local exchange services and (ii) interconnect the Company's network with
BellSouth's network for the purpose of immediately gaining access to all of
BellSouth's unbundled network elements. This agreement will allow the Company
to enter new markets with minimal capital expenditures and to offer local
exchange services to its current customer base. The Interconnection Agreement
currently allows the Company to provide local service on a resale basis or by
purchasing all unbundled network elements required to provide local service on
a facilities bases, without using Company-owned facilities. The terms of the
Interconnection Agreement, including interim pricing terms agreed to by the
Company and BellSouth, have been approved by state regulatory authorities in
most states, although they remain subject to review and modification by such
authorities. In addition, the Interconnection Agreement does not resolve all
operational issues, particularly those relating to the collocation of the
Company's equipment with that of BellSouth. The Company and BellSouth are
continuing to negotiate to resolve such issues. The Company expects that the
Interconnection Agreement will provide a foundation for it to provide local
service on a reasonable commercial basis, but there can be no assurance of this
and important issues remain unsettled as a result of legal and regulatory
developments and related matters. The Interconnection Agreement expires in
1999, and there can be no assurance that the Company will be able to renew it
under favorable terms, or at all.
BUSINESS STRATEGY
The Company's objectives are to maintain its leadership position in the
provision of Carriers' Carrier Services and to become a leading provider of
Retail Services in the southern United States. The Company intends to increase
its market share in existing markets and expand into new markets by (i)
aggressively expanding its customer base and increasing its telecommunications
services, including reselling services and facilities of the incumbent local
exchange carriers; (ii) leveraging the Company's extensive network in its
Retail Services and Carriers' Carrier Services businesses; (iii) concurrently
constructing or obtaining access to additional network infrastructure to serve
its customers more cost-effectively; and (iv) expanding its regional network of
sales offices. The principal elements of the Company's business strategy
include the following:
PROVIDING INTEGRATED TELECOMMUNICATIONS SERVICES TO EXISTING BASE OF MID-
SIZED AND MAJOR REGIONAL BUSINESS CUSTOMERS. By providing additional
telecommunications services such as local telephone service to its existing,
well-established base of long distance customers, the Company expects to be
able to increase revenues at relatively low incremental cost. The Company
believes that bundling a variety of telecommunications services and presenting
customers with one fully integrated monthly billing statement for all of those
services
5
<PAGE>
will allow it to penetrate its target markets rapidly and build customer
loyalty. The Company believes that there is substantial demand in its target
markets among mid-sized and major regional business customers for an integrated
package of telecommunications services that meets all of their
telecommunications needs.
LEVERAGING ITS EXTENSIVE FIBER OPTIC NETWORK. The Company intends to leverage
its extensive fiber optic network, which currently reaches over 60 POPs, by (i)
continuing to provide switched and transport services to other communications
carriers throughout its region to enable such carriers to diversify their
routes and expand their networks; (ii) targeting customers that need to
transmit large amounts of data within the Company's service region, such as
banks and local and state governments; and (iii) offering local exchange
services to its business customers, which began on a limited basis in the
second half of 1997, as part of its integrated package of telecommunications
services. The Company intends initially to provide local exchange services by
reselling the services of incumbent local exchange carriers and, in some
established markets, using its own local switching facilities. Over time, the
Company expects to provide local services primarily using the Company's own
switching facilities and existing regional fiber optic network, supplemented by
unbundled facilities of incumbent local exchange carriers or other competitive
local exchange carriers. The configuration of the Company's network enables the
Company to expand its network by installing additional remote local switches,
which operate in conjunction with the Company's DMS-500 switches to provide
facilities-based local services. Because remote local switches are less
expensive to purchase and install than DMS-500 switches, and can be installed
more quickly than DMS-500 switches, the Company believes that it will be able
to enter new markets at less expense than many of its competitors. At present,
the Company does not plan to construct intra-city local loop facilities.
FOCUSING ON THE SOUTHERN UNITED STATES. The Company intends to continue to
focus on the southern United States in order to leverage its extensive
telecommunications network in the region. The Company believes that its
regional focus will enable it to take advantage of economies of scale in
management, network operations and sales and marketing. The regional
concentration of the Company's network also provides an opportunity for
improved margins because a high portion of its customers' telecommunications
traffic originates and terminates within the region. The Company also believes
that its regional focus will enable it to build on its long-standing customer
and business relationships in the region.
BUILDING MARKET SHARE THROUGH PERSONALIZED CUSTOMER SERVICE. The Company
believes that the key to revenue growth in its target markets is capturing and
retaining customers by emphasizing marketing, sales and customer service.
Management believes that customers prefer one company to be accountable for
their telecommunications services, and that a consultative, face-to-face sales
and service strategy is the most effective method of acquiring and maintaining
a high quality customer base. The Company seeks to obtain long-term commitments
from its business customers by responding rapidly and creatively to their
telecommunications needs. The Company currently operates 14 sales offices in
Alabama, Florida, Georgia, Louisiana, North Carolina and South Carolina. Each
sales office is staffed by personnel capable of marketing all of the Company's
products and providing comprehensive support to the Company's customers.
EXPANDING ITS FIBER OPTIC NETWORK AND SWITCHING FACILITIES. The Company
expects to expand its fiber optic telecommunications network and switching
facilities to include additional markets within the southern United States. The
Company currently owns and operates approximately 2,500 route miles of fiber
optic network extending from Georgia to Texas, with an additional 700 owned and
operated route miles expected to be added by the end of 1997 and approximately
100 owned and operated route miles expected to be added in early 1998. The
Company also markets and manages capacity on 2,900 additional network route
miles through its strategic relationships with public utilities. In addition,
the Company has a buy-sell agreement with Carolinas Fibernet, LLC, which
manages fiber optic facilities in North Carolina and South Carolina. This
agreement enables the parties to buy and sell capacity on each other's networks
and allows the Company to provide customers with access to POPs throughout
those states. The Company believes that, by continuing to combine its owned
network with the networks of public utilities and by adding switching
facilities throughout its network, it will be able to achieve capital
efficiencies and rapidly expand its network in a cost-effective manner.
6
<PAGE>
LEVERAGING PROVEN MANAGEMENT TEAM. The Company's management team consists of
experienced telecommunications managers who in the past have successfully
implemented a customer-focused long distance telecommunications strategy in the
southern United States. Members of the team include Andrew Walker, Chief
Executive Officer of the Company, Foster McDonald, President of the Company,
and Douglas Shumate, Chief Financial Officer of the Company. ITC Holding
Company, Inc. ("ITC Holding"), a diversified company with substantial holdings
in telecommunications businesses operating in the southern United States, is
the Company's sole stockholder. The Company anticipates that ITC Holding's
experience and contacts in the telecommunications industry will enhance the
Company's development.
HISTORY OF THE COMPANY
ITC/\DeltaCom was incorporated in March 1997 as a wholly owned subsidiary of
ITC Holding to acquire and operate ITC Holding's Retail Services and Carriers'
Carrier Services businesses. The Company acquired such businesses on July 25,
1997 in the Reorganization as described below.
BACKGROUND. ITC Holding has provided operator and directory assistance
services since March 1993 through its subsidiary, Eastern Telecom, Inc., which
does business as InterQuest ("InterQuest"). Carriers' Carrier Services have
been offered since April 1992 through Interstate FiberNet, a partnership
originally formed by ITC Holding (with a 49% interest) and SCANA
Communications, Inc. ("SCANA") (with a 51% interest). In August 1994, ITC
Holding acquired SCANA's interest in Interstate FiberNet through ITC
Transmission Systems II, Inc., a wholly owned subsidiary of ITC Holding
("Transmission II"). Also in August 1994, ITC Holding and SCANA formed a second
partnership, Gulf States FiberNet, to construct and operate a fiber optic route
primarily between Atlanta, Georgia and Shreveport, Louisiana with several
supplemental spur routes. In a transaction consummated in March 1997 (the "Gulf
States Acquisition"), ITC Holding acquired SCANA's 64% partnership interest in
Gulf States FiberNet and certain fiber and fiber-related assets, including a
significant customer contract for network services in Georgia (the "Georgia
Fiber Assets"). Following the Gulf States Acquisition, ITC Holding contributed
the remaining 64% interest in Gulf States FiberNet to Gulf States Transmission
Systems, Inc., a wholly owned subsidiary of ITC Holding ("Gulf States
Transmission"), and the Georgia Fiber Assets to ITC Transmission Systems, Inc.,
a wholly owned subsidiary of ITC Holding ("Transmission"). Members of the
Company's management have been managing the businesses of both Interstate
FiberNet and Gulf States FiberNet since their inception.
In January 1996, through its acquisition (the "DeltaCom Acquisition") of
DeltaCom, Inc. ("DeltaCom"), ITC Holding entered the retail long distance
business and acquired several fiber optic routes within the state of Alabama
that complemented the existing networks operated by Interstate FiberNet
(including a fiber route from Atlanta, Georgia to Columbus, Georgia) and Gulf
States FiberNet. DeltaCom, a provider of telecommunications services since its
inception in 1982, provides long distance services to mid-sized businesses
primarily in Alabama. In July 1996, DeltaCom purchased substantially all of the
assets of the Internet business of Viper Computer Systems, Inc. ("ViperNet"),
which provides Internet access, Web-hosting and Web page development services
to business customers.
To finance the DeltaCom Acquisition and to refinance existing DeltaCom debt,
ITC Holding incurred approximately $74.0 million of indebtedness, which was
pushed down to the Company (the "DeltaCom Indebtedness"). The aggregate
consideration paid by ITC Holding in the Gulf States Acquisition was
approximately $27.9 million, of which $10.0 million consisted of an unsecured
note (the "SCANA Note"), which has been assumed by a subsidiary of the Company,
and $17.9 million consisted of ITC Holding preferred stock. In connection with
the Gulf States Acquisition, Gulf States Transmission borrowed $41.6 million
under a credit facility (the "Bridge Facility") with NationsBank, N.A., to
refinance a project loan incurred by Gulf States FiberNet.
SENIOR NOTE OFFERING. On June 3, 1997, the Company completed the sale of $200
million principal amount of Senior Notes in a private offering. The net
proceeds from the sale of the Senior Notes, other than the portion
7
<PAGE>
of such proceeds invested in U.S. government securities pledged to secure and
fund the first six scheduled interest payments on the Senior Notes and the
Exchange Notes (the "Pledged Securities"), were released to the Company upon
consummation of the Reorganization.
REORGANIZATION. On July 25, 1997, ITC Holding contributed to the Company in a
series of transactions the businesses of Interstate FiberNet, Gulf States
FiberNet, DeltaCom and InterQuest (such transactions collectively referred to
herein as the "Reorganization"). In connection with the Reorganization,
approximately $31.0 million of the $74.0 million of the DeltaCom Indebtedness
was forgiven by ITC Holding and contributed to the Company as additional
equity. Following the Reorganization, the Company repaid the remaining
$43.0 million of the DeltaCom Indebtedness, accrued interest on all $74.0
million of such indebtedness and the $41.6 million of indebtedness outstanding
under the Bridge Facility and accrued interest thereon with a portion of the
net proceeds from the Offering. See "Use of Proceeds."
THE EXCHANGE OFFER
The Exchange Offer........ Up to $200 million aggregate principal amount of
Exchange Notes are being offered in exchange for a
like aggregate principal amount of Senior Notes.
Senior Notes may be tendered for exchange in whole
or in part in integral multiples of $1,000
principal amount. The Company is making the
Exchange Offer in order to satisfy its obligations
under the Registration Rights Agreement relating to
the Senior Notes. For a description of the
procedures for tendering Senior Notes, see "The
Exchange Offer--Procedures for Tendering Senior
Notes."
Expiration Date........... 5:00 p.m., New York City time, on , 1997
unless the Exchange Offer is extended by the
Company (in which case the term "Expiration Date"
shall mean the latest date and time to which the
Exchange Offer is extended). See "The Exchange
Offer--Expiration Date; Extensions, Amendments."
Conditions to the
Exchange Offer............ The Exchange Offer is subject to certain
conditions, which may be waived by the Company in
its sole discretion. The Exchange Offer is not
conditioned upon any minimum aggregate principal
amount of Senior Notes being tendered. See "The
Exchange Offer--Conditions to the Exchange Offer."
The Company reserves the right in its sole and
absolute discretion, subject to applicable law, at
any time and from time to time, (i) to delay the
acceptance of the Senior Notes, (ii) to terminate
the Exchange Offer if certain specified conditions
have not been satisfied, (iii) to extend the
Expiration Date of the Exchange Offer and retain
all Senior Notes tendered pursuant to the Exchange
Offer, subject, however, to the right of holders of
Senior Notes to withdraw their tendered Senior
Notes, and (iv) to waive any condition or otherwise
amend the terms of the Exchange Offer in any
respect. See "The Exchange Offer--Expiration Date;
Extensions; Amendments."
Withdrawal Rights......... Tenders of Senior Notes may be withdrawn at any
time prior to the Expiration Date by delivering a
written notice of such withdrawal to
8
<PAGE>
the Exchange Agent (as defined herein) in
conformity with certain procedures as set forth
below under "The Exchange Offer--Withdrawal
Rights."
Procedures for Tendering
Senior Notes............. Tendering holders of Senior Notes must complete and
sign a Letter of Transmittal in accordance with the
instructions contained therein and forward the same
by mail, facsimile transmission or hand delivery,
together with any other required documents, to the
Exchange Agent, either with the Senior Notes to be
tendered or in compliance with the specified
procedures for guaranteed delivery of Senior Notes.
Certain brokers, dealers, commercial banks, trust
companies and other nominees may also effect
tenders by book-entry transfer. Holders of Senior
Notes registered in the name of a broker, dealer,
commercial bank, trust company or other nominee are
urged to contact such person promptly if they wish
to tender Senior Notes pursuant to the Exchange
Offer. See "The Exchange Offer--Procedures for
Tendering Senior Notes."
Letters of Transmittal and certificates
representing Senior Notes should not be sent to the
Company. Such documents should only be sent to the
Exchange Agent. Questions regarding how to tender
and requests for information should be directed to
the Exchange Agent. See "The Exchange Offer--
Exchange Agent."
Resales of Exchange
Notes..................... Based on interpretations by the staff of the
Commission, as set forth in no-action letters
issued to third parties, the Company believes that
holders of Senior Notes (other than any holder that
is (i) a broker-dealer that acquired Senior Notes
as a result of market-making activities or other
trading activities or (ii) an "affiliate" of the
Company within the meaning of Rule 405 under the
Securities Act) who exchange their Senior Notes for
Exchange Notes pursuant to the Exchange Offer may
offer for resale, resell and otherwise transfer
such Exchange Notes without compliance with the
registration and prospectus delivery provisions of
the Securities Act, provided that such Exchange
Notes are acquired in the ordinary course of such
holders' business and such holders have no
arrangement or understanding with any person to
participate in a distribution (within the meaning
of the Securities Act) of such Exchange Notes. Any
holder who tenders Senior Notes in the Exchange
Offer with the intention to participate, or for the
purpose of participating, in a distribution of the
Exchange Notes or who is an affiliate of the
Company may not rely upon such interpretations by
the staff of the Commission and, in the absence of
an exemption therefrom, must comply with the
registration and prospectus delivery requirements
of the Securities Act in connection with any
secondary resale transaction. Failure to comply
with such requirements in such instance may result
in such holder incurring liabilities under the
Securities Act for which the holder is not
indemnified by the Company. The staff of the
Commission has not considered the Exchange Offer in
the context of a no-action letter, and there can be
no assurance that the staff of the
9
<PAGE>
Commission would make a similar determination with
respect to the Exchange Offer. Each broker-dealer
that receives Exchange Notes for its own account in
exchange for Senior Notes, where such Senior Notes
were acquired by such broker-dealer as a result of
market-making activities or other trading
activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such
Exchange Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the
meaning of the Securities Act. The Company has
agreed that, for a period not to exceed 180 days
after the Expiration Date, it will furnish
additional copies of this Prospectus, as amended or
supplemented, to any broker-dealer that reasonably
requests such documents for use in connection with
any such resale. See "Plan of Distribution."
Exchange Agent............ The exchange agent with respect to the Exchange
Offer is United States Trust Company of New York
(the "Exchange Agent"). The address, telephone
number and facsimile number of the Exchange Agent
are set forth in "The Exchange Offer--Exchange
Agent" and in the Letter of Transmittal.
Use of Proceeds........... The Company will not receive any cash proceeds from
the issuance of the Exchange Notes offered hereby.
The net proceeds from the Offering have been and
will be used to repay certain outstanding
indebtedness of the Company; to fund expansion of
the Company's telecommunications business,
including expansion of the Company's fiber optic
network and the opening of new sales offices; and
for additional working capital and general
corporate purposes, including funding cash flow
deficits and the payment of interest on the Senior
Notes and the Exchange Notes. See "Use of
Proceeds."
Certain United States
Federal Income Tax
Consequences............. The exchange of the Senior Notes for the Exchange
Notes will not be a taxable exchange for federal
income tax purposes, and holders of Senior Notes
should not recognize any taxable gain or loss or
any interest income as a result of such exchange.
See "The Exchange Offer--Certain United States
Federal Income Tax Consequences."
THE EXCHANGE NOTES
Securities Offered........ $200 million aggregate principal amount of 11%
Senior Notes dueJune 1, 2007. The terms of the
Exchange Notes will be identical in all material
respects to the terms of the Senior Notes, except
that (i) the Exchange Notes will have been
registered under the Securities Act and therefore
will not be subject to certain restrictions on
transfer applicable to the Senior Notes and (ii)
holders of the Exchange Notes will not be entitled
to certain rights of holders of the Senior Notes
under the Registration Rights Agreement. The
Exchange Notes will evidence the same debt as the
Senior Notes and will be issued pursuant to and
entitled to the benefits of the Indenture.
10
<PAGE>
Maturity.................. June 1, 2007.
Interest.................. Interest on the Exchange Notes is payable
semiannually in cash, on each June 1 and December
1, commencing December 1, 1997.
Security.................. Pursuant to the Indenture, approximately $62.7
million of the net proceeds from the Offering were
used by the Trustee to purchase a portfolio of
Pledged Securities (consisting only of U.S.
government securities) that are being held as
security for the payment of the first six scheduled
interest payments due on the Senior Notes and the
Exchange Notes. The Pledged Securities are being
and will be held by the Trustee for the benefit of
the holders of the Senior Notes and the Exchange
Notes under a Pledge and Security Agreement dated
June 3, 1997 between the Company and the Trustee
(the "Pledge Agreement"), pending disbursement.
After the first six scheduled interest payments on
the Senior Notes and Exchange Notes are made, the
Senior Notes and the Exchange Notes will be
unsecured. See "Description of the Exchange Notes--
Security."
Optional Redemption....... The Exchange Notes may be redeemed at any time on
or after June 1, 2002, at the option of the
Company, in whole or in part, at 105.5% of their
principal amount, plus accrued interest, declining
ratably to 100% of their principal amount, plus
accrued interest, on and after June 1, 2004. In
addition, at any time prior to June 1, 2000, up to
35% of the aggregate principal amount of the Senior
Notes and the Exchange Notes may be redeemed from
the proceeds of one or more Public Equity Offerings
at 111% of their principal amount plus accrued
interest; provided that after any such redemption
at least $130.0 million aggregate principal amount
of the Senior Notes and the Exchange Notes remains
outstanding.
Change of Control......... Upon a Change of Control (as defined herein), the
Company will be required to make an offer to
purchase the Exchange Notes at a purchase price
equal to 101% of their principal amount, plus
accrued interest. There can be no assurance that
the Company will have sufficient funds available at
the time of any Change of Control to make any
required debt repayment (including repurchases of
the Exchange Notes). See "Description of the
Exchange Notes--Repurchases of Exchange Notes upon
a Change of Control," and "Description of the
Exchange Notes--Certain Definitions."
Ranking................... The Exchange Notes will be unsubordinated
indebtedness of the Company, ranking pari passu in
right of payment with the Senior Notes and all
other existing and future unsubordinated
indebtedness of the Company and senior in right of
payment to all subordinated indebtedness of the
Company. After giving pro forma effect to the
Reorganization and the use of the net proceeds from
the Offering, at June 30, 1997, the Company (on an
unconsolidated basis) would have had no other
indebtedness other than the Senior Notes. In
addition, the Exchange Notes will be unsecured
(except as described under""--Security") and will
be effectively subordinated to all secured
11
<PAGE>
indebtedness. The Company is a holding company and
the Senior Notes are, and the Exchange Notes will
be, effectively subordinated to all existing and
future liabilities (including trade payables) of
the Company's subsidiaries. On June 30, 1997, on
the same pro forma basis, the subsidiaries of the
Company would have had approximately $37.8 million
of liabilities (excluding intercompany payables),
including approximately $14.4 million of
indebtedness (including capital leases). A
subsidiary of the Company has received a commitment
letter (the "Commitment Letter") from NationsBank
of Texas, N.A. ("NationsBank") for a secured credit
facility (the "Credit Facility") of up to $100
million to be used for working capital and other
purposes, including capital expenditures and
permitted acquisitions. The Credit Facility is
expected to be secured by substantially all of the
assets of the Company's subsidiaries. The Company
and its other subsidiaries will guarantee all
obligations under the Credit Facility. Indebtedness
under the Credit Facility will be effectively
senior to the Exchange Notes to the extent of such
security interests. See "Risk Factors--Holding
Company Structure; Priority of Secured Debt."
Certain Covenants......... The Indenture contains certain covenants that,
among other things, limit the ability of the
Company to incur indebtedness, pay dividends,
prepay subordinated indebtedness, repurchase
capital stock, make investments, engage in
transactions with stockholders and affiliates,
create liens, sell assets and engage in mergers and
consolidations. However, these limitations are
subject to a number of important qualifications and
exceptions. See "Description of the Exchange
Notes--Covenants."
RISK FACTORS
Potential participants in the Exchange Offer should consider carefully
certain factors relating to the Company, its business and an investment in the
Exchange Notes before tendering their Senior Notes for Exchange Notes. See
"Risk Factors."
12
<PAGE>
SUMMARY FINANCIAL AND OPERATING DATA
The summary historical and pro forma financial and operating data set forth
below should be read in conjunction with "History of the Company," "Use of
Proceeds," "Selected Financial and Operating Data," "Pro Forma Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the financial statements and notes thereto, and other financial
and operating data contained elsewhere in this Prospectus. The pro forma
statement of operations data for 1996 give effect to the following transactions
as if each had occurred on January 1, 1996: (i) the DeltaCom Acquisition; (ii)
the Gulf States Acquisition; (iii) the Reorganization; and (iv) the Offering
and the use of the net proceeds therefrom. The pro forma statement of
operations data for the six months ended June 30, 1997 give effect to the
following transactions as if each had occurred on January 1, 1996: (i) the Gulf
States Acquisition; (ii) the Reorganization; and (iii) the Offering and the use
of the net proceeds therefrom. The pro forma balance sheet data at June 30,
1997 give effect to (i) the Reorganization, including ITC Holding's forgiveness
and contribution of approximately $31.0 million of the DeltaCom Indebtedness to
the Company as additional equity and (ii) the use of the net proceeds from the
Offering as if such transactions had occurred on June 30, 1997. The pro forma
financial and operating information does not purport to represent what the
Company's consolidated results of operations would have been if these
transactions had in fact occurred on these dates, nor does it purport to
indicate the future consolidated financial position or consolidated results of
future operations of the Company. The pro forma adjustments are based on
currently available information and certain assumptions that management
believes to be reasonable.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
---------------------------------------------------- ---------------------------------------
COMBINED PRO FORMA COMBINED PRO FORMA
-------------------------------------- CONSOLIDATED ------------------------- CONSOLIDATED
1994(A)(B) 1995 1996(C) 1996 1996(C) 1997(D)(E) 1997(D)(E)
----------- ----------- ------------ ------------ ----------- ------------ ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Operating revenues.... $ 4,945,902 $ 5,750,587 $ 66,518,585 $ 85,374,362 $28,574,799 $ 53,365,061 $ 54,250,511
Operating expenses:
Cost of service...... 2,484,744 3,149,231 38,756,287 42,587,228 16,129,463 25,302,747 25,302,747
Selling, operations
and
administration expense.. 948,230 1,626,678 18,876,572 23,866,169 8,206,621 16,961,324 17,209,549
Depreciation and am-
ortization.......... 738,052 1,267,882 6,438,074 14,612,761 2,832,017 8,273,232 8,634,041
----------- ----------- ------------ ------------ ----------- ------------ ------------
Total operating ex-
penses.............. 4,171,026 6,043,791 64,070,933 81,066,158 27,168,101 50,537,303 51,146,337
Operating income
(loss)............... 774,876 (293,204) 2,447,652 4,308,204 1,406,698 2,827,758 3,104,174
Equity in losses of
unconsolidated
subsidiaries......... (96,920) (258,242) (1,589,812) -- (1,088,404) -- --
Interest expense...... (273,759) (297,228) (6,172,421) (26,266,789) (2,762,757) (7,561,591) (12,389,998)
Interest and other in-
come................. 82,348 41,734 171,514 3,717,951 107,216 883,388 2,697,611
----------- ----------- ------------ ------------ ----------- ------------ ------------
Income (loss) before
taxes,
preacquisition (earnings)
losses and extraordi-
nary item............ 486,545 (806,940) (5,143,067) (18,240,634) (2,337,247) (3,850,445) (6,588,213)
Income tax (provision)
benefit.............. (113,248) 302,567 1,233,318 6,167,132 671,467 1,005,809 2,046,160
Preacquisition (earn-
ings) losses......... (236,300) -- -- -- -- 74,132 --
----------- ----------- ------------ ------------ ----------- ------------ ------------
Income (loss) from
continuing
operations........... 136,997 (504,373) (3,909,749) (12,073,502) (1,665,780) (2,770,504) (4,542,053)
Extraordinary item--
loss on
extinguishment of
debt (net of tax
benefit)............. -- -- -- -- -- (507,515) (507,515)
----------- ----------- ------------ ------------ ----------- ------------ ------------
Net income (loss)..... $ 136,997 $ (504,373) $ (3,909,749) $(12,073,502) $(1,665,780) $ (3,278,019) $ (5,049,568)
=========== =========== ============ ============ =========== ============ ============
BALANCE SHEET DATA (AT PERIOD
END):
Working capital (defi-
cit)................. $ 254,988 $ (242,136) $ 3,415,088 $ 68,175,664 $ 53,895,964
Property and equip-
ment, net............ 8,486,996 9,386,444 31,880,556 115,852,080 115,852,080
Total assets.......... 20,062,286 20,922,337 113,207,979 402,015,721 301,908,472
Long-term debt,
advances from ITC
Holding and capital
lease obligations,
including current
portions............. 4,013,977 3,143,977 75,442,971 256,029,126 214,429,126
Stockholder's equity.. 13,761,409 14,307,036 19,256,526 33,450,572 64,120,400
OTHER FINANCIAL DATA:
Capital expenditures.. $ 3,703,835 $ 1,805,742 $ 6,172,660 $ 7,427,263 $ 2,279,913 $ 12,357,471 $ 12,559,439
EBITDA(f)............. 1,512,928 974,678 8,885,726 18,920,965 4,238,715 11,100,990 11,738,215
Cash flows from opera-
tions................ 978,775 1,437,317 8,188,618 8,252,717 2,448,698 9,409,779 10,212,231
Ratio of earnings to
fixed charges(g)..... 1.85x -- -- -- -- -- --
</TABLE>
(footnotes on following page)
13
<PAGE>
(a) Through August 17, 1994, the Company owned a 49% interest in Interstate
FiberNet and accounted for this investment under the equity method. On
August 17, 1994, the Company purchased the remaining 51% interest in
Interstate FiberNet from SCANA. Therefore, Interstate FiberNet's revenues
and expenses have been included in the combined statement of operations
data effective January 1, 1994, with the preacquisition earnings
attributable to SCANA deducted to determine the combined net income for
1994. See note 5 to the combined financial statements.
(b) On August 17, 1994, the Company entered into the Gulf States FiberNet
partnership with SCANA. The Company obtained a 36% general partnership
interest and the investment was accounted for under the equity method. See
note 5 to the combined financial statements.
(c) On January 29, 1996, ITC Holding purchased DeltaCom. DeltaCom's results of
operations are included in the historical statement of operations data
since the date of acquisition. See note 13 to the combined financial
statements.
(d) On March 27, 1997, the Company purchased the remaining 64% partnership
interest in Gulf States FiberNet from SCANA. Therefore, Gulf States
FiberNet's revenues and expenses have been included in the combined
statement of operations data effective January 1, 1997 with the
preacquisition losses attributable to SCANA deducted to determine the
combined net loss for the six months ended June 30, 1997. See note 16 to
the combined financial statements.
(e) On March 27, 1997, the Company purchased the Georgia Fiber Assets from
SCANA. The results of operations for the Georgia Fiber Assets were included
in the combined statements of operations beginning April 1, 1997. See note
16 to the combined financial statements.
(f) EBITDA represents earnings before extraordinary item, preacquisition
(earnings) losses, equity in losses of unconsolidated subsidiaries, net
interest, income taxes, depreciation and amortization. EBITDA is provided
because it is a measure commonly used in the industry. EBITDA is not a
measurement of financial performance under generally accepted accounting
principles and should not be considered an alternative to net income as a
measure of performance or to cash flow as a measure of liquidity. EBITDA is
not necessarily comparable with similarly titled measures for other
companies. Pro forma consolidated EBITDA for the year ended December 31,
1996 and the six months ended June 30, 1997 includes an estimated $3.4
million and $1.8 million, respectively, of interest income that would have
been earned on the estimated $62.7 million invested in Pledged Securities.
(g) Earnings consist of income before income taxes, plus fixed charges. Fixed
charges consist of interest charges and amortization of debt issuance costs
(including those reflected as an extraordinary item) and the portion of
rent expense under operating leases representing interest (estimated to be
one-third of such expense). Earnings were insufficient to cover fixed
charges for the years ended December 31, 1995, 1996 and pro forma 1996 and
the six months ended June 30, 1996, 1997 and pro forma 1997 by $.8 million,
$5.1 million, $18.2 million, $2.3 million, $3.8 million and $6.6 million,
respectively.
14
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, holders
of Senior Notes should consider carefully the following factors before
tendering their Senior Notes for Exchange Notes.
HISTORICAL AND ANTICIPATED FUTURE OPERATING LOSSES AND NEGATIVE CASH FLOW
AFTER CAPITAL EXPENDITURES
The Company expects to incur significant and increasing operating losses and
negative cash flow (after capital expenditures) during the next several years
as it implements its business strategy to expand its telecommunications
service offerings, expand its fiber optic network and enter new markets.
Although the Company expects that a majority of its revenue growth will come
from Retail Services, it does not expect its Retail Services to obtain a
significant share of the market for telecommunications services in the
southern United States, and there can be no assurance that the Company will
achieve or sustain profitability or positive net cash flow in the future. If
the Company cannot achieve or sustain operating profitability and positive net
cash flow, it may not be able to meet its working capital or debt service
requirements, which could have a material adverse effect on the Company's
ability to meet its obligations on the Exchange Notes. See "--Significant
Capital Requirements; Uncertainty of Additional Financing," "Selected
Financial and Operating Data," "Pro Forma Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
SIGNIFICANT CAPITAL REQUIREMENTS; UNCERTAINTY OF ADDITIONAL FINANCING
Expansion of the Company's network, operations and services will require
significant capital. The Company currently estimates that its aggregate
capital requirements will total approximately $104 million in 1997 and 1998,
of which approximately $50 million is expected to be incurred in 1997
(including $12.4 million of capital expenditures made as of June 30, 1997) and
$54 million in 1998. The Company anticipates making substantial capital
expenditures thereafter. Capital expenditures will be primarily for: the
addition of facilities-based local telephone service to the Company's bundle
of integrated telecommunications services, including acquisition and
installation of switches; market expansion; continued development and
construction of its fiber optic network (including transmission equipment);
and infrastructure enhancements, principally for information systems. The
Company believes that the net proceeds from the Offering, together with cash
flow from operations and borrowings expected to be available under the Credit
Facility, will provide sufficient funds to enable the Company to expand its
business as currently planned through the expected maturity of the Credit
Facility in 2002, after which the Company will need to seek additional
financing to fund capital expenditures and working capital. Because the Credit
Facility is expected to mature in 2002, the Company may not have a ready
source of liquidity after 2002. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Description of Certain
Indebtedness."
The actual amount and timing of the Company's future capital requirements
may differ materially from the Company's estimate depending on the demand for
the Company's services and as a result of regulatory, technological and
competitive developments (including new market developments and new
opportunities) in the Company's industry. The Company may also require
additional capital in the future (or sooner than currently anticipated) for
new business activities related to its current and planned businesses, or in
the event it decides to make additional acquisitions or enter into joint
ventures and strategic alliances. Sources of additional capital may include
cash flow from operations and public and private equity and debt financings.
There can be no assurance, however, that the Company will be successful in
producing sufficient cash flows or raising sufficient debt or equity capital
to meet its strategic objectives or that such funds, if available at all, will
be available on a timely basis or on terms that are acceptable to the Company.
Failure to generate or raise sufficient funds would require the Company to
delay or abandon some or all of its future expansion plans or expenditures,
which could have a material adverse effect on the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Overview."
HIGH LEVERAGE; ABILITY TO SERVICE DEBT; RESTRICTIVE COVENANTS
At June 30, 1997, on a pro forma basis, giving effect to the Reorganization
and the use of the net proceeds from the Offering, the Company would have had
$214.4 million of indebtedness and its stockholder's equity
15
<PAGE>
would have been $64.1 million. On a pro forma basis, the Company's earnings
would have been insufficient to cover its fixed charges for the year ended
December 31, 1996 and the six months ended June 30, 1997 by $18.2 million and
$6.6 million, respectively, and its EBITDA less capital expenditures and
interest expense would have been negative $14.8 million and negative $13.0
million, respectively.
The Indenture contains, and the Credit Facility will contain, restrictions
on the Company and its subsidiaries that affect, and in certain cases
significantly limit or prohibit, among other things, the ability of the
Company and its subsidiaries to incur additional indebtedness, create liens,
make investments, issue stock of subsidiaries and sell assets. In addition,
the Credit Facility is expected to require the Company to maintain certain
financial ratios. See "Description of Certain Indebtedness--Credit Facility."
There can be no assurance that the Company will be able to maintain such
ratios or that such covenants will not adversely affect the Company's ability
to finance its future operations or capital needs or to engage in other
business activities that may be in the interest of the Company. The
limitations in the Indenture are subject to a number of important
qualifications and exceptions. In particular, while the Indenture restricts
the Company's ability to incur indebtedness by requiring compliance with
specified leverage ratios, it permits the Company to incur an unlimited amount
of additional indebtedness to finance the acquisition of equipment, inventory
or network assets.
There can be no assurance that the Company will be able to improve its
earnings before fixed charges or that the Company will be able to meet its
debt service obligations, including its obligations on the Exchange Notes. If
the Company is unable to generate sufficient cash flow or otherwise obtain
funds necessary to make required payments, or if the Company otherwise fails
to comply with the various covenants in its debt obligations, it would be in
default under the terms thereof, which would permit the holders of such
indebtedness to accelerate the maturity of such indebtedness and could cause
defaults under other indebtedness of the Company. Such defaults could result
in a default on the Exchange Notes and could delay or preclude payment of
interest or principal on the Exchange Notes. The ability of the Company to
meet its obligations will be dependent upon the future performance of the
Company, which will be subject to prevailing economic conditions and to
financial, business and other factors. See "Description of Certain
Indebtedness" and "Description of the Exchange Notes--Covenants."
The level of the Company's indebtedness could adversely affect the Company
in a number of ways. For example, (i) the ability of the Company to obtain any
necessary financing in the future for working capital, capital expenditures,
debt service requirements or other purposes may be limited; (ii) the Company's
level of indebtedness could limit its flexibility in planning for, or reacting
to, changes in its business; (iii) the Company will be more highly leveraged
than some of its competitors, which may place it at a competitive
disadvantage; (iv) the Company's degree of indebtedness may make it more
vulnerable to a downturn in its business or the economy generally; (v) the
debt service requirements of any additional indebtedness could make it more
difficult for the Company to make payments on the Exchange Notes; and (vi) a
substantial portion of the Company's cash flow from operations must be
dedicated to the payment of principal and interest on its indebtedness and
will not be available for other purposes.
The successful implementation of the Company's strategy, including expansion
of its network and obtaining and retaining a significant number of customers,
and significant and sustained growth in the Company's cash flow are necessary
for the Company to be able to meet its debt service requirements, including
its obligations under the Exchange Notes. There can be no assurance that the
Company will successfully implement its strategy or that the Company will be
able to generate sufficient cash flow from operating activities to meet its
debt service obligations and working capital requirements. In the event the
implementation of the Company's strategy is delayed or is unsuccessful or the
Company does not generate sufficient cash flow to meet its debt service and
working capital requirements, the Company may need to seek additional
financing. There can be no assurance that any such financing could be obtained
on terms that are acceptable to the Company, or at all. In the absence of such
financing, the Company could be forced to dispose of assets in order to make
up for any shortfall in the payments due on its indebtedness under
circumstances that might not be favorable to realizing the highest price for
such assets. A substantial portion of the Company's assets consist of
intangible assets, the value of which will depend upon a variety of factors
(including the success of the Company's business). As a result, there can
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be no assurance that the Company's assets could be sold quickly enough or for
sufficient amounts to enable the Company to meet its obligations, including
its obligations with respect to the Exchange Notes.
ABILITY TO MANAGE GROWTH
The expansion and development of the Company's business will depend on,
among other things, the Company's ability to successfully implement its sales
and marketing strategy, evaluate markets, design fiber routes, secure
financing, install facilities, acquire rights of way, obtain any required
government authorizations, implement interconnection to, and co-location with,
facilities owned by incumbent local exchange carriers and obtain appropriately
priced unbundled network elements and wholesale services from the incumbent
local exchange carriers, all in a timely manner, at reasonable costs and on
satisfactory terms and conditions. The Company's rapid growth, particularly in
the provision of Retail Services, has placed, and anticipated growth in other
services in the future may also place, a significant strain on its
administrative, operational and financial resources. The Company's ability to
continue to manage its growth successfully will require the Company to enhance
its operational, management, financial and information systems and controls
and to hire and retain qualified sales, marketing, administrative, operating
and technical personnel. There can be no assurance that the Company will be
able to do so. In addition, as the Company increases its service offerings and
expands its targeted markets, there will be additional demands on customer
support, sales and marketing, administrative resources and network
infrastructure. The Company's inability to manage its growth effectively could
have a material adverse effect on the Company's business, results of
operations and financial condition.
BUSINESS DEVELOPMENT AND EXPANSION RISKS
The successful implementation of the Company's business strategy to provide
an integrated bundle of telecommunications services and expand its operations
will be subject to a variety of risks, including competition and pricing, the
availability of capital on favorable terms, regulatory uncertainties,
operating and technical problems, the need to establish interconnection and
co-location arrangements with incumbent local exchange carriers in its target
markets and the potential difficulties in adding a local service offering. See
"--Dependence on Incumbent Local Exchange Carriers." In addition, the
expansion of the Company's business may involve acquisitions of other
telecommunications businesses and assets that, if made, could divert the
resources and management time of the Company and could require integration
with the Company's operations. There can be no assurance that any such
acquisition could be successfully integrated into the Company's operations or
that any acquired business will perform as expected. Failure of the Company to
implement its expansion and growth strategy successfully would have a material
adverse effect on the Company's business, results of operations and financial
condition.
RISKS RELATED TO LOCAL SERVICES STRATEGY
The Company plans to enter the newly created competitive local
telecommunications services industry. The local dial tone services market has
only recently been opened to competition through the passage of the
Telecommunications Act of 1996 (the "Telecommunications Act") and subsequent
state and Federal regulatory actions designed to implement the
Telecommunications Act. Regulatory bodies have not completed all actions
expected to be needed to implement local service competition, and there is
little experience under those decisions that have been made to date. The
Company will have to make significant operating and capital investments in
order to implement its local exchange services strategy. There are numerous
operating complexities associated with providing these services. The Company
will be required to develop new products, services and systems and will need
to develop new marketing initiatives and train its sales force in connection
with selling these services. The Company will also need to implement the
necessary billing and collecting systems for these services. The Company will
face significant competition from the Regional Bell Operating Companies, whose
core business is providing local dial tone service. The Regional Bell
Operating Companies, who currently are the dominant providers of services in
their markets, are expected to mount a significant competitive response to new
entrants in their markets such as the Company. The Company also will face
significant competitive product and pricing
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pressures from other incumbent local exchange carriers and from other firms
seeking to compete in the local services market.
The Company also expects that the addition of local service to its bundle of
telecommunications services will have an adverse impact on its gross margin
because the gross margin on the resale of local services through incumbent
local exchange carrier facilities is lower than the gross margin on the
Company's existing business. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview."
PRICING PRESSURES AND RISKS OF INDUSTRY OVER-CAPACITY
The long distance transmission industry has generally been characterized by
over-capacity and declining prices since shortly after the AT&T divestiture in
1984. The Company believes that, in the last several years, increasing demand
has ameliorated the over-capacity and that pricing pressure has been reduced.
However, the Company anticipates that prices for its Carriers' Carrier
Services will continue to decline over the next several years. The Company is
aware that certain long distance carriers are expanding their capacity and
believes that other long distance carriers, as well as potential new entrants
to the industry, are constructing new fiber optic and other long distance
transmission networks in the southern United States. Since the cost of the
actual fiber (as opposed to construction costs) is a relatively small portion
of the cost of building new transmission lines, persons building such lines
are likely to install fiber that provides substantially more transmission
capacity than will be needed over the short or medium term. Further, recent
technological advances may greatly expand the capacity of existing and new
fiber optic cable. Although such technological advances may enable the Company
to increase its capacity, an increase in the capacity of the Company's
competitors could adversely affect the Company's business. If industry
capacity expansion results in capacity that exceeds overall demand along any
of the Company's routes, severe additional pricing pressure could develop. In
addition, strategic alliances or similar transactions, such as the long
distance capacity purchasing alliance among certain Regional Bell Operating
Companies announced in the spring of 1996, could result in additional pricing
pressure on long distance carriers. Furthermore, the marginal cost of carrying
an additional call over existing fiber optic cable is extremely low. As a
result, within a few years, there may be dramatic and substantial price
reductions. Such pricing pressure could have a material adverse effect on the
Company. In addition, the Federal Communications Commission (the "FCC") has
announced changes to its interstate access rules which may result in
additional pricing pressures. See "--Competition."
DEPENDENCE ON BILLING, CUSTOMER SERVICE AND INFORMATION SYSTEMS
Sophisticated information and processing systems are vital to the Company's
growth and its ability to monitor costs, bill customers, provision customer
orders and achieve operating efficiencies. As the Company commences providing
dial tone and switched local access services, the need for enhanced billing
and information systems will increase significantly. The inability of the
Company to identify adequately all of its information and processing needs, or
to upgrade systems as necessary, could have a material adverse impact on the
ability of the Company to reach its objectives, on its financial condition and
results of operations and on its ability to pay interest and principal on the
Exchange Notes.
DEPENDENCE ON RIGHTS OF WAY AND OTHER THIRD PARTY AGREEMENTS
The Company has obtained easements, rights of way, franchises and licenses
from various private parties, including actual and potential competitors, and
local governments in order to construct and maintain its fiber optic network.
There can be no assurance that the Company will continue to have access to
existing rights of way and franchises after the expiration of such agreements.
If a franchise, license or lease agreement were terminated and the Company
were forced to remove or abandon a significant portion of its network, such
termination could have a material adverse effect on the Company.
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REGULATION
The Company is required to obtain certain authorizations from the FCC and
state public utility commissions ("PUCs") to offer certain of its
telecommunications services, as well as file tariffs for many of its services.
To date the Company has not experienced significant difficulties in receiving
certification, maintaining tariffs, or otherwise complying with its regulatory
obligations. The Company will face new obligations arising out of the
Telecommunications Act as it begins to enter the local telephone market. It
also is likely that state PUCs will regulate the local telephone services
offered by the Company and other competitive local exchange carriers more
heavily than competitive long distance services have been regulated in the
past. Because the FCC and the states have yet to adopt many of the rules and
policies necessary to implement the Telecommunications Act, or to respond to
other related local telephone competition issues, it is uncertain how
burdensome these requirements will be for the Company.
Although the Company entered into the Interconnection Agreement pursuant to
which it will obtain wholesale local services and access to unbundled network
elements from BellSouth, the terms of the Interconnection Agreement are
subject to the approval of the PUCs regulating the Company's markets. Such
approval has been received from the PUCs of Alabama, Georgia, Kentucky,
Louisiana, Mississippi, North Carolina and South Carolina and is pending in
Florida and Tennessee.
In addition, the Company's plans to provide local telephone service are
heavily dependent upon implementation of provisions of the Telecommunications
Act. The Telecommunications Act preempted state and local laws to the extent
that they prohibited local telephone competition, and imposed a variety of new
duties on incumbent local exchange carriers intended to advance such
competition, including the duty to negotiate in good faith with competitors
requesting interconnection to the incumbent local exchange carrier's network.
However, negotiations with incumbent local exchange carriers have sometimes
involved considerable delays and the resulting negotiated agreements may not
necessarily be obtained on terms and conditions that are acceptable to the
Company. In such instances, the Company may petition the proper state
regulatory agency to arbitrate disputed issues. There can be no assurance that
the Company will be able to negotiate acceptable new interconnection
agreements with incumbent local exchange carriers or that if state regulatory
authorities impose terms and conditions on the parties in arbitration, such
terms will be acceptable to the Company. On August 8, 1996, the FCC adopted
rules and policies implementing the local competition provisions of the
Telecommunications Act, which rules, in general, were considered favorable to
new competitive entrants, but those rules have not been fully implemented. The
FCC's rules were challenged in the federal courts by GTE, Regional Bell
Operating Companies, large independent incumbent local exchange carriers and
state regulatory commissions. On October 15, 1996, the U.S. Court of Appeals
for the Eighth Circuit issued a stay of the implementation of certain of the
FCC's rules and on July 18, 1997, the Court issued its decision finding that
the FCC lacked statutory authority under the Telecommunications Act for
certain of its rules. In particular, the Court found that the FCC was not
empowered to establish the pricing standards governing unbundled local network
elements or wholesale local services of the incumbent local exchange carriers.
The Court also struck down other FCC rules, including one that would have
enabled new entrants to "pick and choose" from provisions of established
interconnection agreements between the incumbent local exchange carriers and
other carriers. The Court rejected certain other objections to the FCC rules
brought by the incumbent local exchange carriers or the states, including
challenges to the FCC's definition of unbundled elements, and to the FCC's
rules allowing new competitors to create their own networks by combining
incumbent local exchange carrier network elements together without adding
additional facilities of their own. The overall impact of the Court's decision
is to materially reduce the role of the FCC in fostering local competition,
including its ability to take enforcement action if the Telecommunications Act
is violated, and increase the role of state utility commissions. The FCC has
indicated that it will ask the Supreme Court to review the Court's decision.
Meanwhile, state commissions have asserted that they will be active in
promoting local telephone competition using the authority they have under the
ruling, lessening the significance of the reduced FCC role. At this time the
impact of the Court's decision cannot be evaluated, but there can be no
assurance that the Court decision and related developments will not have a
materially adverse effect on the Company. Furthermore, other FCC rules related
to local
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telephone competition remain the subject of legal challenges, and there can be
no assurance that decisions affecting those rules will not be adverse to
companies seeking to enter the local telephone market.
The Telecommunications Act also creates the foundation for increased
competition in the long distance market from the incumbent local exchange
carriers, which could affect the successful implementation of the Company's
business plans. For example, certain provisions eliminate previous
prohibitions on the provision of interLATA long distance services (both retail
and carriers' carrier) by the Regional Bell Operating Companies subject to
compliance by such companies with requirements set forth in the
Telecommunications Act and implemented by the FCC. The Company could be
adversely affected if the Regional Bell Operating Companies (and particularly
BellSouth) are allowed to provide wireline interLATA long distance services
within their own regions before local competition is established. In a related
development, the FCC is considering proposed new policies and rules that would
grant the incumbent local exchange carriers additional flexibility in the
pricing of interstate access services, and states are considering or are
expected to consider incumbent local exchange carrier requests for similar
regulatory relief with respect to intrastate services. Such flexibility is
likely to come first for services offered in the business market. Any pricing
flexibility or other significant deregulation of the incumbent local exchange
carriers could have a material adverse effect on the Company. See "Business--
Regulation."
COMPETITION
The Company operates in a highly competitive environment, and the level of
competition, particularly with respect to pricing, is increasing. Local
telephone and intraLATA long distance services substantially similar to those
expected to be offered by the Company are also offered by the incumbent local
exchange carriers serving the markets that the Company plans to serve.
BellSouth is the incumbent local exchange carrier and a particularly strong
competitor in most of the markets to be served by the Company. BellSouth and
other incumbent local exchange carriers already have relationships with every
customer and have the potential to subsidize services of the type offered by
the Company from service revenues not subject to effective competition, which
could result in even more intense price competition. The Company competes with
long distance carriers in the provision of interLATA long distance Retail and
Carriers' Carrier Services. The interLATA long distance market consists of
three major competitors (AT&T, MCI and Sprint) but other companies operate or
are building networks in the southern United States and other geographic
areas. Other competitors of the Company in the Retail and Carriers' Carrier
Services markets are likely to include Regional Bell Operating Companies
providing out-of-region (and, with the future removal of regulatory barriers,
in-region) long distance services, other competitive local exchange carriers,
microwave and satellite carriers, and private networks owned by large end-
users. In addition, the Company competes with direct marketers, equipment
vendors and installers, and telecommunications management companies with
respect to certain portions of its business. Many of the Company's existing
and potential competitors have financial, technical and other resources and
customer bases and name recognition far greater than those of the Company. The
long distance business is extremely competitive and prices have declined
substantially in recent years and are expected to continue to decline, which
will adversely affect the Company's gross margins as a percentage of revenues.
The FCC recently announced changes to its interstate access rules that will
reduce per-minute access charges and substitute new per-line flat-rate monthly
charges. These actions are expected to reduce access rates. AT&T has committed
to reduce its long distance rates to reflect access cost reductions, and other
competitors of the Company are likely to make similar reductions. In such
event, the Company may need to reduce its rates to respond to competitive
pressures. See "--Dependence on Incumbent Local Exchange Carriers" and
"Business--Regulation."
The Telecommunications Act, other recent state legislative actions, and
current federal and state regulatory initiatives provide increased business
opportunities for the Company by removing or substantially reducing certain
barriers to local exchange competition. However, these new competitive
opportunities are expected to be accompanied by new competitive opportunities
for the incumbent local exchange carriers. It is also expected that increased
local competition will result in increased pricing flexibility for, and
relaxation of regulatory oversight of, the incumbent local exchange carriers.
If the incumbent local exchange carriers are permitted to engage in increased
volume and discount pricing practices or charge competitive local exchange
carriers increased fees for
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interconnection to their networks, or if the incumbent local exchange carriers
seek to delay implementation of interconnection by competitors to their
networks, the Company's results of operations and financial condition could be
adversely affected. There can be no assurance that the Company will be able to
achieve or maintain adequate market share or revenues, or compete effectively
in any of its markets.
In addition, a continuing trend toward business combinations and strategic
alliances in the telecommunications industry may further enhance competition.
For example, the national long distance carrier WorldCom acquired MFS
Communications Company, Inc., a competitive local exchange carrier, in
December 1996. In November 1996, British Telecommunications plc, an
international telecommunications company, announced its agreement to acquire
MCI. In March 1997, BellSouth and International Business Machines Corporation
("IBM") announced an alliance to provide Internet and Intranet services to
businesses in the southern United States. These types of strategic alliances
could put the Company at a significant competitive disadvantage.
The Company will face competition in the markets in which it operates from
one or more competitive local exchange carriers operating fiber optic
networks, in some cases in conjunction with the local cable television
operator. One of the primary purposes of the Telecommunications Act is to
promote competition, particularly in the local telephone market. AT&T, MCI,
Sprint and others have begun to offer local telecommunications services,
either directly or in conjunction with other competitive local exchange
carriers in certain locations, and are expected to expand that activity as
opportunities created by the Telecommunications Act develop. BellSouth has
announced plans to provide competitive local service in areas of its region
where it is not the incumbent local exchange carrier.
To complement its telecommunications services offerings, the Company offers
data transmission services. The data transmission business is extremely
competitive and prices have declined substantially in recent years and are
expected to continue to decline.
The recent World Trade Organization ("WTO") agreement on basic
telecommunications services could increase the level of competition faced by
the Company. Under this agreement, the United States and other members of the
WTO committed themselves to opening their telecommunications markets to
competition and foreign ownership and to adopting regulatory measures to
protect against anticompetitive behavior by dominant telephone companies
effective as early as January 1, 1998.
The Company also believes that providers of wireless services increasingly
will offer, in addition to products that supplement a customer's wireline
communications (similar to cellular telephone services in use today), wireline
replacement products that may result in wireless services becoming the
customer's primary mode of communication. For example, AT&T recently announced
plans to offer local services using a new wireless technology. AT&T's proposed
wireless system would link residential and business telephones via radio waves
to the AT&T network. If successful, this new service could further enhance
AT&T's ability to market, on a nationwide basis, "one-stop" telecommunications
services. Competition with providers of wireless telecommunications services
may be intense. Many of the Company's potential wireless competitors have
substantially greater financial, technical, marketing, sales, manufacturing
and distribution resources than those of the Company.
DEPENDENCE ON INCUMBENT LOCAL EXCHANGE CARRIERS
The Company is dependent on incumbent local exchange carriers to provide
access service for the origination and termination of its toll long distance
traffic and interexchange private lines. Historically charges for such access
service have made up a significant percentage of the overall cost of providing
long distance service. On May 7, 1997, the FCC adopted changes to its
interstate access rules that, among other things, will reduce per-minute
access charges and substitute new per-line flat rate monthly charges. The FCC
also approved reductions in overall access rates, and established new rules to
recover subsidies to support universal service and other public policies. The
impact of these changes on the Company or its competitors is not yet clear.
The Company could be adversely affected if it does not experience access cost
reductions proportionally equivalent to those of its competitors. See
"Business--Regulation."
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The Company also generally will be dependent on incumbent local exchange
carriers for provision of local telephone service through access to local
loops, termination service and, in some markets, central office switches of
such carriers. In addition, the Company intends to obtain the local telephone
services of the incumbent local exchange carriers on a wholesale basis and
resell that service to end users, particularly in the early stages of its
local telephone service business.
Any successful effort by the incumbent local exchange carriers to deny or
substantially limit the Company's access to the incumbent local exchange
carrier's network elements or wholesale services would have a material adverse
effect on the Company's ability to provide local telephone services. Although
the Telecommunications Act imposes interconnection obligations on incumbent
local exchange carriers, there can be no assurance that the Company will be
able to obtain access to such network elements or services at rates, and on
terms and conditions, that permit the Company to offer local services at rates
that are both profitable and competitive. As noted above, the Eighth Circuit
Court of Appeals recently struck down certain FCC rules intended to govern
such rates, terms and conditions. See "Risk Factors--Regulation." The result
of this decision is to give state utility commissions a significantly larger
role in implementing the Telecommunications Act. It is uncertain whether such
commissions will adopt and enforce rules or take other actions that will
permit new carriers to have economical use of incumbent local exchange carrier
networks and facilities. The Interconnection Agreement currently allows the
Company to provide local service on a resale basis or by purchasing all
unbundled network elements required to provide local service on a facilities
bases, without using Company-owned facilities. The terms of the
Interconnection Agreement, including interim pricing terms agreed to by the
Company and BellSouth, have been approved by state regulatory authorities in
most states, although they remain subject to review and modification by such
authorities. In addition, the Interconnection Agreement does not resolve all
operational issues, particularly those relating to the collocation of the
Company's equipment with that of BellSouth. The Company and BellSouth are
continuing to negotiate to resolve such issues. Many issues relevant to the
terms and conditions by which competitors may use the incumbent local exchange
carrier network and wholesale services remain to be resolved. For example,
BellSouth and certain other incumbent local exchange carriers have taken the
position that when a carrier seeking to provide local service obtains all
necessary elements (loops and switches) from the incumbent local exchange
carrier in a combined form, the incumbent local exchange carrier retains the
right to receive the access revenues associated with the service to the
customers served on that basis. Although the Court decision appears to reject
this position, further legal challenges are likely and important issues
related to this form of interconnection remain open. Similarly, substantial
problems have arisen with respect to the operational support systems used by
new carriers to order and receive network elements and wholesale services from
the incumbent local exchange carriers. These systems are necessary for new
carriers like the Company to provide local service to customers on a timely
and competitive basis. The FCC has recently created a task force to examine
problems that have slowed the development of local telephone competition. See
"Business--Regulation" and "Services and Facilities."
DEPENDENCE ON CERTAIN CUSTOMERS
For the year ended December 31, 1996 and the six months ended June 30, 1997,
giving effect to the Reorganization, the Company's two largest Carriers'
Carrier customers would together have accounted for approximately 15% and 12%,
respectively, of the Company's combined pro forma revenues. For the six months
ended June 30, 1997, the Company's five largest Retail Services customers
would have represented an aggregate of approximately 10% of the Company's
combined pro forma revenues. The Company's customers generally use more than
one service provider and may reduce their use of the Company's services and
switch to other providers without incurring significant expense. The Company's
agreements with its customers generally provide that the customer may
terminate service without penalty in the event of certain outages in service
and for certain other defined causes. Although, as of June 30, 1997, on a pro
forma basis, the Company's Carriers' Carrier business had remaining future
long-term contract commitments totaling approximately $75.8 million, some of
such contractual commitments provide that, if the customer is offered lower
pricing with respect to any circuit by another carrier, the customer's
commitment to the Company will be reduced to the extent the Company does not
match the price for such circuit and the customer purchases such circuit from
the other carrier. There can be no assurance that the Company will be able to
retain its customers. The loss of or a significant decrease of business from
any of its largest customers would have a material adverse effect on the
Company's business, results of operations and financial condition.
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RISK OF RAPID TECHNOLOGICAL CHANGES
The telecommunications industry is subject to rapid and significant changes
in technology. Although the Company believes that, for the foreseeable future,
these changes will neither materially affect the continued use of its fiber
optic network, digital switches and transmission equipment, nor materially
hinder its ability to acquire necessary technologies, the effect of
technological changes on the business of the Company, such as changes relating
to emerging wireline (including fiber optic) and wireless (including
broadband) transmission technologies, cannot be predicted. In addition, the
Company may be required to select in advance one technology over another, but
it will be impossible to predict with any certainty, at the time the Company
is required to make its investment, which technology will prove to be the most
economic, efficient or capable of attracting customer usage.
DEPENDENCE ON NETWORK INFRASTRUCTURE
The Company has entered into marketing and management agreements with three
southern public utility companies to sell long-haul private line services on a
commission basis on the fiber optic networks owned by these companies.
Pursuant to these agreements, which have remaining terms ranging from five to
eight years, the Company generally earns a commission based upon a percentage
of the gross revenues generated by the sale of capacity on the utility's
networks. By interconnecting the Company's owned network to these other
networks owned by the public utilities, and by marketing and selling capacity
on such networks to the Company's customers, the Company has effectively
extended its network with minimal capital expenditure. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Overview." The Company also has a buy-sell agreement with Carolinas Fibernet,
LLC, which manages fiber optic facilities in North Carolina and South
Carolina. Although the Company does not believe that any of these agreements
will be terminated in the near future, cancellation or non-renewal of any of
such agreements could materially adversely affect the Company's business. In
addition, two of the Company's three agreements with public utility companies
are nonexclusive, and the Company may encounter competition for capacity on
the utilities' networks from other service providers that enter into
comparable arrangements with the utilities. Any reduction in the amount of
capacity that is made available to the Company could adversely affect the
Company. To the extent the Company is unable to establish similar arrangements
in new markets, it may be required to make additional capital expenditures to
extend its fiber network.
The Company's business also could be materially adversely affected by a
cable cut or equipment failure in the Company's fiber optic network. Although
the Company has implemented electronic redundancy throughout its network,
which enables traffic to be rerouted to another fiber in the same fiber sheath
in the event of a partial fiber cut or electronics failure, a substantial
portion of the Company's owned and managed fiber optic network is not
protected in the event of a total cable cut.
HOLDING COMPANY STRUCTURE; PRIORITY OF SECURED DEBT
The Company is a holding company with no direct operations and no
significant assets other than the stock of its subsidiaries. The Company is
dependent on the cash flows of its subsidiaries to meet its obligations,
including the payment of interest and principal on the Exchange Notes. The
Company's subsidiaries are separate legal entities that have no obligation to
pay any amounts due pursuant to the Exchange Notes or to make any funds
available therefor, whether by dividends, loans or other payments. Because the
Company's subsidiaries will not guarantee the payment of the principal or
interest on the Exchange Notes, any right of the Company to receive assets of
any of its subsidiaries upon its liquidation or reorganization (and the
consequent right of holders of the Exchange Notes to participate in the
distribution or realize proceeds from those assets) will be effectively
subordinated to the claims of the creditors of any such subsidiary (including
trade creditors and holders of indebtedness of such subsidiary), except if and
to the extent the Company is itself a creditor of such subsidiary, in which
case the claims of the Company would still be effectively subordinated to any
security interest in the assets of such subsidiary held by other creditors. As
of June 30, 1997, on a pro forma basis, giving effect to the Reorganization,
the subsidiaries of the Company had approximately $37.8 million of liabilities
(excluding
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intercompany payables), including approximately $14.4 million of indebtedness
(including capital leases). A subsidiary of the Company is expected to have up
to $100 million of availability under the Credit Facility, and each of the
other subsidiaries of the Company will be guarantors thereunder.
The Exchange Notes are unsecured (except with respect to the Pledged
Securities) and therefore will be effectively subordinated to any secured
indebtedness of the Company. The Indenture will permit the Company and its
subsidiaries to incur an unlimited amount of indebtedness to finance the
acquisition of equipment, inventory and network assets and to secure such
indebtedness, and up to $100 million of other secured indebtedness pursuant to
one or more credit facilities, including the Credit Facility. The Credit
Facility is expected to be secured by substantially all of the assets of the
Company's subsidiaries. Consequently, in the event of a bankruptcy,
liquidation, dissolution, reorganization or similar proceeding with respect to
the Company, such assets would be available to satisfy obligations of the
secured debt before any payment could be made on the Exchange Notes. In
addition, to the extent such assets did not satisfy in full the secured
indebtedness, the holders of such indebtedness would have a claim for any
shortfall that would be pari passu (or effectively senior if the indebtedness
were issued by a subsidiary) with the Exchange Notes. Accordingly, there may
only be a limited amount of assets available to satisfy any claims of the
holders of the Exchange Notes upon an acceleration of the Exchange Notes.
DEPENDENCE ON KEY PERSONNEL
The Company's business is currently managed by a small number of key
management and operating personnel. The Company does not have any employment
agreements with, nor does the Company maintain "key man" insurance on, these
employees. The loss of the services of key personnel, or the inability to
attract, recruit and retain sufficient or additional qualified personnel,
could have a material adverse effect on the Company. See "Management."
CONTROL BY ITC HOLDING COMPANY; CONFLICTS OF INTEREST
The Company is authorized under its certificate of incorporation to issue
60,000,000 shares of Class A common stock (the "Class A Common Stock"), which
have one vote per share, and 30,000,000 shares of Class B common stock (the
"Class B Common Stock"), which have ten votes per share. ITC Holding owns
15,000,000 shares of Class B Common Stock, which constitute all of the
Company's issued and outstanding capital stock. Certain decisions concerning
the operations or financial structure of the Company may present conflicts of
interest between ITC Holding and the holders of the Exchange Notes. For
example, if the Company encounters financial difficulties or is unable to pay
its debts as they mature, the interests of ITC Holding might conflict with
those of the holders of the Exchange Notes. In addition, ITC Holding may have
an interest in pursuing acquisitions, divestitures, financings or other
transactions that, in its judgment, could enhance its equity investment in the
Company, even though such transactions might involve risk to the holders of
the Exchange Notes.
ABSENCE OF PUBLIC MARKET
The Senior Notes have been designated for trading by qualified buyers in the
PORTAL Market. The Senior Notes have not been registered under the Securities
Act, however, and will continue to be subject to restrictions on
transferability to the extent that they are not exchanged for Exchange Notes.
Furthermore, the Exchange Offer will not be conditioned upon any minimum or
maximum aggregate principal amount of Senior Notes being tendered for
exchange. No assurance can be given as to the liquidity of the trading market
of the Senior Notes following the Exchange Offer.
Although the Exchange Notes will generally be permitted to be resold or
otherwise transferred by the holders thereof (other than any holder that is
(i) an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act or (ii) a broker-dealer that acquired Senior Notes as a result
of market-making activities or other trading activities) without compliance
with the registration requirements under the Securities Act, the
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Exchange Notes will constitute a new issue of securities for which there is
currently no established trading market. If a trading market does not develop
or is not maintained, holders of the Exchange Notes may experience difficulty
in reselling the Exchange Notes or may be unable to sell them at all. If a
market for the Exchange Notes develops, any such market may cease at any time.
If a public trading market develops for the Exchange Notes, future trading
prices of the Exchange Notes will depend on many factors, including, among
other things, prevailing interest rates, the market for similar securities,
the financial conditions and results of operations of the Company and other
factors beyond the control of the Company, including general economic
conditions. The Company does not intend to list the Exchange Notes on any
national securities exchange or to seek approval for quotation through any
automated quotation system. The Company has been advised by the Placement
Agents that following completion of the Exchange Offer, the Placement Agents
intend to make a market in the Exchange Notes. However, the Placement Agents
are not obligated to do so and any market-making activities with respect to
the Exchange Notes may be discontinued at any time without notice.
Accordingly, no assurance can be given that an active public or other market
will develop for the Exchange Notes or as to the liquidity of or the trading
market for the Exchange Notes.
Notwithstanding the registration of the Exchange Notes in the Exchange
Offer, holders who are "affiliates" of the Company (within the meaning of Rule
405 under the Securities Act) may publicly offer for sale or resell the
Exchange Notes only in compliance with the provisions of Rule 144 under the
Securities Act or any other available exemptions under the Securities Act.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Senior Notes, where such Senior Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution."
CONSEQUENCES OF A FAILURE TO EXCHANGE SENIOR NOTES
The Senior Notes have not been registered under the Securities Act or any
state securities laws and therefore may not be offered, sold or otherwise
transferred except in compliance with the registration requirements of the
Securities Act and any other applicable securities laws, or pursuant to an
exemption therefrom or in a transaction not subject thereto, and in each case
in compliance with certain other conditions and restrictions. Senior Notes
that remain outstanding after consummation of the Exchange Offer will continue
to bear a legend reflecting such restrictions on transfer. In addition, upon
consummation of the Exchange Offer, holders of Senior Notes that remain
outstanding will not be entitled to any rights to have such Senior Notes
registered under the Securities Act, except under certain limited
circumstances. The Company does not intend to register under the Securities
Act any Senior Notes that remain outstanding after consummation of the
Exchange Offer. See "The Exchange Offer." To the extent that Senior Notes are
not tendered and accepted in the Exchange Offer, a holder's ability to sell
such Senior Notes could be adversely affected.
EXCHANGE OFFER PROCEDURES
Issuance of the Exchange Notes in exchange for Senior Notes pursuant to the
Exchange Offer will be made only after a timely receipt by the Exchange Agent
of (i) such Senior Notes or a book-entry confirmation of a book-entry transfer
of the Senior Notes into the Exchange Agent's account at The Depository Trust
Company ("DTC"); (ii) the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees;
and (iii) any other documents required by the Letter of Transmittal. Holders
of the Senior Notes desiring to tender such Senior Notes in exchange for
Exchange Notes should allow sufficient time to ensure timely delivery. The
Company and the Exchange Agent are under no duty to give notification of
defects or irregularities with respect to the tenders of Senior Notes for
exchange. See "The Exchange Offer."
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
In connection with the sale of the Senior Notes, the Company entered into
the Registration Rights Agreement with the Placement Agents, pursuant to which
the Company agreed to file and to use its best efforts to cause to become
effective with the Commission a registration statement with respect to the
exchange of the Senior Notes for Exchange Notes with terms identical in all
material respects to the terms of the Senior Notes. A copy of the Registration
Rights Agreement has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part (the "Registration Statement"). The Exchange
Offer is being made to satisfy the contractual obligations of the Company
under the Registration Rights Agreement.
By tendering Senior Notes in exchange for Exchange Notes, each holder will
represent to the Company that: (i) any Exchange Notes to be received by such
holder will be acquired in the ordinary course of such holder's business; (ii)
such holder has no arrangement or understanding with any person to participate
in a distribution (within the meaning of the Securities Act) of the Exchange
Notes; (iii) such holder is not an "affiliate" of the Company (within the
meaning of Rule 405 under the Securities Act), or if such holder is an
affiliate, that such holder will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable; (iv)
such holder has full power and authority to tender, exchange, sell, assign and
transfer the tendered Senior Notes; (v) the Company will acquire good,
marketable and unencumbered title to the tendered Senior Notes, free and clear
of all liens, restrictions, charges and encumbrances; and (vi) the Senior
Notes tendered for exchange are not subject to any adverse claims or proxies.
Each tendering holder also will warrant and agree that such holder will, upon
request, execute and deliver any additional documents deemed by the Company or
the Exchange Agent to be necessary or desirable to complete the exchange,
sale, assignment, and transfer of the Senior Notes tendered pursuant to the
Exchange Offer. Each broker-dealer that receives Exchange Notes for its own
account in exchange for Senior Notes, where such Senior Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution."
The Exchange Offer is not being made to, nor will the Company accept tenders
for exchange from, holders of Senior Notes in any jurisdiction in which the
Exchange Offer or the acceptance thereof would not be in compliance with the
securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to the
Exchange Offer means any person in whose name the Senior Notes are registered
on the books of the Company or any other person who has obtained a properly
completed bond power from the registered holder, or any participant in DTC
whose name appears on a security position listing as a holder of Senior Notes
(which, for purposes of the Exchange Offer, include beneficial interests in
the Senior Notes held by direct or indirect participants in DTC and Senior
Notes held in definitive form).
TERMS OF THE EXCHANGE OFFER
The Company hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange $1,000 principal amount of Exchange Notes for each $1,000 principal
amount of Senior Notes properly tendered prior to the Expiration Date and not
properly withdrawn in accordance with the procedures described below. Holders
may tender their Senior Notes in whole or in part in integral multiples of
$1,000 principal amount.
The form and terms of the Exchange Notes will be the same as the form and
terms of the Senior Notes except that (i) the Exchange Notes will have been
registered under the Securities Act and therefore will not be subject to
certain restrictions on transfer applicable to the Senior Notes and (ii)
holders of the Exchange Notes will not be entitled to certain rights of
holders of the Senior Notes under the Registration Rights Agreement. The
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Exchange Notes will evidence the same indebtedness as the Senior Notes (which
they will replace) and will be issued pursuant to, and entitled to the
benefits of, the Indenture.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Senior Notes being tendered for exchange. The Company reserves the
right in its sole discretion to purchase or make offers for any Senior Notes
that remain outstanding after the Expiration Date or, as set forth under "--
Conditions to the Exchange Offer," to terminate the Exchange Offer and, to the
extent permitted by applicable law, purchase Senior Notes in the open market,
in privately negotiated transactions or otherwise. The terms of any such
purchases or offers could differ from the terms of the Exchange Offer. As of
the date of this Prospectus,$200 million aggregate principal amount of Senior
Notes is outstanding.
Holders of Senior Notes do not have any appraisal or dissenters' rights in
connection with the Exchange Offer. Senior Notes that are not tendered, or are
tendered but not accepted, in connection with the Exchange Offer will remain
outstanding and continue to accrue interest in accordance with their terms,
but will not retain any rights under the Registration Rights Agreement. See
"Risk Factors--Consequences of a Failure to Exchange Senior Notes."
If any tendered Senior Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Senior Notes will be returned,
without expense, to the tendering holder thereof promptly after the Expiration
Date.
Holders who tender Senior Notes in connection with the Exchange Offer will
not be required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with respect to the
exchange of Senior Notes in connection with the Exchange Offer. The Company
will pay all charges and expenses, other than certain applicable taxes
described below, in connection with the Exchange Offer. See "--Fees and
Expenses."
THE BOARD OF DIRECTORS OF THE COMPANY MAKES NO RECOMMENDATION TO HOLDERS OF
SENIOR NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY
PORTION OF THEIR SENIOR NOTES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO
ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF SENIOR
NOTES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE EXCHANGE
OFFER AND, IF SO, THE AGGREGATE AMOUNT OF SENIOR NOTES TO TENDER AFTER READING
THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND CONSULTING WITH THEIR
ADVISERS, IF ANY, BASED ON THEIR FINANCIAL POSITION AND REQUIREMENTS.
EXPIRATION DATE; EXTENSIONS, AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City time, on ,
1997 unless the Exchange Offer is extended by the Company (in which case the
term "Expiration Date" shall mean the latest date and time to which the
Exchange Offer is extended).
The Company expressly reserves the right in its sole and absolute
discretion, subject to applicable law, at any time and from time to time, (i)
to delay the acceptance of the Senior Notes for exchange; (ii) to terminate
the Exchange Offer (whether or not any Senior Notes have theretofore been
accepted for exchange) if the Company determines, in its sole and absolute
discretion, that any of the events or conditions referred to under "--
Conditions to the Exchange Offer" has occurred or exists or has not been
satisfied; (iii) to extend the Expiration Date of the Exchange Offer and
retain all Senior Notes tendered pursuant to the Exchange Offer, subject,
however, to the right of holders of Senior Notes to withdraw their tendered
Senior Notes as described under "--Withdrawal Rights;" and (iv) to waive any
condition or otherwise amend the terms of the Exchange Offer in any respect
(whether or not any Senior Notes have theretofore been accepted for exchange).
If the Exchange Offer is amended in a manner determined by the Company to
constitute a material change, or if the Company waives a material condition of
the Exchange Offer, the Company will promptly disclose such amendment by means
of a prospectus supplement that will be distributed to the registered holders
of the Senior
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Notes, and the Company will extend the Exchange Offer to the extent required
by Rule 14e-1 under the Exchange Act.
Any such delay in acceptance, termination, extension or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent (any
such oral notice to be promptly confirmed in writing) and by making a public
announcement thereof, and such announcement in the case of an extension will
be made no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date. Without limiting the manner in
which the Company may choose to make any public announcement, and subject to
applicable laws, the Company shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by issuing a
release to an appropriate news agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will exchange, and will issue to the Exchange Agent, Exchange Notes
for Senior Notes validly tendered and not withdrawn (pursuant to the
withdrawal rights described under "--Withdrawal Rights") promptly after the
Expiration Date.
In all cases, delivery of Exchange Notes in exchange for Senior Notes
tendered and accepted for exchange pursuant to the Exchange Offer will be made
only after timely receipt by the Exchange Agent of (i) Senior Notes or a book-
entry confirmation of a book-entry transfer of Senior Notes into the Exchange
Agent's account at DTC; (ii) the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees;
and (iii) any other documents required by the Letter of Transmittal.
Accordingly, the delivery of Exchange Notes might not be made to all tendering
holders at the same time, and will depend upon when Senior Notes, book-entry
confirmations with respect to Senior Notes and other required documents are
received by the Exchange Agent.
The term "book-entry confirmation" means a timely confirmation of a book-
entry transfer of Senior Notes into the Exchange Agent's account at DTC.
Subject to the terms and conditions of the Exchange Offer, the Company will
be deemed to have accepted for exchange, and thereby exchanged, Senior Notes
validly tendered and not withdrawn as, if and when the Company gives oral or
written notice to the Exchange Agent (any such oral notice to be promptly
confirmed in writing) of the Company's acceptance of such Senior Notes for
exchange pursuant to the Exchange Offer. The Company's acceptance for exchange
of Senior Notes tendered pursuant to any of the procedures described above
will constitute a binding agreement between the tendering holder and the
Company upon the terms and subject to the conditions of the Exchange Offer.
The Exchange Agent will act as agent for the Company for the purpose of
receiving tenders of Senior Notes, Letters of Transmittal and related
documents, and as agent for tendering holders for the purpose of receiving
Senior Notes, Letters of Transmittal and related documents and transmitting
Exchange Notes to holders who validly tendered Senior Notes. Such exchange
will be made promptly after the Expiration Date. If for any reason whatsoever
the acceptance for exchange or the exchange of any Senior Notes tendered
pursuant to the Exchange Offer is delayed (whether before or after the
Company's acceptance for exchange of Senior Notes), or the Company extends the
Exchange Offer or is unable to accept for exchange or exchange Senior Notes
tendered pursuant to the Exchange Offer, then, without prejudice to the
Company's rights set forth herein, the Exchange Agent may, nevertheless, on
behalf of the Company and subject to Rule 14e-1(c) under the Exchange Act,
retain tendered Senior Notes and such Senior Notes may not be withdrawn except
to the extent tendering holders are entitled to withdrawal rights as described
under "--Withdrawal Rights."
PROCEDURES FOR TENDERING SENIOR NOTES
Valid Tender. Except as set forth below, in order for Senior Notes to be
validly tendered pursuant to the Exchange Offer, either (i) (a) a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), with
any required signature guarantees and any other required documents, must be
received by the Exchange Agent at the address set forth under "--Exchange
Agent" prior to the Expiration Date and (b) tendered Senior
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Notes must be received by the Exchange Agent, or such Senior Notes must be
tendered pursuant to the procedures for book-entry transfer set forth below
and a book-entry confirmation must be received by the Exchange Agent, in each
case prior to the Expiration Date, or (ii) the guaranteed delivery procedures
set forth below must be complied with.
If less than all of the Senior Notes held by a holder are tendered by such
holder, such holder should fill in the amount of Senior Notes being tendered
in the appropriate box on the Letter of Transmittal. The entire amount of
Senior Notes delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated.
If any Letter of Transmittal, endorsement, bond power, power of attorney, or
any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company, in its sole discretion, of such person's
authority to so act must be submitted.
Any beneficial owner of Senior Notes that are held by or registered in the
name of a broker, dealer, commercial bank, trust company or other nominee or
custodian is urged to contact such entity promptly if such beneficial holder
wishes to participate in the Exchange Offer.
THE METHOD OF DELIVERY OF SENIOR NOTES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS
USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY AND PROPER INSURANCE SHOULD BE
OBTAINED. NO LETTER OF TRANSMITTAL OR SENIOR NOTES SHOULD BE SENT TO THE
COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THESE TRANSACTIONS FOR SUCH
HOLDERS.
Book-Entry Transfer. The Exchange Agent will make a request to establish an
account with respect to the Senior Notes at DTC for purposes of the Exchange
Offer within two business days after the date of this Prospectus. Any
financial institution that is a participant in DTC's book-entry transfer
facility system may make a book-entry delivery of the Senior Notes by causing
DTC to transfer such Senior Notes into the Exchange Agent's account at DTC in
accordance with DTC's procedures for transfers. However, although delivery of
Senior Notes may be effected through book-entry transfer into the Exchange
Agent's account at DTC, the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees
and any other required documents, must in any case be delivered to and
received by the Exchange Agent at its address set forth under "--Exchange
Agent" prior to the Expiration Date, or the guaranteed delivery procedure set
forth below must be complied with.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
Signature Guarantees. Certificates for Senior Notes need not be endorsed and
signature guarantees on a Letter of Transmittal or a notice of withdrawal, as
the case may be, are unnecessary unless (a) a certificate for Senior Notes is
registered in a name other than that of the person surrendering the
certificate or (b) a registered holder completes the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" in the Letter of
Transmittal. In the case of (a) or (b) above, such certificates for Senior
Notes must be duly endorsed or accompanied by a properly executed bond power,
with the endorsement or signature on the bond power and on the Letter of
Transmittal or the notice of withdrawal, as the case may be, guaranteed by a
firm or other entity identified in Rule 17Ad-15 under the Exchange Act as an
"eligible guarantor institution," including (as such terms are defined
therein) (i) a bank; (ii) a broker, dealer, municipal securities broker or
dealer or government securities broker or dealer; (iii) a credit union; (iv) a
national securities exchange, registered securities association
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or clearing agency; or (v) a savings association that is a participant in a
Securities Transfer Association (each an "Eligible Institution"), unless
surrendered on behalf of such Eligible Institution. See Instructions 2 and 5
to the Letter of Transmittal.
Guaranteed Delivery. If a holder desires to tender Senior Notes pursuant to
the Exchange Offer and the certificates for such Senior Notes are not
immediately available or time will not permit all required documents to reach
the Exchange Agent before the Expiration Date, or the procedures for book-
entry transfer cannot be completed on a timely basis, such Senior Notes may
nevertheless be tendered, provided that all of the following guaranteed
delivery procedures are complied with:
(i) such tenders are made by or through an Eligible Institution;
(ii) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form accompanying the Letter of
Transmittal, setting forth the name and address of the holder of Senior
Notes and the amount of Senior Notes tendered, stating that the tender is
being made thereby and guaranteeing that within three New York Stock
Exchange trading days after the date of execution of the Notice of
Guaranteed Delivery, the certificates for all physically tendered Senior
Notes, in proper form for transfer, or a book-entry confirmation, as the
case may be, and any other documents required by the Letter of Transmittal
will be deposited by the Eligible Institution with the Exchange Agent. The
Notice of Guaranteed Delivery may be delivered by hand, or transmitted by
facsimile or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in the Notice of Guaranteed
Delivery; and
(iii) the certificates (or book-entry confirmation) representing all
tendered Senior Notes, in proper form for transfer, together with a
properly completed and duly executed Letter of Transmittal, with any
required signature guarantees and any other documents required by the
Letter of Transmittal, are received by the Exchange Agent within three New
York Stock Exchange trading days after the date of execution of the Notice
of Guaranteed Delivery.
Determination of Validity. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange
of any tendered Senior Notes will be determined by the Company, in its sole
discretion, which determination shall be final and binding on all parties. The
Company reserves the absolute right, in its sole and absolute discretion, to
reject any and all tenders determined by it not to be in proper form or the
acceptance for exchange of which may, in the view of counsel to the Company,
be unlawful. The Company also reserves the absolute right, subject to
applicable law, to waive any of the conditions of the Exchange Offer as set
forth under "--Conditions to the Exchange Offer" or any defect or irregularity
in any tender of Senior Notes of any particular holder whether or not similar
defects or irregularities are waived in the case of other holders.
The Company's interpretation of the terms and conditions of the Exchange
Offer (including the Letter of Transmittal and the instructions thereto) will
be final and binding on all parties. No tender of Senior Notes will be deemed
to have been validly made until all defects or irregularities with respect to
such tender have been cured or waived. Neither the Company, any affiliates or
assigns of the Company, the Exchange Agent or any other person shall be under
any duty to give any notification of any defects or irregularities in tenders
or incur any liability for failure to give any such notification.
RESALES OF EXCHANGE NOTES
Based on interpretations by the staff of the Commission, as set forth in no-
action letters issued to third parties unrelated to the Company, the Company
believes that holders of Senior Notes (other than any holder that is (i) a
broker-dealer that acquired Senior Notes as a result of market-making
activities or other trading activities or (ii) an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) who exchange their
Senior Notes for Exchange Notes pursuant to the Exchange Offer may offer for
resale, resell and otherwise transfer such Exchange Notes without compliance
with the registration and prospectus delivery provisions of the Securities
Act, provided that such Exchange Notes are acquired in the ordinary course of
such holders' business
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and such holders have no arrangement or understanding with any person to
participate in a distribution (within the meaning of the Securities Act) of
such Exchange Notes. Any holder who tenders Senior Notes in the Exchange Offer
with the intention to participate, or for the purpose of participating, in a
distribution of the Exchange Notes or who is an affiliate of the Company may
not rely upon such interpretations by the staff of the Commission and, in the
absence of an exemption therefrom, must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
secondary resale transaction. Failure to comply with such requirements in such
instance may result in such holder incurring liabilities under the Securities
Act for which the holder is not indemnified by the Company. The staff of the
Commission has not considered the Exchange Offer in the context of a no-action
letter, and there can be no assurance that the staff of the Commission would
make a similar determination with respect to the Exchange Offer. Each broker-
dealer that receives Exchange Notes for its own account in exchange for Senior
Notes, where such Senior Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. The Company has
agreed that, for a period not to exceed 180 days after the Expiration Date, it
will furnish additional copies of this Prospectus, as amended or supplemented,
to any broker-dealer that reasonably requests such documents for use in
connection with any such resale. See "Plan of Distribution."
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Senior Notes may be
withdrawn at any time prior to the Expiration Date.
In order for a withdrawal to be effective, a written, telegraphic or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at its address set forth under "--Exchange Agent" prior to
the Expiration Date. Any such notice of withdrawal must specify the name of
the person who tendered the Senior Notes to be withdrawn, the aggregate
principal amount of Senior Notes to be withdrawn, and (if certificates for
such Senior Notes have been tendered) the name of the registered holder of the
Senior Notes as set forth on the Senior Notes, if different from that of the
person who tendered such Senior Notes. If certificates for Senior Notes have
been delivered or otherwise identified to the Exchange Agent, the notice of
withdrawal must specify the certificate number on the particular Senior Notes
to be withdrawn and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution, except in the case of Senior Notes
tendered for the account of an Eligible Institution. If Senior Notes have been
tendered pursuant to the procedures for book-entry transfer set forth in "--
Procedures for Tendering Senior Notes," the notice of withdrawal must specify
the name and number of the account at DTC to be credited with the withdrawal
of Senior Notes and must otherwise comply with the procedures of DTC.
Withdrawals of tenders of Senior Notes may not be rescinded. Senior Notes
properly withdrawn will not be deemed validly tendered for purposes of the
Exchange Offer, but may be retendered at any subsequent time prior to the
Expiration Date by following any of the procedures described above under "--
Procedures for Tendering Senior Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, which determination shall be final and binding on all
parties. Neither the Company, any affiliates of the Company, the Exchange
Agent or any other person shall be under any duty to give any notification of
any defects or irregularities in any notice of withdrawal or incur any
liability for failure to give any such notification. Any Senior Notes which
have been tendered but which are withdrawn will be returned to the holder
thereof promptly after withdrawal.
INTEREST ON THE EXCHANGE NOTES
Interest on the Exchange Notes will accrue at the rate of 11% per annum and
will be payable in cash semi-annually on June 1 and December 1, of each year,
commencing December 1, 1997.
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CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer or any extension
of the Exchange Offer, the Company will not be required to accept for
exchange, or to exchange, any Senior Notes for any Exchange Notes, and may, at
any time and from time to time, terminate the Exchange Offer or waive any
conditions to or amend the Exchange Offer in any respect (whether or not any
Senior Notes have theretofore been accepted for exchange), if the Exchange
Offer is determined by the Company, in its sole and absolute discretion, to
violate applicable law or any applicable interpretation of the staff of the
Commission.
If such waiver or amendment constitutes a material change to the Exchange
Offer, the Company will promptly disclose such waiver by means of a prospectus
supplement that will be distributed to the registered holders of the Senior
Notes, and the Company will extend the Exchange Offer to the extent required
by Rule 14e-1 under the Exchange Act.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The exchange of the Senior Notes for the Exchange Notes will not be a
taxable exchange for federal income tax purposes, and holders of Senior Notes
should not recognize any taxable gain or loss or any interest income as a
result of such exchange.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange Agent
for the Exchange Offer. Delivery of the Letters of Transmittal and any other
required documents, questions, requests for assistance, and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent as follows:
BY FACSIMILE
(212) 780-0592
Attention: Customer Service
Confirm by telephone: (800) 548-6565
BY MAIL
United States Trust Company of New York
P.O. Box 843
Cooper Station
New York, New York 10276
Attention: Corporate Trust Services
BY HAND BEFORE 4:30 P.M.
United States Trust Company of New York
111 Broadway
New York, New York 10006
Attention: Lower Level Corporate Trust Window
BY OVERNIGHT COURIER AND BY HAND AFTER 4:30 P.M.
United States Trust Company of New York
770 Broadway, 13th Floor
New York, New York 10003
DELIVERY TO OTHER THAN THE ABOVE ADDRESSES OR FACSIMILE NUMBER WILL NOT
CONSTITUTE A VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail. Additional solicitation may be
made personally or by telephone or other means by officers, directors or
employees of the Company.
32
<PAGE>
The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others soliciting acceptances of the Exchange Offer. The Company
has agreed to pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith. The Company will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus and related documents
to the beneficial owners of Senior Notes, and in handling or tendering for
their customers.
Holders who tender their Senior Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that if Exchange Notes
are to be delivered to, or are to be issued in the name of, any person other
than the registered holder of the Senior Notes tendered, or if a transfer tax
is imposed for any reason other than the exchange of Senior Notes in
connection with the Exchange Offer, then the amount of any such transfer tax
(whether imposed on the registered holder or any other persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with the Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
holder.
33
<PAGE>
HISTORY OF THE COMPANY
ITC/\DeltaCom was incorporated in Delaware in March 1997 as a wholly owned
subsidiary of ITC Holding to acquire and operate ITC Holding's Retail Services
and Carriers' Carrier Services businesses. The Company acquired such
businesses on July 25, 1997 in the Reorganization.
BACKGROUND
ITC Holding has provided operator and directory assistance services since
March 1992 through InterQuest. Carriers' Carrier Services have been offered
since late 1992 through Interstate FiberNet, a partnership originally formed
by ITC Holding (with a 49% interest) and SCANA (with a 51% interest). In
August 1994, ITC Holding acquired SCANA's interest in Interstate FiberNet
through Transmission II. Also in August 1994, ITC Holding and SCANA formed a
second partnership, Gulf States FiberNet, to construct and operate a fiber
optic route primarily between Atlanta, Georgia and Shreveport, Louisiana with
several supplemental spur routes. In the Gulf States Acquisition, ITC Holding
acquired SCANA's 64% partnership interest in Gulf States FiberNet and the
Georgia Fiber Assets, which included one customer contract representing $3.5
million in annual revenues through August 2001, the term of the contract.
Following the Gulf States Acquisition, ITC Holding contributed the remaining
64% interest in Gulf States FiberNet to Gulf States Transmission and the
Georgia Fiber Assets to Transmission. Members of the Company's management have
been managing the businesses of both Interstate FiberNet and Gulf States
FiberNet since their inception.
In January 1996, as a result of the DeltaCom Acquisition, ITC Holding
entered the retail long distance business and acquired several fiber optic
routes within the state of Alabama that complemented the existing networks
operated by Interstate FiberNet and Gulf States FiberNet. DeltaCom, a provider
of telecommunications services since its inception in 1982, provides long
distance services to mid-sized businesses primarily in the state of Alabama.
In July 1996, DeltaCom purchased substantially all of the assets of the
Internet business of ViperNet, which provides Internet access, Web-hosting and
Web page development services to business customers.
The aggregate consideration paid by ITC Holding in the DeltaCom Acquisition
was approximately $71.4 million (of which $6.0 million consisted of ITC
Holding common stock). To finance the DeltaCom Acquisition and to refinance
existing DeltaCom debt, ITC Holding incurred approximately $74.0 million of
indebtedness, which was pushed down to the Company (the DeltaCom
Indebtedness). See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Effects of Accounting Standards." The
aggregate consideration paid by ITC Holding in the Gulf States Acquisition was
approximately $27.9 million, of which $10.0 million consisted of the SCANA
Note, which has been assumed by a subsidiary of the Company, and $17.9 million
consisted of ITC Holding preferred stock. If the Gulf States FiberNet business
achieves a specified performance target for 1997, SCANA will be entitled to
receive additional ITC Holding preferred stock. In connection with the Gulf
States Acquisition, Gulf States Transmission borrowed $41.6 million under the
Bridge Facility to refinance a project loan incurred by Gulf States FiberNet.
SENIOR NOTE OFFERING
On June 3, 1997, the Company completed the sale of $200 million principal
amount of Senior Notes in a private offering. The net proceeds to the Company
from the sale of the Senior notes were approximately $192.7 million, after
deducting the estimated underwriting discounts and commissions and other
expenses payable by the Company. Approximately $62.7 million of such net
proceeds are held by the Trustee as security for and to fund the first six
interest payments on the Senior Notes and the Exchange Notes. The remaining
net proceeds from the sale of the Senior Notes were released to the Company
upon consummation of the Reorganization.
REORGANIZATION
On July 25, 1997, upon receipt of certain regulatory approvals and certain
other consents, ITC Holding contributed to the Company in the Reorganization
the businesses of Interstate FiberNet, Gulf States FiberNet, DeltaCom and
InterQuest. As a result of the Reorganization, the Company became the sole
stockholder of Interstate FiberNet, Inc. (formerly Transmission, Transmission
II, InterQuest and Interstate FiberNet), and Interstate FiberNet, Inc. became
the sole stockholder of Gulf States FiberNet and DeltaCom.
34
<PAGE>
The following chart reflects the organizational structure of the Company
following the Reorganization:
------------------------------------------------------------
ITC/\DeltaCom, Inc.
------------------------------------------------------------
------------------------------------------------------------
Interstate FiberNet, Inc.
(formerly Transmission, Transmission II, InterQuest and
Interstate FiberNet)
------------------------------------------------------------
------------------------------- ---------------------------
Gulf States Transmission
Systems, Inc. DeltaCom, Inc.
------------------------------- ---------------------------
In connection with the Reorganization, approximately $31.0 million of the
DeltaCom Indebtedness was forgiven by ITC Holding and contributed to the
Company as additional equity. Following the Reorganization, the Company repaid
the remaining $43.0 million of the DeltaCom Indebtedness, accrued interest on
all $74.0 million of such indebtedness and the $41.6 million of indebtedness
outstanding under the Bridge Facility and accrued interest thereon with a
portion of the net proceeds from the Offering. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain obligations of the Company
under the Registration Rights Agreement. The Company will not receive any
proceeds from the issuance of the Exchange Notes offered hereby. In
consideration for issuing the Exchange Notes as contemplated in this
Prospectus, the Company will receive, in exchange, an equal number of Senior
Notes in like principal amount. The form and terms of the Exchange Notes will
be identical in all material respects to the form and terms of the Senior
Notes, except as otherwise described herein under "The Exchange Offer--Terms
of the Exchange Offer."
The net proceeds to the Company from the sale of the Senior Notes were
approximately $192.7 million, after deducting the estimated underwriting
discounts and commissions and other expenses payable by the Company.
Approximately $62.7 million of such net proceeds are held by the Trustee as
security for and to fund the first six scheduled interest payments on the
Senior Notes and the Exchange Notes. The remaining net proceeds from the
Offering were released to the Company upon consummation of the Reorganization.
The Company applied approximately $94.3 million of such net proceeds to repay
outstanding indebtedness (plus accrued interest) of the Company and
approximately $5.3 million of such net proceeds to repay advances from ITC
Holding used by the Company for capital expenditures. The Company has applied
or intends to apply the remaining net proceeds released to the Company to fund
market expansion activities of the Company's telecommunications business,
including development and construction costs of the Company's fiber optic
network and its regional sales offices; and for additional working capital and
other general corporate purposes, including the funding of cash flow deficits
(after capital expenditures). See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
The indebtedness that was repaid with the net proceeds from the Offering
consisted of (i) $43.0 million of the DeltaCom Indebtedness (plus accrued
interest on all $74.0 million of the DeltaCom Indebtedness, which was
approximately $9.5 million at July 25, 1997), (ii) $41.6 million of
indebtedness (plus accrued interest, which was approximately $.2 million at
July 25, 1997) under the Bridge Facility, and (iii) as of July 25, 1997, $5.3
million advanced by ITC Holding for general corporate purposes. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview" and "--Liquidity and Capital Resources."
35
<PAGE>
As part of its business strategy, the Company intends to continue to
evaluate potential acquisitions, joint ventures and strategic alliances in
areas such as wireline and wireless services, network construction and
infrastructure and Internet access. The Company has no definitive agreement
with respect to any acquisition, although from time to time it has discussions
with other companies and assesses opportunities on an on-going basis. A
portion of the net proceeds from the Offering may be used to fund any such
acquisitions, joint ventures and strategic alliances. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources."
CAPITALIZATION
The following table sets forth, as of June 30, 1997, (i) the capitalization
of the Company on a historical combined basis and (ii) the pro forma
consolidated as adjusted capitalization of the Company as adjusted for the
Reorganization and the use of the net proceeds from the Offering. This table
should be read in conjunction with "Use of Proceeds," "Selected Financial and
Operating Data," "Pro Forma Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," the financial
statements and notes thereto, and the other financial data included elsewhere
in this Offering Memorandum.
<TABLE>
<CAPTION>
JUNE 30, 1997
----------------------------------------
ADJUSTMENTS PRO FORMA
HISTORICAL FOR THE CONSOLIDATED
COMBINED REORGANIZATION AS ADJUSTED
------------ -------------- ------------
<S> <C> <C> <C>
Advances from ITC Holding..... $ 79,886,220 $(79,886,220) $ --
------------ ------------ ------------
Long-term debt and capital
lease obligations:
Capital lease obligations,
including current portion
of $563,153................ 3,542,360 -- 3,542,360
Senior Notes and Exchange
Notes...................... 200,000,000 -- 200,000,000
Gulf States Transmission,
including current portion
of $41,600,000............. 41,600,000 (41,600,000) --
Georgia Fiber Assets,
including current portion
of $1,992,818.............. 9,964,091 -- 9,964,091
Other, including current
portion of $282,563........ 922,675 -- 922,675
------------ ------------ ------------
Total long-term debt and
capital lease obligations,
including current portion
(a)....................... $256,029,126 $(41,600,000) $214,429,126
------------ ------------ ------------
Total stockholder's equity
(b).......................... 33,450,572 30,669,828 64,120,400
------------ ------------ ------------
Total capitalization.......... $369,365,918 $(90,816,392) $278,549,526
============ ============ ============
</TABLE>
- --------
(a) The pro forma combined and the pro forma consolidated as adjusted
capitalization of the Company exclude any potential borrowings under the
Credit Facility. See "Description of Certain Indebtedness--Credit
Facility."
(b) Pro forma consolidated as adjusted stockholder's equity includes (i) ITC
Holding's forgiveness and contribution of $30,999,900 of the DeltaCom
Indebtedness to the Company in connection with the Reorganization, and
(ii) the write-off of $330,072 of debt issuance costs related to the
Bridge Facility which was repaid with a portion of the proceeds from the
Offering. See "Pro Forma Financial Data."
36
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
The following table sets forth selected financial and operating data for the
Company. The selected historical statements of operations data for each of the
years ended December 31, 1994, 1995 and 1996, and the selected historical
balance sheet data for the years then ended, have been derived from the
combined financial statements that have been audited by Arthur Andersen LLP,
independent public accountants. The selected historical statement of
operations data for the six months ended June 30, 1996 and 1997 have been
derived from the Company's unaudited combined financial statements and
include, in the opinion of management, all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the data for such
periods. Operating results for interim periods are not necessarily indicative
of results for the full fiscal year. The selected historical financial and
operating data should be read in conjunction with "Use of Proceeds," "Pro
Forma Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the financial statements and notes
thereto, and other financial and operating data included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------------------- -------------------------
(COMBINED) (COMBINED)
1992(A)(B) 1993(A) 1994(A)(C) 1995 1996(D) 1996 1997(E)(F)
----------- ----------- ----------- ----------- ------------ ----------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Operating revenues...... $ -- $ 636,913 $ 4,945,902 $ 5,750,587 $ 66,518,585 $28,574,799 $ 53,365,061
Operating expenses:
Cost of service........ -- 578,206 2,484,744 3,149,231 38,756,287 16,129,463 25,302,747
Selling, operations
and administration
expense............... -- 235,627 948,230 1,626,678 18,876,572 8,206,621 16,961,324
Depreciation and
amortization.......... -- 47,068 738,052 1,267,882 6,438,074 2,832,017 8,273,232
---------- ---------- ----------- ----------- ------------ ----------- ------------
Total operating
expenses............ -- 860,901 4,171,026 6,043,791 64,070,933 27,168,101 50,537,303
Operating income
(loss)................. -- (223,988) 774,876 (293,204) 2,447,652 1,406,698 2,827,758
Equity in losses of
unconsolidated
subsidiaries........... (25,819) 360,257 (96,920) (258,242) (1,589,812) (1,088,404) --
Interest expense........ -- -- (273,759) (297,228) (6,172,421) (2,762,757) (7,561,591)
Interest and other
income
(other expense)........ -- (826) 82,348 41,734 171,514 107,216 883,388
---------- ---------- ----------- ----------- ------------ ----------- ------------
Income (loss) before
taxes, preacquisition
earnings (losses) and
extraordinary item..... (25,819) 135,443 486,545 (806,940) (5,143,067) (2,337,247) (3,850,445)
Income tax (provision)
benefit................ 15,672 (54,582) (113,248) 302,567 1,233,318 671,467 1,005,809
Preacquisition
(earnings) losses...... -- -- (236,300) -- -- -- 74,132
Extraordinary item (net
of tax benefit)........ -- -- -- -- -- -- (507,515)
---------- ---------- ----------- ----------- ------------ ----------- ------------
Net income (loss)....... $ (10,147) $ 80,861 $ 136,997 $ (504,373) $ (3,909,749) $(1,665,780) $ (3,278,019)
========== ========== =========== =========== ============ =========== ============
BALANCE SHEET DATA (AT
PERIOD END):
Working capital
(deficit).............. $ -- $ 382,562 $ 254,988 $ (242,136) $ 3,415,088 $ 68,175,664
Property and equipment,
net.................... -- 5,204,153 8,486,996 9,386,444 31,880,556 115,852,080
Total assets............ 2,118,761 6,294,266 20,062,286 20,922,337 113,207,979 402,015,721
Long-term debt, advances
from ITC Holding, and
capital lease
obligations, including
current portions....... -- 797,288 4,013,977 3,143,977 75,442,971 256,029,126
Stockholder's equity.... 2,105,681 4,737,090 13,761,409 14,307,036 19,256,526 33,450,572
OTHER FINANCIAL DATA:
Capital expenditures.... $ -- $ 531,187 $ 3,703,835 $ 1,805,742 $ 6,172,660 $ 2,279,913 $ 12,357,471
EBITDA(g)............... (25,819) (176,920) 1,512,928 974,678 8,885,726 4,238,715 11,100,990
Cash flows from
operations............. (25,819) 33,667 978,775 1,437,317 8,188,618 2,448,698 9,409,779
Ratio of earnings to
fixed charges(h)....... N/A N/A 1.85x -- -- -- --
</TABLE>
(footnotes on following page)
37
<PAGE>
(a) Through August 17, 1994, the Company owned a 49% interest in Interstate
FiberNet and accounted for this investment under the equity method. On
August 17, 1994, the Company purchased the remaining 51% interest in
Interstate FiberNet from SCANA. Therefore, Interstate FiberNet's revenues
and expenses have been included in the combined statement of operations
data effective January 1, 1994, with the preacquisition earnings
attributable to SCANA deducted to determine combined net income for 1994.
See note 5 to the combined financial statements.
(b) Includes operations of InterQuest from March 1992 (date of inception).
(c) On August 17, 1994, the Company entered into the Gulf States FiberNet
partnership with SCANA. The Company obtained a 36% general partnership
interest, and the investment was accounted for under the equity method.
See note 5 to the combined financial statements.
(d) On January 29, 1996, ITC Holding purchased DeltaCom. DeltaCom's results of
operations are included in the historical statement of operations data
since the date of acquisition. See note 13 to the combined financial
statements.
(e) On March 27, 1997, the Company purchased the remaining 64% partnership
interest in Gulf States FiberNet from SCANA. Therefore, Gulf States
FiberNet's revenues and expenses have been included in the combined
statement of operations data effective January 1, 1997 with the
preacquisition losses attributable to SCANA deducted to determine the
combined net loss for the six months ended June 30, 1997. See note 16 to
the combined financial statements.
(f) On March 27, 1997, the Company purchased the Georgia Fiber Assets from
SCANA. The results of operations for the Georgia Fiber Assets are included
in the combined statements of operations beginning April 1, 1997. See note
16 to the combined financial statements.
(g) EBITDA represents earnings before extraordinary item, preacquisition
(earnings) losses, equity in losses of unconsolidated subsidiaries, net
interest, income taxes, depreciation and amortization. EBITDA is provided
because it is a measure commonly used in the industry. EBITDA is not a
measurement of financial performance under generally accepted accounting
principles and should not be considered an alternative to net income as a
measure of performance or to cash flow as a measure of liquidity. EBITDA
is not necessarily comparable with similarly titled measures for other
companies.
(h) Earnings consist of income before income taxes, plus fixed charges. Fixed
charges consist of interest charges and amortization of debt issuance
costs (including those reflected as an extraordinary item) and the portion
of rent expense under operating leases representing interest (estimated to
be one-third of such expense). Earnings were insufficient to cover fixed
charges for the years ended December 31, 1995 and 1996 and the six months
ended June 30, 1996 and 1997 by $.8 million, $5.1 million, $2.3 million
and $3.8 million, respectively.
38
<PAGE>
PRO FORMA FINANCIAL DATA
As discussed in note 1 to the combined financial statements, the historical
combined financial statements include the financial statements of the
following wholly owned subsidiaries of ITC Holding prior to the
Reorganization: Transmission, Transmission II, Gulf States Transmission,
InterQuest and DeltaCom. The historical combined financial statements include
the results of DeltaCom's operations effective as of the date of acquisition,
January 29, 1996. The Company's historical combined financial statements also
include the results of operations of Interstate FiberNet, a partnership
between Transmission and Transmission II, as well as Gulf States
Transmission's 36% equity interest in the results of operations of Gulf States
FiberNet.
The pro forma adjustments to the statements of operations for the year ended
December 31, 1996 and for the six months ended June 30, 1997 reflect (i) the
DeltaCom Acquisition, with respect to the year ended December 31, 1996, (ii)
the Gulf States Acquisition, (iii) the Reorganization and (iv) the Offering
and the use of the net proceeds therefrom, as if each of such transactions had
occurred on January 1, 1996. The pro forma adjustments to the balance sheet
reflect (i) the Reorganization, including ITC Holding's forgiveness and
contribution of approximately $31.0 million of DeltaCom Indebtedness to the
Company as additional equity and (ii) the release and use of the net proceeds
from the Offering, as if each of such transactions had occurred on June 30,
1997.
The pro forma financial and operating information does not purport to
represent what the Company's consolidated results of operations would have
been if these transactions had in fact occurred on these dates, nor does it
purport to indicate the future consolidated financial position or consolidated
results of future operations of the Company. The pro forma adjustments are
based on currently available information and certain assumptions that
management believes to be reasonable.
39
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31,
1996
<TABLE>
<CAPTION>
GEORGIA
HISTORICAL GULF STATES FIBER PRO FORMA PRO FORMA
COMBINED DELTACOM(A) FIBERNET ASSETS ADJUSTMENTS CONSOLIDATED
----------- ----------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues...... $66,518,585 $5,256,931 $10,056,544 $3,542,302 $ -- $ 85,374,362
Cost of services........ 38,756,287 2,963,383 867,558 -- -- 42,587,228
----------- ---------- ----------- ---------- ------------ ------------
Gross margin............ 27,762,298 2,293,548 9,188,986 3,542,302 -- 42,787,134
Operating expenses:
Selling, operations
and administration.... 18,876,572 1,343,761 2,785,596 860,240 -- 23,866,169
Depreciation
and amortization...... 6,438,074 290,226 6,620,382 1,063,408 200,671 (b) 14,612,761
----------- ---------- ----------- ---------- ------------ ------------
Total operating
expenses ............. 25,314,646 1,633,987 9,405,978 1,923,648 200,671 38,478,930
Operating income
(loss)................ 2,447,652 659,561 (216,992) 1,618,654 (200,671) 4,308,204
Other income (expense):
Equity in losses of
unconsolidated
subsidiary............ (1,589,812) -- -- -- 1,589,812 (c) --
Interest expense....... (6,172,421) (143,883) (4,345,001) -- (15,605,484)(d) (26,266,789)
Interest and
other income.......... 171,514 12,334 145,851 -- 3,388,252 (e) 3,717,951
----------- ---------- ----------- ---------- ------------ ------------
Total other income
(expense)............. (7,590,719) (131,549) (4,199,150) -- (10,627,420) (22,548,838)
Income (loss) before
taxes.................. (5,143,067) 528,012 (4,416,142) 1,618,654 (10,828,091) (18,240,634)
Income tax
(provision) benefit.... 1,233,318 (200,645) -- (615,089) 5,749,548 (f) 6,167,132
----------- ---------- ----------- ---------- ------------ ------------
Net income (loss)....... $(3,909,749) $ 327,367 $(4,416,142) $1,003,565 $ (5,078,543) $(12,073,502)
=========== ========== =========== ========== ============ ============
</TABLE>
- --------
(a) Represents the operations of DeltaCom from January 1, 1996 to January 29,
1996, the date it was acquired by ITC Holding.
(b) Reflects one month of additional goodwill amortization resulting from the
DeltaCom Acquisition ($113,844), as well as additional goodwill
amortization resulting from the Gulf States Acquisition ($86,827). See
notes 13 and 16, respectively, to the combined financial statements. The
goodwill amounts will be amortized over 40 years.
(c) Reflects the elimination of Gulf States Transmission's 36% share of Gulf
States FiberNet's results of operations for 1996.
Reflects (i) additional interest expense of $1,096,050 related to the $10.0
million SCANA Note issued by ITC Holding in connection with the Gulf States
Acquisition and assumed by Interstate FiberNet, Inc.; (ii) one month of
additional interest expense of $530,065 related to the DeltaCom
Indebtedness; (iii) interest expense of $22,000,000 related to the Notes;
(iv) the amortization of $735,000 of debt issuance costs relating to the
Offering; (v) the elimination of $9,789,687 of interest expense related to
the DeltaCom Indebtedness and the Gulf States FiberNet debt, $84.6 million
of which was repaid with a portion of the proceeds from the Offering and
approximately $31.0 million of which was forgiven by ITC Holding and
contributed to equity in connection with the Reorganization; and (vi) the
write-off of $1,034,056 of debt issuance costs related to Gulf States
FiberNet's existing debt and the Bridge Facility, which was repaid with a
portion of the net proceeds from the Offering.
(e) Reflects the estimated interest income that would have been earned on the
approximately $62.7 million of Offering proceeds placed in a pledged
account (reflected as restricted cash on the pro forma balance sheet) to
secure and fund the first six scheduled payments of interest (including
.5% interest per annum in the event that the Exchange Offer is not
consummated on or before December 3, 1997) on the Senior Notes and the
Exchange Notes (at an average interest rate of 6.15% per annum). Under the
terms of the Indenture, the amounts placed in the pledged account are
required to be invested in Pledged Securities, which secure the Senior
Notes and the Exchange Notes.
(f) Reflects the income tax effects of the pro forma adjustments above and
includes the additional income tax benefits from additional interest
expense and goodwill amortization as well as the net losses of Gulf States
FiberNet.
40
<PAGE>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
GEORGIA
HISTORICAL FIBER PRO FORMA PRO FORMA
COMBINED ASSETS ADJUSTMENTS CONSOLIDATED
----------- --------- ----------- ------------
<S> <C> <C> <C> <C>
Operating revenues....... $53,365,061 $ 885,450 $ -- $54,250,511
Cost of services......... 25,302,747 -- -- 25,302,747
----------- --------- ----------- -----------
Gross margin............. 28,062,314 885,450 -- 28,947,764
Operating Expenses:
Selling, operations, and
administrative......... 16,961,324 248,225 -- 17,209,549
Depreciation &
amortization........... 8,273,232 334,034 26,775 (a) 8,634,041
----------- --------- ----------- -----------
Total operating
expenses............... 25,234,556 582,259 26,775 25,843,590
Operating income......... 2,827,758 303,191 (26,775) 3,104,174
Other income (expense):
Interest expense........ (7,561,591) -- (4,828,407)(b) (12,389,998)
Interest and other
income (expense)....... 883,388 -- 1,814,223 (c) 2,697,611
----------- --------- ----------- -----------
Total other income
(expense).............. (6,678,203) -- (3,014,184) (9,692,387)
Income before taxes,
preacquisition losses
and extraordinary item.. (3,850,445) 303,191 (3,040,959) (6,588,213)
Income tax (provision)
benefit ................ 1,005,809 (115,213) 1,155,564 (d) 2,046,160
----------- --------- ----------- -----------
Income (loss) before
preacquisition losses
and extraordinary item.. (2,844,636) 187,978 (1,885,395) (4,542,053)
Preacquisition losses.... 74,132 -- (74,132) --
----------- --------- ----------- -----------
Net income (loss) from
continuing
operations(e)........... $(2,770,504) $ 187,978 $(1,959,527) $(4,542,053)
=========== ========= =========== ===========
</TABLE>
- --------
(a) Reflects additional goodwill amortization resulting from the Gulf States
Acquisition. See note 16 to the combined financial statements. The
goodwill will be amortized over 40 years.
(b) Reflects (i) additional interest expense of $274,013 related to the $10.0
million SCANA Note issued by ITC Holding in connection with the Gulf
States Acquisition and assumed by Interstate FiberNet, Inc.; (ii) interest
expense of $9,166,667 related to the Notes; (iii) the amortization of
$304,167 of debt issuance costs relating to the Offering; (iv) the
elimination of $5,246,512 of interest expense related to the DeltaCom
Indebtedness and the Gulf States FiberNet debt, $84.6 million of which was
repaid with a portion of the net proceeds from the Offering and
approximately $31.0 million of which was forgiven by ITC Holding and
contributed to equity in connection with the Reorganization; and (v) the
write-off of $330,072 of debt issuance costs related to the Bridge
Facility, which was repaid with a portion of the net proceeds from the
Offering.
(c) Reflects the estimated interest income that would have been earned on the
approximately $62.7 million of Offering proceeds placed in a pledged
account (reflected as restricted cash on the pro forma balance sheet) to
secure and fund the first six scheduled payments of interest (including
.5% interest per annum in the event that the Exchange Offer is not
consummated within six months of the Closing Date) on the Senior Notes and
the Exchange Notes (at an average interest rate of 6.15% per annum). Under
the terms of the Indenture, the amounts placed in the pledged account are
required to be invested in Pledged Securities, which secure the Senior
Notes and the Exchange Notes.
(d) Reflects the income tax effects of the pro forma adjustments above and
includes the additional income tax benefits from additional interest
expense and goodwill amortization.
(e) In March 1997, the Company incurred an extraordinary loss on the early
retirement of debt totalling $507,515, net of tax. Including this
extraordinary loss, the pro forma consolidated net loss for the six months
ended June 30, 1997 would be $5,049,568.
41
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET
AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
HISTORICAL FOR THE PRO FORMA CONSOLIDATED
COMBINED REORGANIZATION ELIMINATIONS BALANCE SHEET
------------ --------------- ------------ -------------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents............. $ 5,478,614 $31,029,025 (a) $ -- $ 36,507,639
Current restricted
assets.................. 194,775,128 (176,085,082)(a) -- 18,689,326
Accounts receivable, net
of allowance for
uncollectible accounts.. 17,487,268 -- -- 17,487,268
Other current assets.... 3,006,700 -- -- 3,006,700
Long-term restricted
assets.................. -- 44,018,820 (a) -- 44,018,820
Investments............. 5,000 33,941,775 (b) (33,941,775)(d) 5,000
Intangible assets, net.. 65,397,003 930,708 (c) -- 66,327,711
Property, plant, and
equipment, net.......... 115,852,080 -- -- 115,852,080
Other long-term assets.. 13,928 -- -- 13,928
------------ ------------ ------------ ------------
Total assets........... $402,015,721 $(66,165,474) $(33,941,775) $301,908,472
============ ============ ============ ============
LIABILITIES AND
STOCKHOLDER'S EQUITY
Accounts payable........ $ 10,794,956 $ -- $ -- $ 10,794,956
Accrued interest expense
payable to ITC Holding.. 9,011,106 (9,011,106)(a) -- --
Other accrued
liabilities............. 8,441,230 (279,751)(a) -- 8,161,479
Current portion of long-
term debt and capital
lease obligations....... 44,438,534 (41,600,000)(a) -- 2,838,534
Advances from ITC
Holding................. 79,886,220 (79,886,220)(a)(b) -- --
Long-term debt and
capital lease
obligations............. 211,590,592 -- -- 211,590,592
Deferred income taxes... 4,402,511 -- -- 4,402,511
Common stock............ 150,826 -- (826)(d) 150,000
Additional paid-in
capital................. 40,814,227 64,941,675 (b) (40,814,227)(d) (64,941,675)
Accumulated deficit..... (7,514,481) (330,072)(c) 6,873,278 (d) (971,275)
------------ ------------ ------------ ------------
Total liabilities and
stockholder's equity... $402,015,721 $(66,165,474) $(33,941,775) $301,908,472
============ ============ ============ ============
</TABLE>
- ----
(a) Reflects the release of $132,066,982 in net proceeds from the Offering
(excluding $62,708,146 (including $18,689,326 current portion) which has
been invested in certain U.S. government securities and is held by the
trustee in a pledged account to secure and fund the first six scheduled
interest payments on the Senior Notes and the Exchange Notes under the
terms of the Indenture) less: (i) the repayment of $48,886,320 of advances
from ITC Holding (the DeltaCom Indebtedness) and related interest of
$9,011,106; (ii) the repayment of indebtedness under the Bridge Facility
of $41,600,000 and related interest of $279,751; and (iii) estimated
$1,260,780 payment of remaining debt issuance costs.
(b) Reflects ITC Holding's contribution to the Company of its investments in
the historical combined subsidiaries and its forgiveness and contribution
of $30,999,900 of DeltaCom Indebtedness in connection with the
Reorganization.
(c) Reflects the estimated payment of $1,260,780 additional debt issuance
costs from the Offering, partially offset by the writeoff of $330,072 of
debt issuance costs related to the Bridge Facility.
(d) Reflects the Reorganization and corresponding consolidation entry to
eliminate the Company's investment in its subsidiaries. See note 1 to the
combined financial statements.
42
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following analysis should be read in conjunction with the financial
statements and the notes thereto and the other financial data appearing
elsewhere in this Prospectus. The Company has included EBITDA data in the
following analysis because it is a measure commonly used in the industry.
EBITDA represents earnings before extraordinary item, preacquisition
(earnings) losses, equity in losses of unconsolidated subsidiaries, net
interest, income taxes, depreciation and amortization. EBITDA is not a measure
of financial performance under generally accepted accounting principles and
should not be considered an alternative to net income as a measure of
performance or to cash flows as a measure of liquidity. EBITDA is not
necessarily comparable with similarly titled measures for other companies.
Unless otherwise indicated, dollar amounts have been rounded to the nearest
hundred thousand.
OVERVIEW
Company Background. ITC/\DeltaCom was incorporated in March 1997 as a wholly
owned subsidiary of ITC Holding to acquire and operate ITC Holding's Retail
Services and Carriers' Carrier Services businesses.
ITC Holding has provided operator and directory assistance services since
March 1992 through InterQuest. Carriers' Carrier Services have been offered
since late 1992 through Interstate FiberNet, a partnership originally formed
by ITC Holding (with a 49% interest) and SCANA (with a 51% interest). In
August 1994, ITC Holding acquired SCANA's interest in Interstate FiberNet.
Also in August 1994, ITC Holding formed a second partnership with SCANA, Gulf
States FiberNet, to construct and operate a fiber optic route primarily
between Atlanta, Georgia and Shreveport, Louisiana with several supplemental
spur routes. In the Gulf States Acquisition, ITC Holding acquired SCANA's 64%
partnership interest in Gulf States FiberNet and the Georgia Fiber Assets,
which included one customer contract representing $3.5 million in annual
revenues through August 2001, the term of the contract. Members of the
Company's management have been managing the businesses of both Interstate
FiberNet and Gulf States FiberNet since their inception. In 1995, the Company
began offering SS7 Services to its Carriers' Carrier customers.
In January 1996, as a result of the DeltaCom Acquisition, ITC Holding
entered the retail long distance business and acquired several fiber optic
routes within the State of Alabama that complemented the existing networks
operated by Interstate FiberNet and Gulf States FiberNet. DeltaCom, a provider
of telecommunications services since its inception in 1982, provides long
distance services to mid-sized businesses primarily in the state of Alabama.
The aggregate consideration paid by ITC Holding in the DeltaCom Acquisition
was approximately $71.4 million, consisting of approximately $65.4 million in
cash and $6.0 million of ITC Holding common stock. Concurrently with its
acquisition of DeltaCom, ITC Holding advanced $8.6 million to DeltaCom to
repay DeltaCom's outstanding debt. The DeltaCom Acquisition has been accounted
for under the purchase method. To finance the DeltaCom Acquisition and to
refinance DeltaCom's existing debt, ITC Holding incurred approximately $74.0
million of indebtedness, which was pushed down to DeltaCom (the DeltaCom
Indebtedness). See "--Effects of Accounting Standards."
The aggregate consideration paid by ITC Holding in the Gulf States
Acquisition was approximately $27.9 million, consisting of the $10.0 million
SCANA Note, which was assumed by Interstate FiberNet, Inc., and $17.9 million
of ITC Holding preferred stock. Under an earn-out provision, SCANA will be
entitled to receive additional preferred stock of ITC Holding if the Gulf
States FiberNet business achieves a specified performance target for 1997. See
"Description of Indebtedness--SCANA Note." The Company accounted for the Gulf
States Acquisition under the purchase method. Of the purchase price,
approximately $17.0 million was allocated to the Gulf States FiberNet
partnership interest and $10.9 million was allocated to the Georgia Fiber
Assets.
In connection with the Reorganization, approximately $31.0 million of the
DeltaCom Indebtedness was forgiven by ITC Holding and contributed to the
Company as additional equity. Following the Reorganization,
43
<PAGE>
the Company repaid the remaining $43.0 million of the DeltaCom Indebtedness,
accrued interest on all $74.0 million of such indebtedness and the $41.6
million of indebtedness outstanding under the Bridge Facility and accrued
interest thereon. See "History of the Company--Reorganization," "Use of
Proceeds" and "--Liquidity and Capital Resources."
Revenues. The Company derives revenues primarily from two business segments:
(i) Retail Services, which encompass the retail sale of long distance, data,
Internet services and the sale and installation of customer premise equipment
to mid-sized and major regional business customers and certain switched
services telecommunications companies, and (ii) Carriers' Carrier Services,
which encompass the sale of long-haul private line services on a wholesale
basis to other telecommunications companies, using the Company's owned and
managed fiber optic network.
The Company currently offers a wide range of Retail Services, including
retail long distance services such as traditional switched and dedicated long
distance, 800/888 calling, calling card and operator services, ATM and frame
relay, high capacity broadband private line, as well as Internet, Intranet and
Web page hosting and development services, and customer premise equipment
installation and repair. Since January 1996, the Company has expanded its
retail long distance operations into the following markets: Pensacola,
Florida; Atlanta, Georgia; Charlotte, North Carolina; Greenville, South
Carolina; and New Orleans and Baton Rouge, Louisiana. As ofJune 30, 1997, the
Company provided Retail Services to over 6,600 business customers and
approximately 7,100 residential customers. Such residential customers
represented less than 5% of the Company's revenues for the year ended 1996 and
the six months ended June 30, 1997.
In July 1997, the Company began offering local exchange services on a
limited, resale basis in Birmingham and Montgomery, Alabama, and commenced a
general sales effort of services on a resale basis in those markets in August
1997. Also in August 1997, the Company initiated a limited offering in
Birmingham and Montgomery of facilities-based local exchange services, and
expects that general marketing of such services will commence in September
1997. Although the Company's local exchange services offerings in such markets
are in the very early stages, initial expressions of customer interest in such
services have been positive, consistent with management's expectations.
However, there can be no assurance that demand for the Company's local
services will match such preliminary indications of customer interest. The
Company expects to offer local exchange services as part of its Retail
Services in a total of six to nine markets (including Birmingham and
Montgomery) by the end of 1997, initially by reselling the services of
incumbent local exchange carriers and, where market conditions warrant, by
using its own local switching facilities.
In connection with offering local exchange services, the Company has entered
into the Interconnection Agreement with BellSouth to (i) resell BellSouth's
local exchange services and (ii) interconnect the Company's network with
BellSouth's network for the purpose of gaining immediate access to all of
BellSouth's unbundled network elements. This agreement will allow the Company
to enter new markets with minimal capital expenditures and to offer local
exchange service to its current customer base. The Interconnection Agreement
currently allows the Company to provide local service on a resale basis or by
purchasing all unbundled network elements required to provide local service on
a facilities basis, without using Company-owned facilities. The terms of the
Interconnection Agreement, including interim pricing terms agreed to by the
Company and BellSouth, have been approved by state regulatory authorities in
most states, although they remain subject to review and modification by such
authorities. In addition, the Interconnection Agreement does not resolve all
operational issues, particularly those relating to the collocation of the
Company's equipment with that of BellSouth. The Company and BellSouth are
continuing to negotiate to resolve such issues. The Company expects that the
Interconnection Agreement will provide a foundation for it to provide local
service on a reasonable commercial basis, but there can be no assurance of
this and important issues remain unsettled as a result of legal and regulatory
developments and related matters. The Interconnection Agreement expires in
1999, and there can be no assurance that the Company will be able to renew it
under favorable terms, or at all.
The Company's strategy is ultimately to offer facilities-based local service
in certain established markets by collocating its equipment with that of
BellSouth which will enable the Company to purchase fewer unbundled network
elements. The Company expects that it will be able to begin providing local
service to such markets in the fourth quarter of 1997 by using its own
facilities and network, as supplemented by BellSouth's unbundled
44
<PAGE>
network elements. In August 1997, the Company began the process of arranging
for collocation of its equipment with BellSouth in certain markets, primarily
in Alabama, in which the Company has an existing base of long distance
customers. The Company and BellSouth are negotiating the terms of an agreement
with respect to such equipment collocations. In addition, BellSouth has been
experiencing certain central office space limitations, resulting in delays in
completing arrangements for physical collocation of Company equipment. There
can be no assurance that the Company and BellSouth will enter into a
collocation agreement on terms acceptable to the Company or at all, nor can
there be any assurance that BellSouth's space limitations will be resolved to
the Company's satisfaction, in a timely manner, or at all. In the event that
collocation is not possible, the Company plans to provide facilities-based
local service primarily by purchasing unbundled network elements.
The Company anticipates that an increasing portion of its revenue will be
derived from local services, primarily those provided pursuant to the
Interconnection Agreement with BellSouth and similar agreements with other
local exchange carriers. Management expects that gross margin associated with
local Retail Services will be slightly better than gross margin associated
with long distance Retail Services, but that, in general, gross margin
associated with Retail Services will be lower than that associated with
Carriers' Carrier Services. There can be no assurance that the Company will be
able to enter into additional interconnection agreements on terms acceptable
to the Company or at all, or that the incumbent local exchange carriers will
provide the operational support required for the Company to provide local
services to end users. See "Risk Factors--Dependence on Incumbent Local
Exchange Carriers," "--Regulation," "Business--Services and Facilities," and
"--Regulation."
As the Company begins to offer local service on a facilities rather than
resale basis, it will begin to sell switched access and termination services
to carriers terminating calls to its local end user customers, and originating
switched access to long distance companies where the end users choose a
carrier other than the Company for that service. Certain incumbent local
exchange companies, including BellSouth, have taken the position that when a
carrier seeking to provide local service obtains all necessary elements (loops
and switches) from the incumbent local exchange carrier in a combined form,
the incumbent local exchange carrier retains the right to receive the access
revenues associated with service to the customers served on that basis.
Although a recent Eighth Circuit Court of Appeals decision appears to reject
this position, further legal challenges are likely and important issues
related to this form of interconnection remain open.
The Company provides Carriers' Carrier Services using its owned and managed
fiber optic network, which reaches over 60 POPs in ten southern states
(Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina,
South Carolina, Tennessee and Texas). Of the network's approximately 5,400
route miles, approximately 2,500 are Company-owned and operated and
approximately 2,900 are owned and operated by three public utilities, Duke
Power Company, Florida Power & Light Company and Entergy Technology Company,
with which the Company has marketing and management arrangements. The
Company's arrangement with Entergy is exclusive. In addition, the Company has
a buy-sell agreement with Carolinas Fibernet, LLC, which manages fiber optic
facilities in North Carolina and South Carolina. This agreement enables the
parties to buy and sell capacity on each other's networks and allows the
Company to provide customers with access to POPs throughout those states. The
Company expects to add approximately 700 owned and operated route miles to its
fiber network by the end of 1997 and add approximately 100 owned and operated
route miles in early 1998 through long-term dark fiber leases. In addition, as
part of its strategy, the Company intends to continue to evaluate the
potential expansion of its network through a combination of new construction,
long-term dark fiber leases and fiber swap transactions, depending on the
extent of capital required over the economic life of the fiber assets to be
deployed. To the extent that the Company elects to expand its network through
long-term leases in lieu of construction or fiber swap transactions, the
Company expects such leases to have a negative effect on EBITDA; however, the
Company expects that any such expansion of its network would provide
opportunities to generate additional revenues, which would partly offset such
negative effects.
The Company derives commission revenues from the marketing, sale and
management of capacity on the utility-owned portions of the Company's network.
Negligible incremental costs are associated with these
45
<PAGE>
commissions, because the Company uses the same marketing and sales force in
servicing the utility-owned portions of the network as it does for the
portions owned by the Company. In 1996, the Company's commission revenues from
these arrangements amounted to approximately $170,000 because, although the
utility-owned portions owned by Duke Power Company began generating revenues
in late 1995, the portions owned by Florida Power & Light Company and Entergy
Technology Company began generating revenues in late 1996. For the six months
ended June 30, 1997, the Company's commission revenues from these arrangements
amounted to approximately $451,000. The Company expects commissions associated
with the utility-owned portions of the network, which will become fully
operational in the current year, to continue to increase in 1997.
The Company provides long-haul services to its carrier customers on a "take
or pay" long-term basis, on an individual circuit basis, or on a month-to-
month basis after the initial term of the "take or pay" or individual circuit
contract. As of June 30, 1997, the Company had remaining future long-term
contract commitments totaling approximately $75.8 million. These contracts
expire on various dates through 2006 and are expected to generate
approximately $56.0 million in revenues to the Company through 2001, of which
approximately $14.5 million are expected to be realized in 1998. No single
Carriers' Carrier Services customer or Retail Services customer represented
over 10% of the Company's total revenues for the six months ended June 30,
1997.
Although the Company expects that a majority of its revenue growth will come
from its Retail Services business, the Company does not expect its Retail
Services to obtain a significant share of the market for telecommunications
services in the southern United States. The customer contracts for Retail
Services generally provide for payment in arrears based on minutes of use for
switched services and payment in advance for private line services. The
contracts generally also provide that the customer may terminate the affected
services without penalty in the event of certain outages in service, and for
certain other defined causes. To date, no customers have terminated any
services under these provisions. The contracts also typically provide that the
customer must use at least a minimum dollar amount of switched long distance
services per month for the term of the contract. During the past several
years, market prices for many telecommunications services segments have been
declining, which the Company believes will likely continue. In response to
these and other competitive pressures, the Company recently modified certain
of its retail contracts to extend to certain customers lower rates over longer
terms as a means of maintaining and developing the Company's customer base. In
the future, in response to competitive considerations, the Company may decide
to modify certain other retail customer contracts in a similar manner,
emphasizing lower pricing and longer commitment periods. A substantial portion
of the Company's total revenues are from retail long distance services.
Revenue per minute from such services has been declining and is expected to
continue to decline. This decline will have a negative effect on the Company's
gross margin which may not be offset completely by savings from decreases in
the Company's cost of services.
Operating Expenses. The Company's principal operating expenses consist of
cost of services, selling, operations and administration expenses, and
depreciation and amortization. Cost of services related to Retail Services
consists primarily of access charges and local facility charges paid to local
exchange carriers, as well as wholesale carrier origination, termination and
interexchange facility charges paid to other interexchange carriers. Cost of
services related to Carriers' Carrier Services are substantially all fixed
costs attributable to (i) the leasing of dark fiber under long-term operating
leases, (ii) the leasing of capacity outside the Company's owned or managed
network (off-net capacity) to meet customer requirements, (iii) labor
associated with operator services and (iv) network costs associated with the
provision of SS7 Services. The Company purchases off-net capacity to provide
Carriers' Carrier Services in cases where the Company plans to construct its
own network to replace the off-net portion of certain fiber routes. The
Company also purchases off-net capacity in connection with an existing
customer contract, pursuant to which the Company is the exclusive provider of
network capacity to such customer. Although the Company is able to
substantially meet the requirements of such customer on the Company's network,
the Company purchases off-net capacity to fill such customer's requirements
that cannot be met on the Company's network. Selling, operations and
administration expenses consist of expenses of selling and marketing, field
personnel engaged in direct network maintenance and monitoring, customer
service and corporate administration. Depreciation and amortization include
depreciation of the Company's telecommunications network and equipment and
amortization of goodwill and other intangible assets related to acquisitions,
primarily the DeltaCom Acquisition.
46
<PAGE>
As the Company continues to expand into new geographic markets, add new
sales offices and facilities and enlarge its current product offerings to
include local telephone and other services, cost of services and selling,
operations and administration expenses are expected to increase substantially.
Therefore, the Company expects to incur increasing operating losses over the
next few years. Although the Company anticipates that it will continue to
generate positive cash flow from operations, it expects that such cash flows
will be more than offset by capital expenditures during the next several years
as it implements its business plan. The Company also expects that the addition
of local service to its bundle of telecommunications services will have an
adverse impact on its gross margin, because the gross margin on the resale of
local services through incumbent local exchange carrier facilities will be
lower than the gross margin on the Company's existing businesses. As the
Company increasingly uses incumbent local exchange carrier unbundled network
elements instead of resold services, the Company expects gross margin on local
service to improve. Such improvement is expected to result from reduced access
charges and efficiencies realized through increased reliance on the Company's
owned network. Such improved margins, however, could be offset by competitive
market pressures to reduce prices for Retail Services, as discussed above.
There can be no assurance that growth in the Company's revenues or customer
base will continue or that the Company will be able to achieve or sustain
profitability or positive net cash flows.
High Leverage. At June 30, 1997, on a pro forma basis, giving effect to the
Reorganization, as well as the forgiveness of, or repayment in full of certain
indebtedness with a portion of the net proceeds from the Offering, the Company
would have had $214.4 million of indebtedness and its stockholder's equity
would have been $64.1 million. On a pro forma basis, the Company's earnings
would have been insufficient to cover its fixed charges for the year ended
December 31, 1996 and the six months ended June 30, 1997 by $18.2 million and
$6.6 million, respectively, and its EBITDA less capital expenditures and
interest expense would have been negative $14.8 million and negative $13.0
million, respectively.
Although the Company's liquidity has improved, the Company's level of
indebtedness and debt service obligations has significantly increased as a
result of the Offering. The successful implementation of the Company's
strategy, including expansion of its network and obtaining and retaining a
significant number of customers, and significant and sustained growth in the
Company's cash flow are necessary for the Company to be able to meet its debt
service requirements. There can be no assurance that the Company will
successfully implement its strategy or that the Company will be able to
generate sufficient cash flow from operating activities to improve its
earnings before fixed charges, or to meet its debt service obligations and
working capital requirements. The ability of the Company to meet its
obligations will be dependent upon the future performance of the Company,
which will be subject to prevailing economic conditions and to financial,
business and other factors. See "Risk Factors--Significant Capital
Requirements; Uncertainty of Additional Financing" and --High Leverage;
Ability to Service Debt; Restrictive Covenants," "--Liquidity and Capital
Resources," "Description of Certain Indebtedness" and "Description of the
Exchange Notes."
47
<PAGE>
CERTAIN PRO FORMA RESULTS OF OPERATIONS
The following table sets forth certain summary unaudited pro forma financial
data for the years ended December 31, 1994, 1995 and 1996 and the six months
ended June 30, 1996 and 1997. The pro forma data reflect the results of
operations for such periods related to (i) Retail Services, consisting of
certain historical data for DeltaCom as if the DeltaCom Acquisition had
occurred as of the beginning of each period presented, and (ii) Carriers'
Carrier Services, consisting of certain pro forma combined data for Interstate
FiberNet, InterQuest, Gulf States FiberNet and the Georgia Fiber Assets as if
the Gulf States Acquisition had occurred as of the beginning of each period
presented. The information set forth below does not purport to represent what
the Company's financial position or results of operations would have been if
these acquisitions had actually occurred as of such dates, or to project the
Company's financial position or results of operations for any future date or
period. The information presented below should be read in conjunction with the
financial statements and the notes thereto included elsewhere in this
Prospectus.
PRO FORMA RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
----------------------------------------------------------------- -------------------------------------------
1994 1995 1996 1996 1997
--------------------- --------------------- --------------------- --------------------- ---------------------
% OF % OF % OF % OF % OF
REVENUES REVENUES REVENUES REVENUES REVENUES
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Retail Services... $53,777,565 86% $56,271,011 77% $65,176,807 76% $31,106,856 79% $39,920,414 74%
Carriers' Carrier
Services......... 8,582,444 14% 16,837,906 23% 20,197,555 24% 8,495,298 21% 14,330,097 26%
----------- ----------- ----------- ----------- -----------
Total........... $62,360,009 $73,108,917 $85,374,362 $39,602,154 $54,250,511
=========== =========== =========== =========== ===========
Gross Margin
Retail Services... $20,608,785 38% $23,915,653 43% $25,820,210 40% $13,140,448 42% $16,392,403 41%
Carriers' Carrier
Services......... 5,728,170 67% 12,521,873 74% 16,966,924 84% 7,152,759 84% 12,555,361 88%
----------- ----------- ----------- ----------- -----------
Total........... $26,336,955 42% $36,437,526 50% $42,787,134 50% $20,293,207 51% $28,947,764 53%
=========== =========== =========== =========== ===========
EBITDA
Retail Services... $ 9,999,787 19% $10,069,786 18% $ 7,426,297 11% $ 4,441,728 14% $ 3,221,943 8%
Carriers' Carrier
Services......... 3,958,559 46% 8,735,909 52% 11,494,668 57% 4,311,693 51% 8,516,272 59%
----------- ----------- ----------- ----------- -----------
Total(a)........ $13,958,346 22% $18,805,695 26% $18,920,965 22% $ 8,753,421 22% $11,738,215 22%
=========== =========== =========== =========== ===========
Net Income (Loss)
from Continuing
Operations
Retail Services... $(1,441,323) (3)% $(1,405,651) (3)% (3,701,538) (6)% $(1,049,660) (3)% $(2,235,487) (6)%
Carrier's Carrier
Services......... 793,759 9% (462,146) (3)% (1,805,472) (9)% (1,246,039) (15)% 33,544 --%
----------- ----------- ----------- ----------- -----------
Total(b)........ $ (647,564) 1% $(1,867,797) (3)% $(5,507,010) (6)% $(2,295,699) (6)% $(2,201,943) (4)%
=========== =========== =========== =========== ===========
</TABLE>
- --------
(a) Excludes interest income that would have been earned during the periods
presented on the $62.7 million of Offering proceeds invested in Pledged
Securities and held by the Trustee to fund and secure the first six
interest payments on the Notes.
(b) Excludes net interest related to the Offering and the use of the net
proceeds therefrom.
PRO FORMA SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO PRO FORMA SIX MONTHS
ENDED JUNE 30, 1997
Revenues
Pro forma revenues increased 37% from $39.6 million for the six months ended
June 30, 1996 to $54.3 million for the six months ended June 30, 1997. Retail
Services operations' pro forma revenues increased $8.8 million
48
<PAGE>
from $31.1 million for the six months ended June 30, 1996 to $39.9 million for
the six months ended June 30, 1997. Of this increase, $7.0 million was
attributable to long distance services, $.9 million to sales of customer
premise equipment and $.9 million to Internet sales and services. The growth
in long distance services was primarily the result of an increase in minutes
from new and existing customers, partially offset by a decrease in revenues
per minute due to lower prices. Pro forma revenues from Carriers' Carrier
operations contributed $5.8 million of this increase, increasing from $8.5
million for the six months ended June 30, 1996 to $14.3 million for the six
months ended June 30, 1997. Revenues from Carriers' Carrier Services increased
due to increased demand for Carriers' Carrier Services from new and existing
customers.
Gross Margin
Pro forma gross margin increased from $20.3 million for the six months ended
June 30, 1996 to $28.9 million for the six months ended June 30, 1997. Pro
forma gross margin for Carriers' Carrier Services as a percentage of Carrier's
Carrier Services revenues increased from 84% for the six months ended June 30,
1996 to 88% for the six months ended June 30, 1997, primarily due to
additional revenues. Retail Services pro forma gross margin as a percentage of
Retail Services revenues was 42% and 41%, respectively, for the six month
periods ended June 30, 1996 and 1997. The Company anticipates that increased
competition, particularly with respect to pricing, in the long distance market
will likely adversely affect the Company's gross margin on long distance
services as a percentage of revenues. Management expects that the Company will
increasingly utilize its fiber optic network in the deployment of the
Company's switched network design, favorably affecting the Company's gross
margin on the Retail Services segment. As the Company increases the volume of
traffic it either originates or terminates on its own network, it expects to
be able to use more effectively its switched network to reduce per-minute
costs. The Company expects that the provision of local telecommunications
service through the resale of incumbent local exchange carrier facilities will
adversely affect its gross margin. As the Company begins to utilize incumbent
local exchange carrier unbundled network elements instead of reselling local
services, the Company expects gross margin on local services to improve.
EBITDA
Pro forma EBITDA increased $2.9 million from $8.8 million for the six months
ended June 30, 1996 to $11.7 million for the six months ended June 30, 1997,
an increase of 33%. For Carriers' Carrier Services, pro forma EBITDA increased
as a percentage of Carrier's Carrier Services revenues from 51% for the six
months ended June 30, 1996 to 59% for the six months ended June 30, 1997,
primarily due to increased revenues. Pro forma EBITDA related to Retail
Services decreased $1.2 million, from $4.4 million for the six months ended
June 30, 1996 to $3.2 million for the six months ended June 30, 1997. This
decrease was attributable to the costs associated with new sales offices
opened since March 31, 1996 and employment of additional support personnel to
better position this segment for growth and expansion. The Company expects
that EBITDA for Retail Services will continue to decline at least through
1998, as the Company expands its offering of local services and opens
additional sales offices.
Net Income (Loss) From Continuing Operations
Pro forma net loss decreased $.1 million from $2.3 million for the six
months ended June 30, 1996 to a loss of $2.2 million for the six months ended
June 30, 1997. The pro forma net loss from Retail Services increased from $1.0
million for the six months ended June 30, 1996 to a loss of $2.2 million for
the six months ended June 30, 1997. This additional loss resulted from
increased costs associated with new sales offices opened since March 31, 1996,
and the employment of additional support personnel to better position this
segment for growth and expansion. Carriers' Carrier Services had a net loss of
$1.2 million for the six months ended June 30, 1996 and net income of less
than $.1 million for the six months ended June 30, 1997. This increase in net
income is primarily attributable to increased revenues and gross margins.
49
<PAGE>
PRO FORMA YEAR ENDED DECEMBER 31, 1995 COMPARED TO PRO FORMA YEAR ENDED
DECEMBER 31, 1996
Revenues
Pro forma revenues increased 17% from $73.1 million in 1995 to $85.4 million
in 1996. Of this increase, $8.9 million was attributable to Retail Services,
which increased $7.6 million from long distance services and $1.3 million from
Internet services and sales of customer premise equipment. The growth in long
distance services was primarily the result of an increase in minutes from new
and existing customers, which was partially offset by a decrease in revenues
per minute (because of lower prices). The Company also opened six additional
sales offices during the first half of 1996 in the following new markets: New
Orleans, Baton Rouge, Atlanta, Greenville, Charlotte and Pensacola. Carriers'
Carrier Services accounted for $3.4 million of the total revenues increase.
Pro forma revenues for this segment in 1995 included a $3.3 million
nonrecurring payment from a major customer related to the initial construction
of the Gulf States FiberNet fiber optic route. Excluding the effect of this
nonrecurring payment, pro forma revenues attributable to Carriers' Carrier
Services increased 49%, or $6.6 million, to $20.2 million in 1996. Of this
increase, $5.7 million was due to services provided on new network capacity,
primarily the Gulf States FiberNet portions of the network, which were fully
operational for all of 1996, after being operational for only approximately
six months in 1995. The balance of the increase was attributable to increased
demand over existing portions of the Company's network. Gulf States FiberNet
represented $10.1 million and the Georgia Fiber Assets customer contract
represented $3.5 million of the total $20.2 million of Carriers' Carrier
Services pro forma revenues in 1996. For 1995, excluding the effect of the
$3.3 million nonrecurring payment, Gulf States FiberNet represented $4.3
million and the Georgia Fiber Assets customer contract represented $3.5
million of Carriers' Carrier Services pro forma revenues of $13.6 million.
Gross Margin
Pro forma gross margin increased from $36.4 million in 1995 to $42.8 million
in 1996. For Carriers' Carrier Services, pro forma gross margin as a
percentage of revenues increased from 74% in 1995 to 84% in 1996, primarily
because most Carriers' Carrier Services are long-haul private line services
which have low associated variable cost of services. For Retail Services, pro
forma gross margin as a percentage of revenues decreased from 43% in 1995 to
40% in 1996, primarily because of an increase in the number of wholesale
switched minutes sold to other telecommunications companies as a percentage of
total switched minutes in 1996 compared to 1995. The gross margin on these
wholesale services is lower than the gross margin on retail switched services.
In addition, in 1996, the Company modified certain of its retail contracts to
extend to certain customers lower rates over longer terms as a means of
maintaining and developing the Company's customer base.
EBITDA
Pro forma EBITDA increased $.1 million from $18.8 million in 1995 to $18.9
million in 1996. Pro forma EBITDA related to Retail Services decreased $2.7
million from $10.1 million in 1995 to $7.4 million in 1996, principally
because of costs incurred to open six new sales offices during 1996 and the
addition of management and infrastructure after the DeltaCom Acquisition to
position this segment for growth and expansion. EBITDA related to Carriers'
Carrier Services increased from $8.7 million in 1995 to $11.5 million in 1996
on a $3.4 million increase in revenues because the long-haul portion of the
Carriers' Carrier business has low associated variable costs. EBITDA and
revenues for 1995 include a $3.3 million nonrecurring payment related to the
initial construction of the Gulf States FiberNet fiber optic route.
Net Income (Loss) From Continuing Operations
Pro forma net loss increased $3.6 million from $1.9 million in 1995 to $5.5
million in 1996. Of this increase, $2.3 million was attributable to Retail
Services primarily due to costs incurred to open six new sales offices during
1996 and addition of management and infrastructure to position this segment
for growth and expansion. Pro forma net loss from Carriers' Carrier Services
increased $1.3 million from $.5 million in 1995 to $1.8 million in 1996. This
increased net loss was primarily attributable to increased depreciation and
amortization expense and increased interest expense.
50
<PAGE>
PRO FORMA YEAR ENDED DECEMBER 31, 1994 COMPARED TO PRO FORMA YEAR ENDED
DECEMBER 31, 1995
Revenues
Pro forma revenues increased 17% from $62.4 million in 1994 to $73.1 million
in 1995. Revenues from Retail Services accounted for $2.5 million of the $10.7
million total increase, due to an increase of $1.8 million attributable to
long distance services and $.7 million attributable to sales of customer
premise equipment. Revenues from Carriers' Carrier Services contributed $8.3
million to the total increase, including a $3.3 million nonrecurring payment
from a major customer related to the initial construction of the Gulf States
FiberNet fiber optic route. Excluding the effect of this nonrecurring payment,
$4.2 million of the $5.0 million increase in revenues attributable to
Carriers' Carrier Services consisted of revenues generated from the newly
constructed Gulf States FiberNet route, which began operations in June 1995.
The remaining $.8 million was attributable to increased sales on existing
network routes and the sale of newly introduced SS7 Services.
Gross Margin
Pro forma gross margin as a percentage of revenues increased from 42% in
1994 to 50% in 1995. Pro forma gross margin as a percentage of revenues
generated by Retail Services increased from 38% in 1994 to 43% in 1995. This
improvement was primarily a result of (i) reductions in the cost of intrastate
switched access and (ii) newly renegotiated favorable contract terms resulting
in higher revenues to the Company for off-net originating and terminating
interstate services. As a result of the increased revenues derived from
Carriers' Carrier Services, pro forma gross margin as percentage of revenues
generated by this business segment increased from 67% in 1994 to 75% in 1995.
EBITDA
Pro forma EBITDA increased 34% from $14.0 million in 1994 to $18.8 million
in 1995. Pro forma EBITDA related to Retail Services increased slightly from
$10.0 million in 1994 to $10.1 million in 1995. Increases in pro forma 1995
gross margin for Retail Services were partially offset by approximately $1.0
million of costs related to personnel additions to the Company's human
resources, marketing, customer service and information services departments
and approximately $.6 million of costs related to management services.
Although pro forma revenues related to Carriers' Carrier Services increased
$8.3 million in 1995 compared to 1994, pro forma EBITDA for Carriers' Carrier
Services only increased $4.7 million from $4.0 million in 1994 to $8.7 million
in 1995. The Carriers' Carrier Services revenues increase was offset in part
by (i) a $1.5 million increase in cost of services related primarily to
network costs associated with the initiation of SS7 Services, a network
management contract for a large enhanced specialized mobile radio customer and
off-net lease expense incurred in the sale of certain long-haul private lines
and (ii) a $2.0 million increase in selling, operations and administration
expense related to the hiring of additional senior management and key
operations personnel to position the Company for future growth. Also included
in this $2.0 million increase is the opening of a fully staffed network
operation center to monitor the entire fiber optic network 24 hours a day,
seven days a week.
Net Income (Loss) From Continuing Operations
Pro forma net loss increased $1.3 million from $.6 million in 1994 to $1.9
million in 1995. This increased loss was attributable to the loss from
Carriers' Carrier Services which increased $1.3 million to a net loss of $.5
million in 1995 as compared to net income of $.8 million in 1994. This loss
was attributable to (i) an increase in selling, operations and administration
expense related to the hiring of additional management and key operations
personnel to position the Company for future growth and (ii) an increase in
depreciation and amortization expense and interest expense which resulted
primarily from the operations of the Gulf States FiberNet routes which
commenced in August 1994.
51
<PAGE>
HISTORICAL RESULTS OF OPERATIONS
The following tables set forth certain historical financial data for the
years ended December 31, 1994, 1995 and 1996 and the six months ended June 30,
1996 and 1997 for the Carriers' Carrier Services business and for the year
ended December 31, 1996 and the six months ended June 30, 1996 and 1997 for
the Retail Services business.
The comparability of the historical financial data for the six months ended
June 30, 1996 and 1997 has been affected by the DeltaCom Acquisition and the
Gulf States Acquisition. The historical financial statements for the six
months ended June 30, 1996 include the results of operations for DeltaCom
since its acquisition on January 29, 1996. For the six months ended June 30,
1996, the Company's 36% interest in Gulf States FiberNet's results of
operations is reflected using the equity method. Due to the Gulf States
Acquisition on March 27, 1997, the results of operations for the six months
ended June 30, 1997 reflect the total revenues and expenses from January 1,
1997 attributable to Gulf States FiberNet with the preacquisition losses
attributable to SCANA from January 1, 1997 deducted to determine combined net
loss. The results of operations for the six months ended June 30, 1997 also
reflect the revenues and expenses of Georgia Fiber since April 1, 1997.
HISTORICAL RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
CARRIERS' CARRIER SERVICES
-----------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------------------ ----------------------------------
1994 % 1995 % 1996 % 1996 % 1997 %
---------- ---- ---------- ---- ---------- ---- ----------- ---- ----------- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $4,945,902 100% $5,750,587 100% $6,598,709 100% $2,724,874 100% $13,444,647 100%
Cost of services........ 2,484,744 50% 3,149,231 55% 2,363,073 36% 1,126,438 41% 1,774,736 13%
---------- ---------- ---------- ---------- -----------
Gross margin........... 2,461,158 50% 2,601,356 45% 4,235,636 64% 1,598,436 59% 11,669,911 87%
Selling, operations and
administration
expense................ 948,230 19% 1,626,678 28% 1,826,420 28% 851,662 31% 3,790,864 28%
Depreciation and
amortization........... 738,052 15% 1,267,882 22% 1,656,685 25% 759,366 28% 5,315,500 40%
---------- ---------- ---------- ---------- -----------
Total operating ex-
penses................. 1,686,282 34% 2,894,560 50% 3,483,105 53% 1,611,028 59% 9,106,364 68%
---------- ---------- ---------- ---------- -----------
Operating income
(loss)................. $ 774,876 16% $ (293,204) (5)% $ 752,531 11% $ (12,592) 0% $ 2,563,547 19%
========== ========== ========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
RETAIL SERVICES
--------------------------------------------------
YEAR ENDED
DECEMBER 31, SIX MONTHS ENDED JUNE 30,
---------------- ---------------------------------
1996 % 1996 % 1997 %
----------- ---- ----------- ---- ----------- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenues.................... $59,919,876 100% $25,849,925 100% $39,920,414 100%
Cost of services............ 36,393,214 61% 15,003,025 58% 23,528,011 59%
----------- ----------- -----------
Gross margin............... 23,526,662 39% 10,846,900 42% 16,392,403 41%
Selling, operations and ad-
ministration expense....... 17,050,152 28% 7,354,959 28% 13,170,460 33%
Depreciation and amortiza-
tion....................... 4,781,389 8% 2,072,651 8% 2,957,732 7%
----------- ----------- -----------
Total operating expenses... 21,831,541 36% 9,427,610 36% 16,128,192 40%
----------- ----------- -----------
Operating income............ $ 1,695,121 3% $ 1,419,290 5% $ 264,211 1%
=========== =========== ===========
</TABLE>
HISTORICAL SIX MONTHS ENDED JUNE 30, 1997 COMPARED WITH HISTORICAL SIX MONTHS
ENDED JUNE 30, 1996
Revenues
Revenue for the six months ended June 30, 1997 increased from $28.6 million
for the six months ended June 30, 1996 to $53.4 million for the six months
ended June 30, 1997. Revenues from Retail Services increased $14.1 million
from $25.8 million for the six months ended June 30, 1996 to $39.9 million for
the six months
52
<PAGE>
ended June 30, 1997. Results for the six months ended June 30, 1996 reflect
only five months of Retail Services revenues because the DeltaCom Acquisition
occurred on January 29, 1996. Revenues from Carriers' Carrier Services
increased from $2.7 million for the six months ended June 30, 1996 to $13.4
million for the six months ended June 30, 1997. Of the $10.7 million increase,
$8.8 million was attributable to revenues generated during the six months
ended June 30, 1997 by Gulf States FiberNet. Excluding revenues attributable
to Gulf States FiberNet during the six months ended June 30, 1997, Carriers'
Carrier Services increased $1.9 million, of which $.9 million was attributable
to revenue from the Georgia Fiber Assets acquired March 27, 1997.
Cost of Services
Cost of services increased $9.2 million from $16.1 million for the six
months ended June 30, 1996 to $25.3 million for the six months ended June 30,
1997. Cost of services for Retail Services' operations increased $8.5 million
to $23.5 million for the six months ended June 30, 1997 from $15.0 million for
the six months ended June 30, 1996, which reflect only five months of cost of
services attributable to Retail Services operations. Cost of services for
Retail Services' operations as a percentage of revenue increased to 59% for
the six months ended June 30, 1997 compared to 58% for the six months ended
June 30, 1996. This increase was attributable to the cost of new facilities in
order to service expanded retail markets, and the impact of increased minutes
of usage at lower prices per minute. Cost of services attributable to
Carriers' Carrier Services increased $.7 million from $1.1 million for the six
months ended June 30, 1996 to $1.8 million for the six months ended June 30,
1997. Cost of services for Carriers' Carrier Services as a percentage of
revenue decreased to 13% for the six months ended June 30, 1997 compared to
41% for the six months ended June 30, 1996.
Selling, Operations and Administration Expense
Selling, operations and administration expense increased $8.8 million from
$8.2 million (29% as a percentage of revenue) for the six months ended June
30, 1996 to $17.0 million (32% as a percentage of revenue) for the six months
ended June 30, 1997. Selling, operations and administration expense
attributable to Retail Services increased $5.8 million from $7.4 million (or
28% of Retail Services revenues) for the six months ended June 30, 1996 to
$13.2 million (or 33% of Retail Services revenues) for the six months ended
June 30, 1997. This increase resulted from employment of additional sales,
information services and provisioning personnel to support the Company's
geographical market and product expansion as the Company prepared to offer
local service and expand into new markets. Results for the six months ended
June 30, 1996 reflect only five months of selling, operations and
administration expense attributable to Retail Services. Selling, operations
and administration expense attributable to Carriers' Carrier Services
increased $2.9 million from $.9 million (or 31% of Carriers' Carrier Services
revenues) for the six months ended June 30, 1996 to $3.8 million (or 28% of
Carriers' Carrier Services revenues) for the six months ended June 30, 1997.
Of the $2.9 million increase, $1.8 million was attributable to the acquisition
of Gulf States FiberNet. The remaining $1.1 million of this increase was
attributable to increased costs of administrative personnel employed to
support expansion of the business.
Depreciation and Amortization
Depreciation and amortization expense increased $5.5 million from $2.8
million for the six months ended June 30, 1996 to $8.3 million for the six
months ended June 30, 1997. Retail Services accounted for $.9 million of the
increase, which was primarily related to installation of new central office
equipment. Depreciation and amortization for Carriers' Carrier Services
operations accounted for $4.6 million of the increase and was primarily
related to the acquisition of Gulf States FiberNet.
Interest Expense
Interest expense increased from $2.8 million for the six months ended June
30, 1996 to $7.6 million for the six months ended June 30, 1997. Of this $4.8
million increase, $2.2 million was attributable to the acquisition of Gulf
States FiberNet, $1.8 million was attributable to the Senior Notes, $.5
million was attributable to the DeltaCom Indebtedness, and the balance was
attributable to the acquisition of Georgia Fiber Acquisition.
53
<PAGE>
Income Taxes
The Company is included in the consolidated federal income tax returns of
its parent, ITC Holding, which results in the Company receiving benefits for
certain of its net operating losses. The benefit received as a percentage of
taxable income was 26% and 29% for the six month periods ended June 30, 1997
and 1996, respectively.
EBITDA
EBITDA increased from $4.2 million for the six months ended June 30, 1996 to
$11.1 million for the six months ended June 30, 1997. Carriers' Carrier
Services accounted for $7.1 million of the increase. EBITDA attributable to
Retail Services for the six months ended June 30, 1996 was $3.5 million,
compared to $3.2 million for the six months ended June 30, 1997. EBITDA
attributable to Retail Services decreased from 14% of revenues for the six
months ended June 30, 1996 to 8% for the six months ended June 30, 1997,
primarily due to increased costs associated with the expansion of new sales
offices and the employment of additional support personnel to position this
segment for growth and expansion. The Company expects that EBITDA for Retail
Services will continue to decline through at least 1998 as the Company opens
additional sales offices and prepares to offer local service.
HISTORICAL YEAR ENDED DECEMBER 31, 1995 COMPARED WITH HISTORICAL YEAR ENDED
DECEMBER 31, 1996
Revenues
Revenues increased from $5.8 million in 1995 to $66.5 million in 1996. The
$60.7 million increase was primarily attributable to revenues of $59.9 million
generated by DeltaCom since it was acquired on January 29, 1996. Revenues from
Carriers' Carrier Services increased approximately $800,000 in 1996 (15%),
primarily due to the growth in new SS7 Services and directory assistance
products and growth in demand for Carriers' Carrier Services.
Cost of Services
Cost of services increased from $3.1 million in 1995 to $38.8 million in
1996. DeltaCom's operations accounted for $36.4 million of this increase.
Carriers' Carrier Services accounted for a decrease of $700,000 primarily due
to intersegment eliminations related to its utilization of DeltaCom's network
infrastructure.
Selling, Operations and Administration Expense
Selling, operations and administration expense increased from $1.6 million
in 1995 to $18.9 million in 1996. DeltaCom's operations accounted for $17.1
million of the increase. Carriers' Carrier Services accounted for $200,000 of
the increase.
Depreciation and Amortization
Depreciation and amortization expense increased from $1.3 million in 1995 to
$6.4 million in 1996. Of this $5.1 million increase, $4.8 million was
attributable to DeltaCom, including $1.3 million of intangible amortization on
$54.6 million of intangibles pushed down to the Company. See "--Effects of
Accounting Standards." Carriers' Carrier Services accounted for $300,000 of
the increase as a result of additional capital expenditures made for the
provision of SS7 Services, capital expenditures associated with the Company's
network management systems required to support the various management and
marketing agreements with various utilities, and small electronic overbuilds
on existing network segments.
Other Income (Expense)
Other expense increased from $200,000 in 1995 to $1.4 million in 1996. The
Company's share of Gulf States FiberNet's partnership losses accounted for
$1.3 million of this increase, which was partially offset by a
54
<PAGE>
$100,000 increase in other interest and miscellaneous income. Gulf States
FiberNet began full operations in late 1995 and, accordingly, the effect of a
full year of operations was not reflected until 1996. Gulf States FiberNet
recorded a pretax loss of $4.4 million in 1996, compared to a pretax loss of
$700,000 in 1995. As of December 31, 1995 and 1996, the Company owned 36% of
Gulf States FiberNet and recorded losses of $300,000 and $1.6 million,
respectively, from such interest.
Interest Expense
Interest expense increased from $300,000 in 1995 to $6.2 million in 1996.
The increase was primarily attributable to the increase in the Company's
aggregate indebtedness resulting from the $74.0 million of DeltaCom
Indebtedness. See "--Effects of Accounting Standards." The Company incurred
interest expense of $5.8 million related to such indebtedness in 1996.
EBITDA
EBITDA increased from $800,000 in 1995 to $7.5 million in 1996. DeltaCom
accounted for $6.6 million and Carriers' Carrier Services accounted for
$100,000 of the increase. The increased EBITDA attributable to Carriers'
Carrier Services is a result of an increase in revenues with minimal increases
in associated variable costs.
HISTORICAL YEAR ENDED DECEMBER 31, 1994 COMPARED WITH HISTORICAL YEAR ENDED
DECEMBER 31, 1995
Revenues
Revenues increased from $4.9 million in 1994 to $5.8 million in 1995. The
increase was primarily attributable to additional capacity sales on the
Atlanta-to-Columbus fiber route and the introduction of SS7 Services in early
1995. Revenues from operator services remained stable between years at
approximately $2.5 million.
Cost of Services
Cost of services increased from $2.5 million in 1994 to $3.1 million in
1995, primarily as a result of network costs associated with SS7 Services in
1995 and the network management contract for a large enhanced specialized
mobile radio customer.
Selling, Operations and Administration Expense
Selling, operations and administration expense increased from $900,000 in
1994 to $1.6 million in 1995. The increase principally reflected higher
management and personnel costs resulting from the hiring of additional senior
management and a team of key operations personnel in order to position the
Company for future growth.
Depreciation and Amortization
Depreciation and amortization expense increased from $700,000 in 1994 to
$1.3 million in 1995. The $600,000 increase in depreciation and amortization
resulted from additional depreciation on capital assets related to the
establishment of the network operations center that operates 24 hours a day,
seven days a week, several minor spur routes, the initiation of SS7 Services,
and ongoing capital expenditures for Carriers' Carrier Services.
Other Income (Expense)
Other expense increased from less than $100,000 in 1994 to $200,000 in 1995.
The Company's share of the partnership losses related to Gulf States FiberNet
accounted for this increase. Gulf States FiberNet was in the construction
phase during 1994 and incurred a pretax loss of $300,000 in 1994, compared to
a pretax loss of $700,000 in 1995. As of December 31, 1994 and 1995, the
Company owned 36% of Gulf States FiberNet and recorded equity in partnership
losses of $100,000 and $300,000, respectively. The equity in partnership
losses was partially offset by other miscellaneous income in both years.
55
<PAGE>
EBITDA
EBITDA decreased from $1.3 million in 1994 to $800,000 in 1995. The decrease
in EBITDA primarily reflected increased selling, operations and administration
expense incurred in connection with the hiring of additional senior
management, as discussed above, and additional expense related to the
Company's initiation of SS7 Services.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically generated positive cash flow from operations
from its existing lines of business, but has required equity infusions and
advances from ITC Holding to finance a significant portion of its investing
and financing activities. Cash flow from operations totaled $979,000, $1.4
million and $8.2 million for 1994, 1995 and 1996, respectively, and $9.4
million for the six months ended June 30, 1997. Cash flow from operations
(consisting of net loss adjusted for depreciation, amortization, deferred
income taxes, equity in losses of investee, preacquisition losses,
extraordinary item--loss on extinguishment of debt and other) totaled $1.4
million, $1.5 million and $4.7 million for 1994, 1995 and 1996, respectively,
and $5.7 million for the six months ended June 30, 1997. Changes in working
capital used $443,000 and $42,000 in 1994 and 1995, respectively, and provided
$3.5 million and $3.7 million for 1996 and the six months ended June 30, 1997,
respectively. Such changes were primarily due to an increase in accounts
receivable in 1994 and 1995, and an increase in accrued interest, partially
offset by an increase in accounts receivable during 1996. Such changes were
primarily due to increases in unearned revenue, accrued liabilities and income
tax refunds receivable, offset by increases in accounts receivable for the six
months ended June 30, 1997.
Cash used for investing activities was $10.7 million, $1.5 million and $72.7
million for the years ended December 31, 1994, 1995 and 1996, respectively,
and $11.8 million for the six months ended June 30, 1997. The cash used in
1996 was primarily attributable to the investment of $63.5 million, net of
cash received, in connection with the DeltaCom Acquisition in January 1996.
The Company made capital expenditures of $3.7 million, $1.8 million and $6.2
million for the years ended December 31, 1994, 1995 and 1996, respectively,
and $12.4 million for the six months ended June 30, 1997. Of the $6.2 million
of capital expenditures in 1996, $4.1 million related to Retail Services and
$2.1 million related to Carriers' Carrier Services. In addition, the Company
contributed an additional $2.4 million to Gulf States FiberNet in 1996 to meet
debt service requirements and to fund additional capital requirements of that
business. Of the $12.4 million of capital expenditures for the six months
ended June 30, 1997, $5.7 million related to Carriers' Carrier Services and
$6.7 million related to Retail Services.
Cash provided by financing activities was $10.1 million, $200,000, and $65.1
million for the years ended December 31, 1994, 1995 and 1996, respectively,
and $201.3 million for the six months ended June 30, 1997. Net cash provided
by financing activities for the six months ended June 30, 1997 consisted
primarily of net proceeds of $194.3 million from the sale of the Senior Notes
and $8.2 million of advances received from ITC Holding. For 1996, most of the
cash provided by financing activities was attributable to the DeltaCom
Indebtedness, which was advanced to the Company by ITC Holding from funds
borrowed under a bank facility. See "--Effects of Accounting Standards."
ITC Holding partially financed the DeltaCom Acquisition and the Gulf States
Acquisition with debt, which consists of the following: (i) a $74.0 million
term loan under a bank facility incurred in connection with the DeltaCom
Acquisition and pushed down to the Company (the DeltaCom Indebtedness); (ii) a
$41.6 million Bridge Facility incurred in connection with the Gulf States
Acquisition, which required the refinancing of Gulf States FiberNet's existing
project facility; and (iii) the $10.0 million SCANA Note issued in connection
with the Gulf States Acquisition and assumed by the Company.
Upon consummation of the Reorganization on July 25, 1997, approximately
$62.7 million of the $192.7 million of net proceeds from the sale of the
Senior Notes in the Offering were used to purchase U.S. government securities
that are being held by the Trustee in a pledged account as security for and to
fund the first
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six scheduled interest payments on the Senior Notes and Exchange Notes. The
balance of the net proceeds from the Offering, approximately $131.6 million,
was released to the Company. A portion of the released proceeds was applied on
July 25, 1997 as follows: (i) to repay approximately $48.3 million of
indebtedness to ITC Holding (together with approximately $9.5 million of
accrued interest) associated with the DeltaCom Acquisition and advances used
by the Company for capital expenditures; and (ii) to repay approximately $41.6
million of indebtedness incurred under the Bridge Facility (together with
approximately $.2 million of accrued interest). The Company intends to use the
remaining approximately $32.2 million of such net proceeds (i) to fund market
expansion activities of the Company's telecommunications business, including
development and construction costs of the Company's fiber optic network and
its regional sales offices; and (ii) for additional working capital and other
general corporate purposes, including the funding of cash flow deficits (after
capital expenditures). Pending such uses, the Company has invested such
amounts in U.S. government securities. In connection with the Reorganization,
$31.0 million of the DeltaCom Indebtedness was forgiven by ITC Holding and
contributed to the Company as additional equity.
In January 1995, Gulf States FiberNet entered into an interest rate swap
agreement with a $47.5 million principal amount. The agreement swapped the
applicable three-month LIBOR rate selected under Gulf States FiberNet's
project facility with a fixed rate of 8.25%. As of June 30, 1997, Gulf States
FiberNet would have been required to pay $2,142,916 to terminate the interest
rate swap. Gulf States FiberNet made payments totaling $553,320, $1,261,000
and $540,997 for the years ended December 1995 and 1996 and the six months
ended June 30, 1997, respectively, in connection with this interest rate swap
agreement. Although the related debt (the Bridge Facility) has been repaid,
the Company does not currently intend to terminate this interest rate swap
agreement since the Company plans to draw upon its variable rate Credit
Facility to fund capital expenditures and operating losses in accordance with
its expansion plans. The interest rate swap agreement expires in December
2002.
To achieve its business plan, the Company will need significant financing
for capital expenditure and working capital requirements, including repayment
of indebtedness and operating losses. Expansion of the Company's network,
operations and services will require significant capital expenditures. The
Company currently estimates that its aggregate capital requirements will total
approximately $104 million in 1997 and 1998, of which a total of approximately
$50 million is expected to be incurred in 1997 (including $12.4 million of
capital expenditures made as of June 30, 1997) and approximately $54 million
is expected to be incurred in 1998. The Company expects to make substantial
capital expenditures thereafter. Capital expenditures will be primarily for:
(i) addition of facilities-based local telephone service to its bundle of
integrated telecommunications services, including acquisition and installation
of switches and related equipment, (ii) market expansion, (iii) continued
development and construction of its fiber optic network (including
transmission equipment) and (iv) infrastructure enhancements, principally for
information systems. At June 30, 1997, the Company had entered into agreements
with vendors to purchase approximately $11.5 million of equipment and
services, and, for the six months ended June 30, 1997, had made capital
expenditures of $12.4 million. The actual amount and timing of the Company's
capital requirements may differ materially from the foregoing estimate as a
result of regulatory, technological and competitive developments (including
market developments and new opportunities) in the Company's industry. See
"Risk Factors--Significant Capital Requirements; Uncertainty of Additional
Financing."
In May 1997, Interstate FiberNet, Inc., a wholly owned subsidiary of the
Company, entered into a commitment letter with NationsBank, N.A. for a five-
year term and revolving credit facility of up to $100 million, to be used for
working capital and other corporate purposes, including capital expenditures
and permitted acquisitions. The Company expects to enter into the Credit
Facility in September 1997, but there can be no assurance that the Credit
Facility will be entered into on this schedule or at all. The Credit Facility
is expected to consist of a $50 million multi-draw term facility and a $50
millions revolving credit facility, and will contain restrictions on the
Company and its subsidiaries and require the Company to comply with certain
financial tests and to maintain certain financial ratios. The Commitment
Letter contemplates that the Credit Facility will be guaranteed by the
Company, DeltaCom and Gulf States Transmission Systems, Inc. and will be
secured by a first priority lien on all current and future assets of the
Company's subsidiaries and a first priority
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pledge of the stock of the Company's subsidiaries. See "Risk Factors--High
Leverage; Ability to Service Debt; Restructure Covenants" and "Description of
Certain Indebtedness--Credit Facility."
The Company will be dependent on additional capital to fund its growth, as
well as to fund continued operating losses and working capital. The Company
believes that the net proceeds from the Senior Notes, together with cash flow
from operations and borrowings expected under the Credit Facility, will
provide sufficient funds to enable the Company to expand its business as
currently planned through the maturity of the Credit Facility in 2002, after
which the Company will need to seek additional financing to fund capital
expenditures and working capital. Because the Credit Facility is expected to
mature in 2002, the Company may not have a ready source of liquidity after
2002. In the event that the Company's plans or assumptions change or prove to
be inaccurate, the foregoing sources of funds may prove to be insufficient to
fund the Company's currently planned growth and operations. In addition, if
the Company successfully completes any acquisitions, the Company may be
required to seek additional capital sooner than currently anticipated.
Additional sources may include equity and debt financings and other financing
arrangements, such as vendor financing. There can be no assurance that the
Company will be able to generate sufficient cash flow from operations or that
additional financing arrangements will be available, or if available, that
they can be concluded on terms acceptable to the Company. Failure to generate
or obtain sufficient funds would result in delay or abandonment of some or all
of the Company's development and expansion plans, which could have a material
adverse effect on the Company's ability to service its debt, including the
Senior Notes and the Exchange Notes.
At June 30, 1997, on a pro forma basis, giving effect to the Reorganization,
including the forgiveness of, or repayment in full of certain indebtedness
with a portion of the net proceeds from the Offering, the Company would have
had $214.4 million of indebtedness and its stockholder's equity would have
been $64.1 million. On a pro forma basis, the Company's earnings would have
been insufficient to cover its fixed charges for the year ended December 31,
1996, and the six months ended June 30, 1997 by $18.2 million and $6.6
million, respectively, and its EBITDA less capital expenditures and interest
expense would have been negative $14.8 million and negative $13.0 million,
respectively.
Although the Company's liquidity has improved, the Company's level of
indebtedness and debt service obligations has significantly increased as a
result of the Offering. The successful implementation of the Company's
strategy, including expansion of its network and obtaining and retaining a
significant number of customers, and significant and sustained growth in the
Company's cash flow are necessary for the Company to be able to meet its debt
service requirements. There can be no assurance that the Company will
successfully implement its strategy or that the Company will be able to
generate sufficient cash flow from operating activities to improve its
earnings before fixed charges, or to meet its debt service obligations and
working capital requirements. The ability of the Company to meet its
obligations will be dependent upon the future performance of the Company,
which will be subject to prevailing economic conditions and to financial,
business and other factors. See "Risk Factors--Significant Capital
Requirements; Uncertainty of Additional Financing" and --High Leverage;
Ability to Service Debt; Restrictive Covenants," "Description of Certain
Indebtedness" and "Description of the Exchange Notes."
EFFECTS OF ACCOUNTING STANDARDS
SFAS No. 121 and SFAS No. 123. Statement of Financial Accounting Standards
("SFAS") No. 121, Accounting for the Impairment of Long-lived Assets and for
Long-lived Assets to Be Disposed Of, issued by the Financial Accounting
Standards Board, requires the Company to review for impairment, and
potentially write down, the carrying values of long-lived assets and certain
identifiable intangibles (including goodwill) to be held and used by the
Company whenever events or changes in circumstances indicate that the carrying
amount of any such asset may not be recoverable. The Company adopted SFAS No.
121, effective January 1, 1996, with no material impact on the combined
financial statements.
SFAS No. 123, Accounting for Stock-Based Compensation, establishes a fair
value based method for financial accounting and reporting stock-based employee
compensation plans. Companies may elect to adopt the
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measurement criteria of SFAS No. 123 for accounting purposes, thereby
recognizing compensation expense in results of operations on a prospective
basis, or to disclose the pro forma effects of the new measurement criteria.
The Company has elected to disclose the pro forma effects of the new
measurement criteria. See note 9 to the combined financial statements.
"Push Down" of Assets and Liabilities Related to the Acquisitions. ITC
Holding financed the cash purchase price for the DeltaCom Acquisition of
approximately $65.4 million and related debt refinancing of approximately $8.6
million principally with debt. The DeltaCom Acquisition was accounted for
under the purchase method of accounting. In accordance with applicable
accounting requirements of the Securities and Exchange Commission, purchase
transactions that result in one entity becoming substantially wholly owned by
the acquiror establish a new basis of accounting for the purchased assets and
liabilities. Thus, the purchase price for the DeltaCom Acquisition has been
allocated to the underlying assets purchased and liabilities assumed based on
their estimated fair values at January 29, 1996, the acquisition date. Because
the DeltaCom Acquisition was recorded as a purchase, generally accepted
accounting principles require that the purchase price paid and the debt
incurred by ITC Holding for the DeltaCom Acquisition (and the related assets)
be "pushed down" to establish a new accounting basis in DeltaCom's financial
statements so that the basis of accounting for the purchased assets and
liabilities is the same between ITC Holding and DeltaCom. This accounting
treatment is also required because the Company used a portion of the proceeds
of the Offering to repay a significant portion of the debt incurred by ITC
Holding to finance the DeltaCom Acquisition. Similarly, the purchase price and
debt associated with the Gulf States Acquisition was also "pushed down" to the
financial statements of Interstate FiberNet and Gulf States Transmission.
INFLATION
The Company does not believe that inflation has had a significant impact on
the Company's combined operations.
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BUSINESS
The Company provides retail long distance services to mid-sized and major
regional businesses in the southern United States and is a leading regional
provider of Carriers' Carrier Services. The Company intends to become a
leading regional provider of integrated telecommunications services to mid-
sized and major regional businesses in the southern United States by offering
such customers a broad range of telecommunications services, including local
exchange and long distance data and voice, Internet and operator services, and
the sale and servicing of customer premise equipment, in a single package
tailored to the business customer's specific needs. In 1996, the Company had
pro forma revenues of approximately $85.4 million, EBITDA of approximately
$18.9 million and net loss from continuing operations of approximately $12.1
million. For the six months ended June 30, 1997, the Company had pro forma
revenues of approximately $54.3 million, EBITDA of approximately $11.7 million
and net loss from continuing operations of approximately $4.5 million.
The Company provides Carriers' Carrier Services to other telecommunications
carriers, including AT&T, MCI, Sprint, WorldCom, Cable & Wireless, LCI,
Frontier and IXC. The Company's fiber optic network reaches over 60 POPs in
ten southern states (Alabama, Arkansas, Florida, Georgia, Louisiana,
Mississippi, North Carolina, South Carolina, Tennessee and Texas) and extends
approximately 5,400 route miles, of which approximately 2,500 miles are
Company-owned and approximately 2,900 miles are owned and operated by three
public utilities (Duke Power Company, Florida Power & Light Company and
Entergy Technology Company) and managed and marketed by the Company. The
Company expects to add approximately 700 route miles to its fiber network by
the end of 1997 and add approximately 100 owned and operated route miles in
early 1998 through long-term dark fiber leases. In 1996, the Company's
Carriers' Carrier Services business generated pro forma revenues of
approximately $20.2 million, EBITDA of approximately $11.5 million and net
loss from continuing operations of approximately $1.8 million. For the six
months ended June 30, 1997, the Company's Carriers' Carrier Services business
generated pro forma revenues of approximately $14.3 million, EBITDA of
approximately $8.5 million and net income from continuing operations of less
than $0.1 million. As of June 30, 1997, on a pro forma basis, the Company had
remaining future long-term contract commitments totaling approximately $75.8
million. These contracts expire on various dates through 2006 and are expected
to generate approximately $56.0 million in revenues to the Company through
2001, of which approximately $14.5 million are expected to be realized in
1998.
The Company currently provides a variety of Retail Services, including
retail long distance services such as traditional switched and dedicated long
distance, 800/888 calling, calling card and operator services, ATM and frame
relay, high capacity broadband private line services, as well as Internet,
Intranet and Web page hosting and development services, and customer premise
equipment installation and repair. As of June 30, 1997, the Company provided
services to over 6,600 business customers. The Company currently offers Retail
Services, other than local exchange services (which are provided in two
markets), in 12 metropolitan areas in Alabama, Florida, Georgia, Louisiana,
North Carolina and South Carolina and intends to provide a full range of
Retail Services (including local exchange services) in approximately 15
additional metropolitan areas throughout the southern United States over the
next five years. In 1996, the Retail Services business generated pro forma
revenues of approximately $65.2 million, EBITDA of approximately $7.4 million
and net loss from continuing operations of approximately $3.7 million. For the
six months ended June 30, 1997, the Retail Services business generated pro
forma revenues of approximately $39.9 million, EBITDA of approximately $3.2
million and net loss from continuing operations of approximately $2.2 million.
In connection with offering local exchange services, the Company has entered
into the Interconnection Agreement with BellSouth to (i) resell BellSouth's
local exchange services and (ii) interconnect the Company's network with
BellSouth's network for the purpose of gaining immediate access to all of
BellSouth's unbundled network elements. This agreement will allow the Company
to enter new markets with minimal capital expenditures and to offer local
exchange service to its current customer base. The Interconnection Agreement
currently allows the Company to provide local service on a resale basis or by
purchasing all unbundled network elements required to provide local service on
a facilities basis, without using Company-owned facilities. The terms of the
Interconnection Agreement, including interim pricing terms agreed to by the
Company and
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BellSouth, have been approved by state regulatory authorities in most states,
although they remain subject to review and modification by such authorities.
In addition, the Interconnection Agreement does not resolve all operational
issues, particularly those relating to the collocation of the Company's
equipment with that of BellSouth. The Company and BellSouth are continuing to
negotiate to resolve such issues. The Company expects that the Interconnection
Agreement will provide a foundation for it to provide local service on a
reasonable commercial basis, but there can be no assurance of this and
important issues remain unsettled as a result of legal and regulatory
developments and related matters. The Interconnection Agreement expires in
1999, and there can be no assurance that the Company will be able to renew it
under favorable terms, or at all.
ITC^DeltaCom was incorporated in Delaware. The Company's principal executive
offices are located at 206 West Ninth Street, West Point, Georgia 31833, and
its telephone number is (706) 645-8990.
INDUSTRY OVERVIEW
The long distance and local telecommunications markets are currently
undergoing substantial changes, including fundamental changes resulting from
the February 8, 1996 enactment of the Telecommunications Act, and the Company
believes that it is well positioned to take advantage of these developments.
Long Distance Services. Until 1984, AT&T largely monopolized local and long
distance telephone services in the United States. Technological developments
gradually enabled others to compete with AT&T in the long distance market. In
1984, largely as the result of a court decree, AT&T was required to divest its
local telephone systems but was permitted to retain its long distance
operations. Since 1984, competition in the long distance market has increased,
service levels have improved, product offerings have increased and prices for
long distance services have generally declined, all of which has resulted in
increased consumer demand and significant market growth for long distance
services. The increase in competition among long distance providers has also
resulted in a growing trend toward industry consolidation.
Local Services. The market for local exchange services consists of a number
of distinct service components. These service components are defined by
specific regulatory tariff classifications including: (i) local network
services, which generally include basic dial tone, enhanced calling features
and data services (dedicated point-to-point and frame relay service); (ii)
network access services, which consist of access provided by local exchange
carriers to long distance network carriers; (iii) short-haul long distance
network services, which include intraLATA long distance calls; and (iv) other
varied services, including the publication of "white page" and "yellow page"
telephone directories. Industry sources have estimated that the 1995 aggregate
revenues of all local exchange carriers approximated $95 billion. Until
recently, there was virtually no competition in the local exchange markets.
Since 1984, several factors have served to promote competition in the local
exchange market, including: (i) rapidly growing customer demand for an
alternative to the local exchange carrier monopoly, spurred partly by the
development of competitive activities in the long distance market; (ii)
advances in the technology for transmission of data and video, which require
significant capacity and reliability levels; (iii) the development of fiber
optics and digital electronic technology, which reduced network construction
costs while increasing transmission speeds, capacity and reliability as
compared to copper-based networks; (iv) the significant access charges
interexchange carriers are required to pay to local exchange carriers to
access the local exchange carriers' networks; and (v) a willingness on the
part of legislators to enact and regulators to enforce legislation and
regulations permitting and promoting competition in the local exchange market.
In particular, the Telecommunications Act requires all local exchange carriers
to "unbundle" their local network offerings and allow other providers of
telecommunications services to interconnect with their facilities and
equipment. Most significantly, the incumbent local exchange carriers will be
required to complete local calls originated by the Company's customers and
switched by the Company and to deliver inbound local calls to the Company for
termination to its customers, assuring customers of unimpaired local calling
ability. The Company expects to obtain access to incumbent carrier local
"loop" facilities (the transmission lines connecting customers' premises to
the public telephone network) on an unbundled basis at reasonable rates. In
addition, local exchange carriers
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are obligated to provide local number portability and dialing parity upon
request and make their local services available for resale by competitors.
Local exchange carriers also are required to allow competitors non-
discriminatory access to local exchange carrier pole attachments, conduit
space and other rights-of-way. Moreover, states may not erect "barriers to
entry" of local competition, although they may regulate such competition. The
Company believes that, as a result of continued regulatory and technological
changes and competitive trends, competitive local telecommunications companies
have substantial opportunities for growth.
BUSINESS STRATEGY
The Company's objectives are to maintain its leadership position in the
provision of Carriers' Carrier Services and to become a leading provider of
Retail Services in the southern United States. The Company intends to increase
its market share in existing markets and expand into new markets by: (i)
aggressively expanding its customer base and increasing its telecommunications
services, including reselling services and facilities of the incumbent local
exchange carriers; (ii) leveraging the Company's extensive network in its
Retail Services and Carriers' Carrier Services businesses; (iii) concurrently
constructing or obtaining access to additional network infrastructure to serve
its customers more cost-effectively; and (iv) expanding its regional network
of sales offices. The principal elements of the Company's business strategy
include the following:
Providing Integrated Telecommunications Services to Existing Base of Mid-
sized and Major Regional Business Customers. By providing additional
telecommunications services such as local telephone service to its existing,
well-established base of long distance customers, the Company expects to be
able to increase revenues at relatively low incremental cost. The Company
believes that bundling a variety of telecommunications services and presenting
customers with one fully integrated monthly billing statement for all of those
services will allow it to penetrate its target markets rapidly and build
customer loyalty. The Company believes that there is substantial demand in its
target markets among mid-sized and major regional business customers for an
integrated package of telecommunications services that meets all of their
telecommunications needs.
Leveraging Its Extensive Fiber Optic Network. The Company intends to
leverage its extensive fiber optic network, which currently reaches over 60
POPs, by (i) continuing to provide switched and transport services to other
communications carriers throughout its region to enable such carriers to
diversify their routes and expand their networks; (ii) targeting customers
that need to transmit large amounts of data within the Company's service
region, such as banks and local and state governments; and (iii) offering
local exchange services to its business customers, which began on a limited
basis in the second half of 1997, as part of its integrated package of
telecommunications services. The Company intends initially to provide local
exchange services by reselling the services of incumbent local exchange
carriers and, in some established markets, using its own local switching
facilities. Over time, the Company expects to provide local services primarily
using the Company's own switching facilities and existing regional fiber optic
network, supplemented by unbundled facilities of incumbent local exchange
carriers or other competitive local exchange carriers. The configuration of
the Company's network enables the Company to expand its network by installing
additional remote local switches, which operate in conjunction with the
Company's DMS-500 switches, to provide facilities-based local services.
Because remote local switches are less expensive to purchase and install than
DMS-500 switches, and can be installed more quickly than DMS-500 switches, the
Company believes that it will be able to enter new markets at less expense
than many of its competitors. At present, the Company does not plan to
construct intra-city local loop facilities.
Focusing on the Southern United States. The Company intends to continue to
focus on the southern United States in order to leverage its extensive
telecommunications network in the region. The Company believes that its
regional focus will enable it to take advantage of economies of scale in
management, network operations and sales and marketing. The regional
concentration of the Company's network also provides an opportunity for
improved margins because a high portion of its customers' telecommunications
traffic originates and terminates within the region. The Company also believes
that its regional focus will enable it to build on its long-standing customer
and business relationships in the region.
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Building Market Share through Personalized Customer Service. The Company
believes that the key to revenue growth in its target markets is capturing and
retaining customers by emphasizing marketing, sales and customer service.
Management believes that customers prefer one company to be accountable for
their telecommunications services, and that a consultative, face-to-face sales
and service strategy is the most effective method of acquiring and maintaining
a high quality customer base. The Company seeks to obtain long-term
commitments from its business customers by responding rapidly and creatively
to their telecommunications needs. The Company currently operates 14 sales
offices in Alabama, Florida, Georgia, Louisiana, North Carolina and South
Carolina. Each sales office is staffed by personnel capable of marketing all
of the Company's products and providing comprehensive support to the Company's
customers.
Expanding Its Fiber Optic Network and Switching Facilities. The Company
expects to expand its fiber optic telecommunications network and switching
facilities to include additional markets within the southern United States.
The Company currently owns and operates approximately 2,500 route miles of
fiber optic network extending from Georgia to Texas, with an additional 700
owned and operated route miles expected to be added by the end of 1997 and
approximately 100 owned and operated route mile expected to be added in early
1998. The Company also markets and manages capacity on 2,900 additional
network route miles through its strategic relationships with public utilities.
In addition, the Company has a buy-sell agreement with Carolinas Fibernet,
LLC, which manages fiber optic facilities in North Carolina and South
Carolina. This agreement enables the parties to buy and sell capacity on each
other's networks and allows the Company to provide customers with access to
POPs throughout those states. The Company believes that, by continuing to
combine its owned network with the networks of public utilities and by adding
switching facilities throughout its network, it will be able to achieve
capital efficiencies and rapidly expand its network in a cost-effective
manner.
Leveraging Proven Management Team. The Company's management team consists of
experienced telecommunications managers who in the past have successfully
implemented a customer-focused long distance telecommunications strategy in
the southern United States. Members of the team include Andrew Walker, Chief
Executive Officer of the Company, Foster McDonald, President of the Company,
and Douglas Shumate, Chief Financial Officer of the Company. ITC Holding is
the Company's sole stockholder. The Company anticipates that ITC Holding's
experience and contacts in the telecommunications industry will enhance the
Company's development. See "Risk Factors--Control by ITC Holding Company;
Conflicts of Interest" and "Management."
SERVICES AND FACILITIES
Services
The Company currently provides two basic services: (i) Retail Services and
(ii) Carriers' Carrier Services.
Retail Services. Retail Services involve the provision of voice, data or
video telecommunications services to end users or resellers. The Company
currently provides several types of Retail Services, including basic long
distance services (switched, dedicated, and calling card), dedicated Internet
access, data network solutions (frame relay, ATM, point-to-point), and the
sale and installation of customer premise equipment and, in two markets, local
exchange services. The Company intends to provide additional types of Retail
Services in the future and expand the markets in which it offers local
services as part of a bundled "one-stop" integrated telecommunications service
which will offer customers a wide range of switch-based valued-added services.
The Company's customer-focused software and network architecture will permit
the Company to present its customers with one fully integrated monthly billing
statement for the entire package of Retail Services.
Set forth below are brief descriptions of the Company's Retail Services:
LOCAL SERVICES. The Company intends initially to provide local exchange
services by reselling the services of incumbent local exchange carriers
and, in some established markets, using its own local switching facilities.
Over time, the Company expects to provide local services primarily using
the Company's own switching facilities and existing regional fiber optic
network, supplemented by unbundled
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facilities of incumbent local exchange carriers or other competitive local
exchange carriers. In July 1997, the Company began offering local services
in Birmingham and Montgomery, Alabama. The Company expects to offer local
services as part of its Retail Services in six to nine markets (including
Birmingham and Montgomery) by the end of 1997.
In connection with offering local services, the Company has entered into
the Interconnection Agreement with BellSouth to (i) resell BellSouth's
local exchange services and (ii) interconnect the Company's network with
BellSouth's network for the purpose of immediately gaining access to the
unbundled network elements necessary to provide local exchange services.
The Interconnection Agreement contains "most favored nation" provisions
which grant the Company the right to obtain the benefit of any arrangements
entered into during the term of the Interconnection Agreement between
BellSouth and any other carrier that materially differ from the rates,
terms or conditions of the Interconnection Agreement. Under the
Interconnection Agreement, each party may resell one or more unbundled
network elements of the other party at agreed upon prices set forth in the
Interconnection Agreement. In addition, each party is required to pay for
the interconnection trunks needed to terminate traffic into the other
party's local network, with the costs of certain two-way interconnection
trunks and ports to be shared by the Company and BellSouth.
The Interconnection Agreement has a term of two years beginning July 1,
1997, and requires the parties to negotiate renewal terms by July 1, 1998
for interconnection commencing July 1, 1999. In the event the parties fail
to agree on such terms, they have agreed to operate under the existing
terms, pending a determination of new terms by a state commission.
LONG DISTANCE. The Company offers a full range of retail long distance
services, including traditional switched and dedicated long distance,
800/888 calling, international, calling card and operator services.
DATA SERVICES. The Company provides high quality data services to its
customers primarily using frame relay switches distributed strategically
throughout the Company's network, enabling customers to use a single
network connection to communicate with multiple sites throughout the
Company's fiber optic network. The Company currently provides ATM services
on a resale basis. Beginning in late 1997 or early 1998, the Company
intends to offer ATM services on its own network, providing data services
to customers that need to transmit large amounts of data within the
Company's service region, such as banks and local and state governments.
The Company will continue to seek, through strategic business relationships
with other providers, to interconnect its fiber optic network with the
fiber optic networks of other companies. The Company anticipates increased
demand for data services in the future, and expects that in the future a
larger percentage of its revenues will be derived from the sale of
dedicated data services.
INTERNET ACCESS, INTRANET SERVICES AND WEB DEVELOPMENT. Since its
acquisition in 1996 of substantially all of the assets of ViperNet, an
Internet access provider and Web page developer for business customers, the
Company has provided dedicated (frame relay) Internet access and Intranet
services, electronic mail, Web page design and Web hosting services. The
Company expects that mid-sized and larger businesses will require faster
Internet access and larger bandwidth in the future, and intends to offer
products that will meet that demand. The Company refers customers
requesting non-dedicated Internet access to MindSpring Enterprises, Inc.
("MindSpring"), an Internet service provider in which ITC Holding has a
substantial equity interest, and receives a fee per referred customer.
CUSTOMER PREMISE EQUIPMENT. The Company sells and installs customer
premise equipment such as telephones, office switchboard systems and, to a
lesser extent, private branch exchanges (PBX) for customers in the
Huntsville, Birmingham, Dothan and Montgomery, Alabama markets. The Company
intends to offer customer premise equipment sales and installation in
additional markets in the future, with the goals of (i) enhancing and
supporting the Company's sale of local and long distance services and
(ii) enhancing customer retention. The Company plans to form relationships
with local customer premise equipment installation companies in all of its
markets for the purpose of selling and installing customer premise
equipment not otherwise provided by the Company.
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Carriers' Carrier Services. The Company's Carriers' Carrier Services are
used by customers, such as major telecommunications carriers and non-
facilities based carriers that have switches but do not own transmission
facilities, to transport their already-switched traffic between LATAs. Calls
being transmitted over a long-haul circuit for a customer are generally routed
by the customer through a switch to a receiving terminal in the Company's
network. The Company transmits the signals over a long-haul circuit to the
terminal where the signals are to exit the Company's network. The signals are
then routed by the customer through another switch and to the call recipient
through a local exchange carrier. The Company provides DS-1, DS-3 and OC-N
services. OC-N services are used by the Company's customers for very high
capacity inter-city connectivity and specialized high speed data networking.
The interface between the Company's network and the customer's facilities is
by either local exchange carrier or a direct connection between the Company's
network and the facilities of the customer. The Company typically bills the
customers a fixed monthly rate depending on the capacity and length of the
circuit, regardless of the amount the circuit is actually used.
Facilities
The Company owns or manages approximately 5,400 miles of a high quality
fiber optic network which covers portions of ten states in the southern United
States and extends to over 60 POPs. These POPs are located in almost all major
population centers in the areas covered by the fiber optic network and a
significant number of smaller cities where the Company's only competitor is
the incumbent local exchange carrier.
The Company owns approximately 2,500 miles of its fiber optic network, which
the Company has built or acquired since 1992. In addition, the Company has
strategic relationships with three public utilities, Duke Power Company,
Florida Power & Light Company and Entergy Technology Company, pursuant to
which the Company markets, sells and manages capacity on approximately 2,900
route miles of network owned and operated by the utilities.
In addition, the Company is able to purchase network capacity to certain
cities not covered by the Company's owned and managed network in North
Carolina and South Carolina pursuant to a buy-sell agreement with Carolinas
Fibernet, LLC, which manages fiber optic facilities in North Carolina and
South Carolina. This agreement enables the parties to buy and sell capacity on
each other's networks at pre-established prices which are generally favorable
to the prices for such capacity available in the open market. Under this
agreement, neither party is responsible for network maintenance charges
relating to the other party's network.
The Company expects to add approximately 700 owned and operated route miles
to its fiber network by the end of 1997 and add approximately 100 owned and
operated route miles in early 1998 through long-term dark fiber leases. In
addition, as part of its strategy, the Company intends to continue to evaluate
the potential expansion of its network through a combination of new
construction, long-term dark fiber leases and fiber swap transactions,
depending on the extent of capital required over the economic life of the
fiber assets to be deployed.
The Company's decision to further expand its fiber optic network will be
based on various factors, including: (i) the number of its customers in a
market; (ii) the anticipated operating cost savings associated with such
construction; and (iii) any strategic relationships with owners of existing
infrastructure (e.g., utilities and cable operators). Through its strategic
relationships with public utility companies, the Company believes that it will
be able to achieve capital efficiencies in constructing and expanding its
fiber optic network in a rapid and cost-effective manner. The Company also
believes that its fiber optic network, in combination with its personalized
approach to customer service, will create an attractive customer-focused
platform for the provision of local, long distance and enhanced services.
The Company has implemented electronic redundancy throughout its network,
which enables traffic to be rerouted to another fiber in the same fiber sheath
in the event of a partial fiber cut or electronic failure. Approximately 40%
of the Company's owned and operated fiber optic network is also protected by
geographically diverse routing, a network design (also called a "self healing
ring") which enables traffic to be rerouted to an entirely different fiber
optic cable (assuming capacity is available) in the event of a total cable
cut.
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The Company is continuing to increase the geographic diversity of its fiber
optic network, and expects to have a substantial portion of its network
protected in this manner by the end of 1997.
The Company's switching facilities currently consist of Nortel DMS 500
switches in Birmingham, Alabama and Columbia, South Carolina and a Nortel DMS
250 switch in Arab, Alabama. The Arab switch is capable of handling long
distance switching and the Birmingham and Columbia DMS 500 switches are
capable of handling both local and long distance switching. These
installations enable the Company to market its Retail Services, including
local services, on a switch-based facilities basis in, among other markets,
Huntsville, Birmingham and Montgomery, Alabama; Greenville, Columbia and
Charleston, South Carolina and Atlanta, Georgia. The Company intends to
strategically place additional switches along its fiber network over the next
five years. The Company also intends to deploy a significant number of Nortel
Access Nodes in the majority of the markets which the Company intends to
serve. The additional switches and nodes will allow the Company to perform
local and long distance switching in its markets on a host/remote type
relationship to the applicable DMS 500 switch. The Nortel Access Nodes will be
connected to the Company's DMS 500 switching platform, utilizing the Company's
fiber network wherever possible. This networking design, together with the
Interconnection Agreement, will enable the Company to be a facilities-based
provider of local and long distance services in all of the markets that it
intends to enter. For those markets in which the Company intends to resell the
services of incumbent local exchange carriers, the Company's platform will be
BellSouth's Centrex product, known as MultiServ, which provides full feature
functionality, such as caller identification, call waiting, remote call
forwarding, call blocking, anonymous call rejection and conference calling.
The Company's data network currently consists of six Cascade 9000 frame
relay switches located in Atlanta and West Point, Georgia; Birmingham,
Montgomery and Arab, Alabama; and Columbia, South Carolina. The Company's data
network connects with BellSouth's and Intermedia Communications' frame relay
networks to provide nationwide connectivity for the Company's customers. The
data network currently serves over 105 customers connected to approximately
560 customer locations. The Company's Cascade frame relay switches have the
capability to provide ATM connectivity, and the Company has one ATM connection
to American Communication Services, Inc. for the Internet. The Company intends
to strategically locate additional frame relay and ATM switch sites over the
next five years, with approximately eight to ten frame relay switches being
added in 1997. These frame relay and ATM switches will be co-located with the
Company's DMS-500 switches at strategic network facility locations, and will
create a data backbone which will support the Company's data services.
SALES AND MARKETING
Retail Services
The Company focuses its sales efforts on mid-sized and major regional
businesses in the southern United States. The Company believes that it can
effectively compete for business customers based upon service, product
diversity, price and reliability. The Company's sales force, composed of
direct sales personnel, technical consultants and technicians, markets the
Company's long distance and local communications services. The Company's
management believes that high quality employee training is a prerequisite for
superior customer service, and as a result each member of the Company's sales
force is required to complete the Company's intensive training program. The
Company's marketing strategy is built upon the belief that customers prefer to
hold one company accountable for all of their telecommunications services.
Each sales office provides technical assistance for its voice, data, Internet
and customer premise equipment as required. Customers are assured a single
point of contact, 24 hours a day, seven days a week.
Marketing to mid-sized and major regional businesses is currently conducted
by over 70 direct sales personnel (and over 120 other field personnel) located
in 14 sales offices in the southern United States. In the future, the Company
expects to significantly expand its direct sales force and open sales offices
in additional major and secondary population centers in the southern United
States. The Company's sales personnel make direct calls to prospective and
existing business customers, conduct analyses of business customers' usage
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histories and service needs, and demonstrate how the Company's service package
will improve a customer's communications capabilities and costs. Sales
personnel locate potential business customers by several methods, including
customer referral, market research, telemarketing and other networking
alliances such as endorsement agreements with trade associations and local
chambers of commerce. The Company's sales personnel work closely with the
Company's network engineers and information systems consultants to design new
service products and applications. The Company's sales offices are also
primarily responsible for coordinating service and customer premise equipment
installation activities. Technicians survey customers' premises to assess
power and space requirements, and coordinate delivery, installation and
testing of equipment.
A primary element of the Company's Retail Services marketing strategy is to
enter into contracts with its customers. Those agreements generally provide
for payment in arrears based on minutes of use for switched services and in
advance for private line services. The agreements generally also provide that
the customer may terminate the affected service without penalty in the event
of substantial and prolonged outages arising from causes within the Company's
control, and for certain other defined causes. To date, no customers have been
terminated under these provisions. Generally, the agreements provide that the
customer must utilize at least a minimum dollar amount (measured by dollars or
minutes of use) of switched long distance services per month for the term of
the agreement.
In addition, the Company markets its business communication services through
advertisements, event sponsorships, trade journals, direct mail and trade
forums. Because the Company intends to distinguish its retail products largely
on the convenience of its single communications bundle and the benefits of the
Company's comprehensive, individualized and innovative customer support, the
Company believes that advertising will play a larger role in its marketing
strategy than it has in the past.
Carriers' Carrier Services
The Company has long-haul circuit contracts with major long distance
carriers, including AT&T, MCI, Sprint, WorldCom, Cable & Wireless, LCI,
Frontier and IXC. As of June 30, 1997, on a pro forma basis, the Company had
remaining future long term contract commitments totaling approximately $75.8
million. These contracts expire on various dates through 2006 and are expected
to generate approximately $56.0 million in revenues to the Company through
2001, of which $14.5 million are expected to be realized in 1998. The Company
also provides long-haul transmission to customers after contract expiration on
a month-to-month basis. The Company's long-haul contracts provide for fixed
monthly payments, generally in advance. Although sales volumes from particular
customers vary from year to year, the Company has historically enjoyed high
customer retention and circuit renewal rates.
The Company believes that it can continue to compete effectively in the
wholesale, carrier-to-carrier market on the basis of price, reliability,
state-of-the-art technology, route diversity, ease of ordering and customer
service. The Company believes that demand for its Carriers' Carrier Services
will increase as the incumbent local exchange carriers begin competing in the
long distance market.
COMPETITION
The telecommunications industry is highly competitive. The Company competes
primarily on the basis of price, availability, transmission quality,
reliability, customer service and variety of product offerings. The ability of
the Company to compete effectively will depend on its ability to maintain high
quality services at prices generally equal to or below those charged by its
competitors. In particular, price competition in the retail and carrier's
carrier long distance markets has generally been intense and is expected to
increase. Many of the Company's competitors (such as AT&T, MCI, Sprint and
WorldCom on an interexchange basis and BellSouth on an intraLATA basis) have
substantially greater financial, personnel, technical, marketing and other
resources, larger numbers of established customers and more prominent name
recognition than the Company and utilize more extensive transmission networks
than the Company. In addition, IXC and Qwest Communications International Inc.
are constructing nationwide fiber optic systems, including routes through
portions of the
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southern United States. The Company will also increasingly face competition in
the long distance market from local exchange carriers, switchless resellers
and satellite carriers and may eventually compete with public utilities and
cable companies. In particular, Regional Bell Operating Companies such as
BellSouth are now allowed to provide interLATA long distance services outside
their home regions, as well as interLATA mobile services within their regions.
They will be allowed to provide interLATA long distance services within their
regions after meeting certain requirements of the Telecommunications Act
intended to foster opportunities for local telephone competition. The Regional
Bell Operating Companies already have extensive fiber optic cable, switching,
and other network facilities in their respective regions that can be used for
their long distance services. BellSouth and other Regional Bell Operating
Companies are already beginning to take steps toward obtaining approval to
provide in-region long distance services. Although the FCC has not approved
the first two of such applications to come before it, there can be no
assurance that such approvals will be delayed until local competition is
established. In addition, other new competitors may build additional fiber
capacity in the geographic areas served by the Company.
The Company's principal competitor for local exchange services will be the
incumbent local exchange carrier in the particular market, including BellSouth
in virtually all of the Company's initial market areas. The incumbent local
exchange carriers will enjoy substantial competitive advantages arising from
their historical monopoly position in the local telephone market, including
their preexisting customer relationship with all or virtually all end users.
Furthermore, the Company will be highly dependent on the competing incumbent
local exchange carrier for local network facilities and wholesale services
required in order for the Company to assemble its own local retail products.
The Company will also face competition from competitive local exchange
carriers, some of whom have already established local operations in the
Company's target markets. See "Risk Factors--Dependence on Incumbent Local
Exchange Carriers."
Large long distance carriers, such as AT&T, MCI and Sprint, have begun to
offer local services together with their long distance telecommunications
services in certain markets, and are expected to expand that activity as
opportunities created by the Telecommunications Act develop. In addition,
incumbent local exchange carriers are expected to compete in each other's
markets in some cases. For example, BellSouth has recently announced plans to
provide local services within its geographic region in competition with
independent telephone companies. Wireless telecommunications providers may
develop into effective substitutes for wireline local telephone service. For
example, AT&T recently announced plans to offer local services using a new
wireless technology. AT&T's proposed wireless system would link residential
and business telephones via radio waves to the AT&T network. If successful,
this new service could further enhance AT&T's ability to market, on a
nationwide basis, "one-stop" telecommunications services. The Company also
competes with numerous direct marketers and telemarketers and equipment
vendors and installers with respect to certain portions of its business.
A continuing trend toward consolidation, mergers, acquisitions and strategic
alliances in the telecommunications industry could also increase the level of
competition faced by the Company or the Company's carrier customers. For
example, in December 1996, WorldCom, a national long distance carrier,
acquired MFS Communications Company, Inc., one of the largest competitive
local exchange carriers, and, in November 1996, British Telecommunications plc
announced its agreement to acquire MCI. In March 1997, BellSouth and IBM
announced an alliance to provide Internet and Intranet services to businesses
in the South. The telecommunications market is very dynamic, and additional
competitive changes are likely in the future.
REGULATION
Overview. The Company's services are subject to federal, state and local
regulation. The Company, through its wholly owned subsidiaries, holds various
federal and state regulatory authorizations. The FCC exercises jurisdiction
over telecommunications common carriers to the extent they provide, originate
or terminate interstate or international communications. The FCC also
establishes rules and has other authority over certain issues related to local
telephone competition. State regulatory commissions retain jurisdiction over
telecommunications carriers to the extent they provide, originate or terminate
intrastate communications. Local
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governments may require the Company to obtain licenses, permits or franchises
in order to use the public rights-of-way necessary to install and operate its
networks.
Federal Regulation. The Company is categorized as a non-dominant carrier by
the FCC, and as a result is subject to relatively limited regulation of its
interstate and international services. Certain general policies and rules
apply, as well as certain reporting requirements, but the Company's rates are
not reviewed. The Company has all the authority required by the FCC to conduct
its long distance business. As a non-dominant carrier, the Company may install
and operate additional wireline facilities for the transmission of domestic
interstate communications without prior FCC authorization.
The FCC also imposes prior approval requirements on transfers of control and
assignments of operating authorizations. The FCC has the authority generally
to condition, modify, cancel, terminate or revoke operating authority for
failure to comply with federal laws and/or the rules, regulations and policies
of the FCC. Fines or other penalties also may be imposed for such violations.
There can be no assurance that the FCC or third parties will not raise issues
with regard to the Company's compliance with applicable laws and regulations.
The FCC also regulates the interstate access rates charged by incumbent
local exchange carriers for the origination and termination of interstate long
distance traffic. Those access rates make up a significant portion of the cost
of providing long distance service. The FCC has recently announced changes to
its interstate access rules that will result in restructuring of the access
charge system and changes in access charge rate levels. These changes will
reduce per-minute access charges and substitute new per-line flat-rate monthly
charges. These actions are expected to reduce access rates, and hence the cost
of providing long distance service, especially to business customers. However,
the full impact of the FCC's new decisions will not be known until those
decisions are implemented over the next several years, during which time those
decisions may be revised. Long distance companies may be disadvantaged if they
have a disproportionate number of customers with multiple local telephone
lines but relatively limited long distance requirements. In addition, AT&T has
committed to reduce its long distance rates to reflect access cost reductions,
and other competitors of the Company are likely to make similar reductions. In
such event, the Company may need to reduce its rates in response to
competitive pressures. In a related proceeding, the FCC has adopted changes to
the methodology by which access has been used in part to subsidize universal
telephone service and other public policy goals.
The Telecommunications Act also gives the FCC a role in establishing rules
for the implementation of local telephone competition, working with the state
PUCs. The Telecommunications Act imposes a variety of new duties on incumbent
local exchange carriers in order to promote competition in local exchange and
access services, and the FCC has authority to develop rules to implement these
duties. Some smaller independent incumbent local exchange carriers may seek
suspension or modification of these obligations, and some companies serving
rural areas are exempt from them.
In that regard, on August 8, 1996, the FCC adopted the Interconnection
Decision (the "Decision") to implement the interconnection, resale and number
portability provisions of the Telecommunications Act. This Decision
establishes rules pursuant to which incumbent local exchange carriers
interconnect their networks with the networks of competitive local exchange
carriers at rates that are reasonable and non-discriminatory. The Decision
also establishes rules governing the rights of competitive local exchange
carriers to obtain and use elements of the incumbent local exchange carriers'
networks at cost-based rates either to supplement or substitute for
alternative local network facilities that the competitive local exchange
carrier would otherwise be required to install. The Decision sets rules
governing competitive local exchange carrier access to wholesale versions of
the incumbent local exchange carriers' retail local services for resale. The
incumbent local exchange carriers are required to establish administrative
support systems so that these services and functionalities can be made
available to other carriers on a nondiscriminatory basis. The Decision also
created rules to deal with reciprocal compensation for the transport and
termination of local telecommunications, non-discriminatory access to rights
of way, and related matters. A related FCC order adopted the same day
established rules implementing the Telecommunications Act with respect to
local and toll dialing parity among competitors; nondiscriminatory
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access to telephone numbers, operator services, directory assistance and
listings, network information; and reform of numbering administration.
The FCC's rules were challenged in the federal courts by GTE, the Regional
Bell Operating Companies, large independent incumbent local exchange carriers
and state regulatory commissions. On October 15, 1996, the U.S. Court of
Appeals for the Eighth Circuit issued a stay of the implementation of certain
of the FCC's rules and on July 18, 1997, the Court issued its decision finding
that the FCC lacked statutory authority under the Telecommunications Act for
certain of its rules. In particular, the Court found that the FCC was not
empowered to establish the pricing standards governing unbundled local network
elements or wholesale local services of the incumbent local exchange carriers.
The Court also struck down other FCC rules, including one that would have
enabled new entrants to "pick and choose" from provisions of established
interconnection agreements between the incumbent local exchange carriers and
other carriers. The Court, however, rejected certain other objections to the
FCC rules brought by the incumbent local exchange carriers or the states,
including challenges to the FCC's definition of unbundled elements, and to the
FCC's rules allowing new competitors to create their own networks by combining
incumbent local exchange carrier network elements together without adding
additional facilities of their own. The overall impact of the Court's decision
is to materially reduce the role of the FCC in fostering local competition,
including its ability to take enforcement action if the Telecommunications Act
is violated, and increase the role of state utility commissions. The FCC has
indicated that it will ask the Supreme Court to review the Court's decision.
Meanwhile, certain state commissions have asserted that they will be active in
promoting local telephone competition using the authority they have under the
ruling, which may lessen the significance of the reduced FCC role. At this
time the impact of the Court's decision cannot be evaluated and there can be
no assurance that the Court decision and related developments will not have a
material adverse effect on the Company. Furthermore, other FCC rules related
to local telephone competition remain the subject of legal challenges. For
example, on August 22, 1997, the Eighth Circuit Court issued a second order
striking down certain FCC rules regarding dialing parity for new competitors.
There can be no assurance that these and other pending decisions affecting
local competition will not be adverse to companies seeking to enter the local
telephone market.
There can be no assurance that the FCC's remaining rules (including such
rules that may be reinstated by the Supreme Court, if any), together with
rules adopted by state public utility commissions, will be implemented in a
manner that will permit local telephone competition to develop to a
substantial extent and without significant delays. For example, many new
carriers, including the Company, have experienced problems with respect to the
operational support systems used by new carriers to order and receive network
elements and wholesale services from the incumbent local exchange carriers.
These systems are necessary for new carriers like the Company to provide local
service to customers on a timely and competitive basis. The FCC has recently
created a task force to examine problems that have slowed the development of
local telephone competition.
The Company has entered into the Interconnection Agreement with BellSouth.
The Interconnection Agreement currently allows the Company to provide local
service on a resale basis or by purchasing all unbundled network elements
required to provide local service on a facilities bases, without using
Company-owned facilities. The Company and BellSouth have agreed on interim
pricing terms for such resale and purchase of unbundled network elements. The
terms of the Interconnection Agreement, including the interim pricing terms,
are subject to the approval of the PUCs regulating the Company's markets. Such
approval has been received from the PUCs of Alabama, Georgia, Kentucky,
Louisiana, Mississippi, North Carolina, South Carolina, Tennessee and is
pending in Florida. In addition, the Interconnection Agreement does not
resolve all operational issues, particularly those relating to the collocation
of the Company's equipment with that of BellSouth. The Company and BellSouth
are continuing to negotiate to resolve such issues. The Company expects that
the Interconnection Agreement will provide a foundation for it to provide
local service on reasonable commercial basis, but there can be no assurance of
this and important issues remain unsettled as a result of the Court decision
and related matters. See "Risk Factors--Dependence on Local Incumbent Exchange
Carriers."
The Company expects to negotiate similar interconnection agreements with
other incumbent local exchange carriers. However, other carriers who have
preceded the Company in the negotiation process with certain of these
incumbent local exchange carriers have expressed dissatisfaction with some of
the terms of their agreements, or with the operational support systems by
which they obtain the interconnection they require to provide local services
to end users.
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As a general matter, no assurance is possible regarding how quickly or how
adequately the Company will be able to take advantage of the opportunities
created by the Telecommunications Act. The Company could be adversely affected
if the court decision reversing some of the new FCC rules, or problems in the
related arbitration and negotiation process, result in increasing the cost of
using incumbent local exchange carrier network elements or services, or if
such actions otherwise result in delays in the implementation of the
Telecommunications Act or impediments to the development of local telephone
competition.
The Telecommunications Act also imposes certain duties on non-incumbent
local exchange carriers, such as the Company. These duties include the
obligation to complete calls originated by competing carriers under reciprocal
arrangements or through mutual exchange of traffic without explicit payment;
the obligation to permit resale of their telecommunications services without
unreasonable restrictions or conditions; and the duty to provide dialing
parity, number portability, and access to rights of way. The Company does not
anticipate that these obligations will impose a material burden on its
operations. However, given that local telephone competition is still in its
infancy and implementation of the Telecommunications Act has just begun, there
can be no assurance in this regard.
The Telecommunications Act also establishes the foundation for substantial
additional competition to the Company's long distance operations through
elimination or modification of previous prohibitions on the provision of
interLATA long distance services by the Regional Bell Operating Companies and
GTE. The Regional Bell Operating Companies are now permitted to provide
interLATA long distance service outside those states in which they provide
local exchange service ("out-of-region long distance service") upon receipt of
any necessary state and/or federal regulatory approvals that are otherwise
applicable to the provision of intrastate and/or interstate long distance
service. They also are allowed to provide long distance services for their
cellular and other mobile services within the regions in which they also
provide local exchange service ("in-region service"). The Regional Bell
Operating Companies will be allowed to provide wireline in-region services
upon specific approval of the FCC and satisfaction of other conditions,
including a checklist of interconnection requirements. GTE is permitted to
enter the long distance market without regard to limitations by region. GTE is
also subject to the provisions of the Telecommunications Act that impose
interconnection and other requirements on local exchange carriers. BellSouth
and other Regional Bell Operating Companies have begun to take actions
directed towards obtaining authority from the FCC to offer in-region long
distance services in certain of the states in their respective regions.
Although the FCC forced the withdrawal of the first such request, and rejected
the next two, others are anticipated soon. Furthermore, court actions are now
pending challenging both the terms under which the FCC has denied an in-region
application, and the underlying provisions of the Telecommunications Act that
restrict in-region service. There can be no assurance that the Regional Bell
Operating Companies will be prevented from offering in-region long distance
service until local competition is established.
The FCC has granted incumbent local exchange carriers certain flexibility in
pricing their interstate special and switched access services. Under this
pricing scheme, local exchange carriers may establish pricing zones based on
access traffic density and charge different prices for access provided in each
zone. The Company anticipates that the FCC will grant incumbent local exchange
carriers increasing pricing flexibility as the number of interconnection
agreements and competitors increases. In a pending rulemaking proceeding
scheduled for completion soon, the FCC is expected to announce new and more
specific policies regarding the conditions and timing under which incumbent
local exchange carriers will be eligible for such increased pricing
flexibility. There can be no assurance that such pricing flexibility will not
place the Company at a competitive disadvantage, either as a purchaser of
access for its long distance operations, or as a vendor of access to other
carriers or end user customers.
State Regulation. The Company is also subject to various state laws and
regulations. Most public utilities commissions require providers such as the
Company to obtain authority from the commission prior to the initiation of
service. In most states, including Alabama, Georgia and Florida, the Company
also is required to file tariffs setting forth the terms, conditions and
prices for services that are classified as intrastate. The Company
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also is required to update or amend its tariffs when it adjusts its rates or
adds new products, and is subject to various reporting and record-keeping
requirements.
Many states also require prior approval for transfers of control of
certified carriers, corporate reorganizations, acquisitions of
telecommunications operations, assignment of carrier assets, carrier stock
offerings and incurrence by carriers of significant debt obligations.
Certificates of authority can generally be conditioned, modified, canceled,
terminated or revoked by state regulatory authorities for failure to comply
with state law and/or the rules, regulations and policies of state regulatory
authorities. Fines or other penalties also may be imposed for such violations.
There can be no assurance that state utilities commissions or third parties
will not raise issues with regard to the Company's compliance with applicable
laws or regulations.
The Company has all necessary authority to offer intrastate long distance
services in Alabama, Arkansas, California, Colorado, Connecticut, Delaware,
District of Columbia, Florida, Georgia, Idaho, Illinois, Indiana, Iowa,
Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Mississippi,
Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New York,
North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South
Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington,
West Virginia, Wisconsin and Wyoming. The Company is authorized to provide
intrastate long distance service in the states of Arizona and Pennsylvania
while certificates in those states are pending. Applications for authority to
provide intrastate long distance service are also pending in several other
states, including Maine, Minnesota and New Mexico. Applications will be filed,
in the near future, in the states of Alaska and Hawaii. The Company seeks
authority to provide long distance service in states outside of its target
markets to enhance its ability to attract business customers with offices, or
whose employees travel, outside of the Company's target markets. The Company
expects that a penalty will be assessed by the state of Minnesota for
completion of casual intrastate traffic prior to certification. This penalty
is not expected to be significant.
The Company intends initially to provide local exchange services in its
region by reselling the retail local services of the respective incumbent
local exchange carrier in a given territory and, in some established markets,
using its own local switching facilities. The Company has obtained competitive
local exchange carrier certification in Alabama, Florida, Georgia, Kentucky,
Mississippi, North Carolina, South Carolina and Tennessee. A competitive local
exchange carrier petition for certification is pending in Louisiana.
Many issues remain open regarding how new local telephone carriers will be
regulated at the state level. For example, although the Telecommunications Act
preempts the ability of states to forbid local service competition, the
Telecommunications Act preserves the ability of states to impose reasonable
terms and conditions of service and other regulatory requirements. However,
these statutes and related questions arising from the Telecommunications Act
will be elaborated further through rules and policy decisions made by PUCs in
the process of addressing local service competition issues.
The Company also will be heavily affected by state PUC decisions related to
the incumbent local exchange carriers, particularly in view of the July 18,
1997 decision of the Eighth Circuit Court of Appeals noted above which
recognizes a larger role for state utility commissions and a reduced role for
the FCC. For example, PUCs have significant responsibility under the
Telecommunications Act to oversee relationships between incumbent local
exchange carriers and their new competitors with respect to such competitors'
use of the incumbent local exchange carriers' network elements and wholesale
local services. PUCs arbitrate interconnection agreements between the
incumbent local exchange carriers and new competitors such as the Company when
necessary. PUCs are considering incumbent local exchange carrier pricing
issues in major proceedings now underway. PUCs will also determine how
competitors can take advantage of the terms and conditions of interconnection
agreements that incumbent local exchange carriers reach with other carriers.
It is too early to evaluate how these matters will be resolved, or their
impact on the ability of the Company to pursue its business plan.
States also regulate the intrastate carrier access services of the incumbent
local exchange carriers. The Company is required to pay such access charges to
originate and terminate its intrastate long distance traffic. The Company
could be adversely affected by high access charges, particularly to the extent
that the incumbent
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local exchange carriers do not incur the same level of costs with respect to
their own intrastate long distance services. A related issue is use by certain
incumbent local exchange carriers, with the approval of PUCs, of extended
local area calling that converts otherwise competitive intrastate toll service
to local service. States also are or will be addressing various intraLATA
dialing parity issues that may affect competition. It is unclear whether state
utility commissions will adopt changes in their rules governing intrastate
access charges similar to those recently approved by the FCC for interstate
access. The Company's business could be adversely affected by such changes.
The Company also will be affected by how states regulate the retail prices
of the incumbent local exchange carriers with which it competes. The Company
believes that, as the degree of intrastate competition increases, the states
will offer the incumbent local exchange carriers increasing pricing
flexibility. This flexibility may present the incumbent local exchange
carriers with an opportunity to subsidize services that compete with the
Company's services with revenues generated from non-competitive services,
thereby allowing incumbent local exchange carriers to offer competitive
services at lower prices than they otherwise could. The Company cannot predict
the extent to which this may occur or its impact on the Company's business.
Local Government Authorizations. The Company is required to obtain street
use and construction permits and licenses and/or franchises to install and
expand its fiber optic networks using municipal rights-of-way. In some
municipalities where the Company has installed or anticipates constructing
networks, it will be required to pay license or franchise fees based on a
percentage of gross revenues or on a per linear foot basis. There can be no
assurance that, following the expiration of existing franchises, fees will
remain at their current levels. In many markets, the incumbent local exchange
carriers do not pay such franchise fees or pay fees that are substantially
less than those required to be paid by the Company, although the
Telecommunications Act requires that in the future such fees be applied in a
competitively neutral manner. To the extent that, notwithstanding the Act,
competitors do not pay the same level of fees as the Company, the Company
could be at a competitive disadvantage. Termination of the existing franchise
or license agreements prior to their expiration dates or a failure to renew
the franchise or license agreements and a requirement that the Company remove
its facilities or abandon its network in place could have a material adverse
effect on the Company.
General. The telecommunications market is in a period of substantial change
and uncertainty. As the Telecommunications Act and related FCC and state
actions are implemented, new issues are likely to arise that can affect the
Company and its business plan. No assurance can be given that future
regulatory developments will not have a materially adverse impact on the
Company.
FACILITIES, REAL PROPERTY AND LEASES
The Company leases its corporate headquarters space in West Point, Georgia
from ITC Holding. The lease expires in 2005 and may be terminated by either
party on 90 days' notice. See "Certain Transactions--ITC Holding." The Company
also owns a switch site in Birmingham, Alabama and leases space for a network
operations center and a switch site in Arab, Alabama. In addition, the Company
intends to construct a multi-service facility in Anniston, Alabama to function
as a centralized switching control center for the Company's network and an
operator services center. Construction of the Anniston facility is expected to
commence by the end of 1997 and to be completed in the second quarter of 1998.
The Company operates sales offices in Atlanta (two offices), Georgia;
Pensacola, Florida; Columbia and Greenville, South Carolina; Charlotte, North
Carolina; New Orleans and Baton Rouge, Louisiana; and Huntsville, Mobile,
Auburn, Dothan, Florence, Montgomery and Birmingham, Alabama. The leases for
these offices expire between 1997 and 2001.
As part of its fiber optic network and switched service system, the Company
owns or leases rights-of-way, land, office space and towers throughout the
southern United States.
The Company owns land and microwave transmission towers at various locations
in Alabama.
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The Company expects to lease or purchase additional office space and
switching and other network facilities in connection with the planned
expansion of its telecommunications network system.
The Company believes that all of its properties are well maintained.
EMPLOYEES
As of June 30, 1997, the Company had over 500 full-time employees, none of
whom was represented by a union or covered by a collective bargaining
agreement. The Company believes that its relationship with its employees is
good. In connection with the construction and maintenance of its fiber optic
network and the conduct of its other business operations, the Company uses
third party contractors, some of whose employees may be represented by unions
or covered by collective bargaining agreements.
LEGAL PROCEEDINGS
In May 1997, the U.S. District Court for the Middle District of Alabama,
Southern Division returned a verdict against DeltaCom in Digitel Corporation
v. DeltaCom, Inc., Richard A. Wilkins, John A.R. Smith, and Edward L.
Blackwell, awarding plaintiff $265,000 in damages. Plaintiff in this action
alleged that certain of its former employees violated the non-solicitation
agreements they had entered into with plaintiff as part of their employment.
Plaintiff further alleged that DeltaCom, as the current employer of these
former employees, shares liability for their alleged violations. DeltaCom is
indemnified by the former stockholders of DeltaCom against both the attorney's
fees incurred in defending the action and the judgment resulting from the
action.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The table below sets forth, as of June 30, 1997, certain information
concerning the directors and executive officers of the Company. The Board of
Directors (the "Board") currently consists of nine directors, divided into
three classes of directors serving staggered three-year terms. Directors and
executive officers of the Company are elected to serve until they resign or
are removed, or are otherwise disqualified to serve, or until their successors
are elected and qualified. Directors of the Company are elected at the annual
meeting of stockholders. Executive officers of the Company generally are
appointed at the Board's first meeting after each annual meeting of
stockholders.
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH COMPANY TERM AS DIRECTOR EXPIRES
---- --- ------------------------ ------------------------
<S> <C> <C> <C>
Campbell B. Lanier, 46 2000
III.................... Chairman, Director
Andrew M. Walker........ 55 Chief Executive Officer, Director 2000
Foster O. McDonald...... 35 President
Douglas A. Shumate...... 32 Senior Vice President-Chief
Financial Officer
Steven D. Moses......... 47 Senior Vice President-Network
Services
J. Thomas Mullis........ 53 Senior Vice President-General
Counsel, Secretary
Roger F. Woodward....... 44 Senior Vice President-Sales,
Marketing and Customer Support
Sara L. Plunkett........ 47 Vice President-Finance, Treasurer
Donald W. Burton........ 53 Director 1998
Malcolm C. Davenport, 44 1998
V...................... Director
Robert A. Dolson (1).... 51 Director 1999
O. Gene Gabbard (1)(2).. 57 Director 1999
William T. Parr (2)..... 60 Director 1998
William H. Scott, III 49 1999
(2).................... Director
William B. Timmerman.... 50 Director 2000
</TABLE>
- --------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
Campbell B. Lanier, III has been Chairman of the Company since March 1997.
Mr. Lanier serves as Chairman of the Board and Chief Executive Officer of ITC
Holding and has served as a director of ITC Holding since its inception in
1985 through a predecessor company. In addition, Mr. Lanier is an officer and
director of several ITC Holding subsidiaries. He also is a director of KNOLOGY
Holdings, Inc. ("KNOLOGY"), (a broadband telecommunications services company)
(formerly known as CyberNet Holding, Inc.), MindSpring (a company that
provides Internet services), National Vision Associates, Ltd. (a full service
optical retailer) and K&G Men's Centers (a discount retailer of men's
clothing), Vice Chairman of the Board of AvData Systems, Inc. ("AvData") (a
company providing data communications networks) and Chairman of the Board of
InterCel, Inc. ("InterCel") (a wireless telecommunications services company in
which ITC Holding has a substantial equity interest). Since 1989, he has
served as a director of the United States Telephone Association. He served as
Chairman of the Board of AvData from 1988 to 1990.
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<PAGE>
Andrew M. Walker has been Chief Executive Officer of the Company since March
1997. He served as President and Chief Executive Officer of the managing
partner of each of Interstate FiberNet and Gulf States FiberNet from November
1994 until March 1997. Mr. Walker has served as a director of Knology since
July 1996, and he served as Chief Executive Officer and President of KNOLOGY
from July 1996 to February 1997. Mr. Walker worked for MCI from 1990 to 1994
as Vice President Carrier Services. From 1986 to 1990, Mr. Walker served as a
Division President for Telecom*USA, Inc. ("Telecom*USA"). Prior to 1986, Mr.
Walker held different positions with the Christian Broadcasting Network, M/A-
Com and Comsat Laboratories ("Comsat").
Foster O. McDonald has been President of the Company since March 1997. He
served as President of DeltaCom from January 1991 until March 1997. From
February 1996 until March 1997, Mr. McDonald also served as Chief Executive
Officer of DeltaCom. From May 1984 through December 1990, Mr. McDonald served
as Vice President and General Manager of DeltaCom. He also serves as a
director of Brindlee Mountain Telephone Company.
Douglas A. Shumate has been Senior Vice President and Chief Financial
Officer of the Company since March 1997. He served as Chief Financial Officer
of the Managing Partners of each of Interstate FiberNet and Gulf States
FiberNet from January 1995 until March 1997. From May 1991 to January 1995, he
served as Vice President-Finance and Chief Financial Officer of Interstate
Telephone Company ("Interstate Telephone"), a local telephone service provider
and wholly owned subsidiary of ITC Holding. From December 1986 through April
1991, Mr. Shumate was employed as a C.P.A. at Arthur Andersen LLP.
Steven D. Moses has been Senior Vice President-Network Services of the
Company since March 1997. He served as Vice President of Interstate FiberNet
from January 1992 until April 1995 and Chief Operating Officer of Interstate
FiberNet from April 1995 until March 1997. From May 1991 to January 1992, Mr.
Moses served as Director--Special Projects of Interstate Telephone and Valley
Telephone Company ("Valley Telephone") (a local telephone service provider and
a wholly owned subsidiary of ITC Holding).
J. Thomas Mullis has been Senior Vice President, General Counsel and
Secretary of the Company since March 1997. Mr. Mullis served as General
Counsel and Secretary of DeltaCom from May 1985 to March 1997 and as Executive
Vice President of DeltaCom from January 1994 to November 1996. From November
1996 to March 1997, he also served as Senior Vice President of DeltaCom. From
January 1990 to December 1993, Mr. Mullis served as President, General Counsel
and Secretary of both Southern Interexchange Services, Inc. (a switched
services carrier) and Southern Interexchange Facilities, Inc. (a private line
carriers' carrier).
Roger F. Woodward has been Senior Vice President--Sales, Marketing and
Customer Support of the Company since March 1997. Mr. Woodward served as
Senior Vice President-Sales of DeltaCom from October 1996 until March 1997.
From March 1990 until July 1996, Mr. Woodward served in a variety of
positions, including Regional Sales Director and Vice President-Sales, with
Allnet Communications, Inc., which was acquired by Frontier in August 1995.
Sara L. Plunkett has been Vice President--Finance and Treasurer for the
Company since March 1997. She served as Vice President--Finance of DeltaCom
from October 1996 until March 1997. From May 1989 through October 1996, she
served as Chief Financial Officer of DeltaCom.
Donald W. Burton has been a director of the Company since March 1997. He has
served as the Managing General Partner of South Atlantic Venture Funds since
1983 and as the General Partner of The Burton Partnership, Limited Partnership
since 1979. Since 1981, he has served as President of South Atlantic Capital
Corporation. Mr. Burton serves as director of InterCel, MTL, Inc. (a bulk
transportation service company), the Heritage Group of Mutual Funds and
several private companies.
Malcolm C. Davenport, V has been a director of the Company since March 1997.
He has operated his own C.P.A. and law practices since 1979 and 1983,
respectively. Mr. Davenport also serves as a director of ITC
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<PAGE>
Holding and several of its subsidiaries, Spintek Gaming Technologies, Inc. (a
gaming technology provider) and American Artists Film Corporation (a motion
picture production company).
Robert A. Dolson has been a director of the Company since March 1997. He has
served as President and Chairman of Continental Water Company (a holding
company for regulated water utilities) since 1982 and 1989, respectively. He
has served as President and Chairman of National Enterprises, Inc. (the parent
company of Continental Water Company) since 1984 and 1989, respectively. He
has served as a director of ITC Holding since December 1993. He also serves as
a director of several private companies.
O. Gene Gabbard has been a director of the Company since March 1997. He has
worked independently as an entrepreneur and consultant since February 1993.
Mr. Gabbard currently serves as Chairman of the Board of Knology and as a
director of ITC Holding, InterCel, MindSpring, KNOLOGY and InterServ Services
Corporation (a marketing company). He also currently serves as a director of
Masada Security, Inc. (a security system monitoring services company), and of
two telecommunications technology companies, Dynatech Corporation and Adtran,
Inc. From August 1990 through January 1993, he served as Executive Vice
President and Chief Financial Officer of MCI. He served in various senior
executive capacities, including Chairman of the Board, President and Chief
Executive Officer of Telecom*USA, Inc. from December 1988 until Telecom's
merger with MCI in August 1990. From July 1984 to December 1988, he was
Chairman and/or President of SouthernNet, Inc. ("SouthernNet"), a long
distance telecommunications company which was the predecessor to Telecom*USA.
William T. Parr has been a director of the Company since March 1997. Mr.
Parr has served as Vice Chairman of J. Smith Lanier & Co. (an insurance
placement company) since 1980. He currently serves as a director of ITC
Holding and several of its subsidiaries, including ITC Services Co., Inc. (a
management services company), Valley Telephone, InterCall, Inc. (a conference
calling service provider) and Globe Telecommunications, Inc. ("Globe") (a non-
regulated telecommunications provider). He also serves as a director of AvData
and J. Smith Lanier & Co.
William H. Scott, III has been a director of the Company since March 1997.
Mr. Scott has served as President of ITC Holding since December 1991 and has
been a director of ITC Holding since May 1989. Mr. Scott is a director of
InterCel, AvData, KNOLOGY and MindSpring. From 1989 to 1991, he served as
Executive Vice President of ITC Holding. From 1985 to 1989, Mr. Scott was an
officer and director of Async. Between 1984 and 1988, Mr. Scott held several
offices with SouthernNet, including Chief Operating Officer, Chief Financial
Officer, and Vice President-Administration. He was a director of SouthernNet
from 1984 to 1987.
William B. Timmerman has been a director of the Company since March 1997.
Since 1978 he has served in a variety of management positions at SCANA
Corporation (a diversified utility company), including Chief Executive
Officer, President, Senior Vice President, Executive Vice President and Chief
Financial Officer. Mr. Timmerman is also director of SCANA Corporation, ITC
Holding, InterCel and Liberty Corporation (a life insurance company).
COMMITTEES OF THE BOARD OF DIRECTORS
The Board currently has two committees, the Audit Committee and the
Compensation Committee. The Audit Committee, among other things, recommends
the firm to be appointed as independent accountants to audit the Company's
financial statements, discusses the scope and results of the audit with the
independent accountants, reviews with management and the independent
accountants the Company's interim and year-end operating results, considers
the adequacy of the internal accounting controls and audit procedures of the
Company and reviews the non-audit services to be performed by the independent
accountants. The current members of the Audit Committee are Messrs. Dolson and
Gabbard.
The Compensation Committee reviews and recommends the compensation
arrangements for management of the Company and administers the Company's stock
option plans. The current members of the Compensation Committee are Messrs.
Gabbard, Parr and Scott.
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<PAGE>
DIRECTOR COMPENSATION
Directors of the Company who are also employees of the Company receive no
directors' fees. Non-employee directors receive directors fees of $750 for
each Board meeting attended in person, $200 for each Board meeting attended by
telephone and $200 for each Board committee meeting attended (whether in
person or by telephone conference). In addition, directors are reimbursed for
their reasonable out-of-pocket travel expenditures incurred. Directors of the
Company are also eligible to receive grants of stock options under the
Company's Director Stock Option Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Messrs. Gabbard, Parr
and Scott.
INCENTIVE COMPENSATION PLANS
1997 Stock Option Plan. The Company's 1997 Stock Option Plan (the "Stock
Option Plan") provides for the grant of options that are intended to qualify
as "incentive stock options" under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), to employees of the Company, its subsidiaries
and its parent corporation, ITC Holding, as well as the grant of non-
qualifying options to any other individual whose participation in the Stock
Option Plan is determined to be in the best interests of the Company. The
Stock Option Plan authorizes the issuance of up to 1,500,000 shares of Class A
Common Stock pursuant to options granted under the Stock Option Plan (subject
to anti-dilution adjustments in the event of a stock split, recapitalization
or similar transaction). The maximum number of shares subject to options that
may be awarded under the Stock Option Plan to any person is 500,000 shares.
The Compensation Committee of the Board of Directors will administer the Stock
Option Plan and will grant options to purchase Class A Common Stock.
The option exercise price for incentive stock options granted under the
Stock Option Plan may not be less than 100% of the fair market value of the
Class A Common Stock on the date of grant of the option (or 110% in the case
of an incentive stock option granted to an optionee beneficially owning more
than 10% of the outstanding Class A Common Stock). The option exercise price
for non-incentive stock options granted under the Stock Option Plan may not be
less than the par value of the Class A Common Stock on the date of grant of
the option. The maximum option term is ten years (or five years in the case of
an incentive stock option granted to an optionee beneficially owning more than
10% of the outstanding Class A Common Stock). Options may be exercised at any
time after grant, except as otherwise provided in the particular option
agreement. There is also a $100,000 limit on the value of Class A Common Stock
(determined at the time of grant) covered by incentive stock options that
become exercisable by an optionee in any year. Options granted will become
exercisable with respect to 50% of the shares subject to the options on the
second anniversary of the date of grant and with respect to 25% of the shares
subject to the options on each of the third and fourth anniversaries of the
date of grant.
The Board of Directors may amend or terminate the Stock Option Plan with
respect to shares of Class A Common Stock as to which options have not been
granted.
At July 31, 1997, options to purchase 894,254 shares of Class A Common Stock
were outstanding pursuant to the Stock Option Plan.
Directors Stock Option Plan. The Company's 1997 Directors Stock Option Plan
(the "Directors Plan") provides for the "formula" grant of options that are
not intended to qualify as "incentive stock options" under Section 422 of the
Code to directors of the Company who are not officers or employees of the
Company, ITC Holding or any subsidiary of the Company (each an "Eligible
Director"). The Directors Plan authorizes the issuance of up to 150,000 shares
of Class A Common Stock pursuant to options granted under the Directors Plan
(subject to anti-dilution adjustments in the event of a stock split,
recapitalization or similar transaction). The option exercise price for
options granted under the Directors Plan will be 100% of the fair market value
of the shares of Class A Common Stock on the date of grant of the option.
Under the Directors Plan, each Eligible Director will be granted an option to
purchase 10,000 shares of Class A Common Stock upon such person's
78
<PAGE>
initial election or appointment to serve as a director. Options granted will
become exercisable with respect to 50% of the shares subject to the options on
the second anniversary of the date of grant and with respect to 25% of the
shares subject to the options on each of the third and fourth anniversaries of
the date of grant. The options will expire ten years and 30 days after the
date of grant. The Board of Directors may amend or terminate the Directors
Plan with respect to shares of Class A Common Stock as to which options have
not been granted.
At July 31, 1997, stock options to purchase 60,000 shares of Class A Common
Stock were outstanding pursuant to the Directors Plan.
EXECUTIVE COMPENSATION
During 1997 Messrs. Walker, McDonald, Mullis, Woodward and Moses (the "Named
Executive Officers") expect to earn salaries at annual rates of $150,000,
$135,000, $131,472, $125,000 and $110,000, respectively. If certain
performance goals are met, Messrs. Walker, McDonald, Mullis, Woodward and
Moses expect to earn bonuses of $90,000, $75,000, $35,855, $50,000 and
$61,111, respectively.
On March 24, 1997, the Company granted Messrs. Walker, McDonald, Mullis,
Woodward and Moses options to purchase 125,000, 75,000, 40,000, 50,000 and
50,000 shares of Class A Common Stock, respectively. Each of the Named
Executive Officers has been granted certain options to purchase shares of
common stock of ITC Holding under ITC Holding's incentive stock option plan.
These options will continue to vest according to the schedule set forth in
each Named Executive Officer's respective stock option agreement unless such
Named Executive Officer's employment with the Company is terminated (and such
employee is not employed by ITC Holding or another subsidiary thereof), in
which case options that have not vested at that time will terminate.
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<PAGE>
CERTAIN TRANSACTIONS
The Company has adopted a policy requiring that any material transactions
between the Company and persons or entities affiliated with officers,
directors or principal stockholders of the Company be on terms no less
favorable to the Company than reasonably could have been obtained in arm's-
length transactions with independent third parties.
ITC HOLDING
The following is a summary of certain transactions and relationships between
the Company and ITC Holding, its other wholly owned subsidiaries, or entities
in which ITC Holding holds more than 10% of the equity interests, and among
the Company and its directors, executive officers and stockholders and its
associated entities.
The Company, through Interstate FiberNet, Inc. (and formerly through
Interstate FiberNet, a Georgia general partnership), sells capacity on its
fiber optic network to several ITC Holding subsidiaries and affiliates,
including InterCel and InterCel PCS Services, Inc. (collectively, "PowerTel"),
Globe, InterCall, KNOLOGY and MindSpring. Together, these entities paid
Interstate FiberNet approximately $422,000, $316,000 and $243,000 for such
capacity for the years ended December 31, 1996, 1995 and 1994 and $456,000 for
the six months ended June 30, 1997, respectively.
Since 1996, the Company, through DeltaCom, has provided long distance and
carrier switched long distance service to several ITC Holding subsidiaries and
affiliates, including KNOLOGY , InterCall, Interstate Telephone, Valley
Telephone, PowerTel and MindSpring. Together, these entities paid DeltaCom
approximately $1.4 million for the year ended December 31, 1996 and $1,755,000
for the six months ended June 30, 1997. Since 1996, DeltaCom has also earned
commissions by serving as agent for certain interexchange carriers doing
business with PowerTel, InterCall and MindSpring. Under these agreements,
DeltaCom contracts with the interexchange carrier and rebills the appropriate
access charges plus a margin to PowerTel, InterCall and MindSpring. Together,
PowerTel, InterCall and MindSpring paid DeltaCom commissions totaling
approximately $514,000 for the year ended December 31, 1996, and $462,000 for
the six months ended June 30, 1997.
In 1995, the Company, through Interstate FiberNet and Gulfstates FiberNet,
constructed a fiber route on behalf of Knology. Knology reimbursed the Company
for approximately $62,000 worth of construction expenses. The Company also
provided certain engineering and construction-related management services,
estimated to have a value of $50,000, to Knology in 1995. The Company did not
charge Knology for these services.
In addition to his responsibilities with the Company, Mr. Walker also served
as President and Chief Executive Officer of Knology for the period from July
15, 1996 through February 20, 1997. He served in this capacity at the request
of Knology and ITC Holding and received no compensation from Knology. The
Company estimates the value of services provided to be approximately $20,000.
In 1996, Interstate FiberNet provided certain engineering and construction-
related management services to PowerTel. Interstate FiberNet charged
approximately $57,000 for these services.
In 1995, the Company provided certain network optimization services for
InterCall. InterCall paid $24,000 for such services.
The Company, through Interstate FiberNet, Inc. (and formerly through
InterQuest), provides directory assistance and operator service to PowerTel,
Interstate Telephone and Valley Telephone. Revenues recorded by the Company
for these services were approximately $433,000, $245,000 and $202,000 for the
years ended December 31, 1996, 1995 and 1994, respectively, and $451,000 for
the six months ended June 30, 1997.
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<PAGE>
Since 1996, DeltaCom has purchased feature group access from Interstate
Telephone and Valley Telephone. Access fees paid by DeltaCom to these
entities, in the aggregate, totaled approximately $401,000 in 1996 and $87,000
for the six months ended June 30, 1997.
Since 1995, InterCall has provided conference calling services to Interstate
FiberNet (and now to Interstate FiberNet, Inc.) and (beginning in 1996) to
DeltaCom. The Company paid approximately $80,000 and $1,000 for such services
for the years ended December 31, 1996 and 1995, respectively, and $35,000 for
the six months ended June 30, 1997.
ITC Holding, through certain of its subsidiaries, from time to time provides
the Company (and its subsidiaries) with administrative and staff services. The
amounts paid by the Company to ITC Holding and its affiliates for these
services for the years ended December 31, 1996, 1995 and 1994, were $19,000,
$5,000 and $148,000, respectively, and $65,000 for the six months ended June
30, 1997.
Since 1995, ITC Holding advanced funds to InterQuest at a variable rate
equal to the rate paid by ITC Holding through its credit facility with First
Union and CoBank, plus .5%. For the years ended December 31, 1995 and 1996 and
the six months ended June 30, 1997, InterQuest recorded interest expenses to
ITC Holding of approximately $123,000, $97,000 and $40,000, respectively. For
the year ended December 31, 1996 and for the six months ended June 30, 1997,
DeltaCom advanced excess funds from its operations to ITC Holding at an annual
interest rate of 8.25% and DeltaCom recorded interest income of approximately
$78,000 and $7,000, respectively. The advance is repayable on demand.
The Company has leased office space in West Point, Georgia from ITC Holding
since January 1995. Under its lease, the Company pays ITC Holding rent in the
amount of approximately $2,500 per month. The lease may be terminated by
either party on 90 days' notice. In 1996, the Company paid ITC Holding an
additional $7,000 in tax reimbursement payments for 1995 and 1996.
In 1996, InterQuest purchased certain switching equipment located in West
Point, Georgia from Globe for approximately $120,000. During the six months
ended June 30, 1997, DeltaCom sold equipment to Knology for $204,000.
Certain officers and directors of the Company hold or have held positions in
ITC Holding and various subsidiaries of ITC Holding. See "Management--
Directors and Executive Officers." In addition, certain Company officers and
directors have ownership interests in ITC Holding. See "Principal
Stockholders--Stock of ITC Holding Held By Directors and Management."
SCANA
In March 1997, in the Gulf States Acquisition, ITC Holding acquired SCANA's
64% partnership interest in Gulf States FiberNet and the Georgia Fiber Assets.
The purchase price of approximately $27.9 million was paid in the form of the
SCANA Note in the aggregate principal amount of approximately $10.0 million
and 588,411 shares of Series A Convertible Preferred Stock of ITC Holding. See
"Description of Certain Indebtedness--SCANA Note." In addition, pursuant to an
earn-out provision, no later than April 30, 1998, ITC Holding must issue to
SCANA that number of shares of Series A Convertible Preferred Stock that in
aggregate value equal 35.7% of the product of (a) 64%, multiplied by (b)(i)
six, multiplied by (ii) the amount (if any) by which the earnings before
interest, taxes, depreciation and amortization of the Gulf States FiberNet
business for the fiscal year ended December 31, 1997 exceeds $11,265,696.
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PRINCIPAL STOCKHOLDERS
All of the Company's issued and outstanding capital stock is owned by ITC
Holding.
STOCK OF ITC HOLDING HELD BY DIRECTORS AND MANAGEMENT
The following table sets forth information as of July 31, 1997 concerning
beneficial ownership of the common stock of ITC Holding by (i) each director
of the Company, (ii) each executive officer and (iii) all directors and
executive officers of the Company as a group. The information in the table is
based on information from the named persons regarding ownership of ITC Holding
common stock. Unless otherwise indicated, each of the stockholders listed
below has sole voting and investment power with respect to the shares shown as
beneficially owned by them.
<TABLE>
<CAPTION>
AMOUNT OF
BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP(A)(B) OF CLASS
- ------------------------ --------------- --------
<S> <C> <C>
Donald W. Burton(c).................................. 520,952 6.1%
Malcolm C. Davenport, V(d)........................... 168,478 2.0
Robert A. Dolson(e).................................. 875,135 10.2
O. Gene Gabbard...................................... 44,215 *
Campbell B. Lanier, III(f)........................... 2,374,621 27.7
Foster O. McDonald(g)................................ 76,598 *
Steven O. Moses...................................... 19,022 *
J. Thomas Mullis..................................... -- *
William T. Parr...................................... 55,335 *
Sara L. Plunkett..................................... -- *
William H. Scott, III(h)............................. 338,673 3.9
Douglas A. Shumate................................... 27,798 *
William B. Timmerman(i).............................. 774,616 9.1
Andrew M. Walker..................................... 16,800 *
Roger F. Woodward.................................... -- *
All executive officers and directors as a group (15
persons)............................................ 5,293,243 60.5
</TABLE>
- --------
* Less than one percent.
(a) In accordance with Rule 13d-3 under the Exchange Act, a person is deemed
to be the beneficial owner, for purposes of this table, of any shares of
common stock if such person has or shares voting power or investment power
with respect to such security, or has the right to acquire beneficial
ownership at any time within 60 days from July 31, 1997. As used herein,
"voting power" is the power to vote or direct the voting of shares and
"investment power" is the power to dispose or direct the disposition of
shares.
(b) Includes the following shares that the individuals named below have the
right to purchase within 60 days from July 31, 1997 pursuant to options:
<TABLE>
<S> <C>
Donald W. Burton..................................................... 1,480
O. Gene Gabbard...................................................... 1,480
Campbell B. Lanier, III.............................................. 91,372
Steven D. Moses...................................................... 17,102
William H. Scott, III................................................ 120,836
Douglas A. Shumate................................................... 22,452
Andrew M. Walker..................................................... 8,400
-------
Total.............................................................. 263,122
=======
</TABLE>
(c) Includes 26,978 shares held of record by The Burton Partnership, Limited
Partnership, of which Mr. Burton is the sole general partner; 47,337
shares held of record by South Atlantic Venture Fund II, Limited
Partnership, of which South Atlantic Venture Partners II, Limited
Partnership is the sole general partner, of which Mr. Burton is the
managing general partner; 245,157 shares held of record by South Atlantic
Venture Fund III, Limited Partnership, of which South Atlantic Venture
Partners III, Limited Partnership is the sole general partner, of which
Mr. Burton is the managing partner, 78,754 shares held of record by South
Atlantic Venture Fund IV, L.P., of which Mr. Burton is a general partner,
and 121,246 shares held of record by South Atlantic Venture Fund IV (QP),
L.P., of which Mr. Burton is a general partner. Also includes 1,480
unexercised but vested options held of record by South Atlantic Venture
Fund II, Limited Partnership.
(d) Includes 149,970 shares held of record by the Malcolm C. Davenport, V
Family Trust, of which Mr. Davenport is co-trustee.
(e) Represents 875,135 shares held of record by National Enterprises, Inc., of
which Mr. Dolson is President.
(f) Includes 40 shares in the aggregate held of record by Mr. Lanier's wife;
13,000 shares held of record by the Lanier Family Foundation, of which Mr.
Lanier is co-trustee; and 25,000 shares held of record by the Campbell
Lanier, Jr. Irrevocable Life Insurance Trust, of which Mr. Lanier is co-
trustee.
(g) Represents 76,598 shares held of record by three McDonald family trusts,
of which Mr. McDonald is trustee.
(h) Includes 800 shares in the aggregate held of record by members of Mr.
Scott's immediate family; 13,000 shares held of record by the Lanier
Family Foundation, of which Mr. Scott is co-trustee; 25,000 shares held by
the Campbell Lanier, Jr. Irrevocable Life Insurance Trust, of which Mr.
Scott is co-trustee; 65,000 shares held of record by Campbell B. Lanier,
III Charitable Remainder Trust, of which Mr. Scott is trustee; 3,608
shares held in trust for Mr. Scott's minor daughter, of which Mr. Scott's
wife is co-trustee; and 625 shares held of record by the Campbell B.
Lanier, IV 2503(c) Trust, of which Mr. Scott is trustee.
(i) Represents 774,616 shares held of record by SCANA, of which Mr. Timmerman
is Chief Executive Officer.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
SCANA NOTE
The SCANA Note has been assumed by Interstate FiberNet, Inc., which became a
wholly owned subsidiary of the Company as part of the Reorganization. See
"History of the Company--Reorganization." The SCANA Note, which has a
principal balance of approximately $10.0 million, has a maturity date of March
31, 2002. Interest accrues on the SCANA Note at an annual rate of 11% and is
payable semiannually in arrears. Principal is payable semiannually, commencing
on September 30, 1997, in equal semiannual installments of $996,409. The SCANA
Note is unsecured.
CREDIT FACILITY
Interstate FiberNet, Inc. (the "Borrower"), has entered into the Commitment
Letter with NationsBank, pursuant to which NationsBank has agreed, subject to
the terms and conditions set forth in the Commitment Letter (including the
negotiation of definitive loan documents), to provide a Credit Facility of up
to $100 million to the Borrower to be used for working capital and other
purposes, including capital expenditures and permitted acquisitions.
The following summary of the material provisions of the Commitment Letter
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, the Commitment Letter, a copy of which is available
from the Company upon request. Defined terms that are used but not defined in
this section have the meanings given to such terms in the Commitment Letter.
Because the terms, conditions and covenants of the Credit Facility are subject
to the negotiation, execution and delivery of the definitive loan documents,
certain of the actual terms, conditions and covenants thereof may differ from
those described below.
The Credit Facility will mature on the fifth anniversary of its closing. The
Credit Facility will include a $50 million multi-draw term loan facility and a
$50 million revolving credit facility. The Company may draw down amounts under
the term loan facility until the second anniversary of the Credit Facility and
must draw down the full amount of this facility before drawing down any amount
over $10 million under the revolving credit facility.
Amounts drawn under the Credit Facility will bear interest, at the
Borrower's option, at either the Base Rate or the Eurodollar Rate, plus an
Applicable Margin. The Applicable Margin will be an annual rate which will
fluctuate based on the Borrower's Total Leverage Ratio (as defined below) and
which will be between 1.75% and .75% for Base Rate borrowings and between
2.75% and 1.75% for the Eurodollar Rate borrowings.
The Commitment Letter contemplates that the Borrower will be required to
repay indebtedness outstanding under the Credit Facility with the net cash
proceeds from sales of assets other than in the ordinary course of business
and from certain issuances of equity securities by the Borrower or
ITC/\DeltaCom.
The Commitment Letter contemplates that the Borrower's obligations under the
Credit Facility will be guaranteed by the Company and the Borrower's
subsidiaries and will be secured by a first priority lien on all current and
future assets and properties of the Borrower and its subsidiaries and a first
priority pledge of the stock of the Borrower and its subsidiaries.
The Commitment Letter contemplates that the Credit Facility will contain a
number of covenants, including, among others, covenants limiting the ability
of the Borrower, the Borrower's present and future subsidiaries and
ITC/\DeltaCom to incur debt, create liens, pay dividends, make distributions or
stock repurchases, make investments or capital expenditures, change their
business, engage in transactions with affiliates, sell assets and engage in
mergers and acquisitions. In addition, the Commitment Letter contemplates that
the Credit Facility will contain affirmative covenants, including, among
others, covenants requiring compliance with laws, maintenance of corporate
existence, licenses and insurance, payment of taxes and performance of other
material obligations and the delivery of financial and other information.
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The Commitment Letter contemplates that the Credit Facility will restrict
the Borrower from declaring and paying dividends or distributions, including
dividends to pay scheduled interest on the Exchange Notes. However, the
Borrower will be permitted to pay dividends to ITC/\DeltaCom to pay scheduled
interest on the Exchange Notes, commencing after the sixth scheduled interest
payment, unless at the time of such dividend or distribution an event of
default (other than an event of default resulting solely from the breach of a
representation or warranty) under the Credit Facility exists or would be
caused by such dividend or distribution; provided that, with respect to any
event of default (other than a payment default, a bankruptcy event with
respect to ITC/\DeltaCom or the Borrower or the loss of a material license or
fiber network), the Borrower will not be prohibited from paying dividends to
ITC/\DeltaCom to pay scheduled interest on the Exchange Notes for more than 180
days.
The Commitment Letter also contemplates that the Company will be required to
comply with certain financial tests and to maintain certain financial ratios
on a consolidated basis. The Company must maintain (i) a Total Leverage Ratio
no greater than 9.5:1.0 initially, with subsequent reductions, (ii) a Senior
Leverage Ratio no greater than 2.75:1.0 initially, with subsequent reductions,
and (iii) an Interest Coverage Ratio no less than 3.75:1.0 through June 30,
2000 and 1.75:1.0 thereafter. Total Leverage Ratio means at any date, for the
Company on a consolidated basis, the ratio of Total Debt on such date to
Annualized Operating Cash Flow of the Company on a consolidated basis. Total
Debt means the aggregate indebtedness of the Company for borrowed money on a
consolidated basis, net of cash balances in excess of $5 million plus, except
for purposes of calculating the Senior Leverage Ratio, the balance of Pledged
Securities securing the Senior Notes and the Exchange Notes. Annualized
Operating Cash Flow means Operating Cash Flow for the six-month period most
recently ended multiplied by two. Operating Cash Flow for any period means the
consolidated net income (loss) of the Company for such period plus the
following amounts for such period, to the extent included in the determination
of such income (loss): depreciation expense, amortization expense and other
non-cash charges reducing income, net interest expense, and tax expense.
Senior Leverage Ratio means, for the Company on a consolidated basis at any
date, the ratio of Senior Debt (Total Debt minus the Senior Notes and the
Exchange Notes) to Annualized Operating Cash Flow of the Company on a
consolidated basis. Interest Coverage Ratio means, for the Company on a
consolidated basis for any period, the ratio of Operating Cash Flow to the
aggregate amount of interest due and payable by the Company with respect to
Total Debt during such period net of interest on the Senior Notes and the
Exchange Notes funded by Pledged Securities and up to $9.3 million of interest
paid to ITC Holding at the closing of the Credit Facility.
Failure to satisfy any of the financial covenants would constitute an Event
of Default under the Credit Facility, notwithstanding the ability of the
Borrower to meet its debt service obligations. The Commitment Letter also
contemplates that the Credit Facility also will include other customary events
of default, including, without limitation, a cross-default to other
indebtedness, material undischarged judgments, bankruptcy and a change of
control.
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DESCRIPTION OF THE EXCHANGE NOTES
The Senior Notes were, and the Exchange Notes will be, issued under the
Indenture, dated as of June 3, 1997, between the Company and United States
Trust Company of New York, trustee under the Indenture (the "Trustee"). A copy
of the Indenture is filed as an exhibit to the Registration Statement (of
which this Prospectus is a part). The following summary contains a description
of certain provisions of the Indenture, but does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, all of
the provisions of the Indenture, including the definitions of certain terms
therein and those terms made a part thereof by the Trust Indenture Act of
1939, as amended. For definitions of certain capitalized terms used in the
following summary, see "--Certain Definitions."
GENERAL
The terms of the Exchange Notes will be identical in all material respects
to the Senior Notes, except that (i) the Exchange Notes will have been
registered under the Securities Act and therefore will not be subject to
certain restrictions on transfer applicable to the Senior Notes and (ii)
Holders of the Exchange Notes will not be entitled to certain rights of
Holders of Senior Notes under the Registration Rights Agreement.
The Exchange Notes will be unsecured (except to the extent described under
"--Security" below) unsubordinated obligations of the Company, initially
limited to $200,000,000 aggregate principal amount, and will mature on June 1,
2007. Each Exchange Note will bear interest at the rate of 11% per annum from
the Closing Date or from the most recent Interest Payment Date to which
interest has been paid or provided for, payable semiannually (to Holders of
record at the close of business on the May 15 or November 15 immediately
preceding the Interest Payment Date) on June 1 and December 1, of each year,
commencing December 1, 1997.
Principal of, premium, if any, and interest on the Exchange Notes will be
payable, and the Exchange Notes may be exchanged or transferred, at the office
or agency of the Company in the Borough of Manhattan, The City of New York
(which initially will be the corporate trust office of the Trustee at 114 West
47th Street, New York, New York 10036-1532); provided that, at the option of
the Company, payment of interest may be made by check mailed to the Holders at
their addresses as they appear in the Security Register.
The Exchange Notes will be issued only in fully registered form, without
coupons, in denominations of $1,000 of principal amount and any integral
multiple thereof. See "--Book-Entry; Delivery and Form." No service charge
will be made for any registration of transfer or exchange of Exchange Notes,
but the Company may require payment of a sum sufficient to cover any transfer
tax or other similar governmental charge payable in connection therewith.
Subject to the covenants described below under "Covenants" and applicable
law, the Company may issue additional Notes under the Indenture. The Exchange
Notes offered hereby and any additional Notes subsequently issued would be
treated as a single class for all purposes under the Indenture.
OPTIONAL REDEMPTION
The Exchange Notes will be redeemable, at the Company's option, in whole or
in part, at any time or from time to time, on or after June 1, 2002 and prior
to maturity, upon not less than 30 nor more than 60 days' prior notice mailed
by first class mail to each Holder's last address, as it appears in the
Security Register, at the following Redemption Prices (expressed in
percentages of principal amount), plus accrued and unpaid interest to the
Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date that is prior to the Redemption Date to receive interest
due on an Interest Payment Date), if redeemed during the 12-month period
commencing June 1, of the years set forth below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2002..................................................... 105.500%
2003..................................................... 102.750
2004 and thereafter...................................... 100.000
</TABLE>
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In addition, at any time prior to June 1, 2000, the Company may redeem up to
35% of the principal amount of the Senior Notes and the Exchange Notes with
the proceeds of one or more Public Equity Offerings following which a Public
Market occurs, at any time or from time to time in part, at a Redemption Price
(expressed as a percentage of principal amount) of 111%, plus accrued and
unpaid interest to the Redemption Date (subject to the rights of Holders of
record on the relevant Regular Record Date that is prior to the Redemption
Date to receive interest due on an Interest Payment Date); provided that at
least $130.0 million aggregate principal amount of Senior Notes and the
Exchange Notes remains outstanding after each such redemption.
If less than all of the Notes are to be redeemed at any time, the Trustee
will select the Notes, or portions thereof, for redemption in compliance with
the requirements of the principal national securities exchange, if any, on
which the Notes are listed or, if the Notes are not listed on a national
securities exchange, on a pro rata basis, by lot or by such other method as
the Trustee in its sole discretion shall deem to be fair and appropriate;
provided that no Note of $1,000 in principal amount or less shall be redeemed
in part. If any Note is to be redeemed in part only, the notice of redemption
relating to such Note shall state the portion of the principal amount thereof
to be redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note.
SECURITY
The Indenture requires that a portion of the proceeds from the Offering
remain subject to the Pledge Agreement and be invested in Pledged Securities
in such amounts and maturities as will be sufficient upon receipt of scheduled
interest and principal payments of such securities, in the opinion of a
nationally recognized firm of independent public accountants selected by the
Company, to provide for payment in full of the first six scheduled interest
payments due on the Senior Notes and the Exchange Notes. Approximately $62.7
million of such proceeds are held by the Trustee as security for and to fund
the first six interest payments on the Senior Notes and the Exchange Notes.
The Pledged Securities are pledged to the Trustee for the benefit of the
Holders of the Senior Notes and the Exchange Notes pursuant to the Pledge
Agreement and are being held by the Trustee in the Pledge Account. Pursuant to
the Pledge Agreement, immediately prior to an Interest Payment Date, the
Company may either deposit with the Trustee from funds otherwise available to
the Company cash sufficient to pay the interest scheduled to be paid on such
date or the Company may direct the Trustee to release from the Pledge Account
proceeds sufficient to pay interest then due on the Senior Notes and the
Exchange Notes. A failure to pay interest on the Senior Notes or the Exchange
Notes in a timely manner through the first six scheduled interest payment
dates will constitute an immediate Event of Default under the Indenture, with
no grace or cure period. The Pledged Securities and Pledge Account will also
secure the repayment of the principal amount and premium on the Senior Notes
and the Exchange Notes.
Under the Pledge Agreement, once the Company makes the first six scheduled
interest payments on the Exchange Notes, all of the remaining Pledged
Securities, if any, will be released from the Pledge Account and thereafter
the Exchange Notes will be unsecured.
EXCHANGE OFFER; REGISTRATION RIGHTS
The Company entered into the Registration Rights Agreement with the
Placement Agents, for the benefit of the holders of Senior Notes, pursuant to
which the Company agreed to file the Registration Statement (of which this
Prospectus is a part) with the Commission. The Registration Rights Agreement
provides that the Company will, at its cost, use its best efforts to cause the
Registration Statement to be filed with the SEC not later than 60 days after
the Closing Date (as defined in the Purchase Agreement attached as an exhibit
to the Registration Statement of which this Prospectus is a part) and declared
effective under the Securities Act. Upon the effectiveness of the Registration
Statement, the Company will offer the Exchange Notes in exchange for surrender
of the Senior Notes. The Company has agreed to keep the Exchange Offer open
for not less than 20 days after the date notice of the Exchange Offer is
mailed to the holders of Senior Notes. For each Senior Note
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surrendered to the Company pursuant to the Exchange Offer, the holder of such
Senior Note will receive an Exchange Note having a principal amount equal to
that of the surrendered Senior Note. Under existing Commission
interpretations, the Exchange Notes would be freely transferable by holders
other than affiliates of the Company after the Exchange Offer without further
registration under the Securities Act if the holder of the Exchange Notes
represents that it is acquiring the Exchange Notes in the ordinary course of
its business, that it has no arrangement or understanding with any person to
participate in the distribution of the Exchange Notes and that it is not an
affiliate of the Company, as such terms are interpreted by the Commission;
provided that broker-dealers ("Participating Broker-Dealers") receiving
Exchange Notes in the Exchange Offer will have a prospectus delivery
requirement with respect to resales of such Exchange Notes. The Commission has
taken the position that Participating Broker-Dealers may fulfill their
prospectus delivery requirements with respect to Exchange Notes with the
prospectus contained in the Registration Statement under certain
circumstances. Under the Registration Rights Agreement, the Company is
required to allow Participating Broker-Dealers and other persons, if any, with
similar prospectus delivery requirements to use this Prospectus in connection
with the resale of such Exchange Notes.
A holder of Senior Notes who wishes to exchange such Senior Notes for
Exchange Notes in the Exchange Offer will be required to represent that, among
other things, any Exchange Notes to be received by it will be acquired in the
ordinary course of its business and that at the time of the commencement of
the Exchange Offer it has no arrangement or understanding with any person to
participate in a distribution (within the meaning of the Securities Act) of
the Exchange Notes and that it is not an "affiliate" of the Company, as
defined in Rule 405 of the Securities Act, or if it is an affiliate, that it
will comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable.
The Company has filed the Registration Statement (of which this Prospectus
is a part) and will commence the Exchange Offer pursuant to the Registration
Rights Agreement. In the event that applicable interpretations of the staff of
the Commission do not permit the Company to effect the Exchange Offer, or
under certain other circumstances, the Company has agreed, at its cost, to use
its best efforts to file and cause to become effective a shelf registration
statement (the "Shelf Registration Statement") with respect to resales of the
Senior Notes and to keep the Shelf Registration Statement effective until the
expiration of the time period referred to in Rule 144(k) under the Securities
Act or such shorter period that will terminate when all Senior Notes covered
by the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement. The Company has agreed, in the event a Shelf
Registration Statement is filed, among other things, to provide to each holder
for whom such Shelf Registration Statement was filed copies of the prospectus
which is a part of the Shelf Registration Statement, to notify each such
holder when the Shelf Registration Statement has become effective and to take
certain other actions as are required to permit unrestricted resales of the
Senior Notes. A holder selling such Senior Notes pursuant to the Shelf
Registration Statement generally would be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement which are applicable to such
holder (including certain indemnification obligations).
In the event the Exchange Offer is not consummated and a Shelf Registration
Statement is not declared effective on or prior to the date that is six months
after the Closing Date, the interest rate on the Senior Notes will be
increased by .5% per annum until the Exchange Offer is consummated or the
Shelf Registration is declared effective.
Senior Notes not tendered in the Exchange Offer shall accrue interest at the
rate of 11% per annum and be subject to all of the terms and conditions
specified in the Indenture and to the transfer restrictions described in
"Transfer Restrictions."
This summary of certain provisions of the Registration Rights Agreement does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, all the provisions of the Registration Rights
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Agreement, a copy of which has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
RANKING
The Indebtedness evidenced by the Exchange Notes will rank pari passu in
right of payment with the Senior Notes and all other existing and future
unsubordinated indebtedness of the Company and senior in right of payment to
all existing and future subordinated indebtedness of the Company. After giving
pro forma effect to the Reorganization, as of June 30, 1997, the Company would
have had no indebtedness outstanding other than the Senior Notes and the
Exchange Notes. The Company is permitted to incur additional indebtedness to
finance the acquisition of equipment, inventory and network assets and up to
$100 million of other indebtedness and is permitted to secure any such
indebtedness. The Exchange Notes will be effectively subordinated to such
security interests to the extent of such security interests.
The Company is a holding company which conducts substantially all of its
business through subsidiaries. The Company's subsidiaries will have no direct
obligation to pay amounts due on the Senior Notes and the Exchange Notes and
will not guarantee the Senior Notes and the Exchange Notes. As a result, the
Senior Notes and, the Exchange Notes will be, effectively subordinated to all
existing and future indebtedness and other liabilities (including trade
payables) of the Company's subsidiaries. After giving pro forma effect to the
Reorganization, as of June 30, 1997, the Company's subsidiaries would have had
approximately $37.7 million of liabilities (excluding intercompany payables),
including approximately $14.4 million of indebtedness (including capital
leases). The Company will be dependent upon access to the cash flow or assets
of its subsidiaries to make payments on the Exchange Notes and the Company's
ability to obtain such access may be limited by law. See "Risk Factors--
Holding Company Structure; Priority of Secured Debt."
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Indenture. Reference is made to the
Indenture for the definition of any other capitalized term used herein for
which no definition is provided.
"Acquired Assets" means (i) the Capital Stock of any Person that becomes a
Restricted Subsidiary after the Closing Date and (ii) the real or personal
property of any Person that becomes a Restricted Subsidiary after the Closing
Date.
"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person becomes a Restricted Subsidiary or assumed in connection with an
Asset Acquisition by a Restricted Subsidiary; provided that Indebtedness of
such Person which is redeemed, defeased, retired or otherwise repaid at the
time of or immediately upon consummation of the transactions by which such
Person becomes a Restricted Subsidiary or such Asset Acquisition (including
any Indebtedness of any Reorganization Subsidiary to be repaid with the
proceeds from the sale of the Notes upon consummation of the Reorganization)
shall not be Acquired Indebtedness.
"Adjusted Consolidated Net Income" means, for any period, the aggregate net
income (or loss) of the Company and its Restricted Subsidiaries for such
period determined in conformity with GAAP; provided that the following items
shall be excluded in computing Adjusted Consolidated Net Income (without
duplication): (i) the net income (or loss) of any Person (other than a
Restricted Subsidiary) in which any Person (other than the Company or any of
its Restricted Subsidiaries) has a joint interest and the net income (or loss)
of any Unrestricted Subsidiary, except (x) with respect to net income, to the
extent of the amount of dividends or other distributions actually paid to the
Company or any of its Restricted Subsidiaries by such other Person or such
Unrestricted Subsidiary during such period and (y) with respect to net losses,
to the extent of the amount of cash contributed by the Company or any
Restricted Subsidiary to such Person during such period; (ii) solely for the
purposes of calculating the amount of Restricted Payments that may be made
pursuant to clause (C) of the first
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paragraph of the "Limitation on Restricted Payments" covenant described below
(and in such case, except to the extent includable pursuant to clause (i)
above), the net income (or loss) of any Person accrued prior to the date it
becomes a Restricted Subsidiary or is merged into or consolidated with the
Company or any of its Restricted Subsidiaries or all or substantially all of
the property and assets of such Person are acquired by the Company or any of
its Restricted Subsidiaries; (iii) the net income of any Restricted Subsidiary
to the extent that the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary of such net income is not at the
time permitted by the operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Subsidiary; (iv) any gains or losses (on an
after-tax basis) attributable to Asset Sales; (v) except for purposes of
calculating the amount of Restricted Payments that may be made pursuant to
clause (C) of the first paragraph of the "Limitation on Restricted Payments"
covenant described below, any amount paid or accrued as dividends on Preferred
Stock (other than accrued dividends which, pursuant to the terms of the
Preferred Stock, will not be payable prior to the first anniversary after the
Stated Maturity of the Notes) of the Company or any Restricted Subsidiary
owned by Persons other than the Company and any of its Restricted
Subsidiaries; and (vi) all extraordinary gains and extraordinary losses.
"Adjusted Consolidated Net Tangible Assets" means the total amount of assets
of the Company and its Restricted Subsidiaries (less applicable depreciation,
amortization and other valuation reserves), except to the extent resulting
from write-ups of capital assets (excluding write-ups in connection with
accounting for acquisitions in conformity with GAAP), after deducting
therefrom (i) all current liabilities of the Company and its Restricted
Subsidiaries (excluding intercompany items) and (ii) all goodwill, trade
names, trademarks, patents, unamortized debt discount and expense and other
like intangibles, all as set forth on the most recent quarterly or annual
consolidated balance sheet of the Company and its Restricted Subsidiaries,
prepared in conformity with GAAP and filed with the Commission or provided to
the Trustee pursuant to the "Commission Reports and Reports to Holders"
covenant described below.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Asset Acquisition" means (i) an investment by the Company or any of its
Restricted Subsidiaries in any other Person pursuant to which such Person
shall become a Restricted Subsidiary or shall be merged into or consolidated
with the Company or any of its Restricted Subsidiaries; provided that such
Person's primary business is related, ancillary or complementary to the
businesses of the Company and its Restricted Subsidiaries on the date of such
investment or (ii) an acquisition by the Company or any of its Restricted
Subsidiaries of the property and assets of any Person other than the Company
or any of its Restricted Subsidiaries that constitute substantially all of a
division or line of business of such Person; provided that the property and
assets acquired are related, ancillary or complementary to the businesses of
the Company and its Restricted Subsidiaries on the date of such acquisition.
"Asset Disposition" means the sale or other disposition by the Company or
any of its Restricted Subsidiaries (other than to the Company or another
Restricted Subsidiary) of (i) all or substantially all of the Capital Stock of
any Restricted Subsidiary or (ii) all or substantially all of the assets that
constitute a division or line of business of the Company or any of its
Restricted Subsidiaries.
"Asset Sale" means any sale, transfer or other disposition (including by way
of merger, consolidation or sale-leaseback transaction) in one transaction or
a series of related transactions by the Company or any of its Restricted
Subsidiaries to any Person other than the Company or any of its Restricted
Subsidiaries of (i) all or any of the Capital Stock of any Restricted
Subsidiary, (ii) all or substantially all of the property and assets of an
operating unit or business of the Company or any of its Restricted
Subsidiaries or (iii) any other property and
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assets (other than the Capital Stock or other Investment in an Unrestricted
Subsidiary) of the Company or any of its Restricted Subsidiaries outside the
ordinary course of business of the Company or such Restricted Subsidiary and,
in each case, that is not governed by the provisions of the Indenture
applicable to mergers, consolidations and sales of all or substantially all of
the assets of the Company; provided that "Asset Sale" shall not include (a)
sales, transfers or other dispositions of inventory, receivables and other
current assets, (b) sales, transfers or other dispositions of assets with a
fair market value (as certified in an Officers' Certificate) not in excess of
$500,000 in any transaction or series of related transactions or (c) sales,
transfers or other dispositions of assets for consideration at least equal to
the fair market value of the assets sold, transferred or otherwise disposed of
to the extent the consideration received would satisfy clause (B) of the
"Limitation on Assets Sales" covenant described below, provided that after
giving pro forma effect to such exchange, the Consolidated Leverage Ratio
shall be no greater than the Consolidated Leverage Ratio immediately prior to
such exchange.
"Average Life" means, at any date of determination with respect to any debt
security, the quotient obtained by dividing (i) the sum of the products of (a)
the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security and (b) the
amount of such principal payment by (ii) the sum of all such principal
payments.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, whether outstanding on the
Closing Date or issued thereafter, including, without limitation, all Common
Stock and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present
value of the rental obligations of such Person as lessee, in conformity with
GAAP, is required to be capitalized on the balance sheet of such Person.
"Capitalized Lease Obligations" means the discounted present value of the
rental obligations under a Capitalized Lease.
"Change of Control" means such time as (i) (a) prior to the occurrence of a
Public Market, a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act) becomes the ultimate "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of Voting Stock representing a
greater percentage of the total voting power of the Voting Stock of the
Company, on a fully diluted basis, than is held by the Existing Stockholders
on such date and (b) after the occurrence of a Public Market, a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange
Act) becomes the ultimate "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act) of more than 35% of the total voting power of the Voting
Stock of the Company on a fully diluted basis and such ownership represents a
greater percentage of the total voting power of the Voting Stock of the
Company, on a fully diluted basis, than is held by the Existing Stockholders
on such date; or (ii) individuals who on the Closing Date constitute the Board
of Directors (together with any new directors whose election by the Board of
Directors or whose nomination by the Board of Directors for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
members of the Board of Directors then in office who either were members of
the Board of Directors on the Closing Date or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the members of the Board of Directors then in office.
"Closing Date" means the date on which the Notes are originally issued under
the Indenture.
"Common Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's equity, other than Preferred Stock of
such Person, whether outstanding on the Closing Date or issued thereafter,
including, without limitation, all series and classes of such common stock.
"Consolidated EBITDA" means, for any period, the sum of the amounts for such
period of (i) Adjusted Consolidated Net Income, (ii) Consolidated Interest
Expense to the extent such amount was deducted in
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calculating Adjusted Consolidated Net Income, (iii) income taxes, to the
extent such amount was deducted in calculating Adjusted Consolidated Net
Income (other than income taxes (either positive or negative) attributable to
extraordinary and non-recurring gains or losses or sales of assets), (iv)
depreciation expense, to the extent such amount was deducted in calculating
Adjusted Consolidated Net Income, (v) amortization expense, to the extent such
amount was deducted in calculating Adjusted Consolidated Net Income, and (vi)
all other non-cash items reducing Adjusted Consolidated Net Income (other than
items that will require cash payments and for which an accrual or reserve is,
or is required by GAAP to be, made), less all non-cash items increasing
Adjusted Consolidated Net Income, all as determined on a consolidated basis
for the Company and its Restricted Subsidiaries in conformity with GAAP;
provided that, if any Restricted Subsidiary is not a Wholly Owned Restricted
Subsidiary, Consolidated EBITDA shall be reduced (to the extent not otherwise
reduced in accordance with GAAP) by an amount equal to (A) the amount of the
Adjusted Consolidated Net Income attributable to such Restricted Subsidiary
multiplied by (B) the quotient of (1) the number of shares of outstanding
Common Stock of such Restricted Subsidiary not owned on the last day of such
period by the Company or any of its Restricted Subsidiaries divided by (2) the
total number of shares of outstanding Common Stock of such Restricted
Subsidiary on the last day of such period.
"Consolidated Interest Expense" means, for any period, the aggregate amount
of interest in respect of Indebtedness (including, without limitation,
amortization of original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in accordance with the
effective interest method of accounting; all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers'
acceptance financing; the net costs associated with Interest Rate Agreements;
and Indebtedness that is Guaranteed or secured by the Company or any of its
Restricted Subsidiaries) and all but the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid
or to be accrued by the Company and its Restricted Subsidiaries during such
period; excluding, however, (i) any amount of such interest of any Restricted
Subsidiary if the net income of such Restricted Subsidiary is excluded in the
calculation of Adjusted Consolidated Net Income pursuant to clause (iii) of
the definition thereof (but only in the same proportion as the net income of
such Restricted Subsidiary is excluded from the calculation of Adjusted
Consolidated Net Income pursuant to clause (iii) of the definition thereof)
and (ii) any premiums, fees and expenses (and any amortization thereof)
payable in connection with the offering of the Notes and the Reorganization,
all as determined on a consolidated basis (without taking into account
Unrestricted Subsidiaries) in conformity with GAAP.
"Consolidated Leverage Ratio" means, on any Transaction Date, the ratio of
(i) the aggregate amount of Indebtedness of the Company and its Restricted
Subsidiaries on a consolidated basis outstanding on such Transaction Date to
(ii) the aggregate amount of Consolidated EBITDA for the then most recent four
fiscal quarters for which financial statements of the Company have been filed
with the Commission or provided to the Trustee pursuant to the "Commission
Reports and Reports to Holders" covenant described below (such four fiscal
quarter period being the "Four Quarter Period"); provided that, in making the
foregoing calculation, (A) pro forma effect shall be given to any Indebtedness
to be Incurred or repaid on the Transaction Date; (B) pro forma effect shall
be given to Asset Dispositions and Asset Acquisitions (including giving pro
forma effect to the application of proceeds of any Asset Disposition) that
occur from the beginning of the Four Quarter Period through the Transaction
Date (the "Reference Period"), as if they had occurred and such proceeds had
been applied on the first day of such Reference Period; (C) pro forma effect
shall be given to asset dispositions and asset acquisitions (including giving
pro forma effect to the application of proceeds of any asset disposition) that
have been made by any Person that has become a Restricted Subsidiary or has
been merged with or into the Company or any Restricted Subsidiary during such
Reference Period and that would have constituted Asset Dispositions or Asset
Acquisitions had such transactions occurred when such Person was a Restricted
Subsidiary as if such asset dispositions or asset acquisitions were Asset
Dispositions or Asset Acquisitions that occurred on the first day of such
Reference Period; provided that to the extent that clause (B) or (C) of this
sentence requires that pro forma effect be given to an Asset Acquisition or
Asset Disposition, such pro forma calculation shall be based upon the four
full fiscal quarters immediately preceding the Transaction Date of the Person,
or division or line of business of the Person, that is acquired or disposed of
for which
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financial information is available; and (D) the aggregate amount of
Indebtedness outstanding as of the end of the Reference Period will be deemed
to include the total amount of funds outstanding and/or available on the
Transaction Date under any revolving credit or similar facilities of the
Company or its Restricted Subsidiaries.
"Consolidated Net Worth" means, at any date of determination, stockholders'
equity as set forth on the most recently available quarterly or annual
consolidated balance sheet of the Company and its Restricted Subsidiaries
(which shall be as of a date not more than 90 days prior to the date of such
computation and which shall not take into account Unrestricted Subsidiaries),
less any amounts attributable to Redeemable Stock or any equity security
convertible into or exchangeable for Indebtedness, the cost of treasury stock
and the principal amount of any promissory notes receivable from the sale of
the Capital Stock of the Company or any of its Restricted Subsidiaries, each
item to be determined in conformity with GAAP (excluding the effects of
foreign currency exchange adjustments under Financial Accounting Standards
Board Statement of Financial Accounting Standards No. 52).
"Credit Agreement" means the $100 million credit facility to be entered into
by the Company and its Restricted Subsidiaries and NationsBank of Texas, N.A.
pursuant to a commitment letter dated May 9, 1997.
"Credit Facilities" means revolving credit or working capital facilities or
similar facilities made available from time to time to the Company and its
Restricted Subsidiaries.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Existing Stockholders" means ITC Holding, Campbell B. Lanier, III and SCANA
Corporation and their Affiliates, and Campbell B. Lanier, III's spouse and any
one or more of his lineal descendants and their spouses; provided however,
that any such person other than Campbell B. Lanier, III shall only be deemed
to be an "Existing Stockholder" to the extent such person's Capital Stock of
the Company was received, directly or indirectly, from Campbell B. Lanier,
III.
"fair market value" means the price that would be paid in an arm's-length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy, as determined in
good faith by the Board of Directors, whose determination shall be conclusive
if evidenced by a Board Resolution; provided that for purposes of clause
(viii) of the second paragraph of the "Limitation on Indebtedness" covenant,
(x) the fair market value of any security registered under the Exchange Act
shall be the average of the closing prices, regular way, of such security for
the 20 consecutive trading days immediately preceding the capital contribution
or sale of Capital Stock and (y) in the event the aggregate fair market value
of any other property (other than cash or cash equivalents) received by the
Company exceeds $10 million, the fair market value of such property shall be
determined by a nationally recognized investment banking firm and set forth in
their written opinion which shall be delivered to the Trustee.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time, including, without limitation,
those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or
in such other statements by such other entity as approved by a significant
segment of the accounting profession. All ratios and computations contained or
referred to in the Indenture shall be computed in conformity with GAAP applied
on a consistent basis, except that computations made for purposes of
determining compliance with the terms of the covenants and with other
provisions of the Indenture shall be made without giving effect to (i) the
amortization of any expenses incurred in connection with the offering of the
Notes or the Reorganization and (ii) except as otherwise provided, the
amortization of any amounts required or permitted by Accounting Principles
Board Opinion Nos. 16 and 17.
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"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and,
without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness of
such other Person (whether arising by virtue of partnership arrangements, or
by agreements to keep-well, to purchase assets, goods, securities or services
(unless such purchase arrangements are on arm's-length and are entered into in
the ordinary course of business), to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of
assuring in any other manner the obligee of such Indebtedness of the payment
thereof or to protect such obligee against loss in respect thereof (in whole
or in part); provided that the term "Guarantee" shall not include endorsements
for collection or deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning.
"Holder" means the registered holder of any Note.
"Incur" means, with respect to any Indebtedness, to incur, create, issue,
assume, Guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, such Indebtedness,
including an Incurrence of Acquired Indebtedness; provided that neither the
accrual of interest nor the accretion of original issue discount shall be
considered an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), (iv) all obligations of such
Person to pay the deferred and unpaid purchase price of property or services,
which purchase price is due more than six months after the date of placing
such property in service or taking delivery and title thereto or the
completion of such services, except Trade Payables, (v) all Capitalized Lease
Obligations of such Person, (vi) all Indebtedness of other Persons secured by
a Lien on any asset of such Person, whether or not such Indebtedness is
assumed by such Person; provided that the amount of such Indebtedness shall be
the lesser of (A) the fair market value of such asset at such date of
determination and (B) the amount of such Indebtedness, (vii) all Indebtedness
of other Persons Guaranteed by such Person to the extent such Indebtedness is
Guaranteed by such Person and (viii) to the extent not otherwise included in
this definition, obligations under Currency Agreements and Interest Rate
Agreements. The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date (or, in the case of a revolving credit or
other similar facility, the total amount of funds outstanding and/or available
on the date of determination) of all unconditional obligations as described
above and, with respect to contingent obligations, the maximum liability upon
the occurrence of the contingency giving rise to the obligation, provided (A)
that the amount outstanding at any time of any Indebtedness issued with
original issue discount is the face amount of such Indebtedness less the
remaining unamortized portion of the original issue discount of such
Indebtedness at the time of its issuance as determined in conformity with
GAAP, (B) that money borrowed and set aside at the time of the Incurrence of
any Indebtedness in order to prefund the payment of the interest on such
Indebtedness shall not be deemed to be "Indebtedness" and (C) that
Indebtedness shall not include any liability for federal, state, local or
other taxes.
"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement, option or future contract or other similar
agreement or arrangement.
"Investment" in any Person means any direct or indirect advance, loan or
other extension of credit (including, without limitation, by way of Guarantee
or similar arrangement; but excluding advances to customers in the ordinary
course of business that are, in conformity with GAAP, recorded as accounts
receivable on the balance sheet of the Company or its Restricted Subsidiaries)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, bonds, notes,
debentures or other similar instruments issued by, such Person and shall
include (i) the designation of a Restricted Subsidiary as an Unrestricted
Subsidiary and
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(ii) the fair market value of the Capital Stock (or any other Investment),
held by the Company or any of its Restricted Subsidiaries, of (or in) any
Person that has ceased to be a Restricted Subsidiary, including, without
limitation, by reason of any transaction permitted by clause (iii) of the
"Limitation on the Issuance and Sale of Capital Stock of Restricted
Subsidiaries" covenant described below. For purposes of the definition of
"Unrestricted Subsidiary" and the "Limitation on Restricted Payments" covenant
described below, (i) "Investment" shall include the fair market value of the
assets (net of liabilities (other than liabilities to the Company or any of
its Subsidiaries)) of any Restricted Subsidiary at the time that such
Restricted Subsidiary is designated an Unrestricted Subsidiary, (ii) the fair
market value of the assets (net of liabilities (other than liabilities to the
Company or any of its Subsidiaries)) of any Unrestricted Subsidiary at the
time that such Unrestricted Subsidiary is designated a Restricted Subsidiary
shall be considered a reduction in outstanding Investments and (iii) any
property transferred to or from any Person shall be valued at its fair market
value at the time of such transfer.
"ITC Holding" means ITC Holding Company, Inc., a Delaware corporation.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, without limitation, any conditional sale or
other title retention agreement or lease in the nature thereof or any
agreement to give any security interest).
"Net Cash Proceeds" means, (a) with respect to any Asset Sale, the proceeds
of such Asset Sale in the form of cash or cash equivalents, including payments
in respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations are financed
or sold with recourse to the Company or any Restricted Subsidiary) and
proceeds from the conversion of other property received when converted to cash
or cash equivalents, net of (i) brokerage commissions and other fees and
expenses (including fees and expenses of counsel and investment bankers)
related to such Asset Sale, (ii) provisions for all taxes (whether or not such
taxes will actually be paid or are payable) as a result of such Asset Sale
without regard to the consolidated results of operations of the Company and
its Restricted Subsidiaries, taken as a whole, (iii) payments made to repay
Indebtedness or any other obligation outstanding at the time of such Asset
Sale that either (A) is secured by a Lien on the property or assets sold or
(B) is required to be paid as a result of such sale and (iv) appropriate
amounts to be provided by the Company or any Restricted Subsidiary as a
reserve against any liabilities associated with such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as determined
in conformity with GAAP, and (b) with respect to any capital contribution or
issuance or sale of Capital Stock, options, warrants or other rights to
acquire Capital Stock or Indebtedness, the proceeds of such capital
contribution or issuance or sale in the form of cash or cash equivalents,
including payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any
Restricted Subsidiary) and proceeds from the conversion of other property
received when converted to cash or cash equivalents, net of attorney's fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees incurred in connection
with such issuance or sale and net of taxes or payable as a result thereof.
"Offer to Purchase" means an offer by the Company to purchase Notes from the
Holders commenced by mailing a notice to the Trustee and each Holder stating:
(i) the covenant pursuant to which the offer is being made and that all Notes
validly tendered will be accepted for payment on a pro rata basis; (ii) the
purchase price and the date of purchase (which shall be a Business Day no
earlier than 30 days nor later than 60 days from the date such notice is
mailed) (the "Payment Date"); (iii) that any Note not tendered will continue
to accrue interest pursuant to its terms; (iv) that, unless the Company
defaults in the payment of the purchase price, any Note accepted for payment
pursuant to the Offer to Purchase shall cease to accrue interest on and after
the Payment Date; (v) that Holders electing to have a Note purchased pursuant
to the Offer to Purchase will be required to surrender the Note, together with
the form entitled "Option of the Holder to Elect Purchase" on the reverse side
of the Note completed, to the Paying Agent at the address specified in the
notice prior to the close of business on
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the Business Day immediately preceding the Payment Date; (vi) that Holders
will be entitled to withdraw their election if the Paying Agent receives, not
later than the close of business on the third Business Day immediately
preceding the Payment Date, a facsimile transmission or letter setting forth
the name of such Holder, the principal amount of Notes delivered for purchase
and a statement that such Holder is withdrawing his election to have such
Notes purchased; and (vii) that Holders whose Notes are being purchased only
in part will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered; provided that each Note purchased and each
new Note issued shall be in a principal amount of $1,000 or integral multiples
thereof. On the Payment Date, the Company shall (i) accept for payment on a
pro rata basis Notes or portions thereof tendered pursuant to an Offer to
Purchase; (ii) deposit with the Paying Agent money sufficient to pay the
purchase price of all Notes or portions thereof so accepted; and (iii)
deliver, or cause to be delivered, to the Trustee all Notes or portions
thereof so accepted together with an Officers' Certificate specifying the
Notes or portions thereof accepted for payment by the Company. The Paying
Agent shall promptly mail to the Holders of Notes so accepted payment in an
amount equal to the purchase price, and the Trustee shall promptly
authenticate and mail to such Holders a new Note equal in principal amount to
any unpurchased portion of the Note surrendered; provided that each Note
purchased and each new Note issued shall be in a principal amount of $1,000 or
integral multiples thereof. The Company will publicly announce the results of
an Offer to Purchase as soon as practicable after the Payment Date. The
Trustee shall act as the Paying Agent for an Offer to Purchase. The Company
will comply with Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent such laws and regulations are
applicable, in the event that the Company is required to repurchase Notes
pursuant to an Offer to Purchase.
"Permitted Investment" means (i) an Investment in the Company or a
Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary or be merged or consolidated with
or into or transfer or convey all or substantially all its assets to, the
Company or a Restricted Subsidiary; provided that such Person's primary
business is related, ancillary or complementary to the businesses of the
Company and its Restricted Subsidiaries on the date of such Investment; (ii) a
Temporary Cash Investment; (iii) commission, payroll, travel and similar
advances to cover matters that are expected at the time of such advances
ultimately to be treated as expenses in accordance with GAAP; (iv) stock,
obligations or securities received in satisfaction of judgments; (v)
Investments in prepaid expenses, negotiable instruments held for collection,
and lease, utility and workers' compensation, performance and other similar
deposits; and (vi) Interest Rate Agreements and Currency Agreements to the
extent permitted under clause (iv) of the "Limitation on Indebtedness"
covenant described below.
"Permitted Liens" means (i) Liens for taxes, assessments, governmental
charges or claims that are being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a
reserve or other appropriate provisions, if any, as shall be required in
conformity with GAAP shall have been made; (ii) statutory and common law Liens
of landlords and carriers, warehousemen, mechanics, suppliers, materialmen,
repairmen or other similar Liens arising in the ordinary course of business
and with respect to amounts not yet delinquent or being contested in good
faith by appropriate legal proceedings promptly instituted and diligently
conducted and for which a reserve or other appropriate provision, if any, as
shall be required in conformity with GAAP shall have been made; (iii) Liens
incurred or deposits made in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other types of social
security; (iv) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory or regulatory obligations, bankers'
acceptances, surety and appeal bonds, government contracts, performance and
return-of-money bonds and other obligations of a similar nature incurred in
the ordinary course of business (exclusive of obligations for the payment of
borrowed money); (v) easements, rights-of-way, municipal and zoning ordinances
and similar charges, encumbrances, title defects or other irregularities that
do not materially interfere with the ordinary course of business of the
Company or any of its Restricted Subsidiaries; (vi) Liens (including
extensions and renewals thereof) upon real or personal property (including,
without limitation, Acquired Assets) acquired after the Closing Date; provided
that (a) such Lien is created solely for the purpose of securing Indebtedness
Incurred, in accordance with the "Limitation on Indebtedness" covenant
described below, to finance the cost (including, without limitation, the cost
of design, development, construction, acquisition, installation,
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improvement, transportation or integration) of the real or personal property
subject thereto and such Lien is created prior to, at the time of or within
six months after the latest of the acquisition, the completion of construction
or the commencement of full operation of such real or personal property;
provided that in the case of Acquired Assets, the Lien secures the
Indebtedness Incurred to purchase the Capital Stock of the Person to make such
Person a Restricted Subsidiary, (b) the principal amount of the Indebtedness
secured by such Lien does not exceed 100% of such cost and (c) any such Lien
shall not extend to or cover any real or personal property other than such
real or personal property and any improvements on such real or personal
property and any proceeds thereof; (vii) leases or subleases granted to others
that do not materially interfere with the ordinary course of business of the
Company and its Restricted Subsidiaries, taken as a whole; (viii) Liens
encumbering property or assets under construction arising from progress or
partial payments by a customer of the Company or its Restricted Subsidiaries
relating to such property or assets; (ix) any interest or title of a lessor in
the property subject to any Capitalized Lease or operating lease; (x) Liens
arising from filing Uniform Commercial Code financing statements regarding
leases; (xi) Liens on property of, or on shares of Capital Stock or
Indebtedness of, any Person existing at the time such Person becomes, or
becomes a part of, any Restricted Subsidiary; provided that such Liens do not
extend to or cover any property or assets of the Company or any Restricted
Subsidiary other than the property or assets acquired and any proceeds
thereof; (xii) Liens in favor of the Company or any Restricted Subsidiary;
(xiii) Liens arising from the rendering of a final judgment or order against
the Company or any Restricted Subsidiary that does not give rise to an Event
of Default; (xiv) Liens securing reimbursement obligations with respect to
letters of credit that encumber documents and other property relating to such
letters of credit and the products and proceeds thereof; (xv) Liens in favor
of customs and revenue authorities arising as a matter of law to secure
payment of customs duties in connection with the importation of goods; (xvi)
Liens encumbering customary initial deposits and margin deposits, and other
Liens that are either within the general parameters customary in the industry
and incurred in the ordinary course of business, in each case securing
Indebtedness under Interest Rate Agreements and Currency Agreements and
forward contracts, options, future contracts, futures options or similar
agreements or arrangements designed solely to protect the Company or any of
its Restricted Subsidiaries from fluctuations in interest rates, currencies or
the price of commodities; (xvii) Liens arising out of conditional sale, title
retention, consignment or similar arrangements for the sale of goods entered
into by the Company or any of its Restricted Subsidiaries in the ordinary
course of business in accordance with the past practices of the Company and
its Restricted Subsidiaries prior to the Closing Date; (xviii) Liens on or
sales of receivables, including related intangible assets and proceeds
thereof; and (xix) Liens that secure Indebtedness with an aggregate principal
amount not to exceed $5 million at any time outstanding.
"Pledge Account" means the accounts established with the Trustee pursuant to
the terms of the Pledge Agreement for the deposit of the net proceeds from the
sale of the Notes and the purchase of the Pledged Securities.
"Pledge Agreement" means the Pledge and Security Agreement, dated as of the
Closing Date, made by the Company in favor of the Trustee, governing the
disbursement of funds from the Pledge Account, as such agreement may be
amended, restated, supplemented or otherwise modified from time to time.
"Pledged Securities" means the U.S. Government Obligations (and, prior to
the Reorganization, commercial paper rated at least "Prime-1" (or the then
equivalent grade) by Moody's Investors Service, Inc. or "A-1" (or the then
equivalent grade) by Standards & Poor's Ratings Service) to be purchased and
held in the Pledge Account in accordance with the Pledge Agreement.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's preferred or preference equity, whether
outstanding on the Closing Date or issued thereafter, including, without
limitation, all series and classes of such preferred or preference stock.
"Public Equity Offering" means an underwritten primary public offering of
Common Stock of the Company pursuant to an effective registration statement
under the Securities Act.
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A "Public Market" shall be deemed to exist if (i) a Public Equity Offering
has been consummated and (ii) at least 15% of the total issued and outstanding
Common Stock of the Company has been distributed by means of an effective
registration statement under the Securities Act or sales pursuant to Rule 144
under the Securities Act.
"Redeemable Stock" means any class or series of Capital Stock of any Person
that by its terms or otherwise is (i) required to be redeemed prior to the
Stated Maturity of the Notes, (ii) redeemable at the option of the holder of
such class or series of Capital Stock at any time prior to the Stated Maturity
of the Notes or (iii) convertible into or exchangeable for Capital Stock
referred to in clause (i) or (ii) above or Indebtedness having a scheduled
maturity prior to the Stated Maturity of the Notes; provided that any Capital
Stock that would not constitute Redeemable Stock but for provisions thereof
giving holders thereof the right to require such Person to repurchase or
redeem such Capital Stock upon the occurrence of an "asset sale" or "change of
control" occurring prior to the Stated Maturity of the Notes shall not
constitute Redeemable Stock if the "asset sale" or "change of control"
provisions applicable to such Capital Stock are no more favorable in any
material respect to the holders of such Capital Stock than the provisions
contained in "Limitation on Asset Sales" and "Repurchase of Notes upon a
Change of Control" covenants described below are to the holders of the Notes
and such Capital Stock specifically provides that such Person will not
repurchase or redeem any such stock pursuant to such provision prior to the
Company's repurchase of such Notes as are required to be repurchased pursuant
to the "Limitation on Asset Sales" and "Repurchase of Notes upon a Change of
Control" covenants described below.
"Reorganization" means the transactions in which ITC Holding will contribute
to the Company its investments in the Reorganization Subsidiaries (or their
successors-in-interest), which will become Restricted Subsidiaries.
"Reorganization Subsidiaries" means, collectively, (i) DeltaCom, Inc., an
Alabama corporation; (ii) Eastern Telecom, Inc., a Georgia corporation; (iii)
Gulf States Transmission Systems, Inc., a Delaware corporation; (iv) ITC
Transmission Systems, Inc., a Delaware corporation; (v) ITC Transmission
Systems II, Inc., a Delaware corporation; and (vi) Interstate FiberNet, a
Georgia general partnership.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Significant Subsidiary" means, at any date of determination, any Restricted
Subsidiary that, together with its Subsidiaries, (i) for the most recent
fiscal year of the Company, accounted for more than 10% of the consolidated
revenues of the Company and its Restricted Subsidiaries or (ii) as of the end
of such fiscal year, was the owner of more than 10% of the consolidated assets
of the Company and its Restricted Subsidiaries, all as set forth on the most
recently available consolidated financial statements of the Company for such
fiscal year.
"Stated Maturity" means (i) with respect to any debt security, the date
specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable and (ii)
with respect to any scheduled installment of principal of or interest on any
debt security, the date specified in such debt security as the fixed date on
which such installment is due and payable.
"Strategic Subordinated Indebtedness" means Indebtedness of the Company
Incurred to finance the acquisition of a Person engaged in the
Telecommunications Business that by its terms, or by the terms of any
agreement or instrument pursuant to which such Indebtedness is Incurred, (i)
is expressly made subordinate in right of payment to the Notes and (ii)
provides that no payment of principal, premium or interest on, or any other
payment with respect to, such Indebtedness may be made prior to the payment in
full of all of the Company's obligations under the Notes; provided that such
Indebtedness may provide for and be repaid at any time from the proceeds of
the sale of Capital Stock (other than Redeemable Stock) of the Company after
the Incurrence of such Indebtedness.
"Subsidiary" means, with respect to any Person, any corporation, association
or other business entity of which more than 50% of the voting power of the
outstanding Voting Stock is owned, directly or indirectly, by such Person and
one or more other Subsidiaries of such Person.
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"Telecommunications Business" means the development, ownership or operation
of one or more telephone, telecommunications or information systems or the
provision of telephony, telecommunications or information services (including,
without limitation, any voice, video transmission, data or Internet services)
and any related, ancillary or complementary business.
"Temporary Cash Investment" means any of the following: (i) direct
obligations of the United States of America or any agency thereof or
obligations fully and unconditionally guaranteed by the United States of
America or any agency thereof, (ii) time deposit accounts, certificates of
deposit and money market deposits maturing within one year of the date of
acquisition thereof issued by a bank or trust company which is organized under
the laws of the United States of America, any state thereof or any foreign
country recognized by the United States of America, and which bank or trust
company has capital, surplus and undivided profits aggregating in excess of
$50 million (or the foreign currency equivalent thereof) and has outstanding
debt which is rated "A" (or such similar equivalent rating) or higher by at
least one nationally recognized statistical rating organization (as defined in
Rule 436 under the Securities Act) or any money-market fund sponsored by a
registered broker dealer or mutual fund distributor, (iii) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clause (i) above entered into with a bank meeting the
qualifications described in clause (ii) above, (iv) commercial paper, maturing
not more than one year after the date of acquisition, issued by a corporation
(other than an Affiliate of the Company) organized and in existence under the
laws of the United States of America, any state thereof or any foreign country
recognized by the United States of America with a rating at the time as of
which any investment therein is made of "P-1" (or higher) according to Moody's
Investors Service, Inc. or "A-1" (or higher) according to Standard & Poor's
Ratings Service, and (v) securities with maturities of six months or less from
the date of acquisition issued or fully and unconditionally guaranteed by any
state, commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A" by
Standard & Poor's Ratings Service or Moody's Investors Service, Inc.
"Trade Payables" means, with respect to any Person, any accounts payable or
any other indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person or any of its Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods or
services.
"Transaction Date" means, with respect to the Incurrence of any Indebtedness
by the Company or any of its Restricted Subsidiaries, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment,
the date such Restricted Payment is to be made.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors may designate any
Restricted Subsidiary (including any newly acquired or newly formed Subsidiary
of the Company) to be an Unrestricted Subsidiary unless such Subsidiary owns
any Capital Stock of, or owns or holds any Lien on any property of, the
Company or any Restricted Subsidiary; provided that either (A) the Subsidiary
to be so designated has total assets of $1,000 or less or (B) if such
Subsidiary has assets greater than $1,000, such designation would be permitted
under the "Limitation on Restricted Payments" covenant described below. The
Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that (i) no Default or Event of Default shall
have occurred and be continuing at the time of or after giving effect to such
designation and (ii) all Liens and Indebtedness of such Unrestricted
Subsidiary outstanding immediately after such designation would, if Incurred
at such time, have been permitted to be Incurred for all purposes of the
Indenture. Any such designation by the Board of Directors shall be evidenced
to the Trustee by promptly filing with the Trustee a copy of the Board
Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"Voting Stock" means with respect to any Person, Capital Stock of any class
or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.
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"Wholly Owned" means, with respect to any Subsidiary of any Person, the
ownership of all of the outstanding Capital Stock of such Subsidiary (other
than any director's qualifying shares or Investments by foreign nationals
mandated by applicable law) by such Person or one or more Wholly Owned
Subsidiaries of such Person.
COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Indebtedness
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness (other than the Notes and Indebtedness
existing on the Closing Date); provided that the Company may Incur
Indebtedness if, after giving effect to the Incurrence of such Indebtedness
and the receipt and application of the proceeds thereof, the Consolidated
Leverage Ratio would be less than or equal to 7 to 1, for Indebtedness
Incurred on or prior to June 30, 1998, or less than or equal to 5 to 1, for
Indebtedness Incurred thereafter.
Notwithstanding the foregoing, the Company, and (except as specified below)
any Restricted Subsidiary, may Incur each and all of the following: (i)
Indebtedness in an aggregate principal amount outstanding or available at any
time not to exceed $100 million, less any amount of such Indebtedness
permanently repaid as provided under the "Limitation on Asset Sales" covenant
described below; (ii) Indebtedness owed (A) to the Company and evidenced by an
unsubordinated promissory note or (B) to any Restricted Subsidiaries; provided
that any event which results in any such Restricted Subsidiary ceasing to be a
Restricted Subsidiary or any subsequent transfer of such Indebtedness (other
than to the Company or another Restricted Subsidiary) shall be deemed, in each
case, to constitute an Incurrence of such Indebtedness not permitted by this
clause (ii); (iii) Indebtedness issued in exchange for, or the net proceeds of
which are used to refinance or refund, then outstanding Indebtedness (other
than Indebtedness Incurred under clause (i), (ii), (iv), (vi) or (ix) of this
paragraph) and any refinancings of such new Indebtedness in an amount not to
exceed the amount so refinanced or refunded (plus premiums, accrued interest,
fees and expenses); provided that Indebtedness the proceeds of which are used
to refinance or refund the Notes or Indebtedness that is pari passu in right
of payment with, or subordinated in right of payment to, the Notes shall only
be permitted under this clause (iii) if (A) in case the Notes are refinanced
in part or the Indebtedness to be refinanced is pari passu in right of payment
with the Notes, such new Indebtedness, by its terms or by the terms of any
agreement or instrument pursuant to which such new Indebtedness is
outstanding, is expressly made pari passu in right of payment with, or
subordinate in right of payment to, the remaining Notes, (B) in case the
Indebtedness to be refinanced is subordinated in right of payment to the
Notes, such new Indebtedness, by its terms or by the terms of any agreement or
instrument pursuant to which such new Indebtedness is issued or remains
outstanding, is expressly made subordinate in right of payment to the Notes at
least to the extent that the Indebtedness to be refinanced is subordinated to
the Notes and (C) such new Indebtedness, determined as of the date of
Incurrence of such new Indebtedness, does not mature prior to the Stated
Maturity of the Indebtedness to be refinanced or refunded, and the Average
Life of such new Indebtedness is at least equal to the remaining Average Life
of the Indebtedness to be refinanced or refunded; and provided further that in
no event may Indebtedness of the Company be refinanced by means of any
Indebtedness of any Restricted Subsidiary pursuant to this clause (iii); (iv)
Indebtedness (A) in respect of performance, surety or appeal bonds provided in
the ordinary course of business, (B) under Currency Agreements and Interest
Rate Agreements; provided that such agreements (a) are designed solely to
protect the Company or its Subsidiaries against fluctuations in foreign
currency exchange rates or interest rates and (b) do not increase the
Indebtedness of the obligor outstanding at any time other than as a result of
fluctuations in foreign currency exchange rates or interest rates or by reason
of fees, indemnities and compensation payable thereunder or (C) arising from
agreements providing for indemnification, adjustment of purchase price or
similar obligations, or from Guarantees or letters of credit, surety bonds or
performance bonds securing any obligations of the Company or any of its
Restricted Subsidiaries pursuant to such agreements, in each case Incurred in
connection with the disposition of any business, assets or Restricted
Subsidiary (other than Guarantees of Indebtedness Incurred by any Person
acquiring all or any portion of such business, assets or Restricted Subsidiary
for the purpose of
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financing such acquisition), in a principal amount not to exceed the gross
proceeds actually received by the Company or any Restricted Subsidiary in
connection with such disposition; (v) Indebtedness of the Company, to the
extent the net proceeds thereof are promptly (A) used to purchase Notes
tendered in an Offer to Purchase made as a result of a Change of Control or
(B) deposited to defease all of the Notes as described below under
"Defeasance"; (vi) Guarantees of the Notes and Guarantees of Indebtedness of
the Company by any Restricted Subsidiary, provided the Guarantee of such
Indebtedness is permitted by and made in accordance with the "Limitation on
Issuance of Guarantees by Restricted Subsidiaries" covenant described below;
(vii) Indebtedness Incurred to finance the cost (including the cost of design,
development, acquisition, construction, installation, improvement,
transportation or integration) of equipment, inventory or network assets
acquired by the Company or a Restricted Subsidiary after the Closing Date;
(viii) Indebtedness of the Company not to exceed, at any one time outstanding,
two times (A) the Net Cash Proceeds received by the Company after the Closing
Date as a capital contribution or from the issuance and sale of its Capital
Stock (other than Redeemable Stock) to a Person that is not a Subsidiary of
the Company, to the extent such Net Cash Proceeds have not been used pursuant
to clause (C)(2) of the first paragraph or clause (iii), (iv) or (vi) of the
second paragraph of the "Limitation on Restricted Payments" covenant described
below to make a Restricted Payment and (B) 80% of the fair market value of
property (other than cash and cash equivalents) received by the Company after
the Closing Date from a contribution of capital or the sale of its Capital
Stock (other than Redeemable Stock) to a Person that is not a Subsidiary of
the Company, to the extent such capital contribution or sale of Capital Stock
has not been used pursuant to clause (iii), (iv) or (ix) of the second
paragraph of the "Limitation on Restricted Payments" covenant described below
to make a Restricted Payment; provided that such Indebtedness does not mature
prior to the Stated Maturity of the Notes and has an Average Life longer than
the Notes; (ix) Strategic Subordinated Indebtedness; and (x) Indebtedness in
an aggregate principal amount not to exceed $20 million to be Incurred in
connection with the Reorganization.
(b) Notwithstanding any other provision of this "Limitation on Indebtedness"
covenant, the maximum amount of Indebtedness that the Company or a Restricted
Subsidiary may Incur pursuant to this "Limitation on Indebtedness" covenant
shall not be deemed to be exceeded due solely to the result of fluctuations in
the exchange rates of currencies.
(c) For purposes of determining any particular amount of Indebtedness under
this "Limitation on Indebtedness" covenant, (1) Guarantees, Liens or
obligations with respect to letters of credit supporting Indebtedness
otherwise included in the determination of such particular amount shall not be
included and (2) any Liens granted pursuant to the equal and ratable
provisions referred to in the "Limitation on Liens" covenant described below
shall not be treated as Indebtedness. For purposes of determining compliance
with this "Limitation on Indebtedness" covenant, in the event that an item of
Indebtedness meets the criteria of more than one of the types of Indebtedness
described in the above clauses, the Company, in its sole discretion, shall
classify such item of Indebtedness and only be required to include the amount
and type of such Indebtedness in one of such clauses.
Limitation on Restricted Payments
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, (i) declare or pay any dividend or make any
distribution on or with respect to its Capital Stock (other than (x) dividends
or distributions payable solely in shares of its Capital Stock (other than
Redeemable Stock) or in options, warrants or other rights to acquire shares of
such Capital Stock and (y) pro rata dividends or distributions on Common Stock
of Restricted Subsidiaries held by minority stockholders, provided that such
dividends do not in the aggregate exceed the minority stockholders' pro rata
share of such Restricted Subsidiaries' net income from the first day of the
fiscal quarter beginning immediately following the Closing Date) held by
Persons other than the Company or any of its Restricted Subsidiaries, (ii)
purchase, redeem, retire or otherwise acquire for value any shares of Capital
Stock of (A) the Company or an Unrestricted Subsidiary (including options,
warrants or other rights to acquire such shares of Capital Stock) held by any
Person or (B) a Restricted Subsidiary (including options, warrants or other
rights to acquire such shares of Capital Stock) held by any Affiliate of the
Company (other than a Wholly Owned Restricted Subsidiary) or any holder (or
any Affiliate of such holder) of 5% or
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more of the Capital Stock of the Company, (iii) make any voluntary or optional
principal payment, or voluntary or optional redemption, repurchase,
defeasance, or other acquisition or retirement for value, of Indebtedness of
the Company that is subordinated in right of payment to the Notes (other than,
in each case, the purchase, repurchase or acquisition of Indebtedness in
anticipation of satisfying a sinking fund obligation, principal installment or
final maturity, in any case due within one year after the date of such
purchase, repurchase or acquisition) or (iv) make any Investment, other than a
Permitted Investment, in any Person (such payments or any other actions
described in clauses (i) through (iv) above being collectively "Restricted
Payments") if, at the time of, and after giving effect to, the proposed
Restricted Payment: (A) a Default or Event of Default shall have occurred and
be continuing, (B) the Company could not Incur at least $1.00 of Indebtedness
under the first paragraph of the "Limitation on Indebtedness" covenant or (C)
the aggregate amount of all Restricted Payments (the amount, if other than in
cash, to be determined in good faith by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board Resolution) made
after the Closing Date shall exceed the sum of (1) 50% of the aggregate amount
of the Adjusted Consolidated Net Income (or, if the Adjusted Consolidated Net
Income is a loss, minus 100% of the amount of such loss) (excluding, for
purposes of such computation, income resulting from transfers of assets by the
Company or a Restricted Subsidiary to an Unrestricted Subsidiary) accrued on a
cumulative basis during the period (taken as one accounting period) beginning
on the first day of the fiscal quarter immediately following the Closing Date
and ending on the last day of the last fiscal quarter preceding the
Transaction Date for which reports have been filed with the Commission or
provided to the Trustee pursuant to the "Commission Reports and Reports to
Holders" covenant plus (2) the aggregate Net Cash Proceeds received by the
Company after the Closing Date from a capital contribution or the issuance and
sale permitted by the Indenture to a Person who is not a Subsidiary of the
Company of (a) its Capital Stock (other than Redeemable Stock), (b) any
options, warrants or other rights to acquire Capital Stock of the Company (in
each case, exclusive of any Redeemable Stock or any options, warrants or other
rights that are redeemable at the option of the holder, or are required to be
redeemed, prior to the Stated Maturity of the Notes) and (c) Indebtedness of
the Company that has been exchanged for or converted into Capital Stock of the
Company (other than Redeemable Stock), in each case except to the extent such
Net Cash Proceeds are used to Incur Indebtedness pursuant to clause (viii) of
the second paragraph under the "Limitation on Indebtedness" covenant, plus (3)
an amount equal to the net reduction in Investments (other than reductions in
Permitted Investments and reductions in Investments made pursuant to clause
(vi) of the second paragraph of this "Limitation on Restricted Payments"
covenant) in any Person resulting from payments of interest on Indebtedness,
dividends, repayments of loans or advances, or other transfers of assets, in
each case to the Company or any Restricted Subsidiary or from the Net Cash
Proceeds from the sale of any such Investment (except, in each case, to the
extent any such payment or proceeds is included in the calculation of Adjusted
Consolidated Net Income), or from redesignations of Unrestricted Subsidiaries
as Restricted Subsidiaries (valued in each case as provided in the definition
of "Investments"), not to exceed, in each case, the amount of Investments
previously made by the Company or any Restricted Subsidiary in such Person or
Unrestricted Subsidiary.
The foregoing provision shall not be violated by reason of: (i) the payment
of any dividend within 60 days after the date of declaration thereof if, at
such date of declaration, such payment would comply with the foregoing
paragraph; (ii) the redemption, repurchase, defeasance or other acquisition or
retirement for value of Indebtedness that is subordinated in right of payment
to the Notes, including premium, if any, and accrued and unpaid interest, with
the proceeds of, or in exchange for, Indebtedness Incurred under clause (iii)
of the second paragraph of part (a) of the "Limitation on Indebtedness"
covenant; (iii) the repurchase, redemption or other acquisition of Capital
Stock of the Company (or options, warrants or other rights to acquire such
Capital Stock) in exchange for, or out of the proceeds of a substantially
concurrent offering of, shares of Capital Stock (other than Redeemable Stock)
of the Company (or options, warrants or other rights to acquire such Capital
Stock); (iv) the making of any principal payment or the repurchase,
redemption, retirement, defeasance or other acquisition for value of
Indebtedness of the Company which is subordinated in right of payment to the
Notes in exchange for, or out of the proceeds of, a substantially concurrent
offering of shares of the Capital Stock (other than Redeemable Stock) of the
Company (or options, warrants or other rights to acquire such Capital Stock);
(v) payments or distributions to dissenting stockholders pursuant to
applicable law in connection with a consolidation, merger or transfer of
assets that complies with the provisions of the Indenture applicable to
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mergers, consolidations and transfers of all or substantially all of the
property and assets of the Company; (vi) Investments in any Person the primary
business of which is related, ancillary or complementary to the business of
the Company and its Restricted Subsidiaries on the date of such Investments;
provided that the aggregate amount of Investments made pursuant to this clause
(vi) does not exceed the sum of (x) $25 million plus (y) the amount of Net
Cash Proceeds received by the Company after the Closing Date as a capital
contribution or from the sale of its Capital Stock (other than Redeemable
Stock) to a Person who is not a Subsidiary of the Company, except to the
extent such Net Cash Proceeds are used to Incur Indebtedness pursuant to
clause (viii) under the "Limitation on Indebtedness" covenant or to make
Restricted Payments pursuant to clause (C)(2) of the first paragraph, or
clauses (iii) or (iv) of this paragraph, of this "Limitation on Restricted
Payments" covenant, plus (z) the net reduction in Investments made pursuant to
this clause (vi) resulting from distributions on or repayments of such
Investments or from the Net Cash Proceeds from the sale of any such Investment
(except in each case to the extent any such payment or proceeds is included in
the calculation of Adjusted Consolidated Net Income) or from such Person
becoming a Restricted Subsidiary (valued in each case as provided in the
definition of "Investments"), provided that the net reduction in any
Investment shall not exceed the amount of such Investment; (vii) the purchase,
redemption, acquisition, cancellation or other retirement for value of shares
of Capital Stock of the Company to the extent necessary, in the judgment of
the Board of Directors, to prevent the loss or secure the renewal or
reinstatement of any license or franchise held by the Company or any
Restricted Subsidiary from any governmental agency; (viii) the purchase,
redemption, retirement or other acquisition for value of shares of Capital
Stock of the Company, or options to purchase such shares, held by directors,
employees, or former directors or employees of the Company or any Restricted
Subsidiary (or their estates or beneficiaries under their estates) upon their
death, disability, retirement, termination of employment or pursuant to the
terms of any agreement under which such shares of Capital Stock or options
were issued; provided that the aggregate consideration paid for such purchase,
redemption, retirement or other acquisition for value of such shares of
Capital Stock or options after the Closing Date does not exceed $2 million in
any calendar year, or $5 million in the aggregate; or (ix) Investments
acquired as a capital contribution to the Company or in exchange for Capital
Stock (other than Redeemable Stock) of the Company; provided that, except in
the case of clauses (i), (iii) and (iv), no Default or Event of Default shall
have occurred and be continuing, or occur as a consequence of the actions or
payments set forth therein.
Each Restricted Payment permitted pursuant to the preceding paragraph (other
than the Restricted Payment referred to in clause (ii) thereof, an exchange of
Capital Stock for Capital Stock or Indebtedness referred to in clause (iii) or
(iv) thereof and an Investment referred to in clause (ix) thereof), and the
Net Cash Proceeds from any issuance of Capital Stock referred to in clauses
(iii), (iv) and (vi) thereof, shall be included in calculating whether the
conditions of clause (C) of the first paragraph of this "Limitation on
Restricted Payments" covenant have been met with respect to any subsequent
Restricted Payments. In the event the proceeds of an issuance of Capital Stock
of the Company are used for the redemption, repurchase or other acquisition of
the Notes, or Indebtedness that is pari passu in right of payment with the
Notes, then the Net Cash Proceeds of such issuance shall be included in clause
(C) of the first paragraph of this "Limitation on Restricted Payments"
covenant only to the extent such proceeds are not used for such redemption,
repurchase or other acquisition of Indebtedness.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries
The Company will not, and will not permit any Restricted Subsidiary to,
create or otherwise cause or suffer to exist or become effective any
consensual encumbrance or restriction of any kind on the ability of any
Restricted Subsidiary to (i) pay dividends or make any other distributions
permitted by applicable law on any Capital Stock of such Restricted Subsidiary
owned by the Company or any other Restricted Subsidiary, (ii) pay any
Indebtedness owed to the Company or any other Restricted Subsidiary, (iii)
make loans or advances to the Company or any other Restricted Subsidiary or
(iv) transfer any of its property or assets to the Company or any other
Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions: (i) existing on the Closing Date in the Indenture or any other
agreements in effect on the Closing Date, and any extensions, refinancings,
renewals or replacements of such agreements; provided that the encumbrances
and restrictions in any such extensions,
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refinancings, renewals or replacements are no less favorable in any material
respect to the Holders than those encumbrances or restrictions that are then
in effect and that are being extended, refinanced, renewed or replaced; (ii)
existing under or by reason of applicable law; (iii) existing with respect to
any Person or the property or assets of such Person acquired by the Company or
any Restricted Subsidiary and existing at the time of such acquisition and not
incurred in contemplation thereof, which encumbrances or restrictions are not
applicable to any Person or the property or assets of any Person other than
such Person or the property or assets of such Person so acquired; (iv) in the
case of clause (iv) of the first paragraph of this "Limitation on Dividend and
Other Payment Restrictions Affecting Restricted Subsidiaries" covenant, (A)
that restrict in a customary manner the subletting, assignment or transfer of
any property or asset that is a lease, license, conveyance or contract or
similar property or asset, (B) existing by virtue of any transfer of,
agreement to transfer, option or right with respect to, or Lien on, any
property or assets of the Company or any Restricted Subsidiary not otherwise
prohibited by the Indenture or (C) arising or agreed to in the ordinary course
of business, not relating to any Indebtedness, and that do not, individually
or in the aggregate, detract from the value of property or assets of the
Company or any Restricted Subsidiary in any manner material to the Company or
any Restricted Subsidiary; (v) with respect to a Restricted Subsidiary and
imposed pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock of, or property
and assets of, such Restricted Subsidiary; or (vi) contained in the terms of
any Indebtedness or any agreement pursuant to which such Indebtedness was
issued if (A) the encumbrance or restriction applies only in the event of a
payment default or a default with respect to a financial covenant contained in
such Indebtedness or agreement; provided that in the case of the Credit
Agreement the encumbrance or restriction may apply if an event of default
(other than an event of default resulting solely from the breach of a
representation or warranty) occurs and is continuing under the Credit
Agreement; provided that, with respect to any event of default (other than a
payment default, a bankruptcy event with respect to the Company or
Transmission or the loss of a material license or fiber network) under the
Credit Agreement, such encumbrance or restriction may not prohibit dividends
to the Company to pay scheduled interest on the Notes for more than 180 days
in any consecutive 360-day period, (B) the encumbrance or restriction is not
materially more disadvantageous to the Holders of the Notes than is customary
in comparable financings (as determined by the Company) and (C) the Company
determines that any such encumbrance or restriction will not materially affect
the Company's ability to make principal or interest payments on the Notes.
Nothing contained in this "Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries" covenant shall prevent the
Company or any Restricted Subsidiary from (1) creating, incurring, assuming or
suffering to exist any Liens otherwise permitted in the "Limitation on Liens"
covenant described below or (2) restricting the sale or other disposition of
property or assets of the Company or any of its Restricted Subsidiaries that
secure Indebtedness of the Company or any of its Restricted Subsidiaries.
Limitation on the Issuance and Sale of Capital Stock of Restricted
Subsidiaries
The Company will not sell, and will not permit any Restricted Subsidiary,
directly or indirectly, to issue or sell, any shares of Capital Stock of a
Restricted Subsidiary (including options, warrants or other rights to purchase
shares of such Capital Stock) except (i) to the Company or a Wholly Owned
Restricted Subsidiary, (ii) issuances of director's qualifying shares, or
sales to foreign nationals of shares of Capital Stock of foreign Restricted
Subsidiaries, to the extent required by applicable law, (iii) if, immediately
after giving effect to such issuance or sale, such Restricted Subsidiary would
no longer constitute a Restricted Subsidiary and any Investment in such Person
remaining after giving effect to such issuance or sale would have been
permitted to be made under the "Limitation on Restricted Payments" covenant if
made on the date of such issuance or sale or (iv) issuances or sales of Common
Stock of a Restricted Subsidiary, provided that the Company or such Restricted
Subsidiary applies the Net Cash Proceeds, if any, of any such sale in
accordance with clause (A) or (B) of the "Limitation on Asset Sales" covenant
described below.
Limitation on Issuances of Guarantees by Restricted Subsidiaries
The Company will not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness of the Company which is pari passu
in right of payment with, or subordinate in right of payment
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to, the Notes ("Guaranteed Indebtedness"), unless (i) such Restricted
Subsidiary simultaneously executes and delivers a supplemental indenture to
the Indenture providing for a Guarantee (a "Subsidiary Guarantee") of payment
of the Notes by such Restricted Subsidiary and (ii) such Restricted Subsidiary
waives, and will not in any manner whatsoever claim or take the benefit or
advantage of, any rights of reimbursement, indemnity or subrogation or any
other rights against the Company or any other Restricted Subsidiary as a
result of any payment by such Restricted Subsidiary under its Subsidiary
Guarantee; provided that this paragraph shall not be applicable to (x) any
Guarantee of any Restricted Subsidiary that existed at the time such Person
became a Restricted Subsidiary and was not Incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary or (y) any
Guarantee of any Restricted Subsidiary of Indebtedness Incurred (I) under
Credit Facilities pursuant to clause (i) of the second paragraph of the
"Limitation on Indebtedness" covenant or (II) pursuant to clause (vii) of the
second paragraph of the "Limitation on Indebtedness" covenant. If the
Guaranteed Indebtedness is (A) pari passu in right of payment with the Notes,
then the Guarantee of such Guaranteed Indebtedness shall be pari passu in
right of payment with, or subordinated in right of payment to, the Subsidiary
Guarantee or (B) subordinated in right of payment to the Notes, then the
Guarantee of such Guaranteed Indebtedness shall be subordinated in right of
payment to the Subsidiary Guarantee at least to the extent that the Guaranteed
Indebtedness is subordinated in right of payment to the Notes.
Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary may provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or
transfer, to any Person not an Affiliate of the Company, of all of the
Company's and each Restricted Subsidiary's Capital Stock in, or all or
substantially all the assets of, such Restricted Subsidiary (which sale,
exchange or transfer is not prohibited by the Indenture) or (ii) the release
or discharge of the Guarantee which resulted in the creation of such
Subsidiary Guarantee, except a discharge or release by or as a result of
payment under such Guarantee.
Limitation on Transactions with Stockholders and Affiliates
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into, renew or extend any transaction
(including, without limitation, the purchase, sale, lease or exchange of
property or assets, or the rendering of any service) with any holder (or any
Affiliate of such holder) of 5% or more of any class of Capital Stock of the
Company or with any Affiliate of the Company or any Restricted Subsidiary,
except upon fair and reasonable terms no less favorable in any material
respect to the Company or such Restricted Subsidiary than could be obtained,
at the time of such transaction or, if such transaction is pursuant to a
written agreement, at the time of the execution of the agreement providing
therefor, in a comparable arm's-length transaction with a Person that is not
such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to: (i)
transactions (A) approved by a majority of the disinterested members of the
Board of Directors or (B) for which the Company or a Restricted Subsidiary
delivers to the Trustee a written opinion of a nationally recognized
investment banking firm stating that the transaction is fair to the Company or
such Restricted Subsidiary from a financial point of view; (ii) any
transaction solely between the Company and any of its Wholly Owned Restricted
Subsidiaries or solely between Wholly Owned Restricted Subsidiaries; (iii) the
payment of reasonable and customary regular fees to directors of the Company
who are not employees of the Company; (iv) any payments or other transactions
pursuant to any tax-sharing agreement between the Company and any other Person
with which the Company files a consolidated tax return or with which the
Company is part of a consolidated group for tax purposes; (v) any Restricted
Payments not prohibited by the "Limitation on Restricted Payments" covenant;
or (vi) the Reorganization. Notwithstanding the foregoing, any transaction
covered by the first paragraph of this "Limitation on Transactions with
Stockholders and Affiliates" covenant and not covered by clauses (ii) through
(vi) of this paragraph, the aggregate amount of which exceeds $5 million in
value, must be approved or determined to be fair in the manner provided for in
clause (i)(A) or (B) above.
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Limitation on Liens
The Company will not, and will not permit any Restricted Subsidiary to,
create, incur, assume or suffer to exist any Lien on any of its assets or
properties of any character, or any shares of Capital Stock or Indebtedness of
any Restricted Subsidiary, without making effective provision for all of the
Notes and all other amounts due under the Indenture to be directly secured
equally and ratably with (or, if the obligation or liability to be secured by
such Lien is subordinated in right of payment to the Notes, prior to) the
obligation or liability secured by such Lien.
The foregoing limitation does not apply to: (i) Liens existing on the
Closing Date; (ii) Liens granted after the Closing Date on any assets or
Capital Stock of the Company or its Restricted Subsidiaries created in favor
of the Holders; (iii) Liens with respect to the assets of a Restricted
Subsidiary granted by such Restricted Subsidiary to the Company or a Wholly
Owned Restricted Subsidiary to secure Indebtedness owing to the Company or
such other Restricted Subsidiary; (iv) Liens securing Indebtedness which is
Incurred to refinance secured Indebtedness which is permitted to be Incurred
under clause (iii) of the second paragraph of the "Limitation on Indebtedness"
covenant; provided that such Liens do not extend to or cover any property or
assets of the Company or any Restricted Subsidiary other than the property or
assets securing the Indebtedness being refinanced; (v) Liens securing
obligations under Credit Facilities Incurred under clause (i) of the second
paragraph of the "Limitation on Indebtedness" covenant; or (vi) Permitted
Liens.
Limitation on Sale-Leaseback Transactions
The Company will not, and will not permit any Restricted Subsidiary to,
enter into any sale-leaseback transaction involving any of its assets or
properties whether now owned or hereafter acquired, whereby the Company or a
Restricted Subsidiary sells or transfers such assets or properties and then or
thereafter leases such assets or properties or any part thereof or any other
assets or properties which the Company or such Restricted Subsidiary, as the
case may be, intends to use for substantially the same purpose or purposes as
the assets or properties sold or transferred.
The foregoing restriction does not apply to any sale-leaseback transaction
if (i) the lease is for a period, including renewal rights, of not in excess
of three years; (ii) the lease secures or relates to industrial revenue or
pollution control bonds; (iii) the transaction is solely between the Company
and any Wholly Owned Restricted Subsidiary or solely between Wholly Owned
Restricted Subsidiaries; or (iv) the Company or such Restricted Subsidiary,
within 12 months after the sale or transfer of any assets or properties is
completed, applies an amount not less than the net proceeds received from such
sale in accordance with clause (A) or (B) of the first paragraph of the
"Limitation on Asset Sales" covenant described below.
Limitation on Asset Sales
The Company will not, and will not permit any Restricted Subsidiary to,
consummate any Asset Sale, unless (i) the consideration received by the
Company or such Restricted Subsidiary is at least equal to the fair market
value of the assets sold or disposed of and (ii) at least 75% of the
consideration received consists of cash or Temporary Cash Investments. In the
event and to the extent that the Net Cash Proceeds received by the Company or
any of its Restricted Subsidiaries from one or more Asset Sales occurring on
or after the Closing Date in any period of 12 consecutive months exceed 10% of
Adjusted Consolidated Net Tangible Assets (determined as of the date closest
to the commencement of such 12-month period for which a consolidated balance
sheet of the Company and its Subsidiaries has been filed with the Commission
or provided to the Trustee pursuant to the "Commission Reports and Reports to
Holders" covenant), then the Company shall or shall cause the relevant
Restricted Subsidiary to (i) within 12 months after the date Net Cash Proceeds
so received exceed 10% of Adjusted Consolidated Net Tangible Assets (A) apply
an amount equal to such excess Net Cash Proceeds to permanently repay
unsubordinated Indebtedness of the Company or any Restricted Subsidiary
providing a Subsidiary Guarantee pursuant to the "Limitation on Issuances of
Guarantees by Restricted Subsidiaries" covenant described above or
Indebtedness of any other Restricted Subsidiary, in each case owing to a
Person other than the Company or any of its Subsidiaries, or (B) invest an
amount equal to such excess Net Cash
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Proceeds, or the amount of such Net Cash Proceeds not so applied pursuant to
clause (A) (or enter into a definitive agreement committing to so invest
within 12 months after the date of such agreement), in capital assets of a
nature or type or that are used in a business (or in a Person having capital
assets of a nature or type, or engaged in a business) similar or related to
the nature or type of the property and assets of, or the business of, the
Company and its Restricted Subsidiaries existing on the date of such
investment (as determined in good faith by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board Resolution) and
(ii) apply (no later than the end of the 12-month period referred to in clause
(i)) such excess Net Cash Proceeds (to the extent not applied pursuant to
clause (i)) as provided in the following paragraph of this "Limitation on
Asset Sales" covenant. The amount of such excess Net Cash Proceeds required to
be applied (or to be committed to be applied) during such 12-month period as
set forth in clause (i) of the preceding sentence and not applied as so
required by the end of such period shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to
this "Limitation on Asset Sales" covenant totals at least $5 million, the
Company must commence, not later than the fifteenth Business Day of such
month, and consummate an Offer to Purchase from the Holders on a pro rata
basis an aggregate principal amount of Notes equal to the Excess Proceeds on
such date, at a purchase price equal to 100% of the principal amount of the
Notes plus, in each case, accrued interest to the Payment Date.
Commission Reports and Reports to Holders
The Company shall file with the Commission the annual, quarterly and other
reports and other information required by Section 13(a) or 15(d) of the
Exchange Act, regardless of whether such sections of the Exchange Act are
applicable to the Company (unless the Commission will not accept such a
filing). The Company shall mail or cause to be mailed copies of such reports
and information to Holders and the Trustee within 15 days after the date it
files such reports and information with the Commission or after the date it
would have been required to file such reports and information with the
Commission had it been subject to such sections of the Exchange Act; provided,
however, that the copies of such reports and information mailed to Holders may
omit exhibits, which the Company will supply to any Holder at such Holder's
request.
REPURCHASE OF EXCHANGE NOTES UPON A CHANGE OF CONTROL
The Company shall commence, within 30 days of the occurrence of a Change of
Control, and consummate an Offer to Purchase for all Exchange Notes then
outstanding, at a purchase price equal to 101% of the principal amount
thereof, plus accrued interest to the Payment Date.
There can be no assurance that the Company will have sufficient funds
available at the time of any Change of Control to make any debt payment
(including repurchases of Exchange Notes) required by the foregoing covenant
(as well as may be contained in other securities of the Company which might be
outstanding at the time). The foregoing covenant requiring the Company to
repurchase the Exchange Notes will, unless consents are obtained, require the
Company to repay all indebtedness then outstanding which by its terms would
prohibit such Exchange Note repurchase, either prior to or concurrently with
such Exchange Note repurchase.
EVENTS OF DEFAULT
The following events are defined as "Events of Default" in the Indenture:
(a) defaults in the payment of principal of (or premium, if any, on) any Note
when the same becomes due and payable at maturity, upon acceleration,
redemption or otherwise; (b) defaults in the payment of interest on any Note
when the same becomes due and payable, which defaults continue for a period of
30 days; provided that a failure to make any of the first six scheduled
interest payments on the Notes on the applicable Interest Payment Date will
constitute an Event of Default with no grace or cure period; (c) defaults in
the performance or breach of the provisions of the Indenture applicable to
mergers, consolidations and transfers of all or substantially all of the
assets of the Company or mandatory redemption, or the failure to make or
consummate an Offer to Purchase in accordance
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with the "Limitation on Asset Sales" or the "Repurchase of Notes upon a Change
of Control" covenant described above; (d) defaults in the performance or
breach of any covenant or agreement of the Company in the Indenture or under
the Notes (other than a default specified in clause (a), (b) or (c) above),
which default or breach continues for a period of 30 consecutive days after
written notice by the Trustee or the Holders of at least 25% in aggregate
principal amount of the Notes then outstanding; (e) there occurs with respect
to any issue or issues of Indebtedness of the Company or any Significant
Subsidiary having an outstanding principal amount of $5 million or more in the
aggregate for all such issues of all such Persons, whether such Indebtedness
now exists or shall hereafter be created, (I) an event of default that has
caused the holder thereof to declare such Indebtedness to be due and payable
prior to its Stated Maturity and such Indebtedness has not been discharged in
full or such acceleration has not been rescinded or annulled within 30 days of
such acceleration and/or (II) the failure to make a principal payment at the
final (but not any interim) fixed maturity and such defaulted payment shall
not have been made, waived or extended within 30 days of such payment default;
(f) any final judgment or order (not covered by insurance) for the payment of
money in excess of $5 million in the aggregate for all such final judgments or
orders against all such Persons (treating any deductibles, self-insurance or
retention as not so covered) shall be rendered against the Company or any
Significant Subsidiary and shall not be paid or discharged, and there shall be
any period of 30 consecutive days following entry of the final judgment or
order that causes the aggregate amount for all such final judgments or orders
outstanding and not paid or discharged against all such Persons to exceed $5
million during which a stay of enforcement of such final judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect; (g) a court
having jurisdiction in the premises enters a decree or order for (A) relief in
respect of the Company or any Significant Subsidiary in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, (B) appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or any
Significant Subsidiary or for all or substantially all of the property and
assets of the Company or any Significant Subsidiary or (C) the winding up or
liquidation of the affairs of the Company or any Significant Subsidiary and,
in each case, such decree or order shall remain unstayed and in effect for a
period of 60 consecutive days; (h) the Company or any Significant Subsidiary
(A) commences a voluntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or consents to the entry of an
order for relief in an involuntary case under any such law, (B) consents to
the appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or any
Significant Subsidiary or for all or substantially all of the property and
assets of the Company or any Significant Subsidiary or (C) effects any general
assignment for the benefit of creditors; or (i) the Pledge Agreement shall
cease to be in full force and effect or enforceable in accordance with its
terms, other than in accordance with its terms.
If an Event of Default (other than an Event of Default specified in clause
(g) or (h) above that occurs with respect to the Company) occurs and is
continuing under the Indenture, the Trustee or the Holders of at least 25% in
aggregate principal amount of the Notes then outstanding, by written notice to
the Company (and to the Trustee if such notice is given by the Holders), may,
and the Trustee at the request of such Holders shall, declare the principal
of, premium, if any, and accrued interest on the Notes to be immediately due
and payable. Upon a declaration of acceleration, such principal, premium, if
any, and accrued interest shall be immediately due and payable. In the event
of a declaration of acceleration because an Event of Default set forth in
clause (e) above has occurred and is continuing, such declaration of
acceleration shall be automatically rescinded and annulled if the event of
default triggering such Event of Default pursuant to clause (e) shall be
remedied or cured by the Company or the relevant Significant Subsidiary or
waived by the holders of the relevant Indebtedness within 60 days after the
declaration of acceleration with respect thereto. If an Event of Default
specified in clause (g) or (h) above occurs with respect to the Company, the
principal of, premium, if any, and accrued interest on the Notes then
outstanding shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Holder. The
Holders of at least a majority in principal amount of the outstanding Notes,
by written notice to the Company and to the Trustee, may waive all past
defaults and rescind and annul a declaration of acceleration and its
consequences if (i) all existing Events of Default, other than the nonpayment
of the principal of, premium, if any, and interest on the Notes that have
become due solely by such declaration of acceleration, have been cured or
waived and (ii) the rescission would not conflict with any
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judgment or decree of a court of competent jurisdiction. For information as to
the waiver of defaults, see "--Modification and Waiver."
The Holders of at least a majority in aggregate principal amount of the
outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or the Indenture, that may involve the
Trustee in personal liability, or that the Trustee determines in good faith
may be unduly prejudicial to the rights of Holders of Notes not joining in the
giving of such direction and may take any other action it deems proper that is
not inconsistent with any such direction received from Holders of Notes. A
Holder may not pursue any remedy with respect to the Indenture or the Notes
unless: (i) the Holder gives the Trustee written notice of a continuing Event
of Default; (ii) the Holders of at least 25% in aggregate principal amount of
outstanding Notes make a written request to the Trustee to pursue the remedy;
(iii) such Holder or Holders offer the Trustee indemnity satisfactory to the
Trustee against any costs, liability or expense; (iv) the Trustee does not
comply with the request within 60 days after receipt of the request and the
offer of indemnity; and (v) during such 60-day period, the Holders of a
majority in aggregate principal amount of the outstanding Notes do not give
the Trustee a direction that is inconsistent with the request. However, such
limitations do not apply to the right of any Holder of a Note to receive
payment of the principal of, premium, if any, or interest on, such Note or to
bring suit for the enforcement of any such payment, on or after the due date
expressed in the Notes, which right shall not be impaired or affected without
the consent of the Holder.
The Indenture requires certain officers of the Company to certify, on or
before a date not more than 90 days after the end of each fiscal year, that a
review has been conducted of the activities of the Company and its Restricted
Subsidiaries and the performance of the Company and its Restricted
Subsidiaries under the Indenture and that the Company has fulfilled all
obligations thereunder, or, if there has been a default in the fulfillment of
any such obligation, specifying each such default and the nature and status
thereof. The Company is also obligated to notify the Trustee of any default or
defaults in the performance of any covenants or agreements under the
Indenture.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company shall not consolidate with, merge with or into, or sell, convey,
transfer, lease or otherwise dispose of all or substantially all of its
property and assets (as an entirety or substantially an entirety in one
transaction or a series of related transactions) to, any Person or permit any
Person to merge with or into the Company unless: (i) the Company shall be the
continuing Person, or the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or that acquired or leased
such property and assets of the Company shall be a corporation organized and
validly existing under the laws of the United States of America or any
jurisdiction thereof, and shall expressly assume, by a supplemental indenture,
executed and delivered to the Trustee, all of the obligations of the Company
on all of the Notes and under the Indenture; (ii) immediately after giving
effect to such transaction, no Default or Event of Default shall have occurred
and be continuing; (iii) immediately after giving effect to such transaction
on a pro forma basis, the Company or any Person becoming the successor obligor
of the Notes shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such transaction;
(iv) immediately after giving effect to such transaction on a pro forma basis,
the Company, or any Person becoming the successor obligor of the Notes, as the
case may be, could Incur at least $1.00 of Indebtedness under the first
paragraph of the "Limitation on Indebtedness" covenant described above;
provided, however, that this clause (iv) shall not apply to a consolidation or
merger with or into (x) a Wholly Owned Restricted Subsidiary with a positive
net worth or (y) ITC Holding, provided that (A) in connection with any such
merger or consolidation, no consideration (except Capital Stock (other than
Redeemable Stock) in the surviving Person or the Company (or a Person that
owns directly or indirectly all of the Capital Stock of the surviving Person
or the Company immediately following such transaction)) shall be issued or
distributed to the stockholders of the Company and (B) in connection with a
consolidation or merger with or into ITC Holding, all Liens and Indebtedness
of ITC Holding and its Subsidiaries (other than the Company and its Restricted
Subsidiaries) outstanding immediately prior to such transaction would, if
Incurred at such time, have been permitted to be Incurred by the Company
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and its Restricted Subsidiaries for all purposes of the Indenture; and (v) the
Company delivers to the Trustee an Officers' Certificate (attaching the
arithmetic computations to demonstrate compliance with clauses (iii) and
(iv) above) and an Opinion of Counsel, in each case stating that such
consolidation, merger or transfer and such supplemental indenture comply with
this provision and that all conditions precedent provided for herein relating
to such transaction have been complied with; provided, however, that clauses
(iii) and (iv) above do not apply if, in the good faith determination of the
Board of Directors of the Company, whose determination shall be evidenced by a
Board Resolution, the principal purpose of such transaction is to change the
state of incorporation of the Company; and provided further that any such
transaction shall not have as one of its purposes the evasion of the foregoing
limitations.
DEFEASANCE
Defeasance and Discharge. The Indenture provides that the Company will be
deemed to have paid and will be discharged from any and all obligations in
respect of the Notes on the 123rd day after the deposit referred to below, and
the provisions of the Indenture will no longer be in effect with respect to
the Notes (except for, among other matters, certain obligations to register
the transfer or exchange of the Notes, to replace stolen, lost or mutilated
Notes, to maintain paying agencies and to hold monies for payment in trust)
if, among other things, (A) the Company has deposited with the Trustee, in
trust, money and/or U.S. Government Obligations that through the payment of
interest and principal in respect thereof in accordance with their terms will
provide money in an amount sufficient to pay the principal of, premium, if
any, and accrued interest on the Notes on the Stated Maturity of such payments
in accordance with the terms of the Indenture and the Notes, (B) the Company
has delivered to the Trustee (i) either (x) an Opinion of Counsel to the
effect that Holders will not recognize income, gain or loss for federal income
tax purposes as a result of the Company's exercise of its option under this
"Defeasance" provision and will be subject to federal income tax on the same
amount and in the same manner and at the same times as would have been the
case if such deposit, defeasance and discharge had not occurred, which Opinion
of Counsel must be based upon (and accompanied by a copy of) a ruling of the
Internal Revenue Service to the same effect unless there has been a change in
applicable federal income tax law after the Closing Date such that a ruling is
no longer required or (y) a ruling directed to the Trustee received from the
Internal Revenue Service to the same effect as the aforementioned Opinion of
Counsel and (ii) an Opinion of Counsel to the effect that the creation of the
defeasance trust does not violate the Investment Company Act of 1940 and after
the passage of 123 days following the deposit, the trust fund will not be
subject to the effect of Section 547 of the United States Bankruptcy Code or
Section 15 of the New York Debtor and Creditor Law, (C) immediately after
giving effect to such deposit on a pro forma basis, no Event of Default, or
event that after the giving of notice or lapse of time or both would become an
Event of Default, shall have occurred and be continuing on the date of such
deposit or during the period ending on the 123rd day after the date of such
deposit, and such deposit shall not result in a breach or violation of, or
constitute a default under, any other agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which the Company or any
of its Subsidiaries is bound, and (D) if at such time the Notes are listed on
a national securities exchange, the Company has delivered to the Trustee an
Opinion of Counsel to the effect that the Notes will not be delisted as a
result of such deposit, defeasance and discharge.
Defeasance of Certain Covenants and Certain Events of Default. The Indenture
further provides that the provisions of the Indenture will no longer be in
effect with respect to clauses (iii) and (iv) under "Consolidation, Merger and
Sale of Assets" and all the covenants described herein under "Covenants,"
clause (d) under "Events of Default" with respect to such covenants and
clauses (iii) and (iv) under "Consolidation, Merger and Sale of Assets," and
that clauses (e) and (f) under "Events of Default" shall be deemed not to be
Events of Default, upon, among other things, the deposit with the Trustee, in
trust, of money and/or U.S. Government Obligations that through the payment of
interest and principal in respect thereof in accordance with their terms will
provide money in an amount sufficient to pay the principal of, premium, if
any, and accrued interest on the Notes on the Stated Maturity of such payments
in accordance with the terms of the Indenture and the Notes, the satisfaction
of the provisions described in clauses (B)(ii), (C) and (D) of the preceding
paragraph and the delivery by the Company to the Trustee of an Opinion of
Counsel to the effect that, among other things, the Holders will
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not recognize income, gain or loss for federal income tax purposes as a result
of such deposit and defeasance of certain covenants and Events of Default and
will be subject to federal income tax on the same amount and in the same
manner and at the same times as would have been the case if such deposit and
defeasance had not occurred.
Defeasance and Certain Other Events of Default. In the event the Company
exercises its option to omit compliance with certain covenants and provisions
of the Indenture with respect to the Notes as described in the immediately
preceding paragraph and the Notes are declared due and payable because of the
occurrence of an Event of Default that remains applicable, the amount of money
and/or U.S. Government Obligations on deposit with the Trustee will be
sufficient to pay amounts due on the Notes at the time of their Stated
Maturity but may not be sufficient to pay amounts due on the Notes at the time
of the acceleration resulting from such Event of Default. However, the Company
will remain liable for such payments.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of not less than a majority in
aggregate principal amount of the outstanding Notes; provided, however, that
no such modification or amendment may, without the consent of each Holder
affected thereby, (i) change the Stated Maturity of the principal of, or any
installment of interest on, any Note, (ii) reduce the principal of, or
premium, if any, or interest on, any Note, (iii) change the place or currency
of payment of principal of, or premium, if any, or interest on, any Note, (iv)
impair the right to institute suit for the enforcement of any payment on or
after the Stated Maturity (or, in the case of a redemption, on or after the
Redemption Date) of any Note, (v) reduce the above-stated percentage of
outstanding Notes the consent of whose Holders is necessary to modify or amend
the Indenture, (vi) waive a default in the payment of principal of, premium,
if any, or interest on the Notes or (vii) reduce the percentage or aggregate
principal amount of outstanding Notes the consent of whose Holders is
necessary for waiver of compliance with certain provisions of the Indenture or
for waiver of certain defaults.
BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the Exchange Notes will initially be
represented by one or more permanent global Notes in definitive, fully
registered form without interest coupons (each a "Global Note") and will be
deposited with the Trustee as custodian for, and registered in the name of, a
nominee of DTC. Except in the limited circumstances described below under
"Certificated Notes," owners of beneficial interests in a Global Note will not
be entitled to receive physical delivery of Certificated Notes (as defined
below).
Ownership of beneficial interests in a Global Note will be limited to
persons who have accounts with DTC ("participants") or persons who hold
interests through participants. Ownership of beneficial interests in a Global
Note will be shown on, and the transfer of that ownership will be effected
only through, records maintained by DTC or its nominee (with respect to
interests of participants) and the records of participants (with respect to
interests of persons other than participants).
So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Exchange Notes represented by such Global Note for
all purposes under the Indenture and the Exchange Notes. No beneficial owner
of an interest in a Global Note will be able to transfer that interest except
in accordance with DTC's applicable procedures, in addition to those provided
for under the Indenture.
Payments of the principal of, and interest on, a Global Note will be made to
DTC or its nominee, as the case may be, as the registered owner thereof.
Neither the Company, the Trustee nor any Paying Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Note, will credit participants'
accounts with payments in amounts proportionate to their
110
<PAGE>
respective beneficial interests in the principal amount of such Global Note as
shown on the records of DTC or its nominee. The Company also expects that
payments by participants to owners of beneficial interests in such Global Note
held through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts
of customers registered in the names of nominees for such customers. Such
payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds.
The Company expects that DTC will take any action permitted to be taken by a
holder of Exchange Notes (including the presentation of Exchange Notes for
exchange as described below) only at the direction of one or more participants
to whose account the DTC interests in a Global Note is credited and only in
respect of such portion of the aggregate principal amount of Exchange Notes as
to which such participant or participants has or have given such direction.
However, if there is an Event of Default under the Exchange Notes, DTC will
exchange the applicable Global Note for Certificated Exchange Notes, which it
will distribute to its participants.
The Company understands that: DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a clearing corporation within the meaning of the New York Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical
movement of certificates and certain other organizations. Indirect access to
the DTC system is available to others such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("indirect participants").
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in a Global Note among participants of DTC,
it is under no obligation to perform or continue to perform such procedures,
and such procedures may be discontinued at any time. Neither the Company nor
the Trustee will have any responsibility for the performance by DTC or its
respective participants or indirect participants of their respective
obligation under the rules and procedures governing their operations.
CERTIFICATED NOTES
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Notes, and a successor depositary is not appointed by the Company
within 90 days, the Company will issue Certificated Notes in exchange for the
Global Note. Holders of an interest in a Global Note may receive a
Certificated Note in accordance with DTC's rules and procedures in addition to
those provided for under the Indenture.
NO PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS, DIRECTORS OR
EMPLOYEES
The Indenture provides that no recourse for the payment of the principal of,
premium, if any, or interest on any of the Exchange Notes or for any claim
based thereon or otherwise in respect thereof, and no recourse under or upon
any obligation, covenant or agreement of the Company in the Indenture, or in
any of the Exchange Notes or because of the creation of any Indebtedness
represented thereby, shall be had against any incorporator, stockholder,
officer, director, employee or controlling person of the Company or of any
successor Person thereof. Each Holder, by accepting the Exchange Notes, waives
and releases all such liability.
CONCERNING THE TRUSTEE
The Indenture provides that, except during the continuance of a Default, the
Trustee will not be liable, except for the performance of such duties as are
specifically set forth in such Indenture. If an Event of Default has occurred
and is continuing, the Trustee will use the same degree of care and skill in
its exercise as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs.
111
<PAGE>
The Indenture and provisions of the Trust Indenture Act of 1939, as amended,
incorporated by reference therein contain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain payment of
claims in certain cases or to realize on certain property received by it in
respect of any such claims, as security or otherwise. The Trustee is permitted
to engage in other transactions; provided, however, that if it acquires any
conflicting interest, it must eliminate such conflict or resign.
112
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Notes received in exchange for Senior
Notes where such Senior Notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period not to exceed 180 days after the Expiration Date, it will furnish
additional copies of this Prospectus, as amended or supplemented, to any
broker-dealer that reasonably requests such documents for use in connection
with any such resale.
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from
any such broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit of any
such resale of Exchange Notes and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
The Exchange Notes will constitute a new issue of securities with no
established trading market. The Company does not intend to list the Exchange
Notes on any national securities exchange or to seek approval for quotation
through any automated quotation system. The Company has been advised by the
Placement Agents that following completion of the Exchange Offer, the
Placement Agents intend to make a market in the Exchange Notes. However, the
Placement Agents are not obligated to do so and any market-making activities
with respect to the Exchange Notes may be discontinued at any time without
notice. Accordingly, no assurance can be given that an active public or other
market will develop for the Exchange Notes or as to the liquidity of or the
trading market for the Exchange Notes. If a trading market does not develop or
is not maintained, holders of the Exchange Notes may experience difficulty in
reselling the Exchange Notes or may be unable to sell them at all. If a market
for the Exchange Notes develops, any such market may cease at any time. If a
public trading market develops for the Exchange Notes, future trading prices
of the Exchange Notes will depend on many factors, including, among other
things, prevailing interest rates, the market for similar securities, the
financial conditions and results of operations of the Company and other
factors beyond the control of the Company, including general economic
conditions. Notwithstanding the registration of the Exchange Notes in the
Exchange Offer, holders who are "affiliates" of the Company (within the
meaning of Rule 405 under the Securities Act) may publicly offer for sale or
resell the Exchange Notes only in compliance with the provisions of Rule 144
under the Securities Act or any other available exemptions under the
Securities Act.
The Company has agreed to pay all expenses incident to the Exchange Offer
other than commissions or concessions of any brokers or dealers, and will
indemnify the holders of the Senior Notes (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act.
113
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LEGAL MATTERS
Certain legal matters in connection with the Exchange Notes offered hereby
are being passed upon for the Company by Hogan & Hartson L.L.P., Washington,
D.C., counsel for the Company. Hogan & Hartson L.L.P. also provides legal
services to ITC Holding, its affiliated companies and Campbell B. Lanier, III,
Chairman and Chief Executive Officer of ITC Holding. Anthony S. Harrington, a
partner of Hogan & Hartson, L.L.P., beneficially owns 34,800 shares of common
stock of ITC Holding.
EXPERTS
The balance sheet of ITC/\DeltaCom, Inc. as of June 30, 1997 and the related
statements of operations, stockholder's deficit, and cash flows for the period
from inception (March 24, 1997) through June 30, 1997 included in this
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as stated in their report with respect thereto and is
included herein in reliance upon the authority of said firm as experts in
giving said report.
The combined balance sheets of ITC Transmission Systems, Inc., ITC
Transmission Systems II, Inc., Gulf States Transmission Systems, Inc., Eastern
Telecom, Inc. (d.b.a. InterQuest), and DeltaCom, Inc. as of December 31, 1995
and 1996, and the related combined statements of operations, stockholder's
equity and cash flows for each of the three years in the period ended December
31, 1996, included in this Registration Statement have been audited by Arthur
Andersen LLP, independent public accountants, to the extent and for the
periods indicated in their report, and are included herein in reliance upon
the authority of said firm as experts in giving said report.
The statements of operations, stockholders' equity and cash flows of
DeltaCom, Inc. for the year ended December 31, 1994 included in this
Registration Statement have been audited by Martin Stuedeman & Associates,
P.C., independent auditors, as stated in their report appearing herein. The
statements of operations, stockholders' equity and cash flows of DeltaCom,
Inc. for the year ended December 31, 1995 included in this Registration
Statement have been audited by Arthur Andersen LLP, independent public
accountants, as stated in their report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in giving said
report.
The balance sheets of Gulf States FiberNet as of December 31, 1995 and 1996,
and the related statements of operations, partners' capital, and cash flows
for the period from inception (August 17, 1994) through December 31, 1994 and
for the years ended December 31, 1995 and 1996 included in this Registration
Statement have been audited by Arthur Andersen LLP, independent public
accountants, to the extent and for the periods indicated in their report, and
are included herein in reliance upon the authority of said firm as experts in
giving said report.
The financial statements of Georgia Fiber for the years ended December 31,
1996 and 1995 included in this Registration Statement have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report
appearing herein, and have been so included in reliance upon the report of
such firm given upon their authority as experts in accounting and auditing.
114
<PAGE>
AVAILABLE INFORMATION
The Company is not currently subject to the informational reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Upon effectiveness of the Registration Statement (of which this
Prospectus is a part), the Company will become subject to the informational
requirements of the Exchange Act. In addition, the Indenture provides that,
regardless of whether the Company is required to file reports with the
Commission, the Company shall file with the Commission all such reports and
other information as would be required to be filed with the Commission if the
Company were subject to the reporting requirements of the Exchange Act. The
Company will supply, or cause the Trustee to supply, to each holder of
Exchange Notes, without cost, copies of such reports or other information.
The Company has filed the Registration Statement (of which this Prospectus
is a part) under the Securities Act with respect to the Exchange Offer. As
permitted by the rules and regulations of the Commission, this Prospectus does
not contain all the information set forth in the Registration Statement. For
further information about the Company and the Exchange Offer, reference is
made to the Registration Statement and to the financial statements, exhibits
and schedules filed therewith. The statements contained in this Prospectus
about the contents of any contract or other document referred to are not
necessarily complete, and in each instance, reference is made to a copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. Copies of each such document may be obtained from the Commission at
its principal office in Washington, D.C. upon payment or the charges
prescribed by the Commission or, in the case of certain such documents, by
accessing the Commission's World Wide Web site at http://www.sec.gov.
The Company is required by the terms of the Indenture to furnish the Trustee
with annual reports containing consolidated financial statements audited by
their independent public accountants and with quarterly reports containing
unaudited condensed consolidated financial statements for each of the first
three quarters of each fiscal year.
115
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GLOSSARY
Access--Telecommunications services that permit long distance carriers to
use local exchange facilities to originate and/or terminate long distance
service.
Access charges--The fees paid by long distance carriers to local exchange
carriers for originating and terminating long distance calls on their local
network.
AT&T -- AT&T Corp.
Cable & Wireless--Cable & Wireless Communications Inc.
Central offices--The switching centers or central switching facilities of
the local exchange companies.
Co-location--The ability of a competitor carrier to connect its network to
the local exchange carriers' central offices. Physical co-location occurs when
a competitor carrier places its network connection equipment inside the local
exchange company's central offices. Virtual co-location is an alternative to
physical co-location pursuant to which the local exchange company permits a
competitor carrier to connect its network to the local exchange company's
central offices on comparable terms, even through the competitor carrier's
network connection equipment is not physically located inside the central
offices.
Dedicated--Local telecommunications lines reserved for use by particular
customers, generally for connection between the customer's location and an
interexchange carrier POP.
DeltaCom--DeltaCom, Inc., an Alabama corporation which provides long
distance telephone services in the southeastern United States. DeltaCom became
a wholly owned subsidiary of the Company as part of the Reorganization.
Dialing Parity--The ability of a competing local or toll service provider to
provide telecommunications services in such a manner that customers have the
ability to route automatically, without the use of any access code, their
telecommunications to the service provider of the customer's designation.
Digital--A method of storing, processing and transmitting information
through the use of distinct electronic or optical pulses that represent the
binary digits 0 and 1. Digital transmission and switching technologies employ
a sequence of these pulses to represent information as opposed to the
continuously variable analog signal. The precise digital numbers minimize
distortion (such as graininess or snow in the case of video transmission, or
static or other background distortion in the case of audio transmission).
DS-1, DS-3--Standard telecommunications industry digital signal formats,
which are distinguishable by bit rate (the number of binary digits (0 and 1)
transmitted per second). DS-1 service has a bit rate of 1.544 megabits per
second and DS-3 service has a bit rate of 45 megabits per second.
Frontier--Allnet Communications Services, Inc. d/b/a Frontier Communications
Services.
GTE--GTE Corporation.
Gulf States FiberNet--A Georgia general partnership, prior to the
Reorganization, that operates a fiber-optic telecommunications network between
Atlanta, Georgia and Longview, Texas. Gulf States FiberNet's assets and
operations now are 100% owned by Gulf States Transmission Systems, Inc.
Gulf States Transmission--Gulf States Transmission Systems, Inc., a Delaware
corporation, formed in 1994 by ITC Holding to be the 36% managing general
partner in Gulf States FiberNet and which now owns 100% of Gulf States
FiberNet's assets and its operations. Gulf States Transmission Systems, Inc.
became a wholly owned subsidiary of the Company as part of the Reorganization.
G-1
<PAGE>
Interconnection--Interconnection of facilities between or among local
exchange carriers, including potential physical collocation of one carrier's
equipment in the other carrier's premise to facilitate such interconnection.
Interconnection Decision--The August 1996 order issued by the FCC
implementing the interconnection provisions of the Telecommunications Act.
Portions of this order have been stayed by the U.S. Eighth Circuit Court of
Appeals.
InterLATA--Telecommunications services originating in a LATA and terminating
outside of that LATA.
InterQuest--Eastern Telecom, Inc., a Georgia corporation, d/b/a InterQuest,
engaged solely in the provision of operator and other directory assistance
services. Eastern Telecom merged into Interstate FiberNet, Inc. as part of the
Reorganization.
Interstate FiberNet--A Georgia general partnership which operates a fiber-
optic telecommunications network between Georgia and Alabama. Interstate
FiberNet became part of Interstate FiberNet, Inc. following the
Reorganization.
Interstate FiberNet, Inc.--The wholly owned subsidiary of the Company that
currently holds the businesses that were held by ITC Transmission Systems,
Inc., ITC Transmission Systems II, Inc., InterQuest and Interstate FiberNet
prior to the Reorganization.
IntraLATA--Telecommunications services originating and terminating in the
same LATA.
ITC Holding--ITC Holding Company, Inc. is a diversified telecommunications
company based in West Point, Georgia, with substantial holdings in
telecommunications companies operating in the southern United States.
ITC Transmission Systems II, Inc.--A Delaware corporation formed by ITC
Holding to hold a 51 percent interest in InterState FiberNet. ITC Transmission
Systems II merged into Interstate FiberNet, Inc. as part of the
Reorganization.
IXC--IXC Communications Inc.
LATA (local access and transport area)--A geographic area composed of
contiguous local exchanges, usually but not always within a single state.
There are approximately 200 LATAs in the United States.
LCI--LCI International Telecom Corp.
Local exchange--A geographic area determined by the local exchange carrier
in which calls generally are transmitted without toll charges to the calling
or called party.
Local exchange carrier--A company providing local telephone services.
Long distance carriers (interexchange carriers)--Long distance carriers
provide services between local exchanges on an interstate or intrastate basis.
A long distance carrier may offer services over its own or another carrier's
facilities.
MCI--MCI Communications Corporation.
Nortel Access Node--A remote multi-purpose vehicle for local switched access
transport services. Used to extend Nortel DMS-500 local access lines to remote
cities along the long-haul network.
Number portability--The ability of an end user to change local exchange
carriers while retaining the same telephone number.
OC-N--Standard telecommunications industry measurements for optical
transmission capacity distinguishable by bit rate transmitted per second and
the number of voice or data transmissions that can be simultaneously
transmitted through fiber optic cable. "N" represents the number of DS-3s
involved. For
G-2
<PAGE>
example, an OC-3 is generally equivalent to three DS-3s and has a bit rate of
155.52 megabits per second and can transmit 2,016 simultaneous voice or data
transmissions. An OC-12 has a bit rate of 622.08 megabits per second and can
transmit 8,064 simultaneous voice or data transmissions. An OC-48 has a bit
rate of 2488.32 megabits per second and can transmit 32,256 simultaneous voice
or data transmissions.
POPs (points of presence)--Locations where a long distance carrier has
installed transmission equipment in a service area that serves as, or relays
calls to, a network switching center of that long distance carrier.
Private line--A dedicated telecommunications connection between end user
locations.
"PUC" or "Public utilities commission"--A state regulatory body, established
in most states, which regulates utilities, including telephone companies
providing intrastate services.
Reciprocal compensation--The same compensation of a new competitive local
exchange carrier for termination of a local call by the local exchange carrier
on its network as the new competitor pays the local exchange carrier for
termination of local calls on the local exchange carrier network.
Reorganization--The contribution to the Company by ITC Holding of the
businesses of Interstate FiberNet, Gulf States FiberNet, DeltaCom and
InterQuest.
Resale--Resale by a provider of telecommunications services (such as a local
exchange carrier) of such services to other providers or carriers on a
wholesale or a retail basis.
Route miles--The number of miles of the telecommunications path in which
fiber optic cables are installed.
SCANA--SCANA Communications, Inc.
Self-healing ring--A self-healing ring is a network design in which the
network backbone consists of a continuous ring connecting a central hub
facility with one or more network nodes. Traffic is routed between the hub and
each of the nodes simultaneously in both a clockwise and a counterclockwise
direction. In the event of a cable cut or component failure along one of these
paths, traffic will continue to flow along the alternate path so no traffic is
lost. In the event of a catastrophic node failure, other nodes will be
unaffected because traffic will continue to flow along whichever path (primary
or alternate) does not pass through the affected node. The switch from the
primary to the alternate path will be imperceptible to most users.
Sprint--Sprint Corporation.
"SS7" or "Signaling System 7" services--Signaling System 7 network services
utilize common channel signaling, which reduces connect time delays and
directs calls.
Switch--A device that opens or closes circuits or selects the paths or
circuits to be used for transmission of information. Switching is a process of
interconnecting circuits to form a transmission path between users.
Switched access transport services--Transportation of switched traffic along
dedicated lines between the local exchange company central offices and long
distance carrier POPs.
Switched traffic--Telecommunications traffic along the public switched
network. This traffic is generally switched at the local exchange company's
central offices.
Transmission--ITC Transmission Systems, Inc., a Delaware corporation formed
by ITC Holding to hold a 49% managing interest in InterState FiberNet. ITC
Transmission Systems became a wholly owned subsidiary of the Company as part
of the Reorganization and changed its name to Interstate FiberNet, Inc.
Unbundled Access--Access to unbundled elements of a telecommunications
services provider's network, including network facilities, equipment,
features, functions and capabilities, at any technically feasible point within
such network.
WorldCom--WorldCom, Inc.
G-3
<PAGE>
INDEX TO THE FINANCIAL STATEMENTS
ITC/\DELTACOM, INC.
<TABLE>
<S> <C>
Report of Independent Public Accountants................................ F-2
Balance Sheet--June 30, 1997 ........................................... F-3
Statement of Operations for the Period from Inception (March 24, 1997)
through June 30, 1997.................................................. F-4
Statement of Stockholder's Deficit for the Period from Inception (March
24, 1997) through June 30, 1997........................................ F-5
Statement of Cash Flows for the Period from Inception (March 24, 1997)
thrugh June 30, 1997................................................... F-6
Notes to Financial Statements........................................... F-7
INTERSTATE FIBERNET, INC. (FORMERLY ITC TRANSMISSION SYSTEMS, INC.), ITC
TRANSMISSION SYSTEMS II, INC., GULF STATES TRANSMISSION SYSTEMS, INC.,
EASTERN TELECOM, INC., D.B.A INTERQUEST, DELTACOM, INC. AND ITC/\DELTACOM,
INC. (REORGANIZED AS ITC/\DELTACOM, INC.)
Report of Independent Public Accountants................................ F-10
Combined Balance Sheets--December 31, 1995 and 1996 and June 30, 1997
(unaudited) ........................................................... F-11
Combined Statements of Operations for the Years Ended December 31, 1994,
1995, and 1996 and for the Six Months Ended June 30, 1996 and 1997
(unaudited)............................................................ F-12
Combined Statements of Stockholder's Equity for the Years Ended December
31, 1994, 1995, and 1996 and for the Six Months Ended June 30, 1997
(unaudited)............................................................ F-13
Combined Statements of Cash Flows for the Years Ended December 31, 1994,
1995, and 1996 and for the Six Months Ended June 30, 1996 and 1997
(unaudited)............................................................ F-14
Notes to Combined Financial Statements.................................. F-16
DELTACOM, INC.
Independent Auditors' Report............................................ F-35
Report of Independent Public Accountants................................ F-36
Statements of Operations for the Years Ended December 31, 1994 and 1995
and for the One Month Ended January 29, 1996........................... F-37
Statements of Stockholder's Equity for the Years Ended December 31, 1994
and 1995 and for the One Month Ended January 29, 1996.................. F-38
Statements of Cash Flows for the Years Ended December 31, 1994 and 1995
and for the One Month Ended January 29, 1996........................... F-39
Notes to Financial Statements........................................... F-40
GULF STATES FIBERNET
Report of Independent Public Accountants................................ F-43
Balance Sheets--December 31, 1995 and 1996 and March 27, 1997
(unaudited) ........................................................... F-44
Statements of Operations for the Period From Inception (August 17, 1994)
Through December 31, 1994 and for the Years Ended December 31, 1995 and
1996 and for the periods ended March 31, 1996 and March 27, 1997
(unaudited)............................................................ F-45
Statements of Partners' Capital for the Period From Inception (August
17, 1994) Through December 31, 1994 and for the Years Ended December
31, 1995 and 1996 and for the period ended March 27, 1997 (unaudited).. F-46
Statements of Cash Flows for the Period From Inception (August 17, 1994)
Through December 31, 1994 and for the Years Ended December 31, 1995 and
1996 and for the periods ended March 31, 1996 and March 27, 1997
(unaudited)............................................................ F-47
Notes to Financial Statements........................................... F-48
GEORGIA FIBER
Independent Auditors' Report............................................ F-54
Balance Sheets--December 31, 1995 and 1996, and March 31, 1996 and March
27, 1997 (unaudited)................................................... F-55
Statements of Income and Net Equity for the Years Ended December 31,
1995 and 1996 and for the periods ended March 31, 1996 and March 27,
1997 (unaudited)....................................................... F-56
Statements of Cash Flows for the Years Ended December 31, 1995 and 1996
and for the periods ended March 31, 1996 and March 27, 1997
(unaudited)............................................................ F-57
Notes to Financial Statements........................................... F-58
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To ITC/\DeltaCom, Inc.:
We have audited the accompanying balance sheet of ITC/\DELTACOM, INC. (a
Delaware corporation) as of June 30, 1997 and the related statements of
operations, stockholder's deficit and cash flows for the period from inception
(March 24, 1997) to June 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ITC/\DeltaCom, Inc. as of
June 30, 1997 and the results of its operations and its cash flows for the
period from inception (March 24, 1997) through June 30, 1997 in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
July 31, 1997
F-2
<PAGE>
ITC/\DELTACOM, INC.
BALANCE SHEET
JUNE 30, 1997
<TABLE>
<S> <C>
ASSETS
CASH............................................................ $ 401,857
RESTRICTED ASSET................................................ 194,775,128
------------
Total current assets........................................ 195,176,985
OTHER NON-CURRENT ASSETS........................................ 5,978,387
------------
TOTAL ASSETS.................................................... $201,155,372
============
LIABILITIES AND STOCKHOLDER'S DEFICIT
CURRENT LIABILITIES--Accounts payable and accrued liabilities... $ 1,646,575
LONG-TERM DEBT.................................................. 200,000,000
------------
Total liabilities........................................... $201,646,575
------------
PREFERRED STOCK, $.01 par value; 5,000,000 shares authorized, 0
shares issued and outstanding.................................. 0
CLASS A COMMON STOCK, $.01 par value; 60,000,000 shares
authorized, 0 shares issued and outstanding.................... 0
CLASS B COMMON STOCK, $.01 par value; 30,000,000 shares
authorized, 15,000,000 shares issued and outstanding........... 150,000
Accumulated deficit............................................. (641,203)
------------
Total stockholder's deficit................................. (491,203)
------------
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT..................... $201,155,372
============
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-3
<PAGE>
ITC/\DELTACOM, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (MARCH 24, 1997)
THROUGH JUNE 30, 1997
<TABLE>
<S> <C>
OPERATING EXPENSES:
Depreciation and amortization................................... $ 60,833
-----------
OPERATING LOSS.................................................... (60,833)
-----------
OTHER INCOME (EXPENSE):
Interest expense................................................ (1,687,671)
Interest income................................................. 776,985
-----------
Total other income (expense).................................. (910,686)
-----------
LOSS BEFORE INCOME TAXES.......................................... (971,519)
INCOME TAX BENEFIT................................................ 330,316
-----------
NET LOSS.......................................................... $ (641,203)
===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
ITC/\DELTACOM, INC.
STATEMENT OF STOCKHOLDER'S DEFICIT
FOR THE PERIOD FROM INCEPTION (MARCH 24, 1997)
THROUGH JUNE 30, 1997
<TABLE>
<CAPTION>
CLASS A CLASS B ADDITIONAL
PREFERRED COMMON COMMON PAID-IN RETAINED
STOCK STOCK STOCK CAPITAL DEFICIT TOTAL
--------- ------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at inception
(March 24, 1997)....... $ 0 $ 0 $150,000 $ 0 $ 0 $ 150,000
Net loss.............. 0 0 0 0 (641,203) (641,203)
--- --- -------- --- --------- ---------
Balance, June 30, 1997.. $ 0 $ 0 $150,000 $ 0 $(641,203) $(491,203)
=== === ======== === ========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE>
ITC/\DELTACOM, INC.
STATEMENT OF CASH FLOWS
FOR PERIOD FROM INCEPTION (MARCH 24, 1997)
THROUGH JUNE 30, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................. $ (641,203)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization.......................... 60,833
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities.............. 1,646,575
-------------
Total adjustments................................... 1,707,408
-------------
Net cash provided by operating activities........... 1,066,205
-------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in restricted assets (Note 1)................. (194,775,128)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock................... 150,000
Proceeds from issuance of long-term debt, net of offering
expenses................................................ 193,960,780
-------------
Net cash provided by financing activities............... 194,110,780
-------------
NET INCREASE IN CASH...................................... 401,857
CASH, BEGINNING OF THE PERIOD............................. 0
-------------
CASH, END OF THE PERIOD................................... $ 401,857
=============
</TABLE>
The accompanying notes are an integral part of this statement.
F-6
<PAGE>
ITC/\DELTACOM, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
1. ORGANIZATION AND NATURE OF BUSINESS
ITC/\DeltaCom, Inc. (the "Company") was incorporated under the laws of the
state of Delaware on March 24, 1997. The purpose of incorporating the Company
was to enable ITC Holding Company, Inc. ("ITC Holding"), the Company's parent
company and only stockholder to complete a reorganization of certain of its
wholly owned subsidiaries on July 25, 1997 as follows:
. Eastern Telecom, Inc. (d.b.a. InterQuest) and ITC Transmission Systems
II, Inc. were merged with and into Interstate FiberNet, Inc. (formerly
ITC Transmission Systems, Inc.) ("FiberNet").
. ITC Holding contributed all of the outstanding capital stock of
FiberNet, DeltaCom, Inc. ("DeltaCom") and Gulf States Transmission
Systems, Inc. to the Company.
. The Company contributed all of the outstanding capital stock of
DeltaCom, Inc. and Gulf States Transmission Systems, Inc. to FiberNet.
In connection with the Reorganization, FiberNet undertook to repay (and
DeltaCom agreed to reimburse FiberNet) approximately $31 million of DeltaCom's
advances from ITC Holding. ITC Holding then forgave such indebtedness and
contributed it to FiberNet as additional equity.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents
For purposes of the statement of cash flows, the Company considers all
investments purchased with a maturity of three months or less to be cash
equivalents.
Debt issuance costs
The Company has incurred debt issuance costs in connection with its long-
term debt. These costs have been capitalized and are being amortized over the
term of the related debt.
3. EQUITY INTERESTS
CAPITAL STOCK
The Company has authorized two classes of common stock. Holders of the
Company's Class A Common Stock have one vote per share, while holders of the
Company's Class B Common Stock have ten votes per share. At June 30, 1997, 0
shares of the Company's Class A Common Stock and 15,000,000 shares of the
Company's Class B Common Stock were outstanding.
EMPLOYEE STOCK OPTION PLAN
On March 24, 1997, the Company adopted and its stockholder approved the 1997
Stock Option Plan (the "Stock Option Plan"). The Stock Option Plan provides
for the grant of options that are intended to qualify as "incentive stock
options" under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code") to employees of the Company, its subsidiaries to be obtained in
the reorganization described in Note 1, and ITC Holding, as well as the grant
of non-qualifying options to any other individual whose participation in the
Stock Option Plan is determined to be in the best interests of the Company.
The Stock Option Plan authorizes the issuance of up to 1.5 million shares of
Class A Common Stock pursuant to options granted under the Stock Option Plan
(subject to anti-dilution adjustments in the event of a stock split,
recapitalization or similar transaction). The maximum number of shares subject
to options that can be awarded under the Stock Option
F-7
<PAGE>
ITC/\DELTACOM, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Plan to any person is 500,000 shares. The Compensation Committee of the Board
of Directors will administer the Stock Option Plan and will grant options to
purchase Class A Common Stock.
The option exercise price for incentive stock options granted under the
Stock Option Plan may not be less than 100% of the fair market value of the
Class A Common Stock on the date of grant of the option (or 110% in the case
of an incentive stock option granted to an optionee beneficially owning more
than 10% of the outstanding Class A Common Stock). The option exercise price
for non-incentive stock options granted under the Stock Option Plan may not be
less than the par value of the Class A Common Stock on the date of grant of
the option. The maximum option term is 10 years (or five years in the case of
an incentive stock option granted to an optionee beneficially owning more than
10% of the outstanding Class A Common Stock). There is also a $100,000 limit
on the value of Class A Common Stock (determined at the time of grant) covered
by incentive stock options that become exercisable by an optionee in any year.
Options granted will become exercisable with respect to 50% of the shares
subject to the options on the second anniversary of the date of grant and with
respect to 25% of the shares subject to the options on each of the third and
fourth anniversaries of the date of grant.
The Board of Directors may amend or terminate the Stock Option Plan with
respect to shares of Class A Common Stock as to which options have not been
granted.
On March 24, 1997, the Company granted options to purchase 789,000 shares of
Class A Common Stock under the Stock Option Plan. All options were granted at
a price at least equal to the estimated fair value of the common stock on the
date of grant ($7.20) as determined by the Company's stockholder's board of
directors based on equity transactions and other analyses. On July 29, 1997,
the Company granted options to purchase 105,254 shares of Class A Common Stock
under The Stock Option Plan. All options were granted at a price at least
equal to the estimated fair value of the common stock on the date of grant
($7.20) as determined by the Company's stockholder's board of directors based
on equity transactions and other analyses.
DIRECTORS STOCK OPTION PLAN
On March 24, 1997, the Company adopted and its stockholder approved the
Directors Stock Option Plan (the "Directors Plan"). The Directors Plan
provides for the "formula" grant of options that are not intended to qualify
as "incentive stock options" under Section 422 of the Code to directors of the
Company who are not officers or employees of the Company, ITC Holding, or any
subsidiary of the Company (each an "Eligible Director"). The Directors Plan
authorizes the issuance of up to 150,000 shares of Class A Common Stock
pursuant to options granted under the Directors Plan (subject to anti-dilution
adjustments in the event of a stock split, recapitalization or similar
transaction). The option exercise price for options granted under the
Directors Plan will be 100% of the fair market value of the shares of Class A
Common Stock on the date of grant of the option. Under the Directors Plan,
each Eligible Director will be granted an option to purchase 10,000 shares of
Class A Common Stock upon such person's initial election or appointment to
serve as director. Options granted will become exercisable with respect to 50%
of the shares subject to the options on the second anniversary of the date of
grant and with respect to 25% of the shares subject to the options on each of
the third and fourth anniversaries of the date of grant. The options will
expire ten years and 30 days after the date of grant.
On March 24, 1997, the Company granted options to purchase 10,000 shares of
the Company's Class A common stock to each of its six nonemployee directors.
All options were granted at a price equal to the estimated fair value of the
common stock on the date of grant ($7.20) as determined by the Company's
stockholder's board of directors based on equity transactions and other
analyses.
F-8
<PAGE>
ITC/\DELTACOM, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 123
During 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation," which defines a fair value-based
method of accounting for an employee stock option or similar equity instrument
and encourages all entities to adopt that method of accounting for all of
their employee stock compensation plans. However, it also allows an entity to
continue to measure compensation cost for those plans using the method of
accounting prescribed by Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees." The Company has elected to account
for options granted to employees under APB Opinion No. 25, under which no
compensation cost has been recognized. Options granted to non-employees, if
any, will be accounted for under SFAS No. 123 and compensation expense equal
to the fair value of the options granted will be recognized.
4. FINANCING ARRANGEMENTS
FiberNet has entered into a commitment letter with a third-party lender to
provide a five-year term and revolving credit facility of up to $100 million
to be used for working capital and other purposes, including capital
expenditures and permitted acquisitions. The credit facility will include a
$50 million multi-draw term facility and a $50 million revolving credit
facility. The commitment letter contemplates that obligations under the credit
facility will be guaranteed by the Company. The credit facility is expected to
contain a number of covenants applicable to FiberNet and its subsidiaries
obtained in the reorganization described in Note 1 and to the Company,
including, among others, covenants limiting debt to be incurred, dividends to
be paid, as well as other equity distributions and stock repurchases and
covenants requiring compliance with certain financial ratios.
On June 3, 1997, the Company completed the issuance of $200 million
principal amount of 11% Senior Notes due 2007 (the "Offering"). Proceeds from
the Offering were held by the trustee until all regulatory approvals related
to the reorganization described in Note 1 were received. On July 25, 1997, the
reorganization was completed and the proceeds from the Offering were released
to the Company. In accordance with the Indenture related to the Notes,
approximately $62.7 million of the approximately $192.7 million net proceeds
was invested in U.S. government securities, which are in a pledged account
held by the Trustee to secure and fund the first six interest payments on the
Notes. Additionally, approximately $99.6 million of the net proceeds was used
to repay outstanding debt and related accrued interest owed by the Company's
subsidiaries. The Company intends to use the remaining approximately $30.4
million of net proceeds (i) to fund market expansion activities of the
Company's telecommunications business, including development and construction
costs of the Company's fiber optic network and its regional sales offices, and
(ii) for additional working capital and other general corporate purposes,
including the funding of cash flow deficits (after capital expenditures).
Pending such uses, the Company has invested such amounts in U.S. government
securities.
F-9
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Interstate FiberNet, Inc. (formerly ITC Transmission Systems, Inc.),
ITC Transmission Systems II, Inc.,
Gulf States Transmission Systems, Inc.,
Eastern Telecom, Inc., d.b.a. InterQuest, and
DeltaCom, Inc.:
We have audited the accompanying combined balance sheets of INTERSTATE
FIBERNET, INC., (FORMERLY ITC TRANSMISSION SYSTEMS, INC.) (a Delaware
corporation), ITC TRANSMISSION SYSTEMS II, INC. (a Delaware corporation), GULF
STATES TRANSMISSION SYSTEMS, INC. (a Delaware corporation), EASTERN TELECOM,
INC., D.B.A. INTERQUEST (a Georgia corporation), AND DELTACOM, INC. (an
Alabama corporation) (collectively referred to as the "Companies" and
contributed to ITC/\DeltaCom, Inc. in connection with the reorganization as
discussed in Notes 1 and 16) as of December 31, 1995 and 1996 and the related
combined statements of operations, stockholder's equity, and cash flows for
each of the three years in the period ended December 31, 1996. These combined
financial statements are the responsibility of the Companies' management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the
Companies as of December 31, 1995 and 1996 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1996 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 27, 1997 (except with respect
to Note 16, as to which the date
is July 31, 1997)
F-10
<PAGE>
ITC/\DELTACOM, INC.
INTERSTATE FIBERNET, INC. (FORMERLY ITC TRANSMISSION SYSTEMS, INC.)
ITC TRANSMISSION SYSTEMS II, INC.,
GULF STATES TRANSMISSION SYSTEMS, INC.,
EASTERN TELECOM, INC., D.B.A. INTERQUEST, AND
DELTACOM, INC.
(REORGANIZED AS ITC/\DELTACOM, INC.)
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- JUNE 30,
1995 1996 1997
----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............ $ 656,096 $ 1,301,415 $ 5,478,614
Restricted assets.................... 0 0 194,775,128
Accounts receivable:
Customer, net of allowance for
uncollectible accounts of $35,787,
$856,858 and $1,019,606 in 1995,
1996 and 1997, respectively......... 1,577,037 11,029,037 17,308,908
Affiliate............................ 84,796 1,227,661 178,360
Inventory............................ 0 543,447 630,431
Prepaid expenses..................... 220,022 1,191,287 1,348,767
Federal income tax refunds receivable
from Parent (Note 8)................ 523,782 2,546,534 663,200
Deferred income taxes (Note 8)....... 85,357 525,660 364,302
----------- ------------ ------------
Total current assets............... 3,147,090 18,365,041 220,747,710
----------- ------------ ------------
PROPERTY, PLANT, AND EQUIPMENT, NET
(NOTE 3)............................. 9,386,444 31,880,556 115,852,080
OTHER LONG-TERM ASSETS:
Intangible assets, net of accumulated
amortization of $58,695, $1,431,753
and $1,973,562 in 1995, 1996 and
1997, respectively (Note 4)......... 1,721,871 55,517,575 65,397,003
Investments (Note 5)................. 6,653,079 7,424,797 5,000
Other long-term assets............... 13,853 20,010 13,928
----------- ------------ ------------
Total assets....................... $20,922,337 $113,207,979 $402,015,721
=========== ============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable:
Trade................................ $ 376,799 $ 4,192,927 $ 7,130,290
Construction......................... 1,020,904 972,215 3,664,666
Affiliate (Note 12).................. 577,439 658,990 0
Accrued interest expense payable to
Parent.............................. 0 5,830,716 9,011,106
Accrued compensation................. 275,856 1,189,395 1,391,633
Unearned revenue..................... 248,459 762,829 3,178,367
Other accrued liabilities............ 214,769 983,270 3,871,230
Advances from Parent................. 0 0 79,886,220
Current portion of long-term debt
(Note 6)............................ 675,000 290,140 43,875,381
Current portion of capital lease
obligations (Note 6)................ 0 69,471 563,153
----------- ------------ ------------
Total current liabilities.......... 3,389,226 14,949,953 152,572,046
----------- ------------ ------------
LONG-TERM LIABILITIES:
Advance from Parent (Note 7)......... 1,456,477 74,227,827 0
Deferred income taxes (Note 8)....... 757,098 3,918,140 4,402,511
Long-term debt (Note 6).............. 1,012,500 640,112 208,611,385
Capital lease obligations (Note 6)... 0 215,421 2,979,207
----------- ------------ ------------
Total long-term liabilities........ 3,226,075 79,001,500 215,993,103
----------- ------------ ------------
COMMITMENTS AND CONTINGENCIES (NOTES
6, 7, 10, AND 16)
STOCKHOLDER'S EQUITY:
Common stock (Note 9)................ 26 826 150,826
Additional paid-in capital........... 14,633,723 23,492,162 40,814,227
Accumulated deficit.................. (326,713) (4,236,462) (7,514,481)
----------- ------------ ------------
Total stockholder's equity......... 14,307,036 19,256,526 33,450,572
----------- ------------ ------------
Total liabilities and stockholder's
equity............................ $20,922,337 $113,207,979 $402,015,721
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of these combined balance sheets.
F-11
<PAGE>
ITC/\DELTACOM, INC.,
INTERSTATE FIBERNET, INC. (FORMERLY ITC TRANSMISSION SYSTEMS, INC.),
ITC TRANSMISSION SYSTEMS II, INC.,
GULF STATES TRANSMISSION SYSTEMS, INC.,
EASTERN TELECOM, INC., D.B.A. INTERQUEST, AND
DELTACOM, INC.
(REORGANIZED AS ITC/\DELTACOM, INC.)
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
----------------------------------- --------------------------
1994 1995 1996 1996 1997
---------- ---------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES...... $4,945,902 $5,750,587 $66,518,585 $28,574,799 $53,365,061
COST OF SERVICES........ 2,484,744 3,149,231 38,756,287 16,129,463 25,302,747
---------- ---------- ----------- ----------- -----------
GROSS MARGIN............ 2,461,158 2,601,356 27,762,298 12,445,336 28,062,314
---------- ---------- ----------- ----------- -----------
OPERATING EXPENSES:
Selling, operations,
and administration... 948,230 1,626,678 18,876,572 8,206,621 16,961,324
Depreciation and
amortization......... 738,052 1,267,882 6,438,074 2,832,017 8,273,232
---------- ---------- ----------- ----------- -----------
Total operating
expenses........... 1,686,282 2,894,560 25,314,646 11,038,638 25,234,556
---------- ---------- ----------- ----------- -----------
OPERATING INCOME
(LOSS)................. 774,876 (293,204) 2,447,652 1,406,698 2,827,758
---------- ---------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Equity in losses of
unconsolidated
subsidiary (Note 5).. (96,920) (258,242) (1,589,812) (1,088,404) 0
Interest expense...... (273,759) (297,228) (6,172,421) (2,762,757) (7,561,591)
Interest and other
income (other
expense)............. 82,348 41,734 171,514 107,216 883,388
---------- ---------- ----------- ----------- -----------
Total other
expense............ (288,331) (513,736) (7,590,719) (3,743,945) (6,678,203)
---------- ---------- ----------- ----------- -----------
INCOME (LOSS) BEFORE
INCOME TAXES,
PREACQUISITION EARNINGS
(LOSSES) AND
EXTRAORDINARY ITEM..... 486,545 (806,940) (5,143,067) (2,337,247) (3,850,445)
INCOME TAX PROVISION
(BENEFIT).............. 113,248 (302,567) (1,233,318) 671,467 1,005,809
---------- ---------- ----------- ----------- -----------
INCOME (LOSS) BEFORE
PREACQUISITION EARNINGS
(LOSSES) AND
EXTRAORDINARY ITEM..... 373,297 (504,373) (3,909,749) (1,665,780) (2,844,636)
PREACQUISITION EARNINGS
(LOSSES) (NOTE 1)...... 236,300 0 0 0 74,132
---------- ---------- ----------- ----------- -----------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM..... 136,997 (504,373) (3,909,749) (1,665,780) (2,770,504)
EXTRAORDINARY ITEM--
LOSS ON EXTINGUISHMENT
OF DEBT (LESS RELATED
INCOME TAX BENEFITS OF
$311,057).............. 0 0 0 0 (507,515)
---------- ---------- ----------- ----------- -----------
NET INCOME (LOSS)....... $ 136,997 $ (504,373) $(3,909,749) $(1,665,780) $(3,278,019)
========== ========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-12
<PAGE>
ITC/\DELTACOM, INC.
INTERSTATE FIBERNET, INC. (FORMERLY ITC TRANSMISSION SYSTEMS, INC.)
ITC TRANSMISSION SYSTEMS II, INC.,
GULF STATES TRANSMISSION SYSTEMS, INC.,
EASTERN TELECOM, INC., D.B.A. INTERQUEST, AND
DELTACOM, INC.
(REORGANIZED AS ITC/\DELTACOM, INC.)
COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
RETAINED
COMMON STOCK EARNINGS TOTAL
--------------- PAID-IN (ACCUMULATED STOCKHOLDER'S
SHARES AMOUNT CAPITAL DEFICIT) EQUITY
------ -------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1993................... 630 $ 6 $ 2,131,494 $ 40,663 $ 2,172,163
Capital contribution
from Parent for for-
mation of ITC Trans-
mission Systems II,
Inc. and acquisition
of 51% interest in
Interstate FiberNet
(Note 5)............. 1,000 10 4,567,407 0 4,567,417
Capital contribution
from Parent for for-
mation of Gulf States
Transmission Systems,
Inc.................. 1,000 10 6,999,990 0 7,000,000
Return of capital con-
tribution to Parent.. 0 0 (115,168) 0 (115,168)
Net income............ 0 0 0 136,997 136,997
------ -------- ----------- ----------- -----------
BALANCE, DECEMBER 31,
1994................... 2,630 26 13,583,723 177,660 13,761,409
Capital contributions
from Parent, net..... 0 0 1,050,000 0 1,050,000
Net loss.............. 0 0 0 (504,373) (504,373)
------ -------- ----------- ----------- -----------
BALANCE, DECEMBER 31,
1995................... 2,630 26 14,633,723 (326,713) 14,307,036
Acquisition of
DeltaCom, Inc. (Note
13).................. 80,000 800 5,999,200 0 6,000,000
Capital contributions
from Parent, net..... 0 0 2,859,239 0 2,859,239
Net loss.............. 0 0 0 (3,909,749) (3,909,749)
------ -------- ----------- ----------- -----------
BALANCE, DECEMBER 31,
1996................... 82,630 826 23,492,162 (4,236,462) 19,256,526
Capital contributions
from Parent, net..... 0 0 17,322,065 0 17,322,065
Initial capitalization
of ITC/\DeltaCom..... 0 150,000 0 0 150,000
Net loss.............. 0 0 0 (3,278,019) (3,278,019)
------ -------- ----------- ----------- -----------
BALANCE, JUNE 30, 1997
(UNAUDITED)............ 82,630 $150,826 $40,814,227 $(7,514,481) $33,450,572
====== ======== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-13
<PAGE>
ITC/\DELTACOM, INC.,
INTERSTATE FIBERNET, INC. (FORMERLY ITC TRANSMISSION SYSTEMS, INC.),
ITC TRANSMISSION SYSTEMS II, INC.,
GULF STATES TRANSMISSION SYSTEMS, INC.,
EASTERN TELECOM, INC., D.B.A. INTERQUEST, AND
DELTACOM, INC.
(REORGANIZED AS ITC/\DELTACOM, INC.)
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
--------------------------------------- --------------------------
1994 1995 1996 1996 1997
------------ ----------- ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss)...... $ 136,997 $ (504,373) $ (3,909,749) $ (1,665,780) $ (3,278,019)
------------ ----------- ------------ ------------ ------------
Adjustments to
reconcile net income
(loss) to net cash
provided by operating
activities (excluding
the effects of
acquisitions):
Depreciation and
amortization......... 738,052 1,267,882 6,438,074 2,832,017 8,334,065
Deferred income
taxes................ 165,195 368,998 611,530 0 104,330
Equity in losses of
investee............. 96,920 258,242 1,589,812 1,088,404 0
Loss on sale of
assets............... 0 73,967 0 0 0
Preacquisition
earnings............. 236,300 0 0 0 (74,132)
Extraordinary item--
Loss on
extinguishment of
debt, net of income
tax benefit.......... 0 0 0 0 507,515
Other................. 48,794 14,326 13,853 13,265 73,369
Changes in current
operating assets and
liabilities:
Accounts receivable.. (1,321,852) 471,988 (2,646,760) (2,110,448) (3,055,995)
Inventory............ 0 0 (182,853) (228,299) (86,984)
Prepaid expenses..... (14,390) (93,563) (246,159) (536,620) (101,682)
Income tax refunds
receivable from
Parent.............. (52,609) (471,619) (2,022,752) 0 (663,200)
Accounts payable..... 491,656 15,083 1,506,728 1,616,103 (505,512)
Accrued interest..... 0 0 5,830,716 2,650,325 3,180,390
Unearned revenue..... 240,234 4,225 514,370 388,927 2,415,538
Accrued compensation
and other accrued
liabilities......... 227,855 31,718 698,290 (1,505,644) 2,563,342
Other, net........... (14,377) 443 (6,482) (93,552) (3,246)
------------ ----------- ------------ ------------ ------------
Total adjustments... 841,778 1,941,690 12,098,367 4,114,478 12,687,798
------------ ----------- ------------ ------------ ------------
Net cash provided by
operating
activities......... 978,775 1,437,317 8,188,618 2,448,698 9,409,779
------------ ----------- ------------ ------------ ------------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Capital expenditures... (4,003,835) (2,526,646) (6,003,971) (1,855,798) (14,069,380)
Change in accrued
construction costs.... 300,000 720,904 (168,689) (424,115) 1,711,909
Purchase of
Investments........... 0 0 0 (394,923) 0
Proceeds from sales of
property to
affiliate............. 0 326,984 0 0 0
Investment in Gulf
States FiberNet....... (7,000,000) 0 (2,361,530) (501,595) 0
Purchase of DeltaCom,
net of cash received
(Note 13)............. 0 0 (63,534,092) (63,534,092) 0
Purchase of assets of
Viper Computer
Systems, Inc. (Note
14)................... 0 0 (625,000) 0 0
Purchase of Gulf States
FiberNet, net of cash
received.............. 0 0 0 0 574,600
------------ ----------- ------------ ------------ ------------
Net cash used in
investing
activities......... (10,703,835) (1,478,758) (72,693,282) (66,710,523) (11,782,871)
------------ ----------- ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-14
<PAGE>
ITC/\DELTACOM, INC.
INTERSTATE FIBERNET, INC. (FORMERLY ITC TRANSMISSION SYSTEMS, INC.)
ITC TRANSMISSION SYSTEMS II, INC.,
GULF STATES TRANSMISSION SYSTEMS, INC.,
EASTERN TELECOM, INC., D.B.A. INTERQUEST, AND
DELTACOM, INC.
(REORGANIZED AS ITC/\DELTACOM, INC.)
COMBINED STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------------------- -------------------------
1994 1995 1996 1996 1997
----------- ----------- ------------- ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from Senior
Notes................. $ 0 $ 0 $ 0 $ 0 $194,250,000
Proceeds from other
long-term debt........ 2,700,000 0 0 0 41,095,061
Repayment of other
long-term debt and
capital lease obliga-
tions................. (337,500) (675,000) (10,619,682) (10,327,884) (41,562,500)
Proceeds from advance
from Parent........... 854,190 0 74,005,598 74,741,047 8,243,990
Repayment of advance
from Parent........... 0 (195,000) (1,234,248) (1,194,806) (48,329)
Proceeds from common
stock................. 0 0 0 0 150,000
Capital contributions
from Parent, net...... 6,884,832 1,050,000 2,859,239 1,810,412 (624,465)
Repayment of capital
lease obligations..... 0 0 0 (6,000) (184,420)
Proceeds from note re-
ceivable.............. 0 0 139,076 0 6,082
----------- ----------- ------------- ----------- ------------
Net cash provided by
financing activities.. 10,101,522 180,000 65,149,983 65,022,769 201,325,419
----------- ----------- ------------- ----------- ------------
INCREASE IN CASH AND
CASH EQUIVALENTS....... 376,462 138,559 645,319 760,944 198,952,327
----------- ----------- ------------- ----------- ------------
CASH AND CASH EQUIVA-
LENTS AT BEGINNING OF
YEAR................... 141,075 517,537 656,096 656,096 1,301,415
----------- ----------- ------------- ----------- ------------
CASH AND CASH EQUIVA-
LENTS AT END OF YEAR... $ 517,537 $ 656,096 $ 1,301,415 $ 1,417,040 $200,253,742
=========== =========== ============= =========== ============
SUPPLEMENTAL CASH FLOW
DISCLOSURES:
Cash paid for inter-
est................... $ 143,762 $ 174,513 $ 280,791 $ 1,217,972 $ 1,034,980
=========== =========== ============= =========== ============
Cash paid for income
taxes, net of refunds
received.............. $ 7,000 $ 11,558 $ 546,501 $ 362,764 $ (621,319)
=========== =========== ============= =========== ============
NONCASH TRANSACTIONS:
Equity portion of ac-
quisition of DeltaCom
(Note 13)............. $ 0 $ 0 $ 6,000,000 $ 6,000,000 $ 0
=========== =========== ============= =========== ============
Assumption of capital
leases related to
acquisition of assets
of Viper Computer
Systems, Inc.
(Note 14)............. $ 0 $ 0 $ 171,683 $ 0 $ 0
=========== =========== ============= =========== ============
Equity portion of
acquisition of 64%
interest in Gulf State
FiberNet and Georgia
Fiber Assets.......... $ 0 $ 0 $ 0 $ 0 $ 17,896,665
=========== =========== ============= =========== ============
Assumption of long-term
debt related to
acquisition of Georgia
Fiber Assets.......... $ 0 $ 0 $ 0 $ 0 $ 9,964,091
=========== =========== ============= =========== ============
Offset of Advances to
Parent as a reduction
to related advances
from Parent........... $ 0 $ 0 $ 0 $ 0 $ 2,546,534
=========== =========== ============= =========== ============
Accrued debt issuance
costs related to
Notes................. $ 0 $ 0 $ 0 $ 0 $ 289,220
=========== =========== ============= =========== ============
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-15
<PAGE>
ITC/\DELTACOM, INC.
INTERSTATE FIBERNET, INC. (FORMERLY ITC TRANSMISSION SYSTEMS, INC.)
ITC TRANSMISSION SYSTEMS II, INC.,
GULF STATES TRANSMISSION SYSTEMS, INC.,
EASTERN TELECOM, INC., D.B.A. INTERQUEST, AND
DELTACOM, INC.
(REORGANIZED AS ITC/\DELTACOM, INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION, BASIS OF PRESENTATION, AND NATURE OF BUSINESS
Organization
InterState FiberNet, Inc. (formerly ITC Transmission Systems, Inc.)
("FiberNet"), ITC Transmission Systems II, Inc. ("Transmission II"), Gulf
States Transmission Systems, Inc. ("GSTS"), and Eastern Telecom, Inc. d.b.a.
InterQuest ("InterQuest") (collectively, the "Fiber Companies"), as well as
DeltaCom, Inc. ("DeltaCom"), are all wholly owned subsidiaries of ITC Holding
Company, Inc. (the "Parent"). ITC/\DeltaCom, Inc. ("ITC/\DeltaCom") was
incorporated on March 24, 1997 under the laws of the State of Delaware, as a
wholly owned subsidiary of the Parent, to acquire and operate the Fiber
Companies and DeltaCom. Upon receipt of certain regulatory approvals and
certain other consents, on July 25, 1997 the Parent completed the
reorganization of such subsidiaries (the "Reorganization"), as follows:
a. InterQuest and Transmission II were merged with and into FiberNet.
b. The Parent contributed all of the issued and outstanding capital
stock of FiberNet, DeltaCom and GSTS to ITC/\DeltaCom Inc.
c. ITC/\DeltaCom contributed all of the outstanding capital stock of
DeltaCom and GSTS to FiberNet.
As a result of the Reorganization, ITC/\DeltaCom became the sole stockholder
of FiberNet and FiberNet became the sole stockholder of both GSTS and
DeltaCom. ITC/\DeltaCom, FiberNet, Transmission II, GSTS, InterQuest, and
DeltaCom are collectively referred to herein as the "Companies."
At December 31, 1996, FiberNet and Transmission II together held 100% of the
ownership interests in Interstate FiberNet ("Interstate"), a Georgia general
partnership (Note 5). Effective with the Reorganization, Interstate was
absorbed by law into FiberNet. GSTS held a 36% ownership in and is the
managing partner of Gulf States FiberNet ("Gulf States"), a Georgia general
partnership (Note 5). Subsequent to year-end, the Parent agreed to purchase
the remaining 64% interest in Gulf States (Note 16).
Basis of Accounting and Financial Statement Presentation
The accompanying combined financial statements of the Companies are prepared
on the accrual basis of accounting and present their combined assets,
liabilities, revenues, expenses, and cash flows as if they existed as a
separate corporation during the periods presented. ITC/\DeltaCom's results of
operations, changes in stockholder's equity, and cash flow have been included
in the combined statements for the period from inception (March 24, 1997)
through June 30, 1997.
The financial information included herein may not necessarily reflect the
financial position, results of operations, or cash flows of the Companies in
the future or what the financial position, results of operations or cash flows
of the Companies would have been if they were combined as a separate stand
alone company during the periods presented.
F-16
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The combined balance sheet as of June 30, 1997 and the combined statements
of operations and cash flows for the six months ended June 30, 1996 and 1997
are unaudited and have been prepared by management of the Companies in
accordance with the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, the statements contain all
adjustments (consisting of only normal recurring items) necessary for the fair
presentation of the financial position and results of operations for the
interim period. The results of operations for the six months ended June 30,
1997 are not necessarily indicative of the results to be expected for the
entire year.
Investments in affiliated entities in which the Companies have at least 20%
ownership and do not have management control are accounted for using the
equity method. All material intercompany accounts and transactions have been
eliminated in the accompanying combined financial statements.
Interstate was initially formed in 1992 as a partnership between FiberNet,
which held a 49% ownership interest, and SCANA Communications, Inc. ("SCANA"),
which held the remaining 51% interest. FiberNet accounted for this investment
using the equity method. On August 17, 1994, the Parent formed Transmission II
and purchased SCANA's 51% interest in Interstate (Note 5). To reflect this
step acquisition, the revenues and expenses of Interstate have been included
in the accompanying statements of operations for the full year ended December
31, 1994, with the preacquisition earnings attributable to SCANA prior to
August 17, 1994 deducted to determine combined net income of the Companies.
On January 29, 1996, the Parent acquired 100% of the common stock of
DeltaCom (Note 13). The acquisition was accounted for using the purchase
method of accounting. The results of operations of DeltaCom have been included
in the accompanying statements of operations since the date of acquisition.
Gulf States was initially formed in 1994 as a partnership between GSTS,
which held a 36% ownership interest, and SCANA, which held the remaining 64%
interest. GSTS accounted for this investment using the equity method. On March
27, 1997, GSTS purchased SCANA's 64% interest in Gulf States (Note 16). To
reflect this step acquisition, the revenues and expenses of Gulf States have
been included in the statement of operations for the six months ended June 30,
1997, with the preacquisition losses attributable to SCANA prior to March 27,
1997 deducted to determine the combined net loss of the Companies.
Nature of Business
The Companies operate primarily in two business segments. DeltaCom is a
regional long-distance company operating primarily in the State of Alabama.
DeltaCom is engaged in the retail sale of long-distance services such as
traditional switched and dedicated long distance; 800/888 calling; calling
card and operator services; ATM and frame relay; high-capacity broadband
private line services, as well as Intranet, Internet, and Web page hosting and
development services; and customer premises equipment installation and repair.
DeltaCom primarily serves midsized and major regional businesses in the
southern United States (the "Retail Services").
The Fiber Companies are engaged in the sale of long-haul private-line
services on a wholesale basis to other telecommunications companies using
their owned and managed fiber optic network which extends throughout ten
southern states (Arkansas, Texas, Tennessee, Mississippi, Louisiana, Alabama,
Georgia, North Carolina, South Carolina, and Florida) (the "Carriers' Carrier
Services"). The Fiber Companies have been providing Carriers' Carrier Services
since 1992 through their ownership interests in Interstate and, later, Gulf
States (Note 5).
Certain of the Companies have experienced operating losses as a result of
efforts to build their network infrastructure and internal staffing, develop
their systems, and expand into new markets. Assuming financing is available,
all of the Companies expect to continue to focus on increasing their customer
base and expanding their network operations. Accordingly, the Companies expect
that their cost of services, selling, operations, and administration expenses
and capital expenditures will continue to increase significantly, all of which
will have a
F-17
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
negative impact on short-term operating results. In addition, the Companies
may change their pricing policies to respond to a changing competitive
environment. The Companies have entered into a commitment letter with a third-
party lender for a five-year, $100 million secured credit facility and
ITC/\DeltaCom has issued senior notes (Note 16) to refinance certain existing
indebtedness of the Companies and to provide additional funds for the
Companies' expansion plans. In the opinion of management, the Companies' cash
flows from operations and existing credit position, combined with management's
ability to scale back expansion plans if necessary, will be sufficient to meet
the capital and operating needs of the Companies through at least 1997.
However, there can be no assurance that growth in the Companies' revenue or
customer base will continue or that the Companies will be able to achieve or
sustain profitability and/or positive cash flow.
Sources of Supplies
The Companies voluntarily use a single vendor for transmission equipment
used in the Companies' network. However, if this vendor were unable to meet
the Companies' needs, management believes that other sources for this
equipment exist on commensurate terms and that operating results would not be
adversely affected.
Credit Risk and Significant Customers
The Companies' accounts receivable potentially subject the Companies to
credit risk, as collateral is generally not required. The Companies' risk of
loss is limited due to advance billings to certain customers for services and
the ability to terminate access on delinquent accounts. The concentration of
credit risk is mitigated by the large number of customers comprising the
customer base. In 1996 and 1994, no customer represented more than 10% of the
Companies' combined operating revenues. However, in 1995, one customer
represented approximately 30% of the Companies' combined operating revenues.
Regulation
The Companies are subject to certain regulations and requirements of the
Federal Communications Commission and various state public service
commissions.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Companies consider all short term highly liquid investments with an
original maturity date of three months or less to be cash equivalents.
Inventory
Inventory is held only by DeltaCom and consists primarily of customer
premise equipment held for resale.
Inventory is valued at the lower of cost or market, with cost determined
using the first in, first out method.
F-18
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Property and Equipment
Property and equipment are recorded at cost or fair market value at the
acquisition date (Note 3). Depreciation of property and equipment is provided
using the composite or straight line method over the following estimated
useful lives:
<TABLE>
<CAPTION>
YEARS
-------
<S> <C>
Buildings and towers................................................. 30
Office furniture, fixtures, and equipment............................ 3 to 15
Vehicles............................................................. 5
Telecommunications equipment......................................... 5 to 20
</TABLE>
Intangible Assets
Intangible assets include the excess of the purchase price of acquisitions
over the fair value of net assets acquired, as well as various other acquired
intangibles. Intangible assets are amortized over the following estimated
useful lives:
<TABLE>
<CAPTION>
YEARS
-------
<S> <C>
Goodwill............................................................. 40
Trademark............................................................ 40
Customer base........................................................ 5 to 12
Noncompete agreements................................................ 5
</TABLE>
At June 30, 1997, intangible assets also include debt issuance costs
associated with ITC/\DeltaCom's offering of Senior Notes (Note 16) as well as
the Bridge Facility (Note 16), which will be amortized over the life of the
related debt.
Long-Lived Assets
The Companies adopted Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of," on January 1, 1996. SFAS No. 121 establishes
accounting standards for the impairment of long lived assets and goodwill
related to those assets to be held and used and for long-lived assets and
certain identifiable intangible assets to be disposed of. The effect of
adopting SFAS No. 121 was not material to the Companies' combined financial
statements.
The Companies review their intangible assets for impairment at each balance
sheet date or whenever events or changes in circumstances indicate that the
carrying amount of an asset should be assessed. Management evaluates the
intangible assets related to each acquisition individually to determine
whether an impairment has occurred. An impairment is recognized when the
discounted future cash flows estimated to be generated by the acquired
business are sufficient to recover the current unamortized balance of the
intangible asset with the amount of any such deficiency charged to income in
the current year. Estimates of future cash flows are based on many factors,
including current operating results, expected market trends, and competitive
influences.
Unearned Revenue
Unearned revenue represents the liability for advanced billings to customers
for use of the Companies' fiber- optic network. Customers are billed in
advance for fixed monthly charges.
Unbilled Revenue
DeltaCom records unbilled revenue for long-distance services provided to
customers but not yet billed. Approximately $3.4 million in unbilled revenue
is included in accounts receivable in the accompanying balance sheet at
December 31, 1996.
F-19
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Income Taxes
The Companies utilize the liability method of accounting for income taxes.
Under the liability method, deferred taxes are determined based on the
difference between the financial and tax bases of assets and liabilities using
enacted tax rates in effect in the years in which the differences are expected
to reverse.
The Internal Revenue Code and applicable state statutes provide that the
income and expenses of a partnership are not separately taxable to the
partnership but rather accrue directly to the partners. Accordingly, the
accompanying financial statements include provisions for federal and state
income taxes related to partnership interests in Interstate and Gulf States
held by FiberNet, Transmission II, and GSTS.
The Companies are included in the consolidated federal income tax return of
the Parent. Under a tax-sharing arrangement, the Companies are paid for the
utilization of net operating losses included in the consolidated tax return,
even if such losses could not have been used if the Companies were to have
filed on a separate return basis.
Revenue Recognition
Revenues are recognized as services are provided and consist primarily of
charges for use of long-distance services and for use of the Companies' fiber-
optic network.
Fair Value of Financial Instruments
The carrying values of the Companies' financial instruments, other than the
portion of their advance from the Parent related to the DeltaCom acquisition,
approximate their fair values. See Note 7 for the terms of the advance from
the Parent and the related interest swap agreements under which DeltaCom would
receive $285,308 if the agreements were terminated at December 31, 1996.
Advertising Costs
The Companies expense all advertising costs as incurred.
3. PROPERTY AND EQUIPMENT
Balances of major classes of assets and the related accumulated depreciation
as of December 31, 1995 and 1996 are as follows:
<TABLE>
<CAPTION>
1995 1996
---------- -----------
<S> <C> <C>
Land................................................. $ 0 $ 140,695
Buildings and towers................................. 788,107 1,293,495
Furniture and fixtures............................... 1,219,792 4,140,188
Vehicles............................................. 31,610 287,219
Telecommunications equipment......................... 7,598,308 32,321,553
---------- -----------
9,637,817 38,183,150
Less accumulated depreciation........................ 1,511,374 6,569,908
---------- -----------
Net property, plant, and equipment in service........ 8,126,443 31,613,242
Assets under construction............................ 1,260,001 267,314
---------- -----------
Property, plant, and equipment, net.................. $9,386,444 $31,880,556
========== ===========
</TABLE>
F-20
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
4. INTANGIBLE ASSETS
Goodwill and other intangible assets and the related amortization as of
December 31, 1995 and 1996 are as follows:
<TABLE>
<CAPTION>
1995 1996
---------- -----------
<S> <C> <C>
Goodwill............................................ $1,780,566 $50,961,123
Customer base....................................... 0 5,846,371
Noncompete agreements............................... 0 102,000
Trademark........................................... 0 39,834
---------- -----------
1,780,566 56,949,328
Less accumulated amortization....................... (58,695) (1,431,753)
---------- -----------
Intangibles, net.................................... $1,721,871 $55,517,575
========== ===========
</TABLE>
At December 31, 1995, all goodwill related to the acquisition of Interstate
in 1994 (Note 5). See Notes 14 and 15 for a discussion of additional
intangible assets recorded in 1996 related to the acquisitions of DeltaCom and
the assets of Viper Computer Systems, Inc. ("ViperNet").
5. INVESTMENTS
Gulf States
At December 31, 1995 and 1996, investments represent GSTS's 36% ownership
interest in Gulf States, which was formed as a partnership between GSTS and
SCANA in 1994. Gulf States provides digital communications transport services
to communications common carriers in the states of Georgia, Texas, Alabama,
Mississippi, and Louisiana. GSTS is the managing partner and is responsible
for managing and operating Gulf States. Subsequent to year-end, the Parent
agreed to purchase the remaining 64% interest in Gulf States previously owned
by SCANA (Note 16). The following table summarizes various financial data of
Gulf States for the period from inception (August 17, 1994) to December 31,
1994 and for the years ended December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Operating revenues.................... $ 127,569 $ 7,587,713 $10,056,544
Operating (loss) income............... (280,718) 1,214,409 (216,992)
Net loss.............................. (269,222) (717,340) (4,416,142)
Current assets........................ 590,040 6,557,741 2,751,101
Noncurrent assets..................... 42,950,641 64,206,522 63,820,143
Current liabilities................... 10,753,346 9,831,768 9,432,588
Noncurrent liabilities................ 12,700,000 41,562,500 35,625,000
</TABLE>
Interstate
FiberNet owned a 49% interest in Interstate. On August 17, 1994, the Parent
exchanged 250,000 shares of its common stock, valued at $4,435,000, for
SCANA's 51% interest in Interstate and paid $132,417 in related expenses.
Simultaneously, the Parent formed Transmission II, transferred the 51%
ownership interest in Interstate to Transmission II, and made an equity
contribution to Transmission II equal to the value of the net assets acquired.
Goodwill of $1,780,566 related to this transaction has been "pushed down" to
the accounts of Transmission II. The goodwill represents the excess of the
purchase price paid for the 51% ownership interest in Interstate over the fair
market value of the net assets acquired.
F-21
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
To reflect this step acquisition, the revenues and expenses of Interstate
for the year ended December 31, 1994 have been included in the accompanying
statements of operations, with the preacquisition earnings attributable to
SCANA deducted to determine combined net income of the Companies. In addition,
the statement of cash flows for the year ended December 31, 1994 reflects all
cash flows of Interstate during the year. The statement of stockholder's
equity reflects the step acquisition as a capital contribution to FiberNet
during 1994.
As discussed in Note 1, effective with the Reorganization, the partners of
Interstate merged and the partnership was absorbed by law into FiberNet.
6. FINANCING OBLIGATIONS
Long-Term Debt
Long-term debt at December 31, 1995 and 1996 consists of the following:
<TABLE>
<CAPTION>
1995 1996
---------- ---------
<S> <C> <C>
Borrowings under NationsBank of Georgia, N.A. credit
agreement (up to $2,700,000), 8% interest; due in
quarterly installments of $168,750 through September
1998; secured by the assets of Interstate; all
outstanding amounts were repaid during 1996............ $1,687,500 $ 0
Installment payments on equipment due to Northern
Telecom, payable in annual installments of $351,370;
due June 1, 1999; interest rate imputed at 8.6%........ 0 930,252
---------- ---------
1,687,500 930,252
Less current maturities................................. (675,000) (290,140)
---------- ---------
Long-term debt, net of current portion.................. $1,012,500 $ 640,112
========== =========
</TABLE>
Maturities of long term debt at December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997................................................................ $290,140
1998................................................................ 306,862
1999................................................................ 333,250
2000................................................................ 0
2001................................................................ 0
Thereafter.......................................................... 0
--------
$930,252
========
</TABLE>
Long term debt at June 30, 1997 consisted of the following (unaudited):
<TABLE>
<S> <C>
11% Senior Notes Due 2007 (Note 16)............................ $200,000,000
$41.6 million bridge facility, interest payable at LIBOR plus
2.25% (8.25% at June 30, 1997), paid in full on July 25, 1997
(Note 16)..................................................... 41,600,000
$10.0 million term facility, interest payable at 11%, maturing
on March 31, 2002............................................. 9,964,091
Other.......................................................... 922,675
------------
Total long-term debt .......................................... 252,486,766
Less: current maturities....................................... 43,875,381
------------
Total.......................................................... $208,611,385
============
</TABLE>
F-22
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
LEASE OBLIGATIONS
The Companies have entered into various operating and capital leases for
facilities and equipment used in their operations. Aggregate future minimum
rental commitments under noncancelable operating leases with original or
remaining periods in excess of one year and maturities of capital lease
obligations as of December 31, 1996 are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
----------- --------
<S> <C> <C>
1997................................................. $ 2,156,464 $ 90,139
1998................................................. 2,694,668 89,678
1999................................................. 2,583,231 45,643
2000................................................. 1,937,701 21,981
2001................................................. 1,769,097 19,004
Thereafter........................................... 7,987,843 99,797
----------- --------
$19,129,004 366,242
===========
Less amounts representing interest................... (81,350)
--------
Present value of net minimum lease payments.......... 284,892
Less current portion................................. (69,471)
--------
Obligations under capital lease, net of current por-
tion................................................ $215,421
========
</TABLE>
Rental expense charged to operations for the years ended December 31, 1994,
1995, and 1996 was $63,251, $74,534, and $1,272,389, respectively.
7. ADVANCE FROM PARENT
The advance from Parent reflected on the Companies' balance sheets includes
the following at December 31, 1995 and 1996.
<TABLE>
<CAPTION>
1995 1996
---------- -----------
<S> <C> <C>
DeltaCom advance from Parent related to acquisi-
tion............................................. $ 0 $74,005,598
Cash advance from Parent to InterQuest............ 1,456,477 1,267,143
Cash advance to Parent from DeltaCom.............. 0 (1,044,914)
---------- -----------
Total advance from Parent......................... $1,456,477 $74,227,827
========== ===========
</TABLE>
DeltaCom Advance From Parent Related to Acquisition
As discussed in Note 12, the Parent funded the acquisition of DeltaCom and
the related refinancing of DeltaCom's outstanding debt through borrowings of
$74,005,598 on its own credit facility (the "Parent Credit Facility") with
First Union National Bank of North Carolina ("First Union") and CoBank, ACB
("CoBank"). These borrowings have been pushed down to the accounts of the
Company through the advance from Parent account under terms substantially
identical to those of the Parent Credit Facility.
The Parent Credit Facility is a two year line of credit providing for
borrowings of up to $127.5 million on a two year revolving basis. The
available credit was initially split equally between CoBank ("Tranche A") and
First Union ("Tranche B"); however, First Union subsequently syndicated
Tranche B to several other lenders. On January 19, 1998, the Parent may elect
to convert all outstanding balances to a five year term loan with quarterly
principal payments through December 31, 2002. Loans made under the Parent
Credit Facility may, at any time or from time to time, be repaid in whole or
in part, upon certain notices to the administrative agent. As of December 31,
1996, the Parent had $86 million outstanding under this agreement.
F-23
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Interest on the Parent Credit Facility is calculated on a 360 day year, at
the option of the Parent, as follows:
. Tranche A--"Margin" plus either (a) prime, (b) 1-, 2-, 3-, or 6-month
LIBOR, or (c) one year Treasury
. Tranche B--"Margin" plus either (a) prime or (b) 1-, 2-, 3-, or 6-month
LIBOR
The applicable "Margin" varies based on the Parent's leverage ratio and is
adjusted quarterly. At December 31, 1996, the interest rate for both tranches
was calculated based on the applicable margin (2.25%) plus the 3 month LIBOR
rate (5.53125%).
The Parent has also entered into a forward starting interest rate swap
agreement with First Union to hedge its interest rate exposure under the
Parent Credit Facility. The agreement swaps notional amounts of $50 million
and $41 million under the Parent Credit Facility with fixed rates of 8.66% and
8.53%, respectively. As of December 31, 1996, DeltaCom's proportionate share
of the fee the Parent would receive upon termination of the swap agreement was
$285,308. Upon the Reorganization (Note 16), DeltaCom will repay its portion
of these borrowings at an interest rate of 8.595%, which approximates the
Parent's average interest rate under these interest rate swap agreements. At
December 31, 1996, the balance sheet reflects approximately $5.8 million of
accrued interest related to DeltaCom's advance from Parent.
The Parent Credit Facility includes certain financial covenants and ratios.
At December 31, 1996, the Parent was in compliance with these requirements.
The Parent Credit Facility is jointly and severally guaranteed by the Parent,
the Companies, and other wholly owned or majority owned subsidiaries of the
Parent. The Parent Credit Facility is also secured by substantially all of the
assets of the Parent and the Companies, as well as the assets of other wholly
owned or majority owned subsidiaries of the Parent.
Cash Advance to Parent From DeltaCom
Amounts reflected as cash advance to Parent from DeltaCom represent excess
funds from operations which are loaned to the Parent at an annual interest
rate of 8.25%. DeltaCom recorded interest income of $77,868 during 1996. The
advance is repayable on demand.
Cash Advance From Parent to InterQuest
Amounts reflected as cash advance from Parent to InterQuest represent
borrowings for operating purposes. Interest is payable at a rate equal to the
interest rate on the Parent Credit Facility plus .5%. InterQuest recorded
interest expense of $122,696 and $96,665 in 1995 and 1996, respectively.
8. INCOME TAXES
Details of the income tax provision (benefit) for the years ended December
31, 1994, 1995, and 1996 are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
-------- --------- -----------
<S> <C> <C> <C>
Current:
Federal................................. $ 3,040 $(628,795) $(1,804,786)
State................................... (1,453) (42,770) (48,829)
-------- --------- -----------
Total current......................... 1,587 (671,565) (1,853,615)
-------- --------- -----------
Deferred:
Federal................................. 95,812 385,742 660,033
State................................... 15,849 (16,744) (39,736)
-------- --------- -----------
Total deferred........................ 111,661 368,998 620,297
-------- --------- -----------
Total provision (benefit)............. $113,248 $(302,567) $(1,233,318)
======== ========= ===========
</TABLE>
F-24
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The tax effects of temporary differences between the carrying amounts of
assets and liabilities in the financial statements and their respective tax
bases, which give rise to deferred tax assets and liabilities, as of December
31, 1995 and 1996 are as follows:
<TABLE>
<CAPTION>
1995 1996
--------- -----------
<S> <C> <C>
Noncurrent deferred tax (liabilities) assets:
Property, plant, and equipment basis differ-
ences........................................... $(784,435) $(3,903,605)
Intangible assets................................ (48,109) (57,849)
Other............................................ 75,446 43,314
--------- -----------
(757,098) (3,918,140)
--------- -----------
Current deferred tax assets:
Accrued expenses................................. 0 80,245
Net operating loss carryforwards................. 77,526 130,912
Reserves for uncollectible accounts.............. 7,831 314,503
--------- -----------
85,357 525,660
--------- -----------
Net deferred income tax liabilities................ $(671,741) $(3,392,480)
========= ===========
</TABLE>
The Companies are included in the Parent's consolidated federal income tax
return. Prior to January 29, 1996, DeltaCom filed a separate federal income
tax return. The Companies each file separate state income tax returns.
Under a tax-sharing arrangement, the Companies receive payment for net
operating losses generated for federal income tax purposes and used by the
Parent in the Parent's consolidated income tax return. Amounts receivable from
the Parent under this tax-sharing agreement are $523,782 and $2,546,534 at
December 31, 1995 and 1996, respectively. Additionally, certain of the
Companies have generated net operating losses for state income tax purposes.
At December 31, 1995 and 1996, $77,526 and $130,912 respectively, have been
included in current assets in the Companies' balance sheets. Loss
carryforwards of approximately $11,000, $67,000, and $53,000 will expire in
2009, 2010, and 2011, respectively. In management's opinion, the Companies
will generate operating income sufficient to utilize all of the remaining
state net operating loss carryforwards in 1997.
A reconciliation of the federal statutory income tax rate to the effective
income tax rate for the periods presented is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
----- ------ -----
<S> <C> <C> <C>
Federal statutory rate............................... 34.0% (34.0)% (34.0)%
Increase (reduction) in taxes resulting from:
State income taxes, net of federal benefit......... 5.5 (5.2) (2.0)
Nondeductible amortization of goodwill............. 0.0 0.0 9.0
Preacquisition earnings............................ (16.5) 0.0 0.0
Other................................................ 0.3 1.7 3.0
----- ------ -----
Effective income tax rate............................ 23.3% (37.5)% (24.0)%
===== ====== =====
</TABLE>
F-25
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
9. EQUITY INTERESTS
Capital Stock
The common stock authorized, issued, and outstanding at December 31, 1995
and 1996 for each of the Companies is as follows:
<TABLE>
<CAPTION>
SHARES
SHARES ISSUED AND PAR VALUE
AUTHORIZED OUTSTANDING PER SHARE
---------- ----------- ---------
<S> <C> <C> <C>
FiberNet....................................
Transmission II............................. 10,000 1,000 0.01
GSTS........................................ 10,000 1,000 0.01
InterQuest.................................. 100,000 530 0.01
DeltaCom.................................... 80,000 80,000 0.01
</TABLE>
ITC/\DeltaCom has two classes of common stock authorized. Holders of
ITC/\DeltaCom's Class A Common Stock have one vote per share, while holders of
Class B Common Stock have ten votes per share. Upon the formation of
ITC/\DeltaCom (Note 1), 15,000,000 shares of Class B Common Stock were
outstanding.
Parent Stock Option Plan
The Parent sponsors a stock option plan which provides for the granting of
stock options to substantially all employees of the Parent and its wholly
owned and majority owned subsidiaries, including the Companies. Options are
generally granted at a price (established by the Parent's board of directors
based on equity transactions and other analyses) equal to at least 100% of the
fair market value of the Parent's common stock on the option grant date.
Options granted generally become exercisable 40% after two years and 20% per
annum for the next three years and remain exercisable for ten years after the
option grant date. At December 31, 1996, employees of the Companies held
outstanding options for a total of 314,768 of the Parent's shares at option
prices ranging from $7.60 to $30.50 per share.
Statement of Financial Accounting Standards No. 123
During 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock- Based Compensation," which defines a fair value-based
method of accounting for an employee stock option or similar equity instrument
and encourages all entities to adopt that method of accounting for all of
their employee stock compensation plans. However, it also allows an entity to
continue to measure compensation cost for those plans using the method of
accounting prescribed by Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees." Entities electing to remain with
the accounting methodology required by APB Opinion No. 25 must make pro forma
disclosures of net income and, if presented, earnings per share as if the fair
value-based method of accounting defined in SFAS No. 123 had been applied.
The Parent has elected to account for its stock based compensation plans
under APB Opinion No. 25, under which no compensation cost has been recognized
by either the Parent or the Companies. However, the Companies have computed,
for pro forma disclosure purposes, the value of all options for shares of the
Parent's common stock granted since December 15, 1994 to employees of the
Companies using the Black-Scholes option pricing model prescribed by SFAS No.
123 and the following weighted average assumptions:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Risk-free interest rate................................ 5.53% 6.29%
Expected dividend yield................................ 0% 0%
Expected lives......................................... Ten years TEN YEARS
Expected volatility.................................... 50% 50%
</TABLE>
F-26
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The weighted average fair value of options for the Parent's stock granted to
employees of the Companies in 1995 and 1996 was $16.14 and $19.65 per share,
respectively. The total value of options for the Parent's stock granted to
employees of the Companies during 1995 and 1996 was computed as approximately
$257,000 and $4,116,000, respectively, which would be amortized on a pro forma
basis over the five-year vesting period of the options. If the Companies had
accounted for these plans in accordance with SFAS No. 123, the Companies' net
loss for the years ended December 31, 1995 and 1996 would have increased as
follows:
<TABLE>
<CAPTION>
AS REPORTED PRO FORMA
----------- -----------
<S> <C> <C>
Net loss for the year ended December 31, 1995.... $ (504,373) $ (595,987)
Net loss for the year ended December 31, 1996.... (3,909,749) (5,469,440)
</TABLE>
Because SFAS No. 123 has not been applied to options granted prior to
December 15, 1994, the resulting pro forma compensation cost may not be
representative of that expected in future years.
A summary of the status of the Companies' portion of the Parent's stock
option plan at December 31, 1995 and 1996 and changes during the years then
ended is presented in the following table:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
PRICE
SHARES PER SHARE
------- ---------
<S> <C> <C>
Outstanding at December 31, 1994.......................... 94,925 $13.92
Granted................................................. 14,252 21.17
Forfeited............................................... (750) 14.35
-------
Outstanding at December 31, 1995.......................... 108,427 14.87
Granted................................................. 223,081 25.87
Exercised............................................... (840) 16.86
Forfeited............................................... (15,900) 24.55
-------
Outstanding at December 31, 1996.......................... 314,768 22.17
=======
</TABLE>
The following table sets forth the exercise price range, number of shares,
weighted average exercise price, and remaining contractual lives by groups of
similar price and grant date:
<TABLE>
<CAPTION>
WEIGHTED
WEIGHTED AVERAGE
EXERCISE NUMBER AVERAGE CONTRACTUAL
PRICE RANGE OF SHARES PRICE LIFE
----------- --------- -------- -----------
(IN YEARS)
<S> <C> <C> <C>
$ 7.60-$ 7.99 25,000 $ 7.68 4.95
$14.35 31,300 14.35 7.27
$17.74 38,962 17.74 7.89
$20.00 5,300 20.00 8.43
$24.75-$24.78 170,406 24.78 9.87
$30.02-$30.50 43,800 30.08 9.31
</TABLE>
At December 31, 1996, 51,750 options for the Parent's stock with a weighted
average exercise price of $12.06 per share were exercisable by employees of
the Companies. At December 31, 1995, 26,260 options for the Parent's stock
with a weighted average exercise price of $9.27 per share were exercisable by
employees of the Companies.
F-27
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
10. COMMITMENTS AND CONTINGENCIES
Purchase Commitments
At December 31, 1996, the Companies had entered into agreements with vendors
to purchase approximately $5.6 million of equipment related to the
installation of a switch in Columbia, South Carolina, improvements to a switch
in Birmingham, Alabama, and other network expansion efforts.
At June 30, 1997, the Companies had entered into agreements with vendors to
purchase approximately $11.5 million of equipment related to the improvement
and installation of switches, other network expansion efforts and certain
services (unaudited).
Legal Proceedings
In the normal course of business, the Companies are subject to various
litigation; however, in management's opinion and the opinion of counsel, there
are no legal proceedings pending against the Companies which would have a
material adverse effect on the financial position, results of operations, or
liquidity of the Companies.
11. EMPLOYEE BENEFIT PLANS
The Fiber Companies' employees are participants in the Parent's defined
benefit plan. Effective January 31, 1995, the Parent elected to freeze all
future benefit accruals under the plan. The plan provided retirement,
disability, and survivor benefits to eligible employees. The Fiber Companies
funded pension cost in accordance with applicable regulations. Total pension
cost charged to expense in 1994, 1995, and 1996 was $17,805, $8,721, and
$9,600, respectively.
The net assets available for benefits under the plan are maintained by the
Parent on behalf of its subsidiaries. As of December 31, 1995 and 1996, the
plan's net assets available for benefits were $1,878,498 and $1,646,892,
respectively, and the projected benefit obligations were $2,370,391 and
$2,442,917, respectively, as computed under SFAS No. 87.
Employees of the Fiber Companies participate in the Parent's 401(k) defined
contribution plan. This plan, which became effective February 1, 1995, covers
all employees of the participating entities who have one year of service and
are 18 years of age. The Parent contributes a discretionary amount of the
employees' earnings based on the plan's earnings. The discretionary
contribution percentages per employee for the years ended December 31, 1995
and 1996 were 2.53% (limited to a total for all participants of $100,000) and
2.66% (limited to a total for all participants of $150,000), respectively, and
were fully funded by the Parent. In addition, the Fiber Companies offer a
partial matching of employee contributions at a rate of 1/2% for each 1% of
the employee earnings contributed to a maximum match of 4% of employee
earnings. Total matching contributions made to the plan and charged to expense
by the Fiber Companies for the years ended December 31, 1995 and 1996 were
$26,520 and $54,098, respectively.
Employees of DeltaCom may participate in a separately administered 401(k)
defined contribution plan. The plan covers substantially all DeltaCom
employees with at least one year of service. Participants may elect to defer
15% of compensation up to a maximum amount determined annually pursuant to IRS
regulations. DeltaCom has elected to provide matching employer contributions
equal to the lesser of 3% of compensation or the maximum amount annually for
each participant. DeltaCom's policy is to fund contributions as earned.
Company contributions made to the plan and charged to expense by DeltaCom for
the 11 months ended December 31, 1996 were $123,854.
F-28
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
12. RELATED PARTY TRANSACTIONS
The Parent occasionally provides certain administrative services, such as
legal and tax planning services for its subsidiaries, including the Companies.
In addition, for the period from January through July 1994, the Parent
provided FiberNet and InterQuest with additional administrative services,
including marketing, management, and financial services. The costs of these
services are charged to the Companies based primarily on the salaries and
related expenses for certain of the Parent's executives and an estimate of
their time spent on projects specific to the Companies. For the years ended
December 31, 1994, 1995, and 1996, the Companies recorded $148,140, $5,270,
and $19,150 in selling, operations, and administration expenses related to
these services. In the opinion of management, the methodology used to
calculate the amounts charged to the Companies is reasonable.
The Parent also leases office space and transportation to the Companies.
Amounts charged to the Companies related to these leases for the years ended
December 31, 1995 and 1996 were $21,669, and $62,762, respectively, and are
reflected as selling, operations, and administration expenses in the
Companies' statements of operations. No such leases were in place in 1994. See
Notes 7 and 11 for discussion of certain other financial arrangements between
the Parent and the Companies.
Certain of the Parent's other wholly owned or majority-owned subsidiaries
provide the Companies with various services and/or receive services provided
by the Companies. These entities include Interstate Telephone Company and
Valley Telephone Company, which provide local and long-distance telephone
services; InterCall, Inc. ("InterCall"), which provides conference calling
services; and InterServ Services Corporation, which provides operator services
for "800" customer service numbers and full-service marketing research in the
telecommunications industry and other industries. The Parent also holds equity
investments in the following entities which do business with the Companies:
InterCel, Inc., which provides cellular services; KNOLOGY Holdings, Inc.,
formerly CyberNet Holding, Inc. ("KNOLOGY"), which provides cable television
services; and MindSpring Enterprises, Inc. ("MindSpring"), which is a regional
provider of Internet access. In management's opinion, the Companies'
transactions with these affiliated entities are generally representative of
arm's-length transactions.
For the years ended December 31, 1994, 1995, and 1996, the Companies
received services from these affiliated entities in the amounts of $89,149,
$465,167, and $180,400, respectively, which are reflected in selling,
operations, and administration expenses in the Companies' statements of
operations. In addition, in 1996, the Companies received services from these
affiliated entities in the amount of $762,173, which is reflected in cost of
services in the Companies' statements of operations. At December 31, 1995 and
1996, amounts payable for these services of $577,439 and $658,990,
respectively, are recorded in the Companies' balance sheets as affiliate
accounts payable.
The Fiber Companies provide operator and directory assistance services and
lease capacity on certain of their fiber routes to affiliated entities.
Beginning in 1996, DeltaCom also provides long-distance and related services
to the Parent and all of its wholly owned and majority-owned subsidiaries.
Also beginning in 1996, DeltaCom acts as an agent for InterCall and MindSpring
in contracting with major interexchange carriers to provide origination and
termination services. Under these agreements, DeltaCom contracts with the
interexchange carrier and rebills the appropriate access charges plus a margin
to InterCall and MindSpring, such that only the margin impacts the Companies'
combined revenues. Total affiliated revenues included in the Companies'
statements of operations for the years ended December 31, 1994, 1995, and 1996
were $458,302, $486,246, and $2,863,389, respectively. At December 31, 1995
and 1996, amounts receivable for these services were $84,796 and $1,227,661,
respectively, and are recorded in the Companies' balance sheets as affiliate
accounts receivable.
In 1995, the Fiber Companies constructed a fiber route on behalf of
CyberNet. Construction expenses reimbursed by KNOLOGY totaled $62,830. The
Companies also provided certain engineering and construction- related
management services to KNOLOGY in 1995. The Fiber Companies did not bill
KNOLOGY for these services, which are estimated by the Fiber Companies to have
a value of approximately $50,000.
F-29
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
DeltaCom has a contract with a former stockholder to provide management
services to DeltaCom through 1997 for $300,000 annually. In addition, DeltaCom
leases real properties from former stockholders and other related parties.
Total rental expense related to these leases was approximately $235,000 in
1996. DeltaCom is obligated to pay rentals to a former stockholder totaling
approximately $181,000 annually from 1997 through 2005 under leases which are
cancelable by either of the parties with 24 months' notice. DeltaCom is also
obligated through 1999 to pay annual rentals ranging from approximately
$74,000 to $81,000 to an officer of a former stockholder.
Relatives of stockholders of the Parent are stockholders and employees of
the Companies' insurance provider. The costs charged to the Companies for
insurance services from this provider were $40,351, $63,836, and $156,523 for
the years ended December 31, 1994, 1995, and 1996.
The chief executive officer of the Fiber Companies, who has been named as
chief executive officer of ITC/\DeltaCom, has also served since July 15, 1996
as president and chief executive officer and as a director of KNOLOGY. He has
served in his capacity as chief executive officer and president of KNOLOGY at
the request of KNOLOGY and the Parent and received no compensation from
KNOLOGY for the year ended December 31, 1996. He resigned as chief executive
officer and president of KNOLOGY effective February 20, 1997. The value of
services provided through February 20, 1997 is estimated to total
approximately $20,000.
13. ACQUISITION OF DELTACOM
On January 29, 1996 (the "Acquisition Date"), DeltaCom was purchased by the
Parent for total consideration of $71,362,213, including cash acquired of
$1,828,121 (the "Acquisition"). The consideration included $65,362,213 in cash
and $6,000,000 in common stock of the Parent. Simultaneously, the Parent
refinanced $8,643,384 of DeltaCom's outstanding debt by borrowing against its
own line of credit and contributing the proceeds to DeltaCom, which then
repaid all of its outstanding debt. The Acquisition was accounted for under
the purchase method of accounting, and the purchase accounting entries were
"pushed down" to DeltaCom's financial statements. The purchase price has been
allocated to the underlying assets purchased and liabilities assumed based on
their estimated fair values at the Acquisition Date. The acquisition costs
exceeded the fair market value of net tangible assets acquired by $54,645,063,
of which $5,464,506 has been allocated to identifiable intangible assets and
the remainder has been recorded as goodwill in the accompanying balance
sheets. Amounts recorded in connection with the "pushdown" include the
$49,180,557 in goodwill, $5,464,506 in customer base, $74,005,598 in debt
related to the Acquisition and debt refinancing, and $6,000,000 in paid-in
capital. The operating results of DeltaCom have been included in the
Companies' financial statements since the Acquisition Date.
The following table summarizes the net assets purchased in connection with
the Acquisition and the amount attributable to cost in excess of net assets
acquired:
<TABLE>
<S> <C>
Working capital, net of $1,828,121 cash acquired............... $ 5,155,221
Property, plant, and equipment................................. 21,357,357
Other assets................................................... 198,920
Noncurrent liabilities......................................... (11,822,469)
Customer base.................................................. 5,464,506
Goodwill....................................................... 49,180,557
------------
Purchase price, net of cash acquired........................... $ 69,534,092
============
</TABLE>
The common stock portion of the Acquisition has been accounted for as a
noncash transaction for purposes of the statements of cash flows.
F-30
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The following pro forma information has been prepared assuming that the
Acquisition occurred at the beginning of the respective periods. This
information includes pro forma adjustments related to the amortization of
goodwill resulting from the excess of the purchase price over the fair value
of the net assets acquired and interest expense related to the debt financing
used to acquire DeltaCom. The pro forma information is presented for
informational purposes only and may not be indicative of the results of
operations as they would have been had the Acquisition occurred at the
beginning of the respective periods, nor is the information necessarily
indicative of the results of operations which may occur in the future.
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1995 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
Combined operating revenues........................ $62,021,598 $71,775,516
Combined net loss.................................. (1,826,756) (4,024,866)
</TABLE>
14. ACQUISITION OF VIPERNET
In July 1996, DeltaCom purchased certain assets of ViperNet, which provides
business Internet services, for cash of $625,000 and assumption of capital
lease obligations in the amount of $171,683 (Note 6).
The following table summarizes the net assets purchased by DeltaCom in
connection with its acquisition of ViperNet:
<TABLE>
<S> <C>
Working capital................................................... $ 121,500
Property and equipment............................................ 191,318
Noncompete agreement.............................................. 102,000
Customer base..................................................... 381,865
Liabilities assumed............................................... (171,683)
---------
Cash paid for ViperNet, net assets................................ $ 625,000
=========
</TABLE>
The assumption of the capital lease obligations has been treated as a
noncash transaction for purposes of the statements of cash flows.
F-31
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
15. SEGMENT REPORTING
Upon the acquisition of DeltaCom in January 1996 (Note 13), the Companies
began operating in two business segments: Carriers' Carrier Services and
Retail Services. Retail Services are provided by DeltaCom and include the
retail sale of long-distance, data, and Internet services, including the sale
and installation of customer premises equipment primarily to midsized and
major regional business customers. Carriers' Carrier Services are provided by
the Fiber Companies. Carriers' Carrier Services include the sale of long-haul
private line services on a wholesale basis using the Fiber Companies' owned
and managed fiber-optic network. Summarized financial data by business segment
for the year ended December 31, 1996 and as of December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
CARRIERS'
CARRIER RETAIL
SEGMENT SEGMENT ELIMINATIONS COMBINED
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Sales to external custom-
ers..................... $ 6,598,709 $59,919,876 $ 0 $ 66,518,585
Intersegment sales....... 558,312 1,553,445 (2,111,757) 0
----------- ----------- ----------- ------------
Total operating reve-
nues.................. $ 7,157,021 $61,473,321 $(2,111,757) $ 66,518,585
----------- ----------- ----------- ------------
Gross margin............. $ 3,256,596 $24,325,559 $ 180,143 $ 27,762,298
Selling, operations, and
administration expense.. 1,646,277 17,050,152 180,143 18,876,572
Depreciation and amorti-
zation.................. 1,656,685 4,781,389 0 6,438,074
Equity in losses of Gulf
States.................. (1,589,812) 0 0 (1,589,812)
Other income (expense),
net..................... 171,514
Interest expense, net.... (6,172,421)
------------
Loss before income tax-
es...................... $ (5,143,067)
============
Identifiable assets...... 14,597,073 91,592,697 (406,588) $105,783,182
Investment in net assets
of Gulf States.......... 7,424,797 0 0 7,424,797
----------- ----------- ----------- ------------
Total assets............. $22,021,870 $91,592,697 $ (406,588) $113,207,979
=========== =========== =========== ============
Capital expenditures..... $ 1,101,181 $ 5,071,479 $ 0 $ 6,172,660
=========== =========== =========== ============
</TABLE>
16. SUBSEQUENT EVENTS
Acquisition
On March 27, 1997, the Parent purchased the 64% interest in Gulf States
owned by SCANA, along with certain of SCANA's other fiber and fiber-related
assets, including a significant long-term customer contract (the "Georgia
Fiber Assets"), for approximately $28 million payable at closing, plus certain
contingent consideration. The purchase price included 588,411 shares of the
Parent's convertible, nonvoting preferred stock valued at approximately $17.9
million and an unsecured purchase money note for approximately $10 million
(the "SCANA Note"). The purchase price was allocated as follows: $17 million
to the 64% interest in Gulf States and $10.9 million to the Georgia Fiber
Assets. The note, which bears interest at 11%, is payable in ten semiannual
principal payments of approximately $1 million plus accrued interest,
beginning September 30, 1997. The contingent consideration is due no later
than April 30, 1998, at which time the Parent must deliver additional
preferred stock to SCANA equal to 35.7% of (a) 64%, multiplied by (b)(i) 6,
multiplied by (ii) the amount, if any, by which the earnings before interest,
taxes, depreciation, and amortization of Gulf States for the year ended
December 31, 1997 exceed $11,265,696.
Upon the closing of these acquisitions, the Parent contributed the 64%
ownership interest in Gulf States to GSTS and the Georgia Fiber Assets to
FiberNet. The Gulf States partnership has been dissolved. The SCANA Note was
assumed by FiberNet and the Parent was released from its obligations
thereunder.
F-32
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
GSTS Bridge Facility
In connection with the acquisition of the remaining 64% interest in Gulf
States, GSTS refinanced Gulf States' outstanding indebtedness of approximately
$41.6 million. In connection with the refinancing, GSTS wrote off $818,572
($507,515 net of tax benefits) in unamortized debt issuance costs, which is
reflected on the accompanying statement of operations as an extraordinary loss
on extinguishment of debt. The GSTS Bridge Facility matured on the date the
proceeds from ITC/\DeltaCom's debt offering described below were released (July
25, 1997). The GSTS Bridge Facility bore interest at LIBOR plus 2.25%.
ITC/\DeltaCom Employee Stock Option Plan
Upon the Reorganization, all employees of the Companies became eligible to
receive stock options under ITC/\DeltaCom's 1997 Employee Stock Option Plan
(the "Stock Option Plan") which was adopted and approved by its sole
stockholder on March 24, 1997.
The Stock Option Plan provides for the grant of options that are intended to
qualify as "incentive stock options" under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") to employees of ITC/\DeltaCom, its
subsidiaries obtained in the reorganization described in Note 1, and the
Parent, as well as the grant of non-qualifying options to any other individual
whose participation in the Stock Option Plan is determined to be in the best
interests of ITC/\DeltaCom. The Stock Option Plan authorizes the issuance of up
to 1.5 million shares of Class A Common Stock pursuant to options granted
under the Stock Option Plan (subject to anti-dilution adjustments in the event
of a stock split, recapitalization or similar transaction). The maximum number
of shares subject to options that can be awarded under the Stock Option Plan
to any person is 500,000 shares. The Compensation Committee of ITC/\DeltaCom's
Board of Directors will administer the Stock Option Plan and will grant
options to purchase Class A Common Stock.
The option exercise price for incentive stock options granted under the
Stock Option Plan may not be less than 100% of the fair market value of the
Class A Common Stock on the date of grant of the option (or 110% in the case
of an incentive stock option granted to an optionee beneficially owning more
than 10% of the outstanding Class A Common Stock). The option exercise price
for non-incentive stock options granted under the Stock Option Plan may not be
less than the par value of the Class A Common Stock on the date of grant of
the option. The maximum option term is 10 years (or five years in the case of
an incentive stock option granted to an optionee beneficially owning more than
10% of the outstanding Class A Common Stock). There is also a $100,000 limit
on the value of Class A Common Stock (determined at the time of grant) covered
by incentive stock options that become exercisable by an optionee in any year.
Options granted will become exercisable with respect to 50% of the shares
subject to the options on the second anniversary of the date of grant and with
respect to 25% of the shares subject to the options on each of the third and
fourth anniversaries of the date of grant.
ITC/\DeltaCom's Board of Directors may amend or terminate the Stock Option
Plan with respect to shares of Class A Common Stock as to which options have
not been granted.
On March 24, 1997, ITC/\Deltacom granted options to purchase 789,000 shares
of Class A Common Stock under the Stock Option Plan. All options were granted
at a price at least equal to the estimated fair value of the common stock on
the date of grant ($7.20) as determined by ITC/\DeltaCom's sole stockholder's
board of directors based on equity transactions and other analyses.
On July 29, 1997, ITC/\DeltaCom granted options to purchase 105,254 shares of
Class A Common Stock under The Stock Option Plan. All options were granted at
a price at least equal to the estimated fair value of the common stock on the
date of grant ($7.20) as determined by ITC/\DeltaCom's sole stockholder's board
of directors based on equity transactions and other analyses.
F-33
<PAGE>
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Directors Stock Option Plan
On March 24, 1997, ITC/\DeltaCom adopted and its stockholders approved the
Directors Stock Option Plan (the "Directors Plan"). The Directors Plan
provides for the "formula" grant of options that are not intended to qualify
as "incentive stock options" under Section 422 of the Code to directors of
ITC/\Deltacom who are not officers or employees of the Company, the Parent, or
any subsidiary of ITC/\DeltaCom (each an "Eligible Director"). The Directors
Plan authorizes the issuance of up to 150,000 shares of Class A Common Stock
pursuant to options granted under the Directors Plan (subject to anti-dilution
adjustments). The option exercise price for options granted under the
Directors Plan will be at least 100% of the fair market value of the shares of
Class A Common Stock on the date of grant of the option. Under the Directors
Plan, each Eligible Director will be granted an option to purchase 10,000
shares of Class A Common Stock upon such person's initial election or
appointment to serve as director. Options granted will become exercisable with
respect to 50% of the shares subject to the options on the second anniversary
of the date of grant and with respect to 25% of the shares subject to the
options on each of the third and fourth anniversaries of the date of grant.
The options will expire ten years and 30 days after the date of grant.
On March 24, 1997, ITC/\DeltaCom granted options to purchase 10,000 shares of
ITC/\DeltaCom's Class A Common Stock to each of its six nonemployee directors.
All options were granted at a price equal to the estimated fair value of the
common stock on the date of grant ($7.20) as determined by the ITC/\DeltaCom's
stockholder's board of directors based on equity transactions and other
analyses.
Credit Facility
FiberNet has entered into a commitment letter with a third-party lender for
a five-year term and revolving credit facility of up to $100 million which
will be used for working capital and other purposes, including capital
expenditures and permitted acquisitions. The Credit Facility will include a
$50 million multi-draw term facility and a $50 million revolving credit
facility. Obligations under the credit facility are expected to be guaranteed
by ITC/\DeltaCom and the Companies and are expected to be secured by
substantially all current and future assets and properties of the Companies.
The Credit Facility is expected to contain a number of covenants applicable to
the Companies, including, among others, covenants limiting debt to be
incurred, dividends to be paid, as well as other equity distributions or stock
repurchases and covenants requiring compliance with certain financial ratios.
Debt Offering
On June 3, 1997, ITC/\DeltaCom completed the issuance of 11% Senior Notes due
2007 (the "Offering").
Proceeds from the Offering were held by the trustee until all regulatory
approvals related to the Reorganization described in Note 1 were received.
Upon their release, a portion of the proceeds was used to repay approximately
$48.0 million of the Companies' advances from Parent and approximately $41.6
million under the GSTS Bridge Facility as well as accrued interest.
Approximately $62.7 million of such proceeds are held by the Trustee as
security for and to fund the first six interest payments on the Senior Notes.
Also in connection with the Reorganization, FiberNet undertook to repay (and
DeltaCom agreed to reimburse to FiberNet) the remaining $31.0 million of
DeltaCom's advance from Parent; the Parent then forgave this indebtedness and
contributed it to FiberNet as additional equity. Upon the settlement of
DeltaCom's advance from Parent related to the acquisition (and accrued
interest), the Parent Credit Facility was amended to release the Companies as
guarantors and to terminate the related security interests in the assets of
the Companies (Note 7). The Parent effected the Reorganization on July 25,
1997.
F-34
<PAGE>
INDEPENDENT AUDITORS' REPORT
To DeltaCom, Inc.:
We have audited the accompanying statements of operations, stockholders'
equity, and cash flows of DELTACOM, INC. for the year ended December 31, 1994.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of
DeltaCom, Inc. for the year ended December 31, 1994 in conformity with
generally accepted accounting principles.
MARTIN STUEDEMAN & ASSOCIATES P.C.
Birmingham, Alabama
March 19, 1997
F-35
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To DeltaCom, Inc.:
We have audited the accompanying statements of operations, stockholders'
equity, and cash flows of DELTACOM, INC. (an Alabama corporation) for the year
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit. The December 31, 1994 financial
statements were audited by other auditors, whose report dated March 19, 1997
expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of
DeltaCom, Inc. for the year ended December 31, 1995 in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 27, 1997
F-36
<PAGE>
DELTACOM, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
AND FOR THE ONE MONTH ENDED JANUARY 29, 1996
<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
OPERATING REVENUES....................... $53,777,565 $56,271,011 $5,256,931
COST OF SERVICES......................... 33,168,780 32,355,358 2,963,383
----------- ----------- ----------
Gross margin......................... 20,608,785 23,915,653 2,293,548
----------- ----------- ----------
OPERATING EXPENSES:
Selling, general, and administrative... 10,608,998 13,845,867 1,343,761
Depreciation and amortization.......... 2,982,325 3,241,869 290,226
----------- ----------- ----------
Total operating expenses............. 13,591,323 17,087,736 1,633,987
----------- ----------- ----------
OPERATING INCOME......................... 7,017,462 6,827,917 659,561
OTHER INCOME (EXPENSE):
Interest income........................ 56,474 105,477 12,334
Interest expense....................... (1,068,140) (1,025,571) (143,883)
----------- ----------- ----------
INCOME BEFORE INCOME TAXES............... 6,005,796 5,907,823 528,012
PROVISION FOR INCOME TAXES............... 2,239,613 2,211,115 200,645
----------- ----------- ----------
NET INCOME............................... $ 3,766,183 $ 3,696,708 $ 327,367
=========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-37
<PAGE>
DELTACOM, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
AND FOR THE ONE MONTH ENDED JANUARY 29, 1996
<TABLE>
<CAPTION>
COMMON STOCK
------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993... 80,000 $800 $5,145,715 $ 3,780,377 $ 8,926,892
Net income................. 0 0 0 3,766,183 3,766,183
------ ---- ---------- ----------- -----------
BALANCE, December 31, 1994... 80,000 800 5,145,715 7,546,560 12,693,075
Net income................. 0 0 0 3,696,708 3,696,708
------ ---- ---------- ----------- -----------
BALANCE, December 31, 1995... 80,000 800 5,145,715 11,243,268 16,389,783
Net income (unaudited)..... 0 0 0 327,367 327,367
------ ---- ---------- ----------- -----------
BALANCE, January 29, 1996
(Unaudited)................. 80,000 $800 $5,145,715 $11,570,635 $16,717,150
====== ==== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-38
<PAGE>
DELTACOM, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
AND FOR THE ONE MONTH ENDED JANUARY 29, 1996
<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................. $ 3,766,183 $ 3,696,708 $ 327,367
----------- ----------- -----------
Adjustments to reconcile net income to
net cash provided by operating activi-
ties:
Depreciation and amortization......... 2,982,325 3,241,869 290,226
Deferred income taxes................. 605,427 37,185 (8,767)
Changes in current operating assets
and liabilities:
Accounts receivable.................. (347,863) (832,551) (360,594)
Due from related parties............. 0 (26,397) 26,397
Prepayments.......................... (401,052) (137,876) 748,471
Inventories.......................... 28,081 (55,333) (82,217)
Notes receivable..................... 0 (167,481) 8,395
Accounts payable..................... (1,819,564) (863,902) 174,476
Accrued liabilities.................. 89,740 (20,027) 298,047
Income taxes payable................. 326,238 249,670 189,956
Other, net........................... 0 1,075 89,278
----------- ----------- -----------
Total adjustments................... 1,463,332 1,426,232 1,373,668
----------- ----------- -----------
Net cash provided by operating ac-
tivities........................... 5,229,515 5,122,940 1,701,035
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment.... (2,596,331) (4,431,552) (171,036)
Proceeds from sale of equipment........ 0 175,389 0
Increase in accrued construction
payables.............................. 0 144,720 (144,720)
----------- ----------- -----------
Net cash used in investing activi-
ties............................... (2,596,331) (4,111,443) (315,756)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt... $(1,410,155) $(2,127,651) $(1,244,759)
Proceeds from financing agreement...... 0 1,388,859 0
----------- ----------- -----------
Net cash used in financing activi-
ties............................... (1,410,155) (738,792) (1,244,759)
----------- ----------- -----------
NET INCREASE IN CASH AND CASH
EQUIVALENTS............................ 1,223,029 272,705 140,520
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD.............................. 191,867 1,414,896 1,687,601
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD................................. $ 1,414,896 $ 1,687,601 $ 1,828,121
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest.............................. $ 1,068,140 $ 1,005,827 $ 17,210
=========== =========== ===========
Income taxes.......................... $ 1,302,388 $ 2,016,860 $ 0
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-39
<PAGE>
DELTACOM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995 AND JANUARY 29, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DeltaCom, Inc. (the "Company") was incorporated in the state of Alabama on
April 7, 1982. The Company is a provider of telecommunications services and
products in Alabama and surrounding states. Prior to January 29, 1996, the
Company's common stock was owned 50% by SCI Systems (Alabama), Inc., 14% by
Brindlee Mountain Telephone Company ("BMTC"), and 36% by the majority
stockholder of BMTC. ITC Holding Company, Inc. acquired all of the stock of
the Company on January 29, 1996 (Note 7).
Basis of Accounting
The accompanying financial statements are prepared on the accrual basis of
accounting. Revenues are recognized as services are performed. Costs and
expenses are recognized when incurred. The financial statements are prepared
in conformity with generally accepted accounting principles, which require the
use of estimates. Actual results may differ from those estimates.
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from these estimates.
Depreciation
Depreciation of property and equipment is generally provided on a composite
or straight-line basis over the assets' estimated useful lives, which are 40
years for buildings, 5 to 20 years for telecommunications equipment, 3 to 15
years for office furniture and equipment, and 5 years for vehicles.
Expenditures for maintenance and repairs are expensed currently, while
renewals and betterments that materially extend the life of an asset are
capitalized. The cost of assets sold, retired, or otherwise disposed of and
the related accumulated depreciation are eliminated from the accounts, and any
resulting gain or loss is included in the results of operations.
Income Taxes
Deferred income taxes are determined in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." This
approach results in the recognition of deferred tax assets and liabilities for
the expected future tax consequences of temporary differences between the book
carrying amounts and the tax basis of assets and liabilities.
Advertising Costs
The Company expenses all advertising costs as incurred.
F-40
<PAGE>
DELTACOM, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. INCOME TAXES
The components of the provision for income taxes for the years ended
December 31, 1994 and 1995 and the one month ended January 29, 1996 are as
follows:
<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current:
Federal.................................. $1,780,968 $1,970,891 $190,360
State.................................... 164,427 203,039 19,052
<CAPTION>
<S> <C> <C> <C>
Deferred................................... 294,218 37,185 (8,767)
---------- ---------- --------
$2,239,613 $2,211,115 $200,645
========== ========== ========
</TABLE>
A reconciliation of the federal statutory rate to the effective income tax
rate for the periods presented for the years ended December 31, 1994 and 1995
and the one month ended January 29, 1996 is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
Federal statutory rate............................... 34.0% 34.0% 34.0%
State income taxes................................... 3.6 3.6 4.0
Other................................................ (0.3) (0.2) 0.0
---- ---- ----
Effective income tax rate............................ 37.3% 37.4% 38.0%
==== ==== ====
</TABLE>
3. RELATED-PARTY TRANSACTIONS
During 1994, the Company recorded revenues from two affiliates, BMTC and
Valley Telephone Services, for approximately $401,000 and $141,000,
respectively. The Company recorded expenses to BMTC in the amount of
approximately $1,650,000 in 1994.
During 1995, the Company recorded revenues of approximately $88,000 in the
accompanying statements of operations for long distance services provided to
BMTC. These services were discontinued in March 1995. The Company also
recorded revenues of approximately $168,000 during the year ended December 31,
1995 for long-distance services provided to Marshall Cellular, an affiliate of
BMTC.
During January 1996, the Company recorded revenues from BMTC, Marshall
Cellular, and another affiliate, SCI, of approximately $27,500, $13,200, and
$33,400, respectively. The Company also recorded expenses of $30,200 and
$2,000 for telephone services provided by BMTC and Marshall Cellular,
respectively.
The Company paid approximately $770,000 to BMTC for electronic data
information services, including billing and rating services, through July
1995. In August 1995, the Company terminated its contract for such services,
hired the information services personnel from BMTC, and assumed BMTC's
operating lease obligations, totaling approximately $419,000 annually, for
electronic data processing equipment. The Company contracted to furnish
electronic data processing services to BMTC annually for $300,000. The Company
recorded revenues of $125,000 in the accompanying statements of operations
related to these services for the year ended December 31, 1995 and $27,500 for
the one month ended January 29, 1996.
The Company paid $405,000 to BMTC for management services in 1995. These
services were terminated in January 1996. During 1995, the Company also paid
$600,000 in management fees to its stockholders. The
F-41
<PAGE>
DELTACOM, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Company has a contract with a former stockholder to provide management
services to the Company through 1997 for $300,000 annually. The Company
recorded expenses of $25,000 in the accompanying statements of operations
related to those services for the one month ended January 29, 1996.
The Company leases real properties from stockholders and other related
parties. Total rental expense related to these leases was approximately
$133,000, $145,000, and $30,000 for the years ended December 31, 1994 and 1995
and the month ended January 29, 1996, respectively. The Company is obligated
to pay rentals totaling approximately $150,000 to BMTC in 1996 and future
years under leases which are cancelable by either of the parties with 24
months' notice. The Company is also obligated through 1999 to pay annual
rentals ranging from approximately $74,000 to $81,000 to an officer of a
former stockholder.
4. DEFERRED COMPENSATION PLAN
The Company has a 401(k) deferred compensation plan covering substantially
all employees with at least one year of service. Participants may elect to
defer 15% of compensation up to a maximum amount determined annually pursuant
to IRS regulations. The Company has elected to provide matching employer
contributions equal to the lesser of 3% of compensation or the maximum amount
annually for each participant. The Company's policy is to fund contributions
as earned. Company contributions made to the plan and charged to expense for
the years ended December 31, 1994 and 1995 and the one month ended January 29,
1996 were $111,561, $138,697, and $12,588, respectively.
5. COMMITMENTS
Minimum future rental commitments under noncancelable operating leases
having an initial or remaining term in excess of one year as of December 31,
1995 are as follows:
<TABLE>
<S> <C>
December 31:
1996............................................................ $ 988,523
1997............................................................ 831,657
1998............................................................ 754,481
1999............................................................ 407,300
2000............................................................ 279,755
Thereafter...................................................... 726,330
----------
$3,988,046
==========
</TABLE>
Total rental expense charged to operations for the years ended December 31,
1994 and 1995 and the one month ended January 29, 1996 was $287,425, $615,734,
and $105,578, respectively.
At January 29, 1996, the Company had agreed to purchase telecommunications
equipment at a price totaling approximately $365,000.
6. CONTINGENT MATTERS
The Company is subject to various legal proceedings and claims which arise
in the ordinary course of its business. In the opinion of management, the
amount or ultimate liability with respect to these actions will not materially
affect the Company's financial position or results of operations.
7. ACQUISITION OF THE COMPANY
On January 29, 1996, the Company was purchased by ITC Holding Company, Inc.
for total consideration of $71,362,213.
F-42
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Gulf States FiberNet:
We have audited the accompanying balance sheets of GULF STATES FIBERNET (a
Georgia general partnership) as of December 31, 1995 and 1996 and the related
statements of operations, partners' capital, and cash flows for period from
inception (August 17, 1994) through December 31, 1994 and for the years ended
December 31, 1995 and 1996. These financial statements are the responsibility
of the Partnership's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Gulf States FiberNet as of
December 31, 1995 and 1996 and the results of its operations and its cash
flows for the period from inception (August 17, 1994) through December 31,
1994 and for the years ended December 31, 1995 and 1996 in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 27, 1997 (except with
respect to the Debt Refinancing,
Parent's Reorganization of
Subsidiaries, and ITC/\DeltaCom
Debt Offering discussions in
Note 8, as to which the date
is July 25, 1997)
F-43
<PAGE>
GULF STATES FIBERNET
BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
AND MARCH 27, 1997
<TABLE>
<CAPTION>
1995 1996 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................ $ 5,561,737 $ 1,130,668 $ 574,600
Accounts receivable:
Affiliates............................. 496,286 476,102 280,866
Customer accounts receivable, net of
allowance for uncollectible accounts
of $15,000, $24,000 and $39,006 in
1995, 1996 and 1997, respectively..... 428,775 1,127,788 1,923,592
Other.................................... 70,943 16,543 55,799
----------- ----------- -----------
6,557,741 2,751,101 2,834,857
----------- ----------- -----------
PROPERTY AND EQUIPMENT, NET (NOTE 2)....... 62,756,563 62,444,185 66,112,272
----------- ----------- -----------
OTHER NONCURRENT ASSETS:
Goodwill, net of accumulated amortization
of $14,226, $27,358 and $30,640 in 1995,
1996, and 1997 respectively............. 511,034 497,902 494,620
Debt issuance costs, net of accumulated
amortization of $47,251, $188,505 and
$231,321 in 1995, 1996 and 1997, respec-
tively.................................. 938,925 878,056 974,572
----------- ----------- -----------
1,449,959 1,375,958 1,469,192
----------- ----------- -----------
$70,764,263 $66,571,244 $70,416,321
=========== =========== ===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Current maturities of long-term debt..... $ 5,937,500 $ 5,937,500 $42,068,969
Accounts payable:
Affiliates............................. 25,263 0 2,431
Other.................................. 136,604 104,208 1,290,172
Accrued construction costs............... 2,664,051 1,712,272 980,542
Other accrued liabilities................ 860,477 680,941 540,270
Unearned revenue......................... 207,873 997,667 1,185,206
----------- ----------- -----------
Total current liabilities............ 9,831,768 9,432,588 46,067,590
LONG-TERM DEBT (NOTE 4).................... 41,562,500 35,625,000 2,950,906
COMMITMENTS AND CONTINGENCIES (NOTES 4, 5,
AND 7)
PARTNERS' CAPITAL.......................... 19,369,995 21,513,656 21,397,825
----------- ----------- -----------
$70,764,263 $66,571,244 $70,416,321
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-44
<PAGE>
GULF STATES FIBERNET
STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (AUGUST 17, 1994)
THROUGH DECEMBER 31, 1994,
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996 AND FOR THE PERIODS ENDED MARCH
31, 1996 AND MARCH 27, 1997
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------- MARCH 31, MARCH 27,
1994 1995 1996 1996 1997
--------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES................ $ 127,569 $ 7,587,713 $10,056,544 $ 1,832,487 $4,085,039
COST OF SERVICES........ 41,838 82,680 867,558 47,368 418,472
--------- ----------- ----------- ----------- ----------
Gross margin........ 85,731 7,505,033 9,188,986 1,785,119 3,666,567
--------- ----------- ----------- ----------- ----------
OPERATING EXPENSES:
Selling, general, and
administrative....... 318,685 2,455,159 2,785,596 733,135 871,566
Depreciation and
amortization......... 47,764 3,835,465 6,620,382 1,574,627 1,897,826
--------- ----------- ----------- ----------- ----------
Total operating
expenses........... 366,449 6,290,624 9,405,978 2,307,762 2,769,392
--------- ----------- ----------- ----------- ----------
OPERATING (LOSS)
INCOME................. (280,718) 1,214,409 (216,992) (522,643) 897,175
--------- ----------- ----------- ----------- ----------
OTHER INCOME (EXPENSE):
Interest expense...... 0 (2,172,373) (4,345,001) (1,085,287) (1,031,546)
Other................. 11,496 240,624 145,851 62,834 18,540
--------- ----------- ----------- ----------- ----------
Total other income
(expense).......... 11,496 (1,931,749) (4,199,150) (1,022,453) (1,013,006)
--------- ----------- ----------- ----------- ----------
NET LOSS................ $(269,222) $ (717,340) $(4,416,142) $(1,545,096) $ (115,831)
========= =========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-45
<PAGE>
GULF STATES FIBERNET
STATEMENTS OF PARTNERS' CAPITAL
FOR THE PERIOD FROM INCEPTION (AUGUST 17, 1994)
THROUGH DECEMBER 31, 1994,
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
AND FOR THE PERIOD ENDED MARCH 27, 1997
<TABLE>
<CAPTION>
PARTNERS' CAPITAL TOTAL
----------------------- PARTNERS'
SCANA GSTS CAPITAL
----------- ---------- -----------
<S> <C> <C> <C>
BALANCE AT INCEPTION (AUGUST 17, 1994)... $ 5,449,670 $ 0 $ 5,449,670
Partnership contributions.............. 7,906,887 7,000,000 14,906,887
Net loss............................... (172,302) (96,920) (269,222)
----------- ---------- -----------
BALANCE, DECEMBER 31, 1994............... 13,184,255 6,903,080 20,087,335
Net loss............................... (459,098) (258,242) (717,340)
----------- ---------- -----------
BALANCE, DECEMBER 31, 1995............... 12,725,157 6,644,838 19,369,995
Partnership contributions.............. 4,198,274 2,361,529 6,559,803
Net loss............................... (2,826,331) (1,589,811) (4,416,142)
----------- ---------- -----------
BALANCE, DECEMBER 31, 1996............... 14,097,100 7,416,556 21,513,656
Net loss............................... (74,132) (41,699) (115,831)
----------- ---------- -----------
BALANCE, MARCH 27, 1997 (UNAUDITED)...... $14,022,968 $7,374,857 $21,397,825
=========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-46
<PAGE>
GULF STATES FIBERNET
STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (AUGUST 17, 1994)
THROUGH DECEMBER 31, 1994 AND
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
AND FOR THE PERIODS ENDED MARCH 31, 1996 AND MARCH 27, 1997
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------- MARCH 31, MARCH 27,
1994 1995 1996 1996 1997
------------ ------------ ----------- ------------ -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss.............. $ (269,222) $ (717,340) $(4,416,142) $ (1,545,096) $ (115,831)
------------ ------------ ----------- ------------ -----------
Adjustments to recon-
cile net loss to net
cash provided by op-
erating activities:
Depreciation and
amortization....... 47,764 3,835,465 6,620,382 1,574,627 1,897,826
Changes in operating
assets and liabili-
ties:
Accounts
receivable....... (64,004) (861,057) (678,829) (157,231) (600,569)
Other current as-
sets............. (12,600) (58,343) 54,400 (33,821) 49,215
Accounts payable.. 430,873 (269,004) (57,659) (131,172) 1,188,426
Accrued liabili-
ties............. 106,985 753,492 (179,536) (117,742) (140,671)
Unearned revenue.. 36,868 171,005 789,794 38,419 99,068
------------ ------------ ----------- ------------ -----------
Total adjust-
ments.......... 545,886 3,571,558 6,548,552 1,173,080 2,493,295
------------ ------------ ----------- ------------ -----------
Net cash
provided by
(used in)
operating
activities..... 276,664 2,854,218 2,132,410 (372,016) 2,377,464
------------ ------------ ----------- ------------ -----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Capital expenditures.. (37,548,729) (24,105,172) (6,153,618) (1,216,962) (2,062,470)
Accrued construction
costs................ 10,178,620 (7,514,569) (951,779) (1,921,170) (731,730)
------------ ------------ ----------- ------------ -----------
Net cash used in
investing
activities..... (27,370,109) (31,619,741) (7,105,397) (3,138,132) (2,794,200)
------------ ------------ ----------- ------------ -----------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from interim
construction loan.... 12,700,000 24,000,000 0 0 0
Payments on interim
construction loan.... 0 (36,700,000) 0 0 0
Proceeds from long-
term note............ 0 47,500,000 0 0 0
Payments on long-term
note................. 0 0 (5,937,500) 0 0
Payment of debt issu-
ance costs........... 0 (986,176) (80,385) (22,072) (139,332)
Capital contribu-
tions................ 14,906,881 0 6,559,803 1,393,320 0
------------ ------------ ----------- ------------ -----------
Net cash
provided by
(used in)
financing
activities..... 27,606,881 33,813,824 541,918 1,371,248 (139,332)
------------ ------------ ----------- ------------ -----------
INCREASE (DECREASE) IN
CASH AND CASH
EQUIVALENTS............ 513,436 5,048,301 (4,431,069) (2,138,900) (556,068)
CASH AND CASH
EQUIVALENTS AT
BEGINNING OF PERIOD.... 0 513,436 5,561,737 5,561,737 1,130,668
------------ ------------ ----------- ------------ -----------
CASH AND CASH
EQUIVALENTS AT END OF
PERIOD................. $ 513,436 $ 5,561,737 $ 1,130,668 $ 3,422,837 $ 574,600
============ ============ =========== ============ ===========
SUPPLEMENTAL CASH FLOW
DISCLOSURES:
Cash paid for inter-
est.................. $ 45,907 $ 2,909,056 $ 4,689,477 $ 991,318 $ 1,410,816
============ ============ =========== ============ ===========
Noncash financing
activities:
Assets contributed by
SCANA................ $ 5,449,670 $ 0 $ 0 $ 0 $ 0
============ ============ =========== ============ ===========
Capital lease
obligation for fiber
route................ $ 0 $ 0 $ 0 $ 0 $ 3,457,345
============ ============ =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-47
<PAGE>
GULF STATES FIBERNET
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995, AND 1996
1. ORGANIZATION AND BUSINESS OPERATIONS
General
Gulf States FiberNet (the "Partnership") was formed on August 17, 1994
pursuant to the provisions of the Georgia Uniform Partnership Act. The
Partnership provides digital communications transport to communications common
carriers in the states of Georgia, Texas, Alabama, Mississippi, and Louisiana.
The Partnership is a facilities-based entity with an existing fiber optic
transmission facility between Atlanta, Georgia, and Birmingham, Alabama. The
Partnership has also constructed a redundant route from Atlanta to Birmingham
which continues on to Longview, Texas, through such cities as Tuscaloosa,
Alabama; Meridian, Jackson, and Vicksburg, Mississippi; and Monroe and
Shreveport, Louisiana. The Partnership has also constructed a spur from
Meridian to Gulfport, Mississippi. These additional routes became operational
during May 1995. In September 1996, an extension to Longview, Texas, was
completed. The Partnership has also constructed a route from Atlanta to
Gainesville, Georgia, where it connects to the network of another
nonaffiliated entity that provides transit into the networks of several other
nonaffiliated entities in the states of North Carolina and South Carolina. The
Atlanta to Gainesville route was completed in January 1996.
The general partners and their respective ownership percentages as of
December 31, 1996 were as follows:
<TABLE>
<S> <C>
SCANA Communications, Inc. ("SCANA").......... 64%
Gulf States Transmission Systems, Inc.
("GSTS")..................................... 36
</TABLE>
GSTS is the managing partner and is responsible for managing and operating
the Partnership. The partners make capital contributions to share in the
operating results of, and receive distributions from, the Partnership in
accordance with their respective ownership percentages.
The Partnership's revenues are derived from sales to a relatively small
number of customers. The loss of a major customer would have a significant
impact on the partnership's results of operations and financial position. This
risk is mitigated by take-or-pay contracts whereby the customers are
contractually obligated to pay periodic specified amounts, even if they do not
take delivery of the contracted services.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting and Presentation
The Partnership's financial statements are prepared on the accrual basis of
accounting. The balance sheet as of March 27, 1997 and the statements of
operations and cash flows for the periods ending March 31, 1996 and March 27,
1996 are unaudited and, in the opinion of management, contain all adjustments
(consisting of only normal recurring items) necessary for the fair
presentation of the financial position and results of operations for the
interim periods. The results of operations for the period ended March 27, 1997
are not necessarily indicative of the results to be expected for the entire
year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of the statements of cash flows, temporary investments
represent securities with maturities of 90 days or less and are considered
cash equivalents.
F-48
<PAGE>
GULF STATES FIBERNET
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Revenue Recognition
Revenues are recognized as the Partnership performs services in accordance
with contract or tariff terms.
Property and Equipment
Property and equipment are carried at cost or fair market value of
contributed property at the time of the contribution. Depreciation and
amortization of property and equipment are provided using the straight-line
method over estimated useful lives (3 to 20 years). Balances of major classes
of assets and the related accumulated depreciation as of December 31, 1995 and
1996 are as follows:
<TABLE>
<CAPTION>
1995 1996
----------- ------------
<S> <C> <C>
Land............................................... $ 2,500 $ 2,500
Vehicles and work equipment........................ 357,994 459,906
Office furniture, fixtures, equipment, and lease-
hold improvements................................. 79,939 80,628
Electronic equipment............................... 8,935,670 13,730,134
Buildings and POP extensions....................... 3,608,294 4,297,142
Cable and installation costs....................... 42,412,149 45,612,729
Other depreciable assets........................... 8,370,033 8,572,664
Less accumulated depreciation...................... (4,006,455) (10,472,469)
----------- ------------
Net property and equipment in service............ 59,760,124 62,283,234
Property and equipment under construction.......... 2,996,439 160,951
----------- ------------
Net property and equipment......................... $62,756,563 $ 62,444,185
=========== ============
</TABLE>
Long-Lived Assets
In 1995, the Partnership adopted Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." SFAS No. 121 establishes accounting
standards for the impairment of long-lived assets and goodwill related to
those assets to be held and used and for long-lived assets and certain
identifiable intangibles to be disposed of. The effect of adopting SFAS No.
121 was not material.
The Partnership periodically reviews the values assigned to long-lived
assets, such as property and equipment, and cost in excess of net assets
acquired to determine whether any impairments are other than temporary.
Management believes that the long-lived assets in the accompanying balance
sheets are appropriately valued.
Income Taxes
The Internal Revenue Code and applicable state statutes provide that the
income and expenses of a partnership are not separately taxable to the
partnership but rather accrue directly to the partners. Accordingly, no
provision for federal or state income taxes has been made in the accompanying
financial statements.
Interest Expense
All interest incurred during 1994, 1995, and 1996 is attributable to the
construction of the routes detailed in Note 1. Interest was capitalized until
the completion of the construction of a specific route segment. The amount of
interest capitalized in 1994, 1995, and 1996 totaled $45,907, $1,020,204, and
$40,365, respectively.
F-49
<PAGE>
GULF STATES FIBERNET
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Other Noncurrent Assets
The excess of cost over the fair market value of assets acquired
("goodwill") is being amortized to income on a straight-line basis over a
period of 40 years.
In connection with the issuance of its long-term debt, the Partnership
incurred debt issuance costs of approximately $986,000 and $80,000 in 1995 and
1996, respectively. These costs were recorded as other assets and are being
amortized on a straight-line basis over 7 to 8.5 years, the term of the
related debt facilities.
Presentation
Certain prior year amounts have been reclassified to conform with the
current year presentation.
3. SCANA ASSET CONTRIBUTION
Effective November 1, 1994, SCANA contributed an existing Atlanta to
Birmingham fiber optic route to the Partnership as part of its capital
contribution. The tangible assets associated with this route were recorded at
their estimated appraised value of $4,924,410. This route was valued at
$5,449,670 for purposes of determining a portion of SCANA's capital
contribution. The $525,260 difference between the estimated appraised value of
the tangible assets and the fair market value of the route is reflected as
goodwill in the accompanying balance sheets.
4. INTERIM CONSTRUCTION LOAN AND LONG-TERM DEBT
Interim Construction Loan
On December 8, 1994, the Partnership completed a $40,000,000 construction
loan commitment ("Loan") with NationsBank of North Carolina. The Loan provided
the Partnership the ability to draw amounts as needed to finance the
construction of a new route. The interest rates paid on amounts outstanding
under the Loan ranged from 6.75% to 7.25% in 1995. Any unused portion of this
Loan was subject to a commitment fee equal to .25% per annum. The Partnership
borrowed $36,700,000 under this Loan prior to its repayment in full in August
1995. The Partnership utilized funds realized from the $47,500,000 nonrecourse
project financing discussed below to repay the Loan.
Long-Term Debt
Long-term debt consisted of the following at December 31, 1996 and March 27,
1997:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 27,
1996 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
$41.6 million bridge facility, interest
payable at LIBOR plus 2.25% (8.25% at June
30, 1997).................................... $ 41,562,500 $ 41,600,000
Other......................................... 0 3,419,875
------------ ------------
41,562,500 45,019,875
Less: Current maturities...................... (35,625,000) (42,068,969)
------------ ------------
Total long-term debt.......................... $ 5,937,500 $ 2,950,906
============ ============
</TABLE>
On July 25, 1995, the Partnership completed a $47,500,000 nonrecourse
project financing (the "Financing") with NationsBank of North Carolina. The
Financing is to be repaid in 16 equal semiannual installments of $2,968,750
beginning on June 30, 1996 and ending on December 31, 2003. The Financing
bears
F-50
<PAGE>
GULF STATES FIBERNET
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
interest on outstanding amounts at various floating rate options plus an
applicable credit spread, which varies throughout the term of the Financing.
The Partnership is contractually obligated to select the three-month LIBOR
option as a direct result of the interest rate swap agreement discussed below.
The Financing is secured by substantially all of the Partnership's assets.
Concurrent with the closing of the Financing, the parent companies of GSTS
and SCANA, ITC Holding Company, Inc. ("ITC") and SCANA, Inc., respectively,
have entered into the Telecommunications System Capacity Agreement ("TSCA")
with NationsBank of North Carolina ("NationsBank"). The TSCA requires ITC and
SCANA to make additional equity contributions to the Partnership. These
required equity contributions are calculated on a quarterly basis throughout
the term of the Financing based on a contractually determined amount, less the
Partnership's quarterly revenue, excluding the nonrecurring revenue discussed
in Note 7. The contractually determined amounts discussed above are fixed
amounts and are not contingent upon the results of operations of the
Partnership.
On January 24, 1995, the Partnership entered into a forward starting
interest rate swap agreement with a $47,500,000 principal amount with
NationsBank. This agreement is accounted for as a hedge of an anticipated
transaction. The agreement swaps the applicable three-month LIBOR selected
under the Financing with a fixed rate of 8.25%. As of December 31, 1996, the
Partnership would be required to pay $2,962,000 to terminate the interest rate
swap with NationsBank. The Partnership made payments totaling $1,261,000 and
$553,320 to NationsBank in 1995 and 1996, respectively, in connection with
this interest rate swap. These payments are included in interest expense in
the accompanying statements of operations.
As a result of this interest rate swap, the Financing will bear an effective
interest rate as follows:
<TABLE>
<S> <C>
Years 1-3......................................................... 9.375%
Years 4-6......................................................... 9.500
Years 7-8.5....................................................... 9.625
</TABLE>
Maturities of long-term debt as of December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997......................................................... $ 5,937,500
1998......................................................... 5,937,500
1999......................................................... 5,937,500
2000......................................................... 5,937,500
2001......................................................... 5,937,500
Thereafter................................................... 11,875,000
-----------
$41,562,500
===========
</TABLE>
5. LEASE OBLIGATIONS
The Partnership has entered into various operating leases for facilities and
equipment used in its operations. Aggregate future minimum rental commitments
under noncancelable operating leases as of December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997.......................................................... $ 682,902
1998.......................................................... 636,037
1999.......................................................... 620,405
2000.......................................................... 601,135
2001.......................................................... 580,585
Thereafter.................................................... 2,310,260
----------
$5,431,324
==========
</TABLE>
F-51
<PAGE>
GULF STATES FIBERNET
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Rent expense charged to operations for the years ended December 31, 1994,
1995, and 1996 was $6,437, $153,003, and $953,713, respectively.
6. RELATED-PARTY TRANSACTIONS
ITC provides certain administrative services and leases office space to the
Partnership. In addition, certain of ITC's other wholly owned or majority-
owned subsidiaries provide the Partnership with various services and/or
receive services provided by the Partnership. These entities include
Interstate Telephone Company and Valley Telephone Company, which provide local
and long distance telephone services; Interstate FiberNet, which provides
digital communications transport; and InterQuest, which provides operator
assistance services. ITC also holds equity investments in the following
entities which do business with the Partnership: InterCel, Inc., which
provides cellular services, and MindSpring Enterprises, Inc., which is a
regional provider of Internet access.
The Company received services from ITC and other affiliated entities of
approximately $279,000, $1,162,000, and $1,477,000, for the period from
inception through December 31, 1994 and the years ended December 31, 1995 and
1996, respectively, which are reflected in selling, general, and
administrative expenses in the Partnership's statements of operations. In
addition, the Partnership received services from ITC and other affiliated
entities of approximately $70,000 for the year ended December 31, 1996, which
is reflected in cost of services in the Partnership's statement of operations.
At December 31, 1995 and 1996, amounts payable for these services of $0 and
$25,263, respectively, are recorded in the Partnership's balance sheets as
affiliate accounts payable. In management's opinion, the Partnership's
transactions with these affiliated entities are representative of arm's-length
transactions.
Relatives of stockholders of ITC are stockholders and employees of the
Partnership's insurance provider. The costs charged to the Partnership for
insurance services were approximately $1,300, $33,000, and $54,000 for the
years ended December 31, 1994, 1995, and 1996, respectively.
7. SIGNIFICANT CUSTOMERS
No customer was responsible for greater than 10% of the Partnership's
revenues for the period from inception through December 31, 1994. However, two
customers made up greater than 10% of the Partnership's revenues for the years
ended December 31, 1995 and 1996, as follows:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Customer A................................................... 82.5% 43.2%
Customer B................................................... 8.6 21.0
</TABLE>
During 1995, the Partnership received nonrecurring revenue of $3,250,000, or
approximately 43% of net sales to Customer A, related to the cancellation of
an existing lease agreement.
The Partnership entered into an agreement with Customer A to lease certain
fiber optic lines whereby Customer A is contractually obligated to pay
$4,338,996 per annum for 11 years beginning June 1995.
8. SUBSEQUENT EVENTS
Capital Lease
In January 1997, the Partnership entered into a capital lease agreement with
Southern Telecom 1, Inc. ("STI") to construct and lease a fiber optic facility
and related equipment from Birmingham to Montgomery, Alabama. In total, STI
constructed a 24 fiber optic strand facility, 12 strands of which it leased to
the Partnership and 12 strands of which it granted the Partnership a revocable
right to use. STI has the option to lease to the
F-52
<PAGE>
GULF STATES FIBERNET
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Partnership any of the additional 12 licensed fibers for a monthly payment of
$2,000 per fiber after the ninth anniversary of the lease. To the extent STI
does not lease the Partnership at least six of the licensed fibers under its
option, the Partnership will have the right to lease from STI up to a total of
six of the licensed fibers. Construction was completed and lease payments
began in February 1997. Payments under the lease are as follows:
<TABLE>
<CAPTION>
MONTHS MONTHLY
OF TERM PAYMENT
------- -------
<S> <C>
1 through 48.................................................... $75,000
49 through 108.................................................. 25,000
109 through 240................................................. 1,000
</TABLE>
Dissolution of the Partnership
On March 27, 1997, GSTS's parent, ITC, purchased the 64% interest in the
Partnership owned by SCANA for approximately $17 million, payable at closing
in shares of ITC's nonvoting convertible preferred stock, plus certain
contingent consideration. The contingent consideration is due no later than
April 30, 1998, at which time ITC must deliver additional nonvoting
convertible preferred stock to SCANA equal to 35.7% of (a) 64%, multiplied by
(b) (i) 6, multiplied by (ii) the amount, if any, by which the earnings before
interest, taxes, depreciation, and amortization of the Partnership for the
year ended December 31, 1997 exceed $11,265,696.
Upon the closing of the acquisition, ITC contributed the 64% ownership
interest in the Partnership to GSTS and the Partnership was dissolved.
Debt Refinancing
In connection with the acquisition of the remaining 64% interest in the
Partnership, GSTS signed an agreement with NationsBank of Texas, N.A. for a
$41.6 million bridge financing facility (the "Bridge Facility"). The Bridge
Facility finances the Partnership's existing Financing described in Note 4 and
is secured by the assets of the Partnership. The Bridge Facility bore interest
on outstanding amounts at various floating rate options plus an applicable
credit margin. The Bridge Facility matured and was repaid on the date the
proceeds from ITC/\DeltaCom's debt offering discussed later were released.
Parent's Reorganization of Subsidiaries
In March 1997, ITC formed a new wholly owned subsidiary, ITC/\DeltaCom, Inc.
("ITC/\DeltaCom"). Upon completion of the debt offering and the related
transactions described below, ITC reorganized several of its wholly owned
subsidiaries as follows:
. Eastern Telecom, Inc. (d.b.a. InterQuest) and ITC Transmission Systems
II, Inc. merged with and into Interstate FiberNet, Inc., formerly ITC
Transmission Systems, Inc. ("FiberNet").
. ITC contributed all of the outstanding capital stock of FiberNet,
DeltaCom, Inc. and GSTS to ITC/\DeltaCom.
. ITC/\DeltaCom contributed all of the outstanding capital stock of
DeltaCom and GSTS to FiberNet.
These changes are collectively referred to as the "Reorganization."
ITC/\DeltaCom Debt Offering
On June 3, 1997, ITC/\DeltaCom issued senior notes with a principal value of
$200 million (the "Offering"). Proceeds from the Offering were held by the
trustee until all required regulatory approvals related to the Reorganization
were received. Upon consummation of the Reorganization on July 25, 1997, a
portion of the proceeds was used to repay the Bridge Facility described above
as well as certain advances from the Parent outstanding at DeltaCom, Inc.
F-53
<PAGE>
INDEPENDENT AUDITORS' REPORT
SCANA Communications, Inc.
We have audited the accompanying balance sheets of Georgia Fiber (a business
unit of SCANA Communications, Inc. (SCI)) as of December 31, 1996 and 1995,
and the related statements of income and net equity and of cash flows for the
years then ended. These financial statements are the responsibility of SCI's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Georgia Fiber at December 31, 1996 and
1995 and the results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared from the separate
records of Georgia Fiber (a business unit of SCANA Communications, Inc.) and
may not necessarily be indicative of the conditions that would have existed or
the results of operations that would have occurred had Georgia Fiber been
operated as an unaffiliated company.
As discussed in Note 1 to the financial statements, on March 27, 1997, the
assets of Georgia Fiber were sold.
DELOITTE & TOUCHE LLP
Columbia, South Carolina
May 23, 1997
F-54
<PAGE>
GEORGIA FIBER
(A BUSINESS UNIT OF SCANA COMMUNICATIONS, INC.)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- MARCH 27, MARCH 31,
1996 1995 1997 1996
----------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Accounts receivable.......... $ 89 $ 332,426 $ 300,311 $ 302,854
Prepaid expenses............. 18,790 17,761 -- 15,039
----------- ---------- ----------- ----------
Total current assets....... 18,879 350,187 300,311 317,893
FIBER OPTIC TRANSMISSION CAPAC-
ITY, NET (Notes 1 and 2)...... 10,484,324 7,980,616 10,352,258 8,007,715
----------- ---------- ----------- ----------
TOTAL ASSETS................... $10,503,203 $8,330,803 $10,652,569 $8,325,608
=========== ========== =========== ==========
LIABILITIES AND NET EQUITY
CURRENT LIABILITIES--Accounts
payable and accrued
liabilities................... $ 339,644 $ 139,740 $ 596,958 $ 131,135
NET EQUITY..................... 10,163,559 8,191,063 10,055,611 8,194,473
----------- ---------- ----------- ----------
TOTAL LIABILITIES AND NET
EQUITY.................... $10,503,203 $8,330,803 $10,652,569 $8,325,608
=========== ========== =========== ==========
</TABLE>
See notes to financial statements.
F-55
<PAGE>
GEORGIA FIBER
(A BUSINESS UNIT OF SCANA COMMUNICATIONS, INC.)
STATEMENTS OF INCOME AND NET EQUITY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
---------------------- MARCH 27, MARCH 31,
1996 1995 1997 1996
----------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
NET REVENUES (Note 1)........ $ 3,542,302 $3,499,606 $ 885,450 $ 885,950
----------- ---------- ----------- ----------
OPERATING COSTS AND EXPENSES:
Depreciation and
amortization.............. 1,063,408 778,817 334,034 219,662
Selling, general and
administrative expenses... 431,394 432,517 69,921 156,659
Maintenance................ 288,085 122,770 135,286 16,298
Other operating costs and
expenses.................. 140,761 231,446 43,018 29,484
----------- ---------- ----------- ----------
Total costs and
expenses................ 1,923,648 1,565,550 582,259 422,103
----------- ---------- ----------- ----------
OPERATING INCOME............. 1,618,654 1,934,056 303,191 463,847
NET EQUITY, BEGINNING OF
YEAR........................ 8,191,063 6,300,078 10,163,559 8,191,063
NET CASH PROVIDED FROM (TO)
SCANA COMMUNICATIONS, INC... 353,842 (43,071) (411,139) (460,436)
----------- ---------- ----------- ----------
NET EQUITY, END OF YEAR...... $10,163,559 $8,191,063 $10,055,611 $8,194,474
=========== ========== =========== ==========
</TABLE>
See notes to financial statements.
F-56
<PAGE>
GEORGIA FIBER
(A BUSINESS UNIT OF SCANA COMMUNICATIONS, INC.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------ MARCH 27, MARCH 31,
1996 1995 1997 1996
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Operating income............ $ 1,618,654 $ 1,934,056 $ 303,191 $ 463,847
Adjustments to reconcile
operating income to net
cash provided by operating
activities:
Depreciation and
amortization.............. 1,063,408 778,817 334,034 219,662
Changes in operating assets
and liabilities:
Decrease in receivables... 332,337 181,416 (300,222) 29,572
(Increase) decrease in
prepaid expenses......... (1,029) 1,995 18,790 2,722
Increase (decrease) in
accounts payable and
accrued expenses......... 199,904 (169,780) 257,314 (8,605)
----------- ----------- --------- ---------
Net cash provided by
operating activities.... 3,213,274 2,726,504 613,107 707,198
----------- ----------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES--Additions to
fiber optic transmission
capacity.................... (3,567,116) (2,683,433) (201,968) (246,762)
----------- ----------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES--Net cash
provided from (to) SCANA
Communications, Inc......... 353,842 (43,071) (411,139) (460,436)
----------- ----------- --------- ---------
NET CHANGE IN CASH........... -- -- -- --
CASH, BEGINNING OF THE YEAR.. -- -- -- --
----------- ----------- --------- ---------
CASH, END OF THE YEAR........ $ -- $ -- $ -- $ --
=========== =========== ========= =========
</TABLE>
See notes to financial statements.
F-57
<PAGE>
GEORGIA FIBER
(A BUSINESS UNIT OF SCANA COMMUNICATIONS, INC.)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General--Georgia Fiber is a business unit of SCANA Communications, Inc.
("SCI"). This business unit consists of certain fiber optic capacity in the
State of Georgia. Such assets were sold to a third party on March 27, 1997.
The accompanying financial statements include the historical cost basis assets
and related operations of the business unit. No effects of the asset sale are
included in the financial statements.
All revenues were derived from fiber optic service provided to one customer.
Revenues are recognized as earned on a monthly basis in accordance with an
agreement with such customer.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fiber Optic Transmission Capacity--Pursuant to certain agreements, SCI
(formerly MPX Systems, Inc.) obtained fiber optic transmission capacity along
specified routes in Georgia. Such agreements obligated SCI to reimburse the
counterparty for costs incurred in construction of the capacity and to pay for
operation and maintenance costs applicable to the capacity. In addition, SCI
pays an amount equal to 2.8% of operating income from operations to the
counterparty. Since inception, additional costs have been incurred to upgrade
and extend the life of the capacity. Costs of obtaining, constructing,
upgrading and extending the life of the capacity are capitalized. Of the
capitalized cost at December 31, 1996, approximately $6,231,000 is being
amortized over a useful life of 25 years and approximately $9,308,000 is
amortized over a life of 8 years. Costs of operating and maintaining the
capacity are expensed as incurred. These agreements expire in 2015 with two
ten-year renewal options.
Cost and Expenses--The accompanying financial statements reflect costs and
expenses that are applicable to the business unit and selling, general and
administrative expenses of SCI which were allocated to the business unit based
on revenues. Management believes that the method used to allocate such
expenses is reasonable (see Note 3).
Fair Value of Financial Instruments--The carrying values of the Company's
financial instruments (receivables and payables) approximate fair value.
Income Taxes--SCI is a wholly owned subsidiary of SCANA Corporation. As a
business unit of SCI, Georgia Fiber does not incur income tax expense. On a
pro forma separate return basis, for the year ended December 31, 1996,
management estimates that Georgia Fiber would have incurred an income tax
provision of approximately $615,000.
F-58
<PAGE>
GEORGIA FIBER
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. FIBER OPTIC TRANSMISSION CAPACITY
Fiber optic transmission capacity consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
Fiber optic transmission capacity.................. $15,538,718 $11,971,958
Accumulated amortization........................... (5,054,394) (3,991,342)
----------- -----------
Net fiber optic transmission capacity.............. $10,484,324 $ 7,980,616
=========== ===========
</TABLE>
3. RELATED PARTY TRANSACTIONS
Expenses allocated by SCI to the business unit during the years ended
December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Selling, general and administrative expenses.............. $383,824 $383,929
======== ========
</TABLE>
* * * * * * * *
F-59
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESEN-
TATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OF-
FER MADE HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THE DELIV-
ERY OF THIS PROSPECTUS OR THE LETTER OF TRANSMITTAL NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE AS OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS OR THE LET-
TER OF TRANSMITTAL. NEITHER THIS PROSPECTUS NOR THE LETTER OF TRANSMITTAL CON-
STITUTES AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OF-
FER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
UNTIL , 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE NOTES, WHETHER OR NOT PARTICIPATING IN THIS DIS-
TRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
---------------
$200,000,000
[LOGO OF ITC/\DELTACOM APPEARS HERE]
11% SENIOR NOTES DUE 2007
PROSPECTUS
DATED , 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the Delaware General Corporation Law ("DGCL"), a
corporation may indemnify its directors, officers, employees and agents and
its former directors, officers, employees and agents and those who serve, at
the corporation's request, in such capacities with another enterprise, against
expenses (including attorneys' fees), as well as judgments, fines and
settlements, actually and reasonably incurred in connection with the defense
of any action, suit or proceeding in which they or any of them were or are
made parties or are threatened to be made parties by reason of their serving
or having served in such capacity. The DGCL provides, however, that such
person must have acted in good faith and in a manner such person reasonably
believed to be in (or not opposed to) the best interests of the corporation
and, in the case of a criminal action, such person must have had no reasonable
cause to believe his or her conduct was unlawful. In addition, the DGCL does
not permit indemnification in an action or suit by or in the right of the
corporation, where such person has been adjudged liable to the corporation,
unless, and only to the extent that, a court determines that such person
fairly and reasonably is entitled to indemnity for costs the court deems
proper in light of liability adjudication. Indemnity is mandatory to the
extent a claim, issue or matter has been successfully defended.
The Company's Certificate of Incorporation (the "Certificate") contains
provisions that provide that no director of the Company shall be liable for
breach of fiduciary duty as a director except for (1) any breach of the
directors' duty of loyalty to the Company or its stockholders; (2) acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of the law; (3) liability under Section 174 of the DGCL; or
(4) any transaction from which the director derived an improper personal
benefit. Under the Bylaws of the Company, the Company is required to advance
expenses incurred by an officer or director in defending or participating in
any action which such director or officer is made a party to or is threatened
to be made a party to by reason of his or her serving or having served as an
officer or director if the director or officer undertakes to repay such amount
if it is determined that the director or officer is not entitled to
indemnification. In addition, the Company intends to enter into indemnity
agreements with each of its directors pursuant to which the Company will agree
to indemnify the directors as permitted by the DGCL.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
*1.1 Placement Agreement, dated as of May 29, 1997, among ITC/\DeltaCom,
Inc. and Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, First Union Capital Markets Corp. and
NationsBanc Capital Markets, Inc.
*3.1 Certificate of Incorporation of ITC/\DeltaCom, Inc.
*3.2 Bylaws of ITC/\DeltaCom, Inc.
*4.1 Indenture dated June 3, 1997 between ITC/\DeltaCom, Inc. and United
States Trust Company of New York, as Trustee, relating to the 11%
Senior Notes Due 2007 of ITC/\DeltaCom, Inc.
*4.2 Registration Rights Agreement, dated June 3, 1997, among ITC/\DeltaCom,
Inc. and Morgan Stanley & Co. Incorporated, Merrill Lynch & Co., First
Union Capital Markets Corp. and NationsBanc Capital Markets, Inc.
*4.3 Pledge and Security Agreement dated as of June 3, 1997 from
ITC/\DeltaCom, Inc. as Pledgor to United States Trust Company of New
York as Trustee.
*4.4 Form of Exchange Note (contained in Indenture filed as Exhibit 4.1).
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
**5.1 Opinion of Hogan & Hartson L.L.P.
*10.1 Capacity Agreement dated as of February 1, 1997 between Interstate
FiberNet and Entergy Technology Company.
*10.2 License Agreement dated February 1, 1997 between Interstate FiberNet
and Metropolitan Atlanta Rapid Transit Authority.
*10.3 Supply Agreement for Transmission Equipment dated March 26, 1993
between Interstate FiberNet and Northern Telecom, Inc.
*10.4 First Amendment to Supply Agreement for Transmission Equipment dated
as of September 9, 1993 between Interstate FiberNet and Northern
Telecom, Inc.
*10.5 Second Amendment to Supply Agreement for Transmission Equipment dated
as of January 19, 1994 between Interstate FiberNet and Northern
Telecom, Inc.
*10.6 Sixth Amendment to Supply Agreement for Transmission Equipment dated
as of November 21, 1996 between Interstate FiberNet and Northern
Telecom, Inc. (which supersedes the Third and the Fourth Amendment to
this Agreement).
*10.7 Seventh Amendment to Supply Agreement for Transmission Equipment dated
as of April 15, 1997 between Interstate FiberNet and Northern Telecom,
Inc. (which supersedes the Fifth Amendment to this Agreement).
*10.8 Master Capacity Lease dated July 22, 1996 between Interstate FiberNet
and InterCel PCS Services, Inc.
*10.9 First Amendment to Master Capacity Lease dated as of August 22, 1996
between Interstate FiberNet and InterCel PCS Services, Inc.
*10.10 Amended and Restated Loan Agreement dated as of March 27, 1997 by and
among Gulf States Transmission Systems, Inc., the Lenders parties
thereto and NationsBank, N.A.
*10.11 Promissory Note dated March 27, 1997 between Gulf States Transmission
Systems, Inc. and NationsBank, N.A.
*10.12 Amended and Restated Security Agreement dated as of March 27, 1997
between Gulf States Transmission Systems, Inc. and NationsBank, N.A.
*10.13 Assignment and Assumption Agreement dated as of March 27, 1997 between
Gulf States FiberNet and Gulf States Transmission Systems, Inc.
*10.14 Term Agreement dated as of August 11, 1994 between Gulf States
FiberNet and Illinois Central Railroad Company.
*10.15 Revised and Restated Fiber Optic Facilities and Services Agreement
dated as of June 9, 1995 among Southern Development and Investment
Group, Inc., on behalf of itself and as agent for Alabama Power
Company, Georgia Power Company, Gulf Power Company, Mississippi Power
Company, Savannah Electric and Power Company, Southern Electric
Generating Company and Southern Company Services, Inc., and MPX
Systems, Inc., which was assigned in part by MPX Systems, Inc. to Gulf
States FiberNet pursuant to an Assignment dated as of July 25, 1995.
*10.16 First Amendment to Revised and Restated Fiber Optic Facilities and
Services Agreement dated as of July 24, 1995 between Southern
Development and Investment Group, Inc. on behalf of itself and as
agent for others and MPX Systems, Inc.
*10.17 Partial Assignment and Assumption of Revised and Restated Fiber Optic
Facilities and Services Agreement dated July 25, 1995 between MPX
Systems, Inc. and Gulf States FiberNet.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
+10.17.1 Amendment to Revised and Restated Fiber Optic Facilities and Services
Agreement, dated July 15, 1997, by and among Southern Development and
Investment Group, Inc., on behalf of itself and its agent for Alabama
Power Company, Georgia Power Company, Gulf Power Company, Mississippi
Power Company, Savannah Electric and Power Company, Southern Electric
Generating Company and Southern Company Services, Inc. (collectively
"SES"), ITC Transmission Systems, Inc. (as managing partner of
Interstate FiberNet) and Gulf States Transmission Systems, Inc.
*10.18 Consent for Assignment of Interest dated February 20, 1997 among
SCANA Communications, Inc., Gulf States FiberNet, Gulf States
Transmission Systems, Inc. and Southern Development and Investment
Groups, Inc.
*10.19 Second Partial Assignment and Assumption of Revised and Restated
Fiber Optic Facilities and Services Agreement dated March 27, 1997
between SCANA Communications, Inc. and ITC Holding Company, Inc.
*10.20 Fiber System Lease Agreement dated January 30, 1996 between CSW
Communications, Inc. and Gulf States FiberNet.
*10.21 Consent for Acquisition and Assignment dated January 13, 1997 between
CSW Communications, Inc. and Gulf States FiberNet.
*10.22 Agreement for the Provision of Fiber Optic Services and Facilities
dated April 21, 1986 between SouthernNet, Inc. and MPX Systems, Inc.
*10.23 First Amendment to Agreement for the Provision of Fiber Optic
Services and Facilities dated May 8, 1992 between MPX Systems, Inc.
and MCI Telecommunications Corporation.
*10.24 Second Amendment to Agreement for the Provision of Fiber Optic
Services and Facilities dated January 30, 1996 between MPX Systems,
Inc. and MCI Telecommunications Corporation.
*10.25 Network Operating Agreement dated March 25, 1996 among Gulf States
FiberNet, TriNet, Inc., Hart Communications, Inc. and SCANA
Communications, Inc. (f/k/a MPX Systems, Inc.).
*10.26 Agreement for the Provision of Fiber Optic Facilities and Services
dated March 29, 1990 between Alabama Power Company and Southern
Interexchange Facilities, Inc.
*10.27 Amendment to the Agreement for Provision of Fiber Optic Facilities
and Services dated March 29, 1990 between Alabama Power Company and
Southern Interexchange Facilities, Inc.
*10.28 First Amendment to the Agreement for the Provision of Fiber Optic
Facilities and Services dated March 22, 1991 between Alabama Power
Company and Southern Interexchange Facilities, Inc.
*10.29 Second Amendment to the Agreement for the Provision of Fiber Optic
Facilities and Services dated December 1, 1991 between Alabama Power
Company and Southern Interexchange Facilities, Inc.
*10.30 Third Amendment to the Agreement for the Provision of Fiber Optic
Facilities and Services dated September 23, 1992 between Alabama
Power Company and Southern Interexchange Facilities, Inc.
*10.31 Fourth Amendment to the Agreement for the Provision of Fiber Optic
Facilities and Services dated January 1, 1994 between Alabama Power
Company and Southern Interexchange Facilities, Inc.
*10.32 Agreement dated March 6, 1990 between Tennessee Valley Authority and
Consolidated Communications Corporation (predecessor to DeltaCom,
Inc.).
*10.33 Interconnection Agreement signed March 12, 1997 between DeltaCom,
Inc. and BellSouth Telecommunications, Inc.
*10.34 Amendment to Interconnection Agreement relating to BellSouth loops
dated March 12, 1997 between DeltaCom, Inc. and BellSouth
Telecommunications, Inc.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
*10.35 Amendment to Interconnection Agreement relating to resale of
BellSouth services dated March 12, 1997 between DeltaCom, Inc. and
BellSouth Telecommunications, Inc.
10.35.1 Third Amendment to Interconnection Agreement, dated March 12, 1997,
by and between DeltaCom, Inc. and BellSouth Telecommunications, Inc.
*10.36 Master Equipment Lease Agreement dated October 30, 1995 between AT&T
Systems Leasing Co. and DeltaCom, Inc.
*10.37 Network Products Purchase Agreement dated January 24, 1996, as
amended through March 4, 1997, between DeltaCom, Inc. and Northern
Telecom, Inc.
*10.38 First Amendment to Product Attachment Carrier Network Products, dated
May 20, 1997.
*10.39 Agreement for Use of Optical Fiber System, Microwave Radio Tower Site
and Associated Facilities dated January 2, 1996 between DeltaCom,
Inc. and SCI Systems, Inc.
*10.40 Collocate Agreement dated January 7, 1991 between Williams
Telecommunications Services, Inc., and Southern Interexchange
Facilities, Inc. (including consent for change of control).
*10.41 Agreement dated January 14, 1997 between DeltaCom, Inc. and SCANA
Communications, Inc., for switch location in Columbia, South
Carolina.
*10.42 Lease Agreement dated January 1, 1996 between Brindlee Mountain
Telephone Company and DeltaCom, Inc. for, among other purposes,
switch location in Arab, Alabama.
*10.43 Promissory Note dated March 27, 1997 between ITC Holding Company,
Inc. and SCANA Communications, Inc.
+10.44 Agreement for the Provision of Telecommunications Services and
Facilities, dated January 27, 1996, by and between Interstate
FiberNet and Carolinas FiberNet, LLC.
+10.45 Fiber Optic Facilities Agreement, dated November 15, 1996, by and
between Interstate FiberNet and Florida Power Corporation.
+10.46 Fiber Optic Capacity Marketing and Operating Agreement, dated March
21, 1996, by and between Interstate FiberNet and Florida Power &
Light Company.
+10.47 Addendum to Fiber Optic Capacity Marketing and Operating Agreement,
dated July 10, 1997, by and between Interstate FiberNet and Florida
Power & Light Company.
+10.48 Master Service Agreement, dated May 6, 1996, by and between
Interstate FiberNet and MCI Telecommunications Corporation.
+10.49 Telecommunications System Maintenance Agreement, dated as of January
26, 1995, by and between Interstate FiberNet and Sprint
Communications Company L.P.
+10.50 Sprint Communications Company Facilities and Services Agreement,
dated January 26, 1995, by and between Interstate FiberNet and Sprint
Communications Company L.P.
+10.51 Fiber Optic Facility Lease Agreement, dated as of January 31, 1997,
by and between Interstate FiberNet and Southern Telecom 1, Inc.
10.52 First Assignment and Assumption of Fiber Optic Facility Lease
Agreement, dated February 1, 1997, by and between Interstate FiberNet
and Gulf States FiberNet.
+10.53 Telecommunications System Agreement, dated January 26, 1995, by and
between Interstate FiberNet and Sprint Communications Company L.P.
10.54 Amendment to Telecommunications System Agreement, dated July 25,
1995, by and between Gulf States FiberNet and Sprint Communications
Company L.P.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
+10.55 Amendment No. 2 to Telecommunications System Agreement, dated August
8, 1996, by and between Gulf States FiberNet and Sprint Communications
Company L.P.
+10.56 Assignment of the Telecommunications System Agreement, dated July 25,
1995, between Interstate FiberNet, Gulf States FiberNet and Sprint
Communications Company, L.P.
+10.57 Assignment of the Telecommunications System Agreement, dated February
27, 1997, between Sprint Communications Company L.P., Gulf States
FiberNet and Gulf States Transmission Systems, Inc.
10.58 Fixed Fee Agreement for Exchange of Use and Maintenance of Six (6)
Fiber Optic Fibers with an Option of Two (2) Additional Fiber Optic
Fibers, dated July 25, 1997, by and between Interstate FiberNet, Gulf
States Transmission Systems, Inc. and ALLTEL Telephone Services
Corporation.
+10.59 MCI Carrier Agreement, effective August 1, 1995, by and between MCI
Telecommunications Corporation and Associated Communications Companies
of America (ACCA).
+10.60 First Amendment to MCI Carrier Agreement, dated as of March 20, 1996,
by and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA).
+10.61 Third Amendment to MCI Carrier Agreement, dated as of August 1, 1996,
by and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA).
10.62 Fourth Amendment to MCI Carrier Agreement, dated as of May 1, 1996, by
and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA).
+10.63 Fifth Amendment to MCI Carrier Agreement, dated as of April 10, 1996,
by and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA).
+10.64 Sixth Amendment to MCI Carrier Agreement, dated as of September 11,
1996, by and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA).
+10.65 Seventh Amendment to MCI Carrier Agreement, dated as of August 1,
1996, by and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA).
+10.66 Eighth Amendment to MCI Carrier Agreement, effective March 1, 1997, by
and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA).
+10.67 Ninth Amendment to MCI Carrier Agreement, dated as of May 15, 1997, by
and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA).
10.68 Tenth Amendment to MCI Carrier Agreement, dated July 11, 1997, by and
between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA).
+10.69 Switched Reseller Services Agreement, dated January 25, 1994, by and
between DeltaCom, Inc. and Allnet Communication Services, Inc.
+10.70 WilTel, Inc. Carrier Digital Services Agreement, dated September 1,
1995, by and between WorldCom Network Services, Inc. d/b/a WilTel,
Associated Communications Companies of America (ACCA) and the
individual members of ACCA referenced therein.
+10.71 Amendment to WilTel, Inc. Carrier Digital Services Agreement, dated
April 1, 1996, by and between WorldCom Network Services, Inc. d/b/a
WilTel, Associated Communications Companies of America (ACCA) and the
individual members of ACCA referenced therein.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
+10.72 Amendment No. 2 to WilTel, Inc. Carrier Digital Services Agreement,
dated June 1, 1996, by and between WorldCom Network Services, Inc.
d/b/a WilTel, Associated Communications Companies of America (ACCA)
and the individual members of ACCA referenced therein.
+10.73 Amendment No. 3 to WilTel, Inc. Carrier Digital Services Agreement,
dated May 1, 1997, by and between WorldCom Network Services, Inc.
d/b/a WilTel, Associated Communications Companies of America (ACCA)
and the individual members of ACCA referenced therein.
+10.74 Marketing and Operating Agreement, dated as of October 6, 1994, by and
between Interstate FiberNet and DukeNet Communications, Inc.
+10.75 Reseller Agreement, dated June 25, 1997, by and between DeltaCom, Inc.
and Total Network Services, a division of Cable & Wireless, Inc.
10.76 Sublease Agreement, dated as of January 1, 1995, by and between ITC
Holding Company, Inc. and ITC Transmission Systems, Inc.
12.1 Statement regarding Computation of Ratios.
21.1 Subsidiaries of ITC/\DeltaCom, Inc.
23.1 Consents of Arthur Andersen LLP.
23.2 Consent of Martin Stuedeman & Associates P.C.
23.3 Consent of Deloitte & Touche LLP.
**23.4 Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1).
*24.1 Power of attorney (included on signature page).
*25.1 Statement on Form T-1 of Eligibility of Trustee.
27.1 Financial Data Schedule for the year ended December 31, 1996.
27.2 Financial Data Schedule for the six month period ended June 30, 1997.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- --------
* Previously filed.
** To be filed by amendment.
+ Confidential treatment has been requested. The copy filed as an exhibit
omits the information subject to the confidential treatment request.
(B) FINANCIAL STATEMENT SCHEDULES.
The following financial statement schedule is filed herewith:
Schedule II--Valuation and Qualifying Accounts
Schedules not listed above have been omitted because they are inapplicable
or the information required to be set forth therein is provided in the
Combined Financial Statements of the Company or notes thereto.
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
II-6
<PAGE>
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of this Registration Statement through
the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
this Registration Statement when it became effective.
The undersigned registrant hereby undertakes to file, during any period in
which offers or sales are being made, a post-effective amendment to this
Registration Statement;
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of this Registration Statement (or the most recent post-
effective amendment hereof) which, individually or in the aggregate,
represents a fundamental change in the information set forth in this
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Securities and
Exchange Commission pursuant to rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in this Registration Statement when it becomes
effective, and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement.
The undersigned registrant hereby undertakes that for the purpose of
determining any liability under the Securities Act, each post-effective
amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
The undersigned registrant hereby undertakes to remove from registration by
means of a post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECURITIES ACT, THE COMPANY HAS DULY CAUSED
THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF WEST POINT, GEORGIA, ON THIS 27TH
DAY OF AUGUST, 1997.
ITC/\DELTACOM, INC.
By /s/ Andrew M. Walker
----------------------------------
ANDREW M. WALKER
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS, IN THE CAPACITIES
INDICATED BELOW, ON THIS 27TH DAY OF AUGUST, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
Chairman, Director
*
- -------------------------------------
CAMPBELL B. LANIER, III
/s/ Andrew M. Walker Chief Executive Officer and Director
- ------------------------------------- (Principal executive officer)
ANDREW M. WALKER
/s/ Douglas A. Shumate Senior Vice President and Chief
- ------------------------------------- Financial Officer (Principal
DOUGLAS A. SHUMATE financial officer and principal
accounting officer)
Director
*
- -------------------------------------
DONALD W. BURTON
Director
*
- -------------------------------------
MALCOLM C. DAVENPORT, V
Director
*
- -------------------------------------
ROBERT A. DOLSON
Director
*
- -------------------------------------
O. GENE GABBARD
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
Director
*
- -------------------------------------
WILLIAM T. PARR
Director
*
- -------------------------------------
WILLIAM H. SCOTT, III
Director
*
- -------------------------------------
WILLIAM B. TIMMERMAN
*By: /s/ Andrew M. Walker
---------------------------
ANDREW M. WALKER
ATTORNEY-IN-FACT
</TABLE>
II-9
<PAGE>
INDEX TO THE FINANCIAL STATEMENT SCHEDULE
INTERSTATE FIBERNET, INC. (FORMERLY ITC TRANSMISSION SYSTEMS, INC.)
ITC TRANSMISSION SYSTEMS II, INC.
GULF STATES TRANSMISSION SYSTEMS, INC.
EASTERN TELECOM, INC., d.b.a. INTERQUEST
DELTACOM, INC. (REORGANIZED AS ITC/\DELTACOM, INC.)
Report of Independent Public Accountants
Schedule II--Valuation and Qualifying Accounts
S-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
AS TO SCHEDULE
ToInterstate FiberNet, Inc. (formerly ITC Transmission Systems, Inc.),
ITC Transmission Systems II, Inc.,
Gulf States Transmission Systems, Inc.,
Eastern Telecom, Inc. d.b.a. InterQuest, and
DeltaCom, Inc.
We have audited in accordance with generally accepted auditing standards,
the combined financial statements of Interstate FiberNet, Inc. (formerly ITC
Transmission Systems, Inc.), ITC Transmission Systems II, Inc., Gulf States
Transmission Systems, Inc., Eastern Telecom, Inc., d.b.a. InterQuest, and
DeltaCom, Inc. included in this Registration Statement, and have issued our
report thereon dated March 27, 1997 (except with respect to the Credit
Facility and Debt Offering discussions in Note 16, as to which the date is
July 31, 1997). Our audits were made for the purpose of forming an opinion on
those statements taken as a whole. The Schedule listed in the accompanying
index is the responsibility of the Companies' management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and
is not part of the basic combined financial statements. This schedule has been
subjected to the auditing procedures applied in the audits of the basic
combined financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic combined financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
July 31, 1997
S-2
<PAGE>
INTERSTATE FIBERNET, INC. (FORMERLY ITC TRANSMISSION SYSTEMS, INC.),
ITC TRANSMISSION SYSTEMS II, INC.,
GULF STATES TRANSMISSION SYSTEMS, INC.,
EASTERN TELECOM, INC., D.B.A. INTERQUEST, AND
DELTACOM, INC.
(REORGANIZED AS ITC/\DELTACOM, INC.)
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
<TABLE>
<CAPTION>
ADDITIONS
-------------------------
BALANCE AT BALANCE AT
BEGINNING CHARGED TO CHARGED TO END OF
DESCRIPTION OF PERIOD INCOME OTHER ACCOUNTS DEDUCTIONS PERIOD
- ----------- ---------- ---------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Provision for uncollect-
ible accounts
1994.................. $ 8,423 $412,030 $ 0 $339,042(2) $ 81,411
1995.................. 81,411 377,116 0 422,740(2) 35,787
1996.................. 35,787 458,210 1,209,329(1) 846,468(2) 856,858
</TABLE>
- --------
Notes:
(1) Represents a purchased reserve related to the acquisition of DeltaCom, Inc.
(2) Represents write-off of accounts considered to be uncollectible, less
recoveries of amounts previously written off.
S-3
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
*1.1 Placement Agreement, dated as of May 29, 1997, among ITC/\DeltaCom,
Inc. and Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, First Union Capital Markets Corp. and
NationsBanc Capital Markets, Inc.
*3.1 Certificate of Incorporation of ITC/\DeltaCom, Inc.
*3.2 Bylaws of ITC/\DeltaCom, Inc.
*4.1 Indenture dated June 3, 1997 between ITC/\DeltaCom, Inc. and United
States Trust Company of New York, as Trustee, relating to the 11%
Senior Notes Due 2007 of ITC/\DeltaCom, Inc.
*4.2 Registration Rights Agreement, dated June 3, 1997, among ITC/\DeltaCom,
Inc. and Morgan Stanley & Co. Incorporated, Merrill Lynch & Co., First
Union Capital Markets Corp. and NationsBanc Capital Markets, Inc.
*4.3 Pledge and Security Agreement dated as of June 3, 1997 from
ITC/\DeltaCom, Inc. as Pledgor to United States Trust Company of New
York as Trustee.
*4.4 Form of Exchange Note (contained in Indenture filed as Exhibit 4.1).
**5.1 Opinion of Hogan & Hartson L.L.P.
*10.1 Capacity Agreement dated as of February 1, 1997 between Interstate
FiberNet and Entergy Technology Company.
*10.2 License Agreement dated February 1, 1997 between Interstate FiberNet
and Metropolitan Atlanta Rapid Transit Authority.
*10.3 Supply Agreement for Transmission Equipment dated March 26, 1993
between Interstate FiberNet and Northern Telecom, Inc.
*10.4 First Amendment to Supply Agreement for Transmission Equipment dated
as of September 9, 1993 between Interstate FiberNet and Northern
Telecom, Inc.
*10.5 Second Amendment to Supply Agreement for Transmission Equipment dated
as of January 19, 1994 between Interstate FiberNet and Northern
Telecom, Inc.
*10.6 Sixth Amendment to Supply Agreement for Transmission Equipment dated
as of November 21, 1996 between Interstate FiberNet and Northern
Telecom, Inc. (which supersedes the Third and the Fourth Amendment to
this Agreement).
*10.7 Seventh Amendment to Supply Agreement for Transmission Equipment dated
as of April 15, 1997 between Interstate FiberNet and Northern Telecom,
Inc. (which supersedes the Fifth Amendment to this Agreement).
*10.8 Master Capacity Lease dated July 22, 1996 between Interstate FiberNet
and InterCel PCS Services, Inc.
*10.9 First Amendment to Master Capacity Lease dated as of August 22, 1996
between Interstate FiberNet and InterCel PCS Services, Inc.
*10.10 Amended and Restated Loan Agreement dated as of March 27, 1997 by and
among Gulf States Transmission Systems, Inc., the Lenders parties
thereto and NationsBank, N.A.
*10.11 Promissory Note dated March 27, 1997 between Gulf States Transmission
Systems, Inc. and NationsBank, N.A.
*10.12 Amended and Restated Security Agreement dated as of March 27, 1997
between Gulf States Transmission Systems, Inc. and NationsBank, N.A.
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
*10.13 Assignment and Assumption Agreement dated as of March 27, 1997
between Gulf States FiberNet and Gulf States Transmission Systems,
Inc.
*10.14 Term Agreement dated as of August 11, 1994 between Gulf States
FiberNet and Illinois Central Railroad Company.
*10.15 Revised and Restated Fiber Optic Facilities and Services Agreement
dated as of June 9, 1995 among Southern Development and Investment
Group, Inc., on behalf of itself and as agent for Alabama Power
Company, Georgia Power Company, Gulf Power Company, Mississippi Power
Company, Savannah Electric and Power Company, Southern Electric
Generating Company and Southern Company Services, Inc., and MPX
Systems, Inc., which was assigned in part by MPX Systems, Inc. to
Gulf States FiberNet pursuant to an Assignment dated as of July 25,
1995.
*10.16 First Amendment to Revised and Restated Fiber Optic Facilities and
Services Agreement dated as of July 24, 1995 between Southern
Development and Investment Group, Inc. on behalf of itself and as
agent for others and MPX Systems, Inc.
*10.17 Partial Assignment and Assumption of Revised and Restated Fiber Optic
Facilities and Services Agreement dated July 25, 1995 between MPX
Systems, Inc. and Gulf States FiberNet.
+10.17.1 Amendment to Revised and Restated Fiber Optic Facilities and Services
Agreement, dated July 15, 1997, by and among Southern Development and
Investment Group, Inc., on behalf of itself and its agent for Alabama
Power Company, Georgia Power Company, Gulf Power Company, Mississippi
Power Company, Savannah Electric and Power Company, Southern Electric
Generating Company and Southern Company Services, Inc. (collectively
"SES"), ITC Transmission Systems, Inc. (as managing partner of
Interstate FiberNet) and Gulf States Transmission Systems, Inc.
*10.18 Consent for Assignment of Interest dated February 20, 1997 among
SCANA Communications, Inc., Gulf States FiberNet, Gulf States
Transmission Systems, Inc. and Southern Development and Investment
Groups, Inc.
*10.19 Second Partial Assignment and Assumption of Revised and Restated
Fiber Optic Facilities and Services Agreement dated March 27, 1997
between SCANA Communications, Inc. and ITC Holding Company, Inc.
*10.20 Fiber System Lease Agreement dated January 30, 1996 between CSW
Communications, Inc. and Gulf States FiberNet.
*10.21 Consent for Acquisition and Assignment dated January 13, 1997 between
CSW Communications, Inc. and Gulf States FiberNet.
*10.22 Agreement for the Provision of Fiber Optic Services and Facilities
dated April 21, 1986 between SouthernNet, Inc. and MPX Systems, Inc.
*10.23 First Amendment to Agreement for the Provision of Fiber Optic
Services and Facilities dated May 8, 1992 between MPX Systems, Inc.
and MCI Telecommunications Corporation.
*10.24 Second Amendment to Agreement for the Provision of Fiber Optic
Services and Facilities dated January 30, 1996 between MPX Systems,
Inc. and MCI Telecommunications Corporation.
*10.25 Network Operating Agreement dated March 25, 1996 among Gulf States
FiberNet, TriNet, Inc., Hart Communications, Inc. and SCANA
Communications, Inc. (f/k/a MPX Systems, Inc.).
*10.26 Agreement for the Provision of Fiber Optic Facilities and Services
dated March 29, 1990 between Alabama Power Company and Southern
Interexchange Facilities, Inc.
*10.27 Amendment to the Agreement for Provision of Fiber Optic Facilities
and Services dated March 29, 1990 between Alabama Power Company and
Southern Interexchange Facilities, Inc.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
*10.28 First Amendment to the Agreement for the Provision of Fiber Optic
Facilities and Services dated March 22, 1991 between Alabama Power
Company and Southern Interexchange Facilities, Inc.
*10.29 Second Amendment to the Agreement for the Provision of Fiber Optic
Facilities and Services dated December 1, 1991 between Alabama Power
Company and Southern Interexchange Facilities, Inc.
*10.30 Third Amendment to the Agreement for the Provision of Fiber Optic
Facilities and Services dated September 23, 1992 between Alabama Power
Company and Southern Interexchange Facilities, Inc.
*10.31 Fourth Amendment to the Agreement for the Provision of Fiber Optic
Facilities and Services dated January 1, 1994 between Alabama Power
Company and Southern Interexchange Facilities, Inc.
*10.32 Agreement dated March 6, 1990 between Tennessee Valley Authority and
Consolidated Communications Corporation (predecessor to DeltaCom,
Inc.).
*10.33 Interconnection Agreement signed March 12, 1997 between DeltaCom, Inc.
and BellSouth Telecommunications, Inc.
*10.34 Amendment to Interconnection Agreement relating to BellSouth loops
dated March 12, 1997 between DeltaCom, Inc. and BellSouth
Telecommunications, Inc.
*10.35 Amendment to Interconnection Agreement relating to resale of BellSouth
services dated March 12, 1997 between DeltaCom, Inc. and BellSouth
Telecommunications, Inc.
10.35.1 Third Amendment to Interconnection Agreement, dated March 12, 1997, by
and between DeltaCom, Inc. and BellSouth Telecommunications, Inc.
*10.36 Master Equipment Lease Agreement dated October 30, 1995 between AT&T
Systems Leasing Co. and DeltaCom, Inc.
*10.37 Network Products Purchase Agreement dated January 24, 1996, as amended
through March 4, 1997, between DeltaCom, Inc. and Northern Telecom,
Inc.
*10.38 First Amendment to Product Attachment Carrier Network Products, dated
May 20, 1997.
*10.39 Agreement for Use of Optical Fiber System, Microwave Radio Tower Site
and Associated Facilities dated January 2, 1996 between DeltaCom, Inc.
and SCI Systems, Inc.
*10.40 Collocate Agreement dated January 7, 1991 between Williams
Telecommunications Services, Inc., and Southern Interexchange
Facilities, Inc. (including consent for change of control).
*10.41 Agreement dated January 14, 1997 between DeltaCom, Inc. and SCANA
Communications, Inc., for switch location in Columbia, South Carolina.
*10.42 Lease Agreement dated January 1, 1996 between Brindlee Mountain
Telephone Company and DeltaCom, Inc. for, among other purposes, switch
location in Arab, Alabama.
*10.43 Promissory Note dated March 27, 1997 between ITC Holding Company, Inc.
and SCANA Communications, Inc.
+10.44 Agreement for the Provision of Telecommunications Services and
Facilities, dated January 27, 1996, by and between Interstate FiberNet
and Carolinas FiberNet, LLC.
+10.45 Fiber Optic Facilities Agreement, dated November 15, 1996, by and
between Interstate FiberNet and Florida Power Corporation.
+10.46 Fiber Optic Capacity Marketing and Operating Agreement, dated March
21, 1996, by and between Interstate FiberNet and Florida Power & Light
Company.
+10.47 Addendum to Fiber Optic Capacity Marketing and Operating Agreement,
dated July 10, 1997, by and between Interstate FiberNet and Florida
Power & Light Company.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
+10.48 Master Service Agreement, dated May 6, 1996, by and between Interstate
FiberNet and MCI Telecommunications Corporation.
+10.49 Telecommunications System Maintenance Agreement, dated as of January
26, 1995, by and between Interstate FiberNet and Sprint Communications
Company L.P.
+10.50 Sprint Communications Company Facilities and Services Agreement, dated
January 26, 1995, by and between Interstate FiberNet and Sprint
Communications Company L.P.
+10.51 Fiber Optic Facility Lease Agreement, dated as of January 31, 1997, by
and between Interstate FiberNet and Southern Telecom 1, Inc.
10.52 First Assignment and Assumption of Fiber Optic Facility Lease
Agreement, dated February 1, 1997, by and between Interstate FiberNet
and Gulf States FiberNet.
+10.53 Telecommunications System Agreement, dated January 26, 1995, by and
between Interstate FiberNet and Sprint Communications Company L.P.
10.54 Amendment to Telecommunications System Agreement, dated July 25, 1995,
by and between Gulf States FiberNet and Sprint Communications Company
L.P.
+10.55 Amendment No. 2 to Telecommunications System Agreement, dated August
8, 1996, by and between Gulf States FiberNet and Sprint Communications
Company L.P.
+10.56 Assignment of the Telecommunications System Agreement, dated July 25,
1995, between Interstate FiberNet, Gulf States FiberNet and Sprint
Communications Company, L.P.
+10.57 Assignment of the Telecommunications System Agreement, dated February
27, 1997, between Sprint Communications Company L.P., Gulf States
FiberNet and Gulf States Transmission Systems, Inc.
10.58 Fixed Fee Agreement for Exchange of Use and Maintenance of Six (6)
Fiber Optic Fibers with an Option of Two (2) Additional Fiber Optic
Fibers, dated July 25, 1997, by and between Interstate FiberNet, Gulf
States Transmission Systems, Inc. and ALLTEL Telephone Services
Corporation.
+10.59 MCI Carrier Agreement, effective August 1, 1995, by and between MCI
Telecommunications Corporation and Associated Communications Companies
of America (ACCA).
+10.60 First Amendment to MCI Carrier Agreement, dated as of March 20, 1996,
by and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA).
+10.61 Third Amendment to MCI Carrier Agreement, dated as of August 1, 1996,
by and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA).
10.62 Fourth Amendment to MCI Carrier Agreement, dated as of May 1, 1996, by
and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA).
+10.63 Fifth Amendment to MCI Carrier Agreement, dated as of April 10, 1996,
by and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA).
+10.64 Sixth Amendment to MCI Carrier Agreement, dated as of September 11,
1996, by and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA).
+10.65 Seventh Amendment to MCI Carrier Agreement, dated as of August 1,
1996, by and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA).
+10.66 Eighth Amendment to MCI Carrier Agreement, effective March 1, 1997, by
and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA).
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
+10.67 Ninth Amendment to MCI Carrier Agreement, dated as of May 15, 1997, by
and between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA).
10.68 Tenth Amendment to MCI Carrier Agreement, dated July 11, 1997, by and
between MCI Telecommunications Corporation and Associated
Communications Companies of America (ACCA).
+10.69 Switched Reseller Services Agreement, dated January 25, 1994, by and
between DeltaCom, Inc. and Allnet Communication Services, Inc.
+10.70 WilTel, Inc. Carrier Digital Services Agreement, dated September 1,
1995, by and between WorldCom Network Services, Inc. d/b/a WilTel,
Associated Communications Companies of America (ACCA) and the
individual members of ACCA referenced therein.
+10.71 Amendment to WilTel, Inc. Carrier Digital Services Agreement, dated
April 1, 1996, by and between WorldCom Network Services, Inc. d/b/a
WilTel, Associated Communications Companies of America (ACCA) and the
individual members of ACCA referenced therein.
+10.72 Amendment No. 2 to WilTel, Inc. Carrier Digital Services Agreement,
dated June 1, 1996, by and between WorldCom Network Services, Inc.
d/b/a WilTel, Associated Communications Companies of America (ACCA)
and the individual members of ACCA referenced therein.
+10.73 Amendment No. 3 to WilTel, Inc. Carrier Digital Services Agreement,
dated May 1, 1997, by and between WorldCom Network Services, Inc.
d/b/a WilTel, Associated Communications Companies of America (ACCA)
and the individual members of ACCA referenced therein.
+10.74 Marketing and Operating Agreement, dated as of October 6, 1994, by and
between Interstate FiberNet and DukeNet Communications, Inc.
+10.75 Reseller Agreement, dated June 25, 1997, by and between DeltaCom, Inc.
and Total Network Services, a division of Cable & Wireless, Inc.
10.76 Sublease Agreement, dated as of January 1, 1995, by and between ITC
Holding Company, Inc. and ITC Transmission Systems, Inc.
12.1 Statement regarding Computation of Ratios.
21.1 Subsidiaries of ITC/\DeltaCom, Inc.
23.1 Consents of Arthur Andersen LLP.
23.2 Consent of Martin Stuedeman & Associates P.C.
23.3 Consent of Deloitte & Touche LLP.
**23.4 Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.1).
*24.1 Power of attorney (included on signature page).
*25.1 Statement on Form T-1 of Eligibility of Trustee.
27.1 Financial Data Schedule for the year ended December 31, 1996.
27.2 Financial Data Schedule for the six month period ended June 30, 1997.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- --------
* Previously filed.
**To be filed by amendment.
+ Confidential treatment has been requested. The copy filed as an exhibit
omits the information subject to the confidential treatment request.
5
<PAGE>
EXHIBIT 10.17.1
---------------
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[_____]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
CONFIDENTIAL
AMENDMENT TO THE REVISED
AND RESTATED FIBER OPTIC FACILITIES
AND SERVICES AGREEMENT
This Amendment entered into as of July 15, 1997, by and between
SOUTHERN DEVELOPMENT AND INVESTMENT GROUP, INC. ("Southern Development"), a
Georgia corporation, on behalf of itself and its agent for ALABAMA POWER
COMPANY, GEORGIA POWER COMPANY, GULF POWER COMPANY, MISSISSIPPI POWER COMPANY,
SAVANNAH ELECTRIC AND POWER COMPANY, SOUTHERN ELECTRIC GENERATING COMPANY AND
SOUTHERN COMPANY SERVICES, INC. (collectively referred TO AS "SES"), ITC
TRANSMISSION SYSTEMS, INC., as managing partner for Interstate FiberNet, a
Georgia general partnership ("IFN") and Gulf States Transmission Systems, Inc.
("GSTS"), a South Carolina corporation, hereby amend the Revised and Restated
Fiber Optic Facilities and Services Agreement entered into by SES and MPX
Systems, Inc. as of June 9, 1995 (the "Agreement").
PREMISES
SES, IFN and GSTS (IFN and GSTS are successors in interest to MPX Systems,
Inc.) are parties to the Agreement for the installation and use of fiber optic
cable on route segments identified in Exhibits A through H of the Agreement.
The parties desire to add additional Route Segments from Augusta, Georgia
to Athens, Georgia, from Rome, Georgia to Atlanta, Georgia, from Dothan,
Alabama to Panama City, Florida, from Union City, Georgia to Live Oak, Florida
and from Bainbridge, Georgia to Hopkins, Florida and the parties desire to have
such segments governed by the terms and conditions of the Agreement, as amended.
The parties desire to ratify the reclassification of the Shared Fibers and
the WDM Capacity each party granted the other over certain SES and MPX Fibers
along the Winder, Georgia to Athens, Georgia and Winder, Georgia to 55 PARK
Place Route Segments.
The parties desire to update certain Exhibits to reflect the current status
of certain Route Segments.
Accordingly, for value received, the parties agree as follows:
TERMS AND CONDITIONS
1. ADDITIONAL ROUTE SEGMENTS.
-------------------------
1.1.Athens - Augusta. SES has installed SES Route Segments from Athens,
--------------------
Georgia to Union Point, Georgia and from Union Point, Georgia to Augusta,
Georgia as set forth in Exhibits E-5 and E-6 attached hereto and which are
hereby incorporated into the Agreement.
1
<PAGE>
CONFIDENTIAL
1.2. North Park - Hill Street. IFN has installed a New Route Segment from
-----------------------
the North Park substation in Atlanta, Georgia to the Hill Street
substation in Atlanta, Georgia as set forth in Exhibit H-(1)15
attached hereto and which is hereby incorporated into the Agreement.
1.3. North Park - Rome. SES has installed an SES Route Segment from North
-----------------
Park substation in Atlanta, Georgia to Rome, Georgia as set forth in
Exhibit E-7 attached hereto and which is hereby incorporated into the
Agreement.
1.4. Dothan - Panama City. IFN has installed an MPX Route Segment from
--------------------
Dothan, Alabama to Panama City, Florida as set forth in Exhibit F-4
attached hereto and which is hereby incorporated into the Agreement.
1.5. Union City - Live Oak. IFN has installed an MPX Route Segment from
---------------------
Union City, Georgia, to Live Oak, Florida as set forth in Exhibit F-5
attached hereto and which is hereby incorporated into the Agreement.
1.6. Columbus - Albany. IFN has installed an MPX Route Segment from Albany,
-----------------
Georgia to Live Oak, Florida as set forth in Exhibit F-6 attached
hereto and which is hereby incorporated into the Agreement.
1.7. Bainbridge - Hopkins. IFN will install a New Route Segment from
--------------------
Bainbridge, Georgia, to Hopkins, Florida as set forth in Exhibit
H(1)-16 attached hereto and which is hereby incorporated into this
Agreement.
2. WDM Capacity on Existing Route Segments.
---------------------------------------
2.1. Athens - Winder. The parties hereby ratify that on January 1, 1997,
---------------
SES reclassified four (4) of the SES fibers on the SES Route Segment
from Winder, Georgia to Athens, Georgia and granted SCANA
Communications, Inc. IFN's and GSTS's predecessor in interest) one
(1) WDM Window on each of the four (4) fibers. As a consequence,
Exhibit E-4 of the Agreement is hereby superseded by Exhibit E-4(2)
attached hereto and Exhibit E-4(2) is hereby incorporated into the
Agreement.
2.2. Winder - 55 Park Place. The parties ratify that on January 1, 1997,
----------------------
SCANA Communications, Inc. reclassified four (4) of the MPX Fibers on
the MPX Route Segment from Winder, Georgia to 55 Park Place, Atlanta,
Georgia and granted SES one (1) WDM Window on each of the four (4)
fibers. As a consequence, Exhibit H-1 of the Agreement is hereby
superseded by Exhibit H-1(2) attached hereto and Exhibit H-1(2) is
hereby incorporated into the Agreement.
3. Increased Capacity. IFN hereby grants SES increased SES Capacity on the
------------------
Existing Route Segments from Atlanta, Georgia to Columbus, Georgia
described in Exhibits D-1, D-2 and D-8 of the Agreement from three (3) DS-
3's to six (6) DS-3's. Exhibits D-1, D-2 and D-8 are hereby superseded by
Exhibits D-1(2), D-2(2) and D-8(2) attached hereto and Exhibits
2
<PAGE>
CONFIDENTIAL
hereby superseded by Exhibits D- 1(2), D-2(2) and D-8(2) attached hereto
and Exhibits D-1(2), D-2(2) and D-8(2) are hereby incorporated into the
Agreement.
4. NEW ROUTE SEGMENTS. The parties hereby acknowledge that the New Route
------------------
Segments as set forth in Exhibits H-2 through H-11 are more correctly
reflected in Exhibits H(1) - 2 through H(1)-14 attached hereto. As a
consequence, Exhibits H-2 through H-11 are hereby superseded by Exhibits
H(l)-2 through H(1)-14 and Exhibits H(l)-2 through H(l) -14 are hereby
incorporated into the Agreement.
5. WAIVER OF FIRST OFFER AND FIRST REFUSAL RIGHTS. SES hereby waives its right
----------------------------------------------
of first offer and its right of first refusal pursuant to Sections 32.2(a)
and (b) of the Agreement as such rights relate to the Route Segments set
forth in Exhibits F-4, F-5 and F-6 only.
6. CAPITALIZED TERMS. Capitalized terms used, but not defined in this
-----------------
Amendment shall have the same meanings as prescribed to them in the
Agreement.
7. FORCE AND EFFECT. Except as modified herein, all terms and conditions of
----------------
the Agreement shall remain in full force and effect.
SIGNED AND DELIVERED.
SOUTHERN DEVELOPMENT
INVESTMENT GROUP, INC.
By: /s/ Thomas R. Kellogg
------------------------
Name: Thomas R. Kellogg
----------------------
Its: VP & GM
` ----------------------
ITC TRANSMISSIONS SYSTEMS, INC.,
as Managing Partner of Interstate FiberNet,
a Georgia general partnership
By: /s/ DOUGLAS A. SHUMATE
----------------------
DOUGLAS A. SHUMATE
ITS CHIEF FINANCIAL OFFICER
GULF STATES TRANSMISSION
SYSTEMS, INC.
By: /s/ DOUGLAS A. SHUMATE
----------------------
DOUGLAS A. SHIMATE
ITS CHIEF FINANCIAL OFFICER
3
<PAGE>
Exhibit E
Ses Route Segments
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Route Schde. Route 3rd Party New Existing SES Shared MPX
ROUTE Complt. Date Miles Fibers Fibers Fibers Fibers Fibers* Fibers**
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Union Point Complete [__] [_] [_] [__]
- ------------------------------------------------------------------------------------------------
Augusta
</TABLE>
- -----------------------------
New Const. Cost
- -----------------------------
Restriction Buy Out
- -----------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Illumination MPX SES COST
Site Name Schedule Equipment Equip. Bldgs. Equip. Install. O'heads Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Athens $0 $0 $0
? -----------------------------------------------------------------
$0 $0 $0
-----------------------------------------------------------------
$0
-----------------------------------------------------------------
$0
-----------------------------------------------------------------
$0
-----------------------------------------------------------------
$0
-----------------------------------------------------------------
-----------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Total $0 $0 $0 $0 $0
- ------------------------------------------------------------------------------------------------
</TABLE>
* [____________________________________________________________________________
__________________]
** [__________________________]
Responsibility Allocation
<TABLE>
<CAPTION>
================================================================================
Engineering/Design
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
N/A N/A N/A N/A MPX
================================================================================
================================================================================
Const./Installation
OPGW Cable U/G Cable Buildings Power Electronics
N/A N/A N/A N/A MPX
================================================================================
================================================================================
Acquisition
OPGW Cable U/G Cable Buildings Power Electronics
N/A N/A N/A N/A MPX
================================================================================
================================================================================
Maintenance
OPGW Cable U/G Cable Buildings Power Electronics
N/A N/A N/A N/A SES
================================================================================
================================================================================
Cost Allocation
OPGW Cable U/G Cable Buildings Power 7 WDM
MPX N/A N/A $0 See Bldgs. $0
SES
================================================================================
</TABLE>
SES Capacity
[__________________________]
Exhibit E-6
<PAGE>
Exhibit E
Ses Route Segments
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Route Schde. Route 3rd Party New Existing SES Shared MPX
ROUTE Complt. Date Miles Fibers Fibers Fibers Fibers Fibers* Fibers**
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Athens- Complete [__] [_] [_] [__]
- ------------------------------------------------------------------------------------------------
Union Point
</TABLE>
- -----------------------------
New Const. Cost
- -----------------------------
Restriction Buy Out
- -----------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Illumination MPX SES COST
Site Name Schedule Equipment Equip. Bldgs. Equip. Install. O'heads Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Athens $0 $0 $0
? -----------------------------------------------------------------
$0 $0 $0
-----------------------------------------------------------------
$0
-----------------------------------------------------------------
$0
-----------------------------------------------------------------
$0
-----------------------------------------------------------------
$0
-----------------------------------------------------------------
-----------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Total $0 $0 $0 $0 $0
- ------------------------------------------------------------------------------------------------
</TABLE>
* [____________________________________________________________________________
__________________]
** [__________________________]
Responsibility Allocation
<TABLE>
<CAPTION>
================================================================================
Engineering/Design
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
N/A N/A N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Const./Installation
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
N/A N/A N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Acquisition
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
N/A N/A N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Maintenance
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
N/A N/A N/A N/A SES
================================================================================
<CAPTION>
================================================================================
Cost Allocation
OPGW Cable U/G Cable Buildings Power 7 WDM
<S> <C> <C> <C> <C> <C> <C>
MPX N/A N/A $0 See Bldgs. $0
SES
================================================================================
</TABLE>
[____________]
[__________________________]
Exhibit E-5
<PAGE>
Exhibit H
New Route Segments
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Route Schde. Route 3rd Party New Existing SES Shared MPX
ROUTE Complt. Date Miles Fibers Fibers Fibers Fibers Fibers* Fibers
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
North Park Complete 12 [__] [__] [_] [__]
- ------------------------------------------------------------------------------------------------
Hill Street
</TABLE>
- -----------------------------
New Const. Cost
- -----------------------------
Restriction Buy Out
- -----------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Illumination MPX SES COST
Site Name Schedule Equipment Equip. Bldgs. Equip. Install. O'heads Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
? $0 $0 $0
? -----------------------------------------------------------------
$0 $0 $0
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Total $0 $0 $0 $0 $0
- ------------------------------------------------------------------------------------------------
</TABLE>
Responsibility Allocation
<TABLE>
<CAPTION>
================================================================================
Engineering/Design
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
N/A N/A N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Const./Installation
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
N/A N/A N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Acquisition
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
N/A N/A N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Maintenance
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
N/A N/A N/A N/A SES
================================================================================
<CAPTION>
================================================================================
Cost Allocation
OPGW Cable U/G Cable Buildings Power 7 WDM
<S> <C> <C> <C> <C> <C>
MPX N/A N/A $0 See Bldgs. $0
SES
================================================================================
</TABLE>
Exhibit H(1)-15
<PAGE>
Exhibit E
Ses Route Segments
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Route Schde. Route 3rd Party New Existing SES Shared MPX
ROUTE Complt. Date Miles Fibers Fibers Fibers Fibers Fibers* Fibers
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
North Park Complete 70 [__] [_] [_] [_]
- ------------------------------------------------------------------------------------------------
Rome
</TABLE>
- -----------------------------
New Const. Cost
- -----------------------------
Restriction Buy Out
- -----------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Illumination MPX SES COST
Site Name Schedule Equipment Equip. Bldgs. Equip. Install. O'heads Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Rome $0 $0 $0
-----------------------------------------------------------------
$0 $0 $0
-----------------------------------------------------------------
$0
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Total $0 $0 $0 $0 $0
- ------------------------------------------------------------------------------------------------
</TABLE>
* [__________________].
Responsibility Allocation
<TABLE>
<CAPTION>
================================================================================
Engineering/Design
<S> <C> <C> <C> <C> <C>
OPGW Cable U/G Cable Buildings Power Electronics
N/A N/A N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Const./Installation
<S> <C> <C> <C> <C> <C>
OPGW Cable U/G Cable Buildings Power Electronics
N/A N/A N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Acquisition
<S> <C> <C> <C> <C> <C>
OPGW Cable U/G Cable Buildings Power Electronics
N/A N/A N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Maintenance
<S> <C> <C> <C> <C> <C>
OPGW Cable U/G Cable Buildings Power Electronics
N/A N/A N/A N/A SES
================================================================================
<CAPTION>
================================================================================
Cost Allocation
<S> <C> <C> <C> <C> <C> <C>
OPGW Cable U/G Cable Buildings Power 7 WDM
MPX N/A N/A $0 See Bldgs. $0
SES
================================================================================
</TABLE>
SES Capacity
Exhibit E-7
<PAGE>
Exhibit F
MPX Route Segments
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Route Schde. Route 3rd Party New Existing SES Shared MPX
ROUTE Complt. Date Miles Fibers Fibers Fibers Fibers Fibers* Fibers
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dothan Complete 90 [_] [_] [_] [_] [_]
- ------------------------------------------------------------------------------------------------
Panama City
</TABLE>
- -----------------------------
New Const. Cost [_________]
- -----------------------------
Restriction Buy Out
- -----------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Illumination MPX SES COST
Site Name Schedule Equipment Equip. Bldgs. Equip. Install. O'heads Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Complete $0
-----------------------------------------------------------------
Complete
-----------------------------------------------------------------
Complete
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Total $0 $0 $0 $0 $0
- ------------------------------------------------------------------------------------------------
</TABLE>
* [______________________________________________________________________
____________________________]
Responsibility Allocation
<TABLE>
<CAPTION>
================================================================================
Engineering/Design
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
N/A MPX MPX See Bldgs. MPX
================================================================================
================================================================================
Const./Installation
OPGW Cable U/G Cable Buildings Power Electronics
N/A MPX MPX See Bldgs. MPX
================================================================================
================================================================================
Acquisition
OPGW Cable U/G Cable Buildings Power Electronics
N/A MPX MPX See Bldgs. MPX
================================================================================
================================================================================
Maintenance
OPGW Cable U/G Cable Buildings Power Electronics
N/A MPX MPX See Bldgs. MPX
================================================================================
================================================================================
Cost Allocation
OPGW Cable U/G Cable Buildings Power Electronics WDM
MPX [_] [________] [_] [________] [_] [_]
SES
================================================================================
</TABLE>
SES Capacity
[_________________________]
Exhibit F-4
<PAGE>
Exhibit F
MPX Route Segments
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Route Schde. Route 3rd Party New Existing SES Shared MPX
ROUTE Complt. Date Miles Fibers Fibers Fibers Fibers Fibers* Fibers
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Union City Complete 287 [_] [_] [_] [_]
- ------------------------------------------------------------------------------------------------
Live Oak
</TABLE>
- -----------------------------
New Const. Cost
- -----------------------------
Restriction Buy Out
- -----------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Illumination MPX SES COST
Site Name Schedule Equipment Equip. Bldgs. Equip. Install. O'heads Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Macon [______] ERR
-----------------------------------------------------------------
Valdosta [______]
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Total $0 $0 $0 $0 $0
- ------------------------------------------------------------------------------------------------
</TABLE>
* Southern will have one WDM wavelength on Dense Wave Division Multiplex
equipment installed by MPX accessible at locations where MPX places ADM nodes
Responsibility Allocation
<TABLE>
<CAPTION>
================================================================================
Engineering/Design
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
N/A MPX MPX See Bldgs. MPX
================================================================================
================================================================================
Const./Installation
OPGW Cable U/G Cable Buildings Power Electronics
N/A MPX MPX See Bldgs. MPX
================================================================================
================================================================================
Acquisition
OPGW Cable U/G Cable Buildings Power Electronics
N/A MPX MPX See Bldgs. MPX
================================================================================
================================================================================
Maintenance
OPGW Cable U/G Cable Buildings Power Electronics
N/A MPX MPX See Bldgs. MPX
================================================================================
================================================================================
Cost Allocation
OPGW Cable U/G Cable Buildings Power Electronics WDM
MPX [_] [_] [________] [_] [_]
SES
================================================================================
</TABLE>
Exhibit F-5
<PAGE>
Exhibit F
MPX Route Segments
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Route Schde. Route 3rd Party New Existing SES Shared MPX
ROUTE Complt. Date Miles Fibers Fibers Fibers Fibers Fibers* Fibers*
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Columbus Complete 100 ? [_] [_] [_]
- ------------------------------------------------------------------------------------------------
Albany
</TABLE>
- -----------------------------
New Const. Cost
- -----------------------------
Restriction Buy Out
- -----------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Illumination MPX SES COST
Site Name Schedule Equipment Equip. Bldgs. Equip. Install. O'heads Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Columbus Complete DWDM ADM $0
-----------------------------------------------------------------
Albany Complete DWDM ADM
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Total $0 $0 $0 $0
- ------------------------------------------------------------------------------------------------
</TABLE>
*Southern will have one WDM wavelength on Dense Wave Division Multiplex
equipment installed by MPX accessible at locations where MPX places ADM nodes.
Responsibility Allocation
<TABLE>
<CAPTION>
================================================================================
Engineering/Design
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
N/A MPX MPX See Bldgs. MPX
================================================================================
<CAPTION>
================================================================================
Const./Installation
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
N/A MPX MPX See Bldgs. MPX
================================================================================
<CAPTION>
================================================================================
Acquisition
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
N/A MPX MPX See Bldgs. MPX
================================================================================
<CAPTION>
================================================================================
Maintenance
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
N/A MPX MPX See Bldgs. MPX
================================================================================
<CAPTION>
================================================================================
Cost Allocation
OPGW Cable U/G Cable Buildings Power Electronics WDM
<S> <C> <C> <C> <C> <C> <C>
MPX N/A $0 See Bldgs. $0 TBD
SES
================================================================================
</TABLE>
Exhibit F-6
<PAGE>
Exhibit H
New Route Segments
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Route Schde. Route 3rd Party New Existing SES Shared MPX
ROUTE Complt. Date Miles Fibers Fibers Fibers Fibers Fibers* Fibers
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bainbridge Complete 20 [___] [___] [___] [___] [___]
- ------------------------------------------------------------------------------------------------
Hopkins
</TABLE>
- -----------------------------
New Const. Cost
- -----------------------------
Restriction Buy Out
- -----------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Illumination MPX SES COST
Site Name Schedule Equipment Equip. Bldgs. Equip. Install. O'heads Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
? $0
? -----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Total $0 $0 $0 $0 $0
- ------------------------------------------------------------------------------------------------
</TABLE>
*Southern will have one WDM wavelength on Dense Wave Division Multiplex
equipment installed by MPX accessible at locations where MPX places ADM nodes
Responsibility Allocation
<TABLE>
<CAPTION>
================================================================================
Engineering/Design
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
N/A MPX MPX See Bldgs. MPX
================================================================================
<CAPTION>
================================================================================
Const./Installation
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
N/A MPX MPX See Bldgs. MPX
================================================================================
<CAPTION>
================================================================================
Acquisition
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
N/A MPX MPX See Bldgs. MPX
================================================================================
<CAPTION>
================================================================================
Maintenance
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
N/A N/A N/A N/A SES
================================================================================
<CAPTION>
================================================================================
Cost Allocation
OPGW Cable U/G Cable Buildings Power 7 WDM
<S> <C> <C> <C> <C> <C> <C>
MPX N/A $0 See Bldgs. $0 TBD
SES
================================================================================
</TABLE>
Exhibit H(1)-16
<PAGE>
Exhibit E
Ses Route Segments
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Route Schde. Route 3rd Party New Existing SES Shared MPX
ROUTE Complt. Date Miles Fibers Fibers Fibers Fibers Fibers* Fibers
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Athens- Complete 25 [_] [_] [_] [_]
- ------------------------------------------------------------------------------------------------
Winder
</TABLE>
- -----------------------------
New Const. Cost
- -----------------------------
Restriction Buy Out
- -----------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Illumination MPX SES COST
Site Name Schedule Equipment Equip. Bldgs. Equip. Install. O'heads Total
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Winder 3/95 [_______] [_____] [____] [____] [______]
----------------------------------------------------------------------
Athens 3/95 [_______] [_____] [____] [____] [______]
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Total [_] [______] [_____] [____] [______]
- -----------------------------------------------------------------------------------------------------
* [_________________________________________________________________________
____________________]
</TABLE>
Responsibility Allocation
<TABLE>
<CAPTION>
================================================================================
Engineering/Design
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
N/A N/A N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Const./Installation
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
N/A N/A N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Acquisition
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
N/A N/A N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Maintenance
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
N/A N/A N/A N/A SES
================================================================================
<CAPTION>
================================================================================
Cost Allocation
OPGW Cable U/G Cable Buildings Power 7 WDM
<S> <C> <C> <C> <C> <C> <C>
MPX [_] [_] [_] [________] [______]
SES
================================================================================
</TABLE>
SES Capacity
[_______________________________________________]
Exhibit E-4(2)
<PAGE>
Exhibit H
New Route Segments
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Route Schde. Route 3rd Party New Existing SES Shared MPX
ROUTE Complt. Date Miles Fibers Fibers Fibers Fibers Fibers Fibers
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Winder- 12/95 49 [__] [_] [_] [__]
55 Park Place
- ------------------------------------------------------------------------------------------------
New Const. Cost $2,268,896
- ------------------------------------------------------------------------------------------------
Restriction Buy Out
- ------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Illumination MPX SES COST
Site Name Schedule Equipment Equip. Bldgs. Equip. Install. O'heads Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Winder 12/95 [_________] [_______][______] [_____] [_______]
-----------------------------------------------------------------
Klondike 12/95 [_________] [_______][_______][______] [_____] [_______]
-----------------------------------------------------------------
55 ParkPlace ERR [_________] [_______][______] [_____] [_______]
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
[_______][_______][______] [______] [_______]
- ------------------------------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------
</TABLE>
Responsibility Allocation
<TABLE>
<CAPTION>
======================================================================================
Engineering/Design
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
SES SES MPX MPX MPX
======================================================================================
<CAPTION>
======================================================================================
Const./Installation
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
SES SES MPX MPX MPX
======================================================================================
<CAPTION>
======================================================================================
Acquisition
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
MPX MPX MPX MPX MPX
======================================================================================
<CAPTION>
======================================================================================
Maintenance
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
Performance SES SES SES SES SES
Cost MPX MPX MPX MPX MPX
======================================================================================
<CAPTION>
======================================================================================
Cost Allocation
Cable Construction Buildings Power Electronics WDM
<S> <C> <C> <C> <C> <C> <C>
MPX [_________] [_______] [_______] [________] [_______]
SES
======================================================================================
</TABLE>
SES Capacity
[________________________________________________]
Exhibit H-1(2)
<PAGE>
Exhibit D
Existing Route Segments
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Route Schde. Route 3rd Party New Existing SES Shared MPX
ROUTE Complt. Date Miles Fibers Fibers Fibers Fibers Fibers Fibers
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Morrow- Complete 35 [__] [_] [_] [_]
- ------------------------------------------------------------------------------------------------
Plant Yates
</TABLE>
- -----------------------------
New Const. Cost
- -----------------------------
Restriction Buy Out
- -----------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Illumination MPX SES COST
Site Name Schedule Equipment Equip.* Bldgs. Equip. Install. O'heads Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Old National Complete [_______] [_______] [______] [______] [_____] [______]
-----------------------------------------------------------------
Plant Yates Complete [_______] [_______] [______] [_____] [______] [______]
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Total [__] [______] [_____] [_____] [______]
- ------------------------------------------------------------------------------------------------
</TABLE>
* [____________________________________________________________________]
Responsibility Allocation
================================================================================
Engineering/Design
OPGW Cable U/G Cable Buildings Power Electronics
N/A N/A N/A N/A MPX
================================================================================
================================================================================
Const./Installation
OPGW Cable U/G Cable Buildings Power Electronics
N/A N/A N/A N/A MPX
================================================================================
================================================================================
Acquisition
OPGW Cable U/G Cable Buildings Power Electronics
N/A N/A N/A N/A MPX
================================================================================
================================================================================
Maintenance
OPGW Cable U/G Cable Buildings Power Electronics
Performance SES SES SES/MPX SES/MPX SES
Cost MPX MPX MPX MPX MPX
================================================================================
================================================================================
Cost Allocation
OPGW Cable U/G Cable Buildings Power Electronics WDM
MPX [___] [___] [___] [___] [______] [___]
SES
================================================================================
SES Capacity
[_______________________________________________________________________
_________________________]
[______________________________________________________________________
_________________________]
Exhibit D-1(2)
<PAGE>
Exhibit D
Existing Route Segments
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Route Schde. Route 3rd Party New Existing SES Shared MPX
ROUTE Complt. Date Miles Fibers Fibers Fibers Fibers Fibers Fibers
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Plant Yates- Complete 100 [__] [_] [_] [__]
- ------------------------------------------------------------------------------------------------
Columbus
</TABLE>
- -----------------------------
New Const. Cost
- -----------------------------
Restriction Buy Out
- -----------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Illumination MPX SES COST
Site Name Schedule Equipment Equip.* Bldgs. Equip. Install. O'heads Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Newnan Complete [_______] [_______] [_____] [____] [____] [_____]
-----------------------------------------------------------------
Lagrange Complete [_______] [_______] [_____] [____] [____] [_____]
-----------------------------------------------------------------
West Point Complete [_______] [_______] [_____] [____] [____] [_____]
-----------------------------------------------------------------
Goat Rock Complete [_______] [_______] [_____] [____] [____] [_____]
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
Total [__] [______] [_____] [____] [______]
- ------------------------------------------------------------------------------------------------
</TABLE>
* [_____________________________________________________________________]
Responsibility Allocation
<TABLE>
<CAPTION>
================================================================================
Engineering/Design
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
N/A N/A N/A N/A MPX
================================================================================
================================================================================
Const./Installation
OPGW Cable U/G Cable Buildings Power Electronics
N/A N/A N/A N/A MPX
================================================================================
================================================================================
Acquisition
OPGW Cable U/G Cable Buildings Power Electronics
N/A N/A N/A N/A MPX
================================================================================
================================================================================
Maintenance
OPGW Cable U/G Cable Buildings Power Electronics
Performance SES SES SES/MPX SES/MPX SES
Cost MPX MPX MPX MPX MPX
================================================================================
================================================================================
Cost Allocation
OPGW Cable U/G Cable Buildings Power Electronics WDM
MPX [___] [___] [___] [___] [_______]
SES
================================================================================
</TABLE>
SES Capacity
[_______________________________________________________________________________
_____________]
Exhibit D-2(2)
<PAGE>
Exhibit D
Existing Route Segments
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Route Schde. Route 3rd Party New Existing SES Shared MPX
ROUTE Complt. Date Miles Fibers Fibers Fibers Fibers Fibers Fibers
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
55 Park Place Complete 15 [__] [_] [_] [_]
- ------------------------------------------------------------------------------------------------
Morrow (A)
</TABLE>
- -----------------------------
New Const. Cost
- -----------------------------
Restriction Buy Out
- -----------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Illumination MPX SES COST
Site Name Schedule Equipment Equip.* Bldgs. Equip. Install. O'heads Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
55 Park Place Complete [_______] [______] [_____] [____] [____] [_____]
-----------------------------------------------------------------
Morrow [_____] [____] [____] [_____]
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
[__] [_____] [____] [____] [_____]
- ------------------------------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------
</TABLE>
[____________________]
Responsibility Allocation
<TABLE>
<CAPTION>
================================================================================
Engineering/Design
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
N/A N/A N/A N/A SES
================================================================================
<CAPTION>
================================================================================
Const./Installation
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
N/A N/A N/A N/A SES
================================================================================
<CAPTION>
================================================================================
Acquisition
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
N/A N/A N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Maintenance
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
Performance SES SES SES/MPX SES/MPX SES
Cost MPX MPX MPX MPX MPX
================================================================================
<CAPTION>
================================================================================
Cost Allocation
OPGW Cable U/G Cable Buildings Power Electronics WDM
<S> <C> <C> <C> <C> <C>
MPX [___] [___] [___] [___] [_______]
SES
================================================================================
</TABLE>
SES Capacity
[_______________________________________________________________________
________________________]
[_______________________________________________________________________________
_____________]
Exhibit D-8(2)
<PAGE>
Exhibit H
New Route Segments
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Route Schde. Route 3rd Party New Existing SES Shared MPX
ROUTE Complt. Date Miles Fibers Fibers Fibers Fibers Fibers* Fibers**
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Winder- 9/96 30 [__] [_] [_] [_] [__]
- ------------------------------------------------------------------------------------------------
Gainesville
Wachovia
</TABLE>
<TABLE>
- -----------------------------
<S> <C>
New Const. Cost [__________]
- -----------------------------
Restriction Buy Out
- -----------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Illumination MPX SES COST
Site Name Schedule Equipment Equip. Bldgs. Equip. Install. O'heads Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gainesville 9/96 [_________] [________][_______][______] [______][_______]
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Total [_______][_______][______] [_____][_______]
- ------------------------------------------------------------------------------------------------
</TABLE>
Responsibility Allocation
<TABLE>
<CAPTION>
================================================================================
Engineering/Design
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
SES SES MPX MPX MPX
================================================================================
<CAPTION>
================================================================================
Const./Installation
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
SES SES MPX MPX MPX
================================================================================
<CAPTION>
================================================================================
Acquisition
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
MPX MPX MPX MPX MPX
================================================================================
<CAPTION>
================================================================================
Maintenance
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
Performance SES SES SES SES SES
Cost MPX MPX MPX MPX MPX
================================================================================
<CAPTION>
================================================================================
Cost Allocation
OPGW Cable Construction Buildings Power Electronics WDM
<S> <C> <C> <C> <C> <C> <C>
MPX [_______] [_______] [_______] [________] [_______]
SES
================================================================================
</TABLE>
SES Capacity
[_______________________________________________]
Exhibit H(1)-2
<PAGE>
Exhibit H
New Route Segments
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Route Schd. Route 3rd Party New Existing SES Shared MPX
ROUTE Complt. Date Miles Fibers Fibers Fibers Fibers Fibers* Fibers**
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gainesville 9/96 0.25 [__] [_] [_] [_] [__]
- ------------------------------------------------------------------------------------------------
Wachovia -
- ------------------------------------------------------------------------------------------------
Gainesville GPC
- ------------------------------------------------------------------------------------------------
District Office
</TABLE>
- -----------------------------
New Const. Cost [______]
- -----------------------------
Restriction Buy Out
- -----------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Illumination MPX SES COST
Site Name Schedule Equipment Equip. Bldgs. Equip. Install. O'heads Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gainesville GPC
-----------------------------------------------------------------
Disrict Office
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Total $0 $0 $0 $0
- ------------------------------------------------------------------------------------------------
</TABLE>
Responsibility Allocation
<TABLE>
<CAPTION>
================================================================================
Engineering/Design
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
SES SES MPX MPX MPX
================================================================================
================================================================================
Const./Installation
OPGW Cable U/G Cable Buildings Power Electronics
SES SES MPX MPX MPX
================================================================================
================================================================================
Acquisition
OPGW Cable U/G Cable Buildings Power Electronics
MPX MPX MPX MPX MPX
================================================================================
================================================================================
Maintenance
OPGW Cable U/G Cable Buildings Power Electronics
Performance SES SES SES SES SES
Cost MPX MPX MPX MPX MPX
================================================================================
================================================================================
Cost Allocation
OPGW Cable Construction Buildings Power Electronics WDM
MPX $7,326 $4,250 $0 See Bldgs. $0
SES
================================================================================
</TABLE>
SES Capacity
[_______________________________________________]
Exhibit H(1)-3
<PAGE>
Exhibit H
New Route Segments
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Route Schd. Route 3rd Party New Existing SES Shared MPX
ROUTE Complt. Date Miles Fibers Fibers Fibers Fibers Fibers* Fibers**
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Plant Gaston 5/95 42 [__] [_] [_] [__]
- ------------------------------------------------------------------------------------------------
Birmingham
</TABLE>
- -----------------------------
New Const. Cost [_________]
- -----------------------------
Restriction Buy Out
- -----------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Illumination MPX SES COST
Site Name Schedule Equipment Equip. Bldgs. Equip. Install. O'heads Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Birmingham 5/95 [________] [_______][_______][______] [______][_______]
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Total [_______][_______][______] [______][_______]
- ------------------------------------------------------------------------------------------------
</TABLE>
Responsibility Allocation
<TABLE>
<CAPTION>
================================================================================
Engineering/Design
<S> <C> <C> <C> <C> <C>
OPGW Cable U/G Cable Buildings Power Electronics
SES SES MPX MPX MPX
================================================================================
<CAPTION>
================================================================================
Const./Installation
<S> <C> <C> <C> <C> <C>
OPGW Cable U/G Cable Buildings Power Electronics
SES SES MPX MPX MPX
================================================================================
<CAPTION>
================================================================================
Acquisition
<S> <C> <C> <C> <C> <C>
OPGW Cable U/G Cable Buildings Power Electronics
MPX MPX MPX MPX MPX
================================================================================
<CAPTION>
================================================================================
Maintenance
<S> <C> <C> <C> <C> <C>
OPGW Cable U/G Cable Buildings Power Electronics
Performance SES SES SES SES SES
Cost MPX MPX MPX MPX MPX
================================================================================
<CAPTION>
================================================================================
Cost Allocation
<S> <C> <C> <C> <C> <C> <C>
OPGW Cable Construction Buildings Power Electronics WDM
MPX [_________] [_______] [_______] [_________] [_______]
SES
================================================================================
</TABLE>
SES Capacity
[_______________________________________________________________________
________________________]
Exhibit H(1)-4
<PAGE>
Exhibit H
New Route Segments
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Route Schd. Route 3rd Party New Existing SES Shared MPX
ROUTE Complt. Date Miles Fibers Fibers Fibers Fibers Fibers* Fibers**
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Birmingham- 11/94 205 [_] [_] [_] [_] [_]
- ------------------------------------------------------------------------------------------------
Meridian
- -----------------------------
New Const. Cost [_________]
- -----------------------------
Restriction Buy Out
- -----------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Illumination MPX SES COST
Site Name Schedule Equipment Equip. Bldgs. Equip. Install. O'heads Total
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Birmingham 2/95 [_______] [_] [_] [_]
---------------------------------------------------------------------
Gorgas 2/95 [_______] [______] [______] [_____] [_____] [______]
---------------------------------------------------------------------
Tuscaloosa 2/95 [_______] [______] [______] [_____] [_____] [______]
---------------------------------------------------------------------
Eutaw 2/95 [_______] [______] [______] [_____] [_____] [______]
---------------------------------------------------------------------
Plant Green Co. 2/95 [_______] [_______] [______] [______] [_____] [_____] [______]
---------------------------------------------------------------------
York 2/95 [_______] [_______] [______] [______] [_____] [_____] [______]
---------------------------------------------------------------------
Meridian 2/95 [_______] [_______] [______] [______] [_____] [_____] [______]
---------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Total [______] [________] [______] [_____] [________]
- ----------------------------------------------------------------------------------------------------
</TABLE>
Responsibility Allocation
<TABLE>
<CAPTION>
================================================================================
Engineering/Design
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
SES SES MPX MPX MPX
================================================================================
<CAPTION>
================================================================================
Const./Installation
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
SES SES MPX MPX MPX
================================================================================
<CAPTION>
================================================================================
Acquisition
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
MPX MPX MPX MPX MPX
================================================================================
<CAPTION>
================================================================================
Maintenance
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
Performance SES SES SES SES SES
Cost MPX MPX MPX MPX MPX
================================================================================
<CAPTION>
================================================================================
Cost Allocation
OPGW Cable Construction Buildings Power Electronics WDM
<S> <C> <C> <C> <C> <C> <C>
MPX [________] [________] [______] [________] [________]
SES
================================================================================
</TABLE>
SES Capacity
[_______________________________________________]
Exhibit H(1)-5
<PAGE>
Exhibit H
New Route Segments
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Route Schd. Route 3rd Party New Existing SES Shared MPX
ROUTE Complt. Date Miles Fibers Fibers Fibers Fibers Fibers* Fibers**
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Plant Yates- 6/96 18 [_] [_] [_] [_] [_]
- ------------------------------------------------------------------------------------------------
Carrollton MW
</TABLE>
- -----------------------------
New Const. Cost [______]
- -----------------------------
Restriction Buy Out
- -----------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Illumination MPX SES COST
Site Name Schedule Equipment Equip. Bldgs. Equip. Install. O'heads Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Carrollton MW
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Total $0 $0 $0 $0 $0
- ------------------------------------------------------------------------------------------------
</TABLE>
Responsibility Allocation
<TABLE>
<CAPTION>
================================================================================
Engineering/Design
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
SES SES MPX MPX MPX
================================================================================
================================================================================
Const./Installation
OPGW Cable U/G Cable Buildings Power Electronics
SES SES MPX MPX MPX
================================================================================
================================================================================
Acquisition
OPGW Cable U/G Cable Buildings Power Electronics
MPX MPX MPX MPX MPX
================================================================================
================================================================================
Maintenance
OPGW Cable U/G Cable Buildings Power Electronics
Performance SES SES SES SES SES
Cost MPX MPX MPX MPX MPX
================================================================================
================================================================================
Cost Allocation
OPGW Cable Construction Buildings Power Electronics WDM
MPX [______] [______] [_] [________] [_]
SES
================================================================================
</TABLE>
SES Capacity
Exhibit H(1)-6
<PAGE>
Exhibit H
New Route Segments
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Route Schd. Route 3rd Party New Existing SES Shared MPX
ROUTE Complt. Date Miles Fibers Fibers Fibers Fibers Fibers* Fibers**
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Davis 12/94 4 [_] [_] [_] [_] [_]
- ------------------------------------------------------------------------------------------------
West End
</TABLE>
- -----------------------------
New Const. Cost [______]
- -----------------------------
Restriction Buy Out
- -----------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Illumination MPX SES COST
Site Name Schedule Equipment Equip. Bldgs. Equip. Install. O'heads Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Total $0 $0 $0 $0 $0
- ------------------------------------------------------------------------------------------------
</TABLE>
Responsibility Allocation
<TABLE>
<CAPTION>
================================================================================
Engineering/Design
<S> <C> <C> <C> <C> <C>
OPGW Cable U/G Cable Buildings Power Electronics
SES SES N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Const./Installation
<S> <C> <C> <C> <C> <C>
OPGW Cable U/G Cable Buildings Power Electronics
SES SES N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Acquisition
<S> <C> <C> <C> <C> <C>
OPGW Cable U/G Cable Buildings Power Electronics
MPX MPX N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Maintenance
<S> <C> <C> <C> <C> <C>
OPGW Cable U/G Cable Buildings Power Electronics
Performance SES SES
Cost MPX MPX
================================================================================
<CAPTION>
================================================================================
Cost Allocation
<S> <C> <C> <C> <C> <C> <C>
OPGW Cable Construction Buildings Power Electronics WDM
MPX [______] [_____] [_] [________] [_]
SES
================================================================================
</TABLE>
SES Capacity
Exhibit H(1)-7
<PAGE>
Exhibit H
New Route Segments
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Route Schd. Route 3rd Party New Existing SES Shared MPX
ROUTE Complt. Date Miles Fibers Fibers Fibers Fibers Fibers* Fibers**
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
West End 12/94 5 [_] [_] [_] [_] [_]
- ------------------------------------------------------------------------------------------------
Mooreland
</TABLE>
- -----------------------------
New Const. Cost [______]
- -----------------------------
Restriction Buy Out
- -----------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Illumination MPX SES COST
Site Name Schedule Equipment Equip. Bldgs. Equip. Install. O'heads Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Total $0 $0 $0 $0 $0
- ------------------------------------------------------------------------------------------------
</TABLE>
Responsibility Allocation
<TABLE>
<CAPTION>
================================================================================
Engineering/Design
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
SES SES N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Const./Installation
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
SES SES N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Acquisition
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
MPX MPX N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Maintenance
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
Performance SES SES SES SES SES
Cost MPX MPX MPX MPX MPX
================================================================================
<CAPTION>
================================================================================
Cost Allocation
OPGW Cable Construction Buildings Power Electronics WDM
<S> <C> <C> <C> <C> <C> <C>
MPX [______] [_____] [_] [________] [_]
SES
================================================================================
</TABLE>
SES Capacity
Exhibit H(1)-8
<PAGE>
Exhibit H
New Route Segments
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Route Schd. Route 3rd Party New Existing SES Shared MPX
ROUTE Complt. Date Miles Fibers Fibers Fibers Fibers Fibers* Fibers**
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tuscaloosa 12/94 15 [_] [_] [_] [_] [_]
- ------------------------------------------------------------------------------------------------
Loop
</TABLE>
- -----------------------------
New Const. Cost [______]
- -----------------------------
Restriction Buy Out
- -----------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Illumination MPX SES COST
Site Name Schedule Equipment Equip. Bldgs. Equip. Install. O'heads Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Holt 6/95 [_______] [______]
-----------------------------------------------------------------
S. Tuscaloosa 6/95 [_______] [______]
-----------------------------------------------------------------
4th St. Comm. Bldg. 6/95 [_______] [______]
-----------------------------------------------------------------
West Div. Office 6/95 [_______] [______]
-----------------------------------------------------------------
UA Campus 6/95 [_______] [______]
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Total [______] [_] [_] [_] [_]
- ------------------------------------------------------------------------------------------------
</TABLE>
Responsibility Allocation
<TABLE>
<CAPTION>
================================================================================
Engineering/Design
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
SES SES SES SES MPX
================================================================================
<CAPTION>
================================================================================
Const./Installation
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
SES SES SES SES MPX
================================================================================
<CAPTION>
================================================================================
Acquisition
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
MPX MPX SES SES MPX
================================================================================
<CAPTION>
================================================================================
Maintenance
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
Performance SES SES SES SES SES
Cost MPX MPX MPX MPX MPX
================================================================================
<CAPTION>
================================================================================
Cost Allocation
OPGW Cable Construction Buildings Power Electronics WDM
<S> <C> <C> <C> <C> <C> <C>
MPX [______] [______] [______] [________] [_]
SES
================================================================================
</TABLE>
SES Capacity
[______________________________________________]
Exhibit H(1)-9
<PAGE>
Exhibit H
New Route Segments
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Route Schd. Route 3rd Party New Existing SES Shared MPX
ROUTE Complt. Date Miles Fibers Fibers Fibers Fibers Fibers* Fibers**
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1st Ave. Col. 12/94 1 [_] [_] [_] [_] [_]
- ------------------------------------------------------------------------------------------------
IFN POP Col.
</TABLE>
- -----------------------------
New Const. Cost [_____]
- -----------------------------
Restriction Buy Out
- -----------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Illumination MPX SES COST
Site Name Schedule Equipment Equip. Bldgs. Equip. Install. O'heads Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Total $0 $0 $0 $0 $0
- ------------------------------------------------------------------------------------------------
</TABLE>
Responsibility Allocation
<TABLE>
<CAPTION>
================================================================================
Engineering/Design
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
SES SES N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Const./Installation
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
SES SES N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Acquisition
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
MPX MPX N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Maintenance
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
Performance SES SES
Cost MPX MPX
================================================================================
<CAPTION>
================================================================================
Cost Allocation
OPGW Cable Construction Buildings Power Electronics WDC
<S> <C> <C> <C> <C> <C> <C>
MPX [_____] [_____] [_] [________] [_]
SES
================================================================================
</TABLE>
SES Capacity
Exhibit H(1)-10
<PAGE>
Exhibit H
New Route Segments
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Route Schd. Route 3rd Party New Existing SES Shared MPX
ROUTE Complt. Date Miles Fibers Fibers Fibers Fibers Fibers* Fibers**
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
APC G. O. 12/94 3 [_] [_] [_] [_] [_]
- ------------------------------------------------------------------------------------------------
Powell Ave.
</TABLE>
- -----------------------------
New Const. Cost [______]
- -----------------------------
Restriction Buy Out
- -----------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Illumination MPX SES COST
Site Name Schedule Equipment Equip. Bldgs. Equip. Install. O'heads Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Total $0 $0 $0 $0 $0
- ------------------------------------------------------------------------------------------------
</TABLE>
Responsibility Allocation
<TABLE>
<CAPTION>
================================================================================
Engineering/Design
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
SES SES N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Const./Installation
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
SES SES N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Acquisition
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
MPX MPX N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Maintenance
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
Perfomance SES SES SES SES SES
Cost MPX MPX MPX MPX MPX
================================================================================
<CAPTION>
================================================================================
Cost Allocation
OPGW Cable Construction Buildings Power Electronics WDC
<S> <C> <C> <C> <C> <C> <C>
MPX [_____] [_____] [_] [________] [_]
SES
================================================================================
</TABLE>
SES Capacity
Exhibit H(1)-11
<PAGE>
Exhibit H
New Route Segments
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Route Schd. Route 3rd Party New Existing SES Shared MPX
ROUTE Complt. Date Miles Fibers Fibers Fibers Fibers Fibers* Fibers**
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Opelika-
Auburn Univ. 9/95 18.75 [_] [_] [_] [_] [_]
- ------------------------------------------------------------------------------------------------
</TABLE>
- -----------------------------
New Const. Cost [______]
- -----------------------------
Restriction Buy Out
- -----------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Illumination MPX SES COST
Site. Name Schedule Equipment Equip. Bldgs. Equip. Install. O'heads Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Auburn Univ.
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Total $0 $0 $0 $0 $0
- ------------------------------------------------------------------------------------------------
</TABLE>
Responsibility Allocation
<TABLE>
<CAPTION>
================================================================================
Engineering/Design
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
SES SES N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Const./Installation
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
SES SES N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Acquisition
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
MPX MPX N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Maintenance
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
Performance SES SES SES SES SES
Cost MPX MPX MPX MPX MPX
================================================================================
<CAPTION>
================================================================================
Cost Allocation
OPGW Cable Construction Buildings Power Electronics WDC
<S> <C> <C> <C> <C> <C> <C>
MPX [______] [______] [_] [________] [_]
SES
================================================================================
</TABLE>
SES Capacity
Exhibit H(1)-12
<PAGE>
Exhibit H
New Route Segments
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Route Schd. Route 3rd Party New Existing SES Shared MPX
ROUTE Complt. Date Miles Fibers Fibers Fibers Fibers Fibers* Fibers**
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Auburn Univ. -
Auburn APC 9/95 3 [__] [_] [_] [_] [__]
- ------------------------------------------------------------------------------------------------
Business Office
</TABLE>
- -----------------------------
New Const. Cost [_______]
- -----------------------------
Restriction Buy Out
- -----------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Illumination MPX SES COST
Site. Name Schedule Equipment Equip. Bldgs. Equip. Install. O'heads Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Auburn APC
Business Office -----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
Total $0 $0 $0 $0 $0
- ------------------------------------------------------------------------------------------------
</TABLE>
Responsibility Allocation
<TABLE>
<CAPTION>
================================================================================
Engineering/Design
<S> <C> <C> <C> <C> <C>
OPGW Cable U/G Cable Buildings Power Electronics
SES SES N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Const./Installation
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
SES SES N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Acquisition
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
MPX MPX N/A N/A MPX
================================================================================
<CAPTION>
================================================================================
Maintenance
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
Performance SES SES SES SES SES
Cost MPX MPX MPX MPX MPX
================================================================================
<CAPTION>
================================================================================
Cost Allocation
OPGW Cable Construction Buildings Power Electronics WDC
<S> <C> <C> <C> <C> <C> <C>
MPX [______] [______] [_] [________] [_]
SES
================================================================================
</TABLE>
SES Capacity
Exhibit H(1)-13
<PAGE>
Exhibit H
New Route Segments
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Route Schd. Route 3rd Party New Existing SES Shared MPX
ROUTE Complt. Date Miles Fibers Fibers Fibers Fibers Fibers* Fibers**
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Davis 5/95 150 [__] [_] [_] [_] [__]
- ------------------------------------------------------------------------------------------------
Plant Gaston
</TABLE>
- -----------------------------
New Const. Cost [_________]
- -----------------------------
Restriction Buy Out
- -----------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Illumination MPX SES COST
Site. Name Schedule Equipment Equip. Bldgs. Equip. Install. O'heads Total
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Atlanta 5/95 [________] [_______] [_______] [______] [______] [______]
----------------------------------------------------------------------
Regen 1 5/95 [________] [_______] [_______] [______] [______] [______]
----------------------------------------------------------------------
Bremen 5/95 [________] [_______] [_______] [______] [______] [______]
----------------------------------------------------------------------
Morrisons Crossroad 5/95 [________] [_______] [_______] [______] [______] [______]
----------------------------------------------------------------------
Ashland 5/95 [________] [_______] [_______] [______] [______] [______]
----------------------------------------------------------------------
Plant Gaston 5/95 [________] [_______] [_______] [______] [______] [______]
----------------------------------------------------------------------
----------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Total [_______][_________] [_______] [______][________]
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Responsibility Allocation
<TABLE>
<CAPTION>
================================================================================
Engineering/Design
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
SES SES MPX MPX MPX
================================================================================
<CAPTION>
================================================================================
Const./Installation
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
SES SES MPX MPX MPX
================================================================================
<CAPTION>
================================================================================
Acquisition
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
MPX MPX MPX MPX MPX
================================================================================
<CAPTION>
================================================================================
Maintenance
OPGW Cable U/G Cable Buildings Power Electronics
<S> <C> <C> <C> <C> <C>
Performance SES SES SES SES SES
Cost MPX MPX MPX MPX MPX
================================================================================
<CAPTION>
================================================================================
Cost Allocation
OPGW Cable Construction Buildings Power Electronics WDC
<S> <C> <C> <C> <C> <C> <C>
MPX [_________] [_________] [_______] [________] [________]
SES
================================================================================
</TABLE>
SES Capacity
[______________________________________________________________________]
[______________________]
Exhibit H(1)-14
<PAGE>
Exhibit 10.35.1
THIRD AMENDMENT
TO
THE INTERCONNECTION AGREEMENT BETWEEN
DELTACOM, INC. AND
BELLSOUTH TELECOMMUNICATIONS, INC.
DATED MARCH 12, 1997
Pursuant to this Agreement (the "Third Amendment"), DeltaCom, Inc.
("DeltaCom") and BellSouth Telecommunications, Inc. ("BellSouth") hereinafter
referred to collectively as the "Parties", hereby agree to amend that
Interconnection Agreement between the Parties dated March 12, 1997
("Interconnection Agreement").
NOW THEREFORE, in consideration of the mutual provisions contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Parties hereby covenant and agree as follows:
1. The Parties agree that the resale restrictions set forth in Section
III.A. of the first Amendment to the Interconnection Agreement dated March 12,
1997 between BellSouth and DeltaCom shall be deleted.
2. The Parties agree that the only restrictions on resale shall be those
set forth in the Second and Final Order of the Arbitrators in the AT&T/MCI
interconnection arbitrations, Docket Numbers 96-01152 and 96-01271 (the
"Arbitrations"). (See pp. 13-18 of Second and Final Order dated January 23,
1997, attached hereto as Exhibit A.)
3. The Parties agree that all of the other provisions of the
Interconnection Agreement shall remain in full force and effect. Nothing in this
Third Amendment shall in any way limit DeltaCom's ability to select and
substitute more favorable rates or terms of Section XXII, entitled Most
Favorable Provisions, of the Interconnection Agreement.
4. The Parties acknowledge that the terms of this Third Amendment were
established as a result of orders of the Tennessee Regulatory Authority ("TRA")
in the Arbitrations and Avoidable Cost proceedings. The Parties agree that
execution of this Amendment and its submission to the TRA is made without
prejudice to the rights of BellSouth to challenge any decision of the TRA in the
Arbitrations, and to the extent DeltaCom intervenes in the Arbitrations,
execution of this Third Amendment and its submission to the TRA is made without
prejudice to the rights of DeltaCom to challenge any decision of the TRA in the
Arbitrations. The parties further agree to conform this Third Amendment to any
subsequent order of the TRA relating to any of the rates, terms and conditions
affected by this Third Amendment.
74953
<PAGE>
5. The Parties further agree that either or both of the Parties is
authorized to submit this Third Amendment to the Tennessee Regulatory Authority
or other regulatory body having jurisdiction over the subject matter of this
Third Amendment, for approval subject to Section 252(e) of the federal
Telecommunications Act of 1996.
IN WITNESS WHEREOF, the Parties hereto have caused this Third Amendment to
be executed by their respective duly authorized representatives on the date
indicated below.
- ----------------------------------- ---------------------------------------
DELTACOM, INC. BELLSOUTH TELECOMMUNICATIONS,
INC.
By: /s/ Tom Mullis By: /s/ Charles Howorth
-------------------------------- ------------------------------------
DATE: March 27, 1997 DATE: April 1, 1997
------------------------------ ----------------------------------
-2-
<PAGE>
EXHIBIT A
ISSUE 1: "WHAT SERVICES PROVIDED BY BELLSOUTH, IF ANY, SHOULD BE EXCLUDED FROM
RESALE?"/(15)/
COMMENTS AND DISCUSSION:
- -----------------------
On November 14, 1996, the Arbitrators ordered that all services
provided by BellSouth, with the exception of short-term promotions, as that term
is defined below, should be made available for resale, including specifically,
but without limiting the foregoing, long-term promotions, as that term is
defined below, LifeLine Services, Link-Up Services, grandfathered or obsoleted
services, 911 Services, contract service arrangements, and state-specific
discount plans. In other words, the Arbitrators answered the question presented,
by a unanimous vote, as follows: that no service provided by BellSouth shall be
excluded from resale, except short-term promotions.
With regard to the resale of 911 Services, each of the Arbitrators
recognized the importance of the service and that 911 boards should not be
excluded from the benefits which may be derived from competition. They cautioned
not only those subject to the provisions of any order of arbitration award, but
also the 911 boards in the State of Tennessee, to preserve, protect, and verify
that the effectiveness and integrity of the emergency systems will not be harmed
if they choose to change telecommunications carriers.
Finally, Director Malone added that restrictions on cross-class selling
are permissible restrictions on the services available for resale./(16)/
- ---------------
/(15)/ The motion was made by Chairman Greer and amended by Director Malone. The
motion, as amended, was seconded by Director Malone and passed unanimously.
/(16)/ This matter was also covered in the motion made by Director Kyle in Issue
2. Both the amendment which Director Malone made to the motion of Chairman Greer
in Issue 1 and the motion of Director Kyle in Issue 2 passed unanimously. The
order on this aspect has been reduced to writing in Paragraph 13.
13
<PAGE>
On December 3, 1996, the Arbitrators voted unanimously to adopt the
language proposed by BellSouth with regard to contract service arrangements,
nonrecurring charges, and inside wire maintenance./17/
ORDERED:
- --------
8. That all services provided by BellSouth, with the exception of
short-term promotions, as that term is defined below, should be, and hereby are,
made available by BellSouth for resale to AT&T and MCI.
9. That the following terms and conditions on short-term and
long-term promotions are reasonable and necessary, and shall be implemented:
a. Short-term promotions be, and hereby are, defined as those
promotions that are offered for a ninety (90) day period or less, and which
are not offered on a consecutive basis;
b. Long-term promotions be, and hereby are, defined as those
promotions that are offered for more than ninety (90) days;
c. In order to prohibit any abuse or potential abuse of the
provision that short-term promotions are not available for resale, BellSouth may
not offer a series of the same or substantially similar short-term promotions;
d. Long-term promotions may be obtained by AT&T or MCI at one
of the following rates:
(1) the stated tariff rate, less the wholesale discount;
- ---------------------
/17/ Chairman Greer made the motion on the Final Best Offer. It was seconded by
Director Kyle and unanimously approved.
14
<PAGE>
(2) the promotional rate (the promotional rate offered by
BellSouth will not be discounted further by the wholesale discount rate):
e. When AT&T or MCI obtains a long-term promotional offering at the
promotional rate, they will only be permitted to obtain the promotional rate
for the period that the promotion is offered by BellSouth. At the time the
promotion ends, if AT&T or MCI chooses to continue obtaining the applicable
service, they must obtain that service at the stated tariff rate, less the
wholesale discount;
f. AT&T and MCI can only offer a promotional rate for a service
obtained subject to the provisions of this Paragraph 8 to customers who would
have qualified for the promotional rate if the service were being offered by
BellSouth;
g. Any benefit of the promotion must be realized within the time
period of the promotion and BellSouth may not use promotional offerings to
evade the wholesale obligation. If AT&T or MCI believes that such abuse is
occurring, they may file a petition with the Authority challenging the promotion
and, if such petitions are many in number, the Directors of the Authority may
contemplate the establishment of specific rules governing promotional discounts,
which may include, not only the provisions listed above, but also additional
rules or, in the alternative, the Directors may consider making all promotions
available for resale.
10. That the following terms and conditions on the resale of LifeLine
Services are reasonable and necessary, and shall be implemented:
a. AT&T and MCI shall only offer LifeLine Service to customers who
meet the qualifications outlined in the "means test";
15
<PAGE>
b. LifeLine Services and rates shall be offered by AT&T or MCI
in a manner similar to the manner in which LifeLine Services are offered in the
market today, that is through a discount to BellSouth's Message Rate Service,
General Subscriber Tariff A3.2.4;/16/
c. AT&T and MCI shall purchase BellSouth's Message Rate Service
at the stated tariff rate, less the wholesale discount. AT&T and MCI must
further discount the wholesale Message Rate Service to LifeLine customers with a
discount which is no less than the minimum discount that BellSouth now provides;
d. The maximum rate which AT&T and MCI may charge for LifeLine
Service shall be capped at the retail flat rate offered by BellSouth;
e. BellSouth shall charge the federally-mandated Subscriber
Line Charge (currently $3.50) to AT&T and MCI;/19/
f. AT&T and MCI are required to waive the Subscriber Line
Charge for the end-user;
g. AT&T and MCI are responsible for recovering the Subscriber
Line Charge from the National Exchange Carriers Association's interstate toll
settlement pool just as BellSouth does today.
11. That the following terms and conditions on the resale of Link-Up
Service are reasonable and necessary, and shall be implemented:
a. AT&T and MCI may offer Link-Up Service only to those
customers who meet the qualifications outlined in the "means test";
- -------------------
/16/ However, if a competitor has a proposal that it believes is just and
reasonable, the competitor may file the proposal with the Authority for
consideration.
/19/ See FCC Report and Order, Paragraph 983.
16
<PAGE>
b. AT&T and MCI must further discount the Link-Up Service by at
least the percentage that is now offered by BellSouth;
c. AT&T and MCI are responsible for recouping the additional
discount in the same manner as BellSouth does today.
12. That AT&T and MCI may only offer grandfathered services to
customers or subscribers who have already been grandfathered. Grandfathered
services may not be resold to a new or different group of customers or
subscribers.
13. That, while BellSouth has been ordered to make 911 Services
available for resale, AT&T and MCI are cautioned to preserve the integrity of
911 Services.
14. That the Final Best Offer proposed by BellSouth with regard to
contract service arrangements, nonrecurring services, and inside wire
maintenance, attached hereto as Exhibit "A" and made a part hereof by reference,
be, and hereby is, approved and adopted by the Arbitrators.
17
<PAGE>
ISSUE 2: WHAT TERMS AND CONDITIONS, INCLUDING USE AND USER RESTRICTIONS, IF
ANY, SHOULD BE APPLIED TO RESALE OF BELLSOUTH SERVICES?/20/
COMMENTS AND DISCUSSION:
- -----------------------
On November 14, 1996, the Arbitrators answered the question presented
by unanimous vote. Director Kyle, in making the motion, stated that in light of
the FCC's referring to limitations as "presumptively unreasonable," she wished
to adopt only the restrictions stated in the FCC Report and Order, i.e., no
resale of access, no resale to independent pay phone providers, and no cross-
class selling./21/ Chairman Greer stated that he concurred with Director Kyle's
motion, but wanted to amend it by adding that AT&T and MCI must resell services
in compliance with the applicable terms and conditions in BellSouth's retail
tariffs. Director Malone further stated that the applicable terms and conditions
in the tariffs must be just, reasonable, and nondiscriminatory as required by
the Act.
On December 3, 1996, the Arbitrators ordered that the contract
language negotiated by and between BellSouth and AT&T to comply with the
Arbitrators' First Order and to resolve any remaining unresolved issues under
Issue 2 shall also be used by MCI and BellSouth in their Innerconnection
Agreement./22/
ORDERED:
- -------
15. That no terms and conditions, including use and user
restrictions, will be applicable to the resale of BellSouth services, except
for:
- -------------
/20/ Motion was made by Director Kyle and amended by Chairman Greer with
comments by Director Malone. The motion, as amended, was seconded by Chairman
Greer and was passed by unanimous vote of the Arbitrators.
/21/ See FCC Report and Order, Paragraphs 871, 872, 873, 874, 875, 876, and 877,
based upon the Act at Section 251(c)(4).
/22/ Director Malone's motion on December 3, 1996, was seconded by Chairman
Greer and was passed by the unanimous vote of the Arbitrators.
18
<PAGE>
a. the terms and conditions listed above in Paragraphs 9, 10,
11, 12 and 13;
b. a restriction on the resale of access;
c. a restriction on the resale to independent pay phone
providers;
d. a restriction on cross-class selling; and
e. reasonable, non-discriminatory, and narrowly tailored terms,
conditions, and limitations in the underlying BellSouth tariffs.
16. That the contract language negotiated by and between BellSouth
and AT&T to comply with the Arbitrators' First Order and to resolve any
remaining unresolved issues under Issue 2 shall also be used by MCI and
BellSouth in their Interconnection Agreement.
19
<PAGE>
EXHIBIT 10.44
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[_____]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
AGREEMENT FOR THE PROVISION OF TELECOMMUNICATIONS
SERVICES AND FACILIITES
BETWEEN
CAROLINAS FIBERNET, LLC
AND
INTERSTATE FIBERNET, GP
Dated January 27, 1996
<PAGE>
AGREEMENT FOR THE PROVISIONS
OF TELECOMMUNICATIONS SERVICES AND FACILITIES
TABLE OF CONTENTS
INTRODUCTION.................................................. 1
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I
DEFINITIONS................. 1
1.1 "Agreement"........................................ 1
---------
1.2 "Affiliate"........................................ 1
---------
1.3 "Capacity"......................................... 1
--------
1.4 "CFN".............................................. 1
---
1.5 "Committee"........................................ 1
---------
1.6 "Compensation"..................................... 1
------------
1.7 "Customer"......................................... 1
--------
1.8 "Interruption"..................................... 2
------------
1.9 "IFN".............................................. 2
---
1.10 "Network Revenue".................................. 2
---------------
1.11 "Party" or "Parties"............................... 2
----- -------
1.12 "Person"........................................... 2
------
1.13 "Provider"......................................... 2
--------
1.14 "Route Miles"...................................... 2
-----------
1.15 "Route Segments"................................... 2
--------------
1.16 "Seller"........................................... 2
------
1.17 "Service".......................................... 2
-------
1.18 "Stated Compensation".............................. 2
-------------------
1.19 "Stated Compensation Rate"......................... 2
------------------------
ARTICLE II
RELATIONSHIP OF THE PARTIES........... 2
2.1 Limited Liability.................................. 2
-----------------
2.2 Dual Roles......................................... 3
----------
ARTICLE III
ESTABLISHMENT AND MAINTENANCE OF SERVICE......... 3
3.1 Establishment of Service........................... 3
------------------------
3.2 Continuing Record of Available Capacity............ 3
---------------------------------------
3.3 Additional Capacity................................ 3
-------------------
3.4 Dispute of Parallel Routes......................... 3
--------------------------
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
3.5 Stated Compensation................................. 3
-------------------
ARTICLE IV
DUTIES OF THE PROVIDER............. 4
4.1 Capacity Provided................................... 4
-----------------
4.2 Liability for Interruption.......................... 4
--------------------------
4.3 Capacity, Service and Testing....................... 4
-----------------------------
ARTICLE V
DUTIES OF THE SELLER............... 5
5.1 Seller's Use........................................ 5
------------
5.2 Testing............................................. 5
-------
ARTICLE VI
JOINT DUTIES....................... 5
6.1 Sales Efforts....................................... 5
-------------
6.2 Sales Materials: Information Regarding Service...... 5
----------------------------------------------
6.3 Contract Provisions................................. 5
-------------------
6.4 Force Majeure....................................... 6
-------------
ARTICLE VII
COMPENSATION AND BILLING........... 6
7.1 Linear System Compensation.......................... 6
--------------------------
7.2 Ring System Compensation............................ 6
------------------------
7.3 Bonus Compensation.................................. 6
------------------
7.4 Compensation and Interruptions...................... 6
------------------------------
7.5 Billing and Collection.............................. 7
----------------------
7.6 Commissions......................................... 7
-----------
7.7 Payment of Compensation............................. 7
-----------------------
7.8 Late Payment........................................ 7
------------
7.9 Installation Fees and Cancellations................. 7
-----------------------------------
ARTICLE VIII
NON-DISCLOSURE.................... 8
8.1 Acknowledgment...................................... 8
--------------
8.2 Confidential Information Defined.................... 8
--------------------------------
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
8.3 Exclusions from Definition........................... 9
--------------------------
8.4 Non-disclosure Obligation............................ 9
-------------------------
8.5 Compliance with Legal Process........................ 9
-----------------------------
8.6 Ownership; Return of Information..................... 10
--------------------------------
8.7 Remedies for Breach.................................. 10
-------------------
8.8 Term................................................. 10
----
8.9 Applicability to Affiliates.......................... 10
---------------------------
ARTICLE IX
DISPUTE RESOLUTION............... 10
9.1 Intercompany Review Committee........................ 10
-----------------------------
9.2 Arbitration.......................................... 11
-----------
ARTICLE X
MISCELLANEOUS PROVISIONS.............. 13
10.1 Limitation on Agency................................. 13
--------------------
10.2 Term and Termination of Agreement.................... 13
---------------------------------
10.3 Additional Actions and Documents..................... 13
--------------------------------
10.4 Severability......................................... 13
------------
10.5 Warranties........................................... 13
----------
10.6 Limitation of Benefits of this Agreement............. 13
----------------------------------------
10.7 Amendment............................................ 13
---------
10.8 Variations in Pronouns............................... 14
----------------------
10.9 Cumulative Remedies.................................. 14
-------------------
10.10 Governing Law; Resolution............................ 14
-------------------------
10.11 Entire Agreement..................................... 14
----------------
10.12 Successors........................................... 14
----------
10.13 Notices.............................................. 14
-------
10.14 Counterparts......................................... 15
------------
</TABLE>
iii
<PAGE>
INTRODUCTION
THIS AGREEMENT, by and between Carolinas FiberNet, LLC (hereinafter
"CFN") and Interstate FiberNet, G.P. (hereinafter "IFN") (collectively referred
to as the "Parties");
WHEREAS, the Parties hereto each conduct the business of providing
telecommunications services over a network of telecommunications facilities
which each Party has at its access; and
WHEREAS, the Parties desire to interconnect their respective networks and
enter into a cross-marketing agreement whereby either Party may sell point-to-
point internetwork telecommunication transport; and
NOW, THEREFORE, the Parties hereto agree to the following terms and
conditions:
W I T N E S E T H:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meanings:
1.1 "Agreement" shall mean this Agreement for the Provision of
---------
Telecommunications Services and Facilities as amended from time to time.
1.2 "Affiliate" shall mean, with respect to any Person, any other
---------
Person directly or indirectly controlling, controlled by or under common control
with, such Person, whether through the ownership of voting securities, by
contract or otherwise.
1.3 "Capacity" shall mean the telecommunications transport which is made
--------
available to a Party pursuant to this Agreement.
1.4 "CFN" shall mean Carolinas FiberNet, LLC, a North Carolina limited
---
liability company.
1 .5 "Committee" shall mean the Intercompany Review Committee established
---------
pursuant to Section 9.1 of this Agreement.
1.6 "Compensation" shall mean the amount of money due from the Seller to
------------
the Provider for Capacity provided under this Agreement.
1.7 "Customer" shall mean a Person who obtains Service from a Party.
--------
1
<PAGE>
1.8 "Interruption" shall mean any two second interval with a complete
------------
interruption of Capacity or with a bit error rate in excess of 1 x 10/-9/.
1.9 "IFN" shall mean Interstate FiberNet, a Georgia general partnership.
---
1.10 "Network Revenue" shall mean the recurring gross revenues (net of
---------------
access fees and applicable taxes and franchise fees on those gross revenues)
received by the Seller from the sale of a Service.
1.11 "Party" or "Parties" shall mean CFN or IFN or both, as the context
------- -------
shall require.
1.12 "Person" shall mean any corporation, company, association,
------
partnership, other entity or natural person.
1.13 "Provider" shall mean a Party selling Capacity to the other Party
--------
(the Seller) pursuant to this Agreement.
1.14 "Route Miles" shall mean the actual distance in miles over the
-----------
Parties' facilities which are utilized to provide Service to the Customer.
1.15 "Route Segments" shall mean a telecommunications route capable of
--------------
transporting Capacity between any two (i) points of presence, (ii) regenerators,
or (iii) meet points or any combination of two of (i), (ii) and (iii).
1.16 "Seller" shall mean a Party purchasing Capacity from the other Party
------
(the Provider) pursuant to this Agreement for the purpose of selling it to a
Customer.
1.17 "Service" shall mean a combination of a portion of the Seller's
-------
Capacity with a portion of the Provider's Capacity which is to be sold to a
Customer.
1.18 "Stated Compensation" shall mean Stated Compensation as computed
-------------------
pursuant to Section 3.5 of the Agreement.
1.19 "Stated Compensation Rate" shall mean the rate as set forth on
------------------------
the applicable Stated Compensation Rate Schedule established pursuant to Section
3.5 of the Agreement.
ARTICLE II
RELATIONSHIP OF THE PARTIES
2.1 Limited Liability. This Agreement shall not be considered to
-----------------
create a joint venture, partnership or other legal relationship between the
Parties or as giving the right of either to legally bind the other in any manner
or to be able to incur debts and liabilities on behalf of the other Party or
create a condition in which either shall share or be responsible for the debts
2
<PAGE>
or liabilities of the other. This Agreement shall not be considered to
constitute the appointment of either Party as a sales representative (exclusive
or non-exclusive) of the other Party.
2.2 Dual Roles. This Agreement envisions that each Party will be both a
----------
Seller and Provider with respect to the Capacity.
ARTICLE III
ESTABLISHMENT AND MAINTENANCE OF SERVICE
3.1 Establishment of Service. CFN agrees initially to make available
------------------------
to IFN (1) Capacity as described in Schedule 3.1(a) and (2) Route Segments as
described in Schedule 3.1(b). IFN agrees to initially make available to CFN (1)
Capacity as described in Schedule 3.1(c) and (2) Route Segments as described in
Schedule 3.1(d). CFN and IFN shall utilize such Capacity to establish and market
Services.
3.2 Continuing Record of Capacity. Each Party agrees to keep complete and
-------------------- --------
current records of sold Capacity and available Capacity (available Capacity
shall constitute Capacity described in Sections 3.1 and 3.3 of the Agreement
excluding Capacity utilized to provide Service sold to Customers) in a uniform
format developed by the Committee. Each Party shall make such records available
to the other Party.
3.3 Additional Capacity. From time to time a Party may extend or expand
-------------------
its Capacity. Upon approval of the other Party, a Party may add such additional
Capacity to the Capacity already subject to this Agreement. Additional Capacity
and Route Segments subject to this Agreement shall be evidenced by an additional
Schedule which shall be attached to this Agreement (numbered from Schedule
3.3(a) through 3.3(zz)).
3.4 Meet Point. The meet point of the Parties' networks shall be
----------
established at the [________] V & H coordinates of [_________]. Additional meet
points may be established under this Agreement with the written consent of both
Parties.
3.5 Stated Compensation. In the case of Capacity provided under this
-------------------
Agreement where the a point of presence and the z point of presence (described
below) are both located in a Tier I city, Stated Compensation shall be the
product of the Stated Compensation Rate [_____________________] multiplied
by the airline miles ("ALMs") between the a point of presence and z point of
presence (where a and z constitute the points of interconnection with the
Customer or the Customer's access provider). In the case of Capacity provided
under this Agreement where either or both of the a point of presence or the z
point of presence (described above) are located in a Tier II or Tier III city,
Stated Compensation shall be the sum of (i) the product of the Stated
Compensation Rate [_______________________] multiplied by the ALMs between b
point of presence and y point of presence (where b and y constitute points of
interconnection between designated Tier I cities (designated in Schedule 3.5));
(ii) the product of the Stated Compensation Rate [__________________________]
multiplied by the ALMs between the b point
3
<PAGE>
of presence (described above) and the a point of presence (where a constitutes
the interconnection with the Customer or Customer's access provider in a Tier II
or Tier III city); and (iii) the product of the Stated Compensation Rate
[_________________________] multiplied by the ALMs between y point of presence
(described above) and the z point of presence (where z constitutes the point of
interconnection with the Customer or Customer's access provider in a Tier II or
Tier III city). The Stated Compensation Rate will be the applicable rate for
Capacity on the then current Stated Compensation Rate Schedule for the city
pairs between which Service is to be provided. Each Party shall designate the
applicable tier for each of its cities. The governing tier of a city pair shall
be the higher tier number of the designated tier applicable to each city. The
initial Stated Compensation Rate Schedule and the designated Tier I cities are
attached to this Agreement as Schedule 3.5. As frequently as necessary, but not
less than at six month intervals, the Committee may revise the Stated
Compensation Rate Schedule. Notwithstanding the provisions of this Section, a
Seller may charge a Customer a price based on a rate in excess of or below the
applicable Stated Compensation Rate Schedule for Service provided under this
Agreement. However, subject to Article VII, the Provider's minimum Compensation
shall be computed utilizing the Stated Compensation Rate.
ARTICLE IV
DUTIES OF THE PROVIDER
4.1 Capacity Provided. The Provider agrees to provide the Capacity for
-----------------
the provision of point-to-point telecommunications transport in accordance with
industry standards.
4.2 Liability for Interruption. The Provider's liability to Seller
--------------------------
shall be limited to a credit, as provided in Section 7.4 herein, for
Interruption unless the Interruption is the result of gross negligence or
willful misconduct by the Provider, its employees, agents, or contractors. Any
claim or demand for credit as a result of any Interruption shall be waived
unless presented in writing within six months after the date of the
Interruption.
4.3 Capacity, Service and Testing. Provider agrees to properly maintain
-----------------------------
Capacity covered by this Agreement. Upon execution of this Agreement, CFN and
IFN shall each appoint two persons to develop standards and requirements for the
provision of Capacity under this Agreements (the "Standards"). Such Standards
shall equal or exceed general long-haul telecommunications industry performance
standards. Seller and Provider agree to perform joint testing on an as-required
basis in conformance with the requirements described pursuant to this Section.
Provider agrees to provide the Seller with a twenty four (24) hour, seven day a
week technical contact for coordination of testing of Capacity covered under
this Agreement. In the event of an Interruption of the Capacity, Provider agrees
to provide restoration of Capacity, on a priority basis. Provider, at its sole
expense, shall keep the Capacity as now or hereafter constituted with all
improvements and upgrades made thereto in good condition and shall make all
repairs and replacements necessary to maintain the Capacity.
4
<PAGE>
ARTICLE V
DUTIES OF THE SELLER
5.1 Seller's Use. The Seller shall be permitted to use Capacity
------------
operated and maintained by the Provider and contracted for under this Agreement
only to provide Capacity for sale to a Customer. Capacity purchased under this
Agreement must be the subject of actual contracts or agreements for Service with
a Customer and may not be purchased under this Agreement at wholesale for
eventual resale pursuant to unexecuted contracts or agreements with existing or
future Customers. In the event the Provider asserts that the Seller is violating
the provisions of this Section and the Parties cannot resolve the conflict
between themselves, the Provider may name three certified public accountants to
review the applicable contracts to determine the Seller's compliance with this
Section. The Seller shall designate one of the three named certified public
accountants to audit the applicable contracts and shall make such contracts
available to the named certified public accountant. The Provider shall be
responsible for the certified public accountant's fees and expenses, unless the
certified public accountant determines this Section 5.1 is being violated. In
such a case, the Seller shall be responsible for the certified public
accountant's fees and expenses.
5.2 Testing. Seller and Provider agree to perform joint testing on an
-------
as-required basis in conformance with the requirements developed pursuant to
Section 6.3. Seller agrees to provide the Provider with a twenty four (24) hour,
seven day a week technical contact.
ARTICLE VI
JOINT DUTIES
6.1 Sales Efforts. Each Party shall use reasonable efforts to market and
-------------
sell Service to potential Customers.
6.2 Sales Materials; Information Regarding Service. The Seller shall
----------------------------------------------
obtain the written approval of the Provider prior to distribution of any
advertising, promotional or sales materials or other publicity concerning the
Provider and/or its Affiliates with respect to Service offered pursuant to this
Agreement and the relationship between the Parties under this Agreement.
However, if the Seller does not receive written notice of the Provider's
objection to any submitted advertising, promotional or sales materials, within
three business days of Provider's receipt at the place for notices contained in
Section 10.13 of this Agreement, the Provider will be deemed to have given
written approval of such advertising, promotional or sales materials. The Seller
shall make no representations or warranties concerning Service, except as
specifically authorized by the Provider.
6.3 Contract Provisions. Subject to the Standards developed pursuant to
-------------------
Section 4.3, the Seller shall determine the provisions which shall be included
in all contracts for Services to Customers. However, no contract shall contain a
provision which authorizes its termination with
5
<PAGE>
less than thirty (30) days notice to the Seller. Further, without the written
consent of the Provider, no contract shall be for a term which extends beyond
January 31, 2004.
6.4 Force Majeure. Neither Party shall be held liable for any delay
-------------
or failure in performance of any part of this Agreement from any cause beyond
its control and without its fault or negligence, such as acts of God, acts of
civil or military authority, government regulations, embargoes, epidemics, war,
terrorist acts, riots, insurrections, fires, explosions, earthquakes, nuclear
accidents, floods, strikes, power blackouts, volcanic action, other major
environmental disturbances, unusually severe weather conditions, or acts or
omissions of transportation common carriers (collectively referred to as "Force
Majeure Conditions").
ARTICLE VII
COMPENSATION AND BILLING
7.1 Linear System Compensation. With respect to Network Revenue to
--------------------------
be derived from each sale of Service, the Seller shall pay the Provider a fee
equal to the product of the Stated Compensation multiplied by a fraction. The
numerator of the fraction shall be the carriage distance attributable to the
Provider providing facilities to the route producing such Network Revenue, and
the denominator shall be the sum of the carriage distance attributable to the
Provider providing facilities to the route producing such Network Revenues and
the carriage distance attributable to the Seller providing facilities to the
route producing such Network Revenue. Carriage distance attributable to the
Service producing such Network Revenue shall be determined in airline miles
(ALMs) between the meet point of the Parties' networks ([____] V & H coordinates
of [________]) and the point of presence constituting the interconnection with
the Customer or the Customer's access provider. For example, in the case of a
sale of Capacity over a linear route where the carriage distance attributable to
Provider is 20 ALMs, and attributable to Seller is 30 ALMs, the Seller shall pay
to the Provider 40% (20/50) of the Stated Compensation.
7.2 Ring System Compensation. Reserved.
------------------------
7.3 Bonus Compensation. In addition to Compensation paid pursuant to
--------------------
Sections 7.1 and 7.2, to the extent that the Network Revenue attributable to the
Provider provided Capacity is greater than the Stated Compensation attributable
to such Provider (computed according to the principles enunciated in Sections
7.1 and 7.2), the Seller shall pay the Provider a Bonus Compensation fee equal
to [_] multiplied by the difference between the Network Revenue attributable to
the Provider provided Capacity (computed according to the principles enunciated
in Sections 7.1 and 7.2) and the Stated Compensation attributable to such
Provider.
7.4 Compensation and Interruptions. In case of any Interruption to any
------------------------------------
Capacity provided by Provider under this Agreement, if not due to the negligence
of the Seller or its customers, the following rules shall apply:
6
<PAGE>
(a) If the customer's contract contains an Interruption Credit
enumerated on Exhibit 7.4, Seller shall be credited for an
Interruption at the rate as provided in the affected
Customers' contracts. Notwithstanding the previous sentence,
neither Party will enter a contract with a Customer (who is
not a Customer on the date of the execution of this
Agreement) which provides for an interruption credit
enumerated in category B or F of Exhibit 7.4, unless the
Party receives written consent of the other Party. However,
in no event shall the Interruption Credit exceed an amount
equal to the Compensation that would have been payable to
the Provider with respect to such interrupted Capacity.
(b) The Interruption allowance applies only to the Capacity
interrupted.
(c) A credit allowance is not applicable for any period during
which Seller or its Customer fails to afford access to
Capacity provided by Provider for the purpose of
investigations and clearing troubles.
7.5 Billing and Collection. The Seller will be responsible for billing
----------------------------
and collection of its Customer accounts. The Seller may contract for billing and
collection.
7.6 Commissions. There will be no sales commission to the Seller for
-----------------
selling Capacity on the Provider's system.
7.7 Payment of Compensation. Compensation will be payable to the Provider
---------------------------
within 20 days of the end of the month in which the Service was provided to the
Customer. With respect to payable Compensation, the Seller shall issue to the
Provider on a circuit by circuit basis a detailed statement indicating the
Compensation to be paid with respect to such Service. In the event the Provider
asserts that the Seller has miscomputed the amount of payable Compensation and
the Parties cannot resolve the conflict between themselves, the Provider may
name a certified public accountant to review the applicable contracts and
computations of the payable Compensation. The Party requesting the audit shall
be responsible for the certified public accountant's fees and expenses.
7.8 Late Payment. Any payment of Compensation received after the
------------------
required payment date, described in Section 7.7 of this Agreement, will be
subject to a late payment charge. A late payment charge shall accrue on all
outstanding amounts as of each required payment date (as described in Section
7.7 of this Agreement). The late payment charge shall equal the amount due on
the required payment date multiplied by one and one half percent (1 1/2 %)
multiplied by the number of required payment dates which have passed since the
accrual of the liability for the payment of such Compensation.
7.9 Installation Fees and Cancellations. Upon each required payment
-----------------------------------------
date (as described in Section 7.7 of this Agreement), the Seller shall pay the
Provider the following
7
<PAGE>
installation fees with respect to Capacity with an in-service date (as
originally requested by the Customer) occurring in the prior month:
(a) with respect to Capacity where the a point of presence and the z
point of presence (as described in Section 3.5) are both located in a Tier
I city and where the Seller does not charge an installation fee, [______];
(b) with respect to Capacity where the a point of presence and the z
point of presence (as described in Section 3.5) are both located in a Tier
I city and where the Seller charges an installation fee, an installation
fee equal to the [________________] multiplied by a fraction with a
numerator equal to the airline miles (ALMs) between either the a or z point
of presence (where either the a or z point of presence constitutes the
point of interconnection with the Customer or Customer's access provider in
the Provider's territory) and the Meet Point (described in Section 3.4) and
the denominator equal to the ALMs between the a point of presence and the z
point of presence (described in Section 3.5); and
(c) with respect to Capacity where either both of the a point of
presence or the z point of presence are located in a Tier II or Tier III
city, an installation fee equal to [__] for each DS- 1 and [__] for each
DS-3.
In the event the contract is canceled less than ten days prior to the planned
in-service date (as originally requested by the Customer), the Seller shall pay
the Provider an amount equal to the applicable installation fee for the
Capacity. Additionally, in the event the contract is canceled prior to the
expiration of 30 days of the in-service date (as originally required by the
Customer), the Seller shall pay to the Provider an amount equal to the
applicable installation fee for the Capacity less amounts paid to the Provider
under the contract.
ARTICLE VIII
------------
NON-DISCLOSURE
--------------
8.1 Acknowledgment. Each Party acknowledges that it has received or
-------------------
may in the future receive from the other Party information of a non-public
nature for use by such Party and its agents, employees and representatives,
including financial and legal advisors (collectively, "representatives") in
connection with the evaluation of the Agreement and Capacity to be obtained
under the Agreement.
8.2 Confidential Information Defined. Each Party acknowledges that, in
-------------------------------------
the course of its consideration of and any concurrent or subsequent discussions
between such Party and the other Party or their respective representatives
relating to the Agreement, such Party may receive certain non-public and
confidential information from or about the other Party or their Affiliates,
including but not limited to technical, financial and business plans and models,
names of customers or suppliers, proposed business transactions, reports,
market projections, software
8
<PAGE>
programs, data or any other confidential and proprietary information. All such
technical, financial or other business information thus supplied by a Party to
the other Party or its representatives is hereinafter called the "Information."
The term "Information" as used herein also includes the terms and conditions of
this Agreement. Any Information supplied by a Party prior to the execution of
the Agreement shall be considered in the same manner and be subject to the same
treatment as the Information made available after the execution of the
Agreement.
8.3 Exclusions from Definition. The term "Information" as used herein
-------------------------------
does not include any data or information (a) which is already known to the
receiving Party at the time it is disclosed to the receiving Party, or (b)which
before being divulged by the receiving Party (i) has become generally known to
the public through no wrongful act of the receiving Party; (ii) has been
rightfully received by the receiving Party from a third party without
restriction on disclosure and without, to the knowledge of the receiving Party,
a breach of an obligation of confidentiality running directly or indirectly to
the Party; (iii) has, prior to release, been approved for release by a written
authorization by the Party; (iv) has been disclosed pursuant to a requirement of
a governmental agency or of law without similar restrictions or other
protections against public disclosure, or is required to be disclosed by
operation of law; (v) is independently developed by the receiving Party without
use, directly or indirectly, of the Information received for the other Party; or
(vi) is furnished to a third party by the disclosing Party without restrictions
on the third party's right to disclose the information.
8.4 Non-disclosure Obligation. Each Party receiving any Information
------------------------------
shall keep such Information confidential and shall not disclose such
Information, in whole or in part, to any Person other than its representatives
who need to know such Information in connection with the receiving Party's
evaluation thereof and determination of business strategies, or other actions in
connection with this Agreement (it being agreed and understood that such
representatives shall be informed by the receiving Party of the confidential
nature of the Information and shall be directed by the receiving Party to treat
the Information confidentially), except (a) with the prior written consent of
the disclosing Party or (b) as otherwise permitted hereunder. The Information
shall be used by the receiving Party solely in connection with actions to be
pursuant to this Agreement, and shall not be otherwise used for any purpose
detrimental to the interests of the other Party.
8.5 Compliance with Legal Process. In the event that the Party
-----------------------------------
receiving any Information is legally requested or required (by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand or similar process or, in the opinion of outside counsel
for such Party, by federal or state securities or other statutes, regulations or
laws) to disclose any Information, such Party shall promptly notify the
disclosing Party of such request or requirement prior to disclosure so that the
disclosing Party may seek an appropriate protective order and/or waive
compliance with the terms of this Agreement. If, however, in the opinion of
outside counsel for the receiving Party such Party is nonetheless, in the
absence of such order or waiver, compelled to disclose such Information or
otherwise stand liable for contempt or suffer possible censure or other penalty
or liability, then the receiving Party may disclose such information without
liability to the other Party hereunder.
9
<PAGE>
8.6 Ownership: Return of Information. No license to a Party, under any
----------
trademark, patent, copyright, mask work protection right or any other
intellectual property right, is either granted or implied by the conveying of
Information to such Party. All Information (including tangible copies and
computerized or electronic versions thereof), shall remain the property of the
Party furnishing such Information. Within ten (10) days following the receipt of
a written request referencing this Agreement and this paragraph from the Party
furnishing Information hereunder, the receiving Party shall deliver to the
furnishing Party, as the case may be, all tangible materials containing or
embodying the Information received from the furnishing Party, as the case may
be. That portion of the Information which has been incorporated into analyses,
compilations, comparisons, studies or other documents prepared by the receiving
Party or its representatives shall be held by the receiving Party and kept
confidential as provided above or shall be destroyed.
8.7 Remedies for Breach. Each Party understands and agrees that money
-------------------
damages would not be a sufficient remedy for any breach of this Agreement and
that the disclosing party shall be entitled to seek injunctive or other
equitable relief to remedy or forestall any such breach or threatened breach.
Such remedy shall not be deemed to be the exclusive remedy for any breach of
these agreements but shall be in addition to all other rights and remedies
available at law or in equity.
8.8 Term. The obligation of each Party to maintain the confidentiality
----
of the information it has received under the Agreement shall continue for a
period of three (3) years after the termination of this Agreement.
8.9 Applicability to Affiliates. Any information disclosed by an
---------------------------
Affiliate of a Party which would otherwise constitute Information hereunder if
disclosed by any Party, shall be deemed to constitute Information under the
Agreement, and the rights of such Party under the Agreement may be enforced by
any such Affiliate as if such Affiliate were also a party to the Agreement. Each
Party may disclose any Information received hereunder to employees or
representatives of any of its Affiliates, provided such Person complies with the
provisions of this Article VIII.
ARTICLE IX
DISPUTE RESOLUTION
9.1 Intercompany Review Committee. Subject to review pursuant to Section
-----------------------------
9.2 of this Agreement, any dispute regarding any right, obligation, duty or
liability arising out of the provisions of this Agreement, or any dispute
regarding interpretation of any of its provisions, or any other dispute which
any provision of this Agreement specifies is subject to the provisions of this
Section, shall be referred to an Intercompany Review Committee (the
"Committee").
(a) The Committee shall be a standing committee composed of four
members, two each from CFN and IFN who shall be designated by the
respective
10
<PAGE>
Party. Upon resignation or retirement of any member from the
Committee, or replacement of any member of the Committee, the
Party which placed the member on the Committee shall immediately
notify the other Party of the name, title, and address of the
member's replacement.
(b) Upon referral of any dispute to the Committee, the members of the
Committee may meet either in person or by telephone or confer by
any other means to resolve the dispute. Such resolution may be
informal in nature. However, all resolutions shall be approved in
writing by one Committee member of each Party.
(c) Upon consent of all members of the Committee, the Parties may
retain a mediator to aid the Committee in its deliberations by
informally providing advice to the Committee after discussion of
the dispute. Any opinion expressed by the mediator shall be
strictly advisory and shall not be binding on the Parties, nor
will any opinion expressed by the mediator be admissible in any
arbitration or other proceeding. The mediator may either be
chosen from a previously selected list, or by other agreement of
the Committee. Costs of mediation shall be borne equally by the
Parties. Mediation is not required prior to an agreement to
arbitrate under Section 9.2.
9.2 Arbitration.
-----------
(a) If any dispute refereed to the Committee has not been resolved
within thirty (30) days after the date of referral to the
Committee, or if a Party is not satisfied with the decision of
the Committee, a Party may submit the dispute to arbitration
according to the Commercial Arbitration Rules of the American
Arbitration Association. Each Party to the dispute shall select
an arbitrator and the two so selected shall name a third. All
arbitrators selected shall be members of the American Arbitration
Association. The arbitrators shall be impartial and familiar with
the telecommunications industry, and shall not have been employed
by or affiliated with any of the Parties hereto or any of their
respective Affiliates. The arbitration procedure may be initiated
by any Party by written notice to the other Parties, and such
notice shall specify in reasonable detail the dispute being
submitted to arbitration. The Parties hereby renounce all
recourse to litigation and agree that the award of the
arbitrators shall be final and subject to no judicial review. The
arbitrators shall conduct the proceedings, including arguments
and briefs, pursuant to the Commercial Arbitration Rules of the
American Arbitration Association, as now or hereafter amended
(the "Rules"); provided that the provisions of this Agreement
shall prevail in the event of any conflict between the Rules and
the provisions of this Agreement. The panel of arbitrators shall
decide the
11
<PAGE>
issues submitted to them in accordance with the provisions and
commercial purposes of this Agreement, provided that all
substantive questions of law shall be determined under the laws
of the State of North Carolina (without regard to the principles
of conflicts of laws of such jurisdiction). All questions and
issues in connection with the dispute, including procedural
issues, shall be decided by the concurrence of at least two
arbitrators, and all decisions shall be in writing and submitted
to all parties.
(b) In no event shall any Party be entitled to receive, and the
arbitrators shall not be empowered to award, punitive or
exemplary damages. Each Party hereby irrevocably waives any claim
or right for or to punitive or exemplary damages.
(c) The Parties shall facilitate the arbitration by: (i) making
available to one another and to the arbitrators for examination,
inspection and extraction all documents, books, records and
personnel under their control if determined by the arbitrators to
be relevant to the dispute; (ii) conducting arbitration hearings
to the greatest extent possible on successive days; and (iii)
observing strictly the time periods established by the Rules or
by the arbitrators for submission of evidence or briefs.
(d) In the final award, the panel of arbitrators shall divide all
cost, other than fees of counsel incurred in conducting the
arbitration, in such manner as the panel deems just and equitable
under the circumstances. Judgment on the award of the panel of
arbitrators may be entered in any court having jurisdiction over
the party against which enforcement of the award is being sought.
Each Party hereby irrevocably submits and consents to the
jurisdiction of any such court for the purpose of rendering a
judgment on any such award.
(e) Each Party agrees that any award of the panel of arbitrators
against it and on which judgment is entered as provided in the
preceding subsection (d) may be executed against the assets of
such Party in any jurisdiction. By execution of the Agreement,
each Party hereby irrevocably submits to the jurisdiction of any
court in any such jurisdiction in any legal action or proceeding
relating to such executions.
(f) Each Party hereby irrevocably waives, to the fullest extent
permitted by law, any objection it may now or hereafter have to
any suit, action or proceeding, arising out of or relating to
this Agreement that is brought in any of the jurisdictions
designated in the preceding subsections (d) and (e) for the
purposes envisioned by those subsections, and hereby further
irrevocably waives any claim that any such suit, action or
proceeding so brought has been brought in any inconvenient forum.
12
<PAGE>
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Limitation on Agency. It is specifically understood and agreed
--------------------
between the Parties that this Agreement extends only to and is limited to the
rights and obligations under this Agreement and, except as otherwise expressly
provided herein, this Agreement shall not constitute a Party as the agent of or
principal for the other Party.
10.2 Term and Termination of Agreement. The term of this Agreement
---------------------------------
commences on January 29, 1996 and continues for five (5) years. After February
28, 1999, a Party may terminate this Agreement upon thirty (30) days written
notice to the other Party. However,the term of this Agreement will continue
with respect to Capacity subject to Customer contracts (executed prior to the
termination of this Agreement) until the expiration of all such Customer
contracts.
10.3 Additional Actions and Documents. Each Party hereby agrees to take or
--------------------------------
cause to be taken such further actions, to execute, acknowledge, deliver or file
or cause to be executed, acknowledged, delivered, and filed such further
documents and instruments, and to use reasonable efforts to obtain such
consents, as may be necessary or as may be reasonably requested, in order to
fully effectuate the purposes, terms, and conditions of this Agreement, whether
before, at or after the execution of this Agreement.
10.4 Severability. The invalidity of any one or more provisions hereof or
------------
of any other agreement or instrument given pursuant to or in connection with
this Agreement shall not affect the remaining portions of this Agreement or any
such other agreement or instrument or any part thereof, all of which are
inserted conditionally on their being held valid in law; and in the event that
one or more of the provisions contained herein or therein should be invalid, or
should operate to render this Agreement or any such other agreement or
instrument invalid, this Agreement and other such agreements and instruments
shall be construed as if such invalid provisions had not been inserted.
10.5 Warranties. Each Party shall make no representations or warranties
----------
oil the other Party's behalf, and shall effectively disclaim any authority to
make such warranties or representations, except as specifically authorized by
the other Party.
10.6 Limitation of Benefits of this Agreement. It is the explicit
----------------------------------------
intention of each Party that no Person, other than a Party (except as provided
by Section 8.9), is or shall be entitled to bring any action to enforce any
provision of this Agreement against a Party, and that the covenants,
undertakings, and agreements set forth in this Agreement shall be solely for the
benefit of, and shall be enforceable only by, the Party (or its successors and
assigns).
10.7 Amendment. This Agreement shall not be amended, altered, or modified
---------
except by an instrument in writing duly executed by the Parties.
13
<PAGE>
10.8 Variations in Pronouns. All personal pronouns used in this Agreement,
----------------------
whether used in masculine, feminine, or neuter gender, shall include all other
genders; singular shall include plural, and vice versa; and shall refer solely
to the parties signatory thereto except where otherwise specifically provided.
10.9 Cumulative Remedies. The rights, powers and remedies provided
-------------------
hereunder shall be cumulative, and the exercise of one or more of the provisions
hereof shall not preclude the exercise of any other provision hereof. Each of
the Parties confirms that damages at law may be an inadequate remedy for breach
or threatened breach of this Agreement and each Party agrees that, in the event
of a breach of any provisions hereof, the respective rights and obligations
hereunder shall be enforceable by specific performance, injunction or other
equitable remedy. Nothing herein contained is intended to, nor shall it, limit
or affect any right or rights at law, by statute or otherwise of the Party
aggrieved as against any other Party for a breach or threatened breach of any
provision hereof, it being the intention of the Parties that the respective
rights and obligations of the Parties hereunder shall be enforceable in equity
as well as at law or otherwise.
10.10 Governing Law; Resolution. The laws of the State of North Carolina
-------------------------
shall govern the validity of this Agreement, the construction and interpretation
of its terms.
10.11 Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the Parties and supersedes any prior understanding or agreement among
them respecting the subject matter hereof. There are no representations,
arrangements, understandings or agreements, oral or written, among the Parties
hereto relating to the subject matter of this Agreement, except those fully
expressed herein. Except as otherwise provided herein, no amendment, change or
modification of this Agreement or waiver of any provision hereof shall be valid
or binding on the Parties hereto, unless such amendment, change, modification or
waiver shall be in writing and signed by or on behalf of the Parties hereto, and
no waiver on one occasion shall be deemed to be a waiver of the same or any
other provision hereof in the future.
10.12 Successors. All the provision hereof shall inure to the benefit of
----------
and be binding upon the successors, legal representatives and assigns of the
Parties hereto. A Party's assignment of this Agreement must be approved in
writing by the other Party and such approval shall not be unreasonably withheld.
10.13 Notices. All notices or other communications required or permitted
-------
to be given pursuant to this Agreement shall be in writing and shall be mailed
by first class mail, certified or registered, postage prepaid or sent via a
nationally recognized overnight courier (e.g., FedEx) to the other Party at the
address set forth below. Notices are deemed received by a Party when the Party
or its agent receives such Notice. Any Party may change its address by giving
notice in writing stating its new address to the other Party.
CFN 422 South Church Street
Charlotte, North Carolina 28242-0001
IFN 206 West 9th Street
West Point, Georgia 31833
14
<PAGE>
10.14 Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall be an original but all of which shall
constitute one instrument. Any counterpart of this Agreement may be executed by
facsimile, and any such contepart will be deemed to be an original document.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the
day and year first above written.
CAROLINAS FIBERNET, LLC
By: DUKENET COMMUNICATIONS, INC., By: PALMETTONET, INC.,
Member Member
By: /s/ M.H. Smith By: /s/ Johnson Barnes
----------------------- -----------------------
Its: President Its: President
----------------------- -----------------------
By: CARONET, INC., By: ACCESS/ON
Member INTEREXCHANGE
SERVICES, INC.,
Member
By: /s/ Wayne C. Heath By: /s/ Barry R. Roberts
----------------------- -----------------------
Its: General Manager Its: Treasurer
----------------------- -----------------------
INTERSTATE FIBERNET, G.P.
By: /s/ Doug Shumate
------------------------
Its: VP/CFO and Managing Ptr
------------------------
15
<PAGE>
SCHEDULES 3.1(a) and 3.1(b)
***INFORMATION IN THIS SCHEDULE HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***
<TABLE>
<CAPTION>
====================================================================
Access/ON AVAILABLE AVAILABLE
DSI'S AS OF DS3'S AS OF
1/22/96 1/22/96
- --------------------------------------------------------------------
<S> <C> <C>
Concord - Charlotte POC [__] [__]
- --------------------------------------------------------------------
Concord - High Point [__] [__]
- --------------------------------------------------------------------
Concord - Lexington [__] [__]
- --------------------------------------------------------------------
Lexington - High Point [__] [__]
- --------------------------------------------------------------------
Lexington - Reeds [__] [__]
- --------------------------------------------------------------------
Reeds- Courtney [__] [__]
- --------------------------------------------------------------------
Courtney - Clingman [__] [__]
- --------------------------------------------------------------------
Clingman - Baldwin [__] [__]
- --------------------------------------------------------------------
Baldwin- Levels Cross [__] [__]
- --------------------------------------------------------------------
Levels Cross - Courtney [__] [__]
- --------------------------------------------------------------------
Courtney - Lexington [__] [__]
====================================================================
</TABLE>
=====================
Page 1 of 5
=====================
<PAGE>
SCHEDULES 3.1(a) and 3.1(b)
***INFORMATION IN THIS SCHEDULE HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***
<TABLE>
<CAPTION>
=====================================================================
AVAILABLE AVAILABLE
DSI'S AS OF DS3'S AS OF
CARONET 1/22/96 1/22/96
<S> <C> <C>
- ---------------------------------------------------------------------
Raleigh - Sanford [_] [_]
- ---------------------------------------------------------------------
Raleigh - Fayetteville [_] [_]
- ---------------------------------------------------------------------
Fayetteville - Laurinburg [_] [_]
- ---------------------------------------------------------------------
Laurinburg - Florence [_] [_]
- ---------------------------------------------------------------------
Florence - Winter Park [_] [_]
- ---------------------------------------------------------------------
Florence - Lumberton [_] [_]
- ---------------------------------------------------------------------
Lumberton - Winter park [_] [_]
- ---------------------------------------------------------------------
Lumberton - Wilmington [_] [_]
- ---------------------------------------------------------------------
Winter Park - Wilmington [_] [_]
- ---------------------------------------------------------------------
Wilmington - Jacksonville [_] [_]
- ---------------------------------------------------------------------
Jacksonville - New Bern [_] [_]
- ---------------------------------------------------------------------
New Bern - Kinston (Wommack) [_] [_]
- ---------------------------------------------------------------------
Kinston (Wommack) - Goldsboro [_] [_]
- ---------------------------------------------------------------------
Goldsboro - Raleigh [_] [_]
- ---------------------------------------------------------------------
Goldsboro - Selma [_] [_]
- ---------------------------------------------------------------------
Selma - Raleigh [_] [_]
=====================================================================
</TABLE>
=====================
Page 2 of 5
=====================
<PAGE>
SCHEDULES 3.1(a) and 3.1(b)
***INFORMATION IN THIS SCHEDULE HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.***
<TABLE>
<CAPTION>
====================================================================
AVAILABLE AVAILABLE
DUKENET DSI'S AS OF DS3'S AS OF
1/22/96 1/22/96
- --------------------------------------------------------------------
<S> <C> <C>
Worldcom - Raleigh [_] [_]
- --------------------------------------------------------------------
Raleigh- RTP [_] [_]
- --------------------------------------------------------------------
RTP - Glen Raven [_] [_]
- --------------------------------------------------------------------
Glen Raven - N. Greensboro [_] [_]
- --------------------------------------------------------------------
N. Greensboro - Beckerdite [_] [_]
- --------------------------------------------------------------------
Beckerdite-Mocksville [_] [_]
- --------------------------------------------------------------------
Mocksville - McGuire [_] [_]
- --------------------------------------------------------------------
McGuire - Charlotte-College St. [_] [_]
- --------------------------------------------------------------------
Charlotte-College St. - Catawba [_] [_]
- --------------------------------------------------------------------
Catawaba - Pacolet [_] [_]
- --------------------------------------------------------------------
Pacolet - N. Greenville [_] [_]
- --------------------------------------------------------------------
N. Greenville - Greenville-McBee [_] [_]
- --------------------------------------------------------------------
Beckerdite - Winston Salem [_] [_]
- --------------------------------------------------------------------
N. Greenville - Spartanburg [_] [_]
- --------------------------------------------------------------------
Catawba-Rock Hill [_] [_]
====================================================================
</TABLE>
=====================
Page 3 of 5
=====================
<PAGE>
SCHEDULES 3.1(a) and 3.1(b)
***INFORMATION IN THIS SCHEDULE HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***
<TABLE>
<CAPTION>
=====================================================================
AVAILABLE AVAILABLE
PALMETTONET DSI'S AS OF DS3'S AS OF
1/22/96 1/22/96
- ---------------------------------------------------------------------
<S> <C> <C>
Carowinds - Rock Hill [_] [_]
- ---------------------------------------------------------------------
Rock Hill - Bethune [_] [_]
- ---------------------------------------------------------------------
Bethune -N. Sumter [_] [_]
- ---------------------------------------------------------------------
N. Sumter - Columbia [_] [_]
- ---------------------------------------------------------------------
N. Sumter - Florence [_] [_]
- ---------------------------------------------------------------------
Florence - Myrtle Beach [_] [_]
- ---------------------------------------------------------------------
Columbia - St George [_] [_]
- ---------------------------------------------------------------------
St. George - Charleston [_] [_]
- ---------------------------------------------------------------------
St. George - Walterboro [_] [_]
- ---------------------------------------------------------------------
Walterboro - Yemassee [_] [_]
- ---------------------------------------------------------------------
Yemassee - Beaufort [_] [_]
- ---------------------------------------------------------------------
Yemassee - Crosby Station [_] [_]
- ---------------------------------------------------------------------
Crosby Station - Pritchardville [_] [_]
- ---------------------------------------------------------------------
Rock Hill- Chester [_] [_]
- ---------------------------------------------------------------------
St. George - Orangeburg [_] [_]
- ---------------------------------------------------------------------
Crosby Station - Savannah [_] [_]
- ---------------------------------------------------------------------
Clemson - Anderson [_] [_]
- ---------------------------------------------------------------------
Anderson - Due West [_] [_]
- ---------------------------------------------------------------------
Due West-Greenwood [_] [_]
=====================================================================
</TABLE>
=====================
Page 4 of 5
=====================
<PAGE>
<TABLE>
<CAPTION>
================================================================================
AVAILABLE AVAILABLE
PALMETTONET DSI'S AS OF DS3'S AS OF
1/22/96 1/22/96
- --------------------------------------------------------------------------------
<S> <C> <C>
Due West - Hickory Tavern [_] [_]
- --------------------------------------------------------------------------------
Hickory Tavern - Chester [_] [_]
- --------------------------------------------------------------------------------
Columbia - N. Sumter [_] [_]
- --------------------------------------------------------------------------------
Moncks Corner - Charleston [_] [_]
- --------------------------------------------------------------------------------
N. Sumter - Moncks Corner [_] [_]
- --------------------------------------------------------------------------------
Rock Hill-Catawaba [_] [_]
================================================================================
</TABLE>
--------------------
PAGE 5 OF 5
--------------------
<PAGE>
IFN AVAILABLE CAPACITY REPORT
-----------------------------
***INFORMATION IN THIS SCHEDULE HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.***
Atlanta North Route
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Cross Section Atlanta Winder Hartwell Tocca Gainesville Winder
Winder Hartwell Tocca Gainesville Atlanta Athens
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DS3's Free [_] [_] [_] [_] [_] [_]
- ----------------------------------------------------------------------------------------------
</TABLE>
Atlanta-Columbus Route
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Cross Section Atlanta Yates Newman LaGrange West Point Atlanta Yates West Point Opelika
Yates Newman LaGrange West Point Columbus Columbus Carrollton Opelika Auburn
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DS3's Free [_] [_] [_] [_] [_] [_] [_] [_] [_]
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Atlanta-Birmingham
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Cross Section Atlanta Yates Anniston Pell City Leeds Birmingham Wilsonville Anniston
Yates Anniston Pell City Leeds Birmingham Wilsonville Atlanta Gadsden
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DS3's Free [_] [_] [_] [_] [_] [_] [_] [_]
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Birmingham-Longview Tx
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Cross Section Birmingham Holt Meridian Edwards Choudrant Sheveport
Holt Meridian Edwards Choudrant Shreveport Longview
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DS3's Free [_] [_] [_] [_] [_] [_]
- --------------------------------------------------------------------------------------------
</TABLE>
Birmingham-Longview Spurs
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Cross Section Holt UAB Tuscaloosa APCo Meridian Hattisburg Choudrant Edwards
UAB Tuscaloosa APCo Holt Gulfport Gulfport Monroe Vicksburg
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DS3's Free [_] [_] [_] [_] [_] [_] [_] [_]
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Edwards-Jackson Ring
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
Cross Section Edwards LDDS MCI Entergy
LDDS MCI Entergy Edwards
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
DS3's Free [_] [_] [_] [_]
- ----------------------------------------------------------------
</TABLE>
As of 6/12/96
<PAGE>
SCHEDULE 3.5
Initial Stated Compensation Rate Schedule
***INFORMATION IN THIS SCHEDULE HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.***
Basic Schedule [______________]
------------------------------
When DS-1 Capacity is Provided When DS-3 Capacity is Provided
Tier I [___] Tier I [____]
Tier II [___] Tier II [____]
Tier III [___] Tier III [____]
Modified Schedule [_____________________________________________]
----------------------------------------------------------------
When DS-1 Capacity is Provided When DS-3 Capacity is Provided
Tier I [_____] Tier I [_____]
Tier II [_____] Tier II [_____]
Tier III [_____] Tier III [_____]
Designated Tier I Cities for Stated Compensation Purposes
---------------------------------------------------------
Columbia, South Carolina
Charlotte, North Carolina
Greensboro, North Carolina
Greenville, South Carolina
Winston-Salem, North Carolina
Raleigh, North Carolina
[_______________________________________________________________________________
________________________________________________________________________________
_____________].
<PAGE>
Exhibit 7.4
***Information in this Exhibit has been omitted pursuant to a request for
confidential treatment. The omitted portions have been filed separately with
the Securities and Exchange Commission. ***
II. Interuption Credits
-----------------------
================================================================================
Customer Interruption Credit
- --------------------------------------------------------------------------------
A In excess of 2 hours,
[_______] times Contract Rate\2\
-----
- --------------------------------------------------------------------------------
B 5 mins. to 2 hours-[_] times Contract Rate
-----
2 hours-3 hours-[_] times Contract Rate
-----
3 hours-4 hours-[__] times Contract Rate
-----
4 or more hours-[__] times Contract Rate
-----
- ---------------------------------------------------------------------------
C 30 mins. or less-[_]times Contract Rate
-----
30 mins.-1 hour-[_]times Contract Rate
-----
each hour above 1 hour-additional [_]times Contract Rate
-----
(capped at [_] times Contract Rate for a single outage)
-----
- -----------------------------------------------------------------------------
D [_____]for each half year times Contract Rate
-----
- -----------------------------------------------------------------------------
E [_____]for each half year times Contract Rate
-----
- -----------------------------------------------------------------------------
F 10 mins. to 2 hours-[_] times Contract Rate
-----
2 hours-12 hours-[_] times Contract Rate
-----
12 hours-24 hours-[__] times Contract Rate
-----
24 hours or more-[__] times Contract Rate
-----
================================================================================
_______________________________
\1\ Explanation of Outage Denominator: [___________________________________
-----
______________________________________________________________________________]
-----
\2\ Contract Rate means the monthly rate such customer pays.
<PAGE>
EXHIBIT 10.45
-------------
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[_____]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
FLORIDA POWER CORPORATION
FIBER OPTIC FACILITIES AGREEMENT
THIS AGREEMENT (the Agreement) is entered into as of this 15 day of
--
November, 1996, by and between Florida Power Corporation (FPC), a Florida
Corporation, 3201 34th Street South, St. Petersburg, Florida 33711, and
Interstate FiberNet (IFN or Telecommunications Company), a Georgia General
Partnership, with offices at 206 West 9th Street, West Point, Georgia 31833.
WHEREAS, FPC operates or is constructing a fiber optic telecommunication
system for its own use on certain of its overhead and underground electric
transmission and distribution facilities in the state of Florida; and
WHEREAS, certain dark fibers within that system are not immediately
required by FPC for its own use during the term of this Agreement; and
WHEREAS, IFN intends to provide a fiber optic telecommunications service
and will require the availability of dark fibers as part thereof; and
WHEREAS, FPC is willing, during the term of this Agreement, to grant to IFN
the use of certain dark fiber as herein provided, where such use will not
interfere with FPCs own service requirements,
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and promises contained herein, the parties agree as follows:
1. Scope of Agreement IFN intends to provide a telecommunications service
------------------
utilizing the FPC dark fiber between certain points and FPC hereby
agrees to provide the dark fiber in order to facilitate the service
that IFN will provide. The dark fiber to be utilized by IFN is more
particularly described on the Exhibit A attached hereto and hereby
incorporated by reference.
2. Effective Date of Agreement This Agreement shall become effective upon its
----------------- ---------
execution by the parties.
3. Definitions. For purposes of this Agreement and as used herein, the terms
-----------
set forth below shall be defined as follows:
A. Acceptance Test - The tests conducted on the IFN Fibers to insure that
the IFN Fibers meet or exceed the fibers specifications outlined in
Exhibit C.
B. Acceptance of IFN Fibers - As outlined in Section 4.1, IFN's written
approval that the IFN Fibers have passed the Acceptance Test
C. Affiliate - Any entity that directly or indirectly, through one or
more intermediaries, controls or is controlled by or is under common
control with the entity specified as a result of ownership of more
than 50 percent of the voting capital stock or voting securities of
such entity or any entity which acquires all or substantially all of
such entity's assets.
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
1
<PAGE>
D. Cable - The FPC owned fiber optic cable incorporating the FPC Fibers
and the fibers to be utilized by IFN pursuant to this Agreement
E. Fiber Acceptance Date - The date on which IFN Fibers in the Cable
constituting a communication circuit between IFN service points as
defined in Exhibit A has passed the Acceptance Test and has met the
conditions of Section 4.1: Acceptance of IFN Fibers.
F. FPC - Florida Power Corporation, its parent, Affiliates and
subsidiaries, and their directors, officers, employees, agents,
successors and permitted assigns.
G. FPC Fibers - For purposes of this Agreement, all optical fibers not
dedicated for IFN's use shall be considered FPC Fibers whether used by
FPC or used by a third party.
H. FPC Make-Ready - The installation, upgrading or replacement of
overhead or underground facilities necessary to safely and properly
support the Cable in accordance with the requirements of the National
Electrical Safety Code (NESC). FPC Make-Ready cost shall consist of
the sum of FPC's direct cost as hereinafter defined plus fifteen
percent (15%). FPC's direct cost shall include all material, labor
engineering and supervision and travel and loading expenses required
for the installation, upgrading or replacement of overhead or
underground facilities, cost of removal less any salvage value and the
expense of transferring FPC's existing facilities. FPC Make-Ready
shall be mutually agreed upon as described in Exhibit B.
I. IFN Fibers - The dark optical fibers hereunder which are to be
dedicated exclusively to IFN's use as provided herein.
J. IFN Premises - That portion of IFN occupied facilities dedicated to
IFN's use and the housing of its equipment, to accomplish that which
is set out in Section 1.
K. NESC - The term NESC shall mean the current edition of the National
Electrical Safety Code, as amended or revised.
L. Regeneration Facility Location - Locations where repeater equipment
enclosures will be installed as outlined in Exhibit E.
M. Route Segment - A portion of the Cable installed between two points as
set forth in Exhibit A, further defined as:
l. Off-Network - constructed specifically due to the requirement for
connectivity between IFN's service points and the existing or
planned FPC fiber optic telecommunications network.
2. On-Network - contiguous within the existing FPC fiber optic
telecommunications system or to be constructed in conjunction
with the planned expansion of the FPC fiber optic
telecommunications system.
4. Application for IFN Fibers.
--------------------------
A. Beginning with the Effective Date of this Agreement, the execution by
both parties of the Exhibit A attached hereto and by reference made a
part hereof, shall be the exclusive procedure to be used by IFN in
obtaining the use of dark fiber from FPC.
CONFIDENTIAL & PROPRIETARY INFORMATION N
PROPERTY OF FLORIDA POWER CORPORATION
2
<PAGE>
B. Upon receipt of a request for service from IFN, the parties shall
consult in good faith concerning the request, giving due consideration
to the then-existing and projected electric transmission and
distribution and telecommunication requirements of FPC and to such
other factors as they may reasonably deem relevant. Following such
consultation, if FPC can accommodate the request FPC will furnish to
IFN an estimate of annual fee requirements and anticipated Fiber
Acceptance Date(s) (Exhibit A) for IFN's review and acceptance. In
addition, FPC will furnish an estimate of any FPC Make-Ready (Exhibit
B) that is necessary in order to safely and properly install the Cable
and support the Route Segment for IFN's review and acceptance.
C. Upon receipt of IFN's acceptance of the above and payment for any FPC
Make-Ready necessary and upon acceptance by FPC, all appropriate
Exhibits shall be attached hereto and made a part hereof and FPC will
exercise its best efforts to provide the IFN Fibers to IFN in
accordance therewith FPC further agrees to provide written
notification to IFN upon availability of the IFN Fibers.
4.1 Acceptance of IFN Fibers. Upon completion of construction of the Cable and
------------------------
any FPC Make-Ready, FPC will Acceptance Test the IFN Fibers to insure that
the IFN Fibers meet or exceed the Fibers specifications outlined in Exhibit
C. In the event the IFN Fibers meet such specifications, FPC shall notify
IFN in writing of the availability of the IFN Fibers (the Fiber Notice).
Within 5 business days of IFN receiving the Fiber Notice, IFN shall give
FPC written notice of any failure of the IFN Fibers to satisfy IFN's
Acceptance Test
If IFN gives FPC written notice of such failure, FPC shall use its best
commercial efforts to promptly correct such failure, whereupon IFN and FPC
shall jointly conduct another Acceptance Test This procedure shall be
repeated until all IFN Fibers meet or exceed the specifications outlined in
Exhibit C.
In the event deficiencies continue to be identified after the third round
of testing, IFN may, at its option, conditionally accept the IFN Fibers
and, upon such conditional acceptance, commence payment of the fees as set
forth in Exhibit A and according to Section 5A. FPC will correct any such
deficiencies within sixty (60) days of conditional acceptance.
If IFN does not give FPC written notice of such failure within 5 business
days of IFN receiving the Fiber Notice, it shall be deemed that IFN has
accepted the IFN Fibers.
The day in which IFN has accepted the IFN Fibers will be considered the
Fiber Acceptance Date, and fees referenced in Section 5A and specified in
Exhibit A shall commence on this date.
In the event an Off-Network Route Segment(s) is not constructed in time for
the Acceptance Test of the remaining Route Segment(s) identified in Exhibit
A, Section 12 shall apply with respect to that Off-Network Route Segment
and FPC and IFN shall proceed with this Section 4.1, including testing and
acceptance of those Route Segments completed. In such event, this Section
4.1 shall be repeated for such Off-Network Route Segment subject to Section
12 when and if such Segment is completed.
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
3
<PAGE>
5. Price and Payment
-----------------
A. Subject to the allowances for interruptions set forth in Section 8
hereof, IFN shall pay FPC a license fee for the use of the IFN Fibers
provided by FPC, said fee to commence On the actual Fiber Acceptance
Date. The term and fee amount payable to FPC for the IFN Fibers shall
be as shown on attached Exhibit(s) A or as amended. Said fees shall be
payable monthly, in advance, on the first day of each month. Should
the Fiber Acceptance Date be any date other than the first of the
month, then that initial month's fee shall be prorated based on the
actual date.
B. Unless a payment is disputed in good faith, if for any reason IFN is
delinquent in the payment of any amounts due to FPC under this
Agreement for more than thirty (30) days, after written notice of the
past due amount IFN shall pay interest on such unpaid amount from the
date such payment is due until such payment is made. The interest rate
shall be the lesser of 18% per annum or the maximum permitted by law.
C. Upon execution of this Agreement, IFN will advance FPC a non-
refundable (except as provided in Section 12.2(B)) amount equal to
three month's license fee for each Exhibit A approved by FPC and
accepted by IFN in accordance with Section 4 of this Agreement. The
advance shall be considered as prepayment toward IFN's first year
obligation in the initial term under Section 5A.
D. Rates applicable to any renewal term shall be specified on the
attached Exhibit D.
5.1 [________________________________________________________________].
-----------------------------------------------------------------
[_____________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
____________________________________________________________________].
5.2 [_________________________][_______________________________________________
--------------------------
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
__________________________________].
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
4
<PAGE>
6. Ownership. The IFN Fibers shall at all times remain the sole and exclusive
---------
property of FPC. Legal title shall be held by FPC. Neither the provision of
the use of IFN Fibers by FPC to IFN hereunder, nor the payments by IFN
contemplated hereby, shall create or vest in IFN any easement, interest or
any other ownership or property right of any nature in the Cable, except
FPC warrants, subject to the provisions of this Agreement, IFN's right to
use the IFN Fibers for lawful telecommunications transmission purposes
during the term of this Agreement pursuant to the provisions of this
Agreement IFN shall not grant any security interest in the IFN Fibers or
any part or component thereof.
7. Use of Fiber; Taxes, Franchises and Easements.
------ --------------------------------------
A. IFN warrants that its use of the IFN Fibers shall at all times be in
compliance with all certifications, licenses, permits, etc., as
required by proper regulatory authority and that IFN shall not use,
provide the use, or receive a fee for the use of the IFN Fibers or
capacity to others without having obtained such authorization.
B. FPC shall be responsible for and shall pay any and all taxes or fees
with respect to the construction or operation of the FPC Cable,
including, but not limited to, any sales, use, franchise or excise tax
however designated, levied or based, which taxes or fees are (i)
imposed or assessed prior to the Acceptance Date, or (ii) imposed or
assessed (regardless of time) solely with respect to the FPC Cable in
exchange for the approval of construction or in the granting of an
interest in public property or a public right-of-way relating to the
situation of the FPC Cable in public right-of-way. Any fees incurred
by reason of the use of the IFN Fibers or the provision of
telecommunication services by IFN within a local jurisdiction shall be
the responsibility of IFN. IFN shall be responsible for and shall pay
any and all taxes or fees, including franchise fees, imposed as a
result of its use of the IFN Fibers pursuant to this Agreement. IFN
shall, at its own expense, obtain all municipal street franchise
rights that may be required for the use of the IFN Fibers thereof by
IFN. IFN shall be responsible for and shall pay any and all taxes or
fees, including but not limited to, any sales or use tax, levied or
based on the payment of the license fee set forth in Section 5A, but
excluding, however, any federal or state income taxes due by FPC
resulting from receipt of the license fee and excluding any ad valorem
taxes due on the IFN Fibers and the IFN Premises owned by FPC.
C. Other than as set forth in Section 7A and 7B, FPC shall be
responsible, at its own expense, for the acquisition of any easement
or rights-of-way rights that may be required in order to permit the
installation of the Cable; FPC shall use its best commercial effort,
including, if necessary, reasonable legal efforts to obtain such
rights; provided, however, nothing herein shall be deemed as
obligating FPC to pay any exorbitant or grossly disproportional amount
for the acquisition of such rights.
D. During the term of this Agreement, FPC may use or permit the use of
the FPC Fibers and the telecommunication capacity thereof for any
lawful purpose. Nothing in this Agreement shall be construed or
interpreted to prohibit FPC from leasing or licensing the use of the
FPC Fibers or otherwise providing telecommunications capacity to
others or from installing or permitting others to install additional
Fibers or telecommunication capacity, including without limitation,
fiber optic telecommunication capacity, within the right-of-way
constituting any Route Segment or to prohibit FPC from operating such
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
5
<PAGE>
telecommunication capacity (alone or in combination with others) in
competition with the IFN Fibers; provided however, that no such
installation or operation shall interfere with IFN's use of the IFN
Fibers and the telecommunication capacity thereof.
E. IFN shall not provide the use, receive a fee for the use, or sublease
any or all of the IFN Fibers to any entity without first obtaining the
prior written consent of FPC. FPC shall not unreasonably withhold its
approval of said request from IFN. In the event that IFN receives
approval to sublease any or all of the IFN Fibers, and the sublease
amount is in excess of the amount paid by IFN to FPC, FPC will be
entitled to an amount equal to the difference between the sublease
amount and the lease amount paid to FPC by IFN. This Section shall not
be deemed as precluding IFN from leasing capacity on the IFN Fibers to
others without the prior written consent of FPC.
8. Performance and Maintenance.
---------------------------
A. FPC warrants and agrees that the provision of the IFN Fibers hereunder
shall be in conformity with and shall comply with all the requirements
of this Agreement, that such provision shall be made in a good and
workmanlike manner and in accordance with industry standards in order
to enable IFN to provide the telecommunication service. FPC further
warrants and agrees that the IFN Fibers shall meet or exceed the
specifications outlined in Exhibit C.
B. FPC agrees to perform periodic inspections of the Cable and supporting
structures. FPC further agrees to perform periodic inspections,
testing, and any and all maintenance required for the provision of the
IFN Fibers and to maintain and provide adequate spare equipment and
parts as is appropriate for its obligations hereunder. FPC will make
every effort to schedule service-affecting work from midnight to 6
A.M. on Sunday morning and Monday morning during the first and third
weekends of each month, excluding the period beginning two days prior
to Thanksgiving and ending on the following January 3. FPC will notify
IFN as per Exhibit F.
C. In the event of any interruption of provision of the IFN Fibers to IFN
(Outage), FPC shall furnish immediate notice to IFN, and shall specify
in such notice the nature and cause of the interruption, the extent of
the repairs required, and the estimated time to restore, as per
Exhibit F. FPC further agrees to use its best efforts to restore the
provision of the IFN Fibers on an expedited basis, and to restore the
Route Segment and any splicing of the IFN Fibers in a systematic and
rotational manner, with IFN Fibers having equal priority to other
Fibers within the Cable; every attempt will be made to dispatch repair
technicians to the affected site within 2 hours, and to keep the
Outage to less than 12 hours provided however, that nothing herein
shall be construed to preclude FPC from giving higher priority to the
restoration or preservation of electric power service (including
without limitation the restoration or preservation of communications
capability that in FPC's judgment is immediately necessary to the
provision of electric power service) than to the restoration of
service hereunder. in the event an Outage exceeds 24 hours, FPC will
extend to IFN a credit equal to one day's license fee (to be
considered 1/30th of the then current monthly rate) for each
consecutive 24- hour Outage interval, or fraction thereof, in excess
of the initial 24 hours. (e.g. 26-hour Outage = 1 day credit; 40-hour
Outage = 1 day credit; 50-hour Outage = 2 day credit). The credit
shall be applied to the subsequent month's license fee payment.
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
6
<PAGE>
D. In the event repeater equipment is needed, FPC and IFN will specify a
mutually appropriate location(s) (Regeneration Facility Location(s))
for FPC to install and maintain an enclosure for the purpose of
housing such repeater equipment. Specifications for the enclosure and
the location of this Regeneration Facility Location(s) shall be
outlined in Exhibit E. Such location(s) may or may not be collocated
at an existing FPC location(s). FPC shall be responsible for the
purchase, operation, maintenance, and repair, of all enclosures, HVAC,
and associated backup power equipment at Regeneration Facility
Locations, except as outlined in Exhibit E. IFN shall be responsible
for costs, if any, associated with the preparation of repeater
location(s) as specified in Exhibit E.
E. IFN shall be solely responsible, at its own expense, for the purchase,
installation, operation, maintenance and repair of all IFN equipment
and IFN facilities required in connection with the use of the IFN
Fibers.
F. IFN may request that FPC splice into the IFN Fibers at additional,
pre-existing splice points in the future, subject to FPC's approval,
not to be unreasonably withheld. IFN will schedule all such splicing
activities with FPC at a mutually agreed-upon time. All such splicing
will be performed by FPC, and IFN shall reimburse FPC for all FPC
Make-Ready costs as defined in Section 3H and outlined in a Make-Ready
cost estimate FPC shall furnish to IFN upon such request of additional
splice(s).
9. Alteration of Route. Whenever, during the term of this Agreement, it may be
-------------------
necessary or desirable from the standpoint of FPC's electric utility
operations to do so, or if required by public authorities or by a final
order or decree of a court or administrative agency, FPC may, upon
reasonable notice to IFN, relocate all or any part of the Cable to one or
more alternate routes or rights-of-way (inducing without limitation
replacing overhead cable with underground cable, or replacing underground
cable with overhead cable, if such replacement is in connection with an
abandonment, relocation or replacement of electric transmission facilities
over, under, on, upon or in which the Cable has been installed). [_________
___________________________________________________________________________
_____________________________________________________________________]. In
such event, FPC shall give IFN as much prior notice as reasonably
practicable, and the parties shall cooperate to accomplish the transfer of
service over the Cable to the new route or right-of-way so as to minimize
any interference with the use of the IFN Fibers or the FPC Fibers by either
party and to avoid unreasonably impairing the ability of each to provide
telecommunication service of the type, quality and reliability contemplated
by this Agreement.
[__________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
_______________________].
10. Termination. in addition to any other rights of termination specified
-----------
herein, this Agreement may be terminated upon thirty (30) days prior
written notice, as follows:
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
7
<PAGE>
A. By either party, in the event that an injunction or other final order
or judgment is entered in any lawsuit or regulatory proceeding
restraining performance under this Agreement, declaring or otherwise
rendering performance unlawful or compelling removal, discontinuation
or divestiture of all or part of the Route Segment, or directing FPC
to pay an exorbitant or grossly disproportional amount in FPC's
reasonable judgment for the acquisition of any easement or rights-of-
way rights and such injunction, order or judgment has not been
vacated, reversed, or stayed within 30 days from the date of entry
thereof;
B. By FPC, in the event of a catastrophic failure or expiration of the
Cable anytime after the 15th year after the Fiber Acceptance Date of
the IFN Fibers [______________________________________________________
_______________________]. By FPC, if a catastrophic failure or
expiration of the Cable creates a casualty loss in excess of [___] (as
measured in a percentage of route miles of fiber) of the IFN Fibers
and the FPC Fibers occurs prior to the end of the [___] year or in
excess of [___] (as measured in a percentage of route miles of fiber)
of the IFN Fibers and the FPC Fibers occurs after the [___] year but
prior to the end of the [___] year. In the event of a catastrophic
failure that is less than the percentages detailed above and FPC
determines in its discretion not to return the IFN Fibers to the
standards set forth in Exhibit C, [___________________________].
C. By either party, in the event that any of the transactions
contemplated by this Agreement are finally disapproved of by any
Government Authority whose approval is required to consummate such
transactions.
10.1 [____________________]. [_____________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
_______________].
11. Effect of Termination. Upon any termination pursuant to Section 10 and
---------------------
payment of any amount required pursuant to Section 10.1, except as
provided below, this Agreement shall be terminated and neither party
nor any of its directors, officers, stockholders, Affiliates, general
partners, or limited partners shall have any continuing liability to
the other party or its directors, officers, stockholders, Affiliates,
general partners, or limited partners under this Agreement. Provided,
however, that the obligations of the parties under Section 14 of this
Agreement, and the obligations of IFN to pay license fees through the
effective date of such termination, shall remain in full force and
effect, and no termination pursuant to this Section 11 shall entitle
IFN to the return of any license fee theretofore paid or afford to
IFN any defense to the payment of license fees then due and payable.
12. Elimination of Off-Network Route Segment. Failure to complete
----------------------------------------
construction of any Off-Network Route Segment as detailed in Exhibit A
shall not constitute an Event of Default. [___________________________
______________________________________________________________________
________________________________].
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
8
<PAGE>
A. [____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
________________]
[__________________________________________________________
___________________________________________________________
___________________________________________________________
___________________________________________________________
___________________________________________________________
___________________________________________________________
__________________________________________________________]
[__________________________________________________________
___________________________________________________________
___________________________________________________________
________________________]
B. [____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
___________________________________________________________________].
C. [____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
____________________________________________________________________].
D. [____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
____________________________________________________________________].
[______________________________________________________________
_______________________________________________________________
______________________________].
[______________________________________________________________
_______________________________________________________________
___________________________].
[______________________________________________________________
______________________________________________________________].
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
9
<PAGE>
12.1 Default
-------
A. An event of default (Event of Default) by IFN exists if any one or
more of the following events shall occur and be continuing past any
applicable cure periods:
(i) IFN shall admit in writing its inability to pay its debts as
such debts become due;
(ii) IFN shall (1) apply for or consent to the appointment of, or
the taking of possession by, a receiver, custodian, trustee
of liquidator of itself or of all or a substantial part of
its property; (2) make a general assignment for the benefit
of its creditors, (3) commence a voluntary case under the
U.S. Bankruptcy Code, (4) file a petition seeking to take
advantage of any law relating to the bankruptcy, insolvency,
reorganization, winding-up, or composition or readjustment of
debts, (5) fail to controvert in a timely and appropriate
manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the U.S. Bankruptcy
Code, or (6) take any action for the purpose of effecting any
of the foregoing;
(iii) A proceeding or case shall be commenced, without the
application of consent of IFN, in any court of competent
jurisdiction, seeking (1) its liquidation, reorganization,
dissolution or winding-up, or the composition or readjustment
of its debts, (2) the appointment of a trustee, receiver,
custodian, liquidator or the like of IFN or of all or any
substantial part of its assets, or (3) similar relief in
respect of any law relating to bankruptcy; insolvency,
reorganization, winding-up, or composition or readjustment of
debts, which is not dismissed within 90 days thereafter;
(iv) IFN shall fail to perform any material obligation under this
Agreement (other than the obligation to pay license fees) and
such failure shall continue for a period of 30 days following
written notice from FPC to IFN specifying such
nonperformance, provided that if such failure cannot be cured
within such 30-day period with the exercise of reasonable due
diligence, FPC shall grant a reasonable additional period of
time in which to cure such failure, so long as IFN is acting
promptly and diligently to cure;
(v) IFN shall fail or refuse to remit to FPC within thirty (30)
days of written notice following the due date thereof, any
license fees then due and payable, or fail or refuse to remit
to FPC any disputed license fees in accordance with Section
20A; or
(vi) Except as hereinafter provided in Section 22, IFN shall cause
or permit the encumbrance of all or any part of its interest
in this Agreement or the IFN Fibers, without the prior
written consent of FPC; provided that nothing herein shall be
construed to require FPC to give consent to such encumbrance
or to prevent FPC from withholding its consent to such
encumbrance for any or no reason.
B. An Event of Default by FPC shall exist if any one or more of the
following events shall occur and be continuing past any applicable
cure period;
(i) FPC shall (1) apply for or consent to the appointment of, or
the taking of possession by a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part of its
property, (2) make a general assignment for the benefit of
its creditors, (3) commence a voluntary case under the U.S.
Bankruptcy Code, (4) file a petition
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
10
<PAGE>
seeking to take advantage of any law relating to the
bankruptcy, insolvency, reorganization, winding-up, or
composition or readjustment of debts, (5) fail to
controvert in a timely and appropriate manner, or
acquiesce in writing to, any petition filed against it in
an involuntary case under the U.S. Bankruptcy Code, or (6)
take any action for the purpose of effecting any of the
foregoing;
(ii) A proceeding or case shall be commenced, without the
application or consent of FPC, in any court of competent
jurisdiction, seeking (1) its liquidation, reorganization,
dissolution or winding-up, or the composition or
readjustment of its debts, (2) the appointment of a
trustee, receiver, custodian liquidator or the like of FPC
or of all or any substantial part of its assets, or (3)
similar relief in respect of FPC under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or
composition or readjustment of debts, which is not
dismissed within 90 days thereafter;
(iii) FPC shall fail to perform any material obligation under
this Agreement and such failure shall continue for a
period of 30 days following written notice from IFN to FPC
specifying such nonperformance, provided that if such
failure cannot be cured within such 30-day period with the
exercise of reasonable due diligence, IFN shall grant a
reasonable additional period of time in which to cure such
failure; or
(iv) An interruption or reduction in the use or quantity of the
IFN Fibers by IFN that continues for a period of 30 days
following written notice from IFN to FPC of the
interruption or reduction in use, provided that if use of
the IFN Fibers are not restored within such 30-day period
with the exercise of reasonable due diligence, IFN shall
grant a reasonable additional period of time in which to
restore use of the IFN Fibers.
12.2 Rights Upon Default
----------- -------
A. Upon the occurrence of an Event of Default by IFN, FPC shall be
entitled to immediate and exclusive possession, use and control of the
IFN Fibers and may forthwith terminate this Agreement by written
notice to IFN. Upon the occurrence of an Event of Default IFN's right
to possession and use of the IFN Fibers shall terminate and FPC shall
have the right to repossess the IFN Fibers by any lawful means,
without demand or notice of any kind to IFN except as may be required
by law, and without terminating this Agreement or the lease created
hereby.
FPC may declare immediately due and payable all the remaining
installments of the license fee for the remainder of the term hereof
of the applicable Exhibit A and such amount, less the fair licensable
value of the IFN Fibers for the remainder of the terra, shall be
construed as liquidated damages and shall constitute a debt provable
in bankruptcy or receivership. In computing such liquidated damages,
there shall be added to such deficiency the reasonable expenses as FPC
may incur in connection with relicensing the IFN Fibers. The failure
of FPC to relicense the IFN Fibers or any part thereof after
recovering of possession shall not release or affect IFN's liability
for damages. FPC shall in no event be liable in any way whatsoever for
failure to relicense the IFN Fibers, on in the event that the IFN
Fibers is relicensed, for failure to collect the license fee under
such relicensing.
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER
11
<PAGE>
B. Upon the occurrence of an Event of Default by FPC, IFN shall be
entitled to terminate this Agreement by written notice to FPC, and
recover any prepaid amounts.
C. The right to terminate this Agreement shall be in addition to, and not
in substitution for, any other rights that a party may have as a
result of an Event of Default by the other party. In the exercise of
its right of termination as herein provided, FPC may, at its option,
elect to terminate this Agreement in its entirety or with respect to
the particular IFN Fibers to which IFN may be in default of its
obligations under this Agreement
13. Remedies. FPC and IFN may sue from time to time to recover any amounts due
--------
or enforce any rights under this Agreement, and no suit or recovery
shall bar any subsequent action brought for any amount not theretofore
reduced to judgment in favor of FPC or IFN as the case may be. Except
as otherwise provided by law, no repossession of the IFN Fibers by FPC
shall be construed as an election by FPC to terminate this Agreement
unless a written notice of such intention is given by FPC to IFN and
no receipt of moneys by FPC from IFN shall reinstate this Agreement or
IFN right of possession. All remedies provided in this Agreement are
cumulative and exclusive and are in addition to any remedies available
at law or in equity. All remedies may be exercised and enforced
concurrently or sequentially as often as occasion therefore may arise.
14. Indemnification and Insurance.
-----------------------------
A. IFN shall indemnify and save FPC and its agents, contractors,
successors and assigns harmless from and against, and shall reimburse
FPC for all liabilities, obligations, damages, fines, penalties,
claims, demands, costs, judgments and expenses, including but not
limited to reasonable attorneys' fees, which may be imposed upon or
incurred or paid by or asserted against FPC by reason or in connection
with any negligent act or omission by IFN or any of its agents or
employees or any failure by IFN to perform or comply with any of the
provisions of this Agreement
IFN shall further require as a condition precedent to the sublease or
assignment of IFN Fibers to others that all such others agree to
indemnify and save FPC harmless through incorporation of the
provisions of Section 14A into its respective agreements for sublease
or assignment of IFN Fibers to such others.
B. FPC shall indemnify and save IFN and its AGENTS, contractors,
successors and assigns harmless from and against, and shall reimburse
IFN for all liabilities, obligations, damages, fines, penalties,
claims, demands, costs, judgments and expenses, including but not
limited to reasonable attorneys' fees, which may be imposed upon or
incurred by or asserted against IFN by reason of or in connection with
any negligent act or omission by FPC or any of its agents or employees
or any failure by FPC to perform or comply with any of the provisions
of this Agreement
C. The party entitled to indemnification hereunder (the Indemnified
Party) shall notify the other party hereto (the Indemnifying Party) in
writing of the liability, obligation, damage, fine, penalty, claim,
demand, cost judgment or expense for which such indemnity allegedly
applies. The Indemnifying Party may undertake the defense of any such
claim or action and permit the Indemnified Party to participate
therein at the Indemnified Party's
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
12
<PAGE>
own expense. The settlement of any such claim or action by an
Indemnified Party without the Indemnifying Party's prior written
consent which consent shall not be unreasonably withheld or delayed
shall release the Indemnifying Party from its obligations hereunder
with respect to such claim or action so settled.
D. Notwithstanding any other provision of this Agreement, neither party
hereto shall be liable to the other for any special, indirect or
consequential damages or lost profits to anyone arising out of this
Agreement or the performance or nonperformance of any activity
pursuant to this Agreement even if such party has been informed of the
possibility of such damages.
E. Throughout the term of this Agreement, the parties hereto shall, at
their sole cost and expense, maintain Worker's Compensation Insurance
in the amounts required by statute, General Liability Insurance of not
less than $5,000,000 combined single limit (CSL) and Automobile
Liability Insurance, which shall include all owned, non-owned, and
hired VEHICLES, of not less than $1,000,000 combined single limit
(CSL), with Broad Form endorsement providing blanket contractual
liability coverage and name one another as an additional insured on
the policies (excluding the Worker's Compensation policy), and agree
to waive all rights of subrogation.
The parties shall furnish proof of insurance coverage to each other
upon request, however, this requirement shall not preclude either
party from maintaining any required insurance coverage in whole or in
part through self-insurance if it is the party's practice to provide
such coverage or similar coverage applicable to other aspects of its
business through self-insurance.
15. Publicity. Neither party may use the name, trademark, service mark or logo
---------
of the other party in any advertising, news releases or any other manner
without the written consent of such party.
16. Access and Security.
---------- --------
A. IFN agrees, upon reasonable request (considered to be 5 business days
notice for a request not Outage-related), to allow FPC direct ingress
and egress to IFN's Premises at such times as may be required for FPC
to perform any appropriate testing, maintenance and repair of the
Cable located at IFN's Premises. IFN may require that a representative
of IFN accompany any representatives of FPC having access to IFN's
Premises. Employees and agents of FPC shall, while on the premises of
IFN, comply with all rules and regulations, including without
limitation, security requirements and, where required by government
regulations, receipt of satisfactory governmental clearances. IFN
shall have the right to notify FPC that certain FPC or FPC designee
employees are excluded if, in the reasonable judgment of IFN, the
exclusion of such employees is necessary for the proper security and
maintenance of IFN's facilities.
B. IFN and IFN's designee's shall have the right to visit any facilities
of FPC over, under, on, upon or in which the Cable is installed, upon
reasonable prior oral or written notice to FPC (considered to be 5
business days notice for a request not Outage-related), provided that
FPC may require that a representative of FPC accompany any
representatives of IFN or of a IFN designee making a visit. Such
visitation right shall include the right to inspect the
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
13
<PAGE>
Cable and to review performance or service data, and other documents
used in conjunction with this Agreement. Employees and agents of IFN
or of a IFN designee shall, while on the premises of FPC, comply with
all rules and regulations including, without limitation, security
requirements and, where required by government regulations, receipt of
satisfactory governmental clearances. FPC shall have the right to
notify IFN that certain IFN or IFN designee employees are excluded if,
in the reasonable judgment of FPC, the exclusion of such employees is
necessary for the proper security and maintenance of FPC's facilities.
C. IFN shall be granted 24-hour access to IFN Premises. FPC may require
that a representative of FPC accompany any representatives of IFN or
of an IFN designee making a visit. Employees and agents of IFN or of a
IFN designee shall, while on the premises of FPC, comply with all
rules and regulations including, without limitation, security
requirements and, where required by government regulations, receipt of
satisfactory governmental clearances. FPC shall have the right to
notify IFN that certain IFN or IFN designee employees are excluded if,
in the reasonable judgment of FPC, the exclusion of such employees is
necessary for the proper security and maintenance of FPC's facilities.
17. Confidentiality. Each party agrees to provide to the other party such
---------------
information as shall be reasonably necessary to permit performance of
their respective obligations hereunder. Each party hereto shall, in
accordance with the provisions of this Section, at or prior to the time of
providing information, identify in writing as confidential all Confidential
Information. No information which is provided by either party to the other
shall be considered Confidential Information unless it is specifically so
identified at or before the time it is provided to such other party.
Neither party hereto will, without the prior written consent of the party
providing such Confidential Information,
l. use any portion of such Confidential Information for any purpose
other than performance pursuant to this Agreement, or
2. disclose any portion of such Confidential Information to any
persons or entities other than the AGENTS, officers and employees
of such party who reasonably need to have access to the
Confidential Information for purpose of performance under this
Agreement and who are bound by either appropriate confidentiality
agreements (if agents) or commitments consistent with those
utilized by such party in protecting its own Confidential
Information (if officers or employees).
Confidential Information shall remain the property of the disclosing party
and shall be returned to the disclosing party or shall be destroyed upon
termination of the performance pursuant to this Agreement on the basis of
which such Confidential Information was provided. Each recipient party
agrees to safeguard Confidential Information utilizing the same degree of
care utilized by such recipient party in protecting its own Confidential
Information. If the receiving party is compelled to disclose Confidential
Information through lawful process in judicial or administrative
proceeding, the receiving party shall give notice within a reasonable time
to permit the disclosing party the opportunity to seek suitable protective
arrangements before the Confidential Information is disclosed, and the
receiving party shall cooperate fully with the disclosing party's efforts
to obtain such protective arrangements. Confidential Information shall not
apply to information which
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
14
<PAGE>
a. is or becomes publicly available through no fault of the
disclosing party,
b. is In the disclosing party's possession at the time of execution
of this Agreement and not obtained from the other party,
c. is developed by the disclosing party independently outside the
scope of any agreement with the other party,
d. is obtained lawfully and in good faith by the disclosing party
from a third party who did not obtain it from the other party.
The provisions of this Section shall survive the termination of this
Agreement for a period of three (3) years.
18. Compliance with Laws. Each party to this Agreement shall comply, at its
--------------------
own expense, with all applicable laws, statutes, regulations, rules,
ordinances, orders, injunctions, writs, decrees or awards of any government
or political subdivision thereof, or any agency, authority, bureau,
commission, department or instrumentality thereof, or any court tribunal or
arbitrator in all applicable, material respects in connection with all
activities and all performance under or in connection with this Agreement.
19. Force Majeure. Notwithstanding any provision of this Agreement, the
-------------
performance of the obligations set forth in this Agreement other than
obligations to pay money, shall be suspended or excused in the event that
such performance is adversely affected by an event of Force Majeure or its
adverse effects. Force Majeure shall mean the occurrence of any act or
event that has an adverse effect on the engineering, design, acquisition,
construction, installation, operation or maintenance of all or any portion
of the Cable, the IFN Fibers or the FPC Fibers, if such act or event is
beyond the reasonable control of the party relying thereon as justification
for not performing an obligation or complying with any condition required
of such party pursuant to this Agreement. Each party shall exhaust its best
commercial efforts to remedy an event or act of Force Majeure. Such acts or
events include, but are not limited to, the following:
A. Acts of God, landslides, sink holes, lightning, hurricanes,
earthquakes, fires, explosions, floods, acts of a public enemy, wars,
blockades, insurrections, riot, or civil disturbances;
B. Labor disputes, strikes, work slowdown, or work stoppages;
C. Orders, writs, decrees or judgments of any federal, state, or local
court, administrative agency, or governmental body, so long as not the
result of wanton or willful action or Inaction of the party relying
thereon; provided however, the contesting in good faith by such party
of any such order or judgment, or the good faith failure by such party
to contest any such order or judgment, shall not constitute or be
construed to constitute a wanton or WILLFUL action or inaction of such
party;
D. The adoption of or change after the date of the execution of this
Agreement in any federal, state, or local laws, rules, regulations,
ordinances, permits, or licenses, or changes in the interpretation of
such laws, rules, regulations, ordinances, permits, or licenses by a
court or public agency having jurisdiction;
E. The failure of any subcontractor or any supplier to furnish labor,
services, materials, or equipment in accordance with its contractual
obligations, together with the inability of the
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
15
<PAGE>
party relying thereon to obtain reasonable substitute performance
within a reasonable time, provided, that in any case where such
subcontractor or supplier is an Affiliate of the party seeking to rely
upon such failure as an event of Force Majeure, such failure shall be
deemed an event of Force Majeure only to the extent that such failure
is itself due to an event of Force Majeure or its adverse effect; or
F. A defect in manufactured equipment or manufactured components,
provided that in any use where such equipment or component was
manufactured by the party (or an Affiliate of such party) seeking to
rely upon such defect as an event of Force Majeure, such defect shall
be deemed an event of Force Majeure only to the extent that the defect
was caused by an independent event of Force Majeure.
20. Dispute Resolution Procedure.
----------------------------
A. In order to dispute any portion of an FPC invoice, IFN shall notify
FPC in writing of the amount of the disputed charge and the nature of
the dispute within thirty (30) days of the date of the invoice. The
undisputed portion of the invoice shall remain due as rendered. FPC
will then evaluate the dispute within sixty (60) days, and notify IFN
of its evaluation. If the dispute is resolved in favor of FPC, IFN
shall pay FPC the disputed amount due within fifteen (15) days of
receiving notice from FPC. Otherwise, no action will be required.
B. Any dispute arising under this Agreement shall be subject to non-
binding mediation prior to the initiation of judicial proceedings. The
disputing parties shall attempt in good faith to resolve their dispute
in accordance with the procedures and timetable established by the
mediator. If a resolution of the dispute is not reached by the 30th
day after the appointment of the mediator, or such later date as may
be agreed to by the parties, the mediator shall promptly provide the
disputing parties with a written, confidential, nonbinding
recommendation on resolution of the dispute, including the mediator's
assessment of the merits of the principal positions being advanced by
each of the disputing parties. At a time and place specified by the
mediator after delivery of the foregoing recommendation, the disputing
parties shall meet in a good faith attempt to resolve the dispute in
light of the mediator's recommendation. Each disputing party shall be
represented at the meeting by a person with authority to settle the
dispute, along with such other persons as each disputing party shall
deem appropriate. If the disputing parties are unable to resolve the
dispute at or in connection with the meeting, then; (1) any disputing
party may commence such judicial proceedings as may be appropriate;
and (2) the recommendation of the mediator shall have no further force
or effect, and shall not be admissible for any purpose, in any
subsequent judicial proceeding. The costs of the time, expenses, and
other charges of the mediator and of the mediation process shall be
borne by the parties to the dispute, with each side in a mediated
matter bearing one-half of such costs. Each party shall bear its own
costs and attorneys' fees incurred in connection with any mediation
under this Agreement.
C. Unless otherwise agreed in writing or prohibited by applicable law,
the parties shall continue to provide service, honor all other
commitments under this Agreement and continue to make payments in
accordance with this Agreement during the course of any dispute
resolution and during the pendency of any arbitration proceeding or
action at law or in equity relating hereto.
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
16
<PAGE>
21. Conditions Precedent. All obligations of the parities hereto are subject
--------------------
to the condition that all requisite governmental and regulatory approvals
of the execution, delivery and performance of this Agreement shall have
been received. Each party agrees to exert its best commercial efforts to
obtain all such approvals applicable to its execution, delivery and
performance of this Agreement as promptly as reasonably practicable and, in
furtherance thereof, to modify or amend this Agreement in such particulars
as may be required to obtain such approval; provided that if any such
required modification or amendment to this Agreement would, in the good
faith judgment of either party, render the benefit to such party of this
Agreement as a whole uneconomical in light of the obligations of such party
under this Agreement as a whole, then FPC and IFN shall negotiate in good
faith in an effort to restore, insofar as possible, the economic benefits
of the IFN Fibers to IFN and the economic benefits of the FPC Fibers and
the license fee hereunder to FPC provided further, that in the event that
the parties in good faith are unable to agree to terms and conditions which
in their good faith judgment will reasonably retain or restore the economic
benefits of the IFN Fibers to IFN and the economic benefits of the FPC
Fibers and the license fee hereunder to FPC, then this Agreement shall
terminate, as well as all obligations of the parties hereunder other than
l. payment obligations which have accrued prior to such terminations
2. indemnity obligations resulting from events which occurred prior
to such termination, and
3. obligations which pursuant to an express provision of this
Agreement are to survive any termination of this Agreement
IFN shall furnish to FPC a copy of the Certification issued by the Florida
Public Service Commission authoring the IFN to provide fiber optic
telecommunications services through the Cable pursuant to this Agreement.
Said Certificate shall be attached hereto, and by reference, shall be
incorporated into this Agreement.
22. General.
-------
A. Assignment. Neither party hereto shall assign this Agreement, in
----------
whole or in part, whether by operation of law or otherwise, without
the prior written consent of the other party; provided, however, that
either party may assign this Agreement to an Affiliate upon notice to
the other party. It shall be a condition precedent to any such
permitted assignment that the assignee shall execute a counterpart of
this Agreement, thereby becoming a party to this Agreement and
agreeing to be bound by all of the terms and provisions hereof. In the
event of an assignment to a third party, consent from the other party
may not be unreasonably withheld. Not withstanding anything in this
Agreement, IFN shall have the explicit right to assign this Agreement
to a financing institution for collateral purposes and FPC shall
negotiate in good faith a commercially reasonable subordination and an
intercreditor agreement with such lender.
B. Expenses. Except for cost and expenses specifically assumed by a
--------
party under this Agreement, each party hereto shall pay its own
expenses incident to this Agreement (including without limitation
amendments hereto) and the transactions contemplated hereunder
including without limitation all legal and accounting fees and
disbursements.
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
17
<PAGE>
C. Amendment. This Agreement shall not be amended, altered or modified
---------
except by an instrument in writing duly executed by the parties.
D. Binding Effect; Limitation of Benefits. This Agreement shall be
--------------------------------------
binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns. It is the explicit
intention of the parties hereto that no person or entity other than
the parties hereto is or shall be entitled to bring any action to
enforce any provision of this Agreement against either of the parties
hereto, and that the covenants, undertaking, and agreements set forth
in this Agreement shall be solely for the benefit of, and shall be
enforceable only by, the parties hereto or their respective successors
or permitted assigns.
E. Notices. Unless otherwise provided in this Agreement all notices,
-------
demands, requests, reports, approvals or other communications which
may be or are required to be given, served or sent pursuant to this
Agreement shall be in writing and shall be hand delivered, mailed by
first class, registered or certified mail, return receipt requested,
postage prepaid, delivered by overnight courier with proof of delivery
or transmitted by Fax followed by certified mail, addressed as
follows:
To FPC Florida Power Corporation
3201 34th Street South, MAC B2I
St. Petersburg, Florida 33711
Attention: Manager, Project Development
Information Technology Department
To IFN Interstate FiberNet
206 West 9th Street
West Point, Georgia 31833
Attention: Doug Shumate
Each party may designate by notice in writing a new address for itself
to which any notice, demand, request, report, approval or
communication may thereafter be so given, served or sent. Each notice,
demand, request, report, approval or communication which shall be sent
in the manner described above, shall be deemed sufficiently given,
served, sent or received for all purposes at such time as it is
delivered to the addressee (with the return receipt or the delivery
receipt being deemed evidence of such a delivery) or at such time as
delivery is refused by the addressee upon presentation.
F. Severability. 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, said part shall be ineffective to the extent of such
invalidity only, without in any way affecting the remaining parts of
said provision or the remaining provisions of said Agreement; provided
that if any such ineffectiveness or unenforceability of any provision
of this Agreement in the good faith judgment of either party; renders
the benefits to such party of this Agreement as a whole uneconomical
in light of the obligations of such party under this Agreement as a
whole, then FPC and IFN shall negotiate in good faith in an effort to
restore insofar as possible the economic benefits of the IFN Fibers to
IFN and the economic benefits of the FPC Fibers and the license fee
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
18
<PAGE>
hereunder to FPC provided further, that in the event that the
parties in good faith are unable to agree to terms and conditions
which in their good faith judgment will reasonably retain or restore
the economic benefits of the IFN Fibers to IFN and the economic
benefits of the FPC Fibers to FPC, then this Agreement shall
terminate, as well as all obligations of the parties hereunder other
than
l. payment obligations which have accrued prior to such termination,
2. indemnity obligations resulting from events which occurred prior
to such termination, and
3. obligations which pursuant to an express provision of this
Agreement are to survive any termination of this Agreement.
In the event of a termination of this Agreement pursuant to this
Section, FPC and IFN shall negotiate in good faith, given the
circumstances existing at the time of termination, for an appropriate
transition period for the termination.
G. Independent Contractors. In all matters pertaining to this Agreement,
-----------------------
the relationship of FPC and IFN shall be that of independent
contractors, and neither FPC nor IFN shall make any representations or
warranties that their relationship is other than that of independent
contractors. This Agreement is not intended to create nor shall it be
construed to create any partnership, joint venture, employment or
agency relationship between IFN and FPC and no party hereto shall have
the power to bind or obligate any other party. No party hereto shall
be liable for the payment or performance of any DEBTS, obligations, or
liabilities of the other party, unless expressly assumed in writing
herein or otherwise. Each party retains full control over the
employment, direction, compensation and discharge of its employees,
and will be solely responsible for all compensation of such employees,
including without limitation social security, withholding and workers
compensation responsibilities.
H. Exercise of Right. No failure or delay on the part of either party
-----------------
hereto in exercising any right power or privilege hereunder and no
course of dealing between the parties shall operate as a waiver
thereof nor shall any single or partial exercise of any right, power
or privilege hereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.
I. Additional Actions and Documents. Each of the parties hereto hereby
--------------------------------
agrees to take or cause to be taken such further actions, to execute,
acknowledge, deliver and file or cause to be executed, acknowledged,
delivered and filed such further documents and instruments, and to use
its best efforts to obtain such consents, as may be necessary or as
may be reasonably requested in order to fully effectuate the purposes,
terms and conditions of this Agreement, whether at or after the
execution of this Agreement.
J. Survival. It is the express intention and agreement of the parties
--------
hereto that all covenants, agreements, statements, representations,
warranties and indemnities made in this Agreement shall survive the
execution and delivery of this Agreement. No provision of this
Agreement, no covenant, agreement, statement, representation, warranty
or indemnity shall apply or otherwise continue in effect with respect
to any portion of the Cable located
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
19
<PAGE>
or installed on any Route Segment as to which the term of this
Agreement has expired; provided that any payment obligation which has
accrued prior to such expiration and any indemnity obligation
resulting from events which occurred prior to such expiration shall
continue in effect until satisfied in full in accordance with the
terms hereof.
K. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties with respect to the transactions contemplated
herein, and it supersedes all prior oral or written agreements,
commitments or understandings with respect to the matters provided for
herein.
L. Headings. Article and section headings contained in this Agreement are
--------
inserted for convenience of reference only, shall not be deemed to be
a part of this Agreement for any purpose, and shall not in any way
define or affect the meaning, construction or scope of any of the
provisions hereof.
M. Governing Law. The validity, interpretation and performance of this
--------- ---
Agreement and each of its provisions shall be governed by the laws of
the State of Florida, excluding the conflict of law provisions
thereof.
N. Forum for Mediation or Litigation. In the event that mediation or
---------------------------------
litigation is required in order to resolve any dispute or disagreement
connected with this Agreement, it is agreed by and between the parties
hereto that venue and jurisdiction for any such mediation or
litigation shall be in Pinellas County, Florida, unless otherwise
required by law.
23. Exhibits. The following Exhibits shall be attached to and incorporated
--------
within this Agreement as necessary. In the event of any inconsistency
between the terms contained in the Exhibits and the body of the Agreement,
the Exhibits shall control. Provided, however, the Exhibits and the body of
the Agreement are intended to supplement each other to the greatest degree
possible.
Exhibit A: Telecommunications Company Fiber Rates
Exhibit B: Make-Ready Costs
Exhibit C: Fiber Optic Cable Specifications
Exhibit D: Telecommunication Company Options
Exhibit E: Regeneration Facility Locations, Specifications, & Shared
Costs
Exhibit F: FPC & IFN Contact Lists and Escalation Procedures
Exhibit G: Capacity Purchase Rates
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
20
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
INTERSTATE FIBERNET
/s/ Meredith Gnann
- -------------------------
Witness
By:/s/ Doug Shumate
------------------------------------------
/s/ Jackie Rogers
- -------------------------
Witness
Title: VP/CFO Managing Partner
--------------------------------------
Date: 11-15-96
---------------------------------------
FLORIDA POWER CORPORATION
/s/ Karen M. McCrudy
- -------------------------
Witness
By:/s/ [SIGNATURE ILLEGIBLE]
------------------------------------------
/s/ [SIGNATURE ILLEGIBLE]
- -------------------------
Witness
Title: Vice President, Information Technology
--------------------------------------
Date: 11/25/96
--------------------------------------
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
21
<PAGE>
EXHIBIT A
TELECOMMUNICATIONS COMPANY FIBER RATES
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***
Upon acceptance by the parties hereto, this Exhibit A shall be attached to and
incorporated within the existing Fiber Optic Facilities Agreement and the
parties agree to discharge their respective obligations as set forth below in
accordance with the terms and provisions of said Agreement. Additional
Telecommunications Company Fiber may be added to this Exhibit at the request of
the Telecommunications Company and with FPC's concurrence pursuant to Section 4
of the Agreement.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
A. Telecommunications Company Fiber/Route Segment(s) Quantity of Fiber Monthly Rate
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
[______________________________] [______] [________]
</TABLE>
ON-NETWORK ROUTE: [__________________]
OFF-NETWORK ROUTES: [__________________]
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
B. Anticipated Fiber Acceptance Date Term of Service Service Ending Date
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
[_________] [______] [_________]
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
C. FPC Department Routing for Approval Acceptance of Terms & Conditions Above
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interstate FiberNet Florida Power Corporation
Approved By Date
/s/ [SIGNATURE ILLEGIBLE] 11/25/96 By: /s/ Doug Shumate By: /s/ [SIGNATURE ILLEGIBLE]
- ----------------------------------------- -------------------------------- ------------------------------------------
Title: VP/CFO Managing Ptr. Title: Vice President, Information Technology
----------------------------- ---------------------------------------
Approved By Date
_________________________________________ Date: 11-15-96 Date: 11/25/96
------------------------------ ----------------------------------------
</TABLE>
CONFIDENTIAL & PROPRIETARY INFORMATION [STAMP OF FLORIDA
PROPERTY OF FLORIDA POWER CORPORATION POWER CORP.]
<PAGE>
EXHIBIT A
TELECOMMUNICATIONS COMPANY FIBER RATES
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.***
Upon acceptance by the parties hereto, this Exhibit A shall be attached to and
incorporated within the existing Fiber Optic Facilities Agreement and the
parties agree to discharge their respective obligations as set forth below in
accordance with the terms and provisions of said Agreement. Additional
Telecommunications Company Fiber may be added to this Exhibit at the request of
the Telecommunications Company and with FPC's concurrence pursuant to Section 4
of the Agreement.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
A. Telecommunications Company Fiber/Route Segment(s) Quantity of Fiber Monthly Rate
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
[__________________________] [__________] [__________]
</TABLE>
ON-NETWORK ROUTE: [__________________________________________________________]
OFF-NETWORK ROUTES: [__________________________________________________________]
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
B. Anticipated Fiber Acceptance Date Term of Service Service Ending Date
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
[__________] [__________] [__________]
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
C. FPC Department Routing for Approval Acceptance of Terms & Conditions Above
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interstate FiberNet Florida Power Corporation
Approved By Date
/s/ [SIGNATURE ILLEGIBLE] 11/25/96 By: /s/ Doug Shumate By: /s/ [SIGNATURE ILLEGIBLE]
- ----------------------------------------- -------------------------------- ------------------------------------------
Title: VP/CFO Managing Ptr. Title: Vice President, Information Technology
----------------------------- ---------------------------------------
Approved By Date
_________________________________________ Date: 11-15-96 Date: 11/25/96
------------------------------ ----------------------------------------
</TABLE>
[STAMP OF FLORIDA POWER CORP.]
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
<PAGE>
EXHIBIT B
MAKE-READY COSTS
*** INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***
Upon acceptance by the parties hereto, this Exhibit B shall be attached to and
incorporated within the existing Fiber Optic Facilities Agreement and the
parties agree to discharge their respective obligations with regard to make
ready costs associated with and as set forth below in accordance with the terms
and provisions of said Agreement. Additional costs may be added to this Exhibit
as a result of changes in project scope or specifications requested by the
Telecommunications Company and agreed to by FPC pursuant to Section 4 of the
Agreement.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
A. MAKE-READY COST CALCULATIONS
-------------------------------------------------------------------------------------------------------------------------------
[_________________________________________________________________]
-------------------------------------------------------------------------------------------------------------------------------
B. Anticipated Start Date Anticipated Completion Date
-------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
C. FPC Department Routing for Approval Acceptance of Terms & Conditions Above
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interstate FiberNet Florida Power Corporation
Approved By Date
/s/ [SIGNATURE ILLEGIBLE] 11/25/96 By: /s/ Doug Shumate By: /s/ [SIGNATURE ILLEGIBLE]
-------------------------------------- -------------------------------- ------------------------------------------
Title: VP/CFO Managing Title: Vice President, Information Technology
----------------------------- ---------------------------------------
Approved By Date
-------------------------------------- Date: 11-15-96 Date: 11/25/96
----------------------------- ----------------------------------------
</TABLE>
CONFIDENTIAL & PROPRIETARY INFORMATION [STAMP OF FLORIDA
PROPERTY OF FLORIDA POWER CORPORATION POWER CORP.]
<PAGE>
EXHIBIT B
MAKE-READY COSTS
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.***
Upon acceptance by the parties hereto, this Exhibit B shall be attached to and
incorporated within the existing Fiber Optic Facilities Agreement and the
parties agree to discharge their respective obligations with regard to make
ready costs associated with and as set forth below in accordance with the terms
and provisions of said Agreement. Additional costs only be added to this Exhibit
as a result of changes in project scope or specifications requested by the
Telecommunications Company and agreed to by FPC pursuant to Section 4 of the
Agreement.
-----------------------------------------------------------------------------
A. Make-Ready Cost Calculations
-----------------------------------------------------------------------------
[_____________________________________________________________].
-----------------------------------------------------------------------------
B. Anticipated Start Date Anticipated Completion Date
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
C. FPC Department Routing for Approval Acceptance of Terms & Conditions Above
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interstate FiberNet Florida Power Corporation
Approved By Date
/s/ [SIGNATURE ILLEGIBLE] 11/25/96 By: /s/ Doug Shumate By: /s/ [SIGNATURE ILLEGIBLE]
-------------------------------------- -------------------------------- ------------------------------------------
Title: VP/CFO Managing Ptr. Title: Vice President, Information Technology
----------------------------- ---------------------------------------
Approved By Date
-------------------------------------- Date: 11-15-96 Date: 11/25/96
------------------------------ ----------------------------------------
</TABLE>
[STAMP OF FLORIDA POWER CORP.]
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
<PAGE>
EXHIBIT C
Fiber Optic Cable Specifications
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***
Upon acceptance by the parties hereto, this Exhibit C shall be attached to and
incorporated within the existing Fiber Optic Facilities Agreement and the
parties agree to discharge their respective obligations as set forth below in
accordance with the terms and provisions of said Agreement. Additional Fiber
Optic Cable Specifications may be added to this Exhibit at the request of the
Telecommunications Company and with FPC's concurrence pursuant to the Agreement.
Optical Fibers:
[__________________________________________________________________________
____________________________________]
Optical Span Attenuation (Includes Cable and Splicing):
[________________________________________________________]
[________________________________________________________]
Span Specifications:
[__________________________________________________________________________
_____]
Discontinuities (known as steps, splices, or attenuation non-uniformities)
shall be measured with an optical time domain reflectometer to determined
the loss of the localized attenuation.
[__________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
______________]
[__________________________________________________________________________
______________]
(Exhibit C, Page 1 of 2)
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
<PAGE>
EXHIBIT C (cont.)
Fiber Optic Cable Specifications
General Construction:
[______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
______________________________].
[_____________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
________________________________________].
[________________________________________________________________________
__________________________________________________________________________
__________________________________________].
[____________________________________________________________________
___________________________________________].
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
FPC Department Routing for Approval Acceptance of Terms & Conditions Above
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Interstate FiberNet
By: /s/ Doug Shumate
---------------------------------
Title: VP/CFO Managing Ptr.
-----------------------------
Date: 11-15-96
-----------------------------
Florida Power Corporation
Approved By Date
By: /s/ [SIGNATURE ILLEGIBLE]
---------------------------------
/s/ [SIGNATURE ILLEGIBLE] 11/25/96
- --------------------------------------------------
Title: Vice President Information Technology
---------------------------------
Approved By Date
/s/ [SIGNATURE ILLEGIBLE] 11/25/96
- --------------------------------------------------
Date: 11/25/96
---------------------------------
</TABLE>
(Exhibit C, Page 2 of 2)
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
<PAGE>
EXHIBIT D
Telecommunications Company Options
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.***
Upon acceptance by the parties hereto, this Exhibit D shall be attached to and
incorporated within the existing Fiber Optic Facilities Agreement and the
parties agree to discharge their respective obligations as set forth below in
accordance with the terms and provisions of said Agreement. Additional
Telecommunication Company Options may be added to this Exhibit at the request of
the Telecommunications Company and with FPC's concurrence pursuant to Section 4
of the Agreement.
[________________]
------------------
[_________________________________________________________________________
________________________________]
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
[________________________________] [_______________] [___________]
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
[_______________________________]
[_____________________________________] [_______] [_________]
[_____________________________________] [_______] [_________]
[_____________________________________] [_______] [_________]
[_____________________________________] [_______] [_________]
</TABLE>
[_______________________]
-------------------------
[________________________________________________________________________
________________________________________________________________________]
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
[______________] [_____________] [_______________] [___________]
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
[_______________________________] [_______________] [_______] [_________]
[_______________________________] [_______________] [_______] [_________]
[_______________________________] [_______________] [_______] [_________]
[__________________________________] [_______________] [_______] [_________]
[__________________________________] [_______________] [_______] [_________]
[__________________________________] [_______________] [_______] [_________]
</TABLE>
(Exhibit D, Page 1 of 2)
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
<PAGE>
EXHIBIT D (CONT.)
TELECOMMUNICATIONS COMPANY OPTIONS
C. APPROVALS
- ------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
FPC Department Routing for Approval Acceptance of Terms & Conditions Above
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interstate FiberNet Florida Power Corporation
Approved By Date
/s/ [SIGNATURE ILLEGIBLE] 12/25/96 By: /s/ Doug Shumate By: /s/ [SIGNATURE ILLEGIBLE]
- ----------------------------------------- -------------------------------- --------------------------------------
Title: VP/CFO Managing Ptr. Title: Vice President, Information Technology
---------------------------- --------------------------------------
Approved By Date
_________________________________________ Date: 11-15-96 Date: 11/25/96
------------------------------ ------------------------------------
</TABLE>
[STAMP OF FLORIDA POWER CORP.]
(Exhibit D, Page 2 of 2)
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
<PAGE>
EXHIBIT D
TELECOMMUNICATIONS COMPANY OPTIONS
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***
Upon acceptance by the parties hereto, this Exhibit D shall be attached to and
incorporated within the existing Fiber Optic Facilities Agreement and the
parties agree to discharge their respective obligations as set forth below in
accordance with the terms and provisions of said Agreement. Additional
Telecommunication Company Options may be added to this Exhibit at the request of
Telecommunications Company and with FPC's concurrence pursuant to Section 4 of
the Agreement.
[________________]
------------------
[________________]:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
[________________] [________________] [________________]
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
[______________________________]
[______________________________] [______] [______]
[______________________________] [______] [______]
[______________________________] [______] [______]
[______________________________] [______] [______]
</TABLE>
[________________]
------------------
[________________]:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
[________________] [________________] [________________] [________________]
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
[______________________________] [______________] [_______] [_______]
[______________________________] [______________] [_______] [_______]
[______________________________] [______________] [_______] [_______]
</TABLE>
(Exhibit D, Page 1 of 2)
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
<PAGE>
EXHIBIT D (CONT.)
TELECOMMUNICATIONS COMPANY OPTIONS
C. APPROVALS
- ------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
FPC Department Routing for Approval Acceptance of Terms & Conditions Above
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interstate FiberNet Florida Power Corporation
Approved By Date
/s/ [SIGNATURE ILLEGIBLE] 11/25/96 By: /s/ Doug Shumate By: /s/ [SIGNATURE ILLEGIBLE]
- ----------------------------------------- -------------------------------- --------------------------------------
Title: VP/CFO Managing Ptr. Title: Vice President, Information Technology
-------------------- --------------------------------------
Approved By Date
- ----------------------------------------- Date: 11-15-96 Date: 11/25/96
------------------------------ ------------------------------------
</TABLE>
(Exhibit D, Page 2 of 2)
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
<PAGE>
EXHIBIT E
REGENERATION FACILITY LOCATIONS, SPECIFICATIONS, & SHARED COSTS
***INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***
Upon acceptance by the parties hereto, this Exhibit E shall be attached to and
incorporated within the existing Fiber Optic Facilities Agreement and the
parties agree to discharge their respective obligations as set forth below in
accordance with the terms and provisions of said Agreement. Additional
Regeneration Facility Locations, Specifications, & Shared Costs may be added to
this Exhibit at the request of the Telecommunications Company and with FPC's
concurrence pursuant to Section 4 of the Agreement.
A. -----------------------------------------------------------------------------
Regeneration Facility Locations
-----------------------------------------------------------------------------
[_________________________________________________________________________
______________________________________________________________
___________________________________]
[______________________________]
B. -----------------------------------------------------------------------------
Regeneration Facility Specifications
-----------------------------------------------------------------------------
[__________]
[________________________________________________________________________]
[_____________________________________]
[_______________________________________________]
[__________________________________________________________________________
__]
[________________________________]
[__________________________________________]
[__________________________________________________________________________
_________]
[_____________________________________]
[_________________________________________________________________________]
[__________________________________________________________________________
____________________________________________________________]
[___________________________________]
[________________________]
[____________________________________________________________]
[__________________________________________________________________________
________________________________________]
(Exhibit E, Page 1 of 3)
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
<PAGE>
EXHIBIT E (CONT.)
REGENERATION FACILITY LOCATIONS, SPECIFICATIONS, & SHARED COSTS
[_____]
[_____________________________________________________________________________
____________________________________]
[____________________]
[_____________________________________________]
[____________________________________________________________________
______________________________________]
[______________________________________________________________________]
___________________________________________]
[_________________]
[_____________________________________________________________________________
______________________________]
[___________________________________________________________________________
_______________]
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
C. REGENERATION FACILITY OPTIONS
-------------------------------------------------------------------------------------------------------------------
<S> <C>
[______] [______]
[_______________________________________] [_______]
[__________________________________________] [________]
[____________________________] [___________________________]
[__________________________] [___________________________]
[________________________________________________] [____________]
[________________________________________] [________________________________]
[_______________________________] [_________________________________________]
[________]
[______________________________________________] [________]
[________________________________________________________]
[____________________________________] [________]
[______________________________] [________]
</TABLE>
(Exhibit E, Page 2 of 3)
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
<PAGE>
EXHIBIT E (CONT.)
REGENERATION FACILITY LOCATIONS, SPECIFICATIONS, & SHARED COSTS
[_____________________________________________________]
<TABLE>
<CAPTION>
[____] [______] [_____]
---- ------ -----
<S> <C> <C>
[____________] [_______________________] [____________]
[____________] [__________________________] [____________]
[_____________] [_______]
</TABLE>
-----------------------------------------------------------------------------
D. Total Customer Contribution
-----------------------------------------------------------------------------
[_________] [________]
[_________] [________]
[__________________] [________]
-----------------------------------------------------------------------------
E. FPC Department Routing for Approval
-----------------------------------------------------------------------------
Approved By Date
/s/ [SIGNATURE ILLEGIBLE] 11/28/96
- ------------------------------------
Approved By Date
/s/ [SIGNATURE ILLEGIBLE] 11/25/96
- ------------------------------------
- --------------------------------------------------------------------------------
Acceptance of Terms & Conditions Above
- --------------------------------------------------------------------------------
Interstate FiberNet Florida Power Corporation
By: /s/ Doug Shumate By: /s/ [SIGNATURE ILLEGIBLE]
-------------------------- --------------------------
Title: VP/CFO Managing Ptr. Title: Vice President, Information Technology
----------------------- ---------------------------------------
Date: 11-15 Date: 11/25/96
------------------------ ----------------------------------------
(Exhibit E, Page 3 of 3)
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
<PAGE>
EXHIBIT F
FPC & IFN Contact Lists and Escalation Procedures
Upon acceptance by the parties hereto, this Exhibit E shall be attached to and
incorporated within the existing Fiber Optic Facilities Agreement and the
parties agree to discharge their respective obligations as set forth below in
accordance with the terms and provisions of said Agreement. Additional FPC & IFN
Contact Lists and Escalation Procedures may be added to this Exhibit at the
request of the Telecommunications Company and with FPC's concurrence pursuant to
Section 4 of the Agreement.
-----------------------------------------------------------------------------
A. FPC Contact List and Escalation Procedures
-----------------------------------------------------------------------------
. For emergency repairs, contact FPC's Emergency Operations Center (EOC)
at 1-813-866-4794
. For scheduled maintenance, contact FPC's Information Delivery Service
Desk (SD) at 1-813-866-4636
. Reporting and Escalation Procedures:
FPC's EOC and SD are staffed 24 hours a day, 365 days a year. Please
call the appropriate phone number shown above, and give the following
information to the analyst who answers your call:
. Your Company
. Your Name
. Your Phone Number
. The nature of your call (outage, informational, planned
maintenance, etc.)
. Any pertinent details (where the outage is located, etc.)
Be certain to inform the analyst as to what number they should return
your call for updates on outage repairs, etc.
If necessary, the EOC and SD analysts are equipped with a current FPC
escalation list and have automated paging / notification services at
their disposal.
Please be certain to call the EOC only in a real emergency (fiber outage,
etc.)
-----------------------------------------------------------------------------
B. IFN Contact List and Escalation Procedures
-----------------------------------------------------------------------------
. For emergency repairs, contact IFN's Transmission Control Center at
1-800-374-2350 or 706 645-8991
. For scheduled maintenance, contact IFN's Schedule Event Management
Center at
1-800-374-2350 or 706 645-8991
(Exhibit F, Page 1 of 2)
CONFIDENTIAL & PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
<PAGE>
EXHIBIT F (CONT.)
FPC AND CONTRAST LISTS AND ESCALATION PROCEDURES
<TABLE>
------------------------------------------------------------------------------------------------------------------------------
C. FPCD Department Routing for Approval Acceptance of Terms and Conditions above
------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Interstate FiberNet
By: /s/ Doug Shumate
----------------------------------------------
Title: Vice President/CFO Managing Ptr.
--------------------------------------------
Date: 11-15-96
---------------------------------------------
Florida Power Corporation
Approved By Date
By: /s/ [SIGNATURE ILLEGIBLE]
-----------------------------------------------
/s/ [SIGNATURE ILLEGIBLE] 11/25/96
- -------------------------------------------------
Title: Vice President, Information Technology
--------------------------------------------
Approved By Date
/s/ J.C. Trent 11/25/96 Date: 11-25-96
- ------------------------------------------------- ---------------------------------------------
</TABLE>
(Exhibit F, Page 2 of 2)
CONFIDENTIAL AND PROPRIETARY INFORMATION
PROPERTY OF FLORIDA POWER CORPORATION
<PAGE>
EXHIBIT 10.46
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[_______]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
FIBER OPTIC CAPACITY MARKETING AND OPERATING AGREEMENT
between
FLORIDA POWER & LIGHT COMPANY
and
INTERSTATE FIBERNET
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I - DEFINITIONS..................................... 1
1.1 Capacity.......................................... 1
1.2 FPL Network....................................... 1
1.3 Licensee.......................................... 1
1.4 License Agreement................................. 2
1.5 Marks............................................. 2
1.6 Marketing Representative.......................... 2
1.7 Operating Services................................ 2
1.8 Service Order(s).................................. 2
1.9 Technical Specifications.......................... 2
ARTICLE II - NON-EXCLUSIVE INDEPENDENT MARKETING
REPRESENTATIVE AND SERVICE PROVIDER............... 2
2.1 Non-Exclusive Marketing Representative............ 2
2.2 Provision of Operating Services................... 2
2.3 Independent Contractors........................... 2
2.4 Common Carrier Status............................. 3
ARTICLE III - TERM AND TERMINATION.......................... 3
3.1 Term.............................................. 3
3.2 Termination of Marketing Services................. 3
3.3 Termination of Operating Services................. 3
3.4 Termination for Default or Cause.................. 3
3.5 Non-Waiver........................................ 4
[________________________________________________________]
3.7 Use of Marks...................................... 5
ARTICLE IV - IFN RESPONSIBILITIES........................... 5
4.1 Marketing......................................... 5
4.2 Advertising....................................... 5
4.3 Sales Activity.................................... 5
4.4 License Agreement and Service Orders.............. 5
4.5 Operating Services................................ 6
4.5.1 Provision Circuits......................... 6
4.5.2 Monitoring................................. 6
4.5.3 Notification to Repair..................... 6
4.5.4 Licensee Calls and Contact................. 6
4.5.5 Billing and Collection..................... 6
4.5.6 Bad Debt................................... 7
4.5.7 Audit Rights............................... 7
4.6 Coordination...................................... 7
4.7 Actions of IFN.................................... 8
4.8 Proprietary Information........................... 8
4.9 Confidentiality................................... 8
4.10 Warranties........................................ 8
4.11 Limitation of Liability........................... 8
4.12 Indemnification................................... 8
4.13 Insurance......................................... 9
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
4.13.1 Duration.................................. 9
ARTICLE V - FPL'S RESPONSIBILITIES.......................... 9
5.1 Commissions and Fees.............................. 9
5.2 Information....................................... 9
5.3 Coordination...................................... 10
ARTICLE VI - GENERAL PROVISIONS............................. 10
6.1 Survival of Obligations........................... 10
6.2 Non-waiver........................................ 10
6.3 Non-exclusive Right............................... 10
6.4 Assignment........................................ 10
6.5 Notice under this Agreement....................... 11
6.6 Force Majeure..................................... 11
6.6.1 Extension of Time.......................... 11
6.6.2 Notice..................................... 12
6.7 Limitation on Benefits of this Agreement.......... 12
6.8 Severability...................................... 12
6.9 Applicable Law.................................... 12
6.10 Effect of Headings................................ 12
6.11 Modification...................................... 12
6.12 Complete Agreement; Counterparts.................. 12
</TABLE>
Exhibits
- --------
Exhibit A Form Master Capacity License Agreement
Exhibit B Service Order Form (attached to Exhibit A)
Exhibit C Circuitry Design - IFN Provisioning Flow Chart
Exhibit D Monitoring Capability
Exhibit E Commission Schedule
ii
<PAGE>
FIBER OPTIC CAPACITY MARKETING AND OPERATING AGREEMENT
between
FLORIDA POWER & LIGHT COMPANY
and
INTERSTATE FIBERNET
THIS AGREEMENT is entered into as of March 21, 1996 by and between
Interstate FiberNet, a Georgia general partnership ("IFN"), and Florida Power &
Light Company, a Florida corporation ("FPL").
RECITALS
WHEREAS, FPL is an investor-owned electric utility regulated by the Florida
Public Service Commission and has excess fiber optic capacity which it wishes to
make available by license agreement for use for resale by certain
telecommunication companies which offer telecommunications service to the
general public for hire, and
WHEREAS, IFN is a carrier's carrier (certified by FCC) and engaged in the
business of owning, managing and marketing fiber optic networks in the Southeast
United States and has the personnel and expertise to market a license agreement
providing for use of FPL's excess fiber optic capacity by certain
telecommunications companies as Marketing Representative of FPL, and
WHEREAS, IFN has the personnel and expertise to provide operating services
in connection with the use and licensing of FPL's fiber optic capacity,
NOW, THEREFORE, in consideration of the premises, covenants, and
understandings set forth herein and other good and valuable consideration, the
Parties agree as follows:
ARTICLE I -
DEFINITIONS
1.1 Capacity. DS-l and above level capacity provided by FPL to the
--------
Licensee. As used within the context of this Agreement, the term DS-1 shall have
the same meaning and conform to the Technical Specifications as set forth in
Exhibit "A" attached to the Master Capacity Licensing Agreement.
1.2 FPL Network. FPL's optical cable and optical/electronic equipment
-----------
used to deliver Capacity to the Licensee.
1.3 Licensee. The entity which executes a Master Capacity License
--------
Agreement for resale use of FPL's excess Capacity. A Licensee shall be a
telecommunications company which is certified pursuant to Chapter 364, Florida
Statutes.
<PAGE>
1.4 License Agreement. The Master Capacity License Agreement for license
-----------------
of FPL Capacity, in substantially the same form as Exhibit "A" attached hereto.
The Capacity Agreement may be modified as negotiated and agreed to among the
Parties.
1.5 Marks. Trademarks, service marks, trade names, insignia, symbols,
-----
decorative designs, or the like that FPL or its Affiliates own are licensed or
sub-licensed to use in connection with the FPL Network, and which FPL, in its
sole discretion, determines IFN is licensed to use.
1.6 Marketing Representative. IFN acting as an independent contractor in
------------------------
the promoting and marketing of FPL's Capacity to certain Licensees as approved
by FPL and providing certain operating services associated with the use of FPL's
Capacity.
1.7 Operating Services. Those functions provided by IFN to support the
------------------
daily operation of the FPL Network and as defined in Article IV herein.
1.8 Service Order(s). The written executed request by a
----------------
Licensee for a specific Capacity use on a specific segment on the
FPL Network. A copy of the Service Order Form shall be attached as
Exhibit B to the License Agreement and the form is attached hereto
as Exhibit "B".
1.9 Technical Specifications. The operating and technical specification
------------------------
requirements of the Capacity to be licensed to
Licensee as set forth in Exhibit "A" of the Master Capacity Licensing Agreement.
ARTICLE II -
NON-EXCLUSIVE INDEPENDENT MARKETING REPRESENTATIVE
AND SERVICE PROVIDER
2.1 Non-Exclusive Marketing Representative. FPL. hereby appoints IFN
--------------------------------------
to serve as FPL's authorized non-exclusive representative for the marketing
of Capacity to Licensees and IFN hereby accepts appointment as Marketing
Representative.
2.2 Provision of Operating Services. FPL and IFN further agree that IFN
-------------------------------
shall provide certain operating services ("Operating Services"), identified in
Article IV, below, and associated with all Master Capacity License Agreements
which IFN secures for FPL.
2.3 Independent Contractors. IFN and FPL shall be construed to be
-----------------------
independent contractors. This Agreement shall not be deemed to create a joint
venture, partnership or any other legal relationship between IFN and FPL where
either Party shall share or be responsible for the debts and liabilities of the
other beyond the extent expressly provided for in, and limited by, this
Page 2 of 13
<PAGE>
Agreement. Nor shall this Agreement be construed as
right to IFN or FPL to legally bind the other in any manner or to be able to
incur debts and liabilities on behalf of the other except as expressly provided
for herein. IFN is at all times solely responsible for performing and
completing its obligations under this Agreement with full power and authority to
select the methods, means and manner of performing these obligations, as long as
such methods, means and manner conform to the requirements and specifications
and authorized changes thereto of FPL and do not adversely affect or
interfere with FPL's electric service obligations, including considerations
of safety and economics. IFN is solely responsible for its employees, including
but not limited to the hiring, terminating, compensating, training, controlling,
directing and disciplining of its employees.
2.4 Common Carrier Status. Nothing in this Agreement shall be construed
---------------------
to make FPL or IFN a Telecommunications Company or a Common Carrier or obligate
IFN or FPL to provide Telecommunication or Common Carrier Service.
ARTICLE III -
TERM AND TERMINATION
3.1 Term. The term of this Agreement shall be seven (7) years, commencing
----
on the date written above that this Agreement was entered into and terminating
at 12:01 a.m. on March 21, 2003, the seventh (7th) anniversary of the
effective date.
3.2 Termination of Marketing Services. Notwithstanding the foregoing, FPL
---------------------------------
may terminate this Agreement as to IFN acting as Marketing Representative for
FPL, with or without cause, upon thirty (30) days written notice of termination.
Upon receipt of such notice only the following provisions of the Agreement
directly relating to the marketing services shall be terminated: Sections 2.1,
4.1, 4.2, 4.3, and 4.4 herein. All other provisions of this Agreement shall
survive the termination of the Agreement for marketing services.
3.3 Termination of Operating Services. Termination of this Agreement,
---------------------------------
other than as to IFN acting as Marketing Representative as set forth in Section
3.2 above, shall be for default or cause, or upon twelve months prior written
notice to the other Party, after termination of the Marketing Services.
Payments of all commissions to IFN shall cease immediately upon termination of
the Operating Services by IFN.
3.4 Termination for Default or Cause. Either Party may terminate this
--------------------------------
Agreement upon the occurrence of a default or of any one or more of the events
described below, which shall be deemed to be termination for cause, by giving
the other Party written notice
Page 3 of 13
<PAGE>
of its desire to terminate at least thirty (30) days prior to the intended date
of termination:
(a) FPL or IFN makes an assignment for the benefit of creditors; or
a trustee or receiver of any substantial part of FPL or IFN's
assets is appointed by any Court(s); or
(b) IFN has made any material misrepresentations or omission in its
representations to FPL of its ability to act as Marketing
Representative for FPL or FPL has made material
misrepresentations or omission to IFN as to available capacity
or IFN or FPL is convicted of or pleads no contest to a felony
or other crime or offense that is likely to adversely affect the
reputation of the other Party or its affiliated companies; or
(c) IFN or FPL: (i) attempts to make an unauthorized assignment of
this Agreement; or (ii) receives a notice of violation of the
terms or conditions of any license or permit required by either
Party or its employees in the conduct of its business with
respect to this Agreement and fails to correct such violation;
or (iii) fails to comply with any provision of this Agreement,
and does not correct such failure within thirty (30) days after
written notice of such failure to comply is delivered to the
other Party, or (iv) fails in any six (6) consecutive months to
comply with any material provision of this Agreement whether or
not such failures to comply are corrected after notice thereof
is delivered to the other Party; or
(d) FPL or IFN conducts illegal or unauthorized activity associated
with this Agreement.
3.5 Non-Waiver. Waiver by either Party of any deficiencies in one or more
----------
instances shall not constitute a waiver of either Party's right to terminate
this Agreement in subsequent instances.
[________________________________________________________________________
____________________________________________________________________________
_______________________________________________________________________________
_____________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________________
______________________________________________________________________________
________________________________________________________________________].
Page 4 of 13
<PAGE>
3.7 Use of Marks. Upon termination or expiration of this Agreement, IFN
------------
shall immediately cease use of any Mark used by IFN in the marketing or
providing of service for FPL and shall not directly or indirectly identify
itself or any business as associated with FPL and, upon request of FPL
shall return immediately to FPL any advertising and marketing material, or
other documents identifying or relating to FPL's business.
ARTICLE IV -
IFN RESPONSIBILITIES
4.1 Marketing. IFN shall maintain a trained, professional and capable
---------
sales staff to market and provide marketing support for use of FPL fiber optic
Capacity by Licensees and to work with FPL to assure Licensee satisfaction.
4.2 Advertising. IFN, at its cost, shall actively promote and market the
-----------
use of the FPL Capacity consistent with the Technical Specifications and forms
established and approved by IFN and FPL from time to time, relating to factual
matters pertaining to the FPL facilities, marks and trademarks. Such Technical
Specifications and forms shall be limited to factual matters pertaining to FPL
facilities and use of Marks. FPL shall have the right to review all advertising
and marketing materials involving license of FPL Capacity prior to distribution
by IFN
4.3 Sales Activity. IFN shall use its best efforts in securing Master
--------------
Capacity License Agreements for resale use of FPL Capacity by Licensees. These
efforts shall at all time be of a professional nature and in keeping with the
rules and regulations and public utility nature of FPL.
4.4 License Agreement and Service Orders. IFN shall provide to potential
------------------------------------
Licensees a Master Capacity License Agreement in substantially the same form
attached hereto as Exhibit A, as may be amended by FPL and IFN from time to
time, and shall assist a potential Licensee to complete and sign the Licensee
Agreement. IFN shall train and inform its personnel so as to accomplish
execution of the License Agreement in a professional and informed manner. IFN
shall not represent or agree with Licensee that Licensee will be charged or
provided Operating Services other than as agreed to in writing between IFN and
FPL. IFN shall inform potential Licensees that the License Agreement and all
Service Orders are not effective until executed by FPL and that FPL may reject
such Agreement or Service Orders if FPL determines that Licensee is an
unreasonable credit risk or that Licensee's proposed use would interfere with
FPL's own system integrity or service requirements, including considerations of
economy and safety. IFN shall procure and process all Service Orders
implementing the License Agreement, including obtaining the review and prior
written approval by FPL of the Service Orders.
Page 5 of 13
<PAGE>
4.5 Operating Services. IFN shall provide Operating Services,
-------------------
including billing services, as to all Licensees obtained by IFN, as follows:
4.5.1 Provision Circuits. IFN will design circuitry for
------------------
connection to FPL's Network all Licensees for whom IFN will be providing
Operating Services. See Exhibit "C" attached hereto.
4.5.2 Monitoring. IFN will monitor all portions of FPL's fiber
----------
optic network used by Licensees. IFN's system monitoring capability is more
fully described in Exhibit "D" attached hereto. The actual design and
implementation of the monitoring system under this Agreement shall be
completed as part of the coordination requirement between FPL and IFN
engineering.
4.5.3 Notification to Repair. IFN will notify FPL to make repairs
----------------------
on FPL's Network. IFN will utilize the existing system of dispatch and
escalation already established by FPL. Notification instructions, and
subsequent updates, will be forwarded to IFN's Network Operations Center
(NOC). Following notification, IFN will monitor the fiber optic
transmission equipment and perform as much diagnostics as the equipment's
remote devices will allow. The repair notification process may require
reoccurring meetings between operations personnel to increase reliability
and meet Licensee expectations. IFN shall take any special requirements for
the FPL operations scheme under advisement and FPL and IFN shall agree as
to IFN's notification requirements. The requirements shall be acted upon
with Licensee satisfaction as the paramount concern.
4.5.4 Licensee Calls and Contact. IFN shall receive and respond
--------------------------
to all calls of Licensees and to inquiries about Operating Services. IFN
shall provide prompt, courteous, and efficient service to the caller.
4.5.5 Billing and Collection. IFN shall bill and collect monthly
----------------------
from all Licensees all License fees. After the month in which services is
rendered, IFN shall forward to FPL by wire transfer the aggregate sum of
such License fees contracted for less IFN's commission as set forth in
Exhibit "E", attached hereto and incorporated herein. If FPL does not
receive payment within the twenty (20) days as set forth above, FPL may
assess a late payment charge in the amount of one and a half (1 1/2)
percent of the amount due per month calculated on a daily basis or the
highest amount then permitted by law, whichever is higher. Failure to
forward such payment to FPL as due shall constitute a default going to the
essence of this Agreement and FPL, at its discretion, may cancel this
Agreement in whole or in part.
Page 6 of 13
<PAGE>
4.5.6 Bad Debt. In the event that IFN determines a Licensee
--------
account to be uncollectible in part or in its entirety, IFN will deduct
this uncollectible amount, net of the commission that would have been due
IFN under Exhibit E of this Agreement, from the then current month FPL
remittance under Section 4.5.5 above. IFN will be required to take all
reasonable and customary actions to collect any and all amounts billed to a
Licensee including and not limited to direct contact and correspondence
with such Licensee and use of outside collection agencies. In no event will
IFN determine a Licensee account to be uncollectible until it is at least 6
months overdue. [_________________________________________________
_____________________________________________________________________
_______________________________________________________________________
___________________________________________________________________________
_________________________________________________________________________
___________________________________________________________________________
________________________________________________________________________
_______________________________________________________________________
__________________].
4.5.7 Audit Rights. FPL shall have the right, upon reasonable
------------
notice, to audit IFN's accounts and records to the extent necessary to
verify the correctness of the bills rendered under this Agreement. Any such
audit will be conducted during normal business hours at the offices where
such accounts and records are maintained. IFN shall be entitled to review
the audit findings. The results of all such audits shall be kept
confidential by FPL and IFN and shall not be released to any other party
without the written consent of IFN and FPL. IFN shall be responsible for
correcting any audit findings. Any amounts determined to be billed
incorrectly will be rebilled by IFN to the extent permitted by IFN's
contracts with customers. Any amount determined to be either under or over
remitted by IFN will be refunded to FPL or FPL will provide a refund to
IFN.
4.6 Coordination. IFN and FPL shall establish procedures to coordinate
------------
activities under this Agreement. Within five (5) days after execution of this
Agreement by both Parties, each Party shall designate an engineer Project
Manager. The Project Manager shall be responsible for coordinating the everyday
operating activities under this Agreement, including the following
responsibilities: (a) coordinate, plan, schedule and build system extensions,
including the provisioning of circuits and implementation of a monitoring
system; (b) coordinate the identification, analysis and resolution of
operational and maintenance problems and (c) provide monthly updates,
performance reports, etc. to the other Party as agreed upon.
Page 7 of 13
<PAGE>
4.7 Actions of IFN IFN shall be governed in all dealings with the
--------------
Licensee and others making inquiries of, or approached by, IFN as to the License
Agreements or Operating Services by the highest standards of honesty, integrity
and fair dealings, and shall do nothing which would tend to discredit, dishonor,
reflect adversely upon or in any manner injure the reputation of FPL. IFN shall
at all times faithfully, honestly and diligently perform its obligations
hereunder. IFN shall take no action inconsistent with the provisions of this
Agreement.
4.8 Proprietary Information. IFN shall treat Licensee lists and related
-----------------------
information or data as the exclusive property of FPL and use such information
solely in the performance of its obligations and duties as described herein.
Upon request by FPL, IFN shall return such information to FPL upon termination
of this Agreement.
4.9 Confidentiality. Neither Party, without the other's specific prior
---------------
written consent, shall disclose to any third party, including but not limited to
Licensee, any information supplied to it by the other which has been designated
as CONFIDENTIAL or PROPRIETARY or PRIVATE, and which information is not
otherwise generally available to the public. The Parties hereby designate the
terms, conditions, exhibits and schedules of this Agreement to be confidential.
Neither Party, without the written consent of the other, shall provide a copy of
this Agreement in whole or part to any other person or entity except as may be
required by law.
4.10 Warranties. IFN shall not make any representations or warranties
----------
whatsoever, and shall effectively disclaim any authority to make such warranties
or representations on FPL's behalf, to any person or Licensee regarding
services, except as specifically authorized by FPL.
4.11 Limitation of Liability. In no event shall IFN or FPL be liable to
-----------------------
each other or to the Licensee or Licensee's customers or clients or to any other
person, firm or entity in any respect, including, without limitation, for any
damages, either direct, indirect, consequential, special, incidental, actual or
punitive, for any lost profits from customer billings arising out of mistakes,
accidents, errors, omissions, interruption, or defects in transmission, or
delays, including those which may be caused by regulatory or judicial
authorities, arising out of or relating to this Agreement or the obligations of
IFN or FPL pursuant to this Agreement.
4.12 Indemnification. IFN shall exercise its obligations hereunder at its
---------------
own sole risk and in consideration of this Agreement shall release, indemnify,
protect, defend and save harmless FPL, its parent, subsidiaries, affiliates
and their respective officers, directors, agents and employees (FPL Entities)
from and against any and all claims, liability, and demands
Page 8 of 13
<PAGE>
whatsoever, including court costs and attorney's fees, including payments made
under any Workers' Compensation Law or under any plan for employees' disability
and death benefits, which may arise out of or be caused by IFN's negligence
resulting from or in connection with this Agreement or in connection with the
performance by IFN, its employees, contractors or subcontractors, of IFN's
obligations under this Agreement.
4.13 Insurance. IFN prior to exercise of its rights and obligations under
---------
this Agreement shall procure and maintain through the term of this Agreement
insurance in minimum amounts of [________________________________] to protect
IFN against any and all claims, demands, actions, judgments, cost, expenses and
liabilities of every nature, including attorney fees, which may result directly
or indirectly under this Agreement.
4.13.1 Duration. In the event that any policy furnished by
--------
IFN provides for coverage on a "claims made" basis, the retroactive
date of the policy shall be the same as the effective date of this
Agreement. Furthermore, for all policies furnished on a "claims made
basis," IFN's providing of such coverage shall survive the termination
of this Agreement until the expiration of the maximum statutory period
of limitations in the State of Florida for actions based in contract
or in tort; if coverage is on an "occurrence" basis, such insurance
shall be maintained by IFN during the entire term of this Agreement.
ARTICLE V -
FPL' S RESPONSIBILITIES
5.1 Commissions and Fees. In consideration for obtaining Licensees and
--------------------
providing Operating Services, FPL shall pay IFN a commission in accordance
with Exhibit "E" attached hereto. Commissions shall be paid only with respect
to License Agreements accepted and executed by FPL. FPL shall not unreasonably
refuse to accept a License Agreement presented to it by IFN. IFN shall deduct
its commission from the monthly payment to FPL as set forth in Section 4.5.5,
herein.
5.2 Information. FPL shall provide to IFN for use in IFN's marketing and
-----------
training efforts maps showing locations of FPL's Network relating to FPL's
Master Capacity License Agreement and operating Services to be provided by IFN,
as may be amended by FPL from time to time and such quantities of FPL's
literature, instructions and other materials as may be reasonably requested by
IFN for use in connection with IFN's efforts. FPL shall be solely responsible
for the accuracy of the information provided to IFN.
Page 9 of 13
<PAGE>
5.3 Coordination. FPL shall coordinate activities with IFN as set forth
------------
in Section 4.6 above.
ARTICLE VI -
GENERAL PROVISIONS
6.1 Survival of Obligations. Termination of this Agreement for any
-----------------------
reason, in whole or part, shall not release either IFN or FPL from any liability
which at the time of termination has already accrued to the other or from any
obligation which is expressly stated herein to survive termination. All
provisions of this Agreement providing for limitation of or protection against
liability shall apply to the fullest extent provided by law and survive
termination of this Agreement and completion of IFN's services and shall include
but not be limited to Sections 4.8, 4.9, 4.10, 4.11, 4.12 and 4.13.
6.2 Non-waiver. Failure to enforce or insist upon compliance with any of
----------
the terms or conditions of this Agreement shall not constitute a general waiver
or relinquishment of any such terms or conditions, but the same shall be and
remain at all times in full force and effect and shall not affect the right of
either Party to terminate this Agreement or to require performance at any time
thereafter.
6.3 Non-exclusive Right. Nothing in this Agreement shall be construed to
-------------------
confer on IFN an exclusive right to market FPL's Capacity or to provide
Operating Services. IFN and FPL may engage in and possess interests in other
business ventures of any nature whatsoever, and may conduct all activities,
including activities in connection with telecommunications services and
marketing services, except as specifically and explicitly limited in this
Agreement. Nothing in this Agreement is intended, or shall be interpreted, to
restrict either Party in connection with any such activity, including activity
which is competitive with the activities contemplated in this Agreement, so long
as either Party does not violate any specific or explicit restriction or
obligation set forth in this Agreement.
6.4 Assignment. All rights and obligations hereunder, excepting the
----------
right to receive payment, are personal as to IFN and FPL and shall not be
assigned in whole or in part without the prior written consent of the other
Party; provided however, that FPL may assign this Agreement without the prior
consent of IFN, to any person, firm or corporation acquiring all or
substantially all of the assets of FPL or to any affiliate of FPL.
Page 10 of 13
<PAGE>
6.5 Notice under this Agreement. All notices under this Agreement shall
---------------------------
be in writing and shall be delivered personally, sent by facsimile
transmission with facsimile transmitted confirmation of receipt, or be sent
by overnight commercial air courier (such as Federal Express) , or mailed,
certified or registered, postage prepaid, return receipt requested, to the
Project Manager to be designated and to
To IFN Interstate FiberNet
Doug Shumate
206 West 9th Street
West Point, GA 31833
Telephone: (706) 645-8189
Facsimile: (706) 645-8989
To FPL Information Management Business Unit
Attn: J. E. Paul
Florida Power & Light Company
P.O. Box 029100
Miami, FL 33102-9100
Telephone: (305)552-4325
Facsimile: (305) 552-4181
6.6 Force Majeure. Neither IFN nor FPL shall be liable or responsible for
-------------
any delay in the performance of, or the ability to perform, any duty or
obligation required by this Agreement in the event of a force majeure
occurrence. Such occurrence shall include, but shall not be limited to acts of
civil or military authority (including courts or administrative agencies) , acts
of God, war, riot, or insurrection, inability to obtain required permits or
licenses, blockades, embargoes, sabotage, epidemics, fires, unusually severe
floods or weather, strikes, lockouts or other labor disputes or difficulties.
The obligation of either Party to pay money in a timely manner is absolute and
shall not be subject to the force majeure provisions. Force majeure as used
herein means, without limitation, any cause or event not reasonably within the
control of FPL or IFN.
6.6.1 Extension of Time. In the event of any delay resulting from
-----------------
a force majeure circumstance, the time for performance hereunder shall be
extended for a period of time reasonably necessary to overcome the effect
of such delays. This extension applies to this Agreement only and not to
IFN's responsibility under the Master Capacity License Agreement or Service
Orders attached thereto.
Page 11 of 13
<PAGE>
6.6.2 Notice. In the event of any delay or nonperformance
-------
caused by a force majeure circumstance, the Party affected shall promptly
notify the other in writing.
6.7 Limitation on Benefits of this Agreement. It is the intention of the
----------------------------------------
Parties hereto that no person or entity other than the Parties hereto is or
shall be entitled to bring any action to enforce any provision of this Agreement
against either of the Parties hereto, and that the covenants,
undertakings, and agreements set forth in this Agreement shall be solely for
the benefit of, and shall be enforceable only by, the Parties hereto or their
respective successors and assigns as permitted hereunder.
6.8 Severability. Should any part of any paragraph or provision of this
------------
Agreement be determined by a court of competent jurisdiction to be illegal or in
conflict with any applicable law, the validity of the remaining paragraph or
provisions shall not be impaired.
6.9 Applicable Law. This Agreement shall be construed and interpreted in
--------------
accordance with the laws of the State of Florida, without regard to conflicts of
laws principles.
6.10 Effect of Headings. The headings set forth herein are for convenience
------------------
only and shall not be deemed to modify or affect the rights and obligations of
the Parties to this Agreement.
6.11 Modification. This Agreement may not be modified or amended except
------------
in writing signed by both Parties.
6.12 Complete Agreement; Counterparts. This Agreement shall be signed by
--------------------------------
the authorized representatives of IFN and FPL and constitutes the final written
expression of all the terms of the agreement between them and is a complete and
exclusive statement of those terms. Any and all prior or contemporaneous
course of dealing, representations, promises, warranties or statements by the
Parties or their agents, employees, or representatives that differ in any way
from the terms of this written Agreement shall be given no force or effect.
This Agreement may be executed in counterparts, each of which shall
constitute originals hereof.
Page 12 of 13
<PAGE>
IN WITNESS WHEREOF, IFN and FPL have caused this Agreement to be duly
executed the day and year first above written.
FLORIDA POWER & LIGHT COMPANY
By: /s/ Dennis M. Klinger
-----------------------------
Print Name: Dennis M. Klinger
---------------------
Title: VP
--------------------------
INTERSTATE FIBERNET
By: /s/ Doug Shumate
-----------------------------
Print Name: Doug Shumate
---------------------
Title: VP/CFO Managing Partner
--------------------------
Attest:
------------------------
(Seal)
Page 13 of 13
<PAGE>
EXHIBIT A
---------
Technical Specifications
Interstate FiberNet Transmission Performance
Standards and Objective Policy
A. Description of Services
- ---------------------------
1. Interstate Fibernet (IFN) provides transmission transport links between two
or more IFN Points of Premise which meet at a designated point between IFN and
the Customer. Where, IFN is the provider of local interconnect, Local Loop
Availability numbers are provided. The following standards apply to both on a
one-way basis for both DS1, DS3, OC-N and CCS7 services.
B. Availability:
- ----------------
Availability is measurement of the total time the service is operative when
measured over a time period of 30 consecutive days. DS3s and DS1s are considered
to be inoperative when there has been a loss of signal, when loop-back tests
confirm the observation of severely errored seconds, or IFN's network monitoring
system detects a bit-error rate of greater than 1X 10-9.
B1. DS3 and DS1 Performance Objectives
----------------------------------
The performance objectives for IFN DS3 service are as follows:
a). Meet or exceed 99.99% percent Circuit Availability on a monthly
basis. This objective applies except where a customer's
equipment is disconnected and/or inoperative or force majeure
(i.e. cable cuts) or planned maintenance actions initiated by
the customer.
b). Meet or exceed 99.95% percent Error Free Seconds on a monthly
basis.
c). Does not exceed .009% percent Severely Errored Seconds on a
monthly basis.
d). Service Community - in the event of primary facility failure,
service is guaranteed to switch to an alternate facility in
sixty seconds or less. Failure to meet this guarantee will
result in a credit as described in the following where the
trouble is in the network on public/private right-of-way.
e). Where IFN is responsible for end to end circuit engineering and
provisioning the end to end Circuit Availability percentage is
99.88%
The performance objectives for IFN DS1 service are as follows:
a). Meet or exceed 99.925% percent Circuit Availability on a monthly
basis. This objective applies except, where a customer's
equipment is disconnected and/or inoperative or force majeure
(i.e. cable cuts) or planned maintenance actions initiated by
the customer.
b). Meet or exceed 99.875% percent Error Free Seconds on a monthly
basis.
c). Does not exceed .009% percent Severely Errored Seconds on a
monthly basis.
d). Where IFN is responsible for end to end circuit engineering and
provisioning the end to end Circuit Availability percentage is
99.7%
B2. Technical Transmission Specification Standards: IFN and its facilities
pertaining to DS1, DS3 and OC-N performance adhere to the following
Technical References and Standards:
Digital Data Access Service
56.0 and 64 kbps ANSI T1.107b-1991
High Capacity TR-NFL-000054
TR-INS-000342
Self-healing Rings TR-NWT-000496
B3. DS1 AND DS3 Interconnection:
----------------------------
DS3 interface combinations and technical specifications are referenced
in Bellcore TR-INS-000342.
DS1 interface combinations and technical specifications are referenced
in Bellcore TR-NFL-000054.
<PAGE>
Availability Cont.
B4. SONET Specifications
--------------------
STS-1, OC-1, OC-3, and OC-12 interface combinations and technical
specifications are referenced in BellSouth Telecommunications, Inc.
Technical TR-73582.
Where IFN has self-healing rings and customer have subscribed to DS3
service channels have a long term performance objective of 99.95% error-
free seconds and a severly errored second (SES) objective of less than
0.009% SES when the circuit is available. Self-healing multi-nodal DS1
high capacity service channels have a long term performance objective of
99.5% error-free seconds.
Transmission parameter limits, interface combinations, and technical
specifications applicable to Interstate Carriers for customer
interconnection at IFN POPs are contained in ANSI T1.403-1989 and
T1.404-1989.
C. When a Credit Allowance Applies
-------------------------------
In case of an interruption to any service, allowance for the period of
interruption, if not due to the negligence of the customer, shall be as
follows:
C1. IFN DS1 and DS3 Services
------------------------
No credit shall be allowed for an interruption of less than 30 minutes.
The Customer shall be credited for an interruption of 30 minutes or more
at the rate of 1/1440 of the monthly charges for the facility or service
for each period of 30 minutes or major fraction there of that the
interruption continues.
The monthly charges used to determine the credit shall be as follows:
The monthly charges shall be the total of all the monthly rate element
charges associated with the service
C2. SONET Ring Services
-------------------
For service interuption resulting from a failure of the equipment where
IFN's system does not automatically self-heal around the point of
failure, credit shall be allowed only for an interruption of 30 minutes
or more. The credit will begin when the customer reports the
interruption to IFN. This credit shall be at the rate of 1/1440 of the
total monthly charges assessed for that portion of the service that is
interrupted for each period of 30 minutes or major fraction hereof that
the interruption continues.
C3. Credit allowances will not apply if service is interrupted during
customer requested upgrades and/or additions to IFN service or during
customer requested rearrangements.
C4. CCS7 and Enhanced Services
--------------------------
For IFN's CCS7 Services, no credit shall be allowed for an interruption
of less than 30 seconds. The customer shall be credited for an
interruption of 30 seconds or more as follows:
For two-point services, when monthly rates are applicable, the credit
shall be at the rate of 1/8640 of the monthly charges for the service
for each period of 5 minutes or major fraction thereof that the
interruption continues.
<PAGE>
D. Other Information and Conditions:
--------------------------------
D1. SONET Timing Issues
-------------------
DS1's carried over Synchronous Optical Network (SONET) transport systems
can incur phase transients as a result of pointer adjustments. In some
instances timing problems could surface in customer's equipment with
Stratum 3 or better clocks. This may result in the customer's clock
disqualifying its synchronization reference, generating an alarm and/or
selecting an alternate reference or entering holdover. To insure proper
operation, channelized DS1 circuits must comply with Bellcore Technical
Advisory, TA-NWT-000436. Digital Synchronization Network Plan, and ANSI
T1.101-1994. When timing is taken from a Company transported DS1, the
customer's equipment must be capable of accommodating SONET pointer
adjustments.
D2. Automatic Protection Switching
------------------------------
The Automatic Protection Switching provides protection on a 1XN basis
against failure of the electronic facilities between two IFN POPs.
Protection is furnished through the use of a switching arrangement that
automatically switches to a spare system when a working system fails. On
self-healing SONET rings a switch to protect facilities may, in some cases,
cause IFN services to be routed to an alternate path.
D3. Performance of Error Free Seconds
---------------------------------
Performance is noted as Error Free Seconds (EFS) which is measured as the
percentage of seconds over a 24 hour period not containing errors. EFS is
measured using our network management system which conforms to the CCITT
Recommendation 0.151.
E. Trouble Reporting/Monitoring
----------------------------
IFN monitors the network on a 7X24 basis, trouble resolution and repair
efforts will begin when network surveillance and internal monitoring
detects errors. Customer may also notify IFN of performance issues and test
with IFN to isolate and resolve the trouble.
In the event the Customer determines the services provided are not
conforming with the Technical Standards, the Customer shall provide IFN
immediate Telephone Notification, via the trouble reporting processes in
the IFN Operations Manual.
<PAGE>
EXHIBIT B
INTERSTATE FIBERNET/FPL SERVICE ORDER
Master Capacity License No.: Date of Master Capacity License No.:
----- -----
The following order for service on the specified terms and conditions herein is
made by the undersigned Licensee pursuant to the Master Capacity License
referred to above ("Master Capacity License").
Date:
----------------------------------
Provider: Florida Power & Light Company
PON:
-----------------------------------
1. CAPACITY. Under this License, Licensor will provide the following capacity
--------
and ancillary services between its Points of Presence in the following cities:
Capacity Service
City A City Z Description Quantity Date
- ------ ------ ----------- -------- ----
II. SERVICE CHARGES
---------------
A. Aggregate Monthly Charges: $_________ each per month
(of which amount, $__________ each are charges for capacity and
$_________ are charges for ancillary services)
B. Total Non-Recurring Charges: $
--------------
C. Discounts Applicable? Yes No
----- -----
D. Monthly Minimums Applicable? Yes No
----- -----
III. TERMS OF PAYMENT. Monthly in advance, on the first day of each month, as
----------------
more fully described in the Master Capacity License. Any payment not received on
or before the required payment date as specified in the Master Capacity License
shall be subject to a late payment charge, also specified therein.
Page 1 of 2
<PAGE>
IV. SERVICE ORDER TERM.
------------------
V. BASIC AGREEMENT. This Service Order is hereby incorporated in its entirety
---------------
into the Master Capacity License and is hereby executed by the respective
parties hereto as of _______________, 1996
LICENSEE:
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
LICENSOR:
FLORIDA POWER & LIGHT COMPANY
Provider
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
INTERSTATE FIBERNET
Agent
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Page 2 of 2
<PAGE>
Technical Specifications
Interstate FiberNet Transmission Performance
Standards and Objective Policy
A. Description of Services
- --------------------------
1. Interstate Fibernet (IFN) provides transmission transport links between two
or more IFN Points of Premise which meet at a designated point between IFN and
the Customer. Where IFN is the provider of local interconnect, Local Loop
Availability numbers are provided. The following standards apply to both on a
one-way basis for both DS1, DS3, OC-N and CCS7 services.
B. Availability:
- ----------------
Availability is measurement of the total time the service is operative when
measured over a time period of 30 consecutive days. DS3s and DS1s are considered
to be inoperative when there has been a loss of signal, when loop-back tests
confirm the observation of severely errored seconds, or IFN's network monitoring
system detects a bit-error rate of greater than 1 X 10-9.
B1. DS3 and DS1 Performance Objectives
----------------------------------
The performance objectives for IFN DS3 service are as follows:
a). Meet or exceed 99.99% percent Circuit Availability on a monthly
basis. This objective applies except where a customer's equipment
is disconnected and/or inoperative or force majeure (i.e. cable
cuts) or planned maintenance actions initiated by the customer.
b). Meet or exceed 99.95% percent Error Free Seconds on a monthly basis.
c). Does not exceed .009% percent Severely Errored Seconds on a monthly
basis.
d). Service Continuity - in the event of primary facility failure,
service is guaranteed to switch to an alternate facility in sixty
seconds or less. Failure to meet this guarantee will result in a
credit as described in the following where the trouble is in the
network on public/private right-of-way.
e). Where IFN is responsible for end to end circuit engineering and
provisioning the end to end Circuit Availability percentage is
99.88%.
The performance objectives for IFN DS1 service are as follows:
a). Meet or exceed 99.925% percent Circuit Availability on a monthly
basis. This objective applies except where a customer's equipment is
disconnected and/or inoperative or force majeure (i.e. cable cuts)
or planned maintenance actions initiated by the customer.
b). Meet or exceed 99.875% percent Error Free Seconds on a monthly basis.
c). Does not exceed .009% percent Severely Errored Seconds on a monthly
basis.
d). Where IFN is responsible for end to end circuit engineering and
provisioning the end to end Circuit Availability percentage is 99.7%.
B2. Technical Transmission Specification Standards: IFN and its facilities
pertaining to DS1, DS3 and OC-N performance adhere to the following
Technical References and Standards:
Digital Data Access Service
56.0 and 64 khps ANSI T1.107b-1991
High Capacity TR-NFL-000054
TR-INS-000342
Self-healing Rings TR-NWT-000496
B3. DS1 and DS3 Interconnection:
---------------------------
DS3 interface combinations and technical specifications are referenced in
Bellcore TR-INS-000342.
DS1 interface combinations and technical specifications are referenced in
Bellcore TR-NFL-000054.
<PAGE>
Availability Cont.
B4. SONET Specifications
--------------------
STS-1, OC-1, OC-3 and OC-12 interface combinations and technical
specifications are referenced in BellSouth Telecommunications, Inc.
Technical Reference TR-73582.
Where IFN has self-healing rings and customer have subscribed to DS3
service channels have a long term performance objective of 99.95% error-
free seconds and a severely errored second (SES) objective of less than
0.009% SES when the circuit is available. Self-healing multi-nodal DS1 high
capacity service channels have a long term performance objective of 99.5%
error-free seconds.
Transmission parameter limits interface combinations and technical
specifications applicable to Interstate Carriers for customer
interconnection at IFN POPs are contained in ANSI T1.403-1989 and T1.404-
1989.
C. When a Credit Allowance Applies
-------------------------------
In case of an interruption to any service, allowance for the period of
interruption, if not due to the negligence of the customer, shall be as
follows:
C1. IFN DS1 and DS3 Services
------------------------
No credit shall be allowed for an interruption of less than 30 minutes. The
customer shall be credited for an interruption of 30 minutes or more at the
rate of 1/1440 of the monthly charges for the facility or servicee for each
period of 30 minutes or major fraction thereof that the interruption
continues.
The monthly charges used to determine the credit shall be as follows:
The monthly charges shall be the total of all the monthly rate element
charges associated with the service.
C2. SONET Ring Services
-------------------
For service interruptions resulting from a failure of the equipment where
IFN's system does not automatically self-heal around the point of failure,
credit shall be allowed only for an interruption of 30 minutes or more. The
credit will begin when the customer reports the interruption to IFN. This
credit shall be at the rate of 1/1440 of the total monthly charges accrued
for that portion of the service that is interrupted for each period of 30
minutes or major fraction hereof that the interruption continues.
C3. Credit allowances will not apply if service is interrupted during customer
requested upgrades and/or additions to IFN service or during customer
requested rearrangements.
C4. CCS7 and Enhanced Services
--------------------------
For IFN's CCS7 Service, no credit shall be allowed for an interruption of
less then 30 seconds. The customer shall be credited for an interruption of
30 seconds or more as follows:
For two-point services, when monthly rates are applicable, the credit shall
be at the rate of 1/8640 of the monthly charges for the service for each
period of 5 minutes or major fraction thereof that the interruption
continues.
<PAGE>
D. Other Information and Conditions:
--------------------------------
D1. SONET Timing Issues
-------------------
DS1's carried over Synchronous Optical Network (SONET) transport systems
can incur phase transients as a result of pointer adjustments. In some
instances timing problems could surface in customer's equipment with
Stratum 3 or better clocks. This may result in the customer's clock
disqualifying its synchronization reference generating an alarm and/or
selecting an alternate reference or entering holdover. To insure proper
operation, channelized DS1 circuits must comply with Bellcore Technical
Advisory. TA-NWT-000436, Digital Synchronization Network plan, and ANSI
T1.101-1994. When timing is taken from a Company transported DS1, the
customer's equipment must be capable of accommodating SONET pointer
adjustments.
D2. Automatic Protection Switching
------------------------------
The Automatic Protection Switching provides protection on a 1xN basis
against failure of the electronic facilities between two IFN POPs.
Protection is furnished through the use of a switching arrangement that
automatically switches to a spare system when a working system fails. On
self-healing SONET rings a switch to protect facilities may, in some
cases, cause IPN services to be routed to an alternate path.
D3. Performance of Error Free Seconds
---------------------------------
Performance is noted is Error Free Seconds (EFS) which is measured as
the percentage of seconds over a 24 hour period not containing errors.
EFS is measured using our network management system which conforms to
the CCITT Recommendation 0.151.
E. Trouble Reporting/Monitoring
----------------------------
IFN monitors the network on a 7X24 basis, trouble resolution and repair
efforts will begin when network surveillance and internal monitoring
detects errors. Customer may also notify IFN of performance issues and
test with IFN to isolate and resolve the trouble.
In the event the Customer determines the services provided are not
conforming with the Technical Standards, the Customer shall provide IFN
immediate Telephone Notification, via the trouble reporting processes in
the IFN Operations Manual.
<PAGE>
EXHIBIT C
Interstate FiberNet Provisioning Flow Chart
-------------------------------------------
1. Sales, with customer input, sends Service Order form, included in the
exhibit, to the Sales and Marketing Department or to a Point of Contact in
the Provisioning group that has been previously authorized to accept a
Service Order.
2. Traffic Engineer & Provisioning Coordinator Responsibilities:
A. Insure order is correct with all necessary information to process, if
not the Coordinator will contact the Customer's Provisioning and Design
contacts with appropriate questions.
B. Coordinator will issue internal work orders to the FP&L Provisioning
and local telephone company that are sufficient for the Customer to
have end to end service. This work will be completed within two
business days; three days if order involves the issuing of ASRs.
Coordinator will
(1) generate Interstate FiberNet circuit ID.
(2) assigns IFN lease order member
(3) generate routing assignment on the IFN network
FP&L Provisioning will:
(1) generate equipment order requests, if needed
(2) schedule work effort with NOC technician
C. Coordinator will issue an E-mail F(irm) O(rder) C(onfirmation) to
Customer(fax) or phone. If customer doesn't have e-mail and Sales and
Marketing by the end of the next business day. [_____________________]
Coordinator may have to wait for FOCs from LEC if order involves ASRs
before issuing the final due date.
D. FP&L Provisioning will issue internal work packages within two business
days of completing item B; including the scheduling of site visits for
cross-connects and equipment installations.
E. Coordinator prepares design layout record (DLR). [equipment,
cross-connects, slotting, etc. ...].
<PAGE>
- --------------------------------------------------------------------------------
F. Coordinator sends DLR to the Customer's Provisioning Contact, FP&L
Provisioning and Sales/Marketing within two business days from
completion of item E.
G. Provisioning sends Completion Notices to the Sales and Marketing
Contact, Management and Accounting.
H. Interstate FiberNet accounting personnel initiate billing on IFN,
based on instructions from Sales and Marketing. Other accounting
groups initiate billing as appropriate.
Also included with Exhibit C is a copy of the service order form, a
provisioning flowchart and current provisioning contact names.
- --------------------------------------------------------------------------------
<PAGE>
Interstate Fibernet Order Flow
February 16, 1996
+-----------------+
---------[___]-----------+ Marketing/Sales +
+ + Customer +
+ +-----------------+
<TABLE>
<CAPTION>
+
+------------------+ +------------------+ +---------------------+
+ Order Entry & + + Network Director + + Traffic Engineering +
+ Lease Assignment +---------------+ For Distribution +-------------+ Facility Assignment +
+ Must Have Signed + + To Team + + And Provisioning +
+ Lease + +------------------+ +---------------------+
+------------------+
+
+--------------------------------------[_________]--------------------------------+
<S> <C> <C> <C> <C>
+ + + +
+ + + +
+---------------+ +---------------+ +----------------+ +--------------------+ +----------------------+
+ Bell ASR Sent + + CAP ASR Sent + + IXC ASR Sent + + Update All Network + + Order Sent to NOC +
+ Local Loops +-----+ Local Loops +-------+ Local Loops +----+ Records, Drawings +--+ With Network +
+ If Applicable + + If Applicable + + If Applicable + + and Reports + + Connections and +
+---------------+ +---------------+ +----------------+ +--------------------+ + Special Instructions +
+----------------------+
+
+---------------------------------------[______________]----------------------------------------+
+
+
+------------------+ +------------------+ +----------------+ +-------------------+ +-----------------+
+ NOC Audit + + Network + + Test With + + Notify Via e-mail + + Change Order +
+ Work with Field +--+ Connections and +-----+ Customer/Plant +----+ Provisioning +-----+ Report/Notify +
+Techs and Network + + Internal Testing + + Test Date and + + Order Completion + + All Departments +
+ Partners + + + + Acceptance + +-------------------+ +-----------------+
+------------------+ +------------------+ +----------------+ +
+---------------------------------------[_______________]---------------------------------------+
+
+-----------------+ +-------------+ +---------------+ +------------------+ +-------------------+
+Network Partners + + Order Entry + + Accounting + + Network Director + + Marketing/Sales +
+ Notified of +-----+ Coordinator +---------+ Notified to +----+ Notified of +-----+ Customer Notified +
+ Completion + + Notified + + Start Billing + + Completion + + of Completion +
+-----------------+ +-------------+ +---------------+ +------------------+ +-------------------+
</TABLE>
<PAGE>
================================================================================
Interstate FiberNet Service Order Form
================================================================================
======================================= ========================================
IFN PON # IFN LEASE #
======================================= ========================================
================================================================================
IFN SALES REP.
================================================================================
---------------------------------------
Order Coord, A:
---------------------------------------
Order Coord, Z:
---------------------------------------
IFN ID:
---------------------------------------
- -------------------------------------------------------------------------------
IFN PVSCON: TEL:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SERVICE DESCRIPTION
- -------------------------------------------------------------------------------
NOC TESTING AND ACCEPTANCE
- -------------------------------------------------------------------------------
IFN NOC TECH: IXC TECH:
- -------------------------------------------------------------------------------
TEST DATE: ACCEPTED BY:
- -------------------------------------------------------------------------------
TEST TIME: ACCEPTED DATE:
- -------------------------------------------------------------------------------
COMPLETION DATE: ACCEPTED TIME:
- -------------------------------------------------------------------------------
NOC NOTES:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NETWORK CONNECTIONS/SPECIAL INSTRUCTIONS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
DESIGN LAYOUT REPORT
- -------------------------------------------------------------------------------
FIRST FACILITY ASSIGNMENT:
- -------------------------------------------------------------------------------
LAST FACILITY ASSIGNMENT:
- -------------------------------------------------------------------------------
OTHER CIRCUIT INFORMATION:
- -------------------------------------------------------------------------------
===============================================================================
<PAGE>
EXHIBIT D
NETWORK MONITORING:
- -------------------
The IFN Network Operations Center (NOC) is manned by highly qualified
technicians on a 7X24 hour basis 365 days a year. Our NOC technicians have
received formal training on the equipment they operate and maintain. The NOC
utilizes a state of the art Digital Facility Management Systems (DFMS) developed
by PRISM/NorTel for general alarm surveillance. DFMS can be used to monitor
complex, hierarchical transport networks, comprising multiple syschronous
optical network (SONET) rates, asynchronous fiber optic transmission (FOTS), and
copper DS3, DS1 transport facilities, plus environmental and security alarms.
DFMS is fully capable of monitoring a variety of telemetry formats including
discrete, TBOS,E2A, ASCII and TLI. DFMS has many features that are used to
monitor, isolate and maintain a fiber system. Alarm correlation can be used to
find a "root cause" of a problem on a fiber system. Additionally, DFMS provides
a number of management features such as alarm prioritization, trouble ticket
management, a graphical network map display, a real-time sectionalization
display, and audible alerting. The DFMS system that IFN currently utilizes has
unlimited growth and expansion potential. We presently actively monitor SONET
fiber systems across a six state area and we are using only a fraction of the
scaleable architecture that is available to us through this system. Any and all
alarms on the network are received in the NOC. The alarms are sent via alarm
sending devices or collections units form each
<PAGE>
by the NOC technician and contact with the appropriate maintenance personnel is
initiated. The NOC coordinates all repair activity and assists the maintenance
personnel as needed. The NOC keeps management informed on a 30 minute
recurring basis on any service affecting activity. Upon resolution of the alarm
condition, the NOC technical will complete the IFN Trouble/Alarm Report.
Management will then be notified of the final resolution. Additionally, the NOC
coordinates all non-service affecting maintenance with the applicable
maintenance organization and provides advance service advisories to our
customers so that they in turn can notify their customer base.
<PAGE>
EXHIBIT E
COMMISSION SCHEDULE
For purposes of this commission schedule, [_________
____________________________________________________
____________________________________________________
____________________________________________________
_________________________________________].
FPL shall pay IFN for IFN's Marketing and Operating Services provided under this
Agreement as follows:
[_____________________________________________________
___________________________________________].
[_____________________________________________________
______________________________________________________
________________].
[_____________________________________________________
___________________________________________].
[_____________________________________________________________________________
______________________________________________________________________________
__________________________].
<PAGE>
EXHIBIT 10.47
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[______]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
ADDENDUM TO
FIBER OPTIC CAPACITY MARKETING AND OPERATING AGREEMENT
THIS ADDENDUM TO FIBER OPTIC CAPACITY MARKETING AND OPERATING AGREEMENT,
for good and valuable consideration, is made this 10th day of July, 1997, by and
between Florida Power & Light Company ("FPL") and Interstate FiberNet or its
Assign ("IFN").
1. This Addendum is intended to confirm and ratify the terms of that
certain Fiber Optic Capacity Marketing and Operating Agreement entered into
between the parties and dated March 21, 1996 ("Agreement"), except as
specifically modified herein.
2. Paragraph 4.5.5, Billing and Collection, of that Agreement shall be
----------------------
deleted and replace by the following paragraph:
4.5.5 Billing and Collection IFN shall bill and collect monthly from all
----------------------
Licensees all License fees. Payments will be due on the 20th day of the month
in which service is provided, and IFN shall forward to FPL by wire transfer the
aggregate sum of such License fees contracted for less IFN's commission as set
forth in Exhibit "E", attached hereto and incorporated herein. If service is
initiated prior to the 20th day of the first month of service, then the first
payment shall be due on the 20th day of the month following acceptance of
service and shall include payment for the partial initial month and the next
month's charges. If service is initiated on or after the 20th day of the first
month of service, then the first payment shall be due on the 20th day of the
second month following acceptance of service and shall include payment for the
partial initial month and the next two month's charges. If FPL does not receive
payment within one month of the due date, then FPL may assess a late payment
charge of one and a half (1 1/2) percent of the amount due per month calculated
on a daily basis or the highest amount then permitted by law, whichever is
higher. Failure to forward such payment to FPL as due and after notice of such
nonpayment by FPL to IFN and after a 15 day cure period shall constitute a
default going to the essence of this Agreement and FPL, at its discretion, may
cancel this Agreement in whole or in part.
3. Exhibit E, Commission Schedule, of that Agreement shall be amended by
deleting the existing Exhibit E and replacing such Exhibit E with the Exhibit E
attached hereto and incorporated herein.
4. Except as this Addendum has amended and changed the Fiber Optic
Capacity Marketing and Operating Agreement, the terms, conditions and provisions
of that Agreement shall remain in full force and effect.
Page 1 of 2
<PAGE>
IN WITNESS WHEREOF, IFN and FPL have executed this Addendum the day and
year first above written.
FLORIDA POWER & LIGHT COMPANY COMPANY:
By: /s/ Neil Flynn By: /s/ Doug Shumate
---------------------------------- -------------------------------
Print Name: Neil Flynn Print Name: Doug Shumate
-------------------------- -----------------------
Title: Director of Telecommunications
and Technology Title: Snr. VP CFO
------------------------------- ----------------------------
Attest: /s/ Jackie Rogers
----------------------------
(Seal)
Approved as to Form by
FPL Law Department
[SIGNATURE ILLEGIBLE], Attorney
------------------------
Page 2 of 2
<PAGE>
EXHIBIT E
[Amended]
COMMISSION SCHEDULE
For purposes of this commission schedule, [_______________________
_________________________________________________________________
________________________________________________________________
________________________________________________]
FPL shall pay IFN for IFN's Marketing and Operating Services provided under this
Agreement as follows:
[_] of total monthly capacity revenues remitted to FPL
under all License Agreements up to [_______]
[_] of total monthly capacity revenues remitted to FPL
under all License Agreements in excess of [_______]and
up to [______], and
[_] of monthly capacity revenues remitted to FPL under
all License Agreements in excess of [_______]
[_______________________________________________________________________________
_________________________________________________________________________
________________________________________________]
For joint circuits which are routes including sections within FPL's network as
well as the balance of IFN's network, FPL will pay to IFN the commissions shown
above for capacity revenue on the FPL system which results from the marketing
efforts of IFN (that is, [_] on monthly capacity revenues up to [______], [_] on
monthly capacity revenues in excess of [_______]up to [______], and [_] on
monthly capacity revenues in excess of [______]). Reciprocally, on joint
circuits, IFN will pay to FPL the same commissions shown above, less [_], for
capacity revenue on the balance of the IFN system which results from the
marketing efforts of FPL (that is, [_]on monthly capacity revenues up to
[______], [_] on monthly capacity revenues up to [______], [_] on monthly
capacity revenues in excess of [______] up to [______], and [_] on monthly
capacity
Page 1 of 2
<PAGE>
EXHIBIT E
(Continued)
revenues in excess of [_______].
[________________________________________________________________].
[________________________________________________________________].
Page 2 of 2
<PAGE>
EXHIBIT 10.48
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[_____]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
MASTER SERVICE AGREEMENT BETWEEN
INTERSTATE FIBERNET
AND
MCI TELECOMMUNICATIONS CORPORATION
<PAGE>
TABLE CONTENTS
--------------
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE
- ------- ----- ----
<S> <C> <C>
RECITALS ............................................................ 1
1. DEFINITIONS................................................. 1
2. COMMENCEMENT................................................ 3
3. INITIAL TERM AND EXTENSION; APPLICABILITY OF AGREEMENT TO
EXISTING CAPACITY........................................... 3
4. ACCEPTANCE TESTING.......................................... 4
5. PAYMENT..................................................... 6
6. ADDITIONAL CHARGES.......................................... 7
7. INTERRUPTION/CREDITS........................................ 7
8. SYSTEM MAINTENANCE.......................................... 9
9. INDEMNIFICATION............................................. 9
10. DEFAULT/TERMINATION.........................................10
11. CANCELLATION................................................10
12. INTERCONNECTION.............................................11
13. LAWS AND LICENSES...........................................11
14. NOTICE......................................................12
15. ASSIGNMENT..................................................12
16. GOVERNING LAW...............................................13
17. FORCE MAJEURE...............................................13
18. ENTIRE AGREEMENT; MODIFICATION..............................13
19. CONSENTS....................................................14
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
20. PROVISION CONFLICTS.........................................14
21. WAIVER......................................................14
22. CONFIDENTIALITY OF AGREEMENT................................14
23. DISPUTE RESOLUTION..........................................14
24. THIRD PARTY PROVIDERS.......................................15
</TABLE>
EXHIBITS
A. SERVICE ORDER FORM
A-1. SERVICE ACCEPTANCE FORM
B. TECHNICAL SPECIFICATIONS
C. TROUBLE REPORTING NUMBERS
D. PRICING SCHEDULE
E. EXISTING CAPACITY
F. NETWORK MAP
<PAGE>
MASTER SERVICE AGREEMENT
------------------------
This MASTER SERVICE AGREEMENT for telecommunications service (the
"AGREEMENT") is made as of the date of last execution below and is entered into
by and between INTERSTATE FIBERNET, a Georgia general partnership whose
principal place of business is located at 206 West Ninth Street, West Point, GA
31833, (hereinafter "LESSOR"), and MCI TELECOMMUNICATIONS CORPORATION a Delaware
corporation, whose principal place of business is located at 1801 Pennsylvania
Avenue, NW, Washington, DC 20006 (hereinafter "MCI")
RECITALS:
A. LESSOR owns and/or operates a fiber optic and/or a digital microwave
telecommunications system (as applicable, the "SYSTEM") and is in the business
of providing dedicated digital telecommunications service on the System.
B. MCI is a common carrier of communications with Federal Communications
Commission authorizations.
C. LESSOR desires to lease, on its own behalf or as agent on behalf of
other underlying providers of service (a "THIRD PARTY PROVIDER"), DS- 1, DS-3 or
OC-N telecommunications capacity on the System to MCI, and MCI desires to lease
such telecommunications capacity on the System froM LESSOR.
D. The applicable lease terms for MCI's utilization of the System along
the routes specified shall be set forth in Service Orders in the form attached
hereto as Exhibit A, as may be amended from time to time.
---------
E. The parties desire to incorporate by reference all existing and future
Service (as hereinafter defined) into this Agreement and to subject such Service
to the terms of this Agreement, it being the express intention of the parties
that this Agreement shall supersede and replace in its entirety that certain
Master Service Agreement between MCI and LESSOR, dated as of March 6, 1992 (the
"ORIGINAL AGREEMENT").
NOW, THEREFORE, in consideration of the recitals and covenants contained
herein, the parties agree as follows:
1. DEFINITIONS. The terms used in this Agreement shall have their normal
or common meanings, except that the following terms shall have the
following meanings for the purpose of this Agreement:
(a) AGREEMENT shall mean this Master Service Agreement.
<PAGE>
(b) ACCEPTANCE CURE PERIOD shall have the meaning set forth in
Article 4, paragraph (d).
(c) CANCELLATION DATE shall have the meaning set forth in Article 11,
paragraph (a).
(d) COMMENCEMENT DATE shall have the meaning set forth in Article 2,
paragraph (b).
(e) CURE PERIOD shall have the meaning set forth in Article 10.
(f) EFFECTIVE DATE shall have the meaning set forth in Article 2,
paragraph (a).
(g) EXISTING CAPACITY shall have the meaning set forth in this
Article 1, paragraph (n).
(h) INDEMNIFYING PARTY shall have the meaning set forth in Article 9.
(i) INITIAL TERM shall have the meaning set forth in Article 3,
paragraph (a).
(j) INTERRUPTION/INTERRUPTED shall mean a Non-Catastrophic
Interruption on any portion of the System.
(k) NON-CATASTROPHIC INTERRUPTION shall be defined as an interruption
or degradation in Service that violates the standards set forth
in the attached Exhibit B, which interruption or degradation is
---------
not a force majeure event (as defined herein).
(l) NOTICE OF DEFAULT shall have the meaning set forth in Article 10.
(m) ORIGINAL AGREEMENT shall have the meaning set forth in the
Recitals.
(n) SERVICE shall mean, as applicable, DS- 1, DS-3 or OC-N capacity
leased by MCI on the System. The term "SERVICE" shall include all
such capacity leased after the date hereof, as well as (i) any
and all capacity currently leased from LESSOR by MCI pursuant to
the Original Agreement, and (ii) any and all capacity currently
leased from LESSOR by MCI pursuant to a service order or other
arrangement that is unrelated to the Original Agreement
(collectively "EXISTING CAPACITY"). A list of all such Existing
Capacity being made subject to this Agreement is attached hereto
as Exhibit E and incorporated herein by reference.
---------
(o) SERVICE CANCELLATION NOTICE shall have the meaning set forth in
Article 11, paragraph (a).
2
<PAGE>
(p) SERVICE ORDER shall mean a written request for Service, such
request being delivered by MCI to LESSOR in the form attached
hereto as Exhibit A. Such Service Order(s) shall be executed by
---------
MCI and by LESSOR, for itself or as agent for a Third Party
Provider, as appropriate. Notwithstanding the foregoing, all
orders for Existing Capacity shall be deemed to have been placed
via Service Orders, regardless of the actual form of such orders.
(q) TECHNICAL SPECIFICATION shall mean the operating and technical
specification requirements applicable to the provision of DS-1,
DS-3 and OC-N Service under the terms of this Agreement, which
are set forth in the attached Exhibit B.
---------
(r) THIRD PARTY PROVIDER shall have the meaning set forth in the
Recitals.
2. COMMENCEMENT.
(a) This Agreement shall become effective on the date on which it has
been executed by both LESSOR and MCI (the "EFFECTIVE DATE").
(b) A date for commencement of Service shall be requested by MCI in
each Service Order. The actual date of commencement of Service
(the "COMMENCEMENT DATE") shall be the date of Service acceptance
by MCI, as indicated on the Service Acceptance Form in the form
attached hereto as Exhibit A-1. unless such date is delayed
pursuant to paragraph (c) below.
(c) A Service Order Commencement Date may be delayed by either party
one (1) time without penalty for a period of not more than
fifteen (15) days, upon not less than three (3) calendar days'
prior written notice being provided to the other party. In the
case of notice to MCI, a copy of such notice shall simultaneously
be sent by LESSOR to the person placing the order as indicated on
the Service Order. The aforementioned delay may extend for not
more than forty-five (45) days in the event such period of time
is required in order to obtain an entrance facility or
interconnection from a third party. In the event the Commencement
Date does not occur within the time periods set forth in this
paragraph (c), the non-delaying party shall have the option, in
its sole discretion, to cancel the affected Service Order,
without penalty or liability thereunder. upon written notice to
the other party.
3. INITIAL TERM AND EXTENSION; APPLICABILITY OF AGREEMENT TO EXISTING
CAPACITY
3
<PAGE>
(a) This Agreement shall have an initial term of five (5) years
beginning on the Effective Date (the "INITIAL TERM"). Thereafter,
this Agreement shall automatically renew on a month to month
basis unless terminated by either party upon written notice given
to the other party not less than thirty (30) days prior to the
termination date specified in such notice. If this Agreement is
so terminated, MCI shall be precluded from placing any further
Service Orders hereunder. However, it is the intention of the
parties that, notwithstanding any such termination, this
Agreement shall remain in full force and effect, and shall
continue to govern, with respect to any then-existing Service
Order for so long as such Service Order is in effect.
(b) Each Service Order shall set its own initial term or, if
applicable, any extension period thereof, which initial term
shall in no event be shorter than the applicable minimum term
specified in Section V of Exhibit D. For ease of administration,
---------
orders for different types of Service will be placed on separate
Service Orders (i.e., DS-ls and DS-3s will not be ordered on the
same Service Order). Absent a specified extension period, a
Service Order shall automatically continue in effect on a month-
to-month basis at the then existing monthly rate unless
terminated by either party upon written notice given to the other
party not less than thirty (30) days prior to the termination
date specified in such notice.
(c) This Agreement supersedes and replaces in its entirety the
Original Agreement. The provision of Existing Capacity by LESSOR
to MCI shall, as of the Effective Date hereof, be governed by the
terms and conditions of this Agreement.
4. ACCEPTANCE TESTING.
(a) LESSOR shall notify the appropriate MCI field coordination
contact by facsimile, electronic mail or telephone (at the
numbers specified on the applicable Service Order) that the
Service is ready for testing, the place where the test/retest
will take place and the date and time of testing or retesting of
the Service, which date and time shall be not less than two
business days after notification. LESSOR shall perform such
testing pursuant to the Technical Specifications which are
attached hereto as Exhibit B. Any testing or retesting and
---------
acceptance thereunder shall require completion of a Service
Acceptance Form in the form attached hereto as Exhibit A-I and
-----------
shall be performed in accordance with this Article 4, paragraph
(a). LESSOR shall deliver a completed copy of the Service
Acceptance Form and a copy of all test results to the MCI field
representative present at the testing or, if the MCI field
representative is not present, LESSOR shall deliver same by
overnight delivery service, facsimile or electronic mail to the
MCI field coordination contact identified in the Service Order.
4
<PAGE>
(b) If the testing results meet the Technical Specifications and the
circuit conforms with the Service Order, the MCI field
representative shall verify Service acceptance by signing the
applicable Service Acceptance Form. In the event an MCI
representative was not present at the testing, MCI shall execute
the Service Acceptance Form and provide a copy to LESSOR within
ten (10) days after receipt of the completed form and test
results. If MCI believes that the test results do not meet the
Technical Specifications, the MCI field representative present at
the testing shall so notify LESSOR's representatives, or if no
MCI representative is present, MCI shall so notify LESSOR within
ten (10) days after receipt of the completed form and test
results, in either event specifying the inadequacy in the test
results. Notwithstanding anything to the contrary contained
herein, if MCI does not verify Service acceptance in writing (by
executing a Service Acceptance Form and providing a copy to
LESSOR) or notify LESSOR of its rejection of the test results
within said ten (10) day period, MCI shall be deemed to have
rejected the test results and billing shall not commence. In such
event, LESSOR shall notify MCI in writing that no Service
Acceptance Form or other notice was received and shall request
that MCI notify LESSOR as to the reasons for MCI's rejection of
the test results. if no such notification is received by LESSOR
within ten (10) days after receipt by MCI of LESSOR's notice,
MCI's approval, completion and delivery of the Service Acceptance
Form shall be deemed to have occurred, and the Commencement Date
indicated in such Service Acceptance Form for purposes of Article
2, paragraph (b) hereof shall be deemed to be the date which is
ten (10) days after receipt by MCI of LESSOR's notice.
(c) Service shall be available and billing shall commence on the
Commencement Date, except as delayed pursuant to Article 2,
paragraph (c) above. LESSOR shall attach a copy of the fully-
executed Service Acceptance Form to the first invoice for each
applicable Service Order. LESSOR shall also provide a copy of the
fully-executed Service Acceptance Form (by facsimile) to the MCI
representative placing the order for Service as indicated on each
Service Order.
(d) if LESSOR's test results fail to meet the applicable Technical
Specification or if MCI notifies LESSOR, in accordance with
Article 4, paragraph (b) above, that the test results fail to
meet the applicable Technical Specification, LESSOR shall
exercise reasonable diligence to cure all Service defects within
a maximum of ten (10) days ("ACCEPTANCE CURE PERIOD"). If, after
two (2) Service acceptance retests, LESSOR's Service does not
meet the applicable Technical Specification, MCI may either: (1)
cancel the respective Service Order without any further liability
to LESSOR under the Service Order; or (2) accept an amended
Technical Specification. If MCI elects to cancel such Service
Order, MCI shall provide written notice to LESSOR of such intent
to cancel and shall remove any traffic or test signal within ten
(10) days after the applicable Acceptance Cure Period. if MCI
elects to accept the amended Technical
5
<PAGE>
Specification, the Technical Specification for that particular
Service shall be amended to reflect the actual test results for
such Service.
(e) If MCI does not place traffic or a test signal on the System at
the time of Service acceptance, LESSOR shall have the right,
after notifying MCI, to install on the System any device
necessary to prevent framing errors, false alarming, or other
transmission impairments resulting from the absence of MCI's
traffic. Placement of such a device shall not in any way affect
or delay billing as stated in each Service Order. All MCI circuit
interconnect, turn-up and/or traffic commencement after the
Commencement Date must be reported to LESSOR at least one (1)
business day prior to the loading of traffic onto the System. MCI
acknowledges that failure to report and arrange for late turn-up
prior to traffic loading will result in a lack of circuit
continuity.
5. PAYMENT.
(a) MCI agrees to pay LESSOR an aggregate monthly Service charge as
specified on the Service Order(s), subject to and commensurate
with the terms of Exhibit D. MCI's obligation to pay such monthly
---------
Service charge shall begin on the Commencement Date of the
applicable Service Order, which is the date of Service acceptance
as indicated on the Service Acceptance Form. LESSOR shall attach
a copy of the fully-executed Service Acceptance Form to the first
invoice for each applicable Service Order. MCI shall be invoiced
every thirty (30) days in advance of that particular month's
Service (e.g., January 1st invoice for month of January);
provided, however, that the first invoice shall cover the period
from the Commencement Date through the end of the next month
(e.g., April 16 through May 31). MCI shall pay LESSOR's invoice
within thirty (30) days of receipt (the "INVOICE DUE DATE"). Any
amount which is not paid in full by the invoice due date shall be
subject to a late payment charge (the "LATE PAYMENT CHARGE")
calculated from the invoice due date to the date LESSOR receives
MCI's regular invoice payment. The late payment charge shall be
calculated by multiplying any portion of the invoice which
remains' unpaid after the invoice due date by the prime interest
rate quoted by The Wall Street Journal on the invoice due date,
-----------------------
plus three percentage (3%) points, prorated monthly, on a thirty
(30) day basis (the "PENALTY RATE"). LESSOR shall invoice MCI for
the late payment charge on the next regular monthly invoice.
(b) Notwithstanding the provisions of Article 5, paragraph (a) above,
MCI shall have the right to reasonably dispute any invoice amount
that MCI believes is incorrect (the "DISPUTED AMOUNT"). In the
event of a Disputed Amount, MCI shall nevertheless pay to LESSOR,
within the time frame set forth herein, the undisputed amount, if
any, due and owing to LESSOR and provide to LESSOR, in writing'
the grounds upon which MCI is contesting the Disputed Amount. MCI
shall not be required to pay the Disputed Amount until such
6
<PAGE>
dispute is resolved in accordance with Article 23. If the matter
is later resolved against MCI, MCI shall pay the Penalty Rate on
the applicable portion of the Disputed Amount from the first date
of dispute until the date of resolution, which in no event shall
exceed the conclusion of an Article 23 proceeding.
(c) Notwithstanding the provisions of Article 5, paragraph (a) above,
MCI shall not be responsible to pay any LESSOR charge not
invoiced to MCI within ninety (90) days after such LESSOR charge
originated. For purposes of this subparagraph (c), a recurring
monthly Service charge shall be deemed to originate on the first
day of the month (e.g., recurring charges for the month of
January shall be deemed to originate on January 1). By way of
example, MCI will not be obligated to pay a recurring monthly
Service charge for the month of January if that charge is not
invoiced to MCI on or before that date which is ninety (90) days
after January 1.
6. ADDITIONAL CHARGES.
(a) (i) MCI shall pay gross receipts, right-of-way, franchise, or
sales or use taxes, or other similar charges that are levied
upon LESSOR or legally required to be collected by LESSOR as
a direct result of LESSOR's provision of services to MCI
hereunder, but in no event shall MCI be obligated to pay
income taxes levied upon LESSOR's net income or any real or
personal property taxes assessed against. LESSOR or LESSOR's
property.
(ii) MCI shall have the right to protest or appeal any such tax
or charge assessed by any taxing authority, either directly
or indirectly, as well as present any applicable exemption
certificates.
(b) MCI shall not be obligated to pay any additional charges other
than those contemplated by this Agreement; provided, however, MCI
may pay direct verifiable one time charges (e.g., installation,
service, etc.) where such charges are negotiated, and appear upon
the face of a fully-executed Service Order. Where applicable and
approved, such charges shall appear in LESSOR's first invoice to
MCI.
7. INTERRUPTION/CREDITS. LESSOR represents and warrants that LESSOR will
provide and maintain the System during the term of this Agreement in
full compliance with the applicable technical Specification.
(a) MCI shall be entitled to a credit as set forth in paragraph (b)
of this Article 7 for periods in which the LESSOR falls to
operate the System in accordance with the Technical
Specification. LESSOR agrees to undertake immediate action to
7
<PAGE>
correct any Interruption to the System within two (2) hours after
receiving notice from MCI that an Interrupted condition exists.
(b) MCI shall not be entitled to a credit for a Non-Catastrophic
Interruption of Service that is less than thirty (30) minutes in
duration. The amount of the credit owed to MCI for a Non-
Catastrophic Interruption of Service thirty (30) minutes or
longer shall be equal to 1/1440 of the monthly rate of charges
applicable to that portion of the System which is subject to the
Interruption multiplied by each one-half (1/2) hour or major
fraction thereof of the length of the Interruption. If more than
one Non-Catastrophic Interruption of Service occurs within a
twenty-four (24) hour period, the length of all such
Interruptions shall be aggregated and treated as a single
Interruption for purposes of determining the availability and
amount of a credit. Interruptions shall be measured from the time
that the Interruption starts to the time of restoration. MCI may
notify LESSOR of Interruptions by telephone, facsimile,
electronic mall, courier or any such similar expedited notice
mechanism. In order to facilitate such notice, an "ESCALATION
LIST" of appropriate contact personnel of LESSOR and MCI is
attached hereto as Exhibit C.
---------
(c) When Service provided by LESSOR includes more than one
communications path, the Interruption allowance applies only to
the path Interrupted.
(d) An Interruption, for purposes of this Article 7, shall be reduced
by the time period during which MCI fails to accord access to any
necessary MCI facilities provided by LESSOR for the purpose of
investigating and clearing troubles.
(e) In the event of Interruption of local access service or any other
service provided by parties other than LESSOR (other than service
provided by a Third Party Provider), LESSOR shall have no
liability to MCI and MCI shall continue to be liable for all
payments to LESSOR.
(f) In the event of a Non-Catastrophic Interruption of Service on
more than five (5) days during any thirty (30) day period and so
long as such Interruption is not caused in whole or in part by M
MCI's own negligence, MCI shall, at its option, have the right to
either (i) terminate any Service Order(s) along the affected
route, or (ii) receive a credit against amounts owing under the
next invoice received from LESSOR hereunder, which credit shall
be in an amount equal to the monthly Service charge attributable
to the affected route as set forth in Article 5, paragraph (a)
above and in the applicable Service Order(s). The parties agree
to use LESSOR's maintenance log, if any, for purposes of
calculating the duration of the Interruption and, if applicable,
the credit specified in Article 7, paragraph (b). In the absence
of such a log, MCI shall produce sufficient documentation to
substantiate its claim.
8
<PAGE>
(g) THE FOREGOING WARRANTY AND REMEDIES WITH RESPECT TO INTERRUPTIONS
OF SERVICE ARE EXCLUSIVE AND IN LIEU OF ALL OTHER SUCH WARRANTIES
OR REMEDIES, WHETHER EXPRESS, IMPLIED OR STATUTORY. IN THE EVENT
OF ANY INTERRUPTION IN THE SERVICE WHATSOEVER, NEITHER LESSOR,
LESSOR's AFFILIATES NOR ANY THIRD PARTY PROVIDER, NOR OPERATOR OF
FACILITIES EMPLOYED IN THE PROVISION OF THE SERVICE SHALL BE
LIABLE TO MCI OR THIRD PARTIES FOR ANY DIRECT, INDIRECT,
CONSEQUENTIAL, SPECIAL, ACTUAL, PUNITIVE OR ANY OTHER DAMAGES, OR
FOR ANY LOST PROFITS OF ANY KIND OR NATURE WHATSOEVER.
8. SYSTEM MAINTENANCE. System maintenance normally will not result in
Service Interruption. However, in the event System maintenance should
require the Interruption of Service, to the greatest extent possible
it shall be carried out only during non-peak hours; provided, however,
LESSOR shall provide MCI with ten (10) business days' notice prior to
undertaking any such maintenance activity in accordance with the
notice procedure specified in Article 7, paragraph (b) above. System
maintenance requiring interruption of Service shall not be entitled to
an Article 7 credit and shall be completed as soon as practicable, but
in no event shall such maintenance exceed two (2) hours.
9. INDEMNIFICATION. LESSOR and MCI (hereinafter where either has
undertaken the action or inaction to be indemnified against shall be
beknown as the "INDEMNIFYING PARTY") agree to assume all liability for
and indemnify, defend and hold harmless the other party or any third
party claiming through the other party, from and against all
liability, loss, cost, damage, expense or cause of action, of
whatsoever character, or injury or death of any person and damage to
or destruction of any property, including, without limitation, third
parties and all related expenses, including, but not limited to,
reasonable attorneys' fees, investigators' fees and litigation
expenses resulting in whole or in part from any of the following:
(a) claims for libel, slander, infringement of copyright or
unauthorized use of a trade secret, trademark, trade name or
service mark that results from the transmission of material over
the System by MCI, authorized representatives of MCI or other
persons not associated with, or related to, either LESSOR or MCI;
or
(b) claims of any person not a party to this Agreement arising out of
the negligent or willful act or omission of the Indemnifying
Party or its agents, servants, employees, contractors or
representatives; or
9
<PAGE>
(c) claims for patent infringement arising out of the use of the
System by MCI or any person authorized by MCI and resulting from
the acts of MCI or MCI's representatives in combining the System
with the facilities of MCI IC' or others, or using the System in
connection with those of MCI or others; or
(d) claims, except as otherwise set forth herein for the breach of or
failure to comply with any term or condition of this Agreement by
the Indemnifying Party or its officers, employees or invitees; or
(e) claims resulting from patent or trade secret infringement or
infringement or unauthorized use of trade secrets or trade name
by the Indemnifying Party
10. DEFAULT/TERMINATION. A party may deliver to the other party a "NOTICE
OF DEFAULT" for: (i) failing to make any payment owed hereunder, when
no bona fide dispute exists; (ii) the breaching by either party or its
agents, assigns or affiliates of any of the terms, conditions,
covenants, warranties or representations herein; or (iii) the filing
or initiating of proceedings seeking liquidation reorganization or
other such relief under any bankruptcy or insolvency law (state or
federal). A party that has received a Notice of Default shall have
thirty (30) days to cure the alleged breach (the "CURE PERIOD"),
provided, however, that either party shall be given ninety (90) days
to remove any involuntary bankruptcy proceeding. If such party falls
to cure the breach within the Cure Period, the non-defaulting party
shall have the right to either (a) suspend its performance or payment
obligations, (b) terminate the affected Service Order(s), (c)
terminate this Agreement in its entirety, (d) seek an order of
specific performance, and/or (e) seek the award of compensatory
damages.
11. CANCELLATION.
(a) MCI may for any reason voluntarily (not required by governmental/
regulatory action) cancel a Service Order prior to the end of the
initial term as set forth in the Service Order. In the event of a
voluntary MCI cancellation, MCI shall notify LESSOR, in writing,
that it desires to cancel the Service Order(s) within thirty (30)
days (the "SERVICE CANCELLATION NOTICE") and the date upon which
MCI is to cease being billed for the use of the canceled
circuit(s). The Service Cancellation Notice shall set forth the
effective date of cancellation (the "CANCELLATION DATE").
(b) If MCI voluntarily cancels a Service Order prior to the end of
the applicable minimum term for such Service Order as specified
in Section IV of Exhibit D, MCI shall pay a cancellation fee to
---------
LESSOR that is equal to [________________________________________
_________________________________________________________________
___________]. If MCI voluntarily cancels a Service Order after
the expiration of the applicable minimum term, but prior to the
end of the initial term as set forth in the Service Order, MCI
shall pay a cancellation fee to LESSOR that is
10
<PAGE>
equal to [_______________________________________________________
____________________________________] (collectively referred to
as "MCI VOLUNTARY CANCELLATION FEE").
(c) The MCI Voluntary Cancellation Fee described in Article 1;
paragraph (b) above, represents LESSOR's exclusive remedy for a
voluntary cancellation by MCI and shall be in lieu of any other
remedies either at law or in equity.
(d) Either party shall have the right to cancel this Agreement and
any related Service Order(s) without liability if LESSOR is
prohibited from furnishing the Service or if any material rate or
term contained herein is substantially changed by order of the
highest court of competent jurisdiction to which the matter is
appealed, the FCC or other local, state or federal governmental
authority.
(e) Subsequent to the Commencement Date of a Service Order, in lieu
of terminating the circuit(s) placed in service pursuant to the
Service Order, MCI may by written notice to LESSOR request that
said circuit(s) be replaced by new circuit(s) having a
configuration specified in said notice. LESSOR shall permit such
circuit substitution without a cancellation fee for the old
circuit(s) if: a) MCI has requested same at least sixty (60) days
prior to the requested in service date of the new circuit(s); b)
the minimum term of the replacement circuit(s) shall be written
for a period of time at least equal to the remaining minimum term
of the old circuit(s) and for a monthly Service charge equal to
or greater than that of the old circuit(s); and c) the requested
replacement circuit(s) are available on LESSOR's network as
determined by LESSOR.
12. INTERCONNECTION.
(a). Except for the locations identified in Article 12, paragraph (b)
below, MCI shall pay the cost of Service interconnection from
LESSOR's point of presence to MCI's point of presence. LESSOR
shall coordinate with MCI for interconnection completion,
including establishing any applicable points of demarcation,
entrance facilities, interconnection facilities and equipment
access. The parties shall work together to keep such costs to a
minimum.
(b). [________________________________________________________________
_________________________________________________________________
_________________________________________________________________
________________________________________]
13. LAWS AND LICENSES. This Agreement is subject to all applicable
federal, state and local laws, regulations, rulings and orders of
governmental agencies, including, but not limited to, The
Communications Act of 1934, and the rules and regulations of the FCC
and is contingent upon LESSOR's obtaining and continuing any required
approval
11
<PAGE>
or authorization of the FCC or any other duly authorized governmental
body LESSOR shall work with MCI to acquire any permits or licenses
required to be obtained by MCI. LESSOR and MCI agree that the statute
of limitations set forth in The Communications Act of 1934, 47 U.S.C.
section 415, as amended, shall govern all actions arising out of this
Agreement, including arbitrations.
14. NOTICE. Except for the notice provisions related to Article 7,
paragraph (b), all notices, requests, demands or other communications
provided for, permitted or required by this Agreement shall be
delivered by registered or certified mall, return receipt requested,
or by commercial overnight delivery service, or by facsimile, and
shall be deemed given (a) when received or when delivery is refused,
as indicated on the return receipt or commercial carrier's records (in
the case of notices sent by U.S. mall or by overnight delivery
service), or (b) on the next day after the notice was sent (in the
case of notices sent via facsimile). Notwithstanding the foregoing,
the original of any facsimile notice must be sent by overnight
delivery service in order for the delivery of such notice to be deemed
effected. Notices shall be addressed as follows:
LESSOR: Interstate FiberNet
Vice President Finance
206 W. 9th Street
West Point, GA 31833
Fax No.: 706-645-8989
MCI: MCI Telecommunications Corporation
Manager, Contracts Management
Department 1103/041
400 International Parkway
Richardson, TX 75081
Fax No.: 214-918-3303
With a copy to: MCI Telecommunications Corporation
Law and Public Policy, 0598/003
1133 19th Street NW
Washington, DC 20036
Fax No.: 202-736-6666
Provided, however, that any items sent on a periodic basis, such as
invoices, do not need to comply with the provisions of this notice
provision but may be sent by first-class mail, addressed to the
appropriate party.
15. ASSIGNMENT. The capacity leased to MCI hereunder may be used by MCI
for any purpose in the normal course of its telecommunications
business. LESSOR recognizes that MCI sells its telecommunications
services to customers both pursuant
12
<PAGE>
to tariff and pursuant to customer contracts, that some of MCI's
customers are "RESELLERS" of telecommunications services and the
capacity leased to MCI hereunder could be utilized to provide such
services to MCI's customers, including such resellers. LESSOR
acknowledges that MCI has entered into this Agreement in reliance upon
the technical and financial capabilities and experience of LESSOR.
Therefore, LESSOR shall not sell, assign, or transfer (the "TRANSFER")
a) a majority ownership interest in LESSOR or any portions of LESSOR's
transmission network providing service to MCI or b) responsibility for
the operation of LESSOR's transmission network, to any third party
without the prior written consent of MCI, which consent shall not be
unreasonably withheld, provided, however, that LESSOR may assign all
of its rights to a subsidiary or affiliate company of LESSOR without
obtaining MCI's prior consent. LESSOR shall give MCI not less than
sixty (60) days prior written notice of any Transfer of LESSOR's
interest hereunder.
16. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with, and the validity and performance hereof shall be
governed by, the laws of the State of New York;
17. FORCE MAJEURE.
(a) Except as provided in paragraphs (b) and (c) below, neither party
shall be liable for any failure or suspension of performance
hereunder (including the failure to make payments when due) due
to acts of God, fire, explosion, local, state or federal
government action or war (individually, a "FORCE MAJEURE EVENT").
The party claiming relief under this Article 17 shall exercise
its best efforts to minimize the time of any failure of or
suspension of performance hereunder and promptly notify the other
party of the occurrence of the force majeure event.
(b) If such failure of performance shall be on the part of MCI and
shall be for thirty (30) days or less, then the affected Service
Order(s) shall remain in effect and MCI shall remain liable for
all charges thereunder If such failure of performance shall be in
excess of thirty (30) days, MCI shall have the option to maintain
the affected Service Order(s) in effect by continuing payments or
MCI may cancel the Service Order(s) without further liability.
(c) If such failure of performance shall be on the part of LESSOR and
shall be for thirty (30) days or less, then the affected Service
Order(s) shall remain in effect with no charge to MCI and no
liability on the part of LESSOR. If LESSOR's failure of
performance lasts for more than thirty (30) days, then the
affected Service Order(s) may be canceled by MCI with no
liability on the part of either party.
18. ENTIRE AGREEMENT; MODIFICATION. This Agreement contains the entire
agreement of the parties pertaining to the subject matter hereof and
supersedes all prior
13
<PAGE>
communications and agreements, whether oral or written. No subsequent
modification of this Agreement shall be effective or binding unless it
is made in writing and signed by an authorized officer of the party
against whom enforcement of the modification is sought.
19. CONSENTS. Any requested consent to be given by any party to this
Agreement shall not be unreasonably withheld.
20. PROVISION CONFLICTS. In the event of a conflict between the provisions
of this Agreement and those of any Exhibit or Service Order, unless
the provisions of the Exhibit or Service Order expressly take
precedence over the provisions of this Agreement, the provisions of
this Agreement shall prevail and such Exhibits and Service Orders
shall be corrected accordingly.
21. WAIVER For any waiver of any right, option or privilege under this
Agreement to be binding, it must be made in writing and signed by the
party against whom enforcement of the waiver is sought. No waiver of
the terms of this Agreement shall occur because of a failure by either
MCI or LESSOR to exercise any option, right or privilege on any
occasion or through the course of declining, and any waiver granted
shall not be construed to be a waiver of the same on any other
occasion unless agreed to in writing and executed by the parties.
22. CONFIDENTIALITY OF AGREEMENT. The parties to this Agreement shall
treat this Agreement, its notices and Exhibits and their terms and
conditions, as strictly confidential. Neither party shall disclose any
of this information or any of these materials to any person who is not
a party to this Agreement. If a court or other governmental agency
with proper jurisdiction orders a party to disclose or to provide any
data or any documents relating to this Agreement, that party shall
immediately notify the other party and undertake all necessary
measures to protect the other patty's proprietary information and
trade secrets.
23. DISPUTE RESOLUTION. Any dispute arising out of or related to this
Agreement which cannot be resolved by negotiation shall be settled by
binding arbitration in accordance with the J.A.M.S./ENDISPUTE
Arbitration Rules and Procedures ("ENDISPUTE RULES"), as amended by
this Agreement. The costs of arbitration, including the fees and
expenses of the arbitrator, shall be shared equally by the parties
unless the arbitration award provides otherwise. Each party shall bear
the cost of preparing and presenting its case. The parties agree that
this provision and the arbitrator's authority to grant relief shall be
subject to the United States Arbitration Act, 9 U.S.C. 1-16 et seq.
("USAA"), the provisions of this Agreement, and the ABAAAA Code of
Ethics for Arbitrators in Commercial Disputes. The parties agree that
the arbitrator shall have no power or authority to make awards or
issue orders of any kind except as expressly permitted by this
Agreement, and in no event shall the arbitrator have the authority to
make any award that provides for punitive or exemplary
14
<PAGE>
damages. The arbitrator's decision shall follow the plain meaning of
relevant documents, and shall be final and binding. The award may be
confirmed and enforced in any court of competent jurisdiction. All
post-award proceedings shall be governed by the USAA.
24. THIRD PARTY PROVIDERS.
(a) The parties acknowledge and agree that certain Services leased by
MCI hereunder may be delivered on a portion of the System that is
owned by a Third Party Provider, but is managed by LESSOR as
agent of the Third Party Provider. The portion(s) of the System
owned by such Third Party Provider(s) as of the Effective Date,
and the names of such Third Party Provider(s), are listed on
Exhibit F attached hereto. Promptly upon entering into any
---------
additional agency arrangements with Third Party Providers, LESSOR
shall provide to MCI a revised Exhibit F which shall be attached
---------
to this Agreement.
(b) With respect to each Third Party Provider, LESSOR represents and
warrants that (i) such Third Party Provider is the lawful owner
of the applicable portion of the System identified on Exhibit F
---------
and has all necessary rights, authority and approvals to provide
the Service on such portion of the System in accordance with this
Agreement, (ii) LESSOR is the duly authorized agent of such Third
Party Provider and has all necessary rights, authority and
approvals to market and provide the applicable Service to MCI, as
agent of the Third Party Provider, in accordance with this
Agreement, (iii) as agent of the Third Party Provider, LESSOR has
the authority to act on behalf of such Third Party Provider and
to legally bind such Third Party Provider to the terms and
conditions of this Agreement, and (iv) by its signature as agent
on the applicable Service Order, LESSOR shall so bind the Third
Party Provider.
(c) LESSOR assumes all liability for and indemnifies, defends and
holds MCI harmless from and against any liability, loss, cost,
damage, expense, claim or cause of action resulting from (i) a
breach by LESSOR of any of the representations and warranties set
forth in subparagraph (b) above, (ii) the inaccuracy or
incorrectness of any of the representations and warranties set
forth in subparagraph (b) above, or (iii) the inability of LESSOR
to continue to provide Service in accordance with this Agreement
(for reasons other than a force majeure event, which shall be
governed by Article 17 of this Agreement, or an Interruption of
Service, which shall be governed by Article 7 of this Agreement)
on a portion of the System owned by a Third Party Provider (e.g.,
Service can no longer be provided on a Third Party Provider's
system because of a termination or expiration of LESSOR's agency
arrangement with the Third Party Provider).
15
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands as of the day and
year last written below
LESSOR MCI:
INTERSTATE FIBERNET MCI TELECOMMUNICATIONS
CORPORATION
<TABLE>
<S> <C>
By: /s/ Andrew M. Walker By: /s/ Keith E. Steiner
---------------------------------- -----------------------------------
Name: Andrew M. Walker Name: Keith E. Steiner
---------------------------------- -----------------------------------
Title: President & CEO Title: Vice President, Network Engineering
---------------------------------- -----------------------------------
Date April 26, 1996 Date: May 6, 1996
---------------------------------- -----------------------------------
ATTEST ATTEST
By: /s/ Thomas P. Schroeder By: /s/ Mary Steigman
---------------------------------- -----------------------------------
Name: Thomas P. Schroeder Name: MARY STEIGMAN
-----------------------------------
Title: Vice President Sales & Marketing Title: Assistant Secretary
---------------------------------- ---------------------
[Corporate Seal] [Corporate Seal]
</TABLE>
16
<PAGE>
EXHIBIT A
---------
SERVICE ORDER NO.:
Pursuant to all clauses, conditions, terms and covenants of the Master
faster Service Agreement between Interstate FiberNet, ("LESSOR"), and MCI
Telecommunications Corporation ("MCI"), Lessee. dated _______________ 1996
("AGREEMENT"), Lessee orders and LESSOR shall provide the following digital
transmission service:
Requested V&H
City A - City Z Capacity Type Quantity Service Date Mileage
- -------------------------------------------------------------------
Rates and Charges:
- -----------------
A. Recurring Charges:
B. Non-Recurring Charges:
INITIAL TERM OF THIS SERVICE ORDER:
- ----------------------------------
COMMENCEMENT DATE: Shall be as specified in the Agreement and validated by a
- -----------------
Service Acceptance Form in the form of Exhibit A-1 to the Agreement.
MCI field coordination contact: _______________________________________
Address: ______________________________
______________________________
______________________________
Phone: ______________________________
Fax: ______________________________
E-Mail: ______________________________
MCI representative placing this Order: _______________________________________
Address: ______________________________
______________________________
17
<PAGE>
Billing Contact. MCI
Lease Accounting & Reporting
Dept. 9411/623
8003 West Park Drive
McLean, Virginia 22102
BASIC AGREEMENT: This Service Order is hereby incorporated into the Master
- ---------------
Service Agreement referenced above.
LESSEE:
MCI TELECOMMUNICATIONS CORPORATION
By: _____________________________________
Name: _____________________________________
Title: _____________________________________
Date: _____________________________________
LESSOR:
INTERSTATE FIBERNET
If this block is executed by By: _____________________________________
Interstate FiberNet, Name: _____________________________________
Interstate FiberNet shall be Title:______________________________________
the underlying provider of the Date: ______________________________________
Service.
If this block is executed by ____________________________________________
Interstate FiberNet, the provider THIRD PARTY PROVIDER
of Service shall be the Third
Party Provider identified at the INTERSTATE FIBERNET, AGENT for
right, and Interstate FiberNet ___________________________________________
shall be acting on behalf of such
Third Party Provider, as agent.
By its signature as agent,
Interstate FiberNet binds such By: ____________________________________
Third Party Provider to the terms Name: ____________________________________
and conditions of this Service Title: ____________________________________
Order and the Agreement. Date: ____________________________________
18
<PAGE>
EXHIBIT A-1
------- ---
SERVICE ACCEPTANCE FORM FOR MCI LEASED VENDOR DIGITAL FACILITY
Pursuant to all clauses, conditions, terms and covenants of the Master Service
Agreement between Interstate FiberNet ("Lessor"), and MCI Telecommunications
Corporation ("MCI"), dated ____________________________ 1996 ("Agreement"),
Lessor has completed the installation and testing of the following leased
facilities:
Service Order # City A - City Z Capacity Type Quantity Test Date
- --------------------------------------------------------------------------
By their respective signatures below, Lessor certifies, and MCI agrees, that the
above-described leased facilities have been tested and that the results of such
tests (which are attached hereto) conform to the Technical Specifications
attached as Exhibit B to the Agreement.
LESSOR TEST REPRESENTATIVE: _______________________________
DATE:____________________________
MCI TEST REPRESENTATIVE: ________________________________
SERVICE ACCEPTANCE DATE:______________
********************************************************************************
USE THIS SPACE BELOW IF FACILITIES ARE NOT ACCEPTED:
The facilities tested DO NOT meet the Technical Specifications for the following
reasons:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
MCI TEST REPRESENTATIVE: __________________________________________________
DATE ______________________________
19
<PAGE>
EXHIBIT B
---------
TECHNICAL SPECIFICATIONS
NORTEL OC-N INTER-EXCHANGE CARRIER PERFORMANCE OBJECTIVES
The following delineates performance objectives for Inter-exchange Carriers
(IXC) for OC-N facilities for distances up to [_______]
All performance objective primitives are per definitions provided by the current
version of [_________].
The performance values below are predicated on MCI [____________________________
_______] and the MCI [_____________________________].
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
[_____________________] [_________________]
<S> <C> <C>
[___________________________________________ [_____]
___]:
[____________] [__]
[_] [_] [__________________] [__]
[__] [_] [_] [_____________] [___]
[__] [_] [_] [_______________________] [____]
[______________________] [__]
[______________________] [___________________________] [__]
[____________________________] [__]
[_________________________________] [_____________________] [___]
[______________] [_____________]
[_] [_] [________________] [____]
[__] [_] [_] [__________] [____]
[__] [_] [_]
[______________________________________]
[_] [_]
[__] [_] [_]
[__] [_] [_]
[________________________________________]
[_] [_]
[__] [_] [_]
[__] [_] [_]
</TABLE>
20
<PAGE>
STIPULATED CONDITIONS:
1. [__________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
____________________________________]
2. [__________________________________________________________________________
___________________________________________________________________________
___________________]
3. [____________________] must be controlled so that at any point in the
transmission facility, the DS-3 & DS-1 jitter specifications stipulated in
the MCI DS-1 & DS-3 Generic Requirements Documents are adhered to.
4. An [__] of [_____] for all equipment is required.
5. Availibility calculations to support the annual availability [_______] at
the OC-N level will be based on electronic measurement techniques at the
DS-3 level. DS-3 's will be monitored for this purpose.
6. Patchcords shall have the return [___________] or greater.
7. Patchcords bulk head insertion loss shall not exceed [____].
21
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
MCI [_______________]
==================================================================
INTEREXCHANGE CARRIER
_______________________________
PERFORMANCE SPECIFICATION
==================================================================
By MCIT 8/3/96
Network Design Engineering Final
David Jabbarrezned [_______________]
Sr. Engineer
Approval / Date
/s/ Harrell Reagan, /s/ Steven G. Jackson,
--------------------------------- ----------------------------
Harrell Reagan, Manager Steven G. Jackson, Senior Manager
-------------
MCI
PROPRIETARY
-------------
MCI Telecommunications Corporation
Network Integration & Standares
1201 E. Arapano Id.
Richardson, Texas 75081
- --------------------------------------------------------------------------------
================================================================================
22
<PAGE>
[_______________]
=======================================================================
INTEREXCHANGE CARRIER
-----------------------------
PERFORMANCE SPECIFICATION
=======================================================================
By MCIT 8/3/94
Network Design Engineering Final
Javid Jabberarnezhad [_______________]
Sr. Engineer
ABSTRACT:
This document defines the performance objectives for
Dedicated services using DS-1 & DS-3 circuits provisioned
on IXC's facilities. This document replaces the DS-1 & DS-
3 [_______________________________________________________
_______________________________________]. The transmission
performance objectives values enclosed in this document,
are produced by the Network Integration & Standards
department. DS-1 & DS-3 performance values are modified
extracts from [___________________] and support the MCI:
Customer Objectives document.
================================================================
Information in this document reflect: the most current facts
available at the time of publishing. However, all documentation
is subject to change. It is the responsibility of the reader to
check with the publishing author or departments to verify the
present status Of this and all documents and to request the most
recent issue.
==========================================================================
MCI PROPRIETARY
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<PAGE>
MCI Network Integration & Standard Engineering [________________]
Final; 8/3/94 [_______________________]
- --------------------------------------------------------------------------------
REVISION HISTORY
----------------
<TABLE>
<CAPTION>
DATE: PG/SECTION REVISED:
- ----- -------------------
REVISION NO.: AUTHOR: REASON SON FOR REVISION:
- ------------- ------- ------------------------
<S> <C> <C>
8/l9/9l Majid Borojeni Original
8/7/93 Javid Jabbarnezhad [_________________]
8/3/94 Javid Jabbarnezhad [_________]
[____]
</TABLE>
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MCI PROPRIETARY
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<PAGE>
MCI Network Integration & Standard Engineering [________________________]
Final; 8/3/94 [________________________]
- --------------------------------------------------------------------------------
CONTENTS
--------
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
1. EXECUTIVE SUMMARY................................................. 1
2. PARAMETER DEFINITIONS............................................. 1
3. DS-1 SPECIFICATIONS............................................... 3
3.1 DS-1 Electrical Interface Specifications..................... 3
3.2 Jitter....................................................... 5
3.3 DS-1 Access Performance and Availibility
Objectives................................................... 5
4. DS-3 SPECIFICATIONS............................................... 6
4.1 DS-3 Electrical Interface Specifications ............. 7
4.2 Jitter DS-1 & DS-3.................................... 7
4.2.2 Jitter Transfer................................ 7
4.2.3 Jitter Generation.............................. 7
4.2.4 Jitter Enhancement............................. 8
4.3 DS-3 Access Performance and Availability
Objectives............................................ 10
6. INDUSTRY STANDARDS COMPLIANCE LIST:................................ 11
</TABLE>
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MCI PROPRIETARY
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<PAGE>
MCI Network Integration & Standard Engineering [____________________]
Final; 8/3/94 [____________________]
- --------------------------------------------------------------------------------
LIST OF TABLES
--------------
<TABLE>
<CAPTION>
TABLES: PAGE
- ------- ----
<S> <C> <C>
Table 1. [___________________________]........................... 5
Table 2. [___________________________]........................... 5
Table 3. [___________________________]........................... 7
Table 4. [___________________________]........................... 7
Table 5. [___________________________]........................... 11
Table 6. [___________________________]........................... 12
</TABLE>
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MCI PROPRIETARY
V
<PAGE>
*** Information in this Exhibit B (Pages 1-11) has been omitted pursuant to a
request for confidential treatment. The omitted portions have been filed
separately with the Securities and Exchange Commission.***
MCI Network Integration & Standard Engineering [__________________]
Final; 3/3/94 [_______________________]
- -------------------------------------------------------------------------------
1. EXECUTIVE SUMMARY
1. 1 Purpose
[________________________________________________________________].
[________________________________________________________________].
[________________________________________________________________].
[________________________________________________________________].
2. PARAMETER DEFINITIONS
[________________________________________________________________].
- --------------------------------------------------------------------------------
MCI PROPRIETARY
1
<PAGE>
MCI Network Integration & Standard Engineering [_________________]
Final; 8/3/94 [_______________________]
- --------------------------------------------------------------------------------
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
[________________________________________________________________________]
- --------------------------------------------------------------------------------
MCI PROPRIETARY
2
<PAGE>
MCI Network Integration & Standard Engineering [___________]
Final; 8/37/94 [___________]
- --------------------------------------------------------------------------------
3. DS-1 SPECIFICATIONS
[______________________________________________________________________].
3.1 DS-1 Electrical Interface Specifications
[______________________________________________________________________].
[___________]
[________]: [___________]
[________]: [___________]
[________]: [___________]
[___________]
[________]: [___________]
[________]: [___________]
[________]: [___________]
- --------------------------------------------------------------------------------
MCI PROPRIETARY
3
<PAGE>
MCI Network Integration & Standard Engineering [_________________]
Final; 8/3/94 [_______________________]
- --------------------------------------------------------------------------------
[__________] [_________________________________________________________].
[_________________________________________________________].
[_________________________________________________________].
3.2 Jitter
[__________________________________________________________________].
- --------------------------------------------------------------------------------
MCI PROPRIETARY
4
<PAGE>
MCf Network Integration & Standard Engineering [_________________]
Final; 8/3/94 [________________________]
- --------------------------------------------------------------------------------
3.3 DS-1 Access Performance and Availability Objectives
[___________________________________________________________________].
[__________________________________________________________________].
Table 1. [____________________________________________________________]
<TABLE>
<CAPTION>
================================================================================
<S> <C>
*** Information in this table has been omitted pursuant to a request for
confidential treatment. The omitted portions have been filed separately with
the Securities and Exchange Commission.***
================================================================================
</TABLE>
Table 2. [___________________________________]
<TABLE>
<CAPTION>
================================================================================
<S> <C>
*** Information in this table has been omitted pursuant to a request for
Confidential treatment. The omitted portions have been filed separately with
the Securities and Exchange Commission.***
</TABLE>
________________________________________________________________________________
MCI PROPRIETARY
5
<PAGE>
MCI Network Integration & Standard Engineering [_________________]
Final; 8/3/94 [_______________________]
- --------------------------------------------------------------------------------
Table 3. [_____________________________________________]
<TABLE>
<CAPTION>
================================================================================
<S> <C>
*** Information in this table has been omitted pursuant to a request for
confidential treatment. The omitted portions have been filed separately with
the Securities and Exchange Commission.***
================================================================================
Table 4. [______________________________]
================================================================================
<S> <C>
*** Information in this table has been omitted pursuant to a request for
confidential treatment. The omitted portions have been filed separately with
the Securities and Exchange Commission.***
================================================================================
</TABLE>
4. DS-3 SPECIFICATIONS
[________________________________________________________________________]
4.1 DS-3 Electrical Interface Specifications
[________________________________________________________________].
[__________________________________]
[________________________________________________________________].
[________________________________________________________________]
________________________________________________________________________________
MCI PROPRIETARY
6
<PAGE>
MCI Network Integration & Standard Engineering [_________________]
Final; 8/3/94 [________________________]
- --------------------------------------------------------------------------------
[________________________________________________________________].
[________________________________________________________________].
4.2 Jitter DS-1 & DS-3
[________________________________________________________________].
4.2.1 Jitter To1erance
[________________________________________________________________].
[________________________________________________________________].
4.2.2 Jitter Transfer
[________________________________________________________________].
4.2.3 Jitter Generation
________________________________________________________________________________
MCI PROPRIETARY
7
<PAGE>
MCI Network Integration & Standard Engineering [_________________]
Final; 8/3/94 [________________________]
- --------------------------------------------------------------------------------
[________________________________________________________________].
[________________________________________________________________].
4.2.4 Jitter Enhancement
[________________________________________________________________].
________________________________________________________________________________
MCI PROPRIETARY
8
<PAGE>
MCI Network Integration & Standard Engineering [________________]
Final; 8/3/94 [________________]
- --------------------------------------------------------------------------------
[________________]
- --------------------------------------------------------------------------------
***Information in this table has been omitted pursuant to a request for
confidential treatment. The omitted portions have been filed separately with the
Securities and Exchange Commission.***
________________________________________________________________________________
MCI PROPRIETARY
9
<PAGE>
MCI Network Integration & Standard Engineering [_______________]
Final; 8/3/94 [_______________]
- --------------------------------------------------------------------------------
4.3 DS-3 Access Performance and Availability Objectives
[__________________________________________________________________].
[__________________________________________________________________].
Table 5. [_______________]
<TABLE>
<CAPTION>
================================================================================
<S> <C>
*** Information in this table has been omitted pursuant to a request for
confidential treatment. The omitted portions have been filed separately with
the Securities and Exchange Commission.***
================================================================================
</TABLE>
Table 6. [_______________]
<TABLE>
<CAPTION>
================================================================================
<S> <C>
*** Information in this table has been omitted pursuant to a request for
confidential treatment. The omitted portions have been filed separately with
the Securities and Exchange Commission.***
================================================================================
</TABLE>
________________________________________________________________________________
MCI PROPRIETARY
10
<PAGE>
MCI Network Integration & Standard Engineering [_________________]
Final; 8/3/94 [________________________]
- --------------------------------------------------------------------------------
5. INDUSTRY STANDARDS COMPLIANCE LIST:
[_____________________________________________________________________________].
[____________________________________]
[____________________________________]
[____________________________________]
[____________________________________]
[____________________________________]
[____________________________________]
[____________________________________]
[____________________________________]
[____________________________________]
________________________________________________________________________________
MCI PROPRIETARY
11
<PAGE>
EXHIBIT C
---------
TROUBLE REPORTING NUMBERS
ESCALATION LIST
IFN Operations Escalation List IFN Sales Escalation List
- -------------------------------- -------------------------
IFN Network Control Center Tom Schroeder (VP Sales & Marketing)
1-800-374-2350 706-645-8991 Office 706-645-8541
Fax 706-645-8989 Pager 800-336-7032 PIN 516763
Fax 706-645-8989
1st Level Escalation Home 770-998-3545
Network Control Center Lead Technicians
706-645-8991 Fax 706-645-8989
2nd Level Escalation
Network Control Center Manager - Bill Raines
Office 706-645-9012
Fax 706-645-8989
Pager 800-336-7032 PIN 518644
3rd Level Escalation
Director of Operations - Frank Wilcox
Office 706-645-8996
Fax 706-645-8989
Pager 800-336-7032 PIN 517001
4th Level Escalation
VP Operations - Steve Moses
Office 706-645-8658
Fax 706-645-8989
5th Level Escalation
President - Drew Walker
Office 706-645-9007
Fax 706-645-8989
20
<PAGE>
EXHIBIT D
---------
PRICING SCHEDULE
I. [_________________________]
---------------------------
Beginning in the first month following the date which is [____________] after
the Effective Date of the Agreement and continuing until the expiration of the
Initial Term of the Agreement, MCI shall maintain Service Orders pursuant to the
Agreement [____________________________________________________________________]
to LESSOR. This [__________________________] shall include all [_________] and
[_____________________] listed herein, as well as all [__________] by MCI with
respect to Existing Capacity. If MCI falls in any given month to meet the
[________________________], then the [____________] for such month will be the
[________________________].
II [_________] for Tier A - A City Pairs:
--------------------------------------
The following are the rates applicable to any Service Order in which both end
points of a city pair are among the list in Tier A, set forth in Section VIII
below.
All rates are based [_____________________________]:
- --------------------------------------------------------------------------------
[__] [_____]
[_______________________________________________________________].
[__] [_____]
[_______________________________________________________________].
[______________________________________________________________________].
- --------------------------------------------------------------------------------
[____________________] [___________________] [____________________]
[___] [____] [____] [____]
[___] [_] [____] [_____]
[_____________________________________________________________________________].
OC-N Services are billed at a [__________________].
- --------------------------------------------------------------------------------
21
<PAGE>
III [_________] for Tier A - B and Tier B -B City Pairs:
----------------------------------------------------
The following applies to any Service Order in which at least one end point of a
city pair is among the list in Tier B set forth in Section VIII below:
DS-1 and DS-3 service for any city pair shall be provided to MCI by LESSOR at a
monthly rate which is [_______________________________________] for the same or
comparable service. [________________________________________________________]
[______________________________________________________________________________]
[______________________________________________________________________________]
[______________________________________________________________________________]
If LESSOR elects [_____________________________________________________________]
by delivering written notice of same to MCI within [________] days after receipt
of MCI's notice, then MCI [__________________________] which terminate in a Tier
B city, [_________________________] (including, without limitation,
[______________________________ pursuant to Article 11, paragraph (b) of this
Agreement). In the event MCI cancels any such circuit(s), LESSOR further agrees
to reduce the [_________________________] outlined in Section I. above by an
amount equal to the existing monthly charge for the [_______] circuit(s).
Notwithstanding the foregoing, the 12th, 24th, and 36th mos. of Service [______]
(during the term of any original Service Order and during the term of any
renewals thereof, as applicable).
IV. Existing Capacity:
------------------
Notwithstanding anything in any other agreement or Service Order to the
contrary, all Existing Capacity provided to MCI by LESSOR on the Effective Date
of this Agreement shall thereafter be priced at the monthly rates in Exhibit E.
---------
[_______________________], such monthly rates were computed using the pricing in
[_______________________] of this Exhibit D, as applicable. MCI shall receive a
---------
[____] against the first invoice due hereunder for [______________] covering
periods after the Effective Date, to the extent such charges are [__________
_____________] hereunder with respect to such Existing Capacity.
[_________]:
1. Existing DS-3 Services provided to MCI by LESSOR terminating in
[__________] will
continue to be priced at [________________________].
2. Existing DS-3 Services provided to MCI by LESSOR terminating in [____],
will continue to be priced at [_______________________].
V. [_____________________]:
------------------------
The [__________] for any Service Order shall be as follows:
DS-1 DS-3 OC-12 0C-48
[______________] [____________] [_____________] [____________]
22
<PAGE>
VI. [__________________]:
---------------------
[__________________] shall not apply to DS-1 Services.
[_______________________________] for DS-3 Service(s) shall be [__] for the
first DS-3 per Service Order, and [__] for each DS-3 thereafter.
[_______________________________] for OC-12 Service(s) shall be [_____] per
Service Order.
[_______________________________] for 0C-48 Service(s) shall be [_____] per
Service Order.
VIL [______________________]: [__________] Monthly
------------------------ ------------ -------
[______________________________] [_____] [_____]
[________________] [_____] [_____]
[___________________________________________] [__] [_____]
[___________________________________________] [__] [_____]
[___________________________] [_____] [_____]
VIII Tier Cities:
-----------
TIER A CITIES TIER B CITIES
[_________] [__________] [___________]
[_________] [__________] [___________]
[_________] [__________] [___________]
[_________] [__________] [___________]
[_________] [__________] [___________]
[_________] [__________] [___________]
[_________] [__________] [___________]
[_________] [__________] [___________]
[_________] [__________] [___________]
[_________] [__________] [___________]
[_________] [__________] [___________]
[_________] [__________] [___________]
[_________] [__________] [___________]
IX. [______________]:
-----------------
Notwithstanding the pricing set forth in Sections II, III, VI, and VII of this
Exhibit D, MCI and LESSOR acknowledge and agree that LESSOR may from time to
- ---------
time offer Service to MCI [____________] for the purpose of establishing [______
_________________________]. Any such [_________] shall be set forth in the
Service Order for the applicable Service.
23
<PAGE>
EXHIBIT E
---------
*** Information in this Exhibit E (Pages 24 & 25) has been omitted pursuant to a
request for confidential treatment. The omitted portions have been filed
separately with the Securities and Exchange Commission.***
EXISTING CAPACITY
TIER A-A LEASES:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
CITY PAIR TYPE SERVICE ORDER IFN IFN LEASE [_______]
EXPIRATION CIRCUIT PRICE/MO.
DATE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
</TABLE>
[____________________________________________].
[_________________________]
[Continued on next page]
24
<PAGE>
EXHIBIT E (Con't)
-----------------
*** Information in this Exhibit E (pages 24 & 25) has been omitted pursuant to a
request for confidential treatment. The omitted portions have been filed
separately with the Securities and Exchange Commission.***
<TABLE>
<CAPTION>
TIER A-B or B-B LEASES
- --------------------------------------------------------------------------------------------
CITY PAIR TYPE SERVICE ORDER IFN IFN LEASE [_______]
EXPIRATION CIRCUIT PRICE/MO.
DATE
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
</TABLE>
[________________________________________________].
25
<PAGE>
EXHIBIT 10.49
-------------
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[_____]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
TELECOMMUNICATIONS SYSTEM
MAINTENANCE AGREEMENT
THIS TELECOMMUNICATIONS SYSTEM MAINTENANCE AGREEMENT, hereinafter ("TSM")
made and entered into as of January 26, 1995, by and between Interstate
FiberNet, a Georgia General Partnership, having an office at 910 First Avenue,
West Point, GA 31833 ("IFN") and Sprint Communications Company L.P., a Delaware
Limited Partnership, having an office at 903 East 104th Street, Kansas City, MO
64131 ("Sprint"), IFN and Sprint being collectively referred to herein as the
"Parties".
WHEREAS, IFN has caused to be constructed a telecommunications system along
a Route between [____________] and [_________] as depicted in Exhibit E
consisting of approximately [___________________________________________________
______________________________]; and
WHEREAS, IFN and Sprint acknowledge their desire that Sprint perform
operations and maintenance functions for the buried cable portion of the route
and the potential emergency restoral of the [_______________________] of said
route (excluding the [_______________________];
NOW THEREFORE, in consideration of the mutual promises and covenants herein
contained, the parties mutually agree as follows:
ARTICLE 1. SCOPE OF AGREEMENT
Sprint shall perform the operations and maintenance functions which are
herein defined as routine maintenance and demand maintenance, [_________________
____] on the route, excluding [____________________] and the non-service
effecting demand maintenance elected to be provided by IFN. Sprint's operations
and maintenance functions shall be performed in accordance with the following
Exhibits attached hereto, which by this reference are incorporated herein.
EXHIBIT A Sprint and IFN Operations Escalation List
EXHIBIT B [__________] Surveillance Specifications
EXHIBIT C Splicing Specifications
EXHIBIT D Annualized Cable Cuts and Restoration Times
EXHIBIT E System Route Diagram
Page 1
<PAGE>
ARTICLE 2. DEFINITIONS
Unless otherwise defined herein, the terms used in this Agreement shall
have their normal or customary meanings. In addition, for the purpose of this
Agreement, the following terms shall have the meanings set forth:
A. Routine Maintenance
Routine Maintenance shall include and be limited to only the following
items:
1. Twenty-four hour remote surveillance of the Sprint Fibers from Sprints
Network Control Centers for the purpose of identifying and correcting
fiber related dysfunction and monitoring alarms and the performing
appropriate dispatch to restore the fiber to normal specifications as
outlined herein. Such dispatch includes associated time, travel and
labor costs to complete repair or alarm restoral. IFN repair costs,
including shipping to and from the manufacture, are not a part of
Routine Maintenance.
2. Dispatching, and conducting normal locates of the IFN fiber optic cable,
excluding the [____________]of the Route. Normal locates shall be
further defined as all locates except those where a third party is
paralleling the Route within a distance of 10' of the buried IFN fiber
optic cable for a longitudinal distance in excess of one contiguous
mile. Such locates falling in the exception shall constitute a Demand
Maintenance condition.
3. Monitoring the excavating activities and providing protection of the
buried fiber optic cable by third parties. Normal monitoring shall be
further defined as all monitoring except those where a third party is
paralleling the Route within a distance of 10' of the buried IFN fiber
optic cable for a longitudinal distance in excess of one contiguous
mile. Such monitoring falling in the exception shall constitute a Demand
Maintenance condition.
4. Annual testing of all Sprint Fibers and recording the measurements and
maintaining records of such.
5. Periodic surveillance of the buried portion of the Route to identify
potential problems from construction, road maintenance activities, or
other potential hazards to the fiber, as specified in Exhibit B.
B. Demand Maintenance
It is understood and agreed to by the Parties that if an item is not
specifically covered in the definition of Routine Maintenance, it shall be
deemed to be Demand Maintenance. IFN shall pay Sprint for all reasonable Demand
Maintenance performed by Sprint hereunder at Sprint's Costs. IFN has the option
to perform non-service affecting Demand Maintenance ("NSADM") within 14 days
of notification from Sprint. In the event that the NSADM is not completed in 14
days, then Sprint shall complete the required NSADM at Sprint's sole discretion
and IFN shall reimburse Sprint for its Cost. Sprint, at Sprint's sole
discretion, will also perform non-service affecting
Page 2
<PAGE>
Demand Maintenance during the 14 day period at IFN request and IFN shall
reimburse Sprint for its Cost. As used herein, "service affecting" shall mean
any maintenance, repair, activity, manipulation, upgrade, change-out or work on
or relating to the fiber optic cable, IFN Electronics and environmental systems
and any electrical devices attached to such items. It is the express intent of
the parties that Sprint shall provide, in Sprint's sole discretion, Demand
Maintenance which is service affecting or potentially service affecting on the
System. Additionally, Demand Maintenance shall include, at Sprint's sole option,
but not be limited to the following items:
1. Dispatch and subsequent repair to IFN Electronics.
2. Structural repair, painting, weather sealing, water proofing, removal of
graffiti, and replacement of roofs, at Regenerator Locations housing
Sprint Electronics.
3. Repair (including manipulation of fibers), relocation, or replacement of
fiber optic cable, splices, handholes, cable warning signs, conduit or
other outside plant appurtenances damaged through natural or unnatural
causes.
4. Completing extraordinary cable locates and providing cable protection as
noted in Item A.2. above.
5. Providing standby personnel to perform restoral services to the System
in anticipation of an impending natural disaster (i.e., flood, storm, or
other force majeure event). Sprint's reimbursement for Costs for this
standby service shall be limited to 200 man-hours per year. Any Costs in
excess of this limitation in a year shall be borne by Sprint.
C. Costs
Sprint's actual costs reasonably incurred and directly attributable to the
performance of a Demand Maintenance project on the Route is defined as the sum
of the following:
1. "Direct Labor Costs" which shall mean the actual direct cost (i.e.,
wages or salaries) of engineering, craft and immediate craft supervision
as specifically applicable to the performance of the project as recorded
through Sprint's positive labor time reporting system, and shall not
include any Sprint mark-up, margin or profit.
2. "Direct Material Costs" which shall mean the actual invoiced cost or
material transfer cost (including freight costs) for material used in
performance of the project and shall not include any Sprint mark-up,
margin or profit.
3. "Subcontractor Payments" which shall mean the actual amounts paid by
Sprint to subcontractors for the performance of work included in a
project and shall not include any Sprint mark-up, margin or profit.
Page 3
<PAGE>
4. "Overhead Costs" which shall mean:
a. Sprint shall charge Overhead Costs to IFN at one hundred percent
(100%) of Direct Labor Costs for a project.
b. Sprint shall charge Overhead Costs to IFN at fifty percent (50%) of
Direct Material Costs and Subcontractor Payments for a project.
D. IFN Electronics
The fiber optic communications equipment owned and used by IFN to
facilitate the transmission of communications over the fiber optic cable
installed by IFN, excluding the Sprint Electronics.
E. Regenerator Location
Site in which incoming signals are regenerated and retransmitted on an
outgoing circuit.
F. Sprint Electronics
The fiber optic telecommunications equipment owned and used by Sprint to
facilitate the transmission of communications over the Sprint Fibers.
G. System
The fiber optic telecommunications network constructed by IFN pursuant to
the TSA, including, but not limited to, all fiber cables, environmental systems,
the right-of-way, all IFN Sites and facilities.
H. TSA
The Telecommunications System Agreement by and between IFN and Sprint.
ARTICLE 3. MAINTENANCE
This article specifies terms and conditions applicable to Sprint's provision of
service to IFN and to the System.
1. GENERAL:
a. In operating, servicing and maintaining the System or parts thereof, Sprint
will exercise reasonable business judgment to protect and preserve the physical
assets, conduct its affairs practically and apply sound business practices and
principles, taking into consideration technological advances to assure that the
processes of the System do not materially and adversely deviate from evolving
industry practice.
b. In performing its service hereunder, Sprint shall take workmanlike care to
Page 4
<PAGE>
prevent impairment to the signal continuity and performance of the System. The
precautions taken by Sprint shall include notification to the IFN designated
point of contact of any maintenance to the System which is potentially service
affecting. In addition Sprint shall reasonably cooperate with IFN in sharing
information and analyzing disturbances regarding the System, including providing
a summary of alarms relating to a specific event following a request by IFN.
c. Sprint shall operate, service and maintain a Network Control Center
staffed twenty-four (24) hours a day by trained and qualified personnel. Sprint
shall maintain a toll-free telephone number to contact personnel at the Control
Center. Control Center personnel shall dispatch maintenance and repair personnel
along the Route to affect repairs as defined for each route segment, whether
through the Network Control Center's remote surveillance equipment or otherwise.
d. [_________________], Sprint responsibilities - Sprint maintenance personnel
shall at Sprint's sole option, perform Demand Maintenance of Regenerator
Locations along the Route. IFN has the right to request that Sprint perform
emergency cable restoral service, which service is deemed to be Demand
Maintenance, in the event of [_____] outage. However, this type of service will
be performed at Sprint's sole discretion. Such restoral shall be limited to the
placement [___________________________________________________________]portion
of the Route for the temporary restoral service to IFN and Sprint fibers.
e. [___________________], Sprint responsibilities - Sprint maintenance
personnel shall perform Routine and Demand Maintenance and route patrol of the
buried fiber optic cable along the Route. Sprint maintenance personnel shall at
Sprint's sole option, perform Demand Maintenance of Regenerator Locations along
the Route. In addition, Sprint shall perform emergency cable restoral service,
which service is deemed to be Demand Maintenance.
f. Sprint maintenance personnel shall be available for dispatch twenty-four
(24) hours a day, seven days a week. Sprint shall use reasonable efforts to have
its first maintenance employee at the site requiring Demand Maintenance within
four (4) hours from the time of the alarm identification by Sprint's Network
Control Center or from the time of notification to Sprint's Network Control
Center by IFN, whichever occurs first. The current Sprint Network Control Center
telephone numbers are set forth in Exhibit A. The Sprint Network Control Center
shall either accept or deny IFN's request for Demand Maintenance within fifteen
(15) minutes of notification of request for Sprint to perform Demand Maintenance
by IFN.
g. Sprint shall avoid taking any operation, service or maintenance action
between 0700-2300 local time, Monday through Friday, inclusive, which is
reasonably expected to have disruptive impact on the continuity or performance
level of the System. Restricted activities during this period shall include
manually initiated actions that cause operation of the IFN automatic fiber
electronics protection switching equipment. However, specifically excluded from
such restricted activities are any actions required to restore continuity to a
severed or partially severed fiber optic cable, restore dysfunctional power and
ancillary support equipment, and to correct any potential jeopardy conditions.
Page 5
<PAGE>
h. Sprint shall coordinate with the IFN designated point of contact no later
than five (5) business days prior to the date of any planned non-emergency
operation, service and maintenance activity to be accomplished that is
reasonably expected to produce any signal discontinuity to the System including
that imposed by the operation of the fiber electronics protection switching
equipment. In the event that a Sprint planned activity is canceled or delayed
for whatever reason as previously notified, Sprint shall notify the IFN
designated point of contact at Sprint's earliest opportunity and will comply
with the provisions of the previous sentence to re-schedule any delayed
activity. The current IFN telephone numbers are set forth in Exhibit A.
i. Sprint shall provide IFN redline as-built drawings within thirty (30) days
of a request by IFN and new or updated as-built drawings within one hundred
eighty (180) days of completion of any cable relocation or other engineering
changes affecting the buried fiber portions of the Route.
j. Sprint shall use its best faith efforts to meet maintenance specification
on the IFN fiber cable that Sprint sets for its own network. IFN may not use
these maintenance specifications for measuring Sprint's performance hereunder.
It is expressly understood that the maintenance standards and specifications to
which Sprint will be held accountable to are included in Exhibits B through D.
k. If IFN believes that Sprint has failed to use reasonable efforts to perform
its operation, service and maintenance obligations in accordance with this TSM,
then IFN shall utilize Exhibit A, Sprint Operations Escalation List, to report
and seek immediate initial redress of such exceptions to the operation, service
and maintenance objectives. In the event of a material service affecting event,
if IFN has contacted up through the highest level on the Escalation List and has
not obtained resolution and/or not received a call back from the senior Sprint
executive within two hours, then IFN may cure by providing its own maintenance
service to keep the System operational. In such case, IFN may withhold an amount
equal to their direct cost incurred in curing such material service affecting
event. In no event will the amount(s) withheld exceed [_______]in any month.
Sprint shall also have the right to audit the direct costs attributable to the
maintenance cost performed. This is the only remedy available to IFN under the
TSM.
2. REGENERATOR AND POP LOCATIONS
a. Sprint shall provide at Sprint's sole option, Demand Maintenance to operate
and maintain the regenerator locations in a manner which will permit the normal
operation of the Route.
b. Sprint shall provide at Sprint's sole option, Demand Maintenance for [____
____________________________________________]provided by IFN which are necessary
at regenerator locations for the Route, with the exception of non-service
affecting Demand Maintenance as outlined herein.
c. At a minimum, Sprint's Network Control Center shall monitor alarms for
intrusion, high/low temperature, fire or smoke, toxic/explosive gas (where
applicable),
Page 6
<PAGE>
DC and commercial AC power, and high water (where applicable). Upon receipt of
an alarm, Sprint shall take appropriate action. Sprint shall be responsible for
taking all emergency corrective actions, likewise Sprint at its sole discretion
shall take immediate corrective action on Routine or Demand Maintenance items.
3. IFN FIBER AND CABLE
a. Sprint shall use reasonable efforts to service and maintain the IFN fiber
cable in good and operable condition and in a workmanlike manner as described
under Routine and Demand Maintenance.
b. Sprint shall have no obligation (including, but not limited to, any
obligation for any cost of improvement, repair or replacement) with respect to
defects in the material or workmanship (excluding the workmanship of splices
performed by Sprint subsequent to the effective date of this agreement). Sprint
agrees, however, to perform replacements, improvements or make any reasonable
repairs required to IFN fiber cable due to defects in the material or
workmanship of the IFN fiber cable and such replacements, improvements or
repairs shall be treated as Demand Maintenance.
c. Sprint shall perform any operation, service and maintenance as required
under this TSM on the System if such work is necessitated by IFN negligent or
improper use of IFN fiber cable. However, IFN shall pay Sprint the Demand
Maintenance charges for such operation, service and maintenance, including any
operations, service and maintenance to the System, or any portion thereof which
results from IFN negligent or improper use of IFN fiber cable.
d. On the [____________________] portion of the Route, Sprint maintenance
personnel shall perform Routine and Demand Maintenance and route patrol of the
buried fiber optic cable along the IFN Route. Sprint maintenance personnel shall
perform at Sprint's sole option, Demand Maintenance of IFN Regenerator Locations
along the Route.
e. IFN shall register with all applicable state One Call Agencies where the
Route traverses. IFN shall place adequate Cable Warning Signs during
construction to warn the general public of the presence of IFN Fiber Optic
Cable; such Cable Warning Signs shall include the Sprint Call Before You Dig
Center 800 number (1-800-621-0579). IFN shall be responsible for the costs of
receiving all locate information from the state One Call Agencies. IFN shall
deliver to Sprint, in a form acceptable to Sprint, all One Call Agency tickets
that it receives within ten (10) minutes of receipt. Sprint shall maintain a
Call Before You Dig (CBYD) Center available on a twenty-four (24) hour, seven
day a week basis to receive requests for locates from both the state One Call
Agencies and demand locates from the general public through route Cable Warning
Signs. Sprint shall dispatch arid perform all required cable locates in such
manner as to assure reasonable protection of the System.
f. Sprint shall be responsible on a Demand Maintenance basis for correcting or
repairing IFN fiber cable discontinuity or damage on the [_____________________]
segment of the Route. Sprint shall be responsible for providing billing
information to IFN for emergency repair of the IFN fiber cable. IFN shall pay
Sprint for the emergency
Page 7
<PAGE>
repair as Demand Maintenance; collection of damages from a third party shall be
the sole responsibility of IFN.
g. Sprint shall use reasonable efforts to achieve the objectives set forth in
Exhibit D relating to the repair of IFN fiber traffic-affecting discontinuity.
Sprint shall maintain sufficient capability to teleconference with the IFN
designated point of contact during an emergency repair in order to provide
continuous communication. Within twenty-four (24) hours after completion of an
emergency repair, Sprint shall commence its planning for permanent repair, shall
notify the IFN designated point of contact of such plans, and shall implement
such permanent repair within an appropriate time thereafter.
h. Whenever splicing is required under this Agreement, Sprint shall use
reasonable efforts to comply with the Splicing Specifications as provided in
Exhibit C. Sprint shall provide to IFN any modifications to these specifications
for IFN approval, which shall not be unreasonably withheld.
4. CONTRACTING
a. To the extent that Sprint contracts to any contractor all or any portion of
its rights and obligations under the TSM such contractor may be permitted to
assume some or all of Sprint's obligations under the TSM as applicable.
ARTICLE 4. TERM
The initial Term of the TSM shall commence as of the date of Acceptance as
defined in Article 5 of the TSA and shall remain in force and effect for a
period of five (5) years ("Initial Term"). Thereafter, Sprint will have [_______
________________] options to extend the term. Each option to extend the Term
shall be exerciseable by Sprint as set forth in Article 5.C. The TSM shall be
implemented in segments as defined in Article 1.7h of the TSA.
ARTICLE 5. COMPENSATION
A. Until Acceptance of the Sprint Fibers by Sprint or [____________], which
ever occurs first, the compensation defined in Article 1.7(h) of the TSA
shall control. Following Acceptance of the Sprint Fibers by Sprint or [____
_______], which ever occurs first, for Routine Maintenance during the term
of this TSM, IFN shall pay [____________________________________] per
month to Sprint for all Routine Maintenance the buried cable on the Route
(as defined in Exhibit B), beginning thirty (30) days after Acceptance of
the Sprint Fibers, as defined in Article 5 of the TSA, and monthly
thereafter for the term of the TSM. Annually from [____________], the
recurring monthly payment for Routine Maintenance will be adjusted by the
Consumer Price Index (CPI) as defined by the U.S. Department of Labor as
published effective December 31 of the previous year.
Page 8
<PAGE>
B. For Demand Maintenance, Sprint shall charge IFN on a project basis it's
Costs, as defined in Article 2, Section C, of this TSM.
C. At the end of the initial Term and all renewals, Sprint and IFN shall
review the actual costs associated with providing Routine Maintenance and
Demand Maintenance and shall negotiate new pricing to fairly accommodate
the actual cost. Sprint, at Sprint's sole discretion, and if requested by
IFN, may agree to the non-renewal of this TSM.
The existing TSM shall remain in effect after the Initial Term, until IFN
and Sprint have negotiated a renewal to the TSM, unless the non-renewal of
this TSM is jointly agreed upon. In the event that IFN and Sprint are
unable to negotiate a renewal of this TSM within sixty (60) days of the end
of the Initial Term, either party may submit the issue to arbitration
pursuant to Article 15 of the TSA, in which arbitration the arbitrators
shall apply fair market value and other applicable industry standards.
ARTICLE 6. LIMITATION OF LIABILITY
A. Except as stated in this Agreement, neither Party shall be liable to the
other Party for:
1. Any claim by third parties arising out of any act or omission of a
Party, its users or any other entity furnishing services or facilities
for use in conjunction with the Service provided hereunder;
2. Any Claim arising out of a breach in privacy or security of
communications transmitted over either Party's facilities;
3. Any failure of facilities associated with Service provided hereunder, or
for any mistakes, omissions, interruptions, delays errors or defects in
transmission occurring in the course of furnishing the Service.
B. The liability of each Party for defaults, breaches or representations,
warranties, and agreements hereunder, or in any other respect hereunder,
shall not exceed an amount equal to the amounts which are charged for
Service provided under this Agreement for the month in which the default or
breach occurred. In no event will either Party be liable to the other Party
for any indirect, consequential, special, incidental, or punitive damages,
or for any lost profits of any kind or nature whatsoever, regardless of the
foreseeability thereof.
ARTICLE 7. CONFIDENTIAL INFORMATION
IFN shall preserve, with the same degree of care accorded its own
proprietary information, but in no event less than reasonable care, this TSM and
Sprint confidential or proprietary information obtained in Sprint's performance
of operations and maintenance functions for IFN, and shall be bound by the
Nondisclosure
Page 9
<PAGE>
Agreement attached as Exhibit G to the TSA. IFN shall not, without the prior
written consent of Sprint, in any manner advertise or publish the fact that
Sprint has entered into this Agreement. It is understood and agreed by Sprint
that IFN has the right to disclose this Agreement to governmental agencies
having requisite governmental authority over the terms of this Agreement,
provided that IFN has given Sprint prior written notice of impending disclosure,
and Sprint has a reasonable opportunity to defend against such disclosure. IFN
shall retain the right to notify its capacity customers that Sprint is providing
maintenance for the buried fiber plant and may update its customers on restoral
progress by Sprint in the event of an outage.
ARTICLE 8. INDEMNIFICATION
Each Party agrees to indemnify and hold harmless the other Party from
claims by persons not a party to this Agreement for injuries or damages from the
negligent or willful actions of the indemnifying Party's employees, agents,
contractors, or representatives.
ARTICLE 9. INSURANCE
If Sprint is to perform work on IFN's premises, Sprint shall obtain and
maintain in force (for the Term) Services Commercial General Liability
Insurance, including coverage for contractual liability and personal insurance,
personal injury or death or property damage, in the amount not less than [______
______________________________] per occurrence, insuring Sprint and naming IFN
as an additional insured, and waiving all of insurer's right of subrogation
against IFN. Before commencing work on IFN premises, Sprint will provide
satisfactory evidence of the required insurance and stating that no policy may
be canceled or materially altered without first giving IFN thirty (30) days
written notice.
ARTICLE 10. COMPLIANCE WITH LAWS
Sprint, in the providing of operations and maintenance functions to IFN,
will comply with all applicable state, federal and local laws, orders and
judicial and administrative law decisions, and executive orders (including
Executive Order 11246) and regulations, including, but not limited to, matters
regarding occupational health and safety, and the prohibition of employment
discrimination.
ARTICLE 11. TAXES
IFN shall be fully responsible for the payment of any and all ad valorem,
property, franchise, gross receipts, sales, use and other taxes directly
applicable to the System and the maintenance services it purchases pursuant to
this TSM between the Parties (except income taxes on the revenue of Sprint and
any taxes on Sprint personnel or assets).
Page 10
<PAGE>
ARTICLE 12. MISCELLANEOUS
A. Any work performed by Sprint on IFN premises shall be performed while
taking all necessary precautions to prevent the occurrence of any injury to
persons or property during the progress of such work and shall adhere to
Sprint security and operational procedures, policies and operation.
B. Sprint shall immediately notify IFN by telephone (followed by written
confirmation within twenty-four hours) of any product used in providing
services hereunder which fails to comply with any applicable safety rules
or standards of concerned governmental agencies (including the
Environmental Protection Agency), or which contains a defect which could
create or present a substantial risk to stored data or software, or which
presents a substantial risk to the public health or of injury to the public
or to the environment.
C. Except as specifically provided herein, this TSM does not constitute either
Party as the agent or legal representative of the other Party, and does not
create a partnership of joint venture between the Parties. Each Party may
engage in and possess other business ventures that are competitive with the
services under this TSM. This TSM is not intended to be an exclusive TSM
for any services.
D. This TSM, together with all Exhibits, shall constitute the entire agreement
and no negotiations or discussions prior to execution shall be of any
effect.
E. The invalidity in whole or in part of any provision shall not affect the
validity of any other provision.
F. The right and remedies of the Parties shall be cumulative and in addition
to any other rights and remedies provided by law or equity. A waiver of a
breach of any provision hereof shall not constitute a waiver of any other
breach. The laws of the state of Kansas shall govern this Agreement.
G. No subsequent agreement concerning the System shall be effective unless
made in writing and executed by authorized representatives of the Parties.
H. Notices shall be in writing, mailed certified with return receipt
requested, effective upon receipt and sent to:
Sprint: Sprint Communications Company L.P.
903 East 104th Street
Kansas City, Missouri 64131
ATTN.: Network Real Estate
Copy to: Sprint Communications Company L.P.
8140 Ward Parkway
Kansas City, Missouri 64114
ATTN.: Law Department
Page 11
<PAGE>
Interstate FiberNet: Interstate FiberNet
910 First Avenue
P.O. Box 510
West Point, GA 31833
Attn.: Steve Moses
Copy to: Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, DC 20004
Attn.: James J. Rosenhauer
or to replacement addresses that may be later designated in writing.
I. In the event suit is brought or an attorney is retained by either Party to
enforce the terms of this TSM, the prevailing Party shall be entitled to
recover, in addition to any other remedy, reimbursement for reasonable
attorneys' fees.
J. The terms and provisions of this Agreement that by their sense and context
are intended to survive the performance thereof by the Parties shall
survive the completion of performance and termination of this Agreement.
K. Neither Party may assign this Agreement without the prior written consent
of the other Party, except that Sprint may assign its rights and
obligations hereunder to a legal entity which is a successor, assign,
subsidiary or affiliate of Sprint Corporation without notice or consent.
IN WITNESS WHEREOF, the Parties have executed this Agreement in duplicate as of
the date and year first above written.
SPRINT COMMUNICATIONS COMPANY LP. INTERSTATE FIBERNET,
A DELAWARE LIMITED PARTNERSHIP. A GEORGIA GENERAL PARTNERSHIP.
By:/s/ George Fuciu By:/s/ Steve Moses
----------------------------------- ----------------------------
Name: George Fuciu Name: Steve Moses
Title: Senior Vice President, Network Title: General Manager
Date: 1/26/95 Date: 1/30/95
--------------------------------- --------------------------
Page 12
<PAGE>
EXHIBIT A
Operations Escalation List
SPRINT
Sprint Network Control Center
1-800-669-1246
1st Level of Escalation
Network Control Center Lead Technicians
1-800-669-1246
2nd Level of Escalation
Network Control Center Supervisors
404-859-8802
3rd Level of Escalation
Logistics and Control Center Manager
404-859-5311
4th Level of Escalation
East Region Fiber Operations Director
404-859-5361
5th Level of Escalation
Vice President Operations
913-967-3510
All after hour escalation or notifications will be made through the Network
Control Center at 800-669-1246.
Interstate FiberNet
IFN Network Control Center
1-800-374-2350
1st Level of Escalation
Network Control Center Lead Technicians
1-800-374-2350
2nd Level of Escalation
Network Control Center Supervisor
706-645-9000
3rd Level of Escalation
Director of Operations
706-645-8996
4th Level of Escalation
Vice President Operations
706-645-8658
<PAGE>
***INFORMATION IN THIS EXHIBIT B (PAGES 1-3) HAS BEEN OMITTED PURSUANT TO
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED
SEPARATELY WITH SECURITIES AND EXCHANGE COMMISSION.***
EXHIBIT B
[___________]Surveillance Specifications
<PAGE>
***INFORMATION IN THIS EXHIBIT C HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***
EXHIBIT C
Splicing Specifications
<PAGE>
EXHIBIT D
Annualized Cable Cuts and Restorations Times
[________]:
- -----------
[________]
[________]
<PAGE>
EXHIBIT E
SYSTEM ROUTE DIAGRAM
(To be developed)
<PAGE>
EXHIBIT 10.50
-------------
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[_______]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
SPRINT COMMUNICATIONS COMPANY
FACILITIES AND SERVICES
AGREEMENT
THIS AGREEMENT is made and entered into this 26th day of January,
1995, by and between Sprint Communications Company L.P., a Delaware Limited
Partnership ("Sprint") whose principal address is 8140 Ward Parkway, Kansas
City, MO 64114 and Interstate FiberNet, a Georgia General Partnership, having an
office at 910 First Avenue, West Point, GA 31833 ("Customer"), Sprint and
Customer being collectively referred to herein as the "Parties".
WHEREAS, Customer desires to lease space from Sprint at Sprint's point-of-
presence ("POP") for the installation of equipment; and
WHEREAS, Customer may or may not contract with a local exchange carrier or
other third-party service provider (hereinafter "Representative") to install
and/or maintain such equipment in the leased space; and,
WHEREAS, Sprint desires to lease such space to Customer in conjunction with
the Telecommunications System Agreement between the parties and in accordance
with the terms and conditions stated herein,
NOW, THEREFORE, in consideration of the mutual promises and conditions set
forth herein, the Parties agree as follows:
1. Term. The term of this Agreement ("Term") shall commence on the date above
----
and shall continue for a minimum period of one (1) year thereafter to be
continuous with any Sales Agreement which may be in effect between the
Parties, unless terminated by either Party pursuant to the provisions of
Paragraph 16. The Term of this Agreement shall be automatically renewed for
successive [_______________] unless either Party provides written notice of
termination ninety (90) days prior to the end of the then current Term.
2. Equipment Rack Space. Sprint agrees to lease to customer, and customer
--------------------
agrees to lease from Sprint, during the Term, floor space and such other
space as is reasonably necessary for the installation of Customer-provided
equipment ("Equipment Rack Space") at the Sprint POP site(s) specified on
Exhibit "A" attached hereto and incorporated herein. Access to the
Equipment Rack Space shall be provided to Customer at all times upon
reasonable advance notice to Sprint, by Sprint escort only, at such rates
as are set forth in Paragraph 7. Customer accepts the Equipment Rack Space
"as is" and hereby covenants and agrees to use the Equipment Rack Space
only for the purposes set forth and in strict accordance with the terms and
conditions of any applicable Sprint leases, and further agrees to not do,
or omit to do, anything which will cause a breach of any of the terms or
conditions of the applicable Sprint leases or cause damage and/or injury to
the property and/or personnel of Sprint and/or other Sprint customers.
For lease of the Equipment Rack Space during the Term, Customer shall pay
Sprint: (i) a non-recurring site preparation charge of [_________________
__________________________] per each instance of rack and/or ancillary
services installation activity which includes up to two (2) consecutive
working days for installation supervision and escort (thereafter, the
escort rates outlined in Paragraph 7 will apply); and (ii) a monthly
recurring fee of [___________________________________] per each Equipment
Rack Space per Sprint POP site used, which shall include the cost of
electrical power furnished to Customer by Sprint. The non-recurring site
preparation charge and monthly recurring fee shall not begin until the
equipment specified in Exhibit "A" is installed. For the Sprint POP sites
located in [____________________________________________________________]
the non-recurring charge and monthly recurring fees identified above are
waived as long as the Telecommunications System Agreement between the
Parties is in effect.
<PAGE>
3. Site Clean Up. Customer will be responsible for removal of all installation
-------------
material and clean up of affected POP site(s) after completion of Customer
equipment installation in the Equipment Rack Space.
4. Demarcation Point. The point at which the Customer's network inter-connects
-----------------
with the Sprint network shall be the [__________________________________
___________________________________] hereinafter "Demarcation Point". The
Demarcation Point will designate the division of responsibility of
providing service and connectivity. Customer shall provide the necessary
interface cabling to the Demarcation Point. Sprint will be responsible for
the service from the Demarcation Point through the completion of the
circuit through the Sprint network The Customer will be responsible for the
service from the Demarcation Point at each Sprint POP site to the
Customer's premises.
5. Installation and Testing. Customer shall engineer, furnish, install and
------------------------
test, at its sole expense, all Customer-supplied equipment in the Equipment
Rack Space. Prior to installation, this Agreement shall be fully executed
-------------------------------------------------------------
by both Parties, and Customer shall submit to Sprint for its approval all
---------------
engineering plans and specifications pertaining to customer-supplied
equipment to be installed in the Equipment Rack Space. Installation and
testing by customer of equipment located in the Equipment Rack Space shall
at all times be under the direct supervision of a Sprint escort. Title to
equipment furnished by customer hereunder shall, at all times, remain in
Customer (or customer's Representative where applicable) and shall be
appropriately labelled.
6. Equipment Maintenance. During the Term, Customer shall provide maintenance
---------------------
on all Customer-supplied equipment installed in Equipment Rack Space.
All requests for escort service are to be made to the appropriate POP site
or Sprint-designated location for each Equipment Rack Floor Space location.
Contact telephone numbers for each POP site are specified or EXHIBIT "A",
and can be called 24 hours per day, 7 days a week.
7. Escort Rates. Sprint will provide escort service for customer to maintain
------------
its equipment, on a per call basis at the rate of [________________________
_________________]. Escort services are provided for emergency repair and
routine maintenance under guidelines as specified in Paragraph 22.
The escort rate shall apply to all Customer escort requests and are subject
to a one (1) hour minimum charge per call as well as the specifications as
noted in EXHIBIT "A".
8. Permits and Fees. Customer will be responsible for any permits and/or fees,
----------------
as required, between the Demarcation Point at each Sprint POP site to the
customer's premises.
9. Order Administration. Customer shall place orders from time to time during
--------------------
the Term for Sprint services by submitting to Sprint such information as
Sprint shall reasonably request.
10. Power. During the Term, Sprint shall furnish to customer electrical power
-----
necessary to meet the reasonable requirements of Customer at the POP
site(s) specified on Exhibit "A". If the power provided by Sprint causes
interference with the proper operation of Customer's equipment, the
Customer will be responsible for providing, at Customer's sole expense, any
filtering or regulation devices within the Equipment Rack Space to correct
the interference.
11. Transfer, Sale and Assignment. Customer shall not sell, assign, transfer or
-----------------------------
otherwise encumber any interest it has hereunder or may have in the
Equipment Rack Space, the POP(s), POP site(s), or Sprint-supplied equipment
therein, or any portion thereof, by virtue of this Agreement, without the
prior written consent of Sprint.
12. Notices. Any notices or communications required or desired to be given in
-------
connection with this Agreement shall be in writing and shall be delivered
to the applicable Party by U.S. Certified Mail, return receipt requested,
addressed as follows:
Sprint: Sprint Communications Company L.P.
903 East 104th Street
Kansas City, MO 64131
Attn: Real Estate Acquisition & Administration
With a copy to: Sprint Communications Company L.P.
8140 Ward Parkway
Kansas City, MO 64114
Attn: General Counsel
<PAGE>
Customer: Interstate FiberNet
910 First Avenue
West Point, GA 31833
Attn: Janine K. Davis
Phone: 706-645-8992
Any notice given under this Agreement shall be effective upon receipt of
notice by the other Party. Either Party may change the above address by
written notice to the other Party as provided above.
13. Warranties. THE PARTIES DO NOT MAKE ANY WARRANTIES, EXPRESS OR IMPLIED,
----------
WITH RESPECT TO THE POP SITE(S) AS LISTED ON EXHIBIT "A", ANY EQUIPMENT
PLACED THEREIN AND OTHER SERVICES, MATERIALS AND EQUIPMENT PROVIDED
HEREUNDER, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
14. Limitation of Liability. IN NO EVENT SHALL EITHER PARTY HEREUNDER BE LIABLE
-----------------------
TO THE OTHER PARTY FOR ANY INDIRECT, CONSEQUENTIAL OR INCIDENTAL 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. FURTHERMORE, IN NO EVENT WILL SPRINT BE LIABLE TO CUSTOMER OR
ITS REPRESENTATIVE FOR ANY DAMAGES, DIRECT OR INDIRECT, TO CUSTOMER-
SUPPLIED EQUIPMENT ARISING OUT OF CUSTOMER'S USE OF THE POP SITE(S) LISTED
ON EXHIBIT "A" OR THE SERVICES PROVIDED HEREUNDER, UNLESS SUCH DAMAGES ARE
THE RESULT OF SPRINT'S SOLE NEGLIGENCE OR WILLFUL MISCONDUCT. SPRINT SHALL
TAKE REASONABLE PRECAUTIONS TO PROVIDE A SECURE ENVIRONMENT FOR CUSTOMER-
SUPPLIED EQUIPMENT.
15. Indemnification
---------------
15.1 Customer shall indemnify, defend and hold harmless Sprint, its
directors, officers, employees, trade contractors, suppliers,
successors and assigns from any loss, damage, cost of defense
(including reasonable attorneys' fees and court costs), and injuries,
including death to any person,arising out of this Agreement (including
any breach hereof by Customer) to the extent caused by the negligence
or willful misconduct of Customer, its agents or employees, or its
Representative.
15.2 Sprint shall indemnify, defend and hold harmless Customer, its
directors, officers, employees, trade contractors (including
Customer's Representative), suppliers, successors and assigns from any
loss, damage, cost of defense (including reasonable attorneys' fees
and court costs), and injuries, including death to any person, arising
out of this Agreement (including any breach hereof by Sprint) to the
extent caused by the negligence or willful misconduct of Sprint, its
agents, or employees.
16. Termination of Services/Facilities: Compliance.
-----------------------------------------------
16.1 Sprint may limit the use of the Equipment Rack Space or any portion
thereof by Customer hereunder when necessary because of conditions
beyond its control as set forth in Paragraph 23. In addition, Sprint
reserves the right at all times during the Term to suspend any and all
services and/or facilities to be provided hereunder, including,
without limitation furnishing of electrical power, and remove, change
or otherwise terminate the operation of Customer-supplied equipment
installed in the Equipment Rack Space without notice, if Sprint deems,
in its sole discretion, that such action is necessary to protect the
public or Sprint personnel, agents, and Sprint facilities or services
from damages or injury of any kind. Sprint may also take such action
after notice to Customer in accordance with Paragraph 20. Where
possible, Sprint will notify Customer promptly of such action and work
in cooperation with Customer to effect such remedies so as to permit
the Customer-supplied equipment to be returned to operation in an
acceptable manner. All Customer-supplied equipment installed in the
Equipment Rack Space shall comply with all applicable laws,
regulations and standards. including, without limitation, those
standards established by Sprint, and shall be maintained by Customer
in a manner so as to ensure continued compliance therewith and so as
to avoid hazard or damage to Sprint facilities or injury to Sprint
employees, agents and suppliers or to the public. In the case where
additional protection facilities are required, the same shall be
provided by Customer, at Customer's sole expense. Sprint shall
maintain the environmental parameters of the Equipment Rack Space
within customary limits for commercial
<PAGE>
operation so long as Customer maintains Customer-supplied equipment
installed therein in accordance with the applicable specifications.
16.2 Either Party may terminate this Agreement at any time by giving
written notice as outlined in Paragraph 12. The maximum liability to
the Customer, due to termination, will be six (6) months of rental
charges for each Equipment Rack Space as stated in Exhibit "A", from
the date of termination and any charges associated with Sprint escort
services during equipment removal.
17. Insurance.
----------
17.1 Customer's Insurance. Customer shall, at its own expense, procure and
--------------------
maintain throughout the Term, not less than the following insurance
from financially responsible insurers licensed to do business in the
state where any work is performed: (i) Commercial General Liability
insurance, including Contractual Liability, insuring against liability
for Personal Injury, Bodily Injury, and Property Damage in an amount
of not less than [________] Combined Single Limit with respect to any
one occurrence, (ii) Business Auto insurance insuring the ownership,
maintenance or use of owned, non-owned or hired automobiles in an
amount not less than [________] Combined Single Limit for Bodily
Injury or Property Damage for any one accident, and (iii) Workers'
Compensation insurance, including Employers' Liability with limits of
not less than [______] per accident, in compliance with any Workers'
Compensation or similar statute in the State where any work is
performed. The insurance specified in subparagraphs i and ii shall
name Sprint as Additional Insured. Customer shall deliver to Sprint,
prior to and as a condition of its use of the Equipment Rack Space, a
Certificate of Insurance evidencing all of the above insurance
requirements and shall indicate that Sprint shall be notified in
writing not less than thirty (30) days prior to any cancellation or
material change in any coverage. In no event shall the limits of said
policies be considered as limiting the liability of Customer under
this Agreement. Customer or its Representative may not enter Sprint's
POP locations if the provisions of this paragraph have not been met.
17.2 Representative's Insurance: It is the intent of the parties hereto
---------------------------
that Sprint be adequately protected from liability and/or damage
occurring during the term of this Agreement. In the event Customer
uses trade-contractors and/or Representatives to perform any work in
the leased space and loss occurs as a result, Sprint will look first
to the Customer and Customer's insurers for indemnification per
subparagraphs 15.1 and 17.1 contained herein. In all such cases,
Customer shall require its trade-contractors and/or Representatives to
furnish not less than the Insurance referenced in 17.1 above, and
provide that such trade contractors and/or Representatives furnish
Sprint and Customer with Certificates of Insurance, naming Sprint and
Customer as Additional Insureds.
18. Governing Law. This Agreement shall be construed under and enforced in
-------------
accordance with the laws of the State of Kansas.
19. Entire Agreement. This Agreement supersedes and replaces any prior
----------------
agreements, understanding or arrangements, whether oral or written,
heretofore made between the Parties and relating to the subject matter
hereof. This Agreement shall not be modified, changed, altered or amended
except by an express written agreement signed by duly authorized
representatives of both of the Parties.
20. Default. In addition to any right of termination provided for elsewhere
-------
herein, the non-defaulting Party hereto may terminate this Agreement upon
the occurrence of any of the following events which shall constitute a
default:
(a) Material breach of this Agreement after notice of such breach and
failure of the breaching Party to cure within thirty (30) days of
receipt of notice;
(b) A final determination by any governmental entity having jurisdiction
over the facilities and/or services provided under this Agreement
that the relationship of Sprint and Customer and/or the facilities
and/or services provided hereunder are contrary to then existing
laws; or
(c) The filing of bankruptcy by either Party under any federal, state or
municipal bankruptcy or insolvency act, or the appointment of a
receiver or any act or action constituting a general assignment by
either Party of its properties and interest for the benefit of its
creditors.
Upon the occurrence of a default by either Party, the other Party may
exercise one or more of the following remedies: (i) terminate this
Agreement pursuant to (a) above, and/or (ii) exercise any other rights or
<PAGE>
remedies which may be available at law or in equity. Upon the occurrence of
a default, the prevailing Party shall have all reasonable expenses
(including court costs and reasonable attorneys' fees) paid by the other
Party.
21. Payments. All charges incurred by Customer hereunder will be invoiced
--------
monthly by Sprint. Total Customer recurring and non-recurring Equipment
Rack Space lease charges for the Term of this Agreement are shown on
EXHIBIT "A". Escort charges will be charged and invoiced monthly in
accordance with the terms set forth in Paragraph 7. All amounts stated on
each invoice shall be due and payable within thirty (30) days of receipt.
The charges for service provided hereunder are exclusive of any applicable
sales, use, excise and like taxes which will be separately stated and
included on each applicable invoice. All charges for services that remain
unpaid for a period of 10 days or more after written notice, shall be
subject to interest thereon at a rate of the lesser of 18% per annum or the
maximum rate allowable by applicable law.
22. Response Time. In the performance of its obligations hereunder, Sprint
-------------
shall endeavor to respond to a Customer request for escort service
hereunder within (i) one (1) hour when notified by Customer from 8:00 a.m.
-5:00 p.m. on business days and when such request pertains to a manned POP
site, (ii) within three (3) hours when notified by Customer at any other
time for a manned POP site, and (iii) [____________________________________
__________________________________________________________________________
----------------------------------------------------
_____________________________________________________________________
---------------------------------------------------------------------
__________________________________________________________] Emergency
----------------------------------------------------------
repairs on the Sprint network will take precedence over escort services
which may cause lengthening of the response times. For routine maintenance,
72 hours notice is required. Routine maintenance will only be allowed
between the hours of 8:00 a.m. to 5:00 p.m. Monday through Friday, with
holidays excluded. Service affecting routine maintenance may be
accomplished outside of the normal routine maintenance window, but requires
120 hour advance notification. When escort service is provided by Sprint,
both the Sprint representative and Customer representative will sign a CPE
Repair/Vendor Escort Record form confirming the location, time, and date of
the escort service.
23. Inability to Perform. Neither Party shall be responsible for delays in the
---------------------
performance of its obligations hereunder (except payments due) caused by
events beyond its reasonable control.
24. Customer's Representative. Customer agrees that it shall be responsible for
-------------------------
the activities and operations of its Representative (where applicable) as
relates to the installation, and maintenance, of Customer-supplied
equipment and insurance requirements set forth in Paragraph 17. Customer
shall further bind Representative to comply with all Sprint requirements
and terms as stated herein, having to do with the Customer's presence in
Sprint's POP sites.
IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the
date first above written.
INTERSTATE FIBERNET, SPRINT COMMUNICATIONS COMPANY
A GEORGIA GENERAL PARTNERSHIP L.P., A DELAWARE LIMITED PARTNERSHIP
- ----------------------------- ------------------------------------
By /s/ Steve Moses By /s/ James B. Farris
-------------------------- ---------------------------------
Name Steve Moses Name James B. Farris
------------------------ -------------------------------
Title General Manager Title Director, Real Estate
----------------------- ------------------------------
Acquisition & Administration
Date 1/30/95 Date 1/26/95
----------------------- -------------------------------
<PAGE>
EXHIBIT A
<TABLE>
<S> <C> <C>
Customer Name & Address Representative Name & Address (where Co-location [_]
Interstate FiberNet applicable) Direct Connection [_]
- ----------------------- ___________________________
206 W. 9th Street Maintenance by Sprint [_]
- ----------------------- ___________________________
West Point, GA 31833 Escort Required [_]
- ----------------------- ___________________________
Trouble Shooting [_]
Response Time std. hrs
</TABLE>
<TABLE>
<CAPTION>
CHARGE PER MONTHLY NON-RECURRING POP PHONE
POP SITE LOCATION EQUIPMENT RACK SPACE QUANTITY CHARGE CHARGE NUMBER
----------------- -------------------- -------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
1) [__________] [_] [_] [_] [_] [____________]
2) [_____________] [_] [_] [_] [_] [____________]
3)
4)
5)
</TABLE>
West Region Control Center: 800/827-9722
East Region Control Center: 800/669-1245
CUSTOMER EQUIPMENT: [__________________________________________________]
Customer Power Requirements: [____________________________________________]
Purpose: [________________________________________________]
Comments: This installation per Sprint/ Interstate FiberNet contract:
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
COPY TO: Ed Law, Senior Network Technical Engineer
Sterling Mccullough, Network Engineer
Network Services - Operations
Site Supervisor
<PAGE>
ENGINEERING DATA FORM
1. SITE: [________________]
----------------------------------------------------------------------
2. COMPANY: Interstate FiberNet
-------------------------------------------------------------------
3. CONTACT: Janine Davis PHONE: _______________________
---------------------------------
4. SWITCH SUPERVISOR: Andy Sivell PHONE: 706-645-9012
----------------------- -----------------------
5. INTERFACE: DS1:_____________ DS3: X
-------------
6. EQUIPMENT:
A. ELECTRONICS: SPRINT OWNED YES: [____] NO: [____]
Al. VENDOR/MANUFACTURE: [_____]
---------------------------------------
A2. MODEL/DESCRIPTION: [_____]
----------------------------------------
A3. CAPACITY WIRE: [__] EQUIPPED: [__]
---- ----
B. DSX:
B1. TYPE: [_________] [_________]
B2. SPRINT OWNED YES: [____] NO: [____]
C. OTHER:
Cl. VENDOR/MANUFACTURE: _____________________
C2. MODEL/DESCRIPTION: ______________________
C3. CAPACITY: WIRED: ____________ EQUIPPED: _____________
7. EQUIPMENT RACK/BAY REQUIREMENTS:
A. QUANTITY:[__]
----
1ST RACK 2ND RACK 3RD RACK 4TH RACK
B. WIDTH [__] [__]
________ ________ ________ ________
C. DEPTH: [__] [__]
________ ________ ________ ________
D. HEIGHT: [__] [__]
________ ________ ________ ________
<PAGE>
8. POWER REQUIREMENTS.
1ST TRACK 2ND RACK 3RD RACK 4TH RACK
A. INITIAL: [__] [_]
_______ _______ _______ _______
B. ULTIMATE: [___]
_______ _______ _______ _______
9. DATES:
A. DRAWINGS REQUIRED: April 1, 1995
---------------
B. INSTALLATION START: April 15, 1995
---------------
C. INSTALLATION COMPLETE: May 1, 1995
------------
10. ADDITIONAL INFORMATION:
Please mail drawings and Information for installation detail to
Interstate FiberNet
Network Engineering, Attn: T. Metze
206 W. 9th Street
West Point, GA 31833
11. PREPARED BY: Terry R. Metze Jr. : Network Engineering
----------------------------
PHONE: 706-645-9000 DATE: 12-5-94
------------ -------
PREPARED BY:_________________
PHONE:___________ DATE:__________
________________________________________________________________________________
Reserved for Sprint
CONFIGURATION CONTROL
ENGINEER:_______________________________
DATE RECEIVED: ____________ PROJECT NO:________________
DATE DRAWINGS RELEASED:________________________
<PAGE>
EXHIBIT 10.51
-------------
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[_____]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
CONFIDENTIAL
FIBER OPTIC FACILITY
--------------------
LEASE AGREEMENT
---------------
THIS AGREEMENT is made as of January 31, 1997 between SOUTHERN TELECOM
1, INC., a Delaware corporation ("Southern Telecom"), and INTERSTATE FIBERNET, a
Georgia general partnership ("IFN").
PREMISES
--------
IFN desires Southern Telecom to construct and lease to IFN a
telecommunications fiber optic facility made up of 12 fiber optic strands and
related equipment to be installed on Alabama Power Company ("APC") electric
transmission facilities and rights of way from APC's Plant Gaston facility in
Alabama to Montgomery, Alabama, and Southern Telecom desires to so construct and
lease such facility.
Southern Telecom desires to include an additional 12 fiber optic strands
within such fiber optic facility for its potential future use. In the interim,
IFN desires to acquire a revocable license to use such additional 12 fibers and
Southern Telecom desires to grant such revocable license.
In total, Southern Telecom will construct a 24 fiber optic strand fiber
optic facility, 12 strands of which it will lease to IFN and 12 strands of which
it will grant IFN a revocable right to use and IFN will therefore undertake the
responsibility of acquiring the necessary permits and licenses required for
operating the entire 24 strand fiber optic facility and paying the costs of
maintaining such fiber optic facility.
Southern Telecom will have the option to lease to IFN any of the additional
12 licensed fibers after the 9th anniversary of the lease, and, to the extent
Southern Telecom does not lease IFN at least 6 of the licensed fibers under its
option, IFN will have the right to lease from Southern Telecom up to a total of
6 of the licensed fibers.
Accordingly, the parties agree as follows:
TERMS AND CONDITIONS
--------------------
1. DEFINITIONS
1.1. "Cable" means twenty four (24) optical fibers, the surrounding
-----
cable, aluminum sheathing and all associated suspension hardware to be strung
along the Route.
1
<PAGE>
CONFIDENTIAL
1.2. "Circuit Service Date" means the date on which the Fiber Optic
--------------------
Facility becomes operational in accordance with the Specifications.
1.3. "DS-3 Mile" means a 44.6-Mbps digital signal conveyed over one (1)
---------
mile.
1.4. "Equipment" means all equipment and hardware to be attached or
---------
affixed to the Fibers per the Specifications.
1.5. "Fibers" means the twenty four (24) optical fibers in the Cable,
------
whether defined as IFN Fibers, Licensed Fibers or Option Fibers.
1.6. "Fiber Optic Facility" means the Cable and Equipment.
--------------------
1.7. "IFN Fibers" means those twelve (12) Fibers Southern Telecom will
----------
install for and lease to IFN pursuant to Section 3.1.
1.8. "Licensed Fibers" means those twelve (12) Fibers to which Southern
---------------
Telecom grants IFN a revocable license to use pursuant to Section 3.2.1.
1.9. "Option Fibers" means any one (1) or more of the Licensed Fibers
-------------
that Southern Telecom leases to IFN and IFN leases from Southern Telecom
pursuant to Section 3.2.2 or Section 3.2.3.
1.10. "Route" means the path between the origination point and the
-----
termination point set forth in Exhibit A.
---------
1.11. "Specifications" means the specifications for the design,
--------------
engineering, construction and installation of the Fiber Optic Facility set forth
in Exhibit B.
---------
2. FIBER OPTIC FACILITY CONSTRUCTION
2.1. Design and Construction. Southern Telecom will design and construct
-----------------------
the Fiber Optic Facility substantially in accordance with the Specifications.
2.2. Construction Schedule. Southern Telecom will use reasonable efforts
---------------------
to complete the Fiber Optic Facility in accordance with the Specifications by
the proposed Circuit Service Date set forth in Exhibit A. Southern Telecom will
---------
notify IFN as promptly as practical if Southern Telecom determines that the
Fiber Optic Facility will not be completed by such date.
2.3. Splicing. Southern Telecom will perform all Fiber splicing, except
--------
that IFN will, at its own expense, splice the Fibers to the Equipment and to any
additional equipment or hardware. Southern Telecom will leave at least one
hundred (100) feet of the Fiber at the demarcation points at either end of the
Route.
2
<PAGE>
CONFIDENTIAL
2.4. Installation of Upgrades and Improvements. IFN may, with Southern
-----------------------------------------
Telecom's prior written approval, which will not be unreasonably withheld,
replace or upgrade the Equipment or install additional equipment at IFN's
expense from time to time during the Term in order to maximize the capacity and
efficiency of the Fiber Optic Facility.
3. FIBER OPTIC FACILITY LEASE, LICENSE AND TERM
3.1. Fiber Optic Facility Lease. Upon the terms and subject to the
--------------------------
conditions set forth herein, IFN hereby leases from Southern Telecom and
Southern Telecom hereby leases to IFN, for the Term (as hereinafter defined),
the IFN Fibers and the Equipment to be attached thereto.
3.2. Additional Fiber License and Lease Option.
------------------------------------------
3.2.1. Fiber License. Upon the terms and subject to the conditions
-------------
set forth herein, Southern Telecom hereby grants IFN a revocable license to use
the Licensed Fibers for the Term, and IFN hereby accepts such license. Southern
Telecom may terminate IFN's license to use any one (1) or more of the Licensed
Fibers at any time upon sixty (60) days prior notice. Southern Telecom's
termination of IFN's license to use such Licensed Fibers will terminate IFN's
obligations relating to those Licensed Fibers (other than Southern Telecom's
option to lease any of the Licensed Fibers to IFN pursuant to Section 3.2.2) but
will not terminate, limit or otherwise affect IFN's other obligations under this
Agreement, including, without limitation, IFN's obligation to make the full
monthly rental payments as required hereunder.
3.2.2. Fiber Lease Put. At Southern Telecom's option, on or within
---------------
one hundred eighty (180) days after the ninth (9th) anniversary of the Circuit
Service Date, Southern Telecom will, upon giving thirty (30) days prior notice,
lease to IFN and IFN will lease from Southern Telecom, any one (1) or more of
the Licensed Fibers on the same terms and conditions (other than rent) as the
IFN Fibers, whether or not the license to use any of the Licensed Fibers had
previously been terminated pursuant to Section 3.2.1. The Licensed Fibers leased
to IFN pursuant to this Section 3.2.2 will immediately become Option Fibers
upon Southern Telecom's exercising its option without any further action by the
parties. IFN may terminate, as of the fifteenth (15th) anniversary of the
Circuit Service Date, the lease of the Option Fibers leased to IFN pursuant to
this Section 3.2.2 with thirty (30) days prior notice to Southern Telecom.
3.2.3. Fiber Lease Call. At IFN's option, on the one hundred
----------------
eighty first (181st) day following the ninth (9th) anniversary of the Circuit
Service Date and for a period of one hundred and eighty (180) days thereafter,
to the extent the licenses to use the Licensed Fibers have not been terminated
pursuant to Section 3.2.1, and, to the extent Southern Telecom does not exercise
its put under Section 3.2.2 to lease IFN at least [_____] of the Licensed
Fibers, upon thirty (30) days prior notice, IFN will lease from Southern Telecom
and
3
<PAGE>
CONFIDENTIAL
Southern Telecom will lease to IFN up to a total of [_____] of the Licensed
Fibers on the same terms and conditions as the IFN Fibers (other than rent). The
Licensed Fibers leased to IFN pursuant to this Section 3.2.2 will immediately
become Option Fibers upon IFN exercising its option without further action by
the parties. If Southern Telecom chooses not to honor IFN's call option under
this Section 3.2.3, then Southern Telecom will pay IFN [__________________] for
each Licensed Fiber Southern Telecom does not wish to lease to IFN as an Option
Fiber under this Section 3.2.3. Southern Telecom may terminate, as of the
fifteenth (15th) anniversary of the Circuit Service Date, the lease of the
Option Fibers leased to IFN pursuant to this Section 3.2.3 with thirty (30) days
prior notice to IFN.
3.3. Identifying Fibers. When appropriate, the parties will designate the
------------------
Fibers as IFN Fibers, Licensed Fibers and Option Fibers by marking the Fibers in
a mutually acceptable manner.
3.4. Term. The original term of this Agreement and the lease and license
----
granted hereunder begins on the Circuit Service Date and ends on the twentieth
(20th) anniversary thereof.
3.5. Renewal.
--------
3.5.1. IFN Fibers. IFN may extend the term of the IFN Fiber and
----------
Equipment lease granted under Section 3.1 for up to two (2) consecutive five (5)
year periods (the original term and any renewal terms are, collectively, the
"Term") upon the same terms and conditions set forth herein by giving Southern
Telecom notice at least three (3) months prior to the end of the original term
or the first (1st) renewal period, as the case may be.
3.5.2. Option Fibers. If any Option Fibers are under lease on the
-------------
twentieth (20th) anniversary of the Circuit Service Date, then either party may
request the other party agree to extend the Term of the Option Fiber lease
granted under Section 3.2 for up to two (2) consecutive five (5) year periods
upon the same terms and conditions set forth herein with notice to the other at
least three (3) months prior to the end of the original term or the first (1st)
renewal period, as the case may be. The receiving party will have thirty (30)
days following its receipt of the requesting party's notice to agree to or deny
any extension.
3.6. Rights upon Termination. Obligations accruing prior to termination
-----------------------
of this Agreement and other obligations which pursuant to this Agreement survive
termination will survive termination of this Agreement.
4
<PAGE>
CONFIDENTIAL
4. FIBER OPTIC FACILITY MAINTENANCE, REPAIR, RESTORATION AND ELECTRICAL
SERVICE
4.1. MAINTENANCE AND RESTORATION. Southern Telecom will provide end-to-
---------------------------
end maintenance, repair and restoration services for the Fiber Optic Facility
(including maintaining and repairing all Fiber splices other than IFN's splices
to the Equipment) in accordance with the procedures set forth in Exhibit D and
---------
sound utility practices to meet the Fiber and Equipment manufacturers'
performance standards specified for such Fiber and Equipment.
4.2. NOTIFICATION OF SERVICES. Southern Telecom will notify IFN by
------------------------
telephone in accordance with the procedures set forth in Exhibit D before
---------
performing maintenance, repair or restoration services which, in Southern
Telecom's reasonable opinion, present a risk of damage to or interference with
service on the Fiber Optic Facility.
4.3. SERVICE RESTORATION PRIORITY. If IFN notifies Southern Telecom of
----------------------------
any potential or actual failure, interruption or impairment in the Fiber Optic
Facility that IFN reasonably considers an emergency, and Southern Telecom fails
to respond to such notice within three (3) hours with a good faith effort to
take remedial action, then IFN will have the right to perform emergency repairs
provided that such emergency repairs are performed in accordance with Section 7.
If Southern Telecom does not arrange for an APC representative to be on site
within two (2) hours after such notification by IFN, then IFN may proceed with
such emergency repair by laying temporary ground fiber optic cable but will not
have the right to perform any work on APC's electric transmission facilities
except in accordance with Section 7.
4.4. EXTENDED SERVICE OUTAGE. If the Fiber Optic Facility is out of
-----------------------
service for more than twenty four (24) hours and such outage was not caused by a
force majeure described in Section 15, then rent will abate on a daily basis for
the period of the outage.
4.5. ELECTRICAL SERVICE. Southern Telecom, at its expense, will arrange
------------------
for electrical service to the Fiber Optic Facility.
5. RENT, FEES AND BILLING
5.1. RENT. IFN will pay Southern Telecom monthly rent for the Fiber Optic
----
Facility in accordance with the rent payment schedule set forth on Exhibit C.
---------
IFN will remit the first month's rent on the Circuit Service Date and
thereafter IFN will remit the rent in advance, without invoice, to Southern
Telecom on or before the first day of each month thereafter throughout the Term.
5.2. ADMINISTRATIVE FEE. In consideration of Southern Telecom's
------------------
administrative services hereunder, IFN will pay Southern Telecom monthly an
Administrative Fee calculated as follows:
5
<PAGE>
CONFIDENTIAL
5.2.1. ADMINISTRATIVE FEE FOR THE INITIAL FOUR (4) YEARS.
-------------------------------------------------
[___________________________] from and including the calendar month of the
Circuit Service Date through and including the calendar month of the fourth
(4th) anniversary of the Circuit Service Date. If for any month during the
initial four (4) years of the Term, the gross income accrued from the sale by
IFN and its affiliates of telecommunications services to the Utility Market
Segment over the Route [____________________________________________], then the
Administrative Fee will be [_____] to such amount and IFN will submit, with such
[_____] Administrative Fee, evidence reasonably satisfactory to Southern Telecom
showing IFN's and its affiliates' total sales to the Utility Market Segment for
that month.
5.2.2. ADMINISTRATIVE FEE FOR THE REMAINDER OF THE TERM. From and
-------------------------------------------------
including the first (1st) calendar month following the fourth (4th) anniversary
of the Circuit Service Date through the end of the Term, the lesser of
[__________________________________________________] telecommunications services
to the Utility Market Segment over the Route during the month from which the
Administrative Fee is derived. If for any month during such period, the
Administrative Fee is [_____________________________________________], then IFN
will submit, with such [________] Administrative Fee, evidence reasonably
satisfactory to Southern Telecom showing IFN's and its affiliates' total sales
to the Utility Market Segment for that month.
5.2.3. PAYMENT. IFN will pay Southern Telecom the Administrative Fee
--------
monthly on the first (1st) day of the second (2nd) month following the month to
which it relates. For purposes of Sections 5.2.1 and 5.2.2, "Utility Market
Segment" means all electric, water and gas utility companies and all businesses
related to the production, storage, preparation, distribution or sale of
electricity, water or gas.
5.3. RIGHT OF WAY LICENSE FEE. As compensation for the use of the APC
------------------------
electric transmission facilities and rights of way over which the Fiber Optic
Facility is installed, IFN hereby grants APC [_______________________________].
5.4. MAINTENANCE FEE. IFN will reimburse Southern Telecom monthly for the
---------------
actual cost of the end-to-end maintenance, repair and restoration services for
the Fiber Optic Facility (excluding a pro rata amount for those Licensed Fibers
in which Southern Telecom has terminated IFN's right to use pursuant to Section
3.2.1) thirty (30) days after IFN receives an invoice from Southern Telecom
setting forth Southern Telecom's costs for such services performed during the
previous month.
5.5. LATE PAYMENTS. In addition to any other right or remedy available to
-------------
Southern Telecom, if IFN fails to make any payment under this Agreement within
ten (10) days after it becomes due, then IFN will pay interest thereon at a rate
of one and one-half percent (l.5%)
6
<PAGE>
CONFIDENTIAL
per month, or, if less, then the highest rate permitted by law. All payments
will be applied first to interest and then to principal in the order in which
the same has become due.
6. RELOCATION
6.1. RELOCATION OPTIONS. Before APC significantly changes any part of the
------------------
Route's path (including, without limitation, relocating or dismantling any part
of the electric transmission facility on which the Fiber Optic Facility is
installed) or substantially alters the character of any part of such electric
transmission facility (including, without limitation, moving any part of such
overhead electric transmission facility underground or underground electric
transmission facility above ground or altering any part of such electrical
transmission facility such that the continued use of any part of the Fiber Optic
Facility in its original state is no longer feasible), Southern Telecom will
give IFN at least six (6) months notice, or if such notice period is
impractical, then as much notice as practical. IFN will have thirty (30) days
after receipt of such notice to notify Southern Telecom which of the following
options it will take:
[_____________________________________________________________________________].
[_____________________________________________________________________________].
[_____________________________________________________________________________].
6.2. RELOCATION EXPENSES. If a significant change or alteration described
-------------------
in Section 6.1 is initiated by either Southern Telecom or APC for reasons other
than order by public authority, public necessity, a force majeure described in
Section 15 or the rights or alleged rights of third parties (other than the
Southern Company or its affiliates), [_______________________________________].
[_______________], IFN will pay the total incremental costs of re-routing the
IFN Fibers and Option Fibers (excluding the cost of re-routing the surrounding
cable, aluminum sheathing and all associated suspension hardware), relocating
any Equipment or upgrades attached thereto and the installation of any
additional equipment necessitated thereby.
7
<PAGE>
CONFIDENTIAL
7. ACCESS AND SAFETY
7.1. Access to the Fiber Optic Facility. Except as allowed under Section
----------------------------------
4.3, IFN's employees, agents and contractors may only have access to the Fiber
Optic Facility with APC's prior written approval. Whenever access is allowed,
each such IFN employee, agent or contractor must be accompanied by an APC or
Southern Telecom representative. IFN will provide Southern Telecom a list of
IFN's employees, agents and contractors who are to perform any work on the
Equipment or any additional equipment or upgrades for APC's and Southern
Telecom's pre-approval. Southern Telecom may deny access to any party on the
list which, in APC's and Southern Telecom's reasonable judgment, is not
qualified to perform work within the vicinity of the Fiber Optic Facility.
7.2. COMPLIANCE WITH NESC AND APC STANDARDS. All activities conducted on or
--------------------------------------
in the vicinity of the Fiber Optic Facility by IFN, its employees, agents and
contractors will be conducted in accordance with the National Electrical Safety
Code, as revised, ("NESC"), and APC's standard safety procedures and
requirements, including, without limitation, the maintenance procedures set
forth in Exhibit D.
---------
7.3. WARNINGS. IFN will forewarn its employees, agents and contractors of
--------
the danger inherent in making contact with or coming closer to APC's electric
transmission facilities than permitted by the NESC, Occupational Safety and
Health Administration regulations and prudent engineering and construction
practices. IFN will also forewarn all persons whom IFN knows or has reason to
know might come within the vicinity of APC's electric transmission facilities or
the Fiber Optic Facility that APC electric transmission facilities are electric
facilities, energized, uninsulated and dangerous.
8. TITLE TO FIBER OPTIC FACILITY
8.1. NO ESTATE. Other than as set forth in this Agreement, no use of the
---------
Fiber Optic Facility under this Agreement will create or vest in IFN any
ownership or property right in the Fiber Optic Facility and IFN's rights herein
will be and remain a mere occupancy right and will be subject to termination and
assignment as set forth herein.
8.2. [___________________________].
8.3. TITLE TO UPGRADES. IFN will pay all costs of installing additional
-----------------
equipment or hardware on the Fiber Optic Facility. IFN will retain title to any
such additional equipment and hardware.
8.4. NO LIENS. IFN will not create or suffer, and, will promptly
--------
discharge, at its expense, any lien, claim, encumbrance or charge on any part of
the Fiber Optic Facility,
8
<PAGE>
CONFIDENTIAL
including, without limitation, any lien arising out of any labor, service or
material furnished or claimed, to have been furnished by any person other than
Southern Telecom and its affiliates at IFN's direction.
8.5. Taxes. [__________] will pay, together with all interest and
-----
penalties, all taxes and other governmental impositions and charges of every
kind which might be charged, levied, assessed or imposed on or with respect to
any part of the Fiber Optic Facility, until [______________] will pay all such
taxes, impositions or charges, together with all interest and penalties, levied,
assessed or imposed on or with respect to any part of the Fiber Optic Facility
attributable to [_____________].
9. USE OF FIBERS
Subject to Southern Telecom's rights hereunder, IFN may use or permit third
parties to use the Fiber Optic Facility and receive all revenue arising out of
such use. IFN will not permit others to use the Fiber Optic Facility or the
telecommunications capacity thereof without first obtaining all required
regulatory certifications or approvals from appropriate regulatory bodies.
10. COMPLIANCE WITH LAW
10.1. Southern Telecom's Compliance. Southern Telecom will perform its
-----------------------------
duties under this Agreement in compliance with law and will obtain all required
licenses, permits and authorizations from all governments that have jurisdiction
over its performance hereunder.
10.2. IFN's Compliance. IFN will perform its duties under this Agreement
----------------
in compliance with law and will obtain all required licenses, permits, and
authorizations from all governments that have jurisdiction over its performance
hereunder. IFN will acquire in its own name and at its sole expense any
authority necessary to operate the Fiber Optic Facility within public streets,
highways and other thoroughfares, including street franchise rights, and will
secure any necessary consent, including rights of way, from state or municipal
authorities or from the owners of private property on the Route.
11. DEFAULT AND REMEDIES
11.1. Events of Default. The occurrence of any of the following will
-----------------
constitute an event of default under this Agreement by the relevant party:
9
<PAGE>
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11.1.1. Failure To Pay. IFN fails to pay any amount due under this
--------------
Agreement within ten (10) days after demand.
11.1.2. Failure To Perform. Either party continues to fail to comply with
------------------
any other term or condition of this Agreement thirty (30) days after receiving
such notice from the other party of such failure, or, if the cure reasonably
requires more than thirty (30) days, then the failure of such party to commence
a cure within such thirty (30) days and to continue such cure with all possible
diligence to completion.
11.1.3. Untrue or Misleading Representations. Either party makes any
------------------------------------
representation or warranty herein or in any other document relating to this
Agreement that proves to be materially untrue, false or misleading when made and
which materially and adversely affects the rights of the other party.
11.1.4. Bankruptcy. Either party makes a general assignment for the
----------
benefit of creditors or files a voluntary petition in bankruptcy, or a petition
in bankruptcy or other insolvency protection is filed against either party which
is not dismissed with a finding in such party's favor within ninety (90) days
thereafter, or any petition or answer is filed seeking, consenting to, or
acquiescing in reorganization, liquidation, dissolution or similar relief, or
either party's inability to pay its debts as they mature.
11.2. Remedies. Upon the occurrence of an event of default:
--------
11.2.1. Termination. The non-defaulting party may terminate this Agreement
-----------
by giving the other notice, and IFN will promptly disconnect and remove all its
equipment and other property from the Fiber Optic Facility and promptly
surrender the Fiber Optic Facility. If IFN fails to disconnect and remove such
equipment and other property, Southern Telecom may, without prejudice to any
other right or remedy which it might have, enter upon and take possession of the
Fiber Optic Facility and disconnect and remove IFN's equipment and its other
property without being liable for prosecution or any claim for damages therefor,
and IFN hereby waives its rights to any legal proceedings in connection with
such re-entry.
11.2.2. Entry and Possession. If IFN causes the default, then Southern
--------------------
Telecom may take immediate possession of the Fiber Optic Facility without
termination of this Agreement, and remove IFN by force, summary proceedings,
ejectment or otherwise, without being liable for prosecution or any claim for
damages therefor, and IFN hereby waives its rights to any legal proceedings in
connection with such re-entry provided that IFN has caused the default. Southern
Telecom may, in its discretion, take such action as is necessary to relet the
Fiber Optic Facility and may so relet the Fiber Optic Facility at such rental
rates and upon such terms and conditions as Southern Telecom may deem advisable
and receive the rent therefor. Upon such reletting, all rentals received by
Southern Telecom from such reletting will be applied first to the payment of any
expenses of such reletting, including, without limitation, brokerage fees and
attorneys' fees and the costs of alterations and repairs, second to the payment
of rental and other charges due and unpaid hereunder, and the residue, if any,
10
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will be held by Southern Telecom and applied against future rent and other
charges as the same may become due and payable under this Agreement. IFN will
pay to Southern Telecom, on demand, any deficiency that may from time to time
arise by reason of such reletting and Southern Telecom hereby reserves the
right to bring an action or proceeding for the recovery of any such deficiency.
11.2.3. Damages. If Southern Telecom terminates this Agreement under
-------
Section 11.2.1, then Southern Telecom may demand and recover from IFN as
damages, all rent, including all abated rent, if any, and any amounts treated as
additional rent under this Agreement, and other sums due and payable by IFN on
the date of termination, plus as liquidated damages and not as a penalty, an
amount equal to the sum of: (1) The then-present value (using a discount rate of
eight percent (8%)) of the rent reserved in this Agreement for the residue of
the Term including any amounts treated as additional rent under this Agreement
and all other sums provided in this Agreement to be paid by IFN, less the fair
rental value of the Fiber Optic Facility for such residue; (2) the value of the
time and expense necessary to obtain replacement tenants, and the estimated
expenses relating to recovery of the Fiber Optic Facility, preparation for
reletting and for reletting itself: and (3) the cost of performing any other
obligations which would have otherwise been performed by IFN.
12. LIMITATION OF WARRANTIES, DAMAGES AND CLAIMS
12.1. WARRANTY FOR SERVICES. In performing hereunder, Southern Telecom
will exercise due care to ensure that its services are performed in a
workmanlike manner and meet the standards and specifications set forth in this
Agreement. Other than the extended service outage credits set forth in Section
4.4, failure to meet these obligations will not subject Southern Telecom, APC or
any other affiliate of the Southern Company to any claims or liabilities other
than, if applicable, to reperform the work. Except as provided in this
Agreement, Southern Telecom makes no warranties and IFN will accept Southern
Telecom's services without further warranty of any nature. The warranties set
forth in this Agreement are the sole and exclusive warranties provided to IFN
hereunder with respect to the service to be performed by Southern Telecom
hereunder, and all other express or implied warranties (including, without
limitation, any warranty of description, merchantability or fitness for a
particular purpose) are hereby disclaimed.
12.2. LIMITATION OF DAMAGES. Neither Southern Telecom nor its affiliates
will be liable to IFN for any special, indirect or consequential damages or loss
of use, lost revenues or lost profits arising out of this Agreement or the
performance or non-performance thereof, even if Southern Telecom or its
affiliates have been informed of the possibility of such damages.
12.3. MAXIMUM LIABILITY. Southern Telecom and its affiliates' maximum
cumulative liability to IFN for all damages of any kind will not exceed the
total amount of consideration received by Southern Telecom as of the date the
liability was incurred. Notwithstanding the
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foregoing, Southern Telecom and its affiliates' maximum total cumulative
liability in connection with this Agreement will not exceed [_____________].
12.4. Time To Bring Claims. IFN's failure to bring a claim against
Southern Telecom within six (6) months after the sooner of, the date on which
IFN becomes aware, or should have become aware of the existence of a potential
claim constitutes a waiver of such claim.
13. IDEMNIFICATION
13.1. Indemnification. IFN will indemnify and hold harmless and hereby
---------------
releases Southern Telecom, its affiliates, agents, contractors and subsidiaries
and its and their officers, directors, employees and agents (each an
"Indemnitee") from and against any (1) liability, (2) amounts paid in compromise
or settlement (whether or not liability has been determined or can be known),
(3) loss, (4) penalty, (5) forfeiture or (6) cause of action of any kind or
nature, whether actual or alleged, and any expenses connected therewith
(including, without limitation, litigation expenses, reasonable attorneys' fees
and interest at Southern Telecom's cost of funds rate accruing from the date a
loss or cost or expense is incurred until the date when such indemnification is
satisfied) arising out of or in connection with the following types of claims as
they relate to this Agreement, the transactions contemplated herein or the Fiber
Optic Facility (each a "Claim"):
13.1.1. Any claim by IFN or any person using the Fiber Optic Facility
by, under or through IFN, or its or their agents, whether or not such claim
arises from Indemnitee's negligence but excluding any such claim that arises
from the Indemnitee's gross negligence or willful misconduct.
13.1.2. Any claim by IFN, any of its affiliates, agents, contractors
or subsidiaries or its or their officers, directors, employees or agents arising
from damage to tangible property or personal injury (including the death of
persons), whether or not such claim arises from Indemnitee's negligence but
excluding any such claim that arises from the Indemnitee's gross negligence or
willful misconduct.
13.1.3. Any claim arising from IFN's or any of its customer's failure
to comply with any law, regulation, ordinance, order, injunction, ruling or
award of any government agency or court, whether or not such claim arises from
Indemnitee's negligence but excluding any such claim that arises from the
Indemnitee's gross negligence or willful misconduct.
13.1.4. Any claim arising from the failure of IFN to acquire or
maintain any street franchise or public or private right of way or easement
necessary to permit the presence or use of the Fiber Optic Facility, other than
any such claim that arises from the Indemnitee's negligence or willful
misconduct, but an Indemnitee's recovery therefor will be reduced to the extent
of such Indemnitee's own negligence.
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13.1.5. Any other third-party claim to the extent such claim arises
from the negligence, breach or willful misconduct of IFN, its affiliates,
agents, contractors, customers or subsidiaries or its or their officers,
directors, employees or agents.
13.2. INSURANCE. At all times during the Term and thereafter until the
---------
resolution or satisfaction of all Claims, IFN will maintain in force and effect
one (1) or more general liability insurance policies providing minimum coverage
(including, without limitation, coverage for liabilities contractually assumed)
of [__________________] per occurrence and in the aggregate for bodily injury,
[__________________] per occurrence for property damage, and excess liability
umbrella coverage of [__________________]. All such policies will contain a
waiver of subrogation in favor of the Southern Company, its affiliates and all
Indemnitees.
13.3. SETTLEMENT AND DEFENSE OF CLAIMS.
---------------------------------
13.3.1. Notice of Claim. If any Claim arises for which an Indemnitee
----------------
is or could be liable to a third party under this Agreement, then such
Indemnitee will promptly notify IFN of such Claim and IFN will have thirty (30)
days after receipt of such notice to inform Indemnitee whether IFN or its
insurer (individually or collectively, the "Indemnitor") will assume the
defense of the Claim or not. If Indemnitor assumes the defense of the Claim,
then Indemnitor will employ competent and experienced legal counsel appropriate
for the defense of the Claim in view of the facts and circumstances and pay all
expenses of the defense of such Claim. If Indemnitee is named as a party to any
action in connection with a Claim, then Indemnitee may control its defense of
the Claim at its expense. So long as Indemnitee is not named as a party to such
action and Indemnitor assumes the defense of any such Claim and protects the
assets of Indemnitee from levy, lien or seizure, Indemnitor may control the
conduct of such defense and will not be responsible for any expenses of
Indemnitee in connection with the defense of any such Claim. Indemnitee's
failure to provide timely notice of a Claim will not relieve Indemnitor of its
obligations hereunder except to the extent such failure materially prejudices
Indemnitor.
13.3.2. Indemnitee's Right To Defend. If Indemnitor does not assume
----------------------------
the defense of a Claim, then Indemnitee may defend such Claim in the manner it
deems appropriate, and settle such Claim on terms it deems appropriate. If a
Claim is not settled, then Indemnitor will satisfy any judgment rendered against
Indemnitee with respect to such Claim.
13.3.3. Settling Claims. Except as provided in Section 13.3.2,
---------------
Indemnitee may not settle a Claim without Indemnitor's prior written approval.
If Indemnitor disapproves such settlement, then Indemnitor must reimburse
Indemnitee for Indemnitee's reasonable expenses in connection with its control
of the defense of such Claim to the date of such assumption. IFN's failure to
assume such defense and to pay such reimbursement will give Indemnitee the right
to settle such Claim.
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13.4. Exclusion from Waiver. The waivers and indemnities in this
---------------------
Agreement in favor of Southern Telecom will not apply to damages arising out of
bodily injury to persons or damage to property caused by or resulting from the
sole negligence of Southern Telecom, or its agents or employees to the extent
prohibited by law.
14. WAIVER OF SUBROGATION
To the fullest extent permitted by law, Southern Telecom and IFN hereby
waive any claim each may have against the other or any affiliate by way of
subrogation or otherwise from any and all liability for any loss or damage to
property, whether caused by the negligence or fault of the other party, to the
extent such loss or damage is covered or required to be covered by the fire and
extended coverage policy or all-risk policy with respect to the Fiber Optic
Facility. Southern Telecom and IFN will each cause any fire insurance and
extended coverage or all-risk policies which it maintains with respect to the
Fiber Optic Facility to contain a provision whereby the insurer waives any
rights of subrogation against the other party.
15. FORCE MAJEURE
The parties' obligations under this Agreement will be suspended as a
result of any act of God, hurricane, tornado, rain, flood, sink hole, wind,
hail, lightning, earthquake, snow or ice, extreme high or low temperatures,
water or gas main break, fire, explosion, riot, terrorist act, military action,
failure to act on the part of a governmental authority, strike, lockout or other
labor problem, transportation delay, unavailability of supplies or materials or
change in or in the interpretation of any law or regulation. Such obligations
will be suspended until such time as the interrupting event abates and the
parties may reasonably operate as they had prior to such event.
16. CASUALTY AND CONDEMNATION
16.1. Destruction of Fiber Optic Facility. If the Fiber Optic Facility,
-----------------------------------
or such portion of the Fiber Optic Facility as would make the Fiber Optic
Facility unusable for IFN's use, in Southern Telecom's reasonable discretion, is
damaged and such damage can be repaired or the Fiber Optic Facility can be
rerouted within one hundred twenty (120) days after the occurrence, then this
Agreement will not terminate If the damage cannot be repaired or the Fiber Optic
Facility cannot be re-routed within such period of time, then either party may
terminate this Agreement. Notwithstanding the foregoing, if greater than twenty
percent (20 %) of the Fiber Optic Facility is damaged to the extent that it
makes the Fiber Optic Facility temporarily or permanently unusable, then either
party may terminate this Agreement.
16.2. Condemnation. If the Fiber Optic Facility, or such portion of the Fiber
------------
Optic Facility as would make the Fiber Optic Facility unusable by IFN, in
Southern Telecom's reasonable discretion, is condemned by any legally competent
authority, or conveyed to such
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authority in lieu of such condemnation, then this Agreement will automatically
terminate on the date when possession thereof is taken by the condemning
authority, and rental will be accounted for between Southern Telecom and IFN as
of such date without further action of the parties. All condemnation proceeds
will belong to Southern Telecom.
17. SUBORDINATION
IFN's rights hereunder are subject to any lien or security interest now or
hereafter in effect upon the Fiber Optic Facility given by Southern Telecom, APC
or any affiliate.
18. CONFIDENTIALITY
Any information disclosed to a party in a document or other media clearly
indicated to be confidential by a label, legend or other notice will be used by
the receiving party solely for the purpose of performing its obligations under
this Agreement. Neither party will divulge any such information to anyone
without the written consent of the other, except as required by law. This
Agreement will not be recorded in any public records.
19. ASSIGNMENT AND SUBLETTING
19.1. BY IFN. IFN may not assign its rights or obligations under this
------
Agreement nor sublet any part of the Fiber Optic Facility with out the prior
written consent of Southern Telecom, which will not be unreasonably withheld.
For purposes of this Section 19.1, a consolidation or merger of IFN with or into
any other corporation or a change of control of IFN will be an assignment of
this Agreement by IFN. Notwithstanding the foregoing, IFN will have the right to
assign its rights and obligations under this Agreement to a subsidiary of ITC,
Inc., except that no such permitted assignment will operate to relieve IFN of
any duty or obligation under this Agreement. For purposes of the foregoing,
"control" means the possession, directly or indirectly, of at least fifty
percent (50%) of the outstanding voting power of IFN.
19.2. By Southern Telecom. Southern Telecom may assign its rights and
-------------------
delegate its obligations under this Agreement to any third party.
20. MISCELLANEOUS
20.1. Notice. Unless otherwise provided in this Agreement, all notices,
------
requests, demands and other communications in connection with this Agreement
must be in writing and may be mailed, or delivered via facsimile or by courier
to the parties at the addresses shown on the signature page below (or at such
other addresses as will be given in writing by the parties to one another) and
will be effective when delivered.
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20.2. Severability. If any term or condition of this Agreement is or will
------------
become invalid or unenforceable, then such part will be ineffective to the
extent of such invaliditv only, without affecting the remaining provisions of
this Agreement.
20.3. Waivers. No party's failure or delay in exercising any right,
-------
power or privilege herein or course of dealing between the parties will operate
as a waiver thereof; nor will any single or partial exercise of any right, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege herein.
20.4. Entire Agreement. This Agreement, together with its Exhibits,
----------------
constitutes the entire agreement between the parties with respect to the
transactions contemplated herein, and supersedes all prior oral or written
agreements between the parties with respect thereto.
20.5. Governing Law. The validity, interpretation and performance of this
-------------
Agreement and each of its provisions will be governed by Alabama law. The
exclusive venue and jurisdiction for any litigation will be in the courts of
competent jurisdiction sitting in Birmingham, Alabama. Each party hereby
consents to personal jurisdiction in such courts and waives forum non
conveniens.
20.6. Counterparts. This Agreement may be executed in counterparts.
------------
SIGNED AND DELIVERED
Southern Telecom 1, Inc.
/s/ Robert S. Beason
------------------------------
Robert S. Beason
Title: President
------------------------
600 North 18th Street
Birmingham, Alabama 35203
MAIL BIN: 5N-8428
TEL: (205) 257-6900
FAX: (205) 257-3636
Contact person: Timothy D. Ford
(Signatures continued on the following page)
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Interstate FiberNet
/s/ Douglas Shumate
--------------------------------
Douglas Shumate
Chief Financial Officer
Interstate FiberNet
206 West 9th Street
West Point, Georgia 31833
TEL: (706) 645-8189
FAX: (706) 645-8989
Contact person: Douglas Shumate
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Acknowledgement
of
Alabama Power Company
Alabama Power Company acknowledges and agrees that it has authorized
Southern Telecom to construct, install, operate, maintain and use fiber optic
telecommunications lines and facilities on Alabama Power Company's transmission
rights-of-way and in Alabama Power Company's underground distribution conduits
and that, insofar as the rights of Alabama Power Company are concerned, Southern
Telecom has all of the right, power and authority to construct, install,
operate, maintain and use fiber optic telecommunications lines and facilities on
Alabama Power Company's transmission rights-of-way and in Alabama Power
Company's underground distribution conduits. Alabama Power Company acknowledges
and agrees that it will honor this Agreement and perform its obligations
hereunder as they relate to Alabama Power Company.
Alabama Power Company
By: __________________________________
Name: ________________________________
Title: _______________________________
Date: ________________________________
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Exhibit A
FIBER OPTIC FACILITY ROUTE AND EQUIPMENT
ROUTE
Proposed Circuit
Origination Point Termination Point Length Service Date
- ----------------- ----------------- ------ ------------------
Montgomery, Al. Birmingham, Al. 70 miles 2/15/97
Length shown does not include sags or splice allowances.
EQUIPMENT
SITE EQUIPMENT INSTALLED
- ---- -------------------
Montgomery 0C-48 ADM
Plt. Mitchell 0C-48 RGN
Plt. Gaston 0C-48 RGN
Birmingham 0C-48 ADM
ADM = Add Drop Multiplexer
RGN = Regenerator
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Exhibit B
SPECIFICATIONS
Fiber Cable Specifications. The Underground fiber cable will be single
----------------------------
mode, gel filled, dual window, loose buffered, and all dielectric. OPGW fiber
cable will meet current and sag-tension requirements as determined for each line
segment.
Fiber Optic Specifications. All fibers within the Fiber Optic Facility
--------------------------
will be single mode and conform to all the following minimum specifications:
Operating Wavelength 1300 NM 1550 NM
Maximum Attenuation .40dB/KM .30 dB/KM
Maximum Dispersion 3.5 PS/NM-KM 4 PS/NM-KM
Core Diameter (Typical) 8.7 microns
Core Noncircularity (Max) 10%
Cladding Diameter 125 microns
3um
Cladding Noncircularity 2%
Core Cladding Offset 1.0 micron
Proof Test 50 KPSI (100 KPSI
for OPGW)
Fiber Bandwidth Limitation None
Cut Off Wavelength 1100-1310 NM
Note: NM = nanometers; dB = decibels; KM = kilometers; PS = picoseconds
um = microns; KPSI = Kilopounds per square inch
Splice Specifications. Southern Telecom's installed Fiber Optic Facility
---------------------
will utilize either "Fusion Splicing" or "Mechanical Splicing" and meet an
average of 0.15 dB loss per splice with a maximum splice loss not to exceed 0.3
dB on any individual splice. Southern Telecom will record the actual dB loss
reading as displayed on the splicer or Optical Time Domain Reflectometer
("OTDR") as the splice is completed. Southern Telecom will provide the results
to IFN
Equipment Specifications.
-------------------------
Site Equipment Installed
- ---- -------------------
Montgomery (1) 0C-48 ADM
Plt. Mitchell (1) 0C-48 RGN
Plt. Gaston (1) 0C-48 RGN
Birmingham (1) 0C-48 ADM
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End to End Analysis.
--------------------
Southern Telecom will measure the maximum End to End Optical Loss
for all fibers in the Fiber Optic Facility by segment. This will be measured by
a laboratory calibrated optical power meter utilizing a stabilized single mode
light source. Southern Telecom will provide the results to IFN.
Southern Telecom will make the End to End OTDR tracings at 1300 NM
and 1500 NM for each fiber after all the splicing has been completed. This
tracing will be provided to IFN.
Splice cans and closures to be provided by Southern Telecom. One
hundred (100) foot coils on Fiber from static wire must be provided to
accommodate splicing. Splice can be mounted twenty five (25) feet above ground
line.
IFN will provide dielectric fiber cable from splice cans mounted at
twenty five (25) feet to handholes or manholes. APC will attach this Fiber Optic
Facility and U guard to their concrete or metal poles.
Splicing details, by fiber will be shown on construction work
prints for the Fibers.
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Exhibit C
RENT PAYMENT SCHEDULE
<TABLE>
<CAPTION>
Months Monthly
of Term Payment
- ------- -------
<S> <C>
IFN Fibers and Licensed Fibers
- ------------------------------
[____________] [_________]
[____________] [_________]
[________]
- ---------
[____________] [_________]
[____________] [_________]
[____________]
- -------------
[____________] [_________]
</TABLE>
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EXHIBIT D
MAINTENANCE, REPAIR AND SERVICE RESTORATION PROCEDURES
1. General Maintenance and Repair Responsibilities
-----------------------------------------------
1.1. Southern Telecom Responsibilities.
----------------------------------
1.1.1. Southern Telecom will notify the IFN Operations Center (the
telephone Number to supplied upon request) of any Fiber Optic Facility
maintenance or restoration service required.
1.1.2. Southern Telecom will respond to Fiber Optic Facility outage
reports to Southern Telecom by the IFN Operation Center. Southern Telecom will
assess the damage and will provide an estimate of time required to restore the
Fiber Optic Facility. If temporary cable is used to restore service, a report
will be made by Southern Telecom as to the time of the permanent restoration.
l.2. IFN Responsibilities. IFN will notify the APC Telecommunications
--------------------
Network Control Center (the telephone Number to supplied upon request) of any
changes in configuration of the Route or any Fiber Optic Facility outage.
1.3. Fiber Optic Facility Interface Point.
-------------------------------------
1.3.1. The demarcation point for the Fiber cable will be the
splice point at the end of the static line.
1.3.2. IFN will be responsible for making all splices and isolating
troubles.
1.3.3. IFN will provide single point of contact for reporting
troubles.
2. APC Restoration Procedure for Optical Ground Wire ("OPGW").
----------------------------------------------------------
The following lists the sequence of steps the parties will take to
restore service over the Fiber Optic Facility:
2.1. After a break in service is detected, all the parties will be
notified in the following sequence:
(1) IFN;
(2) Southern Telecom
(3) Power Dispatchers;
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(4) APC Telecom; then
(5) On-Call Crews.
2.2. The location of the break will then be determined by: (1) APC
Telecom from a Regenerator; (2) IFN from its hub; (3) Power System Detection;
(4) Ground crews; or (5) Fly over.
2.3. Restoration teams will subsequently arrive on site to assess the
damage and select the fastest service restoration method.
2.4. APC will deliver a restoration trailer equipped with OPGW and all
support hardware to the site with the restoration crew. APC will maintain a reel
of dielectric cable for use for emergency restorations. If the permanent
restoration of OPGW requires an extended period of time, then the dielectric
cable will be rolled out on the right-of-way and temporarily installed to re-
establish service. Damaged OPGW will be cut out and the ends brought down at the
nearest towers to allow splicing on the ground. If the ends of OPGW are not
available in a reasonable time, then the dielectric cable will be brought back
to the nearest splice case and service rolled over.
2.5. Service will be rolled back when permanent OPGW repair is
completed.
2.6. Restoration work will continue until regular service is restored.
3. DDN ASSURED NETWORK RELIABILITY GUIDELINES
-------------------------------------------
The following procedures specify times and conditions when designated
tasks can be performed on the Fiber Optic Facility. Digital data traffic
activities will be governed by procedures administered and controlled at the APC
Network Operations Center ("NOC").
3.1. TRAFFIC ACTIVITY - NORMAL CONDITIONS
------------------------------------
3.1.1. BUSY HOURS: 0601 - 2400 (Seven (7) days a week)
3.1.2. OFF HOURS: 0001 - 0600 (Seven (7) days a week)
3.1.3. All work on systems containing live traffic will be
coordinated in advance with the respective Network Manager ("NM") in charge of
the NOC.
3.1.4. The NM must be on line at the nearest order wire facility or
common voice conference bridge before any work can be done on the Fiber Optic
Facility.
3.1.5. The NOC must be in direct contact with the field technical
personnel
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whenever the planned construction or maintenance activity on the Fiber Optic
Facility could result in traffic outage thereon.
3.2. TRAFFIC ACTIVITY HOURS - EMERGENCY CONDITIONS
----------------------------------------------
If emergency restoration efforts are instituted to correct outages in the
Fiber Optic Facility, then extraordinary procedures that temporarily violate
these guidelines may be instituted.
3.3. REQUIREMENTS - APPROVED CONTRACTORS
-----------------------------------
3.3.1. Construction or maintenance activities may be handled by
contractors, provided the contractors have been certified and approved by APC
pursuant to this Agreement.
3.3.2. The procedures described herein are applicable to all
approved contractors who perform work on the Fiber Optic Facility.
3.3.3. If a bid, RFP, or other proposal involving third party
contractors is issued, the issuing party will ensure that the bidders understand
the procedures herein.
3.4. BUILDINGS, COMMERCIAL POWER AND GENERATORS
------------------------------------------
3.4.1. When generator or commercial power service is upgraded,
the steps outlined in a statement of work and Method of Procedure ("MOP")
approved by IFN must be followed.
3.4.2. The NM must be notified and a time schedule established
before any power upgrade work may be performed.
3.4.3. If commercial power service will be disrupted for any length
of time, then temporary service must be connected to the Fiber Optic Facility.
3.4.4. All power upgrades must be coordinated in advance with the
NM to establish when work may be performed.
3.4.5. If generator repair service or random inspection service or
the like is performed, then the work must be coordinated in advance with the NM.
3.5. GROUNDING OR BONDING
--------------------
3.5.1. EXTERIOR BONDING OR GROUNDING. All exterior grounding
activities including subsurface work, building or shelter connections,
installation of bus bars and,
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lightning protection, as well as the bonding of metallic objects to the ground
ring or bus, may be accomplished during BUSY HOURS.
3.5.2. INTERIOR BONDING OR GROUNDING
(1) Grounding wires or cables may be run into a
building and connected to ancillary equipment or other devices or non-traffic-
carrying racks of communications equipment at anytime during BUSY HOURS if there
are no extraordinary circumstances which would jeopardize existing traffic-
carrying equipment. Such circumstances include, without limitation, moving
traffic-bearing equipment if relocating active wires or cables.
(2) Cable ends must be insulated to prevent any
possible short caused by the unterminated cable. Cable insulation must include
either electrical tape, wire nuts, or heat shrink caps.
(3) New ground wires can only be terminated on
traffic-carrying equipment (including DSX frames) during OFF HOURS unless the
respective NOC NM grants approval for such work during BUSY HOURS. These wires
must have been previously been connected to a supplemental ground bus.
(4) Old ground wires may not be removed before new
wires have been terminated.
(5) Isolation of DC return bus bars from distribution
racks may only be conducted during OFF HOURS.
3.6. RADIO INTERFERENCE SUPPRESSION RFI OR EMI
-----------------------------------------
3.6.1. Radio frequency interference ("RFI") or electro-magnetic
interference ("EMI") noise mitigation activities may be conducted anytime
provided the procedures established for work on systems containing live traffic
are followed.
3.6.2 Work which affects traffic channels may only be conducted
during OFF HOURS.
3.7. EQUIPMENT INSTALLATION
----------------------
3.7.1. All physical work on active equipment racks or cabling for
power systems including chargers, batteries and uninterruptible power sources
("UPS") may only be conducted during OFF HOURS.
26
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CONFIDENTIAL
3.7.2. Equipment not specified in the previous paragraph may be
physically installed within a building or shelter at any time if (1) moving
traffic-carrying equipment, or (2) relocating active cables or wave guides to
accommodate such an installation would not jeopardize existing traffic
carrying equipment by such installation.
3.7.3. DC power cables, AC power cables and ground cables must be
installed as follows:
(1) Such cables may be placed on cable ladders at any
time but, may not be installed or connected into breaker racks on active
equipment until OFF HOURS and may only be connected to active equipment racks,
existing battery plants, DC power boards or breaker panels during OFF HOURS.
(2) Cutting in new power on traffic bearing systems
must be conducted OFF HOURS.
(3) If time does not permit the connection to the
newly installed racks then cable ends must be insulated to prevent any short.
(4) Power cable insulation must consist of either
electrical tape, wire nuts or heat shrink caps.
(5) Fault alarm and coaxial cables may be run at any
time during the day but may not be connected to any active equipment until OFF
HOURS.
(6) When installing new equipment, ends of all cables
that connect to such equipment must be terminated on such equipment before power
is applied.
(7) New equipment may only be powered up during OFF
HOURS. Co-located radio equipment should be initially powered up during OFF
HOURS and the impact, if any, of the new equipment on traffic-carrying channel
must be determined.
3.8. OUTSIDE PLAN RELOCATION, UPGRADE OR OVERBUILD
---------------------------------------------
3.8.1. Construction on the Fiber Optic Cable Facility may be
accomplished during BUSY HOURS.
3.8.2. Splicing work on the Fiber Optic Facility when DDN traffic
is present must be conducted as follows:
(1) When there is active DDN traffic in a tray, the
work must be done during a DDN window. All traffic in that tray must be rolled
to another tray when
27
<PAGE>
CONFIDENTIAL
possible. DDN window periods are in accordance with the published annual
schedule. In addition, a DDN window must be requested at least fourteen (14)
days in advance.
(2) When there is DDN traffic, but not in a tray that
is to be worked in, work may be accomplished during a DDN advisory which is any
day during OFF HOURS. A DDN Advisory must be requested at least forty-eight (48)
hours in advance. All traffic will be removed from the tray being worked on.
(3) When working in a splice termination box ("STB")
to install or replace pigtails or repair a bad splice, the above listed
procedures and restrictions apply.
(4) Fiber optic cords may be run at any time as long
as the existing traffic carrying Fibers are not disturbed.
(5) Work that disturbs traffic carrying fibers may
only be done during OFF HOURS.
3.8.3. All work on the portion of the Fiber Optic Facility
containing live traffic must be (1) coordinated with the NM and (2) may not
start until the NOC grants clearance to commence and is on-line with the field
technical personnel.
3.8.4. The NOC must be in direct contact with the field technical
personnel when cuts are made that may jeopardize traffic or that could result in
an outage and may not be done if the NOC is not in direct contact with the field
technical personnel.
3.8.5. Only one (1) Fiber may be cut at a time. After each cut is
made, system operation must be verified before another Fiber may be cut.
3.8.6. Prior to commencing work on Fibers in splice trays or splice
closures, all Fibers associated with active systems must be labeled and verified
as follows:
(1) The Fiber being worked on must be labeled.
(2) Once labeled, traffic can be rolled from the
active tray or buffer.
(3) Prior to cutting any fiber, the field technician
must test the Fiber to ensure traffic has been removed by placing a hand held
fiber traffic identifier or similar instrument on the pigtail or fiber.
3.9. FIELD SYSTEMS TEST
------------------
3.9.1. Testing at the DSX-3 frame or patch panel may be done any
time,
28
<PAGE>
CONFIDENTIAL
however, connectivity cannot be disrupted until OFF HOURS.
3.9.2. DS-3 patching may only be performed during OFF HOURS. DDN
traffic may only be patched during a scheduled DDN maintenance window.
3.9.3. Lightwave Distribution Frame ("LDF") connections to unused
bulkhead connectors may be made at any time. Patch panel connections may only be
disconnected from the frame during OFF HOURS. Traffic rolls from live pig-tails
may only be performed during OFF HOURS.
3.9.4. If inactive lightwave equipment racks are in the same line
up rack as active equipment, then power may only be turned on or off during OFF
HOURS.
3.9.5. Protection switch Differential Absolute Delay Equalization
("DADE") or the equivalent may only be conducted during OFF HOURS.
3.9.6. Any work which prevents a traffic carrying channel from
switching to "protect" may only be conducted during OFF HOURS.
3.9.7. Overbuilds or reconfiguration of active traffic carrying
common equipment such as protection switches may only be conducted during OFF
HOURS.
3.9.8. Over-path testing may only be conducted after the effect of
the new equipment on the existing system performance has been verified.
3.9.9. Initially, new channels and line-ups may only be conducted
during OFF HOURS. If no degradations are noted, then work on new or overbuild
channels may proceed at any time except where otherwise restricted.
3.9.10.Before any work is conducted on overbuild channels,
traffic-carrying equipment in the overbuild lineup racks must be distinctively
marked to prevent accidental tampering with active equipment (using red tape,
removable labels, etc.)
3.9.11.Physical connections of temporary "cutover equipment" in
preparation for a system changeout or upgrade must only be conducted during OFF
HOURS unless the associated work could endanger employee or contractor safety if
accomplished during OFF HOURS. In such cases, approval must be secured in
advance before work may be conducted during BUSY HOURS.
3.9.12.Fiber optic channel electronic switching may only be done
during OFF HOURS, after coordinating with the NOC. No more than two (2) switches
each, up and back, may occur without prior DDN coordination.
29
<PAGE>
CONFIDENTIAL
3.9.13.Traffic rollover of traffic on fiber optic systems to a
spare fiber path in order that an active fiber pair or active lightwave
equipment may be worked on must be done during OFF HOURS. This applies whether
the rollover is conducted at the DS-3 or optical level. A DDN maintenance window
is required for systems carrying DDN traffic.
3.10. GENERAL NOTIFICATIONS OF WORK ACTIVITY IN THE AREA.
---------------------------------------------------
3.10.1 Personnel planning any work activity that is not directly
related to the Fiber Optic Facility but which could have an adverse effect in
the event of a mishap must meet the following advance reporting requirements:
(1) Any party proposing any non-recurring work on or
around structures, buildings, equipment, etc. which are part of the Fiber Optic
Facility must first notify the NOC at least forty-eight (48) hours in advance
of such activity.
(2) Any party proposing recurring work on or around
structures, buildings, equipment, etc., that are part of the Fiber Optic
Facility must notify the NOC at least forty-eight (48) hours in advance and
provide a schedule of such activity.
30
<PAGE>
Exhibit 10.52
FIRST ASSIGNMENT AND ASSUMPTION OF
FIBER OPTIC FACILITY LEASE AGREEMENT
THIS FIRST ASSIGNMENT AND ASSUMPTION OF FIBER OPTIC FACILITY LEASE
AGREEMENT (the "Assignment") is dated as of the 1st day of February, 1997,
-------
by and between INTERSTATE FIBERNET, a Georgia general partnership ("Assignor"),
and a GULF STATES FIBERNET, a Georgia general partnership ("Assignee").
WHEREAS, Assignor and Southern Telecom 1, Inc., a Delaware corporation
("Southern Telecom"), are parties to that certain Fiber Optic Facility Lease
Agreement entered into as of January 31, 1997 (the "Lease Agreement");
WHEREAS, Assignor desires to assign to Assignee the Lease Agreement and
Assignor's rights and obligations thereunder on the terms and conditions set
forth herein.
WHEREAS, Southern Telecom has heretofore consented in writing to Assignor's
assignment to Assignee of the Lease Agreement and Assignor's rights and
obligations thereunder on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Assignor and Assignee hereby agree as follows:
1. All capitalized terms not otherwise defined herein shall have the
meanings such terms have in the Lease Agreement.
2. Assignor does hereby assign, bargain, sell, transfer, convey and
deliver to Assignee and its successors and assigns the Lease Agreement together
with all rights and obligations of Assignor under the Lease Agreement.
3. Assignee hereby accepts such assignment and grant and assumes, and
agrees to perform and be bound by, all obligations and liabilities of Assignor
under the Lease Agreement.
4. Assignor does hereby agree, from and after the date hereof upon the
request of Assignee, to execute such other documents as Assignee may require in
order to obtain the full benefit of this Assignment and Assignor's obligations
and agreements hereunder.
5. Notwithstanding any terms or conditions to the contrary contained in
the Lease Agreement and as heretofore consented to by Southern Telecom in
writing, the assignment and assumption by Assignor effected hereby shall operate
to relieve and release Assignor of any duty or obligation under the Lease
Agreement simultaneously with the execution hereof.
6. Assignee hereby agrees to indemnity, defend and hold harmless Assignor
from and against any and all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, costs and expenses, including,
without limitation, reasonable attorneys' fees
<PAGE>
and disbursements (collectively, "Claims"), to the extent any such Claim is
asserted against, resulting to, imposed upon or incurred by Assignor, directly
or indirectly, by reason or resulting from, any breach of or noncompliance with
any covenant or condition by Assignee required to be performed by Assignee under
the Lease Agreement by virtue of this Assignment.
7. Assignor hereby agrees to indemnify, defend and hold harmless Assignee
from and against any and all Claims to the extent any such Claim is asserted
against, resulting to, imposed upon or incurred by Assignee, directly or
Indirectly, by reason or resulting from, any breach of or noncompliance with any
covenant or condition by Assignor in or pursuant to the Lease Agreement (except
for Covenants or conditions required to be performed by Assignee by virtue of
this Assignment).
8. All notices, demands, requests, or other communications to be given,
served, or sent by either party to the other party regarding this Assignment
shall be in writing and shall be mailed by first-class registered or certified
mail, return receipt requested, postage prepaid, or transmitted by overnight
courier, hand delivery (including delivery by courier), telegram, telex, or
facsimile transmission, addressed as follows:
(i) If to Assignor:
Interstate Fibernet
206 West 9th Street
West Point, Georgia 31833
Attention: Doug Shumate
Telecopy No.: (706)645-8989
with an additional copy (which shall not constitute notice) to:
DeltaCom, Inc.
700 Boulevard South, Suite 101
Huntsville, Alabama 35802
Attention: General Counsel
Telecopy No.: (205)650-3839
(ii) If to Assignee:
Gulf States Fibernet
206 West 9th Street
West Point, GA 31833
Attention: Doug Shumate
Telecopy No.; (706) 645-8989
2
<PAGE>
with an additional copy (which shall not constitute notice) to:
DeltaCom, Inc.
700 Boulevard South, Suite 101
Huntsville, AL 35802
Attention: General Counsel
Telecopy No.: (205) 650-3936
9. To facilitate execution, this Assignment may be executed in as many
counterparts as may be required; and it shall not be necessary that the
signatures of, or on behalf of, each party, or that the signatures of all
persons required to bind any party, appear on each counterpart but it shall be
sufficient that the signature of, or on behalf of each party; or that the
signatures of the persons required to bind any party, appear on one or more of
the counterparts. All counterparts shall collectively constitute a single
agreement. It shall not be necessary in making proof of this Assignment to
produce or account for more than a number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto.
IN WITNESS WHEREOF, Assignor and Assignee have caused this First Assignment
and Assumption of Fiber Optic Facility Lease Agreement to be executed as of the
day and year first above written.
ASSIGNOR:
INTERSTATE FIBERNET
By: /s/ Douglas Shumate
------------------------------
Douglas Shumate
Its Chief Financial officer
ASSIGNEE:
GULF STATES FIBERNET
By: /s/ Douglas Shumate
-------------------------------
Douglas Shumate
Its Chief Financial Officer
3
<PAGE>
EXHIBIT 10.53
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[_____]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
TELECOMMUNICATIONS SYSTEM AGREEMENT
THIS TELECOMMUNICATIONS SYSTEM AGREEMENT ("AGREEMENT"), made and entered
into this 26th day of January, 1995, by and between Interstate FiberNet, a
Georgia General Partnership (hereinafter referred to as "IFN"), having an office
at 910 First Avenue, West Point, GA 31833 and Sprint Communications Company
L.P., a Delaware Limited Partnership, having an office at 903 East 104th Street,
Kansas City, MO 64131 ("Sprint", which expression shall include its successors
and permitted assigns), IFN and Sprint being collectively referred to herein as
the "Parties".
WHEREAS Sprint and Radians Telecommunications, Inc. entered into a
Telecommunication System Agreement dated October 20, 1993 which was assigned to
IFN and Amended on July 27, 1994; and
WHEREAS Sprint and IFN have agreed to substantially change the content of
the original Telecommunication System Agreement dated October 20, 1993, to the
extent that this Agreement will supersede and amend in its entirety the original
Telecommunication System Agreement dated October 20, 1993 and all associated
Amendments; and
WHEREAS, IFN will [___] to Sprint [______________________] on the portion
of the route from [___________________________________________________]; and
[____________________________________________________________________________
_________________________] (collectively "Sprint Fibers"); and
WHEREAS, Sprint has agreed to accept the leased fibers in accordance with
the terms and conditions of this Agreement;
NOW THEREFORE, in consideration of the mutual promises and covenants herein
contained, the Parties mutually agree as follows:
Article 1. SCOPE OF AGREEMENT
1.1 IFN shall design, engineer, construct or cause to be constructed,
facilities and acquire appropriate interests in real property or other rights,
all as may be required to provide, operate, and maintain a fiber optics
transmission system (the "System") between Sprint's locations in [____________]
and [___________] ("Route"), as more fully defined in Exhibit A-1, Preliminary
System Route Diagram. The System will be constructed [________________________
__________________________________________________________________], to a point
near [__________]. From this point on the Route to [____________], the [_____]
will be [_____]. All of the Sprint Fibers will be [____________________________
__________________________________________________________________________
________________________]. All fiber cable shall contain a minimum of [_
________________________________________________________]. IFN has acquired or
shall acquire appropriate interests in real property or other rights, all as are
or may be required to provide a physical route for the installation and
operation of the System. IFN's construction and maintenance obligations shall be
performed in accordance with
PAGE 1
<PAGE>
industry standards and the following Exhibits attached hereto, which by this
reference are incorporated herein.
Exhibit A-1 Preliminary System Route Diagram
Exhibit A-2 Final System Route Diagram (to be provided by IFN no later
than [______________], and subject to Sprint's approval)
Exhibit A-3 Cable Vendor List
Exhibit B Optical Fiber Cable Specification for [_________________
__________________].
Exhibit C Outside Plant and Cable Splicing Specifications
Exhibit D [_________________________] Criteria and Maintenance
Specifications
Exhibit E [____] Fiber Optic Specifications
Exhibit F [___________________________________________]
Telecommunications
Exhibit G Nondisclosure Agreements
Exhibit H Telecommunications System Maintenance Agreement
Exhibit I Facilities and Services Agreement
Exhibit J Specifications for Maintenance of Fiber Regenerator Sites
1.2 Sprint shall provide IFN with a list of fiber optic cable vendors,
which list will include the following: at least two vendors for [________], and
three vendors of in-ground buried cable (a copy of which is attached hereto as
Exhibit A-3), from which list IFN shall select its cable vendors. Sprint will
have the right to participate in such selection, with the final vendor
selections being made at IFN's sole discretion. All engineering documentation
and drawings shall be submitted to Sprint prior to construction and such
documents and drawings shall require Sprint's prior written approval, which
shall not be unreasonably withheld or delayed. Sprint shall make its best
efforts to provide such approval within thirty (30) days of receipt of said
documents and drawings. IFN agrees to engineer the System in accordance with
Exhibits A through F. Changes to engineering plans must be approved by Sprint in
writing.
1.3 IFN shall maintain and update on a daily basis as-built drawings
during the construction. Sprint shall be provided access at all times to such
as-built drawings for the purpose of data verification and accuracy.
1.4 IFN shall use the [_____________________] to cross all navigable
waters
PAGE 2
<PAGE>
along the buried cable portion of the Route except for the crossings at the
following rivers: [___________________], and the [___]. IFN shall cross these
rivers pursuant to specifications set forth in Exhibit C.
1.5 During the construction, Sprint has the right, but not the obligation,
to have on-site inspectors monitor construction activity. In addition, the
Parties shall conduct periodic program review meetings throughout the
construction period for the purpose of determining program status, and
identifying and resolving problem areas. These meetings shall be conducted at
mutually agreeable intervals. Any desired modifications to the approved
engineering plans and drawings (referenced in 1.2) shall require Sprint's prior
written approval which shall not be unreasonably withheld or delayed.
1.6 IFN shall provide, at its sole cost, facilities, [____________________
_________________________], site access and outdoor security and lighting and
all other necessary and normal facility requirements at all IFN Sites
substantially as set forth in Exhibit D, but in no event less than the current
prevailing industry standards for like facilities. IFN shall maintain the IFN
Sites substantially as set forth in Exhibit J, but in no event less than the
current prevailing industry standards for like facilities.
1.7 Construction and Acceptance of the Sprint Fibers, as defined in
Article 5, may be in segments as set forth and defined as follows: "[___________
_______________________________________________________________________];
"System Segment - [___________________]" is that portion of the Route between
and including the Sprint Site at [____________] and the Sprint switch site in
[_________]; "System Segment - [_____________________]" is that portion of the
Route between and including the Sprint Sites at [____________] and [_________,
__]; and "Interim System Segment - [___________________]" is the that portion of
the Route between and including the Sprint Site at [____________] and the Sprint
switch site in [_________] that is temporarily provided to Sprint on existing
IFN fibers.
a) IFN shall complete construction of the System and perform any acts
required by IFN to be performed for Sprint to Accept the Sprint Fibers, as
set forth in Article 5, no later than [_________]. If delivery of Sprint
Fibers does not occur on or before this date or if after delivery of the
Sprint Fibers, Sprint notifies IFN of non-Acceptance, IFN shall pay to
Sprint liquidated damages in the amounts as set forth below until the
Sprint Fibers are Accepted by Sprint as set forth in Article 5.1. If the
Sprint Fibers are not Accepted by [_________], Sprint shall maintain the
right to continue using the Accepted System Segment(s) as set forth above
and specified below, at no cost or expense to Sprint until the end of a
ninety (90) day period or until Acceptance of the Sprint Fibers, whichever
occurs first. Should Acceptance of the Sprint Fibers not occur within this
time frame, and Sprint has not terminated the Agreement or cured the event
of default as provided for in Article 12, Sprint shall be allowed to
continue using the Accepted System Segment(s) specified above, at the
monthly recurring rates specified hereinafter for each such Accepted System
Segment for an additional ninety (90) days or until earlier Acceptance of
the Sprint Fibers. Should Acceptance of the Sprint Fibers not occur within
this one hundred eighty (180) day time frame, and Sprint has not terminated
the Agreement or cured the
PAGE 3
<PAGE>
event of default as contemplated in Article 12, IFN's liability for the
liquidated damages set forth below shall terminate and Sprint shall be
allowed to continue using such Accepted System Segment(s) and Sprint and
IFN will negotiate a reasonable lease payment for the Accepted System
Segment(s) or portions thereof (as required by Sprint). Said lease payment
shall be the lesser of IFN's lowest rate offered for similar fiber or the
then current market rate.
b) IFN shall complete construction of the [______] Extension and perform
any acts required by IFN to be performed for Sprint to Accept the Sprint
Fibers in System Segment - [________] Extension, as set forth in Article 5,
on or before [_________________]. Commencing upon Acceptance thereof,
Sprint agrees to pay the lease amount for the [_______] Extension as set
forth in Article 4.1. If delivery of Sprint Fibers for the [______]
Extension does not occur on or before this date or if after delivery of the
Sprint Fibers for the [_______] Extension, Sprint notifies IFN of non-
Acceptance, IFN shall pay to Sprint liquidated damages in the amount of
[______________________________] per day until the System Segment - [_____]
Extension is Accepted by Sprint as set forth in Article 5.1.
c) IFN shall provide [_____________] for the Interim System Segment -
[________] to [____________], and any acts required by IFN to be performed
for Sprint to Accept the Interim System Segment - [_________] to
[___________] shall be completed on or before [_________________]. Sprint
acknowledges that this Interim System Segment-[________________________] is
a part of IFN's existing network and is on single mode non-dispersion
shifted fiber and agrees to waive the requirements in the Agreement and
Exhibits which are based upon use of dispersion shifted fibers instead of
single mode fibers for this Interim System Segment -[____________________].
Notwithstanding the aforementioned wavier, IFN warrants that the Interim
System Segment -[_____________________] will meet all performance measures
as required in the Exhibits (e.g., Bit Error Rate Performance) of the
Agreement, provided that such performance measures do not require
[___________________________]. In consideration for this Interim System
Segment -[________________________], if delivered on or before
[_________________], Sprint agrees to pay on [_______________] a one time
fee of [_________________________________________]. In addition, beginning
on [________________], Sprint shall pay a recurring fee of [______________
__________________________] per month for the use thereof, pursuant to the
conditions set forth In Article 4.1. Such recurring fee will cease upon
Acceptance of the Sprint Fibers or on [_____________], whichever occurs
first. If delivery of Sprint Fibers for the Interim System Segment -
[_____________________] does not occur on or before this date or if after
delivery of the Sprint Fibers, Sprint notifies IFN of non-Acceptance of the
interim System Segment - [___________________], IFN shall pay to Sprint
liquidated damages in the amount of [____________________________________
______] per day until the interim System Segment-[______________________]
is Accepted by Sprint as set forth in Article 5.1. In addition, the one
time fee of [_____________________________________________________________]
will be reduced by [__________________________________________] per day
from [_______________] through [_________________________________________
______________________] per day from [_________________] through [________
________] and [_______________________________________________] per day
from [________________], until Acceptance of the Interim System Segment -
[______________________].
PAGE 4
<PAGE>
d) Construction of [_________________] for the System Segment -[_________
_____________ and any acts required by IFN to be performed for Sprint to
Accept the System Segment- [_______________________], shall be completed by
IFN on or before [________________]. Sprint agrees to pay commencing on
[________________________________________________________] per month
pursuant to the conditions set forth in Article 4.1. Such payment will
cease upon Acceptance of the Sprint Fibers or [___________], whichever
occurs first. If delivery of Sprint Fibers for the System Segment -
[_______________________] does not occur on or before this date or if
after delivery of the Sprint Fibers, Sprint notifies IFN of non-Acceptance
of the System Segment - [_______________________], IFN shall pay to Sprint
liquidated damages in the amount of [_____________________________] per
day until the System Segment - [_______________________] is Accepted by
Sprint as set forth in Article 5.1.
e) Construction of [__________________] for the System Segment - [_______
_____________] and any acts required by IFN to be performed for Sprint to
Accept the System Segment - [_____________________], shall be completed by
IFN on or before [______________], with the exception of the fiber from the
IFN [________] regen site in [___________], to the Sprint Switch Site at
[____________________________], which shall be completed by IFN on or
before [___________]. If delivery of Sprint Fibers for the System Segment
- [____________________] does not occur on or before the dates described
above or if after delivery of the Sprint Fibers, Sprint notifies IFN of
non-Acceptance of the System Segment - [____________________] IFN shall
pay to Sprint liquidated damages in the amount of [_______________________
______] per day until the System Segment - [____________________] is
Accepted by Sprint as set forth in Article 5.1.
f) Upon Acceptance of the Sprint Fibers by Sprint, IFN shall allow Sprint
continued use of the Interim System Segment - [______________________],
without cost to Sprint, to allow reasonable time to transfer traffic from
the Interim System Segment - [____________________] to the Accepted System.
In addition, IFN shall reasonably cooperate with such transfer.
g) Each deadline for completion as set forth above shall be extended for
a period not to exceed thirty (30) days to the extent such delays are due
to causes beyond the control and without the fault of IFN, including Acts
of God, fires, floods, or inability to obtain materials; provided, however,
that the thirty (30) day extension of time for completion and Acceptance
shall be granted to IFN only after delivery of written notification to
Sprint of such delays. Notice must be delivered within fifteen (15) days
after the end of the month in which the delay occurred.
h) As a result of Accepting the System Segments of the Sprint Fibers as
set forth above, the Maintenance Agreement providing for the maintenance of
the System (Telecommunications System Maintenance Agreement, Exhibit H of
the Agreement) shall be enforced with the following exceptions until
Acceptance of the Sprint Fibers: i) when Sprint Accepts System Segment -
[_______] Extension and Interim System Segment - [_____________________],
Sprint will waive the
PAGE 5
<PAGE>
Routine Maintenance charges to IFN. ii) when Sprint Accepts System Segment
- [_________________________],Sprint will adjust the charge to IFN for
Routine Maintenance to [_______________________________________] per month,
for which Sprint's obligation as set forth in Exhibit H is limited to
Routine and Demand Maintenance on the Accepted System Segment - [________
_____________] and Accepted System Segment - [___________________].
i) Sprint will waive the requirement for the Letter of Credit Agreement
as set forth in Article 5.1 until Acceptance of the Sprint Fibers or June
1, 1995, whichever occurs first. At IFN's option, IFN may substitute a
Letter of Guarantee in a form acceptable to Sprint which fulfills the
requirements set forth in Article 5.1, issued by SCANA Corporation
("SCANA") for sixty-six and two third's percent (66 2/3's %) of the
obligation and ITC Holding Company, Inc. ("ITC") for thirty-three and one
third percent (33 1/3 %) of the obligation, upon the condition that SCANA
and ITC maintain, at a minimum, substantially the same financial condition
as represented in the Financial Statements attached as Exhibit B to the
Assignment, executed on July 27, 1994.
1.8 Sprint shall, subject to Sprint's sole discretion and IFN entering
into and maintaining in good standing Sprint's Facilities and Services Agreement
attached hereto as Exhibit I, provide to IFN the use of, and collocation in,
environmentally controlled floor space and DC power at Sprint's POP sites in
[____________], [____________], and [____________],and the Sprint switch site in
[____________].
1.9 Upon completion of the System, IFN shall [_____] to Sprint [_________
__________] on the portion of the Route from [______________] to Sprint's switch
site in [_____________]; and [________________________] from Sprint's POP site
located on [_____________], in [__________] to Sprints switch site in [_________
__________________].
1.10 IFN hereby grants Sprint access to the Sprint Fibers to exercise any
indicia of ownership, including, but not limited to, drop and insert
capabilities, upgrade capacity and replacement of the Sprint Electronics. Such
replacement of the Sprint Electronics will not result in a modification of the
payment obligations of Sprint to IFN.
1.11 The Demarcation Point between IFN and Sprint shall be the [__________
___________________] or the [_____________________________________], located
within IFN's Site or Sprint's Site.
ARTICLE 2. DEFINITIONS
Unless otherwise defined herein, the terms used in this Agreement shall
have their normal or customary meanings. In addition, for the purpose of this
Agreement, the following terms shall have the meanings set forth:
POP Point of Presence, the point of Interface between the
interexchange network and the local network.
[_____] [____________________________]
PAGE 6
<PAGE>
Bona Fide Offer An offer to give valuable consideration, made in good
faith.
Regenerator Site in which incoming signals are regenerated and
retransmitted on an outgoing circuit.
Sprint Electronics The fiber optic telecommunications equipment owned and
used by Sprint to facilitate the transmission of
communications over the Sprint Fibers.
Sprint Fibers [________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
____________________________].
IFN Sites All POP, Regenerator, or other facilities, except Sprint
Sites, where IFN Electronics are housed.
IFN Fibers All non-Sprint Fibers contained within a fiber optic
cable installed by IFN between [_______________________
_______________________________________________________
______________________________] and non-Sprint Fibers
contained within a fiber optic cable installed by IFN
between Sprint's [_____________________________________
_______________________________________________________
____________].
Sprint Sites The Sprint POPs located at [___________________________
_______________________________________________________
_______________________________________________________
__________________________________].
IFN Electronics The fiber optic telecommunications equipment used to
facilitate the transmission of [______________] over the
fiber optic cable owned by IFN hereunder and not
including the Sprint Electronics.
Right-of-Way (ROW) Easement or right to use real property owned by
railroads, individual property owners, or other entities.
System The fiber optic telecommunications network constructed by
IFN hereunder, including, but not limited to, all fiber
cables, environmental systems, the Right-of-Way, all
Sites and facilities.
Prime The Prime Rate as published in the Wall Street Journal.
PAGE 7
<PAGE>
Entrance Facilities Telecommunications cable that may or may not have
electronic equipment for the purpose of transport of
telecommunication services from carrier to carrier or
from customer to carrier. Such telecommunications cable
may be provided from a local operation company or other
companies licensed to provide cable for
telecommunications.
ARTICLE 3. TERM/TERMINATION
The initial Term of this Agreement shall commence as of the date and year
first above written and shall continue for a period of eleven (11) years from
the date of Acceptance, as defined in Article 5. Thereafter, Sprint will have
[_______________] year options to extend the Term. Each option to extend the
Term shall be exerciseable by Sprint as set forth in Article 4.2.
Upon termination of this Agreement, both Parties will be provided access,
upon prior written notice, to the others' sites for removal of their equipment
ARTICLE 4. COMPENSATION
4.1 Lease of Fiber Dark
-------------------
During the Term Of this Agreement, Sprint shall pay [___________________
____________________________________________] per month to IFN for the [_______
___________] Sprint Fibers, and [____] per month for lease of the [_________]
Extension for a total of [______] per month, beginning thirty (30) days after
Acceptance of the Sprint Fibers, as defined in Article 5, and monthly thereafter
for the term of the Agreement, including all extensions. Except as provided in
5.2, there shall be no payments by Sprint during the construction phase. Except
as expressly otherwise provided herein, both Sprint's and IFN's efforts shall be
carried out at each company's sole cost.
Sprint shall send all payments payable hereunder, via wire transfer, to:
ITC Holding Company
Bank ABA# 061109487
Account #707788
First National Bank
10th Street
West Point, GA 31833
Any amounts not paid by Sprint within ten (10) days after receipt of
written notice from IFN shall be subject to a late payment charge calculated
from the invoice due date to the date paid, with interest calculated at Prime
plus 2%.
PAGE 8
<PAGE>
IFN represents and warrants to Sprint that the prices charged to Sprint are
the lowest prices charged by IFN for dark fiber leases on this System between
[____________________________].
4.2 Options for Extension of Dark Fiber Lease
-----------------------------------------
Sprint is granted [_______________] year options for renewal of this Dark
Fiber Lease upon the following terms and conditions:
Sprint shall provide at least twelve (12) months advance written notice to
IFN of its intent to exercise an option to renew.
At the beginning of the third and fourth option periods (specifically, the
date when Sprint must provide written notice to IFN of its intent to exercise
its option to renew), if IFN is unable to provide to Sprint use of Sprint Fibers
which will meet the performance specifications attached hereto for 20% or more
of the Route, then the Parties agree to negotiate a remedy (e.g., IFN's
replacement of the defective portion of the Route with a financial contribution
from Sprint).
Should Sprint elect to exercise any of its options to renew, the lease
price per month for the Sprint Fibers for the extended term will be as follows:
First Option [______] per month
Second Option [______] per month
Third Option [______] per month
Fourth Option [______] per month
The lease price to renew the [_____] Extension shall be [_________________].
4.3 Others Payments
---------------
Sprint shall pay to IFN the sum of [________] payable as follows:
[________] upon Acceptance of the System Segment - [______________________] and
[______] upon Acceptance of the System Segment - [___________________]. Payment
shall be due and payable by wire transfer within five (5) business days of each
Acceptance.
ARTICLE 5. ACCEPTANCE
5.1 IFN shall perform testing on the System to determine the performance
level of the System after installation is complete. Sprint shall have the right
to have technicians present when testing is performed. IFN shall provide Sprint
with a copy of the test results. Based on Sprint's review of the test results,
the Parties shall mutually agree upon a list of items to be corrected. IFN will
correct any such items at IFN's sole cost. Sprint will provide a Notice of
Acceptance of the Sprint Fibers ("Acceptance"), in writing, when 1) the Parties
mutually agree the results are in conformance with the Exhibits and all product
specifications; 2) the Parties have executed a Maintenance Agreement
substantially in the form attached hereto as Exhibit H, providing, at a
PAGE 9
<PAGE>
minimum, that Sprint provide routine maintenance (for the term of this Agreement
as extended) of all [__________] at a monthly rate of [_____] throughout the
initial term of the Maintenance Agreement; and 3) IFN has delivered to Sprint an
annually renewable Letter of Credit Agreement maintained for the duration of the
initial Term of this Agreement and thereafter as may be required by Sprint in
the amount of [________________] naming Sprint as the beneficiary from a
commercial bank on which the S & P bond rating is at or above A-. The Letter of
Credit Agreement shall provide that payment shall be made to Sprint upon
Sprint's presentment of a Certificate stating that IFN has defaulted on the
terms of this Agreement.
5.2 In the event non-service effecting deficiencies are identified, Sprint
shall conditionally Accept the Sprint Fibers and shall commence payment of the
fees as set forth in Article 4, subject to the conditions precedent for
Acceptance identified in 5.1 hereinabove.
IFN shall correct any such non-service effecting deficiencies within ninety
(90) days of Conditional Acceptance. Should any such identified deficiencies
remain uncorrected at the end of the 90 days, Sprint has the right to correct
such deficiencies, at IFN's expense. Sprint may offset the reimbursement owed
for correcting any deficiencies against the Fees to be paid hereunder.
5.3 The Parties expressly agree that Sprint may retest the Sprint Fibers,
using its own equipment, provided that such re-testing shall be at Sprint's sole
cost.
5.4 Nothing contained herein shall prevent Sprint from electing to Accept
the Sprint Fibers in segments, in which event, Sprint shall pay the rates as set
forth in Article 1.7.
ARTICLE 6. ENTRANCE FACILITIES
6.1 Each Party shall be responsible for providing/arranging for their own
Entrance Facilities at any location where either Party desires to terminate
traffic and hand it off to a local telephone company or alternative access
provider.
6.2 Should Sprint determine that it has excess facilities at its POP sites
along the Route, then Sprint agrees to make such excess facilities available to
IFN at a cost to be determined by Sprint.
ARTICLE 7. CONFIDENTIAL INFORMATION
IFN shall preserve, with the same degree of care accorded its own proprietary
information, but in no event less than reasonable care, this Agreement and
Sprint confidential or proprietary information obtained in leasing to Sprint the
Sprint Fibers, and shall execute the Nondisclosure Agreement attached as Exhibit
G. IFN shall not, without the prior written consent of Sprint, in any manner
advertise or publish the fact that Sprint has entered into this Agreement. It is
understood and agreed by Sprint that IFN has the right to disclose this
Agreement to governmental agencies having
PAGE 10
<PAGE>
requisite governmental authority over the terms of this Agreement, provided that
IFN has given Sprint prior written notice of impending disclosure, and Sprint
has a reasonable opportunity to defend against such disclosure. Notwithstanding
the foregoing, it is understood and agreed by Sprint that IFN has the right to
disclose in writing all or part of the financial terms and conditions of this
Agreement to IFN's proposed financing sources, provided that Sprint has the
right to approve in advance such written disclosures (which approval will not be
unreasonably withheld), and further provided that Sprint's name shall not be
disclosed by IFN in such written disclosure statement without Sprint's express
written authorization. This Article 7 shall survive the termination or
expiration of the Agreement for a period of three (3) years.
ARTICLE 8. WARRANTIES
8.1 The Warranties and remedies set forth in this Agreement constitute the
only warranties and remedies with respect to this Agreement. Such Warranties are
in lieu of all other warranties, written or oral, statutory, express or implied,
including without limitation the Warranty of merchantability and the Warranty of
fitness for a particular purpose or use.
8.2 IFN represents and warrants to Sprint that it has the right to perform
as required hereunder and/or provide to Sprint the Sprint Fibers specified
herein, and that it is an entity, duly organized, validly existing and in good
standing under the laws of its origin, with all requisite power to enter into
and perform its obligations under this Agreement in accordance with its terms.
8.3 IFN represents and warrants to Sprint that all performance obligations
rendered by it hereunder shall be designed, produced, installed, furnished and
in all respects provided and maintained in conformance and compliance with
applicable federal, state and local laws, administrative and regulatory
requirements, and any other authorities having jurisdiction over the subject
matter of this Agreement that were in effect at the time of such design,
production, installation or furnishing, and it shall be responsible for applying
for, obtaining and maintaining all registrations and certifications which may be
required by such authorities.
8.4 Each Party represents that it is not aware of any facts that would
justify a complaint to the Federal Communications Commission or any state
regulatory authority concerning the prices, terms or conditions of the
transactions contemplated by this Agreement. The Parties also agree that in the
event a decision by a telecommunications regulatory authority at the federal,
state or local level necessitates modifications in this Agreement, the Parties
will negotiate in good faith to modify this Agreement in light of such decision.
8.5 IFN shall obtain all required regulatory authorizations, construction
permits, and appropriate agreements for installation and use of the System in
ducts, on poles, and/or in trenches on public or private property prior to
commencement of construction. It is expressly understood that the System may be
installed in or on ROW, the use of which is licensed or leased to IFN by others.
IFN shall acquire such
PAGE 11
<PAGE>
ROW (including any necessary renewals or new licenses or leases) and obtain for
Sprint the right to use, maintain and access the System without interruption and
a guarantee of non disturbance during the Term of this Agreement and any
renewals thereof, including, but not limited to, sufficient ingress and egress
rights to all IFN Sites. IFN shall immediately inform Sprint in the event that
IFN is unable, after diligent and good faith efforts, to obtain renewals of
existing licenses or leases, new licenses or new leases, in order to enable
Sprint to protect its rights to use, maintain and access the System provided
hereunder during the Term of this Agreement.
8.6 IFN represents and warrants, to Sprint, that the System has been
installed in a workmanlike manner and in accordance with the Exhibits to this
Agreement. IFN shall further warrant that the System will operate in accordance
with Exhibit B and E, Technical Specifications for the term of the Agreement (as
extended). In the event that the System fails to perform in accordance with
Exhibit B and E, Technical Specifications, Sprint shall have the rights and
remedies as set forth in Article 12.4.
ARTICLE 9. INDEMNIFICATION
Each Party agrees to indemnify and hold harmless the other Party from
claims by persons not a party to this Agreement for personal injury or damage to
personal property from the negligent or willful actions of the indemnifying
Party's employees, agents, contractors, or representatives.
ARTICLE 10. LIABILITIES
Neither party shall be liable for any consequential, incidental, indirect,
special, or punitive damages, or for lost profits. This provision shall not
affect Sprint's right to liquidated damages as provided in Article 1 and Article
12.
ARTICLE 11. INSURANCE
If IFN is to perform work on Sprint premises. IFN shall obtain and maintain
in force [for the Term] Services Commercial General Liability Insurance,
including coverage for contractual liability and personal insurance, personal
injury or death, or property damage, in the amount not less than [_________] per
occurrence, insuring IFN and naming Sprint as an additional insured, and waiving
all of insurer's rights of subrogation against Sprint. Before commencing work on
Sprint premises, IFN will provide satisfactory evidence of the required
insurance and stating that no policy may be canceled or materially altered
without first giving Sprint thirty (30) days written notice.
ARTICLE 12. DEFAULT
12.1 IFN shall be in default of this Agreement if: 1) IFN becomes
insolvent, liquidates, is adjudicated as bankrupt, makes an assignment for the
benefit of
PAGE 12
<PAGE>
creditors, invokes any provision of law for the relief of debtors, or initiates
any proceeding seeking protection from its creditors; or 2) IFN violates any
applicable laws or other legal requirements which results in a material impact
on the System or System Segments; or 3) IFN fails to acquire and/or maintain
necessary Right-of-Way for the uninterrupted use of the System as required under
this Agreement; 4) IFN fails to perform any material obligation, which is not
associated with the physical operation of the System, under the terms of this
Agreement; 5) IFN fails to perform any material obligation regarding the
physical operation of the System under the terms of this Agreement.
Such failure shall not be considered a default however if it is the result
of a material default on behalf of Sprint in its obligations under the
Maintenance Agreement.
12.2 In the event of a default as described in (3) and (5) of Article 12.1
above, Sprint has the right, without the duty, and solely at its discretion to
cure the default if IFN is not using best faith efforts to cure the same. In
such event, IFN hereby appoints Sprint as its authorized agent, with authority
to negotiate and obtain licenses, lease renewals, or rights-of-way to allow for
the completion of construction or to allow for Sprint's uninterrupted use of the
System. IFN shall reimburse Sprint for any costs associated with curing such
default at a rate of two times Sprint's direct cost for labor and services and
one and one half times Sprint's direct costs for materials and fees. Sprint may
offset such reimbursement against any fees due and owing hereunder by Sprint.
Sprint shall provide an itemized invoice to IFN for any amounts offset.
12.3 If any event of default continues for thirty (30) days after written
notice thereof, Sprint has the right, but not the duty, and solely at its
discretion to initiate any of the actions that follow:
a) To terminate the Agreement. As time is of the essence for the
completion of the System, termination shall be immediate and effective upon
notice. In such event, IFN hereby releases and discharges Sprint of and from any
and all claims, causes of action, damages or liabilities, known or unknown,
incurred by reason of or in any way growing out of the use of the System and
Route or related to this Agreement. IFN's liability for the liquidated damages
set forth in Section 1.7 shall cease upon termination of the Agreement.
b) To cure the event of default to the extent Sprint deems necessary to
allow for the continued use of the Sprint Fibers by Sprint or to complete
construction of the System for use by Sprint. In such event, IFN hereby appoints
Sprint as its authorized agent, with authority to negotiate and obtain licenses,
lease renewals, or rights-of-way to allow for the completion of construction or
to allow for Sprint's uninterrupted use of the Sprint Fibers. IFN shall
reimburse Sprint for any costs associated with curing such default at a rate of
two times Sprint's direct cost for labor and services and one and one half times
Sprint's direct costs for materials and fees. Sprint may offset such
reimbursement against any fees due and owing hereunder by Sprint. Sprint shall
provide an itemized invoice to IFN for any amounts offset.
PAGE 13
<PAGE>
12.4 If any portion of the System experiences performance which fails the
material requirements as set forth in the Exhibits or in industry standards of
comparable systems with current and like technology, which results in an
interruption in Sprint's ability to use or a material degradation of the System,
then Sprint's obligation for payment here under shall immediately cease for the
duration of such interruption or degradation on a pro rata basis in one
sixteenth increments for each Sprint Fiber affected (one twenty fourth
increments for each Sprint Fiber affected on the Accepted System Segment -
[_____] Extension) until the same is cured, as demonstrated by IFN to the
reasonable satisfaction of Sprint. Notwithstanding any other provision of this
Agreement to the contrary, if Sprint exercises its remedy to cease payment of
its monthly obligation to IFN due to an alleged material default by IFN, then
IFN shall have the right to draw upon its Letter of Credit referenced in Article
5 hereof to satisfy IFN's monthly financial obligations related to the System,
provided that IFN may not reduce the available balance under the Letter of
Credit to an amount less than [__________] pursuant to this Article 12 without
the prior written consent of Sprint. Additionally, the amount available under
the Letter of Credit must be reinstated to the maximum amount required pursuant
to Article 5 hereof within twelve (12) months after the date IFN first makes any
draw under the Letter of Credit pursuant to this Article 12.
12.5 Sprint shall be in default of this Agreement if: 1) Sprint becomes
insolvent, liquidates, is adjudicated as bankrupt, makes an assignment for the
benefit of creditors, invokes any provision of law for the relief of debtors, or
initiates any proceeding seeking (including payment obligation) protection from
its creditors; or 2) Sprint fails to perform any material obligation under the
terms of this Agreement. If any such event of default continues for thirty (30)
days after written notice thereof, IFN has the right, but not the duty, solely
at its discretion to terminate this Agreement. Such termination shall be
immediate and effective upon notice. In such event, Sprint hereby releases and
discharges IFN of and from any and all claims, causes of action, damages or
liabilities, known or unknown, incurred by reason of or in any way growing out
of the use of the System and Route or related to this Agreement. It is not
intended that Sprint release IFN from claims relating to this Agreement such
that IFN caused or contributed to Sprint's material default hereunder.
ARTICLE 13. UTILITIES
13.1 IFN's responsibility for utilities at IFN's Sites
------------------------------------------------
IFN hereby agrees to pay any and all charges for utility services rendered
to any IFN Site along the Route. Such charges can include, but are not limited
to; electric power necessary for common alarms, interior and exterior lighting,
environmental systems (air-conditioning), Sprint Electronics, and IFN
Electronics; any water necessary for the operation of the site; any sewer
charges necessary for operation of the site; any trash/garbage fees assessed for
the IFN Sites.
13.2 Sprint's responsibility for utilities at Sprint Sites
-----------------------------------------------------
Sprint hereby agrees to pay any and all charges for utility services
rendered to
PAGE 14
<PAGE>
Sprint Sites. Such charges can include, but are not limited to: electric power
necessary for common alarms, interior and exterior lighting, environmental
systems (air-conditioning), Sprint Electronics, and IFN Electronics; any water
necessary for the operation of the site; any sewer charges necessary for
operation of the site; any trash/garbage fees assessed for the Sprint POP site.
ARTICLE 14. TAXES
IFN shall be fully responsible for the payment of any and all ad valorem,
property, franchise, gross receipts, sales, use and other taxes directly
applicable to the leasing of the Sprint Fibers to Sprint and the maintenance
services it purchases pursuant to the Maintenance Agreement between the Parties
(except income taxes on the revenue of Sprint).
ARTICLE 15. ARBITRATION
15.1 Dispute Resolution. In the event of any dispute, controversy or
------------------
claim of any kind or nature arising under or in connection with this Agreement
or the provision of the Services by IFN that the Parties are unable to resolve
through informal discussions or negotiations, the Parties agree to submit such
dispute, controversy or claim to arbitration in accordance with the following
procedures:
(a) Either party may demand arbitration by giving the other party written
notice to such effect, which notice shall (i)describe, in reasonable
detail, the nature of the dispute, controversy or claim, and (ii)
name an arbitrator who is experienced in the subject matter of the
issue in dispute.
(b) Within thirty (30) days after the other party's receipt of such
demand, such other party shall name a second arbitrator who is
experienced in the subject matter of the issue in dispute.
(c) The two arbitrators so named shall promptly select a third arbitrator
who also is experienced in the subject matter of the issue in
dispute. The arbitration shall be heard by a panel of the three
arbitrators so chosen (the "Arbitration Panel"), and the resolution
of the dispute, controversy or claim shall be determined by a
majority vote of the Arbitration Panel. The Commercial Arbitration
Rules of the American Arbitration Association shall govern the
conduct of the arbitration.
(d) Sprint and IFN shall each bear 50% of all fees, costs and expenses of
the arbitration, and each party shall bear its own legal fees and
expenses, and costs of all experts and witnesses; provided, however,
that if the claim of either party is upheld by the Arbitration Panel
in all material respects, then the Arbitration Panel may apportion
between the Parties as the Arbitration Panel may deem equitable the
costs incurred by the prevailing party.
PAGE 15
<PAGE>
(e) The party demanding arbitration shall request the Arbitration Panel
to (i) allow for the Parties to request reasonable discovery pursuant
to the rules then in effect under the Federal Rules of Civil
Procedure for a period not to exceed sixty (60) days prior to such
arbitration and (ii) require the testimony to be transcribed. No
findings of fact or opinions of law shall be required to be made by
the arbitrators.
(f) Any award rendered by the Arbitration Panel shall be final,
conclusive and binding upon the Parties and any judgment thereon may
be entered and enforced in any court of competent jurisdiction.
15.2 Exclusive Remedy. Other than any action necessary to enforce the
----------------
award of the Arbitration Panel, the Parties agree that the provisions of this
Article 15 are a complete defense to any suit, action or other proceeding
instituted in any court or before any administrative tribunal with respect to
any dispute, controversy or claim arising under or in connection with this
Agreement or the provisions of the Services by IFN. Nothing in this Article 15
prevents the Parties from exercising their rights to terminate this Agreement in
accordance with this Agreement.
ARTICLE 16. MISCELLANEOUS
16.1 Any work performed by either party on the premises of the other party
shall be performed while taking all necessary precautions to prevent the
occurrence of any injury to persons or property during the progress of such work
and shall adhere to Sprint security procedures, policies and operation.
16.2 Each party shall immediately notify the other party by telephone
(followed by written confirmation within twenty-four hours) of any product used
in providing services hereunder which fails to comply with any applicable safety
rules or standards of concerned governmental agencies (including the
Environmental Protection Agency), or which contains a defect which could create
or present a substantial risk to stored data or software, or which presents a
substantial risk to the public health or of injury to the public or to the
environment.
16.3 Except as specifically provided herein, this agreement does not
constitute either Party as the agent or legal representative of the other Party,
and does not create a partnership or joint venture between the Parties. Each
Party may engage in and possess other business ventures that are competitive
with the services under this Agreement. This Agreement is not intended to be an
exclusive Agreement for any services.
16.4 This Agreement, together with all Exhibits, shall constitute the
entire agreement and no negotiations or discussions prior to execution shall be
of any effect.
16.5 The invalidity in whole or in part of any provision shall not affect
the validity of any other provision.
PAGE 16
<PAGE>
16.6 The right and remedies of the parties shall be cumulative and in
addition to any other rights and remedies provided by law or equity. A waiver of
a breach of any provision hereof shall not constitute a waiver of any other
breach. The laws of the state of Kansas shall govern this Agreement.
16.7 No subsequent agreement concerning the System shall be effective
unless made in writing and executed by authorized representatives of the
Parties.
16.8 Notices shall be in writing, mailed certified with return receipt
requested, effective upon receipt and sent to:
Sprint: Sprint Communications Company L.P.
903 East 104th Street
Kansas City, Missouri 64131
ATTN.: Network Contracts and
Real Property Administration
Copy to: Sprint Communications Company L.P.
8140 Ward Parkway
Kansas City, Missouri 64114
ATTN.: Law Department
Interstate Fibernet: Interstate Fibernet
910 First Avenue
P.O. Box 510
West Point,GA 31833
Attn.: Steve Moses
Copy to: Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, DC 20004
Attn.: James J. Rosenhauer
or to replacement addresses that may be later designated in writing.
16.9 Neither Party may assign this Agreement without the prior written
consent of the other Party which assignment shall not be unreasonably withheld,
except that Sprint may assign its rights and obligations hereunder to a legal
entity which is a successor, assign, subsidiary or affiliate of Sprint
Corporation without notice or consent, provided that such entity is of a
financial condition that will allow it to meet all obligations under this
agreement.
16.10 Sprint hereby consents to the assignment by IFN of the Agreement in
its entirety to an entity of which MPX Systems, Inc. ("MPX") and a corporation
that is, directly or indirectly, a wholly-owned subsidiary of ITC Holding
Company, Inc. ("ITC Holding") are owners holding a controlling interest, so long
as SCANA Corporation and ITC Holding continue to guarantee financing for such
assignee. For this purpose,
PROPRIETARY INFORMATION PAGE 17
<PAGE>
"controlling interest" shall mean retention by MPX and such ITC Holding
subsidiary of at least fifty-one percent (51%) of the ownership interest in such
entity, and the ability to control the selection of management. This consent
shall terminate if such assignment does not occur on or before [______________].
ARTICLE 17. EQUIPMENT PURCHASE BY IFN
IFN shall purchase and deliver to Sprint, on or before December 31, 1994,
the equipment identified below including all right, title and interest thereto,
free and clear from any liens or encumbrances.
A. [_____________________________________________________
_____________________
_______________________________
__________
__________________
_________________________
_______________________________________
__________________________________
______________________________________]
B. [____________________________________
________________________________________________]
IFN shall ensure that all manufacturer's warranties are fully transferable
to Sprint.
ARTICLE 18. COUNTERPARTS
To facilitate execution, this Amendment may be executed in as many
counterparts as may be required, it shall not be necessary that the signature of
or on behalf of each party appears on each counterpart, but it shall be
sufficient that the signature of or on behalf of each party appears on one or
more of the counterparts. All counterparts shall collectively constitute a
single agreement. It shall not be necessary in any proof of the Agreement to
produce or account for more than a number of counterparts containing the
respective signatures of or on behalf of all of the parties.
PAGE 18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year below written, but effective as of the day and year first set forth
above.
INTERSTATE FIBERNET, SPRINT COMMUNICATIONS COMPANY L.P.,
A GEORGIA GENERAL PARTNERSHIP A DELAWARE LIMITED PARTNERSHIP
- ----------------------------- ------------------------------------
By: /s/ Steve Moses By: /s/ George N. Fuciu
-------------------------- --------------------------------
Name: Steve Moses Name: George Fuciu
Title: General Manager Title: Senior Vice President, Network
Date: 1/30/95 Date: 1/26/95
------------------------ -------------------------------
STATE OF Georgia
--------------------)
COUNTY OF Troup ) ss
--------------------)
On this 30th day of January 1995, Steve Moses, General Manager, Interstate
Fibernet, a Georgia General Partnership executed the foregoing instrument. IN
TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal the
day and year aforesaid
/s/ Martha B. Quinton
-----------------------------------
Notary Public
STATE OF Missouri Notary Public, Troup County, Georgia
---------------------)
COUNTY OF Jackson ) ss My Commission Expires March 23, 1998.
--------------------)
On this 26th day of January 1996, George Fuciu, Senior Vice President,
Network Sprint Communications Company L.P., a Delaware Limited Partnership
executed the foregoing instrument. IN TESTIMONY WHEREOF, I have hereunto set my
hand and affixed my official seal the day and year aforesaid.
[SEAL APPEARS HERE] /s/ Janet S. Rynard
---------------------------------------
Notary Public
MPX SYSTEMS, ITC TRANSMISSION SYSTEMS, INC:
A SOUTH CAROLINA CORPORATION A DELAWARE CORPORATION
- -------------------------------- ---------------------------------------
By: /s/ Michael D. Blackwell By: /s/ Steve Moses
----------------------------- ------------------------------------
Name: Michael D. Blackwell Name: Steve Moses
Title: Executive vice President Title: Vice President
AS GENERAL PARTNER FOR
INTERSTATE FIBERNET,
A GEORGIA GENERAL PARTNERSHIP
Date: 1/30/95 Date:__________________________________
--------------------------
STATE OF SC
------------------------)
COUNTY OF Lexington ) ss
-----------------------)
On this 31 day of January 1996, Michael D. Blackwell, Executive Vice
President, MPX Systems, a South Carolina Corporation executed the foregoing
instrument. IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year aforesaid.
/s/ [SIGNATURE ILLEGIBLE]
---------------------------------------
Notary Public
STATE OF Georgia My Commission Expires 4/30/2002
------------------------)
COUNTY OF Troup ) ss
-----------------------)
On 30th day January, 1996, Steve Moses, Vice President, ITC Transmission
Systems, Inc, a Delaware Corporation executed the foregoing instrument. IN
TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal the
day and year aforesaid.
/s/ Martha B. Quinton
---------------------------------------
Notary Public
Notary Public, Troup County, Georgia
My Commission Expires March 23, 1998.
PAGE 19
<PAGE>
***INFORMATION IN THIS EXHIBIT A-1 DIAGRAM HAS BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***
Exhibit A-1
Preliminary System Route Diagram
[___________________]
<PAGE>
EXHIBIT A-2
FINAL SYSTEM ROUTE DIAGRAM
[___________________]
(to be provided by IFN no later than January 27, 1995 and subject to Sprint's
approval)
<PAGE>
[LOGO] Sprint 903 East 104th Street
P.O. Box 8490
Kansas City MO 64114-0490
(816) 854-7081
April 5, 1995
Mr. Frank Wilcox
Director of Operations
Gulf States FiberNet
208 West Ninth Street
P.O. Box 510
West Point, GA 31833
Reference: [________________] Contract, Exhibit A-2
Dear Mr. Wilcox:
The proposal in your letter of March 30, 1995 is acceptable to us. As stated in
your letter, [_________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
___________________________________________________________].
Sincerely,
/s/ Wayne C. Young
Wayne C. Young
Contract Negotiator
cc. O.A.Bell
<PAGE>
EXHIBIT A-3
CABLE VENDOR LIST
[___________________]
[__________________________________________________________________________
___________________________________________].
[____]
- ------
[_______]
[________]
[_______________]
[____]
- ------
[_______________]
[_______________]
<PAGE>
***INFORMATION IN THIS EXHIBIT B (PAGES 1-25) HAS BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***
EXHIBIT B
- --------------------------------------------------------------------------------
OPTICAL FIBER CABLE SPECIFICATION FOR
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Paragraph Page
- --------- ----
<C> <S>
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
12.0
</TABLE>
1
<PAGE>
***INFORMATION IN THIS EXHIBIT C (PAGES 1-9) HAS BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***
Exhibit C
OUTSIDE PLANT AND CABLE SPLICING SPECIFICATIONS
[___________________]
<PAGE>
***INFORMATION IN THIS EXHIBIT D (PAGES 1-12) HAS BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***
EXHIBIT D
[__________________]
CRITERIA AND SPECIFICATION
[___________________]
<PAGE>
***INFORMATION IN THIS EXHIBIT E (PAGES 1+2) HAS BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT E
[____] Fiber Specifications
<PAGE>
***INFORMATION IN THIS EXHIBIT F (PAGES 1-10) HAS BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***
EXHIBIT F
- --------------------------------------------------------------------------------
[___________________________________________]
Telecommunications
<PAGE>
EXHIBIT G
AGREEMENT FOR USE AND NON-DISCLOSURE
OF CONFIDENTIAL INFORMATION
THIS AGREEMENT, made effective as of the 26th day of January 1995, by and
between Sprint Communications Company L.P., a Delaware Limited Partnership
("Sprint"), having an office at 903 East 104th Street, Kansas City, MO 64131,
and Interstate FiberNet, a Georgia General Partnership ("Carrier"), having an
office at 910 First Avenue, West Point, GA 31833, is to assure the protection
and preservation of the confidential and/or proprietary nature of information to
be disclosed or made available to each other in connection with an agreement
regarding telecommunications services contemplated by Carrier and Sprint ("the
Party(ies)").
WHEREAS, the Parties contemplate entering into business and/or technical
discussions relating to:
Telecommunications Services
NOW, THEREFORE, in reliance upon and in consideration of the following
undertakings, the Parties, for themselves, their subsidiaries and their
affiliates, agree as follows:
1. All information disclosed to the other Party shall be deemed to be
confidential and proprietary (hereinafter referred to as "Proprietary
Information") provided that written information is clearly marked in a
conspicuous place as confidential or proprietary, and verbal
information is immediately confirmed in writing as confidential or
proprietary.
2. Each Party agrees to use the Proprietary Information received from the
other Party only for the purpose stated above. No other rights, and
particularly licenses, to trademarks, inventions, copyrights, or
patents are implied or granted under this Agreement.
3. Proprietary Information supplied shall not be reproduced in any form
except as required to accomplish the intent of this Agreement.
4. The receiving Party shall provide the same care to avoid disclosure or
unauthorized use of the Proprietary Information as it provides to
protect its own proprietary information, but in any event at least
reasonable care. It is agreed that all Proprietary Information shall be
retained by the receiving Party in a secure place with access limited
to only such of the receiving Party's employees or agents who need to
know such information for purposes stated above.
5. All Proprietary Information, unless otherwise specified in writing,
shall remain the property of the disclosing Party, shall be used by the
receiving Party only for the purpose intended, and such Proprietary
Information, including all copies thereof, shall be returned to the
disclosing Party or destroyed after the receiving Party's need for it
has expired or upon request of the disclosing Party, or, in any event,
upon termination of this Agreement.
6. It is understood that the term "Proprietary Information" does not
include information which:
a) has been published or is now or may become in the public
domain through no fault of the receiving Party;
b) prior to disclosure hereunder is property within the
legitimate possession of the receiving Party;
c) subsequent to disclosure hereunder is lawfully received from
a third party having no obligation not to disclose;
d) is independently developed by the receiving Party through
parties who have not had, either directly or indirectly,
access to or knowledge of such Proprietary Information;
e) is transmitted to the receiving Party after the disclosing
Party has received written notice from the receiving Party
that it does not desire to receive further Proprietary
Information.
f) is required to be disclosed pursuant to court order or as
otherwise required by law, on the condition that reasonable
written notice of the requirements for such disclosure is
given to the disclosing party as soon as possible prior to
making any disclosure and the receiving party to such
requirements cooperates as the other may reasonably request in
resisting the disclosure or disclosing only under a protective
court order or other entity or agency.
7. Each Party agrees not to reveal this relationship with the other Party
to any third parties except as contemplated by Paragraph 4 of this
Agreement.
8. Damages, being difficult to ascertain in the event of violation of this
Agreement, the Parties agree that, without limiting any other rights
and remedies of each other, upon breech hereof, an injunction may be
sought by the non-breaching Party to protect its rights hereunder.
9. This Agreement shall continue in full force and effect so long as
either Party shall possess the Proprietary Information of the other
Party. This Agreement may be terminated at any time by mutual
agreement, or by either Party upon sixty (60) days written notice to
the other Party; provided that such unilateral termination of this
Agreement shall not relieve the recipient Party of its obligations
under this Agreement with respect to Proprietary Information exchanged
prior to the effective date of termination.
Sprint Communications Company L.P. Interstate FiberNet
By: By:
------------------------------- -------------------------------
Name: Name:
----------------------------- -----------------------------
Title: Title:
---------------------------- ----------------------------
----------------------------
Date: Date:
----------------------------- -----------------------------
<PAGE>
EXHIBIT H
TELECOMMUNICATIONS SYSTEM MAINTENANCE AGREEMENT
[THIS EXHIBIT IS INCORPORATED BY REFERENCE TO AN EXECUTED VERSION OF
THAT CERTAIN TELECOMMUNICATIONS SYSTEM MAINTENANCE AGREEMENT, DATED AS OF
JANUARY 26, 1995, BETWEEN INTERSTATE FIBERNET AND SPRINT COMMUNICATIONS COMPANY
L.P., FILED AS EXHIBIT NO. 10.49 TO AMENDMENT NO. 1 TO THE COMPANY'S
REGISTRATION STATEMENT OF FORM S-4 (REGISTRATION NO. 333-31361). CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF SUCH EXHIBIT. THE EXECUTED VERSION
FILED AS EXHIBIT NO. 10.49 OMITS THE INFORMATION SUBJECT TO THE CONFIDENTIAL
TREATMENT REQUEST.]
<PAGE>
EXHIBIT I
SPRINT COMMUNICATIONS COMPANY FACILITIES
AND SERVICES AGREEMENT
[THIS EXHIBIT IS INCORPORATED BY REFERENCE TO AN EXECUTED
VERSION OF THAT CERTAIN SPRINT COMMUNICATIONS COMPANY FACILITIES AND SERVICES
AGREEMENT, DATED AS OF JANUARY 26, 1995, BETWEEN INTERSTATE FIBERNET AND SPRINT
COMMUNICATIONS COMPANY L.P., FILED AS EXHIBIT NO. 10.50 TO AMENDMENT NO. 1 TO
THE COMPANY'S REGISTRATION STATEMENT ON FORM S-4 (REGISTRATION NO. 333-31361).
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF SUCH EXHIBIT. THE
EXECUTED VERSION FILED AS EXHIBIT NO. 10.50 OMITS THE INFORMATION SUBJECT TO THE
CONFIDENTIAL TREATMENT REQUEST.]
<PAGE>
***INFORMATION IN THIS EXHIBIT J (PAGES 1-7) HAS BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***
EXHIBIT J
SPECIFICATIONS FOR MAINTENANCE OF FIBER REGENERATOR SITES
[__________________]
<PAGE>
EXHIBIT 10.54
-------------
Amendment No. 1
Amendment To
Telecommunications System Agreement
Dated January 26, 1995 Between
Gulf States FiberNet and
Sprint Communications Company L.P.
THIS AMENDMENT IS entered into, effective as of July 25 1995, by and between
Sprint Communications Company L.P., 2 Delaware Limited Partnership (hereinafter
referred to as "Sprint"), whose address is 903 E. 104th Street, Kansas City, MO
64131 and Gulf States FiberNet (hereinafter referred to as "GSF"), whose address
is 910 First Avenue, West Point, GA 31833.
WITNESSETH:
WHEREAS, Interstate FiberNet ("IFN") and Sprint entered into the
Telecommunications System Agreement, dated effective January 26, I 1995.
("Agreement"), and such Agreement was assigned by IFN to GSF pursuant to Article
16.10 or the Agreement, and:
WHEREAS, GSF and Sprint desire to amend the Agreement in certain respects as are
set forth herein.
NOW THEREFORE, in consideration of the premises and the mutual covenants and
promises herein contained, the parties covenant and agree as follows:
1. Add the following language as Article 4.4
Payments in Case of GSF Default
-------------------------------
"In the event of GSF's default on a loan agreement between GSF and
NationsBank N.A. ("Lendor"), the Parties hereby agree that Lendor may
provide written notice to Sprint of such default and request that Sprint
remit all payments due under this Agreement to Lendor. GSF hereby agrees to
indemnify and hold harmless Sprint, its affiliates successors and assigns
from any claim resulting from such change in payment remittance."
2. Add the following language as the third paragraph In Article 12.1.
"Sprint shall endeavor to also provide notice of GSF's default to
NationsBank N.A.; however, Sprint shall not be held liable for any failure
to provide such notice."
3. Except as amended herein, the Agreement shall continue in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the day
and year below written, but effective as of the day and year first set forth
above.
GULF STATES FlBERNET. A SPRINT COMMUNICATIONS COMPANY L.P.,
GEORGIA GENERAL PARTNERSHIP A DELAWARE LIMITED PARTNERSHIP
- --------------------------------- ---------------------------------------
By: /s/ Doug Shumante By: /s/ James B. Farris
------------------------------ -----------------------------------
Name: Doug Shumante Name: James B. Farris
---------------------------- ----------------------------------
(Type or Print)
Title: VP/CFO Gulf States
Transmission Systems Inc.
Managing Ptr.
---------------------------
Title: Director, Network Real Estate
Acquisition and Administration
Date: 7 - 25- 95 Date: 7-24-95
---------------------------- ----------------------------------
<PAGE>
EXHIBIT 10.55
-------------
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[_____]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
Amendment No. 2
Amendment No. 2 to
Telecommunications System Agreement
Dated January 26,1995 Between
Gulf States FiberNet and
Sprint Communications Company L.P.
THIS AMENDMENT IS entered into, effective as to this 8TH day of AUGUST
1996, by and between Sprint Communications Company L.P., a Delaware limited
partnership (hereinafter referred to as "Sprint"), with offices at 1200 Main,
Kansas City, MO 64105 and Gulf States FiberNet, a Georgia General Partnership
(hereinafter referred to as "GSF"), having an address at 910 First Avenue, West
Point, GA 31833, GSF and Sprint collectively referred to as the "Parties".
BACKGROUND:
InterState FiberNet ("IFN") and Sprint entered into the Telecommunications
System Agreement, dated January 26,1995 and as amended on July 25,1995
("Agreement"), and such Agreement was assigned by IFN to GSF pursuant to Article
16.10 of the Agreement; and
The Agreement obligates GSF to design, engineer, construct or cause to be
constructed facilities and acquire appropriate interests in real property or
other rights, all as may be required to provide, operate, and maintain a
telecommunications fiber optic system between [____________] and [_________]
(hereinafter referred to as "Route" and as shown in Exhibit A2); and
The Agreement obligates GSF to provide Sprint space within GSF buildings
along the Route (hereinafter "Sprint Space"), including the [_____] regenerator
located at [________________________________________]; and
Sprint does not currently require the entire minimum of 100 square feet of
Sprint Space at the [_______] regenerator and agrees to allow GSF use of any
space not currently required by Sprint to supply its customers with
telecommunications services.
THEREFORE, the Parties agree as follows:
1. As if the Effective date of this Amendment No. 2, GSF may use Sprint Space
not currently being utilized by Sprint at the [_____] regenerator site, provided
that GSF's use of the space at the [_____] regenerator site will in no way have
any effect on current Sprint fibers, equipment, or relay racks currently
installed at the site.
2. Sprint will give GSF nine (9) months notice to re-acquire its space at the
[_____] regenerator. Immediately upon notice, GSF will take the appropriate
actions to restore the original space for Sprint's use, provide an additional
building, or attachment to the existing building which will meet or exceed the
specifications in Exhibit D of the Agreement. This space will be ready for
Sprint to occupy within nine (9) months from the date of notice to
GSF.
3. Sprint may revoke GSF's right to utilize the Sprint Space immediately upon
notice to GSF that Sprint Fibers, equipment, or relay racks currently installed
are materially, adversely impacted by GSF's use of sprint Space.
<PAGE>
AMENDMENT NO. 2
4. During GSF's use of Sprint Space, all obligations of Sprint to GSF in
reference to or applicable to that portion of the Sprint Space shall cease.
5. Except as amended herein, the Agreement shall continue in full force and
effect.
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment on the day
and year written below, but effective as of the day and year first set forth
above.
SPRINT COMMUNICATIONS COMPANY LP., GULF STATES FIBERNET, A GEORGIA
A DELAWARE LIMITED PARTNERSHIP GENERAL PARTNERSHIP
BY: /s/ James B. Farris By: /s/ Steve D. Moses
------------------------------------ ----------------------------
NAME:JAMES B. FARRIS Name:Steve D. Moses
----------------------------------- ---------------------------
TITLE: Director Real Estate Acquisitions Title: Vice President
--------------------------------- -------------------------
& Administration
---------------------------------
DATE: 8-8-96 Date: 8-5-96
--------------------------------- --------------------------
<PAGE>
EXHIBIT 10.56
-------------
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[_____]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
Assignment of the
TELECOMMUNICATIONS SYSTEM AGREEMENT
Dated January 26,1995 between
INTERSTATE FIBERNET and
SPRINT COMMUNICATIONS COMPANY L.P.
THIS ASSIGNMENT IS entered into and effective this 25 day of July, 1995, by and
between Sprint Communications Company L.P., a Delaware Limited Partnership
(hereinafter referred to as "Sprint"), with offices at 903 E. 104th Street,
Kansas City, MO 64131, Interstate FiberNet, a Georgia General Partnership
(hereinafter referred to as "IFN"), having an office at 910 First Avenue, West
Point, GA 31833, and Gulf States FiberNet, a Georgia General Partnership
(hereinafter referred to as "Assignee"), having an office at 910 First Avenue,
West Point, GA 31833 with Interstate FiberNet and Sprint being collectively
referred to herein as the "Parties".
WHEREAS the Parties entered into a Telecommunication System Agreement dated
January 26, 1995 ("Agreement") which obligates IFN to design, engineer,
construct or cause to be constructed, facilities and acquire appropriate
interests in real property or other rights, all as may be required to provide,
operate, and maintain a telecommunications fiber optic system between
[____________] and [_________] (defined in the Agreement as the Route); and
WHEREAS IFN wishes to assign the Agreement to Assignee; and
WHEREAS pursuant to the Telecommunications System Agreement, IFN and Sprint
entered into the following additional contracts:
(i) Sprint Communications Company Facilities and Services Agreement made
and entered into January 26, 1995;
(ii) Telecommunications System Maintenance Agreement made and entered
into as of January 26, 1995;
(iii) Agreement for Use and Non-Disclosure of Confidential Information
made effective as of January 26, 1995.
WHEREAS Sprint is willing to allow the assignment of all Agreements described
above to Assignee;
NOW THEREFORE, in consideration of the rights and obligations set forth below,
the Assignment is hereby consented and agreed to as follows:
1.0 ASSIGNMENT
1.1 On January 26, 1995, IFN entered into a Telecommunication System
Agreement ("Agreement"), Sprint Communications Company Facilities
and Services Agreement, Telecommunications System Maintenance
Agreement, and Agreement for Use and Non-Disclosure of Confidential
Information,
Assignment of Telecommunications Systems Agreement
Page 1
<PAGE>
collectively referenced hereinafter as "Agreements", and a copy of
which are attached to this Assignment as Exhibit A.
1.2 In accordance with Article 16.9 of the Agreement, IFN requests and
Sprint hereby agrees to the assignment of the Agreement including
all obligations thereunder to Assignee. IFN warrants that Assignee
is an entity that can reasonably be expected to carry out the terms
and conditions of the Agreements. IFN hereby assigns to Assignee all
right, title and interest of IFN in and to the Agreements between
IFN and Sprint.
1.3 By its execution of this Assignment, Assignee agrees to accept the
Agreements. Assignee agrees to assume and faithfully perform and
discharge all the terms and obligations of IFN under the Agreements.
1.4 Assignee hereby warrants that it has the financial wherewithall to
carry out the obligations required by the Agreements. In this
regard, Assignee represents and warrants that the copies of the
financial statements that are attached to this Assignment as Exhibit
B have been prepared from the books and records of Assignee and
fairly present the results of operations and financial condition of
Assignee at the respective dates thereof and for the periods therein
referred to, in accordance with generally accepted accounting
principles, consistently applied. The financial representations
include such financial reports for the Assignee and any general
partners of the Assignee, and a letter of guarantee of financing
from SCANA Corporation and ITC Holding Company, Inc. in the form
attached as Exhibit C. It shall be a condition precedent of Sprint's
obligations under this Assignment that Assignee shall deliver to
Sprint an opinion of counsel as to the authority of the Assignee to
accept the assignment of the Agreements by close of business on
____________.
2.0 STATUS OF AGREEMENTS
Except as assigned and modified herein, the Agreements shall continue in
full force and effect. In the event of a conflict between the terms and
conditions of the Agreements and this Assignment, the Assignment shall
control. The execution of this Assignment does not limit the right of
Sprint and Assignee to pursue amendments to the Agreements in the future.
3.0 COUNTERPARTS
To facilitate execution, this Assignment may be executed in as many
counterparts as may be required. It shall not be necessary that the signature of
or on behalf of each party appears on each counterpart, but it shall be
sufficient that the signature of or on behalf of each party appears on one or
more of the counterparts. All counterparts shall collectively constitute a
single agreement. It shall not be necessary in any proof of the Assignment to
produce or account for more than a number of counterparts containing the
respective signatures of or on behalf of all of the parties.
Assignment of the Telecommunications Systems Agreement Page 2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Assignment on the day
and year below written, but effective as of the day and year first set forth
above.
INTERSTATE FIBERNET, A SPRINT COMMUNICATIONS COMPANY L.P.,
GEORGIA GENERAL PARTNERSHIP A DELAWARE LIMITED PARTNERSHIP
- ---------------------------------- -----------------------------------
By: /s/ Doug Shumante By: /s/ James B. Farris ???
--------------------------- ----------------------------
Name: Doug Shumante Name: James B. Farris
--------------------------- Title: Director, Network Real
Title: VP/CFO Managing PTR Estate Acquisition and
--------------------------- Administration
Date: 7/24/95
Date: 7/25/95 ----------------------------
---------------------------
STATE OF GEORGIA )
) SS
COUNTY OF TROUP )
On this 25 day of July, 1995 Doug Shumante, VP I CFO Managing PTR,
Interstate FiberNet, a Georgia General Partnership, executed the foregoing
instrument. IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year aforesaid.
/s/ Nicole Holley [MY COMMISSION EXPIRES FEB 1, 1999]
--------------------
Notary Public
STATE OF MISSOURI )
) ss
COUNTY OF JACKSON )
On this 24 day of July 1995 Wayne ??? for and at the Direction of James
B. Farris, Director, Real Estate Acquisition and Administration, Sprint
Communications company L.P., a Delaware Limited Partnership executed the
foregoing instrument. IN TESTIMONY WHEREOF, I have hereunto set my hand and
affixed my official seal the day and year aforesaid.
"NOTARY SEAL
Janet S. Rynard, Notary Public /s/ Janet S. Rynard
Cass county, State of Missouri -------------------------------
My Commission Expires 4/18/98 Notary Public
ITC TRANSMISSION SYSTEMS, II ITC TRANSMISSION SYSTEMS, INC.
A DELAWARE CORPORATION A DELAWARE CORPORATION
- ------------------------------ ------------------------------
By: /s/ Doug Shumante By: /s/ Doug Shumante
--------------------------- ---------------------------
Name: Doug Shumante Name: Doug Shumante
------------------------- -------------------------
Title: VP /CFO Title: VP /CFO
------------------------ ------------------------
AS GENERAL PARTNER FOR AS GENERAL PARTNER FOR
INTERSTATE FIBERNET, INTERSTATE FIBERNET,
A GEORGIA GENERAL PARTNERSHIP A GEORGIA GENERAL PARTNERSHIP
Date: 7/25/95 Date: 7/25/95
----------------------------- -------------------------
STATE OF GEORGIA )
)ss
COUNTY OF TROUP )
On this 25 day of July 1995 /s/ Doug Shumante, VP/CFO, ITC Transmission
System, II, a Delaware Corporation executed the foregoing instrument. IN
TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal the
day and year aforesaid.
/s/Nicole Holley [MY COMMISSION EXPIRES FEB. 1, 1999]
-------------------
Notary Public
Assignment of the Telecommunications System Agreement Page 3
<PAGE>
STATE OF Georgia )
)ss
COUNTY OF Troup )
On this 26th day of July, 1995 /s/ Doug Shumante VP/CFO, ITC Transmission
Systems, Inc. a Delaware Corporation executed the foregoing instrument. IN
TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal the
day and year aforesaid.
/s/ Nicole Holley
--------------------------------
[MY COMMISSION EXPIRES FEB.1, 1999] Notary Public
MPX SYSTEMS, GULF STATES TRANSIMISSION SYSTEMS,
A SOUTH CAROLINA CORPORATION INC. A CORPORATION
- ----------------------------------- ---------------------------------
By: /s/ M. D. Blackwell By: /s/ Doug Shumante
---------------------------- ---------------------------
Name: /s/ M. D. BLACKWELL Name: /s/ Doug Shumante
---------------------------- ---------------------------
Title: EXEC. VICE PRES. Title: VP\CFO
---------------------------- --------------------------
AS GENERAL PARTNER FOR AS GENERAL PARTNER FOR
GULF STATES FIBERNET GULF STATES FIBERNET,
A GEORGIA GENERAL PARTNERSHIP A GEORGIA GENERAL PARTNERSHIP
Date: 7/25/1995 Date: 7/25/95
------------------------------ ----------------------------
STATE OF South Carolina )
)ss
COUNTY OF Lexington )
On this 31 day of July, 1995 Mike D Blackwell, Exec. VP., MPX Systems, a
South Carolina Corporation executed the foregoing instrument. IN TESTIMONY
WHEREOF, I have hereunto set my hand and affixed my official seal the day and
year aforesaid.
/s/ Billie Kay Morris
------------------------------
Notary Public
My Commission Expires Febuary 28, 2000
STATE OF Georgia )
) ss
COUNTY OF Troup )
On this 26th day of July, 1995 Doug Shumate, V.P./CFO, Gulf states
Transmission Systems, Inc., a Delaware Corporation executed the forgoing
instrument. IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year aforesaid.
MY COMMISSION EXPIRES FEB.1, 1999 /s/ Nicole Holley
-----------------------------
Notary Public
Assignment of the Telecommunications System Agreement Page 4
<PAGE>
EXHIBIT A
TELECOMMUNICATIONS SYSTEM AGREEMENT
Dated January 26, 1995 between
INTERSTATE FIBERNET and
SPRINT COMMUNICATIONS COMPANY L.P.
Page 5
<PAGE>
EXHIBIT B
FINANCIAL STATEMENTS
I. SCANA Corporation - 1994 Annual Report
II. ITC Holding Company, Inc. and Subsidiaries - 1994 Consolidated Financial
Statements and Auditors' Report
III. MPX Systems, A SCANA Corporation - Unaudited 1994 Consolidated Balance
Sheet and Statement of Income
IV. Gulf States FiberNet - Unaudited 1994 Provisional Balance Sheet
and Income Statement
V. Gulf States Transmission Systems, Inc. - Unaudited 1994 Provisional
Balance Sheets and Income Statement
Page 6
<PAGE>
EXHIBIT C
LETTER OF GUARANTEE OF FINANCING
Page 7
<PAGE>
LETTER OF GUARANTEE OF FINANCING
WHEREAS, ITC Transmissions Systems, Inc. and MPX Systems Inc.
("MPX") are the partners of Interstate FiberNet ("IFN"), ITC Holding Company,
Inc. is the sole shareholder of ITC Transmission Systems, Inc. and SCANA
Corporation is the sole shareholder of MPX; and
WHEREAS, IFN has entered into a Telecommunications System
Agreement dated January 26, 1995 ("TSA") with Sprint Communications Company L.P.
("SPRINT"');
WHEREAS, the financing of the performance of IFN under the TSA is
critical to execution of the TSA by Sprint;
WHEREAS, Gulf States Transmission Systems, Inc. and MPX are the
partners of Gulf States FiberNet ("GSFN") and ITC Holding Company, Inc. is the
sole shareholder of Gulf States Transmission Systems, Inc; and
WHEREAS, pursuant to Section 16.10 of the TSA, IFN has assigned
the TSA in its entirety to GSFN, but under Section 16.10 Sprint consents to such
assignment so long as ITC Holding Company, Inc. and SCANA Corporation guarantee
the financing of the performance of GSFN under the TSA;
NOW, THEREFORE, ITC Holding Company, Inc. and SCANA Corporation
hereby guarantee that should financing not be obtained from outside sources, ITC
Holding Company, Inc. and SCANA Corporation shall provide the necessary
financing of the performance of GSFN under the TSA in the following proportions:
SCANA Corporation Two-thirds
ITC Holding Company, Inc. One-third
SCANA CORPORATION ITC HOLDING COMPANY, INC.
By: /s/ [SIGNATURE ILLEGIBLE] By: /s/ Doug Shumate
- ------------------------------- ----------------------------
March 21, 1995 March 21, 1995
- ------------------------------- ----------------------------
Date Date
3
<PAGE>
Exhibit 10.57
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[_____]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
Assignment of the
TELECOMMUNICATIONS SYSTEM AGREEMENT
Dated January 26, 1995 between
INTERSTATE FIBERNET and
SPRINT COMMUNICATIONS COMPANY LP.
THIS ASSIGNMENT IS entered into and effective this 27th day of February, 1997,
by and between Sprint Communications Company L.P., a Delaware Limited
Partnership (hereinafter referred to as "Sprint"), with offices at 1200 Main,
Kansas City, MO 64105, Gulf States FiberNet, a Georgia General Partnership
(hereinafter referred to as "GSFN"), having an office at 910 First Avenue, West
Point, GA 31833, and Gulf States Transmission Systems, Inc., a Georgia
Corporation (hereinafter referred to as "Assignee"), having an office at 910
First Avenue, West Point, GA 31833, with GSFN and Sprint being collectively
referred to herein as the "Parties."
WHEREAS Sprint and Interstate FiberNet (hereinafter referred to as "IFN")
entered into a Telecommunications System Agreement dated January 26, 1995
("Agreement") which obligated IFN to design, engineer, construct, or cause to
be constructed, facilities and acquire appropriate interests in real property or
other rights, all as may be required to provide, operate, and maintain a
telecommunications fiber optic system between [____________] and [_________]
(defined in the Agreement as the Route); and
WHEREAS Sprint and IFN executed on July 25, 1995 an Assignment of the Agreement
in which IFN assigned all its rights and obligations under the Agreement to GSFN
(the "IFN Assignment").
WHEREAS GSFN now wishes to further assign the Agreement to Assignee; and
WHEREAS pursuant to the Agreement and the IFN Assignment of the Agreement, GSFN
now wishes to assign the following additional contracts to Assignee:
(i) Sprint Communications Company Facilities and Service Agreement,
made and entered into January 26, 1995;
(ii) Telecommunications Systems Maintenance Agreement, made and
entered into January 26, 1995;
(iii) Agreement for Use and Non-Disclosure of Confidential Information
made effective as of January 26, 1995.
WHEREAS Sprint is willing to allow the assignment of all Agreements described
above to Assignee upon the terms and conditions provided herein;
NOW THEREFORE, in consideration of the rights and obligations set forth below,
the Assignment is hereby consented and agreed to as follows:
<PAGE>
1.0 ASSIGNMENT
1.1 On January 26, 1995 IFN and Sprint entered into a Telecommunications
System Agreement ("Agreement"), a Sprint Communications Company
Facilities and Services Agreement, a Telecommunications System
Maintenance Agreement, and an Agreement for Use and Non-Disclosure of
Confidential information, collectively referenced hereinafter as
"Agreements," and a copy of which are attached to this Assignment as
Exhibits A-1, A-2, A-3 and A-4.
1.2 On July 25, 1995 IFN and Sprint entered into an Assignment Agreement
(the "IFN Assignment") which effectively transferred all rights and
obligations of IFN to GSFN, a copy of which is attached to this
Assignment as Exhibit B.
1.3 In accordance with Article 16.9 of the Agreement, GSFN requests and
Sprint hereby agrees, upon completion of the condition set forth in
Section 1.5 herein, to the assignment of the Agreements, including all
obligations thereunder, to Assignee. GSFN and ITC warrant that
Assignee is an entity that will carry out the terms and conditions of
the Agreements. GSFN hereby assigns to Assignee all rights, title and
interest of GSFN in and to the Agreements between GSFN and Sprint.
1.4 By its execution of this Assignment, Assignee agree to accept the
Agreements. Assignee agrees to assume and faithfully perform and
discharge all the terms and obligations of GSFN under the Agreements.
1.5 Assignee hereby warrants that it has the financial wherewithall to
carry out the obligations required by the Agreements. Assignee shall
cause GSFN and ITC to guarantee such obligation by providing Sprint
with financials for fiscal year 1996 and a projected budget for fiscal
year 1997.
2.0 STATUS OF AGREEMENTS
Except as assigned and modified herein, the Agreements shall continue in
full force and effect. In the event of a conflict between the terms and
conditions of the Agreements and this Assignment, the Assignment shall control.
The execution of this Assignment does not limit the right of Sprint and Assignee
to pursue amendments to the Agreements in the future.
3.0 COUNTERPARTS
To facilitate execution, this Assignment may be executed in as many
counterparts as may be required. It shall not be necessary that the signature of
or on behalf of each party appears on each counterpart, but it shall be
sufficient that the signature of or on behalf of each party appears on one or
more of the counterparts. All counterparts shall collectively constitute a
single agreement. It shall not be necessary in any proof of the Assignment to
produce or account for more than a number of counterparts containing the
respective signatures of or on behalf of all of the Parties.
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Assignment on the day
and year below written, but effective as of the day and year first set forth
above.
GULF STATES FIBERNET SPRINT COMMUNICATIONS COMPANY
L.P.
A GEORGIA GENERAL PARTNERSHIP A DELAWARE LIMITED PARTNERSHIP
BY: /s/ Douglas Shumate BY: /s/ James B. Farris
-------------------------------- -----------------------------------
Douglas Shumate James B. Farris
Vice President & CFO Director, Real Estate Acquisition
and Administration
DATE: 2-24-97 DATE: 2-27-97
------------------------------ ---------------------------------
GULF STATES TRANSMISSION ITC HOLDING COMPANY, INC.
SYSTEMS, INC.
BY: /s/ Douglas Shumate BY: /s/ Douglas Shumate
-------------------------------- -----------------------------------
NAME: Douglas Shumate NAME: Douglas Shumate
------------------------------ ---------------------------------
TITLE: VP/CFO TITLE: VICE PRESIDENT
----------------------------- --------------------------------
DATE: 2-24-97 DATE: 2-24-97
------------------------------ ---------------------------------
<PAGE>
EXHIBIT 10.58
-------------
FIXED FEE AGREEMENT
FOR
EXCHANGE OF
USE AND MAINTENANCE OF
SIX (6) FIBER OPTIC FIBERS
WITH AN OPTION OF
TWO (2) ADDITIONAL FIBER OPTIC FIBERS
BETWEEN
ALLTEL TELEPHONE SERVICES CORPORATION
AND
INTERSTATE FIBERNET
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I. DEFINITIONS............................................. 5
ARTICLE II. CONSTRUCTION............................................ 3
ARTICLE III. CONSIDERATION........................................... 4
ARTICLE IV. GRANT OF IRU............................................ 5
ARTICLE V. TERMS................................................... 6
ARTICLE VI. COOPERATION............................................. 6
ARTICLE VII. REPRESENTATIONS AND WARRANTIES.......................... 8
ARTICLE VIII. WARRANTY................................................ 8
ARTICLE IX. MAINTENANCE FEE......................................... 9
ARTICLE X. OPERATIONS.............................................. 11
ARTICLE XI. RISK OF LOSS............................................ 12
ARTICLE XII. TAXES................................................... 12
ARTICLE XIII. INDEMNITY............................................... 13
ARTICLE XIV. LIABILITY............................................... 13
ARTICLE XV. DEFAULT................................................. 13
ARTICLE XVI. CONFIDENTIALITY......................................... 14
ARTICLE XVII CONFLICTS OF INTEREST................................... 14
ARTICLE XVIII. RELATIONSHIP OF THE PARTIES............................. 14
ARTICLE XIX. INSURANCE............................................... 14
ARTICLE XX. EXCUSE FOR NONPERFORMANCE............................... 15
ARTICLE XXI. GOVERNING LAW........................................... 15
ARTICLE XXII. INTERPRETATION.......................................... 16
ARTICLE XXIII. WAIVER.................................................. 16
ARTICLE XXIV. ASSIGNMENT.............................................. 16
ARTICLE XXV. RESOLUTION OF DISPUTES.................................. 16
ARTICLE XXVI. LATE PAYMENTS........................................... 17
ARTICLE XXVII. SEVERABILITY............................................ 17
ARTICLE XXVIII. NOTICE.................................................. 17
ARTICLE XXIX. BINDING EFFECT.......................................... 18
ARTICLE XXX. ENTIRE AGREEMENT........................................ 18
ARTICLE XXXI. COUNTERPARTS............................................ 21
</TABLE>
i
<PAGE>
INDEX TO EXHIBITS
EXHIBIT A : AGREEMENT MAP
EXHIBIT 1 : ALLTEL FIBER FACILITY
EXHIBIT 2 : ALLTEL SPECIFICATION SUMMARY FOR AERIAL, BURIED, AND
UNDERGROUND FIBER OPTIC CABLE
EXHIBIT 3 : ALLTEL FIBER SPLICING, TESTING AND ACCEPTANCE
EXHIBIT 4 : ALLTEL AS BUILT FIBER DOCUMENTATION SPECIFICATIONS
EXHIBIT 5 : ALLTEL OPERATIONS SPECIFICATION
EXHIBIT 6 : ALLTEL SITE POWER SPECIFICATIONS
EXHIBIT 7 : ALLTEL MINIMUM REGENERATOR/AMPLIFIER HOUSING SPECIFICATIONS
EXHIBIT 8 : IFN FIBER FACILITY
EXHIBIT 9 : IFN SPECIFICATION SUMMARY FOR AERIAL, BURIED AND UNDERGROUND
FIBER OPTIC CABLE
EXHIBIT 10 : IFN FIBER SPLICING, TESTING AND ACCEPTANCE
EXHIBIT 11 : IFN AS BUILT FIBER DOCUMENTATION SPECIFICATIONS
EXHIBIT 12 : IFN OPERATIONS SPECIFICATIONS
EXHIBIT 13 : IFN SITE POWER SPECIFICATION
EXHIBIT 14 : IFN MINIMUM REGENERATOR/AMPLIFIER HOUSING SPECIFICATION
ii
<PAGE>
FIXED FEE AGREEMENT FOR
EXCHANGE OF THE USE
AND MAINTENANCE
of Fiber Optic Fibers
THIS FIXED FEE AGREEMENT FOR THE EXCHANGE OF USE AND MAINTENANCE OF SIX FIBER
OPTIC FIBERS WITH AN OPTION OF TWO ADDITIONAL FIBERS, dated and effective this
25th day of July, 1997 (the "Agreement"), is entered into by and between
ALLTEL Telephone Services Corporation, an Ohio corporation, for the use and
benefit and on behalf of any of its affiliated companies that are during the
Initial Term or a Renewal Term in the business of providing telecommunications
services in the state of Georgia, (collectively referred to as, "ALLTEL"), with
offices in Little Rock, Arkansas, on the one hand, and Gulf States Transmission
Systems, Inc. ("Gulf States") and Interstate FiberNet, a general partnership,
with its principle place of business located at West Point, Georgia, on the
other hand ( Gulf States and IFN, collectively referred to as "IFN"), sets forth
the terms and conditions for the exchange of use and maintenance of eight (8)
fiber optic fibers and certain telecommunications facilities and services as
hereinafter described: Six (6) fibers will be exchanged for use by the other
party on the Primary Target Completion Date with an additional two (2) fibers to
be exchanged for use by the other party at the request of either party on a
Secondary Target Completion Date.
WITNESSETH:
WHEREAS, ALLTEL intends to install or provide a fiber optic
telecommunications system along a route extending from Union Point, Georgia to
Valdosta, Georgia and to Live Oak, Florida, as identified on Exhibit A.
WHEREAS, IFN desires to be granted the indefeasible right to use certain
optical fibers along such route.
WHEREAS, IFN intends to install or provide a fiber optic telecommunications
system along a route extending from Rome, Georgia to Union Point, Georgia, as
identified on Exhibit A.
WHEREAS, ALLTEL desires to be granted the indefeasible right to use certain
optical fibers along such route.
WHEREAS, the grant of an indefeasible right to use fiber optic fibers from
IFN to ALLTEL, as provided in this Agreement, is of the indefeasible right to
use of those fibers granted by the Southern Development and Investment Group,
Inc. as agent for Southern Electric System to Scana Communications (formerly MPX
Systems), which was subsequently assigned to Gulf States and IFN and for which
the granting of to ALLTEL is consented to by the Southern Development and
Investment Group, Inc. as agent for Southern Electric System by its execution of
a Rights Agreement dated as of the date of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants provided for herein,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, ALLTEL and IFN expressly agree as follows:
ARTICLE I. DEFINITIONS
-----------
The terms defined in this Article shall have the following meanings when used
in this Agreement:
1.1 "ALLTEL FIBERS" means those certain six (6) optical fibers and an
additional two (2) optical fibers which shall, upon the request of either party,
be added on the Secondary Target Completion Date dedicated
<PAGE>
by IFN for use by ALLTEL hereunder and incorporated as an integral part of the
Cable, in which are included certain other optical fibers all as more fully
described in Exhibit 8 hereto.
1.2 "IFN FIBERS" means those certain six (6) optical fibers and an
additional two (2) optical fibers which shall, upon the request of either party,
be added on the Secondary Target Completion Date dedicated by ALLTEL for use by
IFN hereunder and incorporated as an integral part of the Cable, in which are
included certain other optical fibers all as more fully described in Exhibit 1
hereto.
1.3 "CABLE" means that certain fiber optic cable existing, installed,
spliced and tested by either IFN or ALLTEL, together with splicing connections
appurtenant thereto, pursuant to the terms set forth herein.
1.4 "COMPLETION DATE" means the later of either the date ALLTEL notifies
IFN or IFN notifies ALLTEL that the Fiber Facility is complete and ready for
use.
1.5 ALLTEL "CONSTRUCTION COSTS" means any and all direct and indirect
costs and expense incurred by ALLTEL in designing, engineering, constructing,
installing, splicing and testing the Fiber Facility. Such costs and expenses
include, without limitation, those actual, direct costs and expenses incurred in
splicing and testing any IFN Fibers. (Including existing available fibers based
on Proportionate Share).
1.6 IFN "CONSTRUCTION COSTS" means any and all direct and indirect costs
and expense incurred by IFN in designing, engineering, constructing, installing,
splicing and testing the fiber facility. Such costs and expenses include,
without limitation, those actual, direct costs and expenses incurred in splicing
and testing any ALLTEL Fibers (including existing available fibers based on
Proportionate Share).
1.7 "FIBER FACILITY" (ALLTEL or IFN) means all facilities, including but
not limited to the Cable and associated splicing connections, splice vaults,
conduit and other materials, equipment and associated appurtenances which occupy
the Route and which are directly utilized in the provision of service under this
Agreement. The Fiber Facility expressly excludes any and all optronic and
electronic equipment, any regenerator shelters and central offices, and any
equipment located inside such shelters or central offices.
1.8 "IRU" means the indefeasible right of use to the initial six (6) and,
if requested, two (2) additional fiber optic fibers granted to ALLTEL or IFN as
provided in this Agreement.
1.9 "PROPORTIONATE SHARE" means, with respect to fiber optic cable related
costs, a percentage determined by dividing the total number of ALLTEL or IFN
Fibers by the total number of fibers in the Cable and, with respect to floor
space related costs, a percentage determined by dividing the number of feet of
floor space utilized by the non-owner of floor space by the total number of feet
of floor space of the immediate room where floor space is utilized.
1.10 "ALLTEL ROUTE" means that route extending from Union Point, Georgia to
Valdosta, Georgia and continuing to Live Oak, Florida, with such route more
clearly shown on Exhibit 1 of this Agreement.
1.11 "IFN ROUTE" means that route extending from Rome, Georgia to Union
Point, Georgia with such route more clearly shown on Exhibit 8 of this
Agreement.
1.12 "PRIMARY TARGET COMPLETION DATE" means July 24, 1997.
1.13 "CENTRAL OFFICE" or "CO", means the Telephone company facility where
subscriber lines are joined to switching equipment for connecting subscribers to
each other, locally and long distance.
1.14 "INTERNAL REQUIREMENTS" means for the sole use of the party in its own
internal telecommunications needs and not for the use and benefit of the public
or entities or persons that are not parties to this Agreement.
1.15 "SECONDARY TARGET DATE" means the future date for the exchange of use
of two (s) additional fiber optic fibers. A written request exercising the
option for two additional fibers will be made by either party to the other one
hundred and eighty (180) days prior to the date the two additional fiber optic
fibers are to be exchanged for use.
2
<PAGE>
ARTICLE II. CONSTRUCTION
------------
2.1 ALLTEL shall design, engineer, install, procure necessary material and
construct all new sections of the ALLTEL Fiber Facility and shall bear and pay
all Construction Costs related to the ALLTEL Fiber Facility. The ALLTEL Fiber
Facility shall be designed, engineered, installed and constructed (a) in
compliance with any and all applicable building, construction and safety codes,
as well as any and all applicable governmental laws, codes, ordinances, statutes
and regulations; and (b) all sections of the ALLTEL Fiber Facility that were or
are being constructed pursuant to this Agreement shall be constructed and
maintained to perform reasonably in accordance with the specifications set forth
in Exhibits 2, 3, 4, 5, 6 and 7. ALLTEL shall make commercially reasonable
efforts to complete its obligations pursuant to this Article on or before the
Primary Target Completion Date or the Secondary Target Completion Date, as
applicable. In the event ALLTEL fails to complete construction of the ALLTEL
Fiber Facility on or before the Primary Target Completion Date or the Secondary
Target Completion Date, as applicable, ALLTEL and IFN agree to meet and arrange
a schedule for completion of the ALLTEL Fiber Facility within a reasonably
prompt time thereafter, and ALLTEL agrees to use its commercially reasonable
efforts to fulfill its obligations under this Article.
2.2 IFN shall design, engineer, install, procure necessary material and
construct all new sections of the IFN Fiber Facility and shall bear and pay all
Construction Costs related to the IFN Fiber Facility. The IFN Fiber Facility
shall be designed, engineered, installed and constructed (a) in compliance with
any and all applicable building, construction and safety codes, as well as any
and all applicable governmental laws, codes, ordinances, statutes and
regulations; and (b) all new sections of the IFN Fiber Facility that were or are
being constructed pursuant to this Agreement shall be constructed and maintained
to perform reasonably in accordance with the specifications set forth in
Exhibits 9, 10, 11, 12, 13 and 14. IFN shall make commercially reasonable
efforts to complete its obligations pursuant to this Article II on or before the
Primary Target Completion Date or the Secondary Target Completion Date, as
applicable. In the event IFN fails to complete construction of the IFN Fiber
Facility On or before the Primary Target Completion Date or the Secondary Target
Completion Date, IFN and ALLTEL agree to meet and arrange a schedule for
completion of the IFN Fiber Facility within a reasonably prompt time thereafter,
and IFN agrees to use its commercially reasonable efforts to fulfill its
obligations under this Article.
2.3 ALLTEL shall test the new and existing sections of Cable installed or
owned by ALLTEL in accordance with its standard fiber acceptance testing
procedures to verify that the Cable, with respect to site to site locations, in
accordance with Article X Paragraph 10.5a, is operating in accordance with the
specifications in Exhibit 3. Fiber acceptance testing shall progress site to
site along the ALLTEL Route, so that test results may be reviewed in a timely
manner. IFN shall have the right, but not the obligation, to have a person or
persons present to observe ALLTEL's fiber acceptance testing. Within fourteen
(14) days of the conclusion of ALLTEL's fiber acceptance testing, ALLTEL shall
provide IFN with a copy of the test results.
2.4 IFN shall test the new and existing sections of Cable installed or
owned by IFN in accordance with its standard fiber acceptance testing procedures
to verify that the Cable is operating in accordance with the specifications in
Exhibit 10. Fiber acceptance testing shall progress site to site, along the IFN
Route, so that test results may be reviewed in a timely manner. ALLTEL shall
have the right, but not the obligation, to have a person or persons present to
observe IFN's fiber acceptance testing. Within fourteen (14) days of the
conclusion of IFN's fiber acceptance testing, IFN shall provide ALLTEL with a
copy of the test results.
2.5 After completion of the ALLTEL Fiber Facility and upon thirty (30)
days' request from IFN (subject to availability), ALLTEL shall provide IFN with
documentation with respect to the ALLTEL Fiber Facility consisting of the
following:
a. As-built drawings as set forth in Exhibit 4, as available.
b. Optical reflectometer traces of the cable and splices at IFN's
desired bandwidth of 1310 nm and 1550 nm in the Fiber Facility.
c. Technical specifications of the Cable and associated splices and other
equipment placed in the ALLTEL Fiber Facility.
3
<PAGE>
2.6 After completion of the IFN Fiber Facility and upon thirty (30) days'
request (subject to availability), IFN shall provide ALLTEL with documentation
with respect to the IFN Fiber Facility consisting of the following:
a. As-built drawings as set forth in Exhibit 11, as available.
b. Technical specifications of the Cable and associated splices and other
equipment placed in the IFN Fiber Facility.
c. Optical reflectometer traces of the cable and splices at ALLTEL's
desired bandwidth of 1310 nm and 1550 nm in the Fiber Facility.
2.7 ALLTEL will identify the construction and testing standards, under
which, the existing ALLTEL Fiber Facility sections were originally constructed.
ALLTEL will work with IFN to determine the acceptability of the cable and the
costs, if any, required to meet the specifications set forth above.
2.8 IFN will identify the construction and testing standards, under which,
the existing IFN Fiber Facility sections were originally placed. IFN will work
with ALLTEL to determine the acceptability of the cable and the costs, if any,
required to meet the specifications set forth above.
2.9 IFN will purchase any and all optronic and electronic equipment,
including regenerators, required to be installed on IFN Fibers at ALLTEL
buildings or shelters (except that paragraphs b and d shall not be applicable
with respect to buildings or shelter at Macon and Valdosta), in accordance with
the following:
a. IFN will, utilizing a contractor reasonably acceptable to ALLTEL,
engineer, purchase, furnish and install all of the required equipment
in accordance with ALLTEL standard practices, including but not
limited to those practices related to installation of such equipment
and access to buildings. It is agreed Nortel is an acceptable
contractor for purposes of this paragraph.
b. IFN will sell all of the equipment to ALLTEL for one ($1) dollar and
transfer to ALLTEL all related transferable manufacturer's and
vendor's warranties. Any such equipment for which these warranties are
not transferable will be maintained by IFN during any such warranty
period. During the term of ALLTEL's ownership of said equipment,
ALLTEL will not sell or transfer said equipment and will keep the same
free and clear of all liens or encumbrances.
c. IFN will, in addition to the consideration to be paid by IFN to ALLTEL
pursuant to Article III of this Agreement, which includes compensation
for use of building or shelter floor space and related matters,
reimburse ALLTEL for all actual costs, if any, incurred by ALLTEL that
are associated with installation, and removal, including testing of
original or replacement units.
d. Upon removal, as requested by IFN or otherwise, or replacement of any
or all equipment, ALLTEL will sell the removed or replaced equipment
back to IFN for one ($1) dollar.
e. IFN or its representative, for the purpose of inspection, will be
permitted escorted access into ALLTEL buildings or shelters containing
any equipment placed in them in accordance with this Article.
ARTICLE III. CONSIDERATION
-------------
3.1 As full and complete payment for the grant of the IRU to IFN, as
contemplated in Article IV, IFN shall pay ALLTEL in accordance with the
following provisions:
a. $750,000 per year during the Initial Term and any Renewal Term of this
Agreement
b. Payments for the Initial Term will be due on an annual basis with the
first annual payment required within 30 days of the Completion Date.
Thereafter, each such payment shall be due annually on each
anniversary of the Completion Date.
4
<PAGE>
c. Payments for any Renewal Term will be due on an annual basis for the
life of the renewal term with the first annual payment required within
30 days of the annual payment date established in the "initial term."
d. All payments shall be by wire transfer.
3.2 As full and complete payment for the grant of the IRU to ALLTEL, as
contemplated in Article IV, ALLTEL shall pay IFN in accordance with the
following provisions:
a. $750,000 per year during the Initial Term and any Renewal Term of this
Agreement
b. Payments for the Initial Term will be due on an annual basis with the
first annual payment required within 30 days of the Completion Date.
Thereafter, each such payment shall be due annually on each
anniversary of the Completion Date.
c. Payments for any Renewal Term will be due on an annual basis for the
life of the term with the first annual payment required within 30 days
of the annual payment date established in the "initial term."
d. All payments shall be by wire transfer.
3.3 After issuance of ALLTEL's completion notice, IFN will be solely
responsible for monitoring its own equipment including environmental conditions
and will maintain its own equipment at its sole cost and expense.
3.4 After issuance of IFN's completion notice, ALLTEL will be solely
responsible for monitoring its own equipment and will maintain its own equipment
at its sole cost and expense.
ARTICLE IV. GRANT OF IRU
------------
4.1 As long as IFN has timely paid ALLTEL all sums due ALLTEL from IFN
under this Agreement and is not otherwise in material breach of the provisions
of this Agreement, IFN is, during the term of this Agreement, granted the IRU
with respect to the IFN Fibers for any lawful purpose including, without
limitation, the use of the communications capacity of the fibers or any portion
thereof by third parties for transmitting messages or data, and other similar
lawful uses. Any use by third parties may only be on terms consistent with this
Agreement. IFN shall not use the IFN Fibers in any way which does not comply
with all applicable governmental codes, ordinances, laws, rules, regulations or
restrictions. Further, IFN shall not use the IFN Fibers in any way which
interferes or adversely affects the use of the Fiber Facility by ALLTEL. ALLTEL
services provided to IFN or any third party permittee of IFN in connection with
any ALLTEL Central Office identified in Article X Paragraph 10.5a, except those
currently existing in Macon and Valdosta, shall be limited solely to signal
regeneration. Without limiting the foregoing statement, ALLTEL Central Office
building locations will not provide services to IFN or its permittees in
connection with or to allow it to multiplex or demultiplex transmission signals
except to the extent for Internal Requirements of IFN. IFN shall not be allowed
to obtain direct or indirect cross connection or interconnection of the IFN
Fibers or any associated equipment with any ALLTEL telecommunications facilities
or equipment. IFN shall be provided use of sufficient space, electrical power
and environmental control measures to accommodate five twenty-six inch by seven
feet relay racks in non-wire center buildings in the Macon and Valdosta areas.
Notwithstanding the provisions of paragraph 2.9.e, above, IFN is granted
unescorted and unrestricted access in ALLTEL's Macon and Valdosta fiber terminal
facilities, provided IFN provides prior notice to the ALLTEL Network Management
Center in Twinsburg, Ohio, and except that IFN will not have such access to
facilities not providing service to IFN. Failure to exercise the rights granted
hereunder shall not excuse IFN's obligation to make the payments required under
this Agreement.
4.2 As long as ALLTEL has timely paid IFN all sums due IFN from ALLTEL
under the Agreement and is not otherwise in material breach of the provisions of
this Agreement, ALLTEL is, during the term of this Agreement, granted the IRU
with respect to the ALLTEL Fibers for any lawful purpose including, without
limitation, the use of the communications capacity of the fibers or any portion
thereof by third parties for transmitting messages or data, and other similar
lawful uses. ALLTEL shall not use the ALLTEL Fibers in any way which does not
comply with all applicable governmental codes, ordinances, laws, rules,
regulations or
5
<PAGE>
restrictions. IFN and Southern Company shall provide ALLTEL use of sufficient
space, electrical power and environmental control measures to accommodate five
twenty-six-inch by seven feet relay racks in IFN or Southern Company buildings
in proximity to the fiber facility in Rome, Athens (Dairy Pack building), and
Atlanta, Georgia (55 Park Place). ALLTEL is granted unescorted and unrestricted
access in IFN's Rome, Athens (Dairy Pack building), and Atlanta facility (55
Park Place), provided ALLTEL provides prior notice to the IFN Network Management
Center, and except that ALLTEL will not have such access to facilities not
providing service to ALLTEL. Further, ALLTEL shall not use the ALLTEL Fibers in
any way which interferes or adversely affects the use of the Fiber Facility by
IFN. Failure to exercise the rights granted hereunder shall not excuse ALLTEL's
obligation to make the payments required under this Agreement.
4.3 The IRU granted IFN does not convey, create or vest in IFN any
ownership or property rights in the Route, the Cable or the Fiber Facility other
than IFN's rights as expressly set forth herein.
4.4 The IRU granted ALLTEL does not convey, create or vest in ALLTEL any
ownership or property rights in the Route, the Cable or the Fiber Facility other
than ALLTEL's rights as expressly set forth herein.
ARTICLE V. TERMS
-----
5.1 The Initial Term of this Agreement shall be for a period of time
beginning with the effective date of this Agreement and ending on June 9, 2015.
5.2 In the event that Gulf States or IFN elects to extend the IRU granted
to it by the Southern Development and Investment Group, Inc. as agent for
Southern Electric System related to the ALLTEL Fibers, that ends on June 9,
2015, beyond June 9, 2015, ALLTEL shall be entitled to extend the IRU granted it
under this Agreement for an period equal to such extension as long as both IFN
and ALLTEL mutually agree to extend the term of this Agreement as provided
herein.
5.3 This Agreement, with respect to a party, may be extended for up to two
(2) consecutive renewal terms of ten (10) years each (a "Renewal Term") by a
party as a grantee of an IRU providing written notice to the other at least four
months prior to the end of the Initial Term or a Renewal Term, as relevant. In
the event one party, as a grantee of an IRU, elects to extend the IRU granted
such extending party under this Agreement, the other party is not obligated to
similarly extend the IRU that such other party has been granted.
5.4 At any time during the Initial Term or Renewal Term and upon payment
of the balance of the full amount due from IFN as set forth in Paragraph 3.1 for
the Initial Term and any Renewal Term of this Agreement, if it has been
extended, IFN shall have the right to terminate this Agreement as it relates to
the IFN Fibers and any further obligations of IFN and ALLTEL hereunder, with
respect to the IFN Fibers, effective on the one hundred and eightieth (180th)
day after written notice to ALLTEL; provided, however, such termination shall
not terminate any obligation of IFN to ALLTEL for events occurring prior to such
date of termination.
5.5 At any time during the Initial Term and upon payment of the balance of
the full amount due from ALLTEL as set forth in Paragraph 3.2 for the Initial
Term and any Renewal Term of this Agreement, if it has been extended, ALLTEL
shall have the right to terminate this Agreement with respect to the ALLTEL
Fibers and any further obligations of ALLTEL and IFN hereunder with respect to
the ALLTEL Fibers, effective on the one hundred and eightieth (180th) day after
written notice to IFN; provided, however, such termination shall not terminate
any obligation of ALLTEL to IFN for events occurring prior to such date of
termination.
5.6 In the event that IFN or Gulf States shall become insolvent or
materially breach or default under any agreement pursuant to which IFN or Gulf
States have obtained rights to the ALLTEL Fibers or the authority to grant the
IRU to ALLTEL under this Agreement, then IFN and Gulf States shall promptly
provide written notice to ALLTEL of such events.
ARTICLE VI. COOPERATION
-----------
6.1 ALLTEL and IFN shall each promptly notify the other of any damages
or impending damage to or loss of the Fiber Facility that are known to such
party.
6
<PAGE>
6.2 Except as provided herein, ALLTEL shall take no action to interfere
with or prevent IFN's use of the IFN Fibers, and IFN shall take no action to
interfere with or prevent ALLTEL's right to use of the remaining fibers in the
Fiber Facility. Each party shall take all reasonable precautions to avoid
damage or loss caused by such party to the other's fibers within the Fiber
Facility. Except as otherwise provided herein, ALLTEL shall have no right to
use the IFN Fibers and IFN shall have no right to use the ALLTEL Fibers or any
property of ALLTEL, except as described in Article IV, Paragraph 4.1 and in
Article II, paragraph 2.9.b.
6.3 Except as provided herein, IFN shall take no action to interfere with
or prevent ALLTEL's use of the ALLTEL Fibers, and ALLTEL shall take no action
to interfere with or prevent IFN's use of the remaining fibers in the Fiber
Facility. Each party shall take all reasonable precautions to avoid damage or
loss caused by such party to the other's fibers within the Fiber Facility.
Except as otherwise provided herein, IFN shall have no right to use the ALLTEL
Fibers and ALLTEL shall have no right to use the IFN Fiber or any property of
IFN except as provided under Article IV, Paragraph 4.2.
6.4 IFN shall not cause or permit the ALLTEL Fiber Facility or the ALLTEL
owned Cable to become subject to any mechanic's lien, materialman's lien,
vendor's lien or any other similar lien whether by operation of law or otherwise
or impose any mortgage or security interest or any other similar lien or
encumbrance thereupon. ALLTEL shall not cause or permit the IFN Fibers to become
subject to any mechanic's lien, materialman's lien, vendor's lien or any other
similar lien whether by operation of law or otherwise or any other similar lien
or encumbrance thereupon. In the event that either party breaches such
obligation, such party shall immediately notify the other party in writing,
shall promptly cause such lien to be discharged and released or record without
cost to such other party and shall indemnify such other party against all costs
and expenses (including reasonable attorneys' fees and court costs) incurred in
discharging and releasing such lien; provided, however, that the indemnifying
party shall have the right to contest such lien or the validity thereof in good
faith by appropriate proceeding which shall operate to prevent the collection
and/or foreclosure of such lien contested; provided, further, that the
indemnifying party shall cause any such lien to be discharged prior to
commencement of any foreclosure action on said lien.
6.5 ALLTEL shall not cause or permit the IFN Fiber Facility or the IFN
owned Cable or the equipment referred to in 2.9.b to become subject to any
mechanic's lien, materialman's lien, vendor's lien or any other similar lien
whether by operation of law or otherwise or impose any mortgage or security
interest or any other similar lien or encumbrance thereupon. IFN shall not
cause or permit the ALLTEL Fibers to become subject to any mechanic's lien,
materialman's lien, vendor's lien or any other similar lien whether by operation
of law or otherwise or any other similar lien or encumbrance thereupon. In the
event that either party breaches such obligation, such party shall immediately
notify the other party in writing, shall promptly cause such lien to be
discharged and released or record without cost to such other party and shall
indemnify such other party against all costs and expenses (including reasonable
attorneys' fees and court costs) incurred in discharging and releasing such
lien; provided, however, that the indemnifying party shall have the right to
contest such lien or the validity thereof in good faith by appropriate
proceeding which shall operate to prevent the collection and/or foreclosure of
such lien contested; provided, further, that the indemnifying party shall cause
any such lien to be discharged prior to commencement of any foreclosure action
on said lien.
6.6 IFN and ALLTEL agree that their respective use of the Fiber Facility
shall not in any way interfere with or adversely affect the use of the Fiber
Facility by the other party.
6.7 ALLTEL and IFN each agree to cooperate with and support the other in
complying with any requirements imposed with respect to the Fiber Facility by
any governmental or regulatory agency or authority.
6.8 IFN shall not be permitted to physically access the IFN Fibers except
with the express prior written consent of ALLTEL which consent shall not be
unreasonably withheld and/or delayed. Access to the IFN Fibers may only be made
from splice locations, which for the purposes of this Agreement means those
points where Cable ends are joined and building sites described in Article IV,
Paragraph 4.1. In no event shall access by either party be permitted where it
will adversely affect the other party's operations. Any access to the IFN
Fibers shall be performed by ALLTEL and only at IFN's request. ALLTEL will
perform any necessary openings and closings on such splice locations at IFN's
sole expense.
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6.9 ALLTEL shall not be permitted to physically access the ALLTEL Fibers
except with the express prior written consent of IFN which consent shall not be
unreasonably withheld and/or delayed. Access to the ALLTEL Fibers may only be
made from splice locations, which for the purposes of this Agreement means those
points where Cable ends are joined and building sites described in Article IV,
Paragraph 4.2. In no event shall access by either party be permitted where it
will adversely affect the other party's operations. Any access to the ALLTEL
Fibers shall be performed by IFN and only at ALLTEL's request. IFN will perform
any necessary openings and closings on such splice locations at ALLTEL's sole
expense.
6.10 ALLTEL will purchase or provide IFN Fibers that are warranted by the
vendor to meet the specifications set forth in Exhibit 2.
6.11 IFN will purchase or provide ALLTEL Fibers that are warranted by the
vendor to meet the specifications set forth in Exhibit 9.
6.12 All work on the ALLTEL Fiber Facility will be exclusively performed by
ALLTEL or its contractors.
6.13 All work on the IFN Fiber Facility will be exclusively performed by
IFN or its contractors.
ARTICLE VII. REPRESENTATIONS AND WARRANTIES
------------------------------
7.1 Each party represents and warrants to the other party as follows:
a. It has full right and authority to enter into, execute, deliver and
perform its obligations under this Agreement;
b. It has taken all requisite corporate action to approve the execution,
delivery and performance of this Agreement;
c. This Agreement constitutes a legal, valid and binding obligation
enforceable against such party in accordance with its terms; and
d. Its execution of and performance under this Agreement will not violate
any applicable existing regulations, rules, statutes or court orders
of any local, state or federal government agency, court or body. If
governmental approval or certification is determined to be necessary
at any time with respect to this Agreement or any of the facilities or
services contemplated herein, the parties will cooperate with the
other and support any application to obtain acceptance or approval by
any governmental agency. In the event that any such approval or
certification is not obtained in spite of the parties best efforts,
the parties shall each have the right to terminate this Agreement.
ARTICLE VIII. WARRANTY
--------
8.1 ALLTEL does not warrant the material or workmanship of the IFN
Fibers or any other component of the Fiber Facility. In the event any
maintenance or repairs to the IFN Fibers are required as a result of a breach of
any warranty made by any manufacturers or vendors, ALLTEL shall pursue any
remedies it may have against such manufacturers or vendors. NO WARRANTY IS
PROVIDED BY ALLTEL UNDER THIS AGREEMENT, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY, WHETHER
EXPRESSED OR IMPLIED. THE MANUFACTURER'S HONORING, IF ANY, OF ANY WARRANTY IT
MAY HAVE GIVEN SHALL BE THE SOLE AND EXCLUSIVE REMEDY OF IFN AND SHALL
CONSTITUTE FULFILLMENT OF ALL LIABILITIES OF ALLTEL TO IFN WITH RESPECT TO, OR
ARISING OUT OF THESE WARRANTIES, WHETHER SUCH LIABILITY IS BASED ON STATUTE,
AGREEMENT, NEGLIGENCE, STRICT LIABILITY IN TORT OR OTHERWISE.
IFN ACKNOWLEDGES THAT IT HAS NOT RELIED ON ANY WRITTEN OR ORAL
REPRESENTATIONS BY ALLTEL CONCERNING THE SUBJECT OF THIS AGREEMENT OTHER THAN
THOSE EXPRESSED HEREIN.
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8.2 IFN does not warrant the material or workmanship of the ALLTEL Fibers
or any other component of the Fiber Facility. In the event any maintenance or
repairs to the ALLTEL Fibers are required as a result of a breach of any
warranty made by any manufacturers or vendors, IFN shall pursue any remedies it
may have against such manufacturers or vendors. NO WARRANTY IS PROVIDED BY IFN
UNDER THIS AGREEMENT, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY, WHETHER EXPRESSED OR IMPLIED.
THE MANUFACTURER'S HONORING, IF ANY, OF ANY WARRANTY IT MAY HAVE GIVEN SHALL BE
THE SOLE AND EXCLUSIVE REMEDY OF ALLTEL AND SHALL CONSTITUTE FULFILLMENT OF ALL
LIABILITIES OF IFN TO ALLTEL WITH RESPECT TO, OR ARISING OUT OF THESE
WARRANTIES, WHETHER SUCH LIABILITY IS BASED ON STATUTE, AGREEMENT, NEGLIGENCE,
STRICT LIABILITY IN TORT OR OTHERWISE.
ALLTEL ACKNOWLEDGES THAT IT HAS NOT RELIED ON ANY WRITTEN OR ORAL
REPRESENTATIONS BY IFN CONCERNING THE SUBJECT OF THIS AGREEMENT OTHER THAN THOSE
EXPRESSED HEREIN.
8.3 ALLTEL represents and specially warrants that ALLTEL will, during the
Initial Term and any Renewal Term, defend title to the ALLTEL Route against the
claims and demands of all persons whomsoever claiming or attempting to claim the
same or any part thereof by, through or under ALLTEL, but not otherwise.
8.4 IFN represents and specially warrants that IFN will, during the
Initial Term and any Renewal Term, defend title to the IFN Route against the
claims and demands of all persons whomsoever claiming or attempting to claim the
same or any part thereof by, through or under IFN, but not otherwise.
ARTICLE IX. MAINTENANCE FEE
---------------
9.1 ALLTEL shall, with regard to the ALLTEL Route, provide routine route
surveillance, Cable locates, "Call Before You Dig" service, encroachment
monitoring, easement and permit administration. and preventive maintenance of
the regenerator equipment and electricity at regenerator sites ("Routine
Maintenance"). Subsequent to the Completion Date, IFN shall, by wire transfer,
pay to ALLTEL for performing such services, an annual fee in the amount of Two
Hundred Thousand Dollars ($200,000) (the "Payment"). The first Payment will be
due and payable thirty (30) days after the Completion Date. Thereafter, each
Payment shall be invoiced annually on or after each anniversary date of the
Completion Date during the Initial Term or any Renewal Term. The Payment shall
be due by IFN within thirty (30) days of receipt of invoice therefor. The
Payments may be adjusted annually, at ALLTEL's sole discretion, beginning with
the first anniversary date, for increases in the United States Bureau of Labor
Statistics, CPI-U All Services Index (unadjusted), as published (the "Index").
Said adjustment shall be hereinafter referred to as "CPI-U Adjustment". Each
Payment, as adjusted by the CPI-U Adjustment, shall be equal to the product of
the Payment specified herein multiplied by the fraction (a) whose denominator is
the CPI-U ALL Services Index for March of the previous calendar year for which
the adjustment to the Payment is being made, and (b) whose numerator is the CPI-
U ALL Services Index for March of the current year. The adjusted Payment shall
remain in effect until the next annual Payment is due when a new adjusted
Payment fixed pursuant to this provision shall become effective. In no event
shall the amount of the Payment as adjusted pursuant to this provision be less
than the amount of Payment in effect for the immediately preceding year. The
parties agree that the Index for March 1997 is defined as 160. In the event
that the Bureau of Labor Statistics (or any successor organization) changes the
current base of the CPI-U from 1982-84 = 100, the calculation of a Payment under
this provision shall be adjusted to ensure that ALLTEL receives the same amount
as it would have received, had the base not been changed. In the event the
Bureau of Labor Statistics or any successor organization no longer publishes the
CPI-U, ALLTEL shall, subject to IFN's agreement, which shall not be unreasonably
withheld, designate the statistical index it deems most appropriate for
calculation of adjustments to a Payment, and from the date the CPI-U ceased to
be published, such index shall be used to make adjustments in a Payment under
this provision.
9.2 IFN shall, with regard to the IFN Route, provide routine route
surveillance, Cable locates, "Call Before You Dig" service, encroachment
monitoring, easement and permit administration. and preventive maintenance of
the regenerator equipment and electricity at regenerator sites ("Routine
Maintenance").
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Subsequent to the Completion Date, ALLTEL shall, by wire transfer, pay to IFN
for performing such services, an annual fee in the amount of Two Hundred
Thousand Dollars ($200,000) (the "Payment"). The first such Payment will be due
and payable thirty (30) days after the Completion Date. Thereafter, each such
Payment shall be due annually on each anniversary date of the Completion Date
during the Initial Term or any Renewal Term. The Payment shall be made by ALLTEL
within thirty (30) days of receipt of invoice therefor. The Payment may be
adjusted annually, at IFN's sole discretion, beginning with the first
anniversary date, for increases in the United States Bureau of Labor Statistics,
CPI-U All Services Index (unadjusted), as published. Said adjustment shall be
hereinafter referred to as "CPI-U Adjustment". Each Payment, as adjusted by the
CPI-U Adjustment, shall be equal to the product of the Payment specified herein
multiplied by the fraction (a) whose denominator is the CPI-U ALL Services for
March of the previous calendar year for which the adjustment to the Payment is
being made, and (b) whose numerator is the CPI-U ALL Services Index for March of
the current year. The adjusted Payment shall remain in effect until the next
annual Payment is due when a new adjusted Payment fixed pursuant to this
provision shall become effective. In no event shall the amount of the Payment as
adjusted pursuant to this provision be less than the amount of Payment in effect
for the immediately preceding year. The parties agree that the Index for March
1997 is defined as 160. In the event that the Bureau of Labor Statistics (or any
successor organization) changes the current base of the CPI-U from 1982-84 =
100, the calculation of a Payment under this provision shall be adjusted to
ensure that IFN receives the same amount as it would have received, had the base
not been changed. In the event the Bureau of Labor Statistics or any successor
organization no longer publishes the CPI-U, IFN shall, subject to ALLTEL's
agreement, which shall not be unreasonably withheld, designate the statistical
index it deems most appropriate for calculation of adjustments to a Payment, and
from the date the CPI-U ceased to be published, such index shall be used to make
adjustments in a Payment under this provision.
9.3 Routine Maintenance - Invoices with respect to Routine Maintenance in
addition to that described in Sections 9.1 and 9.2 shall be paid by the parties
in accordance with each parties Proportionate Share. Other than with respect to
invoices issued pursuant to Paragraph 9.1 or 9.2, and each invoice shall
describe any services performed, the time expended in performing such services,
the description of any materials used and any services performed by ALLTEL, IFN
or its subcontractor (s) or service providers, if any, and shall include such
relevant supporting documentation as may be requested by ALLTEL or IFN and as
may be available.
9.3.1 Demand Maintenance - In the event that either party requires the
other party to perform maintenance within a reasonable time period after request
which is other than Routine Maintenance ("Demand Maintenance") on either the IFN
Fibers or ALLTEL Fibers, the party providing the Demand Maintenance shall
deliver an invoice to the party that requested the Demand Maintenance and the
requesting party shall pay the entire invoice within 30 days after receipt of
the invoice. The invoice shall describe any services performed, the time
expended in performing such services, the description of any materials used and
any services performed by ALLTEL or IFN or its subcontractor(s) or service
providers, if any, and shall include all relevant supporting documentation as
may be requested by the other party.
9.3.2 Emergency Response Maintenance - In the event either party is
required to immediately perform maintenance on either the IFN Fibers or ALLTEL
Fibers ("Emergency Response Maintenance"), the party providing the Emergency
Response Maintenance shall invoice the other party, based on the invoiced
party's Proportionate Share and the invoice shall be due and payable 30 days
after receipt. The invoice shall describe any services performed, the time
expended in performing such service, the description of any materials used and
any services performed by ALLTEL or IFN or its subcontractor(s) or service
providers, if any, and shall include all relevant supporting documentation as
may be requested by the other party. A party shall not be liable for its
Proportionate Share of any emergency response maintenance to the extent the
maintenance was necessary due to the actions or inactions of the other party and
such other party shall be solely responsible for such costs.
9.3.3 Catastrophic Damage of Fiber Facilities - In the event either party
is required to perform Emergency Response Maintenance, that is estimated to
exceed Five Million Dollars $5,000,000 and such occurs in year 5 or later of the
Initial Term or any Renewal Term, both companies shall discuss the various
options available and select and agree on the proper course of action,
consistent with the following:
9.3.3.1 The parties must mutually determine whether the facility still has
economic life and agree to the same terms and conditions detailed in 9.3.2.
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9.3.3.2 If the parties determine the facility does not have economic life,
they agree to negotiate without penalty a mutually satisfactory termination
agreement.
9.4 Relocation of Fiber Facilities - Each party, except in response to
maintenance needs, will be responsible for the cost of relocation of fiber
facilities along their respective routes.
9.4.1 Relocation of Fiber Facilities - Relocation of fiber facilities in
response to maintenance needs, will be subject to terms and conditions under
9.3, 9.3.1, 9.3.2 or 9.3.3, as appropriate.
9.5. All maintenance shall be performed as soon as possible and without any
preference to fiber assignment.
9.6 In the maintenance, repair and relocation of the Fiber Facility,
ALLTEL shall exercise a reasonable degree of care and skill. ALLTEL and IFN
will use reasonable best efforts to correct any degradations, failures or
interruptions in service as soon as possible after learning of their occurrence.
9.7 In the maintenance, repair and relocation of the Fiber Facility, IFN
shall exercise a reasonable degree of care and skill. IFN and ALLTEL will use
reasonable efforts to correct any degradations, failures or interruptions in
service as soon as possible after learning of their occurrence.
9.8 The sums to be paid as computed under the provisions of this Article
IX shall include ALLTEL's incremental direct labor costs, if any, plus one
hundred twenty-six percent (126%) and all other incremental costs and expenses
incurred by ALLTEL and directly attributable to the performance by ALLTEL of its
obligations under this Agreement. "Incremental" is defined for the purpose of
this Article IX to mean costs not already intended to be covered.
9.9 The sums to be paid as computed under the provisions of this Article
IX shall include IFN's incremental direct labor costs, if any, plus one hundred
twenty-six percent (126%) and all other incremental costs and expenses incurred
by IFN and directly attributable to the performance by IFN of its obligations
under this Agreement. "Incremental" is defined for the purpose of this Article
IX to mean costs not already intended to be covered.
9.10 The method of computing the annual payment under Paragraph 9.1 and 9.2
shall not exceed the initial $200,000 annually by more than $100,000 for any
single year.
9.10.1 The method of computing the annual payment under Paragraph 9.1 and 9.2
is subject to renegotiation at the end of year 3 and prior to year 5 of the
Agreement.
ARTICLE X. OPERATIONS
----------
10.1 Except as expressly provided in this Agreement, each party shall
have full and complete control and responsibility for determining any network
and service configuration or designs, routing configurations, regrooming,
rearrangement or consolidation of channels or circuits and all related functions
with regard to the use of that party's fiber.
10.2 Other than as specified in this Agreement, neither party is supplying
or is obligated to supply to the other party any optronics or electronics or
optical or electrical equipment or other facilities, including without
limitation, generators, batteries, air conditioners, fire protection and
monitoring and testing equipment, nor is either party responsible for performing
any labor to install equipment.
10.3 ALLTEL shall establish and maintain the demarcation point (the
"DEMARCATION POINT") at which point ALLTEL shall hand off the IFN Fibers to
IFN and at which IFN may access the IFN Fibers. ALLTEL shall install, maintain
and route the IFN Fibers within ALLTEL facilities at its sole discretion.
10.4 IFN shall establish and maintain the demarcation point (the
"DEMARCATION POINT") at which point IFN shall hand off the ALLTEL Fibers to
ALLTEL and at which ALLTEL may access the ALLTEL Fibers. IFN shall install,
maintain and route the ALLTEL Fibers within IFN facilities at its sole
discretion.
10.5 As provided in Section 2.9 and under the same terms, conditions and
limitations specified therein, IFN will be provided the following:
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a. An opportunity to purchase regenerators and to sell the units to
ALLTEL for one (1) dollar. ALLTEL will make arrangements to
install the units and connect to specified IFN Fibers in the
following ALLTEL locations: Union Point, Milledgeville, Perry,
Unadilla, Pineview, Fitzgerald, Douglas, Nashville, Hahira &
Jennings.
b. If these regenerators are disconnected and removed from service
for any reason, they will be offered for sale to IFN for one (1)
dollar.
c. IFN or its representatives will upon reasonable notice be
permitted escorted access to these locations for the purpose of
inspection.
d. Floor space, rack space and DC power in the following
environmentally controlled locations: Macon and Valdosta.
10.6 IFN will provide ALLTEL the following:
a. Floor space, rack space and DC power in the following
environmentally controlled locations: Rome, Atlanta (55 Park
Place), Athens (Dairy Pack building).
b. Right of way easement at the following locations: From Georgia
Power Structure 37 on Core Subligna Road continuing to the
Georgia Power Summerville Substation.
c. ALLTEL or its representatives will be permitted escorted access
to these locations.
10.7 ALLTEL shall maintain the Fiber Facility as required in Exhibit 5
attached hereto. ALLTEL shall use such care in performing repair and
maintenance pursuant to this Agreement which equals or exceeds that
which is normal and customary in the telecommunications industry.
10.8 IFN shall maintain the Fiber Facility as required in Exhibit 12
attached hereto. IFN shall use such care in performing repair and
maintenance pursuant to this Agreement which equals or exceeds that
which is normal and customary in the telecommunications industry.
ARTICLE XI. RISK OF LOSS
------------
11.1 Except as otherwise provided herein, following the Completion Date,
each party shall bear its Proportionate Share of any and all loss or damage to
the Fiber Facility, or any item, element or component thereof.
ARTICLE XII. TAXES
-----
12.1 Following the Primary Target Completion Date, IFN shall be
responsible for and shall timely pay any and all use fees assessed against the
IFN Fibers for periods subsequent to the date of this Agreement. IFN agrees to
reimburse ALLTEL for its Proportionate Share of any such fees assessed against
ALLTEL.
12.2 Following the Primary Target Completion Date, ALLTEL shall be
responsible for and shall timely pay any and all use fees assessed against the
ALLTEL Fibers for periods subsequent to the date of this Agreement. ALLTEL
agrees to reimburse IFN for its Proportionate Share of any such fees assessed
against IFN.
12.3 IFN and ALLTEL shall each be responsible for any and all taxes and
shall timely pay any and all sales, use or similar taxes and duties, property
taxes, fees or other assessments which may be imposed on it as a result of the
execution of this Agreement. Each party shall cooperate with the other in
reporting such transaction as exempt to the extent it provides adequate
documentation supporting such exemption and provided that it shall reimburse the
other for any tax, interest and penalty that might be assessed upon audit due to
such exemption. Each of IFN and ALLTEL shall be responsible individually for
its own income, gross receipts or similar tax.
12.4 Following the Completion Date, each party shall be responsible for any
sales, use, property, excise or similar tax assessed against it related to the
recurring costs outlined in Article IX. Each party shall cooperate with the
other in reporting any such transaction as exempt to the extent it is provided
adequate documentation supporting such exemption and provided that the other
shall reimburse it for any tax, interest and penalty that might be assessed upon
audit due to such exemption.
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ARTICLE XIII. INDEMNITY
---------
13.1 IFN hereby releases and agrees to indemnify, defend, protect and
hold harmless ALLTEL, its employees, officers, directors, agents and corporate
shareholder, and the employees, officers, directors and agents of any corporate
shareholder, from and against, and assumes liability for:
a. Any injury, loss or damage to any person, property or facilities of
any person or entity, arising out of or resulting from the acts or
omissions, negligent or otherwise, of IFN, its officers, employees,
servants, affiliates, agents or contractors under this Agreement.
b. Any claims, liabilities or damages arising out of any violation by IFN
of regulations, rules, statutes or court orders of any local, state or
federal governmental agency, court or body; and
c. Any claims, demands, suits, actions, losses, damages, assessments or
payments that may be asserted by any party that may have use of the
'IFN Fibers, arising out of or relating to such usage.
13.2 ALLTEL hereby releases and agrees to indemnify, defend, protect and
hold harmless IFN, its employees, officers, directors, agents and corporate
shareholder, and the employees, officers, directors and agents of any corporate
shareholder, from and against, and assumes liability for:
a. Any injury, loss or damage to any person, property or facilities of
any person or entity, arising out of or resulting from the acts or
omissions, negligent or otherwise, of ALLTEL, its officers, employees,
servants, affiliates, agents or contractors under this Agreement.
b. Any claims, liabilities or damages arising out of any violation by
ALLTEL or regulations, rules, statutes or court orders of any local,
state or federal governmental agency, court or body; and
c. Any claims, demands, suits, actions, losses, damages, assessments or
payments that may be asserted by any party that may have use of the
'ALLTEL Fibers, arising out of or relating to such usage.
ARTICLE XIV. LIABILITY
---------
Neither party shall be liable to the other party or any customer of such
other party or any other person (including, for example, a person buying
communications service from a customer of such other party) for indirect,
special, punitive, incidental or consequential damages, whether foreseeable or
not (including but not limited to lost revenues or any claim of any client,
customer or patron for loss of services, lost profits or revenues, cost of
capital and including any such liabilities arising under this Agreement or from
any breach or partial breach of the provisions of this Agreement or arising out
of any act or omission by either party, its employees, servants, agents or
affiliates, whether based on a breach of contract, breach of warranty,
negligence or any other theory of liability).
ARTICLE XV. DEFAULT
-------
15.1 Neither party shall be in default under this Agreement or in breach of
any provision hereof unless and until the other party shall have given such
party written notice of such default and the defaulting party shall have failed
to cure the default within thirty (30) days after receipt of such notice;
provided, however, that where such default cannot reasonably be cured within
such thirty (30) day period, if the defaulting party shall proceed promptly to
cure the same and prosecute such cure with due diligence, the time for curing
such default shall be extended for such period of time as may be necessary under
the circumstances to complete such cure.
15.2 In the event a default or breach hereof by a party hereto causes the
other party to bring an action for remedies or damages, the prevailing party may
recover its reasonable attorneys' fees from the party held liable or at fault.
15.3 If a party materially breaches or defaults under this Agreement and
fails to cure such breach or default after reasonable notice and opportunity to
cure, then the non-breaching, non-defaulting party may terminate the IRU granted
to the other party without affecting or terminating the non-defaulting or non-
breaching party's rights under this Agreement, including but not limited to
continued use of the IRU granted it hereunder.
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ARTICLE XVI. CONFIDENTIALITY
---------------
16.1 All proprietary information disclosed and identified as proprietary at
the time of disclosure by either party hereto to the other party shall be kept
confidential by the other party, shall be used only in performing under this
Agreement and may not be used for other purposes, except upon such terms as may
be agreed upon in writing by the parties. Information which is considered
confidential or proprietary in nature will be identified as such by a marking
placed on the information when such information is in tangible form. Such
marking may take various forms from time to time but will clearly specify the
proprietary nature of the information. In addition, the parties shall use
reasonable efforts to assure that the terms and provisions of this Agreement
shall not be disclosed by either party to third parties except third parties
rendering professional consulting services to the disclosing party or third
parties to whom the disclosing party is seeking to provide services and only
following the execution by the third parties of agreements of confidentiality
and nondisclosure that are consistent with the provisions of this Agreement.
However, consideration paid pursuant to this Agreement shall not be disclosed to
such third parties to whom the disclosing party seeks to provide service.
16.2 Neither party shall be required by this Article XVI to keep
confidential any information which is publicly known, other than by breach of
this Agreement; which is disclosed by either party to the other without being
identified as proprietary; which becomes available to such party without
restriction from a third party; which is developed at any time by the receiving
party independently of any disclosures hereunder; or which is required to be
disclosed by law or by any governmental agency or court of law having
jurisdiction. In the event a disclosure is required by law or by any
governmental agency or court of law, the party required to make such disclosure
shall give the other party notice of such requirements in sufficient time to
allow the other party to seek a protective order from such court or agency
restraining the disclosure or shall itself seek such protective order as is
reasonably acceptable to and requested by the other party.
16.3 Neither party shall use the name, trade name, service mark or
trademark of the other party or the existence of this Agreement in any
promotional or advertising material without the prior written consent of the
other party.
16.4 The provisions of this Article shall survive termination of this
Agreement for a period of five (5) years.
ARTICLE XVII CONFLICTS OF INTEREST
---------------------
17.1 Neither party shall use any funds received under this Agreement for
illegal or otherwise "improper" purposes. Neither party shall pay any
commissions, fees or rebates to any employee of the other party, or favor any
employee of such other party with gifts or entertainment of significant cost or
value. If either party has reasonable cause to believe that one of the
provisions in this Article has been violated, it, or its representative, may
audit the books and records of the other party for the sole purpose and only to
the extent necessary to examine compliance with such provisions.
ARTICLE XVIII. RELATIONSHIP OF THE PARTIES
---------------------------
18.1 The relationship between ALLTEL and IFN shall not be that of partners,
agents or joint ventures for one another, and nothing contained in this
Agreement shall be deemed to constitute a partnership or agency agreement
between them for any purposes, including but not limited to federal income tax
purposes. ALLTEL and IFN, in performing any of their obligations hereunder,
shall be independent contractors or independent parties and shall discharge
their contractual obligations at their own risk.
ARTICLE XIX. INSURANCE
---------
19.1 For so long as this Agreement remains in effect each party shall
obtain, pay for and maintain insurance for at least the coverages and amounts of
coverage as set forth below and shall provide to the other party certificates
issued by insurance companies satisfactory to such other party to evidence such
coverages. Such certificates shall provide that there shall be no termination,
non-renewal or reduction of such coverage without thirty (30) days' prior
written notice to such other party. In the event of any failure by either party
to comply with the provisions of this Article, the other party may, at its
option, on notice to such party, either suspend any
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obligations owned to such party until there is full compliance with this
Article, or contract for such insurance at such party's expense. The coverages
and amounts of coverage required are:
a. Worker's Compensation insurance complying with the laws of the state
in which the work is to be performed. The contract shall include
Employers Liability coverage with a limit of $500,000 per accident,
occupational disease coverage with a limit of $500,000 per person
subject to an aggregate of $500,000 per annum. Coverage shall include
all states.
b. Commercial General Liability Insurance with combined bodily injury and
property damage limit of $1,000,000 per occurrence, $2,000,000
aggregate, to include products and completed operations; broad form
property damage including completed operations; personal injury
liability with deletion of the contractual liability exclusion; and
broad form blanket contractual liability for liabilities assumed by
ALLTEL or IFN for work to be performed under this Agreement by ALLTEL,
IFN or independent contractors. The following exclusions shall be
deleted, so that coverage shall apply to them: (X) explosion; (C)
collapse; (U) underground property damage; (D) underground resources
and equipment.
c. Commercial Automobile Liability insurance with a combined bodily
injury and property damage limit of $1,000,000 per occurrence to
include all vehicles whether owned, not owned or hired.
d. Excess or umbrella insurance with a combined single limit of
$1,000,000 per occurrence, to be in excess of the liability coverages
in a, b and c above.
In the event either party fails to obtain the required certificates from any
contractor and a claim is made or suffered, such party shall indemnify and hold
harmless the other party from any and all claims for which the required
insurance would have provided coverage.
In the event coverage is denied or reimbursement of a properly presented
claim is disputed by the carrier for insurance provided in (a) through (c)
above, the party carrying such coverage shall make good faith efforts to pursue
such claim with its carrier.
19.2 ALLTEL and IFN will obtain from the insurance companies providing the
coverages required by this Agreement the permission of such party to waive all
rights of subrogation and such party does hereby waive all rights of said
insurance companies to subrogation against the other party, its parent
corporation, affiliates, subsidiaries, assigns, officers, directors and
employees or any other party entitled to indemnify under this Agreement.
19.3 Either party, in lieu of providing the coverages required by this
Agreement, may self insure.
19.4 Maintenance by a party of any such insurance coverages shall not,
however, be deemed a limitation of that party's liability hereunder.
ARTICLE XX. EXCUSE FOR NONPERFORMANCE
-------------------------
20.1 Either party's performance under this Agreement shall be suspended for
as long as and to the extent that performance is prevented by any cause beyond
the reasonable control of the party claiming relief (such as, but not limited
to, a strike or other labor problems, acts of God, fire, flood, lightning,
blizzard, natural disaster, train derailment, war, inability to obtain materials
or transportation or civil disorder, inability or failure to obtain right of way
or governmental approval, legal action preventing or substantially interfering
with performance hereunder), provided that the party claiming the relief under
this Article XX shall immediately notify the other party and follow up within
ten (10) days in writing of: the existence of the event relied on, and the
cessation or termination of the said event. The party claiming relief under
this Article XX shall exercise reasonable efforts to minimize the time for any
such suspension.
ARTICLE XXI. GOVERNING LAW
-------------
21.1 The rights and obligations of the parties hereto shall be construed in
accordance with the laws of the State of Georgia, without regard to the conflict
of law provision thereof.
15
<PAGE>
ARTICLE XXII. INTERPRETATION
--------------
22.1 Unless expressly defined herein, words having well-known technical or
trade meanings shall be so construed. All listing 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.
22.2 Except as set forth to the contrary herein, any right or remedy of
ALLTEL or IFN shall be cumulative and without prejudice to any other right or
remedy, whether contained herein or not.
22.3 Nothing in this Agreement is intended to provide any legal rights to
anyone not an executing party of this Agreement.
22.4 All heading used herein are for index and reference purposes only, and
are not to be given any substantive effect.
22.5 No rule of construction requiring interpretation against the draftsman
hereof shall apply in the interpretation of this Agreement.
22.6 In the event of a conflict between the provisions of this Agreement
and those of any exhibit, the provisions of this Agreement shall prevail and
such exhibits shall be corrected accordingly.
ARTICLE XXIII. WAIVER
------
23.1 For any waiver of any right, option or privilege hereunder to be
binding it must be made in writing and signed by both parties. No waiver of the
terms of this Agreement or failure of either party to exercise any option, right
or privilege on any occasion or through the course of dealing, shall be
construed to be a waiver of the same or of any other option, right or privilege
on any other occasion.
ARTICLE XXIV. ASSIGNMENT
----------
24.1 A Party may not assign, except through mergers and to successors to
all of the assets of such party that are necessary to perform its obligations
under this Agreement, sell, mortgage, encumber, convey or otherwise transfer
any interest in this Agreement, except to its majority or wholly owned
subsidiaries or those of its parent company ("AFFILIATES") that are also
receiving all of the assets of the party that are necessary to perform its
obligations under this Agreement , without the express prior written consent of
the other Party which consent shall not be unreasonably withheld and/or delayed.
Any such assignment or transfer other than to an Affiliate without the express
written consent of the other Party shall be void. In the event a request for
any such transfer is made by a Party, the other may require as a condition to
its consent that:
a. Any assignee, sublessee, licensee, mortgagee or other transferee
(hereinafter a Transferee") shall (i) agree that its rights with
respect to this Agreement shall be subject to all of the terms and
conditions of this Agreement, and (ii) assume and agree to perform all
of the terms and provisions of this Agreement from and after the date
of such transfer and for and during the period such party shall have
an interest in this Agreement; and
b. The assignor shall not, by reason of such transfer, be released from
any of its obligations under this Agreement. Notwithstanding the
foregoing, the Parties acknowledge that IFN will, in the near future,
be merged into its general partner, ITC Transmission Systems, Inc.
("Systems") and that Systems' name will be changed to Interstate
FiberNet, Inc. and do further acknowledge and agree that the consent
of ALLTEL shall not be required for these events.
ARTICLE XXV. RESOLUTION OF DISPUTES
----------------------
25.1 ALLTEL and IFN recognize that during the term of this Agreement
various disputes may arise between the parties. In the event that a dispute
shall arise, the parties, through their appropriate personnel, will attempt to
amicably resolve such dispute in an expeditious manner. In the event that any
dispute shall not be resolved by the parties within a reasonable time, not to
exceed thirty days unless extended by mutual agreement of the parties, then
either party may elect to pursue any other legal action it deems appropriate to
resolve such dispute. Nothing in this paragraph shall be deemed a waiver of any
rights either party may have to pursue any
16
<PAGE>
legal or equitable remedy available to it, at any time; nor may the provisions
of this article be invoked with respect to the payments required pursuant to
Article III.
ARTICLE XXVI. LATE PAYMENTS
-------------
26.1 In the event that ALLTEL or IFN shall fail to make any payment under
this Agreement when due, such amounts shall accrue interest, from the date such
payment is due until paid, including accrued interest, at a rate equal to the
Prime Rate as reported by the Wall Street Journal on the date such payment was
due.
ARTICLE XXVII. SEVERABILITY
------------
27.1 If any term, covenant or condition contained herein shall, to any
extent, be invalid or unenforceable in any respect under the laws governing this
Agreement, the remainder of this Agreement shall not be affected thereby, and
each term, convenient or condition of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
ARTICLE XXVIII. NOTICE
------
28.1 Unless otherwise provided herein, all notices and communications
concerning or made pursuant to the terms of this Agreement shall be made in
writing and shall be deemed duly given when delivered in-hand, overnight courier
service or telegram, or on the third day after being mailed by US certified
mail, return receipt requested, addressed to the parties as follows:
Chief Executive Officer ALLTEL Telephone Services Corporation
IFN Interstate FiberNet ATTN: Legal Department
P. O. Box 510 P. O. Box 2177
910 First Avenue Little Rock, Arkansas 72212
West Point, Georgia 31833
General Counsel Tim Griffin
Interstate FiberNet ALLTEL Georgia, Inc.
700 Boulevard South, Suite 101 906 Vista Drive
Huntsville, Alabama 35802 P. O. Box 1247
Dalton, Georgia 30721
ALLTEL Corporate Services, Inc.
ATTN: Vice President - Law
One Allied Drive
Little Rock, Arkansas 72202
or at such other address as may be designated in writing to the other party.
17
<PAGE>
ARTICLE XXIX. BINDING EFFECT
--------------
29.1 The provisions of this Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective permitted successors
and assigns.
ARTICLE XXX. ENTIRE AGREEMENT
----------------
30.1 This Agreement, including all Exhibits attached hereto, constitutes
the entire agreement between the parties with respect to the subject matter
hereof and supersedes any other prior agreements with regard thereto, whether
written or oral, between ALLTEL and IFN. This Agreement may not be amended or
otherwise altered except by written agreement between the parties hereto.
ARTICLE XXXI. COUNTERPARTS
------------
31.1 To facilitate execution, this Agreement may be executed in as many
counterparts as may be required; and it shall not be necessary that the
signatures of or on behalf of each Party appear on each counterpart, but it
shall be sufficient that the signature of or on behalf of each Party appear on
one or more counterparts. All counterparts shall collectively constitute a
single agreement, and the signature page may be delivered by one Party to any
other Party via facsimile transmission. It shall not be necessary in any proof
of this document to produce or account for more than the number of counterparts
containing the respective signatures of or on behalf of all the Parties.
[THE REMAINDER OF THIS PAGE IS LEFT BLANK INTENTIONALLY]
18
<PAGE>
IN WITNESS WHEREOF, the parties have hereunder set their hands as of the
day and year first above written.
"ALLTEL" "IFN"
ALLTEL Telephone Services Corporation Interstate FiberNet
By: /s/ J. Scott Chesbro By: /s/ Doug Shumate
_____________________________________ _____________________________________
Title: Executive Vice President Title: Snr. VP and CFO
_____________________________________ _____________________________________
Date: Date:
_____________________________________ _____________________________________
Gulf States Transmission Systems, Inc.
By: /s/ Doug Shumate
_____________________________________ _____________________________________
Title: Snr. VP and CFO
_____________________________________ _____________________________________
Date:
_____________________________________ _____________________________________
19
<PAGE>
ALLTEL AND IFN
EXHIBIT A
AGREEMENT MAP
[A GRAPHIC APPEARS HERE DEPICTING A MAP OF THE STATE OF GEORGIA AND A PORTION OF
THE STATE OF FLORIDA WHICH INDICATES CERTAIN FIBER ROUTES UTILIZING ALLTEL
FIBERS AND IFN FIBER FACILITY (REPRESENTED BY A DOTTED LINE) AND OTHERS
UTILIZING IFN FIBERS AND ALLTEL FIBER FACILITY (REPRESENTED BY A SOLID LINE.]
LEGEND
------
- - - - - ALLTEL Fibers
IFN Fiber Facility
_________ IFN Fibers
ALLTEL Fiber Facility
PROPRIETARY INFORMATION OF ALLTEL CORPORATION
<PAGE>
ALLTEL EXHIBIT 1 ALLTEL FIBER FACILITY
[A DIAGRAM APPEARS HERE INDICATING THE LOCATION OF ALLTEL FIBER FACILITY,
EXISTING FIBER CABLE, FIBER SIZE SINGLE MODE, AVERAGE FIBER LOSS, ESTIMATED
LENGTH OF CONSTRUCTION AND ESTIMATED FIBER LOSS FROM LOCATION TO LOCATION ALONG
THE FIBER ROUTE]
1550 TESTING
ACTUAL MEASUREMENTS
TAKEN JULY 1996
PROPRIETARY INFORMATION OF ALLTEL CORPORATION
<PAGE>
ALLTEL EXHIBIT 2 SPECIFICATION SUMMARY FOR AERIAL,
------ BURIED AND UNDERGROUND FIBER OPTIC
CABLE
<TABLE>
<CAPTION>
CONTENTS PARAGRAPH CONTENTS PARAGRAPH
- -------- --------- -------- ---------
<S> <C> <C> <C>
GENERAL 1.0 PLACEMENT OF AERIAL CABLE 5.0
GLASS FIBER 2.0 PLACEMENT OF DIRECT 6.0
SPECIFICATIONS BURIED CABLE
BASIC SPLICING 3.0 PLACEMENT OF 7.0
PROCEDURES UNDERGROUND DUCT CABLE
CABLE 4.0 CABLES ENTERING BUILDINGS 8.0
SPECIFICATIONS
</TABLE>
1.0 GENERAL
1.01 This document will provide direction and standardization in splicing
procedures for fiber optic cable. All construction will be done in strict
compliance with the 1996 National Electrical Safety Code and all other federal,
state and local regulations.
1.02 This exhibit sets forth general principles of fiber optic cable
construction, and incorporates comprehensive details and specifications
concerning fiber optic cable construction contained in the following practices:
ASP (ALLTEL System Practice) 290-350-456, ASP 290-350-455, ASP 290-400-605, ASP
290-500-400, ASP 540-850-005, ASP 540-850-010, ASP 540-850-015, SRP (Southern
Region Practice) 290-630-610 and SRP 93-2020.
2.0 GLASS FIBER SPECIFICATIONS:
2.01 All glass fiber used in any fiber optic cable will adhere to the following
specifications. Specific circumstances may necessitate a variance from these
perimeters. In these instances a case by case evaluation will be made.
1. Single mode fiber
2. 8.3 micron core nominal
3. Cladding diameter 125 +/- 2 micron
4. Coated diameter 250 +/- 15 micron
1
<PAGE>
5. Core eccentricity not more than 1.0 micron
6. Dispersion not to exceed 2.6 psec/nm-km @ 1310nm and
typically less than 1 psec/nm-km @ 1550 nm.
7. Attenuation per fiber not to exceed 0.40db/Km @ 1310 nm
0.30db/Km @ 1550 nm
2.02 Copies of the manufacture's test results are to be retained and become
part of the as-built documentation.
3.0 BASIC SPLICING PROCEDURES
3.01 Each fiber will be tested at each splice and the results recorded on the
form provided in Attachment I of Exhibit 3. These forms will become part of the
as built documentation.
3.02 Splice cases will be standard manufactured Preformed stainless steel
Fiberlign or injection-molded Coyote splice cases. Splice cases will be
installed in accordance with the manufacture's recommended procedures. All
splices will be protected fusion splices.
3.03 When the cable sheath contain armor, each sheath will be bonded to a #6
insulated ground wire. Each sheath will be isolated from the others sheaths and
the splice case. The #6 insulated ground wires will be connected to a driven
ground rod that has a ground resistance reading of not more than 25 ohms.
3.04 Standard procedure for aerial or buried plant requires all splice cases to
be at ground level in a Reltec OPFOBD7 cabinet. The cabinet will also contain
storage for approximately 100' of cable. The stored cable will permit the case
to be relocated to an environmentally controlled area for splicing.
3.05 In location where ground level facilities are not permitted, subsurface
splices vaults will be placed. The vaults must permit ready access to the splice
case. This vault will also provide storage for cable which will permit the
splice case to be relocated to an environmentally controlled area for splicing
operations. Direct buried splices are not to be placed without written approval
of management.
4.0 CABLE SPECIFICATIONS:
4.01 Fiber optic cable for aerial, buried or underground construction will be
single mode standard production cable, with a high or medium density
polyethylene jacket. All cable will be filled or contain a water blocking
compound. The fibers will be color coded with industry standard colors. The
cable may be loose tube, central tube or ribbon type constructed. Armored cable
will contain an
2
<PAGE>
overlapping coated steel armor. Metallic strength members are acceptable only in
armored cable.
5.0 PLACEMENT OF AERIAL CABLE
5.01 Aerial splices will be brought down the pole and placed in a BPFOBD7
cabinet. If the cable sheath contains any metallic member it will be bonded to a
#6 ground wire and connected to a driven ground rod. Sufficient cable will be
stored in the cabinet to allow the splice to be relocated to an environmentally
controlled area for slicing.
5.02 A 3" drip loop will be placed in the fiber cable at each pole. Attached to
the cable at the drip loop will be an identification tag stating the owner of
the cable.
6.0 PLACEMENT OF DIRECT BURIED CABLE
6.01 Splices in direct buried plant will be brought to the surface and placed in
a BPFOBD7 cabinet. The armor and any metallic member in each sheath will be
bonded to an insulated #6 ground wire and connected to a driven ground rod in
the cabinet. Each sheath will be isolated from the others sheaths and the splice
case. The #6 insulated ground wires will be connected to a driven ground rod
that has a ground resistance reading of not more than 25 ohms. Sufficient cable
will be stored in the cabinet to allow the splice to be relocated to an
environmentally controlled area for splicing.
6.02 The buried cable will be placed at a minimum depth of 36" measured from the
top of the cable to the surface of the ground. Buried warning tape is to be
placed at a depth of 18" to 24" below grade at the time of construction.
6.03 Warning signs will be located along the route, culverts and at road
crossings. Signs will be placed at approximately quarter mile intervals and at
other locations that are susceptible to excavation. Signs are to be tubular in
design, providing 360(degrees) visibility, and display the 1-800 call before you
dig telephone number.
7.0 PLACEMENT OF UNDERGROUND DUCT CABLE
7.01 Cable may be placed in duct by pulling or blowing the cable into the duct.
At no time should the pull on cable being placed in the duct exceed the
recommended tensile load rating of the manufacturer, typically 600 pounds.
7.02 Cable placed in manholes will wrap the hole a minimum of two times to
provide slack for restoration. The cable will be identified with a tag in each
hole.
3
<PAGE>
7.03 Splice cases located in manholes will be securely mounted on the cable
racking and identified. Sufficient cable will be stored in the manhole to allow
the splice to be relocated to an environmentally controlled area for spicing.
8.0 CABLES ENTERING BUILDINGS
8.01 Cables entering buildings will have two separate entrances where ever
possible. The intent is to promote diverse routing at every opportunity.
8.02 The armor and any metallic members of any cable entering a building will be
severed and bonded with a #6 insulated ground wire at the first opportunity upon
entering the building. This will normally occur at the point the outside plant
cables are spliced to the inside cables. This can be a splice case or a splice
cabinet. The #6 ground wire will be bonded to the hot side of the single point
MGN bar. Cables that do not contain metal and therefore do not require isolation
and grounding should be identified as non-metallic.
4
<PAGE>
ALLTEL EXHIBIT 3 FIBER SPLICING, TESTING AND
--- ACCEPTANCE
<TABLE>
<CAPTION>
CONTENTS PARAGRAPH CONTENTS PARAGRAPH
- -------- --------- -------- ---------
<S> <C> <C> <C>
GENERAL 1.0 ARMOR BOND CONTINUITY 5.0
TEST
GENERAL SPLICING 2.0 END TO END OTDR TRACES 6.0
SPECIFICATIONS
FIBER OPTIC CABLE 3.0 END TO END POWER METER 7.0
ACCEPTANCE-GENERAL READING
ARMOR TO GROUND TEST 4.0 FORMS REPRODUCTION 8.0
</TABLE>
1.0 GENERAL
1.01 This practice will provide direction and standardization in splicing and
acceptance of fiber optic cable. This practice sets the minimum standard tests
that are to be performed during construction, acceptance and restoration. It
does not limit testing to these tests if there is reason to suspect the presence
of a condition that would render a cable unserviceable.
1.02 The procedures are applicable to all aerial, buried, or underground fiber
optic cable. These procedure will be the standard for the acceptance. All fiber
optic cable, regardless of length, will pass the tests prescribed in this
practice.
1.03 This practice also describes the tests that are required on existing cable
that is being considered as feeder for digital loop carrier.
1.04 The performance of the tests and the recording of the test data will be the
responsibility of the engineering department. If independent contractors are
used for construction the engineer and a representative of the contractor will
perform the test jointly. The results of the tests will be recorded on the
appropriate Southern Region Cable Acceptance form. The acceptance form for fiber
optic cable is shown in Attachment I.
2.0 GENERAL SPLICING SPECIFICATIONS
2.01 All construction splicing will be protected fusion splices and all test
results will be recorded. Individual splices should be evaluated with the OTDR
during the actual splicing phase of the project. No splice should have a loss of
more than .1db. If.1db loss is not obtained after three (3) attempts, the splice
may exceed the .1 db loss
1
<PAGE>
requirement but is not to exceed .5db. The engineer is to be consulted if more
than .5db occurs. High losses can be the result of core mismatch, poor core
concentricity or irregular core shape. These conditions are not likely to be
corrected with repeated attempts at splicing. This condition is exceptional and
should occur infrequently and only on single fibers in the slice. If difficulty
is experienced in obtaining splices of .1db or less on all but an exceptional
fiber, procedural or mechanical causes are to be suspected.
2.02 The splicing of different manufacturer's fiber can also result in
difficulty in obtaining low loss splices. This is the result of inherent
difference in the glass of the fiber. If this occurs, all the fibers in the
splice are usually affected. For this reason it is suggested not to mix cable
from different manufacturers if possible.
2.03 Protected fusion splices are the first choice for restoration splicing.
Mechanical splices may be utilized only for temporary restoration purposes when
fusion capabilities are not available. All mechanical splices will be replace
with protected fusion splices as soon as practical.
2.04 When circumstances do require the use of mechanical splices the splice lose
will not exceed .20 db insertion loss with a minimum reflective loss not less
than 35.0 db.
3.0 OPTIC CABLE ACCEPTANCE-GENERAL
3.01 Fiber optic cable will pass the following acceptance test prior to being
accepted and placed in service. Fiber optic cable has no length exceptions and
all new cable will be tested. The test results will be recorded on the Southern
Region Cable Acceptance - Fiber Optic form shown in Attachment I.
3.02 REQUIRED FIBER OPTIC CABLE TEST
Armor to ground
Armor bond continuity
End to end OTDR traces
End to end power meter reading
4.0 ARMOR TO GROUND TEST
4.01 The armor to ground test for buried fiber optic cable will be performed
using a megohmmeter in a similar manner to that described for the shield to
ground test used on
2
<PAGE>
copper cable. A value of 161,000 ohm-kilometer should be considered the minimum
acceptable value of the armor ground resistance.
4.02 For example, at 161,000 ohms per kilometer, for a 6KM (3.7 mile) fiber
cable would be estimated at approximately 26,833 ohms. This is calculated by
dividing 161,000 ohms by 6KM, the length for the estimated ohms resistance.
4.03 To obtain the actual value for the cable, the actual test set reading is
multiplied by length of the cable. This value is then compared to the estimate
to determine the acceptability of the cable. The actual results must exceed the
estimated value.
4.04 The intent of testing the armor in the fiber cable is to ensure no damage
was incurred during placement. If sheath damage did occur during placement the
testing will show a ground fault.
4.05 To record the results of the armor to ground test the following information
is entered as shown in Attachment II. Enter N.A. if the cable is nonmetallic.
1. Enter the work order number authorizing the cable construction.
2. Enter the type, manufacture and number of fibers of the cable being
tested.
3. Enter the exchange the cable is located.
4. Enter the number of sheets needed to record the test data
5. Enter the pole or pedestal number where the test equipment is located to
perform the test. If more sections of cable are tested than can be shown,
go to a second sheet.
6. Enter the pole or pedestal number that is at the far end of the section
of cable being tested.
7. The megohms reading is entered in block number 7.
8. Enter the actual date the test was performed.
9. The name of the person performing the test is entered in block 9.
5.0 ARMOR BOND CONTINUITY TEST
3
<PAGE>
5.01 The armor bond continuity test will be performed after the cable is in
place and all splices are complete. In testing the armor bond continuity in
fiber optic cable a VOLT-OHM meter will be used to read the resistance of the
armor and check for opens.
5.02 To perform this test the far end of the cable armor is to be grounded. The
near end will be isolated. Place the positive lead from the VOLT-OHM meter on
the armor. The common lead is then grounded. The resulting reading should show
very low resistance. Typical results for fiber cable are 33.6 ohms per KM for
cable constructed with only metallic armor. If the cable also contains metallic
strength members embedded in the sheath a resistance figure of 21.5 ohms per KM
should be used. The actual reading will depend on the length of the cable.
5.03 To ensure the full length of the cable is being read, a second reading is
taken with the far end ground isolated. The result should show an open,
indicating that the ground that was read the first time was the far end ground.
5.04 If a fiber optic cable is made up of sections of armored and dielectric
cable each section of armored will need to be tested individually.
5.05 To record the results of the armor bond continuity test enter the following
information in blocks 10 through 14 as indicated in Attachment II. Dielectric
cable will be indicated with N.A.
10. Enter the pole or pedestal number where the test equipment is
located while performing the test. If more sections of cable are
tested than can be shown go to a second sheet.
11. Enter the pole or pedestal number that is at the far end of the
section of cable being tested.
12. Enter the result of the VOLT-OHM meter test as good or fail.
13. Enter the actual date the test was performed.
14. Place the name of the person performing the test.
6.0 END TO END OTDR TRACES
6.01 Although traces are not an actual acceptance test, OTDR traces are required
final documents. A trace will be taken of each fiber from both directions. These
will serve as a permanent base line record for each fiber. The traces show the
fiber attenuation,
4
<PAGE>
splice loss, location of splices and overall length. A trace of each individual
fiber is required.
6.02 OTDR traces are to be maintained as permanent record in each central office
in which the cable appears, the work order file and with the restoration kit.
This information is invaluable in the event of restoration and is required in
the SRP290-630-610, Fiber Optic Emergency Restoration Guidelines.
6.03 The OTDR will be connected to each fiber through the patch panel. Consult
the operator's manual for instructions. Each fiber trace should also indicate
the location from which the trace was made and the number of the fiber.
6.04 The fact that OTDR traces were made is recorded on the acceptance form as
indicated in Attachment II.
15. Enter the central office where the OTDR is located during the test.
16. Enter the date the traces were made.
17. Enter the central office where the OTDR is located to perform the
traces for the direction opposite to that shown in block 15.
18. Enter the date the traces were made.
7.0 END TO END POWER METER READING
7.01 The end to end loss of the fiber is the deciding factor in fiber optic
cable acceptance. This tests evaluates both the fiber and splices. The loss
associated with individual splices is not a specific function of acceptance
testing.
7.02 To accomplish the end-to-end loss test, a power meter and light source are
used to determine the actual attenuation of the fiber and splices over its
entire length. The source of the light can be the multiplexed equipment or a
separate light source. Operator's manuals should be consulted for specific
instructions.
7.03 To perform this test a known quantity of light is introduced into the fiber
with a light source. This is determined by using the power meter to read the
out put of the light source. The fiber is then connected to the light source.
The amount of light reaching the far end is then read with the same power meter.
The known source light figure is then subtracted from the reading taken at the
far end with the power meter. The difference is the actual loss incurred in the
entire length. All of the fibers will be tested.
5
<PAGE>
7.04 This process is then repeated in the opposite direction. It is not unusual
for readings taken from one direction to differ from readings taken in the
opposite direction.
7.05 Compare the estimated loss on the loss budget provided by engineering to
the results of the test. If the figures are within 10% plus or minus, the cable
is acceptable. If a greater difference is found the transmission engineer should
be informed of the discrepancy. The cable will not be considered as accepted
until the discrepancy is explained. The loss of the fiber and splices combined
determine the acceptability of the cable.
7.06 The end-to-end power meter loss test results will be recorded as indicated
on Attachment II.
19. Enter the central office or location were the light source is
located.
20. Enter the central office or location that is the far end of the cable
being tested.
21. Enter the number of the fiber. If a fiber cable is being tested that
is larger than 16 fibers a second sheet is required.
22. Enter the db reading of the light source. This should be a constant
for all the fibers tested from that location at that time.
23. Enter the power meter reading at the far end.
24. Enter the result of subtracting the source light from the end
reading.
Blocks 25 through 30 reflect the similar information as 19 through 24 but
with readings from the opposite direction. This permits directional
comparison of the same fiber.
31. The engineer indicates the cable as being accepted or rejected.
32. Enter the date of the final acceptance.
33. Enter the name of the engineer accepting or rejecting the cable.
34. Enter the name of the representative of construction who jointly
performed the tests.
7.07 The completed form is to be maintained in each central office in which the
cable appears, the work order folder and with the restoration kit.
6
<PAGE>
8.0 FORMS REPRODUCTION
8.01 Working copies of the Fiber Optic Acceptance forms for fiber optic cable
testing are shown in Attachment I and should be reproduced.
7
<PAGE>
FIBER OPTIC CABLE
WORK ORDER:______ TYPE/SIZE CABLE:______
EXCHANGE:______ SHEET____OF____
<TABLE>
<CAPTION>
ARMOR TO GROUND TEST
- --------------------------------------------------------------------------------
Location Location Results Date By
From To
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
ARMOR BOND CONTINUITY TEST
- --------------------------------------------------------------------------------
Location Location Results Date By
From To
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
END TO END OTDR TRACES
- --------------------------------------------------------------------------------
Location: Date Location: Date
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
<CAPTION>
END TO END POWER METER TEST
- --------------------------------------------------------------------------------
From: To: From: To:
- --------------------------------------------------------------------------------
Fiber Source End db Fiber Source End db
# Light Reading Loss # Light Reading Loss
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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- --------------------------------------------------------------------------------
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</TABLE>
The cable shown on this sheet was tested as indicated and was ACCEPTED/REJECTED.
Date__________________ ENGINEER__________________ CONSTRUCTION________________
8
<PAGE>
ATTACHMENT I
9
<PAGE>
FIBER OPTIC CABLE
WORK ORDER:__1___ TYPE/SIZE CABLE:___2__
EXCHANGE:__3___ SHEET_4__OF__4_
<TABLE>
<CAPTION>
ARMOR TO GROUND TEST
- --------------------------------------------------------------------------------
Location Location Results Date By
From To
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
5 6 7 8 9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
ARMOR BOND CONTINUITY TEST
- --------------------------------------------------------------------------------
Location Location Results Date By
From To
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10 11 12 13 14
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
END TO END OTDR TRACES
- --------------------------------------------------------------------------------
Location: 15 Date: 16 Location: 17 Date: 18
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
<CAPTION>
END TO END POWER METER TEST
- --------------------------------------------------------------------------------
From: 19 To: 20 From: 25 To: 26
- --------------------------------------------------------------------------------
Fiber Source End db Fiber Source End db
# Light Reading Loss # Light Reading Loss
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
21 22 23 24 27 28 29 30
- --------------------------------------------------------------------------------
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</TABLE>
The cable shown on this sheet was tested as indicated and was
ACCEPTED/REJECTED. 31
Date______32__________ ENGINEER_______33_________ CONSTRUCTION_______34_______
10
<PAGE>
ATTACHMENT II
11
<PAGE>
ALLTEL EXHIBIT 4 AS-BUILT FIBER DOCUMENTATION
-----
SPECIFICATIONS
<TABLE>
<CAPTION>
CONTENTS PARAGRAPH CONTENTS PARAGRAPH
- -------- --------- -------- ---------
<S> <C> <C> <C>
GENERAL 1.0 FACILITIES DRAWINGS 3.0
BASIC INFORMATION 2.0 TESTING AND ACCEPTANCE 4.0
DOCUMENTS
</TABLE>
1.0 GENERAL
1.01 The following specifications define the minium requirements for as-built
documentation. Documentation will be exchanged by IFN and ALLTEL for their
respective fiber facilities. These documents will be combined with the
acceptance testing forms and any other pertinent information to serve as the
source data during a restoration. Without accurate and detailed records of the
plant as it was built, restoration activities will be greatly hampered.
2.0 BASIC INFORMATION
2.01 Basic as-built information will include the date of placement, size, type
and manufacture of the fiber cable. Included with this will be the cable
manufacture's reel test and all other acceptance test results.
3.0 FACILITIES DRAWINGS
3.01 Facility drawings will show the actual route, location and depth of the
fiber cable as constructed. Details are to include road names, splice points,
road crossings, conduit, sequential readings of the cable and any other
specifics that will assist in any restoration activity.
4.0 TESTING AND ACCEPTANCE DOCUMENTS
4.01 Test and Acceptance Documents will include bi-directional OTDR traces and
power meter readings, both at 1310 NM and 1550 NM, for each fiber.
1
<PAGE>
ALLTEL EXHIBIT 5 OPERATIONS SPECIFICATIONS
-----
<TABLE>
<CAPTION>
CONTENTS SECTION
- -------- -------
<S> <C>
GENERAL 1.0
OPERATIONS
</TABLE>
SECTION ONE GENERAL OPERATIONS
------------------------------
1.1 CRAFTSMAN TRAINING
1.2 ALARM REPORTING
1.3 RESTORATION PROCEDURES
1.4 EMERGENCY RESTORATION
1.1 CRAFTSMAN TRAINING
All craftsmen will be properly trained to handle and work with fiber optic
cable.
I. Outside Plant Construction personnel will receive training that details the
following areas:
A. Minimum bend radius for various sizes of armored (metallic shield) and
non-armored (dielectric) fiber optic cables.
B. Maximum pulling tension for armored and non-armored fiber optic cables.
C. Proper methods of placing buried, underground and aerial fiber optic
cables.
II. Fiber optic splicing, repair, acceptance, and maintenance personnel will be
trained in the following areas:
A. Handling and splice preparation of fiber optic cables and pigtails.
B. Closure and organizer installation.
C. Fusion splicing and/or mechanical splicing connectors (emergency
restoration).
1
<PAGE>
D. Operation of OTDR and power meters.
III. Outside plant span acceptance will require making permanent documentation
from OTDR readings and completing end-to-end attenuation measurements:
A. Create permanent records of span performance by printing hard copies
of OTDR traces (footprints) or by entering OTDR data into an
auxiliary personal computing program.
B. Demonstrate the ability to properly complete end-to-end attenuation
measurements using 1310nm and 1550mn wavelength sources and power
meters.
1.2 ALARM REPORTING
1. Alarms from all ALLTEL locations will be received in the ALLTEL Operations
Center (AOC). The alarms will be sent via alarm sending devices from each
site to the AOC.
2. Each alarm occurrence will be logged by the AOC duty technician. He or she
will verify the alarm and initiate contact with the appropriate maintenance
personnel. The AOC personnel will coordinate repair activity and assist the
maintenance people as needed.
3. The ALLTEL Operation Center will keep management informed as to the status
of the repair work that is service affecting and estimated completion time.
4. Upon resolution of the alarm condition, the AOC technician will then
complete the Trouble/Alarm Report.
5. The AOC will complete a Service Affecting Trouble Log.
6. An escalation list for all ALLTEL maintenance personnel will be kept in the
AOC.
1.3 RESTORATION PROCEDURES
The following procedures will be followed when a fiber optic cable has been
severed. Proposed restoration objective is six (6) hours.
1. The cable maintenance technicians should immediately obtain all necessary
equipment and materials required to repair a cable cut from restoration
stores and should report with those items as quickly as possible to the
electronics equipment site
2
<PAGE>
nearest the suspected cable cut.
2. The Duty Man should obtain all necessary test equipment, including Optical
Time Domain Reflectometer (OTDR), Optical Power Meter, and should report
(in a 2-way radio or mobile telephone equipped vehicle) to the electronics
site.
3. Through on-site analysis of the local alarms displayed on the equipment at
each site, the Duty Men are to confirm whether a cable cut has taken place.
If a cable cut has not occurred, the cable maintenance personnel should be
released and the Duty Men should take whatever action is required to
correct the trouble, keeping their AOC informed at all times. If a cable
cut has taken place, the Duty Men should coordinate their efforts to do the
following:
A. Dispatch cable maintenance personnel (from each company if two
----
companies are involved) to ride the cable route in an effort to
physically locate the point of the cable cut.
B. Alert the AOC that a cable cut has occurred and provide expected
restoration time.
C. The AOC will notify ALLTEL and IFN management that a cable cut has
occurred.
D. Disconnect from the electronics equipment (at both sites) all fibers
----
associated with the cut cable.
E. Connect the OTDR to one of the transmit fibers at one location to
scan the fiber to determine the approximate distance to the cable
--------
cut.
F. Using the distance obtained above, consult the as-built drawings kept
----
on hand at that site to geographically locate the cut.
-------------------- --------------
G. If an OTDR is available at the equipment location on the other side
of the cable cut, the Duty Man at that locations should also scan a
transmit fiber to obtain a distance to the cable cut and should
consult the as-built drawing file at his site to determine the
geographic location of the cable cut. The information obtained at
both sites should be compared to verify that the geographic location
of the cable cut has been obtained with reasonable accuracy.
H. Notify the cable maintenance personnel via 2-way radio or mobile
telephone of the approximate location of he cable cut as obtained
from the OTDR scan(s). If the cable personnel have not already
located the cable cut, these personnel should immediately report to
that location. If two companies are involved, both companies'
----
personnel should report to that location and the "non-owner's crew"
should assist the "owner's crew" as needed.
3
<PAGE>
4. The cable maintenance personnel should determine what caused the cable cut
and should note the name and address of the responsible party if the damage
is not due to "natural causes". This information should be provided to the
AOC which will be forwarded to ALLTEL management, after the system has been
-----
returned to service.
5. It is important that communication be maintained between the cable
maintenance personnel and at least one of the electronics sites on either
side of the cable cut. This communication will be necessary to coordinate
cable restoration and to conduct tests necessary to minimize splicing
losses. It is possible that an individual may be required to man the
maintenance radio base station of the company involved. This individual may
be called upon to relay information obtained via 2-way radio or mobile
telephone communications from the cable maintenance personnel to the Duty
Man (or men) via land-line communications. The decision to assign a man to
the radio base station is left to the judgment of each company's
Maintenance Supervisor and/or Duty Man.
6. It is the responsibility of the network control center to keep ALLTEL
management and others informed of the ongoing status of the restoration
effort.
7. The cable maintenance personnel are to access the cable at the site of the
cut and are to follow prescribed procedures to restore the cable. The
transmit and receive fibers for the primary fiber pair should be restored
first so that the system can be returned to service. The transmit and
receive fibers of the standby pair should be restored next. This approach
should minimize service outage time.
8. While cable splicing is in progress, the output power levels for each
transmit fiber should be measured with an Optical Power meter and then
recorded. These readings should be made at each electronic site on either
side of the cable break. As each fiber is restored, the receive power level
should be measured with an Optical Power Meter and again recorded. The
fiber loss derived from the above reading can then be compared to existing
site records to assure that cable restoration has not resulted in
unacceptable system operational levels.
9. When service has been restored, the AOC will immediately notify ALLTEL, and
Interstate FiberNet.
10. The AOC, will insure that all alarms at all sites affected by the cable cut
have been returned to their normal condition and that the overall system,
from terminal to terminal, has been returned to normal service.
11. After all restoration splicing is complete, the supervisor of the cable
maintenance crew is to update the as-built drawings to indicate all
technical information associated with the cable cut. This information
should be forwarded to the AOC.
4
<PAGE>
12. All materials and supplies used during our restoration will be replaced as
soon as possible.
5
<PAGE>
1.4 EMERGENCY RESTORATION
I The ALLTEL Operation Center maintains and up-to-date emergency restoration
call out list and escalation list.
A. The AOC will monitor alarms 24 hours a day, 7 days a week.
B. The AOC provides a single point of contact for emergency restoration.
C. An up-to-date list of trained repair supervisors and craftsmen are kept
in the AOC.
1. This list will prioritize the supervisor and craftsmen to be called
first.
2. This list will also identify repair areas or exchanges and the
supervisors/craftsmen responsible for those locations.
II. Trained supervisors/craftsmen and emergency restoration equipment will be
strategically located along the fiber route to enhance faster system
restoration.
A. Appropriate vehicles and repair/restoration equipment are strategically
located along the route.
B. Sufficient amounts of equipment will be located strategically along the
route.
III. Emergency restoration cable coils will be prepared in advance and pre-
established quantities of cable will be stored to handle extreme emergency
situations.
A. Emergency restoration coils of not less than 100 meters in length and
equipped with organizers and closures will be used for primary
restoration.
B. Quantities of fiber cable of sufficient size and length will be
maintained, as repair stock, to cover section replacements that
are longer than previously prepared emergency restoration coils.
IV. When emergency restoration splicing is completed with mechanical splicing
connectors, the following are recommendations that should be considered
when selecting a mechanical splice connector.
A. The connector should consistently make low loss splices of 0.5 db or
less.
6
<PAGE>
V. Permanent repairs will be completed as soon as possible and will normally
begin immediately following emergency restoration.
A. Following the permanent repairs, maintenance personnel will complete
an outside plant system span test.
1. End-to-end attenuation measurements of each fiber will be
completed in both directions from FDP (Fiber Distribution
Panel) to FDP at either 1310nm and/or 1550nm wavelengths.
7
<PAGE>
ALLTEL EXHIBIT 6 SITE POWER SPECIFICATIONS
---
CONTENTS PARAGRAPH CONTENTS
- -------- --------- --------
GENERAL 1.0 SPECIFIC POWER 2.0
REQUIREMENTS
1.0 GENERAL
1.01 The following specifies the minimum power and grounding requirements that
will be provided at all building facilities where shared facilities occur. The
owner of the building facility will have the responsibility to provide the
powering and grounding for the building.
2.0 SPECIFIC POWER REQUIREMENTS
2.01 AC power will include transfer switch, circuit breakers and auxiliary power
inlet.
2.02 DC power supply will have a minimum output sufficient to meet of the fiber
optic, switching and environmental needs, 30.0 AMPS or 60 AMPS typical.
2.03 Battery Backup with a minimum backup time of 5 hours.
2.04 Auxiliary Power generator will have a minimum output sufficient to meet the
fiber optic, switching and environmental needs.
2.05 Auxiliary power receptacle, if required, will be Hubbel twist lock 2715 or
equivalent if 30 AMP or Hubble 460B12W or equivalent if 60 AMP.
2.06 Access to an independent 5 ohm ground.
2.07 The master ground bar will segregate surge producers from non-isolated and
isolated equipment.
2.08 An independent 5 ohm single point ground will be provided.
2.09 Buildings should not be in close proximity of any tower prone to attract
lighting or in a ground fault zone.
1
<PAGE>
ALLTEL EXHIBIT 7 MINIMUM REGENERATOR/AMPLIFIER HOUSING SPECIFICATIONS
---
CONTENTS PARAGRAPH
- -------- ---------
SPECIFICATIONS FOR 1.0
BUILDINGS
1.0 SPECIFICATIONS FOR BUILDINGS
1.01 The building will provide physical and environmental protection for fiber
terminal electronics, associated power equipment and fiber splicing facilities.
Separated and diverse cable entry will be provided if possible. A vault or space
will be provided near the cable entrance for splicing outside plant cable to
cable suitable for interior use. Racking or runways will provide safe cable
routing from the transition area to the equipment bays. Floor space will be
sufficient to provide a minimum of five (5) standard 23" X 7' equipment racks in
locations specified in article X, paragraph 10.5 and 10.6. Batteries, sump
pumps, redundant air conditioning, emergency lighting and alarm systems will be
provided. Reserve time on batteries will be a minimum of 5 hours based on
equipment demands. The alarm systems will provide alarms for intrusion, high
water, smoke, toxic and explosive gases. The AC power distribution system will
include a transfer switch and auxiliary power inlet. Emergency power generators
will have a minimum output sufficient to meet the needs of the existing fiber
optic and switching equipment in addition to heating, air conditioning and
emergency lighting. Auxiliary power receptacle, if required, will be Hubbel
twist lock 2715 or equivalent if 30 AMP or Hubbel 460B12W or equivalent if 60
AMP. An independent 5 ohm single point ground will be provided. The master
ground bar will segregate surge producers from non-isolated and isolated
equipment. The building will meet or exceed the structural requirements
necessary to withstand earthquake conditions for zone 1.
<PAGE>
IFN FIBER FACILITY
EXHIBIT 8: PAGE 1
[A MAP OF THE STATE OF GEORGIA DEPICTING CERTAIN POINTS ALONG THE IFN FIBER
OPTIC ROUTE APPEARS HERE]
- --------------------------------------------------------------------------------
[LOGO OF INTERSTATE FIBERNET APPEARS HERE]
- --------------------------------------------------------------------------------
<PAGE>
[A GRAPHIC DEPICTING CERTAIN TECHNICAL INFORMATION RELATING TO THE ROME TO
ATLANTA PORTION OF THE FIBER OPTIC ROUTE APPEARS HERE]
ROME TO ATLANTA (HILL ST.) SoCo fiber
(FOR ALLTEL CONTRACT)
EXHIBIT 8; PAGE 2
- --------------------------------------------------------------------------------
[LOGO OF INTERSTATE FIBERNET
APPEARS HERE]
- --------------------------------------------------------------------------------
<PAGE>
[A GRAPHIC DEPICTING CERTAIN TECHNICAL INFORMATION RELATING TO THE ATLANTA
PORTION OF THE IFN FIBER OPTIC ROUTE APPEARS HERE]
ATLANTA (HILL ST. / 55 PARK PLACE) IFN fiber
(FOR ALLTEL CONTRACT)
EXHIBIT 8; PAGE 3
- --------------------------------------------------------------------------------
[LOGO OF INTERSTATE FIBERNET
APPEARS HERE]
- --------------------------------------------------------------------------------
<PAGE>
[A GRAPHIC DEPICTING CERTAIN TECHNICAL INFORMATION RELATING TO THE OLD
WINDER-UNION POINT PORTION OF THE FIBER OPTIC ROUTE APPEARS HERE]
OLD WINDER-UNION POINT (SPLICE POINT) SoCo fiber
FOR ALLTEL CONTRACT
EXHIBIT 8; PAGE 4
- --------------------------------------------------------------------------------
[LOGO OF INTERSTATE FIBERNET APPEARS HERE]
- --------------------------------------------------------------------------------
<PAGE>
IFN EXHIBIT 9 SPECIFICATION SUMMARY FOR AERIAL,
---
BURIED AND UNDERGROUND FIBER OPTIC CABLE
CONTENTS PARAGRAPH CONTENTS PARAGRAPH
- -------- --------- -------- ---------
GENERAL 1.0 PLACEMENT OF AERIAL CABLE 5.0
GLASS FIBER 2.0 PLACEMENT OF DIRECT 6.0
SPECIFICATIONS BURIED CABLE
BASIC SPLICING 3.0 PLACEMENT OF 7.0
PROCEDURES UNDERGROUND DUCT CABLE
CABLE 4.0 CABLES ENTERING BUILDINGS 8.0
SPECIFICATIONS
1.0 GENERAL
1.01 This document will provide direction and standardization in splicing
procedures for fiber optic cable. All construction will be done in strict
compliance with the 1996 National Electrical Safety Code and all other federal,
state and local regulations.
1.02 This exhibit sets forth general principles of fiber optic cable
construction, and incorporates comprehensive details and specifications
concerning fiber optic cable construction contained the following practices:
ASP (ALLTEL System Practice) 290-350-456, ASP 290-350-455, ASP 290-400-605, ASP
290-500-400, ASP 540-850-005, ASP 540-850-010, ASP 540-850-015, SRP (Southern
Region Practice) 290-630-610 and SRP 93-2020.
2.0 GLASS FIBER SPECIFICATIONS
2.01 All glass fiber used in any fiber optic cable will adhere to the following
specifications. Specific circumstances may necessitate a variance from these
perimeters. In these instances a case by case evaluation will be made.
1. Single mode fiber
2. 8.3 micron core nominal
3. Cladding diameter 125 +/- 2 micron
4. Coated diameter 250 +/- 15 micron
5. Core eccentricity not more than 1.0 micron
1
<PAGE>
6. Dispersion not to exceed 2.6 psec/nm-km @ 1310nm and typically
less than 1 psec/nm-km @ 1550 nm.
7. Attenuation per fiber not to exceed 0.40db/Km @ 1310 nm
0.30db/Km @ 1500 nm.
2.02 Copies of the manufacture's test results are to be retained and become part
of the as-built documentation.
3.0 BASIC SPLICING PROCEDURES
3.01 Each fiber will be tested at each splice and the results recorded on the
form provided in Attachment I of Exhibit 3 . These forms will become part of the
---
as built documentation.
3.02 Splice cases will be standard manufactured Preformed stainless steel
Fiberlign or injection-molded Coyote splice cases. Splice cases will be
installed in accordance with the manufacture's recommended procedures. All
splices will be protected fusion splices.
3.03 When the cable sheath contain armor, each sheath will be bonded to a #6
insulated ground wire. Each sheath will be isolated from the others sheaths and
the splice case. The #6 insulated ground wires will be connected to a driven
ground rod that has a ground resistance reading of not more than 25 ohms.
3.04 Standard procedure for aerial or buried plant requires all splice cases to
be at ground level in a Reltec OPFOBD7 cabinet. The cabinet will also contain
storage for approximately 100' of cable. The stored cable will permit the case
to be relocated to an environmentally controlled area for splicing.
3.05 In location where ground level facilities are not permitted, subsurface
splices vaults will be placed. The vaults must permit ready access to the splice
case. This vault will also provide storage for cable which will permit the
splice case to be relocated to an environmentally controlled area for splicing
operations. Direct buried splices are not to be placed without approval of
management.
4.0 CABLE SPECIFICATIONS:
4.01 Fiber optic cable for aerial, buried or underground construction will be
single mode standard production cable, with a high or medium density
polyethylene jacket. All cable will be filled or contain a water blocking
compound. The fibers will be color coded with industry standard colors. The
cable may be loose tube, central tube or ribbon type constructed. Armored cable
will contain an overlapping coated steel armor. Metallic strength members are
acceptable only in armored cable.
2
<PAGE>
5.0 PLACEMENT OF AERIAL CABLE
5.01. Aerial splices will be brought down the pole and placed in a BPFOBD7
cabinet. If the cable sheath contains any metallic member it will be bonded to a
#6 ground wire and connected to a driven ground rod. Sufficient cable will be
stored in the cabinet to allow the splice to be relocated to an environmentally
controlled area for slicing.
5.02 A 3" drip loop will be placed in the fiber cable at each pole. Attached to
the cable at the drip loop will be an identification tag stating the owner of
the cable.
6.0 PLACEMENT OF DIRECT BURIED CABLE
6.01 Splices in direct buried plant will be brought to the surface and placed in
a BPFOBD7 cabinet. The armor and any metallic member in each sheath will be
bonded to an insulated #6 ground wire and connected to a driven ground rod in
the cabinet. Each sheath will be isolated from the others sheaths and the splice
case. The #6 insulated ground wires will be connected to a driven ground rod
that has a ground resistance reading of not more than 25 ohms. Sufficient cable
will be stored in the cabinet to allow the splice to be relocated to an
environmentally controlled area for splicing.
6.02 The buried cable will be placed at a minimum depth of 36" measured from the
top of the cable to the surface of the ground. Buried warning tape is to be
placed at a depth of 18" to 24" below grade at the time of construction.
6.03 Warning signs will be located along the route, culverts and at road
crossings. Signs will be placed at approximately quarter mile intervals and at
other locations that are susceptible to excavation. Signs are to be tubular in
design, providing 360 degrees visibility, and display the 1-800 call before you
dig telephone number.
7.0 PLACEMENT OF UNDERGROUND DUCT CABLE
7.01 Cable may be placed in duct by pulling or blowing the cable into the duct.
At no time should the pull on cable being placed in the duct exceed the
recommended tensile load rating of the manufacturer, typically 600 pounds.
7.02 Cable placed in manholes will wrap the hole a minimum of two times to
provide slack for restoration. The cable will be identified with a tag in each
hole.
3
<PAGE>
7.03 Splice cases located in manholes will be securely mounted on the cable
racking and identified. Sufficient cable will be stored in the manhole to allow
the splice to be relocated to an environmentally controlled area for spicing.
8.0 CABLES ENTERING BUILDINGS
8.01 Cables entering buildings will have two separate entrances where ever
possible. The intent is to promote diverse routing at every opportunity.
8.02 The armor and any metallic members of any cable entering a building will be
severed and bonded with a #6 insulated ground wire at the first opportunity upon
entering the building. This will normally occur at the point the outside plant
cables are spliced to the inside cables. This can be a splice case or a splice
cabinet. The #6 ground wire will be bonded to the hot side of the single point
MGN bar. Cables that do not contain metal and therefore do not require isolation
and grounding should be identified as non-metallic.
4
<PAGE>
IFN EXHIBIT 10 FIBER SPLICING, TESTING AND ACCEPTANCE
--
<TABLE>
<CAPTION>
CONTENTS PARAGRAPH CONTENTS PARAGRAPH
- -------- --------- -------- ---------
<S> <C> <C> <C>
GENERAL 1.0 ARMOR BOND CONTINUITY TEST 5.0
GENERAL SPLICING 2.0 END TO END OTDR TRACES 6.0
SPECIFICATIONS
FIBER OPTIC CABLE 3.0 END TO END POWER METER READING 7.0
ACCEPTANCE-GENERAL
ARMOR TO GROUND TEST 4.0 FORMS REPRODUCTION 8.0
</TABLE>
1.0 GENERAL
1.01 This practice will provide direction and standardization in splicing and
acceptance of fiber optic cable. This practice sets the minimum standard tests
that are to be performed during construction, acceptance and restoration. It
does not limit testing to these tests if there is reason to suspect the presence
of a condition that would render a cable unserviceable.
1.02 The procedures are applicable to all aerial, buried, or underground fiber
optic cable. These procedure will be the standard for the acceptance. All fiber
optic cable, regardless of length, will pass the tests prescribed in this
practice.
1.03 This practice also describes the tests that are required on existing cable
that is being considered as feeder for digital loop carrier.
1.04 The performance of the tests and the recording of the test data will be the
responsibility of the engineering department. If independent contractors are
used for construction the engineer and a representative of the contractor will
perform the test jointly. The results of the tests will be recorded on the
appropriate Southern Region Cable Acceptance form. The acceptance for fiber
optic cable is shown in Attachment I.
2.0 GENERAL SPLICING SPECIFICATIONS
2.01 All construction splicing will be protected fusion splices and all test
results will be recorded. Individual splices should be evaluated with the OTDR
during the actual splicing phase of the project. No splice should have a loss of
more than .1db. If .1db loss is not obtained after three (3) attempts, the
splice may exceed the .1db loss
1
<PAGE>
requirement but is not to exceed .5db. The engineer is to be consulted if more
than .5db occurs. High losses can be the result of core mismatch, poor core
concentricity or irregular core shape. These conditions are not likely to be
corrected with repeated attempts at splicing. This condition is exceptional and
should occur infrequently and only on single fibers in the slice. If difficulty
is experienced in obtaining splices of .1db or less on all but an exceptional
fiber, procedural or mechanical causes are to be suspected.
2.02 The splicing of different manufacturer's fiber can also result in
difficulty in obtaining low loss splices. This is the result of inherent
difference in the glass of the fiber. If this occurs, all of the fibers in the
splice are usually affected. For this reason it is suggested not to mix cable
from different manufacturers if possible.
2.03 Protected fusion splices are the first choice for restoration splicing.
Mechanical splices may be utilized only for temporary restoration purposes when
fusion capabilities are not available. All mechanical splices will be replaced
with protected fusion splices as soon as practical.
2.04 When circumstances do require the use of mechanical splices the splice loss
will not exceed .20 db insertion loss with a minimum reflective loss not less
than 35.0 db.
3.0 OPTIC CABLE ACCEPTANCE-GENERAL
3.01 Fiber optic cable will pass the following acceptance test prior to being
accepted and placed in service. Fiber optic cable has no length exceptions and
all new cable will be tested. The test results will be recorded on the Southern
Region Cable Acceptance-Fiber Optic form shown in Attachment I.
3.02 REQUIRED FIBER OPTIC CABLE TEST
Armor to ground
Armor bond continuity
End to end OTDR traces
End to end power meter reading
4.0 ARMOR TO GROUND TEST
4.01 The armor to ground test for buried fiber optic cable will be performed
using a megohmmeter in a similar manner to that described for the shield to
ground test used on
2
<PAGE>
copper cable. A value of 161,000 ohm-kilometer should be considered the minimum
acceptable value of the armor ground resistance.
4.02 For example, at 161,000 ohms per kilometer, for a 6KM (3.7 mile) fiber
cable would be estimated at approximately 26,883 ohms. This is calculated by
dividing 161,000 ohms by 6KM, the length for the estimated ohms resistance.
4.03 To obtain the actual value for the cable, the actual test set reading is
multiplied by length of the cable. This value is then compared to the estimate
to determine the acceptability of the cable. The actual results must exceed the
estimated value.
4.04 The intent of testing the armor in the fiber cable is to ensure no damage
was incurred during placement. If sheath damage did occur during placement the
testing will show a ground fault.
4.05 To record the results of the armor to ground test the following information
is entered as shown in Attachment II. Enter N.A. if the cable is nonmetallic.
1. Enter the work order number authorizing the cable construction.
2. Enter the type, manufacture and number of fibers of the cable being
tested.
3. Enter the exchange the cable is located.
4. Enter the number of sheets needed to record the test data.
5. Enter the pole or pedestal number where the test equipment is located to
perform the test. If more sections of cable are tested than can be shown,
go to a second sheet.
6. Enter the pole or pedestal number that is at the far end of the section
of cable being tested.
7. The megohms reading is entered in block number 7.
8. Enter the actual date the test was performed.
9. The name of the person performing the test is entered in block 9.
5.0 ARMOR BOND CONTINUITY TEST
3
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5.01 The armor bond continuity test will be performed after the cable is in
place and all splices are complete. In testing the armor bond continuity in
fiber optic cable a VOLT-OHM meter will be used to read the resistance of the
armor and check for opens.
5.02 To perform this test the far end of the cable armor is to be grounded. The
near end will be isolated. Place the positive lead from the VOLT-OHM meter on
the armor. The common lead is then grounded. The resulting reading should show
very low resistance. Typical results for fiber cable are 33.6 ohms per KM for
cable constructed with only metallic armor. If the cable also contains metallic
strength members embedded in the sheath a resistance figure of 21.5 ohms per KM
should be used. The actual reading will depend on the length of the cable.
5.03 To ensure the full length of the cable is being read, a second reading is
taken with the far end ground isolated. The result should show an open,
indicating that the ground that was read the first time was the far end ground.
5.04 If a fiber optic cable is made up of sections of armored and dielectric
cable each of section of armored will need to be tested individually.
5.05 To record the results of the armor bond continuity test enter the following
information in blocks 10 through 14 as indicated in Attachment II. Dielectric
cable will be indicated with N.A.
10. Enter the pole or pedestal number where the test equipment is located
while performing the test. If more sections of cable are tested than can be
shown go to a second sheet.
11. Enter the pole or pedestal number that is at the far end of the section
of cable being tested.
12. Enter the result of the VOLT-OHM meter test as good or fail
13. Enter the actual date the test was performed.
14. Place the name of the person performing the test.
6.0 END TO END OTDR TRACES
6.01 Although traces are not an actual acceptance test, OTDR traces are required
final documents. A trace will be taken of each fiber from both directions. These
will serve as a permanent base line record for each fiber. The traces show the
fiber attenuation,
4
<PAGE>
splice loss, location of splices and overall length. A trace of each individual
fiber is required.
6.02 OTDR traces are to be maintained as permanent record in each central office
in which the cable appears, the work order file and with the restoration kit.
This information is invaluable in the event of restoration and is required in
the SRP 290-630-610, Fiber Optic Emergency Restoration Guidelines.
6.03 The OTDR will be connected to each fiber through the patch panel. Consult
the operator's manual for instructions. Each fiber trace should also indicate
the location from which the trace was made and the number of the fiber.
6.04 The fact that OTDR traces were made is recorded on the acceptance form as
indicated in Attachment II.
15. Enter the central office where the OTDR is located during the test.
16. Enter the date the traces were made.
17. Enter the central office where the OTDR is located to perform the
traces for the direction opposite to that shown in block 15.
18. Enter the date the traces were made.
7.0 END TO END POWER METER READING
7.01 The end to end loss of the fiber is the deciding factor in fiber optic
cable acceptance. This test evaluates both the fiber and splices. The loss
associated with individual splices is not a specific function of acceptance
testing.
7.02 To accomplish the end-to-end loss test, a power meter and light source are
used to determine the actual attenuation of the fiber and splices over its
entire length. The source of the light can be the multiplexed equipment or a
separate light source. Operator's manuals should be consulted for specific
instructions.
7.03 To perform this test a known quantity of light is introduced into the fiber
with a light source. This is determined by using the power meter to read the
output of the light source. The fiber is then connected to the light source. The
amount of light reaching the far end is then read with the same power meter. The
known source light figure is then subtracted from the reading taken at the far
end with the power meter. The difference is the actual loss incurred in the
entire length. All of the fibers will be tested.
5
<PAGE>
7.04 This process is then repeated in the opposite direction. It is not unusual
for readings taken from one direction to differ from readings taken in the
opposite direction.
7.05 Compare the estimated loss on the loss budget provided by engineering to
the results of the test. If the figures are within 10% plus or minus, the cable
is acceptable. If a greater difference is found the transmission engineer should
be informed of the discrepancy. The cable will not be considered as accepted
until the discrepancy is explained. The loss of the fiber and splices combined
determine the acceptability of the cable.
7.06 The end-to-end power meter less test results will be recorded as indicated
on Attachment II.
19. Enter the central office or location were the light source is
located.
20. Enter the central office or location that is the far end of the
cable being tested.
21. Enter the number of the fiber. If a fiber cable is being tested that
is larger than 16 fibers a second sheet is required.
22. Enter the db reading of the light source. This should be a constant
for all the fiber tested from that location at that time.
23. Enter the power meter reading at the far end.
24. Enter the result of subtracting the source light from the end
reading.
Blocks 25 through 30 reflect the similar information as 19 through 24
but with readings from the opposite direction. This permits directional
comparison of the same fiber.
31. The engineer indicates the cable as being accepted or rejected.
32. Enter the date of the final acceptance.
33. Enter the name of the engineer accepting or rejecting the cable.
34. Enter the name of the representative of construction who jointly
performed the tests.
7.07 The completed form is to be maintained in each central office in which the
cable appears, the work order folder and with the restoration kit.
6
<PAGE>
8.0 FORMS REPRODUCTION
8.01 Working copies of the Fiber Optic Acceptance forms for fiber optic cable
testing are shown in Attachment I and should be reproduced.
7
<PAGE>
FIBER OPTIC CABLE
WORK ORDER: TYPE/SIZE CABLE:
----- -----
EXCHANGE: SHEET OF
----- --- ---
<TABLE>
<CAPTION>
ARMOR TO GROUND TEST
- --------------------------------------------------------------------------------
Location Location Results Date By
From To
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
ARMOR BOND CONTINUITY TEST
- --------------------------------------------------------------------------------
Location Location Results Date By
From To
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
END TO END OTDR TRACES
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Location: Date Location: Date
- --------------------------------------------------------------------------------
<CAPTION>
END TO END POWER METER TEST
- --------------------------------------------------------------------------------
From: To: From: To:
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Fiber Source End db Fiber Source End db
# Light Reading Loss # Light Reading Loss
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The cable shown on this sheet was tested as indicated and was ACCEPTED/REJECTED.
DATE ENGINEER CONSTRUCTION
------- ---------- ----------------
8
<PAGE>
ATTACHMENT I
9
<PAGE>
FIBER OPTIC CABLE
WORK ORDER:__1___ TYPE/SIZE CABLE:__2___
EXCHANGE:__3___ SHEET_4__OF_4__
<TABLE>
<CAPTION>
ARMOR TO GROUND TEST
- --------------------------------------------------------------------------------
Location Location Results Date By
From To
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
5 6 7 8 9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
ARMOR BOND CONTINUITY TEST
- --------------------------------------------------------------------------------
Location Location Results Date By
From To
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10 11 12 13 14
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
END TO END OTDR TRACES
- --------------------------------------------------------------------------------
Location: 15 Date: 16 Location: 17 Date: 18
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
<CAPTION>
END TO END POWER METER TEST
- --------------------------------------------------------------------------------
From: 19 To: 20 From: 25 To: 26
- --------------------------------------------------------------------------------
Fiber Source End db Fiber Source End db
# Light Reading Loss # Light Reading Loss
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
21 22 23 24 27 28 29 30
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The cable shown on this sheet was tested as indicated and was ACCEPTED/REJECTED.
31
Date____32____________ ENGINEER____33____________ CONSTRUCTION____34__________
10
<PAGE>
ATTACHMENT II
11
<PAGE>
IFN EXHIBIT 11 AS-BUILT FIBER DOCUMENTATION SPECIFICATIONS
----
<TABLE>
<CAPTION>
CONTENTS PARAGRAPH CONTENTS PARAGRAPH
- -------- --------- -------- ---------
<S> <C> <C> <C>
GENERAL 1.0 FACILITIES DRAWINGS 3.0
BASIC INFORMATION 2.0 TESTING AND ACCEPTANCE 4.0
DOCUMENTS
</TABLE>
1.0 GENERAL
1.01 The following specifications define the minimum requirements for as-built
documentation. Documentation will be exchanged by IFN and ALLTEL for their
respective fiber facilities. These documents will be combined with the
acceptance testing forms and any other pertinent information to serve as the
source data during a restoration. Without accurate and detailed records of the
plant as it was built, restoration activities will be greatly hampered.
2.0 BASIC INFORMATION
2.01 Basic as-built information will include the date of placement, size, type
and manufacture of the fiber cable. Included with this will be the cable
manufacture's reel test and all other acceptance test results.
3.0 FACILITIES DRAWINGS
3.01 Facility drawings will show the actual route, location and depth of the
fiber cable as constructed. Details are to include road names, splice points,
road crossings, conduit, sequential readings of the cable and any other
specifics that will assist in any restoration activity.
4.0 TESTING AND ACCEPTANCE DOCUMENTS
4.01 Test and Acceptance Documents will include bi-directional OTDR traces and
power meter readings, both at 1310 NM and 1550 NM, for each fiber.
1
<PAGE>
IFN EXHIBIT 12 OPERATIONS SPECIFICATIONS
--
CONTENTS SECTION CONTENTS SECTION
- -------- ------- -------- -------
GENERAL OPERATIONS 1.0 MAINTENANCE 4.0
MAINTENANCE 2.0 ATTACHMENTS 5.0
ASSURED RELIABILITY 3.0
SECTION ONE GENERAL OPERATIONS
1.1 CRAFTSMAN TRAINING
1.2 ALARM REPORTING
1.3 CUSTOMER TROUBLE REPORTING
1.4 ACCESS ADMINISTRATION - IFN SITES
1.5 RESTORATION PROCEDURES
1.6 EMERGENCY RESTORATION
1.7 EMERGENCY POWER
1.8 CREDIT FOR OUTAGE PROCEDURES
1.9 ROUTINE MAINTENANCE - FIBER OPTIC PLANT
1.1 CRAFTSMAN TRAINING
All craftsmen will be properly trained to handle and work with fiber optic
cable.
I. Outside Plant Construction personnel will receive training that details
the following areas:
A. Minimum bend radius for various sizes of armored (metallic shield)
and non-armored (dielectric) fiber optic cables.
B. Maximum pulling tension for armored and non-armored fiber optic
cables.
C. Proper methods of placing buried, underground and aerial fiber optic
cables.
1
<PAGE>
II. Fiber optic splicing, repair, acceptance, and maintenance personnel
will be certified in the following areas:
A. Handling and splice preparation of fiber optic cables and
pigtails.
B. Closure and organizer installation.
C. Fusion splicing and/or mechanical splicing connectors
(emergency restoration).
D. Operation of OTDR and power meters.
E. Handling and identification of various pigtail and patch cord
connectors.
III. Certification for outside plant span acceptance and maintenance
personnel will require making permanent documentation from OTDR
readings and completing end-to-end attenuation measurements.
A. Create permanent records of span performance by printing hard
copies of DR traces (footprints) or by entering OTDR data into
an auxiliary personal computing program.
B. Demonstrate the ability to properly complete end-to-end
attenuation measurements using 1310nm and 1550nm wavelength
sources and power meters.
IV. Initial certification will be completed before splicing begins.
Additional certification on new products and procedures will be
completed as required.
1.2 ALARM REPORTING
I. Alarms from all IFN equipment locations will be received in the IFN
Network Operations Center (NOC). The alarms will be sent via alarm
sending devices from each site to the NOC in West Point, GA. (Note:
IFN will require IFB lines into each site).
II. Each alarm occurrence will be logged by the NOC duty technician. He
or she will verify the alarm and initiate contact with the
appropriate maintenance personnel. The IFN NOC personnel will
coordinate repair activity and assist the maintenance people as
needed.
III. The IFN NOC will keep management informed on an hourly basis as to
the status of the repair work that is service affecting and estimated
completion time. If any customer expresses dissatisfaction, IFN
management will maintain contact with the customer through updates of
the progress on an hourly basis.
IV. Upon resolution of the alarm condition, the IFN NOC technician will
then complete the Trouble/Alarm Report. Service affecting trouble
will then be cleared with management.
V. The IFN NOC will complete a Service Affecting Trouble Log and pass to
management.
VI. An escalation list for all IFN maintenance personnel will be kept in
the NOC.
2
<PAGE>
1.3 CUSTOMER TROUBLE REPORTING
I. IFN customer troubles should be reported to (1-800-374-2350/706-645-8981).
This number will be answered in the IFN NOC at all times.
II. Customer reported troubles will be logged by the IFN NOC technician. A
customer trouble ticket will be opened for each occurrence. The IFN NOC
technician will then contact the appropriate maintenance personnel.
III. Upon resolution of the trouble condition, clearance will be given to the
IFN NOC.
IV. An escalation list for all IFN management personnel will be kept in the
NOC. (see attached)
1.4 ACCESS ADMINISTRATION - IFN SITES
I. IFN required notification prior to site access. Contractors requiring
access must provide the NOC (800-374-2350) with the following:
A. Contact the NOC to advise of entering and exiting the building.
(Authorities will be contacted when NOC is not contacted).
B. Upon entering an IFN site and contacting the NOC, sign in the log book
located near the entrance.
C. The IFN NOC will have full discretion on escort requirements.
D. If a contractor is in an IFN site and notices any abnormal occurrence,
the IFN NOC should be notified IMMEDIATIELY!
3
<PAGE>
PROPOSED INSTALLATION AND OBJECTIVES
INSTALLATION OF ALL ORDERS:
100% MEETING THE CUSTOMER REQUESTED DUE DATE.
MAINTENANCE: MEAN TIME TO REPAIR
2 HOURS PRIORITY-ONE==DS-3 & DS-1
2.5 HOURS PRIORITY-TWO==STP (56) LINKS
RESTORATION:
FIBER RESTORAL TIME-6 HOURS
4
<PAGE>
DFMS ALARM MONITORING
---------------------
I. Provides a full set of maintenance and administrative features for
managing fiber based and other high rate digital transport facilities.
II. Immediate creation and update of a trouble ticket for service affecting
situations.
III. Common cause trouble association to enable automatic identification of the
many DS-1 failures that occur with single high rate carrier outage.
IV. Continuously updated real-time trouble reporting from digital and dry
contact alarm monitor points.
V. Operator access control tailored to the authorized functions of the system
specialist, administrative and diagnostic use.
VI. Full data capture and statistical reporting for managing trend analysis
and trouble diagnosis by type of trouble, length of time in trouble, and
priority of faulty facility.
VII. Comprehensive, up-to-date network configuration information.
VIII. Facility map overlay.
5
<PAGE>
INTERSTATE FiberNet
OPERATIONS ESCALATION LIST SALES
1.5 RESTORATION PROCEDURES
The following procedures will be followed when a fiber optic cable has been
severed:
I. The cable maintenance technicians should immediately obtain all necessary
equipment and materials required to repair a cable cut from restoration
stores and should report with those items as quickly as possible to the
electronics equipment site nearest the suspected cable cut.
II. The Duty Man should obtain all necessary test equipment, including Optical
Time Domain Reflectometer (OTDR), DS-1 and DS-3 Bit Error Rate (BER) Test
Sets, and Optical Power Meter, and should report (in a 2-way radio or
mobile telephone equipped vehicle) to the electronics site. The IFN NOC
will monitor and assist from West Point, Georgia.
III. Through on-site analysis of the local alarms displayed on the equipment at
each site, the Duty Men are to confirm whether a cable cut has taken place.
If a cable cut has not occurred, the cable maintenance personnel should be
released and the Duty Men should take whatever action is required to
correct the trouble, keeping their NOC informed at all times. If a cable
cut has taken place, the Duty Men should coordinate their efforts to do the
following:
A. Dispatch cable maintenance personnel (from each company if two
----
companies are involved) to ride the cable route in an effort to
physically locate the point of the cable cut.
B. Alert the IFN NOC that a cable cut has occurred and provide expected
restoration time.
C. Upon discover, IFN NOC will notify ALLTEL and IFN management that a
cable cut has occurred.
D. Disconnect from the electronics equipment (at both sites) all fibers
----
associated with the cut cable.
E. Connect the OTDR to one of the transmit fibers at one location to scan
the fiber to determine the approximate distance to the cable cut.
--------
F. Using the distance obtained above, consult the as-built drawing kept
----
on hand at that site to geographically locate the cut.
-------------------- --------------
G. If an OTDR is available at the equipment location on the other side of
the cable cut, the Duty Man at that location should also scan a
transmit fiber to obtain a
6
<PAGE>
distance to the cable cut and should consult the as-built drawing
file at his site to determine the geographical location of the cable
cut. The information obtained at both sites should be compared to
verify that the geographic location of the cable cut has been
obtained with reasonable accuracy.
H. Notify the cable maintenance personnel via 2-way radio or mobile
telephone of the approximate location of the cable cut as obtained
from the OTDR scan(s). If the cable personnel have not already
located the cable cut, these personnel should immediately report to
that location. If two companies are involved, both companies'
----
personnel should report to that location and the "non-owner's" crew
should assist the "owner's" crew as needed.
IV. The cable maintenance personnel should determine what caused the cable cut
and should note the name, address and telephone number of the responsible
party if the damage is not due to "natural causes." This information
should be provided to IFN NOC which will be forwarded to ALLTEL and IFN
management, after the system has been returned to service.
-----
V. It is important that communication be maintained between the cable
maintenance personnel and at last one of the electronics sites on either
side of the cable cut. A conference bridge will be established (set up by
IFN NOC). This communication will be necessary to coordinate cable
restoration and to conduct tests necessary to minimize splicing losses. It
is possible that an individual may be required to man the maintenance
radio base station of the company involved. This individual may be called
upon to relay information obtained via 2-way radio or mobile telephone
communications from the cable maintenance personnel to the Duty Man (or
men) via land-line communications. The decision to assign a man to the
radio base station is left to the judgment of each company's Maintenance
Supervisor and/or Duty Man.
VI. It is the responsibility of the network control centers to keep ALLTEL and
IFN management and others which are involved informed of the ongoing
status of the restoration effort.
VII. The cable maintenance personnel are to access the cable at the site of the
cut and are to follow prescribed procedures to restore the cable. The
transmit and receive fibers for the standby fiber pair should be restored
first so that the system can be returned to service. The transmit and
receive fibers of the primary pair should be restored next. Using this
approach, traffic will be restored on standby fibers as the primary would
have switched upon LOS (Loss-of-Signal). Primary traffic would then be
locked over via NOC until the primary fibers are restored. This approach
should minimize outage time.
VIII. While cable splicing is in progress, the output power levels for each
transmit fiber should be measured with an Optical Power Meter and then
recorded. These readings should be made at each electronic site on either
side of the cable break. As each fiber is restored, the receive power
level should be measured with an Optical Power Meter and again recorded.
The fiber loss derived from the above reading can then be compared to
existing site records to assure that cable restoration has not resulted in
unacceptable system operational levels.
7
<PAGE>
IX. When service has been restored, the IFN NOC will immediately notify ALLTEL,
and Interstate FiberNet. The time of restoral will serve to calculate the
total outage time for IFN's customer service interruption credits. The IFN
NOC will complete the trouble report at this time.
X. The IFN NOC will insure that all alarms at all sites affected by the cable
cut have been returned to their normal condition and that the overall
system, from terminal to terminal, has been returned to normal service.
XI. After all restoration splicing is complete, the supervisor of the cable
maintenance crew is to update the as-built drawings to indicate all
technical information associated with the cable cut. This information
should be forwarded to the IFN NOC and forwarded to IFN Engineering.
XII. All materials and supplies used during our restorations will be replaced as
soon as possible.
1.6 EMERGENCY RESTORATION
I. The IFN NOC maintains and up-to-date emergency restoration call out list
and escalation list.
A. The IFN NOC will monitor alarms 24 hours a day, 7 days a week.
B. The IFN NOC provides a single point of contract for emergency
restoration.
C. An up-to-date list of certified repair supervisors and craftsmen are
kept in the IFN NOC.
1. This list will prioritize the supervisor and craftsmen to be
called first.
2. This list will also identify repair areas or exchanges and the
supervisors/craftsmen responsible for those locations.
II. Supervisors/craftsmen and emergency restoration equipment will be
strategically located along the fiber route to enhance faster system
restoration.
A. Appropriate vehicles and repair/restoration equipment are
strategically located along the route.
B. Sufficient amounts of equipment will be located strategically along
the route.
III. Emergency restoration cable coils will be prepared in advance and pre-
established quantities of cable will be stored to handle extreme emergency
situations.
A. Emergency restoration coils of not less than 100 meters in length and
equipped with organizers and closures will be used for primary
restoration.
8
<PAGE>
B. Quantities of fiber cable of sufficient size and length will be
maintained, as repair stock, to cover section replacements that are
longer than previously prepared emergency restoration coils.
IV. When emergency restoration splicing is completed with mechanical splicing
connectors, the following are recommendations that should be considered
when selecting a mechanical splice connector.
A. The connector should consistently make low loss splices of 0.5 db or
less.
B. The reflection (return loss) should be greater than -35.0 db.
C. A connector that uses optical adhesive should be avoided. These
connectors require additional time for complete assembly and the
optical adhesive has a relatively short shelf life.
V. Permanent repairs will be completed as soon as possible and will normally
begin immediately following emergency restoration as coordinated through
the NOC.
A. Following the permanent repairs, maintenance personnel will complete
an outside plant system span test.
1. End-to-end attenuation measurements of each fiber will be
completed in both directions from FDP to FDP at either 1310 nm
and/or 1550 nm wavelengths.
2. New permanent records of span performance will be created by
printing hard copies of OTDR traces (footprints) or by entering
OTDR data into an auxiliary personal computing program.
3. All route diagrams or documentation containing pertinent
information for trouble locating must be updated and issued to
all essential field personnel.
4. Upon permanent repair, the new splice loss readings should be
no greater than the temporary splice loss readings.
1.7 EMERGENCY POWER
In case of commercial (AC) outage, power is restored by an on-site
emergency generator.
In the event that a power company needs to be notified of the outage, the
IFN NOC will do so.
In addition, voltage and specific gravity measurements are taken on the
batteries at each site on a "per cell" basis monthly. Cell temperature
measurements will take on a simple of cells at each site also. All of this
information is recorded and is used to provided early detection of any battery
problems.
9
<PAGE>
1.8 CREDIT FOR OUTAGE PROCEDURES
The IFN NOC will forward to management a copy of the Trouble Log which
will detail not only the description of the trouble found and the action taken,
but also include the time duration if an outage has occurred.
The IFN management will provide the VP of Network Sales and VP of Finance
a report detailing the length of outage and circuits affected (by circuit
number) with a cross reference to IFN customer. The VP of Network Sales and VP
of Finance will take the appropriate steps to issue outage credits to those
customers affected.
1.9 ROUTINE MAINTENANCE - FIBER OPTIC PLANT
I. Optical power readings will be made on primary and standby systems at
terminal and repeater locations.
A. Record system transmit level.
B. Record system receive level.
C. Compare the scheduled maintenance span loss levels with the original
acceptance readings.
II. Scan each fiber with an OTDR at 1310 nm and/or 1500 nm wavelength and
print a hard copy of the trace or file the OTDR data into an auxiliary
personal computing program.
A. Routes shorter than 20 kilometers between FDPs will be tested from
only one FDP location.
B. Routes longer than 20 kilometers between FDPs will be tested from
both FDP locations.
C. Compare original acceptance trace to scheduled maintenance trace to
detect any point anomalies or deteriorating fiber.
III. Direct buried cables containing an armor will be evaluated to determine
if sheath faults exist. All buried splices will be required to maintain
cable shield (armor) isolation. Each shield will connect to an above
ground test station with an insulated #6 ground wire that is connected to
a driven 5/8 inch x 8 foot ground rod.
A. Each section of fiber cable between splices will be isolated at the
test stations and read for the presence of sheath faults.
B. Ground rods will be read to ensure a proper minimum resistance to
the earth is achieved (25 ohms or less).
10
<PAGE>
SECTION TWO MAINTENANCE
2.1 REQUIRED MAINTENANCE ITEMS
2.2 OUTSIDE PLANT CABLE AND SPAN ACCEPTANCE TESTING
2.3 SUMMARY OF PLANT ACCEPTANCE TEST RESULTS
2.4 TESTING AND TURN-UP OF DS-3'S
2.5 ELECTRONIC SPARES
2.1 REQUIRED MAINTENANCE ITEMS OVERVIEW
This section identifies the Required Maintenance Items for IFN's
maintenance group.
It has been determined that these items are necessary to provide proper
maintenance for the network.
This equipment would also be required to return the cable back to service
in the event of a cable being cut.
The Required Maintenance Items are listed in this section.
REQUIRED MAINTENANCE ITEMS
1. Optical Time Domain Reflectometer (OTDR) capable of measurements at 1300
and 1500 nm, printing hard copy of the trace.
2. Continuously Variable Optical Attenuator.
3. Optical Power Meter.
4. Bit Error Rate (BER) Test Set: DS-1 and DS-3 levels.
5. Spare fiber Optic Pigtails and Patch Cords.
6. Spare Electronic Circuit Packs.
2.2 OUTSIDE PLANT CABLE AND SPAN ACCEPTANCE TESTING
The following detailed procedures are necessary to document the integrity
on an outside plant fiber system. This sequence of procedures begins with the
receipt of the first reel of cable and finishes with the end-to-end performance
testing of the span.
11
<PAGE>
I. Test every fiber of every incoming reel of fiber cable to determine
quality of the fiber and condition of the cable.
A. Couple a 1 kilometer spool of fiber into an OTDR operating at 1550
nm wavelength and mechanically splice to each fiber to evaluate
performance and optical length.
B. Print a hard copy of the OTDR trace or file the OTDR data into an
auxiliary personal computer program.
C. Store the test data until the cable manufacturer's warranty has
lapsed.
II. Create a fiber optic splice performance log that monitors fiber splicing
results. splicing can be affected by poor quality fiber or malfunctioning
splicing equipment.
A. The splice log should contain adequate information to properly
evaluate equipment and fiber performance at each splice point.
B. Read each fiber at each splice point from both FDP locations with an
OTDR to ensure splice loss conforms to standards for splicing
operations.
C. Create a route diagram (as built sheet) or document containing
pertinent information for trouble locating. This diagram should
include, but not be limited, to the following items:
1. List splice locations by pole, vault, manhole, line number,
street or road, etc.
2. Document the sequential meter markings on the sheath at each
splice location.
3. On lengthy buried routes sequential meter markings should be
obtained at frequent permanent locations, such as road
crossings, storm culverts, pedestals or poles, etc.
4. The optical length to each splice location from each FDP should
be listed. Ensure the correct index of refraction setting is
used on the OTDR for the various glass manufacturers.
III. Made end-to-end attenuation measurements from FDP to FDP, using a
portable laser source and power meter.
A. Record measurements at both 1300 and 1550 nm wavelengths.
B. Compare these measurements to the calculated loss and notify the
Transmission Engineering Group if notable differences exist.
IV. Scan each fiber from both FDP locations with an OTDR at both 1300 and
1550 nm wavelengths.
12
<PAGE>
A. View each trace for any irregularities that do not appear to be
normal scattering.
B. Create permanent records of span performance by printing hard copies
of OTDR traces (footprints) or by entering OTDR data into an
auxiliary personal computing program.
2.3 SUMMARY OF PLANT ACCEPTANCE TEST RESULTS
- --------------------------------------------------------------------------------
Site Looking toward
-------------------------------- ------------------------------
Maintaining Company
-------------------------------------------------------------
Date: Performed by Approved by
---------- ------------------- -----------------------
- --------------------------------------------------------------------------------
Optical Power Readings (for terminal and repeater locations):
- ----------------------
A. Primary system transmit level*: db (must be -5 db or better)
-----------
B. Standby system transmit level*: db (must be -5 db or better)
-----------
C. Primary system receive level*: db (fiber # ) (must be -30
------------ -----
db or better)
D. Primary system transmit level into fiber # at far end*: db (must
----- -----
be -5 db or better)
E. Standby system receive level*: db (fiber # ) (must be -30
------------ -------
db or better)
F. Standby system transmit level into fiber # at far end*:
------------ --------
db (must be -5 db or better)
*measured at test point closet to the lightwave equipment
Bit Error Rate Tests (for terminal locations only):
- --------------------
A. DS3 test - terminal to terminal: Check if all channels test good*
--------------------------------
1. to primary standby
------------------------- ------------------------
(location) (location)
2. to primary standby
------------------------- ------------------------
(location) (location)
*Note: Each DS-3 channel tested in each direction with NO errors in 10
--
minutes for maintenance test and NO errors in 100 hours on initial
--
installation.
13
<PAGE>
B. DS-1 test - terminal to terminal:
1. to primary standby
------------------------- -------------------------
(location) (location)
*Note: Test 1 channel on each low speed card from one end (using remote
------------
loopback) - should record NO errors in 10 minutes.
-------- --
Optical Margin Tests (for terminal and repeater locations)
- --------------------
A. Variable Attenutor (VA) setting at which minor alarm condition
occurs:
db (VA connected to primary receive)
--------------
db (VA connected to standby receive)
--------------
B. Variable Attenuator (VA setting at which major alarm condition
-----
occurs:
db (VA connected to primary receive)
--------------
db (VA connected to standby receive)
--------------
OTDR Scans - check if copy of trace is filed on-site and copy is attached
- ----------
hereto:
Fiber 1
Fiber 2
Fiber 3
Fiber 4
Other Equipment Items - Check if operating correctly:
- ---------------------
A. Protection Switch (terminal locations only)
-----------------
B. Order Wire System
-----------------
C. Spare Parts Inventory - check if all spares are on-sites, test OK,
---------------------
and are properly stored.
D. Power Plant - also check emergency generator system
-----------
E. Alarm System
------------
F. Other manufacturers' (MFG) Tests - check if all other tests as
--------------------------------
specified in MFG Practices have been successfully conducted.
G. Equipment Documentation - check if on-site
-----------------------
"As-Built" Cable Drawings
- -------------------------
14
<PAGE>
Check if accurate "as-built" cable drawings, marked with cumulative
distances are on-site.
Equipment Maintenance Responsibility - Check if accepted
- ------------------------------------
2.4 FOR TESTING AND TURN-UP OF Ds-3'S
General
This procedure governs all aspects of the testing and turn-up of DS-3's.
This procedure supersedes all existing procedures.
Introduction
Interstate FiberNet establishes this procedure as a subset of the IFN
transmission network. This certification process is employed to verify that
those transmission facilities meet the design and performance objectives set
forth.
This document describes the steps required of the IFN NOC and the field to
certify any new or existing DS-3 turn-up.
The certification process involves four general phases:
1) A configuration review of the system that the DS-3 is transported.
2) A 72-hour performance test of the entire DS-3 path.
3) The analysis of the Service Order depicting routing information.
4) Completing NOC Technician information on the Service Order.
Phase one, three and four are performed by the IFN NOC. The performance
test, phase two, set up by the field, in conjunction with the IFN NOC is
conducted by field personnel under the direction of the IFN NOC.
Performance Testing Process
The method of testing utilizes the Bit Error Rate (BER) test set(s)
external to the facility under test.
The only approved test for use are as follows:
Fireberd 6000
T-Berd 310
T-Berd 209A
All of these devices should have printers connected to them for test
verification and the duration of the test is 72 consecutive hours.
BER Test Set Method (On Site Testing)
Fireberd 6000 Set-Up Practice
15
<PAGE>
I. Test equipment should be on UPS when possible to prevent uninterrupted
testing.
II. Contact the IFN NOC to inform them of testing.
III. Ensure printer has paper supply for a 3-day test. All end to end tests
will use a 2E20-1 pattern.
IV. All settings are as follows:
A. Synth Freq 15644 Khz
B. Test Interval 10E7
C. Char Format N/A
D. Jitter N/A
E. Print Event Normal (greater than) Time = 240 min.
(greater than) Error = Bit err
(greater than) Synlos = On
(greater than) Tesint = Off
F. Recall/Store Recall (greater than) 9:Name
(After completing settings, store
them EM at this function)
G. Interface Result (greater than) Standard
Input (greater than) Term
BPVINS (greater than) Off
Coding (greater than) AMI
Framing (greater than) D4
LBO (greater than) db
R SEL = RC PRINT NONE 232
30 BLK LEN = 1000000 BITS
31 DELAY = GPAT RPAT
START STOP
33 PATTERN = N/A
34 SITE I.D. = N/A
35 RESULTS PRINT = CUSTOM
% MASK = OFF FRA ERR = ON
% ACT SEC = OFF FRA LOSS = ON
% AVL SEC = OFF FRMR = OFF
% DEG MIN = OFF G%EFS = ON
% PAT SEC = OFF G%VFS = OFF
% SEC = OFF G EFS = ON
% SVS = OFF G VFS = ON
% VF EAS = OFF GEN FREQ = ON
+ LVL db = OFF GERR SEC = ON
+ WANDER = OFF IF = ON
- LVL db = OFF JTR FREQ'S = OFF
16
<PAGE>
-LVL V =OFF JTR HITS =OFF
-WANDER =OFF L2 ABORT =OFF
15m WANDER =OFF L2 FERR =OFF
1S DEN S =OFF L2 FRMS =OFF
1sCRC =OFF LVL DBM =OFF
24hr WANDER =OFF MAXJTR =OFF
2.3.4
AIS SEC1 =ON MAX ZERO =OFF
AVG BER =ON PAT LOSS =OFF
AVG BLER =OFF PAT SLP =ON
AVG BPVR =OFF PAT L SEC =ON
AVG CRC =OFF PP WANDER =OFF
AVG FAS =OFF PWR LOSS =ON
AVG FER =OFF PWR STAT =OFF
AVG SEC =OFF RLVL DB =OFF
AVL SEC =ON RLVL V =OFF
BER =ON RCV BOM =OFF
FAX_E_RATE =OFF
FAS ERROR =OFF
FCS ERR =OFF
FE RATE =OFF
INTERFACE =OFF
G.821 TRANS =OFF ASYNC FR ERR =OFF
OVERFLOW PRINT=ON RCV CLK POL CHG=OFF
DATA LOSS =ON
CLOCK LOSS =OFF SIG CHG =OFF
SIGNAL LOSS =OFF POWER UP =ON
SYNC LOSS =ON TEST RESTART =ON
SYNC ACQUIRED=ON FR SYNC LOSS =ON
36-STATUS PRINT=ON
37-40,CRLF,F
38-9600,8 NONE (SET PRINTER AND 232 PORT TO MATCH)
41-USER 1
44-OFF
17
<PAGE>
60 - HH:MM:OO DD/MM/YY
5. Other front panel settings are as follows:
A. SELF LOOP=OFF
B. ERR INSERT=OFF
C. DATA=2E-20-1 for non DXC term, = 2/\23 for DXC terminations
D. GEN CLK=SYNTH
E. ANALYSIS MODE=CONTINUOUS
F. PRINTER =ON
G. DISPLAY HOLD =OFF
H. LOOP UP & DOWN =OFF
J. TIMING MODE =SYNC
K. ANALYSIS MODE =ERROR ALARM
BIT ERRS SYN LOSS
6. Establish continuity by verification when the distant-end makes and breaks
their loop.
7. Press "RESTART" on the FB6000 and ensure "SYNC" is acquired.
8. Insert several bit errors and ensure they are received via the distant-end
loopback.
9. Restart test and press `CONTROLS PRINT' and `RESULTS PRINT' for test
beginning.
10. When completed, press `CONTROLS PRINT' and `RESULTS PRINT' the test results
will be faxed to the IFM NOC for certification.
Appendix 3.2 T-Berd 209A Set-up Procedure
TBERD 209A
1. Verify test equipment is on UPS to prevent interrupted testing.
2. Contact the IFN NOC to inform them of testing.
3. Perform 3 pretests: 5 min All 1's, 5 min All 0's, 5 min 96 Octet.
4. Ensure printer has paper supply for 3-day test. All tests use a 2E20-1
pattern.
5. All settings are as follows:
*************Front Panel*************
A. MODE;T1 D4
B. PATTERN: 2E20 (SEE #3 ABOVE)
C. TIMED/CONT: TIMED (72:00 HRS)
D. DIS/HOLD: OFF
E. TIMING: INT
F. CODE:B8ZS/AMI
G. ERR INS BPV:OFF
18
<PAGE>
H. ERR INS LOG:OFF
I. RCV INPUT: TERM
J. TX LBO; 0db
K. PRE EVNT: 2HRS
*******Side Panel*******
L. CONT/HALT: CONT
M. CSU/FAC/PGM: CSU
N. IMB/OVE: OVERWRITE
O. REPSONSE: AUTO
P. PARITY: EVEN
Q. BAUD RATE: 2400
R. CR/CR/LF: CR
S. FORMAT: NORMAL
T. COLUMN: 20
6. Establish continuity by verification when the distant-end makes and breaks
their loop.
7. Press "RESTART" on the T-209A and ensure "SYNC" is acquired.
8. Insert several bit errors and ensure they are received via the distant-end
loopback.
9. Restart test and press "CONTROLS PRINT" and "RESULTS PRINT," for test
beginning.
10. When completed, press "CONTROLS PRINT" AND "RESULTS PRINT," test
information will be faxed to the IFN NOC for certification.
2.5 ELECTRONIC SPARES
Have on-site records of spares. Stock initially by manufacturers' spare
parts lists.
Stock spare cards for:
Lightwave Equipment
Multiplexer
Order Wire
Alarm Equipment
Have detailed instructions available for emergency card replacement and
repair and return procedures.
19
<PAGE>
SECTION THREE ASSURED RELIABILITY
3.1 GENERAL GUIDELINES-FIBER OPTIC CONSTRUCTION & MAINTENANCE
3.2 ACTIVITY GUIDELINES BY FUNCTIONAL AREA
3.1 GENERAL GUIDELINES
I. Purpose:
--------
A. IFN and its partners and associates are urged and invited to adopt
the guidelines contained herein as Standard Operating Procedures for
each respective company.
B. These procedures are intended to define and specify times and
conditions when designed tasks can be performed on the network. It is
necessary to maintain specific guidelines for construction,
provisioning, maintenance and related activities which will apply in
all partner companies' regions.
C. Each company/entity can then enforce the set of standards uniformly,
with the goals of assuring system reliability, maximizing
---------------------------------------
productivity, minimizing the impact on customers, and prevent
-------------------------------------------------------------
unintentional outage conditions.
--------------------------------
D. While this document is organized by functional areas for structure,
it should be noted that each of the specified procedures applies to
all areas of responsibility.
II. Digital Data Network (DDN) Related Procedures
---------------------------------------------
A. Activities affecting Digital Data traffic should be governed by
special procedures administered and controlled at the IFN Network
Operation Center (NOC) in West Point, Georgia.
B. In addition, the NOC's must insure that the applicable procedures
required by each carrier are followed.
1. An example would be other carriers Network Surveillance Center
(DDCSN) activities involving Digital Data Network (DDN) traffic
carrying systems.
20
<PAGE>
A. In certain situations Construction/Maintenance/Provisioning
activities may be handled by Certified and Approved Contractors.
B. The procedures herein are fully applicable to any and all Approved
Contractors who may be on the system from time to time.
C. It should be noted that whenever a bid, RFP, or other proposal
involving contractor personnel is issued, the issuing entity must
-----------------------
insure that the bidders/respondents are aware that these procedures
-------------------------------------------------------------------
are applicable to them.
-----------------------
3.2 ACTIVITY GUIDELINES BY FUNCTIONAL AREA
I. Civil/Generator
---------------
A. When generator/commercial power service is upgraded, steps outlined
in a pertinent statement of work and properly approved Method of
Procedure (MOP) must be followed.
B. The respective Network Manager should be notified and a time schedule
established, so that the power upgrade may be performed.
C. If commercial power service will be disrupted for any length of time,
a temporary service should be connected to the system.
D. All power upgrades are to be coordinated in advance with NOC
personnel to establish hours of work and a schedule.
E. Whenever generator repair service, random inspection service or the
like is performed, the work should be coordinated in advance with the
respective Network Manager at the IFN NOC.
II. Grounding/Bonding
----------------
A. All exterior grounding activities including subsurface work,
building/shelter connections, installation of bus bars and lightning
protection, as well as the bonding of metallic objects to the ground
ring or bus, may be accomplished during BUSY HOURS.
B. Interior Bonding/Grounding
1. Grounding wires/cables may be run within a building and
connected to ancillary equipment/devices or non-traffic-
carrying equipment. Such circumstances would include: (1) the
movement of traffic-carrying equipment or (2) relocation of
active wires/cables.
22
<PAGE>
2. Cable ends will be insulated to prevent any possible short that
could occur by the unterminated cable. Insulation of cable will
consist of one of the following items: 1) electrical tape; 2)
wire nuts; or 3) heat shrink caps.
3. New ground wires can only be terminated on traffic-carrying
equipment (including DSX frames) during OFF HOURS unless the
respective NOC Network Manager has granted approval for this
work to be done during BUSY HOURS. These wires must have
previously been connected to a supplemental ground bus.
4. Old ground wires may not be removed until after the new wires
have been terminated.
5. Isolation of DC return bus bars from distribution racks shall
be done during OFF HOURS.
III. Radio Interference Suppression RFO/EMI
------------------------------------
A. Other RFI/EMI noise mitigation activities may be conducted anytime
provided the procedures established for work on systems containing
live traffic are adhered to.
B. Work which affects traffic channels shall be deterred until an OFF
HOURS period.
IV. Equipment Installation
----------------------
A. All physical work on active equipment rack, cabling, etc., for power
systems including chargers, batteries and UPS, will only be done
during OFF HOURS.
B. Equipment other than that specified in the previous paragraph may be
physically installed within a building, or shelter at any time,
provided that there are no extraordinary circumstances which would
jeopardize existing traffic carrying equipment by such installation.
Such circumstances would include: (a) the movement of traffic-
carrying equipment, (b) having to relocate active cables to
accommodate such as installation, etc.
C. DC power, AC power and ground cables
1. These may be placed on cable ladders at any time.
2. However, they may not be installed/connected into breaker racks
on active equipment until OFF HOUR.
23
<PAGE>
3. They may only be connected to active equipment racks, existing
battery plant, DC power board, or breaker panel during OFF
HOURS.
4. Cutting in new power on traffic carrying systems may only be
done OFF HOURS.
5. Insulation of DC power cable will consist of one of the
following items: 1) electrical tape; 2) wire nuts; or 3) heat
shrink caps.
6. Fault alarm and coax cables may be run at any time during the
day. However, they may not be connected to any active equipment
until OFF HOURS.
7. When installing new equipment, ends of all cables that connect
to this equipment should be terminated on this equipment before
power is applied.
8. New equipment can only be powered up during OFF HOURS. Radio
equipment should be configured so that it cannot radiate when
powered up until the impact, if any, of the new equipment on
traffic-carrying channels can be determined.
9. Fiber optic cords may be run at any time as long as the
existing traffic carrying fibers are not disturbed.
10. Work requiring traffic carrying fibers to be disturbed may only
be done during OFF HOURS.
V. Outside Plant Relocation/Upgrade/Overbuild
------------------------------------------
A. Construction on operational fiber optic cable systems will generally
be accomplished during BUSY HOURS. This is necessary due to the
general requirements to obtain third party personnel, and the
necessity for maximum sight visibility while working in confined
right-of-way environments. In addition, this time frame affords
increased visibility on collocated cable systems owned by other
common carriers, electric utilities, etc.
B. Splicing work on fiber optic systems when DDN traffic is present will
be accomplished under the following conditions.
1. When there is active DDN traffic in a tray the work will be
done during a DDN window. All traffic in that tray will be
rolled to another tray where possible. DDN window periods are
in
24
<PAGE>
accordance with the published annual schedule. In addition, a
DDN window must be requested at least 14 days in advance.
2. When there is DDN traffic, but not in a tray that is to be
worked in, work may be accomplished during a DDN Advisory which
is any day during OFF HOURS. A DDN Advisory must be requested
at least 48 hours in advance. All traffic will be removed from
the tray being worked on.
3. When working in a splice termination box (STB), to install or
replace pigtails or repair a bad splice, the above conditions
will apply.
C. All work on the fiber system containing live traffic will be
coordinated IN ADVANCE with the Network Manager at the IFN NOC.
1. Work will not start until clearance to commence is granted by
the NOC.
2. The NOC will be required to be on line before starting work and
periodically during the work activities.
3. The NOC must be in direct contact with the field technical
personnel when cuts are made that may jeopardize traffic or
that could result in an actual outage.
4. Only one (1) fiber is to be cut at a time. After each cut is
made, system operation must be verified before another fiber
can be cut.
D. Prior to commencement of any work on fibers in splice trays or splice
closures, all fibers associated with active systems must be labeled
and verified.
1. Once this has been accomplished, traffic can be rolled from the
active tray or buffer.
2. Prior to cutting any fiber, the field technician will test the
fiber to ensure traffic has been removed.
3. Traffic verification will be tested by placing a handheld fiber
traffic identifier or similar instrument on the pigtail or
fiber.
VI. Filed System Test
-----------------
A. There are a multitude of tasks associated with the commissioning of
new and Overbuild equipment for revenue service. The functions noted
below are those that are known to impact system performance and/or
traffic.
25
<PAGE>
1. Testing at the DSX-3 frame or patch panel may be done any time, however,
connectivity cannot be disrupted until OFF HOURS.
2. DS-3 patching will only be performed during OFF HOURS. DDN traffic can only
be patched during a scheduled DDN maintenance window.
3. Lightwave Distribution Frame (LDF) connections can be made any time to
unused bulkhead connectors. Patch covers can only be disconnected from the
frame during OFF HOURS. Traffic rolls from live pig-tails can only be
performed during OFF HOURS.
4. Turn power on and off inactive lightwave equipment racks during OFF HOURS
in they are in the same line up with active equipment.
5. Protection switch Differential Absolute Delay Equalization (DADE) or
equivalent will be done during OFF HOURS.
6. Any work which prevents a traffic carrying channel from switching to
protect will be done OFF HOURS.
7. Overbuilds or reconfiguration of active traffic carrying common equipment
such as protection switches can only be done OFF HOURS.
8. Over-path testing should be accomplished after the effect of the new
equipment on the existing system performance has been verified.
9. Turning up on new channels should be done during OFF HOURS initially, if no
degradations are noted, then work on new or overbuild channels can proceed
at any time except where restricted elsewhere.
10. Before any work is accomplished on overbuild channels, red tape will be
placed on all traffic-carrying equipment in the overbuild lineup, to
prevent accidental tampering with active equipment.
11. Physical connections of temporary "cutover equipment" in preparation for a
system change-out/upgrade must be done OFF HOURS unless the associated work
could endanger employee/contractor safety. In such cases, secure approval
in advance for BUSY HOURS.
12. Electronic switching of a fiber optic channel may be done during OFF HOURS,
after coordinating with the NOC. No more than two
26
<PAGE>
switches each, up and back may occur without prior DDN
coordination.
13. Rollover of traffic on fiber optic systems to a spare fiber
path in order that an active fiber pair or active lightwave
equipment can be worked on must be done during OFF HOURS.
This applies whether the rollover is done at the DA-3 or
optical level. A DDN maintenance window is required for
systems carrying DDN traffic.
B. Prior to accepting a site for service initiation, IFN requires a
site walk through by IFN Operations personnel and a 72-hour test on
the new system, printed and provided to IFN Operations.
VII. General Notifications of Work Activity in the Area
--------------------------------------------------
A. System reliability requirements dictate that companies/personnel
planning any work activity which is not directly related to the
network but which could have an adverse affect in the event of a
mishap must meet advance reporting requirements as follows:
1. For non-recurring work- on or around structures, building,
equipment, etc. which are part of the fiber optic network -
Notify the NOC at least 72 hours in advance and provide a
schedule of the planned activity(ies) and a full
scope/explanation of the work to be performed.
27
<PAGE>
SECTION FOUR MAINTENANCE
4.1 ROUTINE PREVENTIVE MAINTENANCE
4.2 QUARTERLY PREVENTIVE MAINTENANCE
4.3 ANNUAL PREVENTIVE MAINTENANCE
4.1 ROUTINE MAINTENANCE
I. Routine maintenance is any services requested for repair related to the
equipment associated with or within the terminals or regenerator
buildings.
II. Service for routine maintenance will be coordinated from IFN's Operations
Center. IFN will coordinate service on IFN terminal equipment in the
event that this is required.
4.2 QUARTERLY PREVENTIVE MAINTENANCE
I. Quarterly preventive Maintenance will be performed in accordance with the
guidelines set forth.
A. All Preventive Maintenance with any other maintenance work will be
coordinated through the NOCs.
B. All maintenance work will be recorded on the appropriate log sheets
located within the regen or terminal building in the LOG BOOKS.
C. All discrepancies will be noted and the NOC notified for taking
corrective action.
D. All technicians should be well qualified to perform any maintenance
function.
E. Housekeeping and Alarms:
1. Test all GOA alarms with the NOCs on line.
2. Check filters in air-conditioners.
3. Test air-conditioners by switching and adjusting thermostats.
28
<PAGE>
4. Check each commercial power phase and phase to phase for
balancing of load.
5. Check all lighting inside and outside.
6. Visually check fire suppressions systems and gauges.
7. Check wall type mounted fire extinguishers and record date.
8. Check cleanness of building.
F. Generators:
1. Check all fluids, belts and make visual inspection of
generator and its housing.
2. Check propane fuel and record the percentage of fill.
3. Start generator and free fun for approximately thirty
minutes.
4. Check oil pressure, temperature and voltages.
5. Check start up time and cool down time.
6. Monitor exercising of the generator until it shuts down.
G. Batteries:
1. Check batteries visually for corrosion, leaks and
abnormalities.
2. Check cell voltage.
3. Check gravity (Wet Cells Only).
4. Check the entire Banks voltage.
5. Compare readings with prior quarterly readings for any major
differences.
6. If Cell voltages vary put the charges on equalize for 72
hours and re-check later for stability.
7. Calculate the battery reserve using the battery formula and
record.
8. Check chargers for load sharing.
29
<PAGE>
4.3 ANNUAL PREVENTIVE MAINTENANCE
I. During the Annual Preventive Maintenance checks the Companies, IFN's or
contractor employees performing the checks must be on a conference bridge
with the Network Operations Centers or notified depending on what
functions are being performed.
A. Fiber testing: Test all vacant fibers between each regain or
terminal by reading with an OTDR doing traces and taking power
readings across each fiber. (Transmit & Receive)
B. Grounding: Check all OPGW grounds at splice points.
C. Access: Check all access roads to splice points.
D. Battery Checks: Clean batteries and check connections on all bolts
applying the manufacturers' recommended pressure (torque) using
proper tools.
E. Generator: Change filters, oil and fluids.
F. Load test: The regen or terminal load test will be performed by
isolating the commercial power and running the generator with the
full power load for a minimum of thirty minutes. While the
generator is supplying the power all functions within the regen/
terminal must be monitored by on-site personnel along with the
generator gauges. Once load test is performed, commercial power
will be restored and performance checks monitored for fifteen
minutes before departing site.
30
<PAGE>
SECTION FIVE ATTACHMENTS
5.1 DEFINITIONS
5.2 FACILITY RESPONSIBILITY
5.1 DEFINITIONS
Unless otherwise defined herein, the terms used in this Agreement shall have
their normal or customary meanings. In addition, for the purpose of this
Agreement, the following terms shall have the meanings set forth:
I. Routine Maintenance
Routine Maintenance shall include and be limited to the following items:
A. Twenty-four remote surveillance of the systems for the purpose of
identifying and correcting fiber and/or electronic dysfunction and
monitoring alarms and performing appropriate dispatch to restore the
fiber and systems to normal specifications as outlined herein.
B. Dispatching and conduction normal locates of the fiber optic cable.
C. Monitoring the excavating activities and providing protection of the
buried fiber optic cable by the third parties. Normal monitoring
shall be further defined as all monitoring except those where a
third party is paralleling the route within a distance of 10' of the
buried fiber optic cable.
D. Annual testing of all fibers and recording the measurements and
maintaining records of such.
E. Periodic surveillance of the buried portion of the Route to identify
potential problems from construction, road maintenance activities,
or other potential hazards to the fiber cable.
II. Electronics
The fiber optic communications equipment owned and used by the companies
to facilitate the transmission of communications over the fiber optic
cable.
III. Regenerator Location
Site in which incoming signals are regenerated and retransmitted on an
outgoing circuit.
31
<PAGE>
IV. System
The fiber optic telecommunications network relating to all fiber cables,
environmental systems, the right-of-way, all fiber sites and facilities.
MAINTENANCE
I. General:
A. In operating, servicing and maintaining the System or parts thereof,
the companies will exercise reasonable business judgment to protect
and preserve the physical assets, conduct their affairs practically
and apply sound business practices and principles, taking into
consideration technological advances to assure that the processes of
the System do not deviate from evolving industry practice.
B. In performing their service hereunder, the companies shall take
workmanlike care to prevent impairment to the signal continuity and
performance of the system. The precautions taken by the companies
shall include notification to the IFN Network Operations Center (NOC)
of any maintenance to the System which is potentially service
affecting. In addition the companies shall reasonably cooperate with
each other in sharing information and analyzing disturbances
regarding the System, including providing a summary of events.
C. IFN shall operate, service and maintain their respective sites.
D. The IF NOC shall dispatch maintenance and repair personnel along the
IFN Route to affect fiber repairs as defined for each route segment.
E. Maintenance personnel of IFN shall be available for dispatch
twenty-four (24) hours a day, seven days a week. IFN shall use
reasonable efforts to have its first maintenance personnel at the site
requiring maintenance with thirty (30) minutes from the time of the
alarm identification by IFN's NOC.
F. IFN shall avoid taking any operation, service or maintenance action
between 0600-2300 local time Monday through Friday, inclusive, which
is reasonably expected to have disruptive impact on the continuity
or performance level of the System. Restricted activities during this
period shall include manually initiated actions that cause operation
of the IFN automatic fiber electronics protection switching
equipment. However, specifically excluded from such restricted
activities are any actions required to restore continuity to a
severed or partially severed fiber optic
32
<PAGE>
cable, restore dysfunctional power and ancillary support equipment,
and to correct any potential jeopardy conditions.
G. IFN shall coordinate with the IFN Operations Center no later than
five (5) business days prior to the date of any planned
non-emergency operation, service and maintenance activity to be
accomplished that is reasonably expected to produce any signal
discontinuity to the System.
II. Regenerator and Pop Locations
A. IFN shall operate and maintain the regenerator locations at their
respective sites.
B. IFN shall operate and maintain power and associated environmental
control systems at their respective sites.
C. IFN's Operations Center shall monitor alarms at their respective
sites.
5.2 FACILITY RESPONSIBILITY
Maintenance, operation and service responsibility will be performed by IFN as
indicated:
SITE FIRST OPTION SECOND OPTION THIRD OPTION
---- ------------ ------------- ------------
33
<PAGE>
IFN GUIDELINES FOR PREVENTIVE MAINTENANCE
I. Quarterly and Annual Preventive Maintenance will be performed in
accordance with the guidelines set forth.
A. All preventive maintenance with any other maintenance work will be
coordinated through the IFN NOC.
B. All maintenance work will be recorded on the appropriate log sheets
located within the regen or terminal building in the LOG BOOKS.
C. All discrepancies will be noted and the NOC notified for taking
corrective action.
D. All technicians should be well qualified to perform any maintenance
function.
E. Housekeeping and Alarms:
1. Test all GOA alarms with the NOC on line.
2. Check filters in air-conditioners.
3. Test air-conditioners by switching and adjusting thermostats.
4. Check heating strips (older sites).
5. Check each commercial power phase and phase to phase for
balancing of load.
6. Check all lighting inside and outside.
7. Visually check fire suppression systems and gauges.
8. Check wall type mounted fire extinguishers and record date.
9. Check cleanness of buildings.
F. Generators:
1. Check all fluids, belts and make visual inspection of
generator and its housing.
2. Check propane fuel and record the percentage of fill.
3. Start generator and free run for approximately thirty minutes.
34
<PAGE>
4. Check oil pressure, temperature and voltages.
5. Check start up time and cool down time.
6. Monitor exercising of the generator until it shuts down.
G. Batteries
1. Check batteries visually for corrosion, leaks and
abnormalities.
2. Check cell voltage.
3. Check gravity (Wet Cells Only).
4. Check the entire Banks voltage.
5. Compare readings with prior quarterly readings for any major
differences.
6. If cell voltages vary put the chargers on equalize for 72 hour
and re-check later for stability.
7. Calculate the battery reserve using the battery formula and
record.
8. Check chargers for load sharing.
35
<PAGE>
IFN ANNUAL PREVENTIVE MAINTENANCE
I. During the Annual Preventive Maintenance checks, IFN or IFN's
contractor employees performing the checks must be on a conference
bridge with the Network Operations Center or notified depending on
what functions are being performed.
A. Electronics: Switch all systems to the protect channels for
verifications.
B. Fiber testing: Test all vacant fibers between each regen or
terminal by reading with an OTDR doing traces power readings
across each fiber. (Transmit & Receive).
C. Grounding: Check grounds at splice points.
D. Access: Check all access roads to splice points.
E. Battery Checks: Clean batteries and check connections on all
bolts applying the manufacturers recommended pressure (torque)
using proper tools.
F. Generator: Change filter, oil and fluids.
G. Load test: The regen or terminal load test will be performed by
isolating the commercial power and running the generator with
the full power load for minimum of thirty minutes. While the
generator is supplying the power all functions within the
regen/terminal must be monitored by on site personnel along
with the generator gauges. Once load test is performed,
commercial power will be restored and performance checks
monitored for fifteen minutes before departing site.
36
<PAGE>
IFN EXHIBIT 13 SITE POWER SPECIFICATIONS
------
CONTENTS PARAGRAPH CONTENTS
- -------- --------- --------
GENERAL 1.0 SPECIFIC POWER 2.0
REQUIREMENTS
1.0 GENERAL
1.01 The following specifies the minimum power and grounding requirements that
will be provided at all building facilities where shared facilities occur. The
owner of the building facility will have the responsibility to provide the
powering and grounding for the building.
2.0 SPECIFIC POWER REQUIREMENTS
2.01 AC power will include transfer switch, circuit breakers and auxiliary power
inlet.
2.02 DC power supply will have a minimum output sufficient to meet of the fiber
optic, switching and environmental needs, 30.0 AMPS or 60 AMPS typical.
2.03 Battery Backup with a minimum backup time of 5 hours.
2.04 Auxiliary Power generator will have a minimum output sufficient to meet the
fiber optic, switching and environmental needs.
2.05 Auxiliary power receptacle, if required, will be Hubbel twist lock 2715 or
equivalent if 30 AMP or Hubbel 460B12W or equivalent if 60 AMP.
2.06 Access to an independent 5 ohm ground.
2.07 The master ground bar will segregate surge producers from non-isolated and
isolated equipment.
2.08 An independent 5 ohm single point ground will be provided.
2.09 Buildings should not be in close proximity of any tower prone to attract
lighting or in a ground fault zone.
1
<PAGE>
IFN EXHIBIT 14 MINIMUM REGENERATOR/AMPLIFIER HOUSING
------
SPECIFICATIONS
<TABLE>
<CAPTION>
CONTENTS PARAGRAPH
- -------- ---------
<S> <C>
SPECIFICATIONS FOR 1.0
BUILDINGS
</TABLE>
1.0 SPECIFICATIONS FOR BUILDINGS
1.01 The building will provide physical and environmental protection for fiber
terminal electronics, associated power equipment and fiber splicing facilities.
Separated and diverse cable entry will be provided if possible. A vault or space
will be provided near the cable entrance for splicing outside plant cable to
cable suitable for interior use. Racking or runways will provide safe cable
routing from the transition area to the equipment bays. Floor space will be
sufficient to provide a minimum of five (5) standard 23" X 7' equipment racks in
locations specified in article X, paragraph 10.5 and 10.6. Batteries, sump
pumps, redundant air conditioning, emergency lighting and alarm systems will be
provided. Reserve time on batteries will be a minimum of 5 hours based on
equipment demands. The alarm systems will provide alarms for intrusion,high
water, smoke, toxic and explosive gases. The AC power distribution system will
include a transfer switch and auxiliary power inlet. Emergency power generators
will have a minimum output sufficient to meet the needs of the existing fiber
optic and switching equipment in addition to heating, air conditioning and
emergency lighting. Auxiliary power receptacle, if required, will be Hubbel
twist lock 2715 or equivalent if 30 AMP or Hubbel 460B12W or equivalent if 60
AMP. An independent 5 ohm single point ground will be provided. The master
ground bar will segregate surge producers from non-isolated and isolated
equipment. The building will meet or exceed the structural requirements
necessary to withstand earthquake conditions for zone 1.
<PAGE>
EXHIBIT 10.59
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[_____]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
[LOGO]
[LETTERHEAD OF MCI]
MCI CARRIER SERVICES
MCI CARRIER AGREEMENT
ASSOCIATED COMMUNICATIONS COMPANIES OF AMERICA
<PAGE>
[LOGO]
[LETTERHEAD MCI]
CARRIER AGREEMENT
TERMS AND CONDITIONS
This Carrier Agreement (the "Agreement") is between MCI TELECOMMUNICATIONS
CORPORATION ("MCI") and ASSOCIATED COMMUNICATIONS COMPANIES OF AMERICA (ACCA)
("Customer"), an association of carriers which are subject to the Communications
Act of 1934, as amended, with offices located at 111 Congress Avenue, Suite
3000, Austin, Texas 78701.
1. Scope of Agreement.
-------------------
(a) A Member of ACCA shall be referred to herein as ("Member(s)"). A list
of said Members is attached hereto as Exhibit A. Each Member must be a
signatory to this Agreement in order to receive the benefit of this
Agreement. New Members of ACCA shall be permitted to become a
signatory and receive the benefits of this Agreement with the written
consent of MCI, which consent shall not be unreasonably withheld.
(b) MCI shall provide to Customer certain specified domestic interstate
service(s), international services, and intrastate common carriage
service (s). For domestic interstate and international services, this
Agreement incorporates by reference the terms of MCI Tariff FCC No. 1
("Tariff"), which is on file with the Federal Communications
Commission and which may be modified from time to time by MCI in
accordance with law and thereby affect the service(s) furnished
Customer, except that the following terms and conditions shall
supplement or, to the extent inconsistent, supersede Tariff terms and
conditions and shall remain in effect throughout the Service Term. For
intrastate services, this Agreement incorporates by reference each
applicable state tariff filed by MCI, which may be modified by MCI
from time to time, and thereby affect the service(s) furnished
Customer. This Agreement is entered pursuant to Section 211(a) of the
Communications Act of 1934.
(c) Capitalized terms not otherwise defined in this Agreement shall
have the meanings assigned to them in the Tariff.
2. Monthly Commitment.
-------------------
(a) During each monthly billing period of the Service Term (as defined in
Paragraph 15 below), Customer's Monthly Usage shall equal or exceed
[______________________________] per month ("Monthly Commitment").
MCI CONFIDENTIAL
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As a part of Customer's Monthly Commitment, each Member shall have the
individual Monthly Usage Commitments associated with each Member's
name in Exhibit A (Member Monthly Commitment (s). Monthly Usage shall
mean Customer's usage of: (i) MCI Carrier Network Service, MCI Carrier
Operator Service, domestic interstate MCI PRISM I Service, MCI 800 DAL
Service, MCI Feature Card Service, MCI Directory Assistance, MCI
Terrestrial Digital Service 1.5 ("TDS 1.5"), MCI Terrestrial Digital
Service-45 ("TDS-45") and MCI Digital Private Line Service ("DS-0
Service")) (hereinafter "MCI Services") at the rates in Paragraphs 4
and 7 below or if no rates for MCI Services listed herein are set
forth, then at standard tariffed rates after application of tariffed
discounts, but not including any applicable taxes (and gross receipts
taxes) and tax-related surcharges on MCI Services; (ii) International
PRISM I Service and International 800 DAL Service at the rates in
Exhibit E (hereinafter "International Services"); and (iii)
intrastate MCI Services at standard tariffed rates after application
of any applicable tariffed discounts (hereinafter "Intrastate
Services"). For these services listed above, the charges for
Telefonica Larga Distancia de'Puerto Rico, Inc. (including those under
an agreement between TLD and MCI dated June 9, 1994) shall count.
(b) If Customer's Monthly Usage is less than the Monthly Commitment in a
month, for that month: (i) Customer will pay the Customer's actual
combined monthly recurring and usage charges for MCI services at
standard MCI tariffed rates (however, Members will continue to be
billed at the rates contained in this Agreement); and (ii) an
underutilization charge (which Customer agrees is reasonable) equal to
[______] of the difference between the Monthly Commitment
and Customer's Monthly Usage. All underutilization charges shall be
billed both to ACCA and to Members. ACCA shall be responsible for
paying all such underutilization charges. However, Customer's
liability under this Paragraph 2(b) shall be limited to the amount of
the Monthly Commitment. Members shall not be liable for
underutilization in any month that the overall Monthly Usage equals or
exceeds the Monthly Commitment.
(c) If in any monthly billing period during the Service Term, MCI
overbills any or all ACCA Members for services and subsequently
corrects that billing, reducing the amount of the bill(s) and if
Customer reduced its usage of MCI services as a direct result of such
overbilling, and if the usage reduction was reasonably calculated,
based on the overbilling, to maintain Customer's Monthly
MCI CONFIDENTIAL
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Commitment as required in Paragraph 2 (a), MCI shall not assess
underutilization charges for any month in which underutilization
charges are due until sixty (60) days from the date that MCI provides
rebill information that reduces the actual monthly usage below the
Monthly Commitment.
(d) At such time as Customer believes that it has met the [___________
___________________________] contract minimum usage requirement as
contained in Paragraph 15(b), Customer may inform MCI in writing that
it has projected the attainment of its minimum usage requirement. MCI
and Customer will, within ten (10) days, jointly agree in writing as
to the actual total usage as of a date certain, and MCI shall not
assess Customer underutilization charges for the difference between
the agreed upon actual total usage and a lesser amount that results
from a subsequent MCI rebilling, should a subsequent rebilling reduce
the actual total amount.
3. Carrier Network Service.
------------------------
(a) In order to be eligible to purchase MCI Carrier Network Service:
(1) Except in areas where service origination is not available from
access providers via a Carrier Identification Code ("CIC"),
Members must originate all traffic via Member's own CIC. Member
shall pay all charges associated with the installation of
Member's CIC in all Local Exchange Carrier ("LEC") end offices.
(2) Customer shall comply with Section 64.1100 of the FCC's Rules and
Regulations, as well as other applicable law or regulation
pertaining to the sale and delivery of telecommunications
service(s) to Member's enduser. MCI shall not be liable to
Member's enduser for any claim, liability or expense asserted by
those customers in connection with Member's sale or delivery of
such service(s), including the unauthorized conversion of a
customer's Primary Interexchange Carrier ("PIC") designation to
Member's CIC. In addition, Members shall indemnify and hold MCI
harmless from any actions, claims, suits or damages arising out
of Member's violation or alleged violation of any FCC or other
applicable law or state regulation, and Customer shall pay all
reasonable attorney fees and
MCI CONFIDENTIAL
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<PAGE>
costs incurred by MCI in connection with such actions, claims,
suits or damages.
(3) Customer agrees that it or its Members will obtain and maintain
any and all approvals to resell MCI Carrier Network Service
hereunder from the FCC, including requirements imposed by Section
214 of the Communications Act of 1934, as amended, and state
regulatory bodies.
(4) Customer or its Members agree to sell and bill MCI Carrier
Network Service under its own name, identity or mark, and Member
further agrees not to reference MCI's name or marks in any
context involving its furnishing of service(s) to the public
except as provided herein. Member agrees to abide by the "Use of
Name Guidelines" contained in Exhibit F hereto. In reselling MCI
Services under this Agreement, Member will observe the highest .
standard of integrity and fair dealing with members of the
public. Furthermore, Member agrees to indemnify MCI for any
actions, claims, suits or damages arising out of any allegation
that if proved would cause Member to be in breach of this
provision and Member shall also pay all reasonable attorney's
fees and costs incurred by MCI due to any actions, claims, suits
or damages arising out of such allegation.
(5) Except as set forth in Paragraph 12(e) herein, Member shall have
sole responsibility for interacting with its endusers in all
matters pertaining to service, including the placing and handling
of service orders, service installation, operation and
termination, dispute handling and resolution, and billing and
collection matters. MCI shall incur no obligation, nor shall it
be deemed to have any obligation, to interact with Member's
endusers for any reason or purpose. Member shall cooperate with
MCI as necessary to address and resolve service-related issues
and problems and shall impose upon its endusers an obligation to
cooperate, with Member in addressing and resolving service-
related issues and problems.
(b) Without limitation, if any Member fails to abide by the requirements
in Paragraphs 3(a)1, (a)3), (a)4), or any requirement in 3(a)2
excluding the unauthorized conversion of customer's PIC, MCI shall
provide Member written notice, and if Member fails to cure the default
in fifteen (15) days after receipt of written notice, MCI
MCI CONFIDENTIAL
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<PAGE>
shall have the right to terminate the Carrier Network Services
provided in this Agreement to said Member.
If any Member fails to abide by the requirement in Paragraph 3(a)2 as
it relates to the unauthorized conversion of a customer's PIC, the
following shall apply:
Upon the second (2nd) finding by a court, the FCC or state commission
of an unauthorized conversion of a Member's enduser's PIC, such
finding shall be regarded as a material breach of the Carrier Network
Services portion of the Agreement, and MCI may terminate the Carrier
Network Services, upon five (5) days' written notice to Member. In
such case, MCI will provide Member up to six (6) months to convert
such traffic to another vendor; provided that however, during the six
(6) month period, upon a third (3rd) finding by a court, the FCC or
state commission of an unauthorized conversion of a Member's endusers
PIC, MCI may terminate the Carrier Network Services on five (5)
business days written notice for such Member.
(c) Customer agrees that MCI may use the National Leads Information System
("NLIS") or an appropriate internal MCI system to determine Working
Telephone Number ("WTN") historical data regarding MCI and non-MCI
PICs and Customer and its enduser understand that such systems are not
error free. MCI will not be liable to Members for errors made in
determining WTN in reliance on information contained in NLIS or
internal MCI systems.
(d) Customer understands and accepts that, as part of MCI's normal
business policy and practices and its obligations under law, MCI will
engage in extensive marketing efforts in attempt to sell its services
to the public and that such efforts will result in active competition
with Customer for the business of users who are Customer's customers
or prospects. Accordingly, Customer further understands and accepts
that such competition by MCI is in all respects fair and proper and
that Customer shall not complain, nor be heard to complain, of
business lost to MCI. Under no circumstance shall any inference be
derived that MCI's entry into this Agreement with Customer means that
MCI will restrict its efforts to compete against Customer in any way.
(e) Customer understands and accepts that no fiduciary relationship arises
by virtue of this Agreement and that, accordingly, MCI incurs none of
the obligations that arise in such relationship as an incident of its
MCI CONFIDENTIAL
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<PAGE>
fulfilling its obligations under this Agreement. Further, Customer
understands and accepts that MCI is not an insurer of profits for
Customer, nor does MCI guarantee the success of Customer's business as
a result of Customer's receipt of service(s) under this Agreement.
(f) Member agrees that if its enduser makes a call using 1OXXX access
(utilizing Member's CIC), from an ANI which Member did not provide to
MCI to enter into MCI's Billing and Order Entry systems, MCI will bill
the call through the LEC at MCI tariffed rates, and MCI's name will
appear as the service provider on the LEC invoice. Furthermore,
Members agree its sales and marketing channels will only market 1OXXX
access as a dialing option from ANIs that the enduser had PIC'd to the
Member's CIC, in areas where the Member's CIC is pointed to MCI for
termination
4. Carrier Network Service Rates.
------------------------------
(a) INTERSTATE NON-DEDICATED RATES. For interstate non-dedicated Carrier
Network Service, except for international service for which Member
shall pay switched to switched base rates (Option G in the Tariff,
Section C3.073) subject to the discounts contained in Paragraph 4 (h),
and for as long as Customer achieves the Monthly Commitment, Member
will pay in addition to all installation charges, access and access-
related charges, applicable surcharges, taxes and tax-related charges,
the following non-distance sensitive "postalized" rate per minute as
determined by Customer's overall monthly usage:
<TABLE>
<CAPTION>
Domestic Interstate Outbound
Monthly Usage Day Rate Non-Day Rate
------------- ----------- ---------------
<S> <C> <C>
Below [________] Tariff Tariff
[_________] [_____] [_____]
</TABLE>
<TABLE>
<CAPTION>
Domestic Interstate 800
Monthly Usage Day Rate Non-Day Rate
------------- -------- ------------
<S> <C> <C>
Below [________] Tariff Tariff
[_________] [_____] [_____]
</TABLE>
For purposes of Paragraph 2 (b), "Standard MCI tariffed rates" for
Carrier Network Services shall be deemed to be tariffed Option G
rates. Underutilization charges in Paragraph 2(b) shall also apply.
MCI CONFIDENTIAL
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<PAGE>
(b) INTERSTATE DEDICATED RATES.
For domestic interstate switched outbound service originating via
dedicated access from Member's endusers location to an MCI point of
presence, except for service terminating to Alaska, Hawaii, Puerto
Rico or U.S. Virgin Islands, and for domestic interstate inbound
services terminating via dedicated egress from an MCI point of
presence to a Member's customer's location, except for service
originating from Alaska, Hawaii, Puerto Rico, and the U.S. Virgin
Islands, and for as long as Customer achieves the Monthly Commitment,
Member will pay in addition to all installation charges, access and
access-related charges, applicable surcharges, taxes and tax-related
charges, the following non-distance sensitive postalized rate per
minute as determined by Customer Monthly Usage.
<TABLE>
<CAPTION>
Domestic Interstate Domestic Interstate
Monthly Usage Dedicated Outbound Dedicated Inbound
------------- ------------------ -----------------
<S> <C> <C>
Below [________] Tariff Tariff
[_________] [_____] [_____]
</TABLE>
For purposes of Paragraph 2 (b), "Standard MCI Tariffed Rates" for
Carrier Network Services shall be deemed to be tariffed Option G
rates. Underutilization charges in Paragraph 2(b) shall also apply.
(c) INTERSTATE OUTBOUND - EXTENDED CALL COVERAGE FOR ALASKA, PUERTO RICO,
THE U.S. VIRGIN ISLANDS AND HAWAII. Member will pay interstate rates
at the switched to switched base rates Option G, Section C.3.0932 of
the Tariff with associated maximizer discounts in Paragraph 4 (h).
Member is not eligible for any other tariffed discounts on such
service.
(d) INTERSTATE 800 - EXTENDED CALL COVERAGE FOR ALASKA, PUERTO RICO, THE
U.S. VIRGIN ISLANDS AND HAWAII. Member will pay interstate rates at
the 800 Business Line Termination Rates Option F, Section C.3.08213 of
the Tariff with associated maximizer discounts in Paragraph 4 (h).
Member is not eligible for any other tariffed discounts on such
service.
(e) INTRASTATE RATES (Outbound). Member shall pay for outbound intrastate
service tariffed rates for switched to switched base rates in each
applicable MCI state tariff. The discounts contained in Paragraph 4(h)
will be supplemented by MCI with an additional discount of [______
____________]. The discounts will be calculated on all intrastate
outbound usage less taxes and tax-related surcharges. The resulting
amounts will be
MCI CONFIDENTIAL
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applied to Member's interstate usage only. Member is not eligible for
any other tariffed discounts on such service.
(f) INTRASTATE 800. For inbound intrastate service (800) Member will pay
the 800 Business Line Termination Base Rates in each applicable MCI
state tariff. MCI shall apply the maximizer discounts in Paragraph
4(h) and an additional discount of [_____] percent [___]. The
discounts will be calculated on all intrastate 800 usage less taxes
and tax-related surcharges. The resulting amounts will be applied to
Member's interstate usage only. Member is not eligible for any other
standard tariffed discounts on such service.
(g) INTERNATIONAL 800. For inbound international service (800), Member
will pay international switched to dedicated 800 rates at the Tariffed
800 Base Rates Option F, Section C.3.07314 with associated maximizer
discounts in Paragraph 4 (h). Member is not eligible for any other
standard tariffed discounts on such service.
(h) MARKETING MAXIMIZER DISCOUNTS. Member will receive an additional
discount on all usage of MCI Carrier Network Service less taxes and
tax-related surcharges based on the number of non-MCI ANIs or WTNs
(ANIs or WTNs that have not been PICed to MCI for at least the
previous ninety (90) days) that Member converts to MCI. Each month MCI
will calculate the overall cumulative total of non-MCI ANIs or WTNs
converted to MCI and then apply a discount to Member's usage as
follows:
<TABLE>
<CAPTION>
Cumulative Percent of Percentage of
Converted non-MCI Usage Eligible
WTNs or ANIs for Discount Discount
--------------------- -------------- --------
<S> <C> <C>
[_________] [___] [___]
[____________] [___] [___]
[____________] [___] [___]
[____________] [___] [___]
[____________] [___] [___]
[____________] [___] [___]
</TABLE>
5. ANI Management Responsibilities.
--------------------------------
On or before the thirtieth (30th) day after the close of the billing cycle,
MCI will provide Customer with a list of ANIs, including traffic minutes
and number of calls associated with ANIs associated with Customer's Carrier
Network Services Account ("MCI Active ANI List"). Within sixty (60) days
after Customer's receipt of the MCI Active ANI List, Customer shall
MCI CONFIDENTIAL
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<PAGE>
provide to MCI, in writing, with a report of all ANIs in the billing cycle
covered by the MCI Active ANI List that were either: (1) ordered by
Customer to be added by MCI to the Customer's account, but which were not
added to Customer's Network Account; (2) on the MCI Active ANI list but
which Customer had requested be deleted; or (3) experienced zero (0) or
significantly reduced usage ("Customer ANI Report"). Customer shall
provide MCI with documentation establishing the ordering, deletion and
actual usage of each ANI contained in the Customer ANI Report. For any ANI
not timely included by Customer in the Customer ANI Report: (1) Customer
shall be liable to MCI for charges associated with said ANI; and (2) MCI
shall not be liable to Customer for any costs, claims or damages resulting
from failure to implement Customer's directions with respect to said ANI.
6. Detention Facilities.
---------------------
Member may not use MCI Carrier Network Services in conjunction with the
provision of communications services to any detention facility, including,
but not limited to, any local, state or federal prison.
7. Additional Rates.
-----------------
Subject to Paragraph 2 herein, Customer shall receive the following rates
during the Service Term for MCI services provided to Member at Type A
Locations as defined in MCI Tariff FCC No. 1 Section A, Definition of
Terms, Locations.
Rates set forth in this Paragraph 7 do not include charges for
installation, taxes, tax-related surcharges, any other applicable
surcharges, charges for access and access-related charges (including,
without limitation, access charges in the Tariff, which are additional).
Rates are in lieu of any discounts, promotions and credits otherwise
applicable pursuant to the Tariff.
As a promotional offering to Customer for executing this Agreement on or
before the date specified in Paragraph 26, MCI shall waive the monthly
recurring central office connection charges and access coordination charges
(subject to the condition below) for MCI's metered (usage sensitive) access
circuits installed prior to the Effective Date of this Agreement and
currently utilized by Member and for MCI metered access circuits installed
pursuant to this Agreement. Such waiver of charges shall be in effect for
the term of this Agreement, after which Member shall pay standard tariffed
rates for such circuits. Access coordination charges for metered access
circuits are only waived on Member-provided access circuits.
MCI CONFIDENTIAL
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<PAGE>
(a) Domestic Interstate MCI PRISM I Service.
----------------------------------------
(1) Except as provided in Paragraph 7(a) (2) below, for domestic
interstate switched outbound service originating via dedicated
access to an MCI point of presence [except for service
terminating to Alaska, Hawaii, Puerto Rico and the U.S. Virgin
Islands for which Customer shall pay tariffed rates (less
applicable tariffed discounts) and less an additional [______
_____________], Customer will pay a non-distance sensitive
("postalized") rate per minute of [_____].
If a Member's monthly usage of PRISM I Service is more than [____
____________] Off-Peak and the PRISM I Subcommitment is achieved,
Member(s) shall receive the following postalized credits per
minute based on the Customer's total monthly usage:
Total Monthly Usage Credit
------------------- -------
[_________] [_____]
(2) (i) As a part of the overall Monthly Commitment contained in
Paragraph 2, Customer will purchase from MCI at least [____
_______________] Dollars [________] of domestic interstate MCI
PRISM I Service (net of taxes and tax-related surcharges.)
(hereafter PRISM I Subcommitment). The PRISM I Subcommitment
shall be measured at the rates in 7(a) (1) and 7(a) (2) (i) based
on [______________________] minutes in a billing month being
attained. If Customer meets the PRISM I Subcommitment, and if
Customer's domestic interstate MCI PRISM I Service minutes to the
NPA's in this Paragraph 7(a) (2) (i) in a month exceed [__
___________________], Customer shall receive a [_____] postalized
rate per minute for domestic interstate MCI PRISM I Service
terminating in the following Number Plan Area Codes (NPAS). If
Customer meets the PRISM I Subcommitment and if Customer's
domestic interstate MCI PRISM I Service minutes to the NPA's in
this Paragraph 7(a) (2) (i) in a month is between [___________
________________________________] and [____________________],
Customer shall receive a [_____] postalized rate per minute for
domestic interstate MCI PRISM I Service terminating in the
following NPAs or such NPA that results from a NPA split or
overlay to one of the following NPAs.
MCI CONFIDENTIAL
-10-
<PAGE>
<TABLE>
<CAPTION>
State Major City NPA
-------------- --------------- ---
<S> <C> <C>
California Los Angeles 213
California Los Angeles 310
California San Francisco 415
California San Francisco 510
California Sacramento 916
Illinois Chicago 312
DC Washington 202
Georgia Atlanta 404
Utah Salt Lake City 801
Colorado Denver 303
Michigan Detroit 313
Michigan Grand Rapids 616
North Carolina Charlotte 704
810
610
630
540
770
</TABLE>
(2) (ii) If Customer meets the PRISM I Subcommitment, and if Customer's
domestic interstate MCI PRISM I Service minutes to the NPA's in
Paragraph 7(a) (2) (i) in a month is below [________________________
___________________], Customer shall receive a [_____] postalized rate
per minute for domestic interstate MCI PRISM I Service terminating in
the NPA's in Paragraph 7(a) (2) (i).
(3) If Customer fails to meet the PRISM I Subcommitment in a month,
Customer shall pay the amount billed for domestic interstate PRISM I
Service and the difference between that amount and [____________
__________________________] (however, Members will continue to be
billed at the rates contained in this Agreement).
(4) Customer will pay, in addition to all applicable taxes and tax related
surcharges, the postalized rate per minute of [___________________]
for all MCI PRISM I Service terminating in Canada.
(5) For Mexican International PRISM I Service traffic originating via
dedicated access, Customer will pay the following postalized rate per
minute for the U.S. portion and MCI tariffed rates for the Mexican
portion of the Mexican PRISM I Service with an additional discount as
provided below:
MCI CONFIDENTIAL
- 11 -
<PAGE>
<TABLE>
<CAPTION>
U.S. Rate Mexico
Per Minute Discount
---------- --------
<S> <C>
[_____] [__]
</TABLE>
(b) Domestic Interstate MCI 800 DAL Service.
--------------------------- ------------
(1) As part of the overall Monthly Commitment contained in Paragraph 2,
Customer will purchase from MCI at least [___________________] Dollars
[________] of domestic interstate MCI 800 DAL Service (net of taxes and
tax-related surcharges) ("800 DAL Subcommitment"). The 800 DAL
Subcommitment shall be measured at the rates in Paragraphs 7(b) (2) and
7(b) (3). Customer shall receive the rates in 7(b) (2) and 7(b) (3)
below if Customer meet the 800 DAL Subcommitment. If Customer fails to
meet the 800 DAL Subcommitment, Customer shall pay tariffed rates for
interstate MCI 800 DAL service. However, Customer's liability under
this Paragraph 7(b) (1) shall be limited to the amount of the 800 DAL
Subcommitment. All charges under this Paragraph 7(b) (1) shall be
billed to ACCA and to Members, and Members will continue to be billed
at the rates contained in this Agreement. ACCA shall be responsible for
paying all such underutilization charges.
(2) Except as provided in Paragraph 7(b) (3) below, for domestic interstate
inbound services terminating via dedicated access from an MCI point of
presence, [except for service originating from Alaska, Hawaii,
Puerto Rico and the U.S. Virgin Islands for which Member shall pay
tariffed rates (less applicable tariffed discounts) and less an
additional [_____] percent [____], Customer will pay a [_____]
postalized per minute rate.
(3) Customer shall receive a [______] postalized rate per minute for
domestic interstate MCI DAL Service originating in the following Number
Plan Area Codes ("NPAs") or such NPA that results from a NPA split or
overlay to one of the following NPAs.
<TABLE>
<CAPTION>
State Major City NPA
---------- ---------- ---
<S> <C> <C>
Arizona Tucson 520
Arizona All Other 602
California Irvine 714
California Los Angeles 909
California Los Angeles 310
</TABLE>
MCI CONFIDENTIAL
- 12 -
<PAGE>
<TABLE>
<S> <C> <C>
California Los Angeles 213
California Oakland 510
California Sacramento 916
California San Diego 619
California San Francisco 415
California San Jose 408
California Sherman Oaks 818
DC All 202
Delaware All 302
Iowa Cedar Rapids 319
Iowa Des Moines 515
Maryland Baltimore 410
Maryland Rockville 301
Missouri St. Louis 314
New Jersey Newark 201
Pennsylvania Philadelphia 215
Pennsylvania Pittsburgh 412
Virginia Arlington 703
Virginia Richmond 804
West Virginia All 304
Illinois Chicago 312
Illinois Chicago 708
Indiana Indianapolis 317
Michigan Detroit 313
Ohio Cleveland 216
Ohio Columbus 614
Ohio Cincinnati 513
Ohio Toledo 419
Wisconsin Milwaukee 414
Alabama All 205
Florida Miami 305
Florida Tampa 813
Florida Jacksonville 904
Georgia Atlanta 404
Kentucky Louisville 502
Louisiana New Orleans 504
Mississippi All 601
North Carolina Raleigh 919
North Carolina Charlotte 704
South Carolina All 803
Tennessee Nashville 615
Texas Brownsville 210
Texas Dallas 214
Texas Houston 281
Texas Austin 512
Texas Houston 713
910
810
610
630
334
</TABLE>
MCI CONFIDENTIAL
- 13 -
<PAGE>
954
941
540
770
(4) The above rates for MCI DAL Service do not include any feature
charges described in the Tariff, including, but not limited to, any
800 Service Management System ("SMS") charges or RESP ORG charges,
which are additional in the event that any such services are provided
by MCI to Customer.
(5) Customer will receive the maximum discount associated with VIP
Plus at the three (3) year and [_____________________________________]
annual commitment level and on MOD on all MCI 800 DAL Service usage
originating in Canada.
(c) Domestic Interstate Digital Private Line (DS-O) Service, TDS 1.5 Service,
-------------------------------------------------------------------------
and TDS-45 Service.
-------------------
(1) As part of Customer's overall Monthly Commitment, Customer agrees that
during each month of the Service Term Customer's interoffice channel
(IOC) charges for DS-O, TDS 1.5 and TDS-45 shall exceed [_____________
_______] Dollars [_________] (net of taxes and tax-related
surcharges) (hereinafter "Private Line Billing Tier Threshold").
This threshold shall be measured at the rates contained in Paragraph
7(c) (2).
If Customer meets the Private Line Billing Tier Threshold, Customer
shall pay the rates in Paragraph 7(c) (2) and if Customer fails to
meet the Private Line Billing Tier Threshold, Member shall pay the
rates in Paragraph 7(c) (3) below.
(2) For domestic interstate DS-O Service, Customer will pay a IOC monthly
charge per DS-O circuit mile of [___].
For domestic interstate TDS 1.5 service, Customer will pay a IOC
charge per DS-O circuit mile of [_____].
For domestic interstate TDS-45 service, Customer will pay a IOC
monthly charge per DS-O circuit mile of [____].
MCI CONFIDENTIAL
- 14 -
<PAGE>
In addition to the postalized rates in this Paragraph (c) (2),
Customer will receive a [________________] percent [____] discount on
the rates.
In addition, Member shall receive an additional discount of [___]
percent [__] on its IOC monthly charges of TDS-45 Service if Member
orders and installs three (3) or more TDS-45 circuits between the same
city pairs. The [__] percent [__] discount shall apply only to the
TDS-45 circuits that meet the conditions in the preceding sentence.
(3) (i) For domestic interstate DS-O, TDS 1.5 and TDS-45 Service, when
the average circuit length is one hundred (100) miles or more as
determined by: (1) averaging all of a Member's circuits of each
circuit type; or (2) all of Customer's circuits of a circuit type
if a Member's average of either circuit type is below one hundred
(100) miles, Member may elect to pay, in addition to all
applicable federal, state and local taxes and surcharges, the
following IOC monthly charge per circuit:
<TABLE>
<CAPTION>
Total Monthly charge Monthly charge Monthly Charge
Monthly for DS-O Per for TDS 1.5 Per for TDS-45 Per
Usage Circuit Mile Circuit Mile Circuit Mile
---------------- -------------- --------------- --------------
<S> <C> <C> <C>
[____________] [____] [____] [____]
[________] [____] [_____] [_____]
</TABLE>
(ii) If the above circuit miles as determined in Paragraph 7(c) (3)
(i) above, fall below one hundred (100), Member shall pay the
greater of the rates contained above or [_________] Dollars
[______] per DS-O circuit, [____________________] Dollars [____]
per TDS 1.5 circuit and [_________________________] Dollars
[______] per TDS-45 circuit.
(iii) For circuits installed under this Agreement, in lieu of the rates
determined in 7(c) (3) (i) and 7(c) (3) (ii), a Member may elect
to pay for domestic interstate TDS 1.5 Service, by paying the
greater of: (i) Member's actual usage of domestic interstate TDS
1.5 Service at the rate in the Schedules above in Paragraph 7(c)
(3) (i) plus a [_] percent [___] surcharge; or (ii) [__________
_____________________] per circuit. For domestic interstate TDS-
45 Service, Member may elect to pay MCI on a monthly basis the
greater of: (i) Member's
MCI CONFIDENTIAL
- 15 -
<PAGE>
actual usage of TDS-45 Service at the rate in the Schedules above
in Paragraph 7(c) (3) (i) plus a [_] percent [___] surcharge; or
(ii) [______________________________] Dollars [______] per
circuit. Circuits which are priced at Customer's election under
this Paragraph shall not be considered in the circuit average
calculation in Paragraph 7(c) (3) (i) and 7(c) (3) (ii) above.
*Members may elect the rate treatment of their MCI Private Lines
contained in Paragraphs 7(c) (3) (i) and 7(c) (3) (iii) only once
during the Service Term.
(iv) If Customer's total MCI Private Line Usage exceeds [__________
_________________] Dollars [________] in a month, but is less
than [__________________] Dollars [________] in a month, all MCI
Private Line rates will be reduced by [________________] percent
[____] for that month.
(v) Customer's monthly usage of DS-O Service may not exceed [_____]
percent [___] of Customer's total monthly usage of domestic MCI
Private Line Services. In the event Customer's monthly usage of
DS-O Service exceeds [____] percent [___] of Customer's total
monthly usage of domestic MCI Private Lines Services, Customer
shall pay [___] Cents [______] per circuit mile for its usage in
excess of [____] percent [___] of MCI Private Line Services.
(4) The following provisions shall apply for DS-O, TDS 1.5 and TDS-45
service:
(i) The rates for domestic interstate DS-O, TDS 1.5 and TDS-45
Service provided herein are in lieu of any rates, charges and
discounts available from MCI for the IOC portion of such service
including, without limitation, the Network Pricing Plan(s)
specified in the Tariff.
(ii) The pricing for domestic interstate DS-O, TDS 1.5 and TDS-45
Service shall only apply to circuits having [_] or more domestic
interstate traffic.
MCI CONFIDENTIAL
- 16 -
<PAGE>
(iii) Rates for domestic interstate DS-O, TDS 1.5 and TDS-45 Services
are based on a least mileage routing and the mileage per route is
determined by using the airline mileage between the two
applicable MCI Dedicated Leased Line cities in accordance with
the calculation as set forth in Section C-11, Table I, Part A of
the Tariff. The domestic interstate DS-O, TDS 1.5, and TDS-45
services in this Agreement shall apply to circuits currently
installed and where MCI has received and accepted a firm order on
or before July 31, 1995. For circuits where MCI has not received
and accepted a firm order on or before July 31, 1995, if MCI
leases all or a portion of the DS-O, TDS 1.5, or TDS-45
facilities, MCI may elect to provide a rate different than the
rates in this Agreement. Customer may purchase the DS-O, TDS 1.5,
or. TDS-45 service from another vendor if MCI offers a rate
different than the rates in this Agreement
(iv) MCI shall waive the M13 multiplex charges as the charges are
described in the Tariff.
(v) MCI shall waive the Echo control charges as the charges are
described in the Tariff.
(vi) MCI agrees to waive the Access Coordination (AC) charges and
monthly recurring Central Office Connection charges contained in
the Tariff for MCI network circuits on Customer provided
access.
(vii) The Rates for Domestic interstate DS-O, TDS 1.5 and TDS-45
circuits shall also apply to the Domestic portion of cross border
circuits to Canada.
(d) Domestic Interstate Directorv Assistance.
-----------------------------------------
For domestic interstate Directory Assistance, Customer will pay, in
addition to all applicable federal, state and local taxes and surcharges,
[___] per call for calls to the following NPAs (or such NPA that results
from a NPA split or overlay to one of the following NPAs) so long as
Customer's Monthly Usage exceeds [______________________________] Dollars
[__________].
MCI CONFIDENTIAL
- 17 -
<PAGE>
<TABLE>
<CAPTION>
Area Area
State Code State Code
--------------- ---- ----------- ----
<S> <C> <C> <C>
Alabama 205 Nevada 702
Connecticut 203 New Hampshire 603
Georgia 912 New York 518
706 212
404 718
Illinois 217 716
312 607
618 516
708 914
815 315
Indiana 812 North Carolina 704
219 919
317 910
Kentucky 606 Ohio 216
502 513
Louisiana 504 614
318 419
Maine 207 Rhode Island 401
Massachusetts 617 South Carolina 803
413 Tennessee 615
508 901
Michigan 313 Vermont 802
616 Wisconsin 608
906 715
517 414
Mississippi 601 ---
810
630
334
770
</TABLE>
If Customer's Monthly Usage fails to exceed [_____________________________
____________________________], for domestic interstate Directory
Assistance, Customer will pay, in addition to all federal, state and local
taxes and surcharges, [_______] Cents [_____] per call for calls to the
above NPAs.
For domestic interstate Directory Assistance, Customer shall pay, in
addition to all federal, state and local taxes and surcharges, [_________]
Cents [_____] per call for calls that are not to the above NPAs.
(e) MCI Carrier Operator Services.
------------------------------
Customer shall receive the rates, service terms and conditions for MCI
Carrier Operator Services as set forth in Exhibit B to this Agreement.
MCI CONFIDENTIAL
-18-
<PAGE>
(f) MCI Feature Card
----------------
Customer shall receive the rates in Exhibit C for MCI Feature Card.
(g) Wholesale Debit Card.
---------------------
(1) Each Member shall be entitled to utilize MCI for the debit card
platform and transport of Customer's domestic interstate and
international termination debit card traffic.
Each Member shall pay a rate per unit as indicated in the schedule
below based on the number of debit card units purchased in the
individual Member's order. Debit Card Units is defined in MCI Tariff
F.C.C. No. 1. The rate per unit includes access to the MCI debit card
platform, transport, order entry and debit card activation.
<TABLE>
<CAPTION>
Units in Member's Order Rate per Unit
----------------------------- --------------
<S> <C>
[_________________] [______]
[___________________________] [______]
[___________________________] [______]
[___________________________] [______]
[______________] [______]
</TABLE>
(2) Debit card units will only be reduced by the Debit Card Units utilized
by completed calls (calls that are answered at the ultimate
destination).
(3) The number of Debit Card Units per minute for a domestic and
international call shall be provided in MCI Tariff F.C.C. No. 1.
(4) In addition to the above rates, Member shall pay an additional [__
______] Dollar [____] charge for each customized script identifying
Member to its end-users.
(5) Member shall be solely responsible for all card fulfillment, Member
service and any operator services.
(6) Member shall not include MCI's name or logo on any Member debit card.
MCI CONFIDENTIAL
-19-
<PAGE>
(h) Switched 56Kbps Service.
------------------------
For switched 56Kbps Service (currently Option H, MCI PRISM I, Section C-
3.1036 in MCI Tariff F.C.C. No. 1), [except for service terminating to
Alaska, Hawaii, Puerto Rico and the U.S. Virgin Islands for which Customer
shall pay tariffed rates less applicable Tariffed discounts (and less an
additional [_____] percent [___] discount), Customer will pay a [________]
non-distance sensitive postalized rate per minute. The [_____] percent
[___] discount and [_____] rate referenced above apply only to switched
56Kbps Service minutes that are less than [____] percent [___] of
Customer's total monthly MCI PRISM I service minutes. All switched 56Kbps
service minutes that exceed [____] percent [___] of Customer's total
monthly MCI PRISM I Service minutes shall be rated at standard tariffed
rates and neither the [_____] percent [___] nor [_____] rate shall apply.
(i) Customer shall receive the rates for international PRISM I and
international 800 service in Exhibit E.
(j) Domestic Interstate Virtual DS-3.
---------------------------------
Conditions:
(1) MCI's Business Development Department authorizes in writing the
application of this Paragraph 7(j).
(2) Member shall submit in writing a request for TDS-45 service that is
rejected by MCI's Operations Department on MCI Mail due to capacity
limitations.
(3) MCI's Operations Department must commit via MCI Mail that TDS-45
capacity shall be available for the Member within twelve (12) months
after the TDS-45 service was rejected pursuant to item (2) above.
(4) The pricing in this Paragraph 7(j) applies for no more than twelve
(12) months. At the end of twelve (12) months, Member shall order MCI
TDS-45 service or the TDS 1.5 rates shall apply.
(5) Member shall install no more than [________________] TDS 1.5 circuits.
Such TDS 1.5 circuits shall be ordered and installed between the same
city pairs.
(6) The domestic interstate DS-O, TDS 1.5, and TDS-45 services in this
Agreement shall apply to circuits currently installed and where MCI
has received and
MCI CONFIDENTIAL
-20-
<PAGE>
accepted a firm order on or before July 31, 1995. For circuits where
MCI has not received and accepted a firm order on or before July
31, 1995, if MCI leases all or a portion of the DS-O, TDS 1.5, or TDS-
45 facilities, MCI may elect to provide a rate different than the
rates in this Agreement. Customer may purchase the DS-O, TDS 1.5, or
TDS-45 service from another vendor if MCI offers a rate different than
the rates in this Agreement.
If Customer meets each of the above conditions, for domestic interstate TDS
1.5 service, Customer shall pay [______] per TDS-45 mile associated with
TDS-45 service.
(k) Remote Origination Service.
---------------------------
(1) Member(s) may originate a limited amount of domestic interstate
switched outbound traffic over MCI's network via MCI PRISM Plus
Service in areas in which Members do not have a Point of Presence
("Remote Origination Service"); provided that Member(s) qualifies
as set forth herein.
(2) To qualify, Members must hold resale common carrier certificates, to
the extent required by law, in the states in which such service is to
be provided. All sales/marketing, customer service and billing
associated with the provision of such service to third parties must be
provided under Member's name.
(3) For Remote Origination Service, Members will pay, in addition to all
applicable taxes and tax-related surcharges,the postalized rate per
minute as follows:
<TABLE>
<CAPTION>
Total Monthly Usage Rate
------------------- ----
<S> <C>
[___________] [______]
[__________] [____]
</TABLE>
*(Subject to the limitation contained in Paragraph 2(b) herein.)
(4) Location B fees do not apply to Remote Origination Service, except as
provided in subparagraph 5, immediately below.
(5) Member's monthly usage of Remote Origination Service in
minutes may not exceed [_____]percent [___] of Customer's total
monthly usage of domestic interstate PRISM I Service in minutes. In
the
MCI CONFIDENTIAL
-21-
<PAGE>
event Customer's monthly usage of Remote Origination
Services in minutes exceeds [____] percent [___] of Customer's total
monthly usage of domestic interstate PRISM I Service in minutes,
Customer shall pay MCI PRISM Plus tariffed rates including, without
limitation, Location B fees, for its usage in excess of [____] percent
[___] of Remote Origination Service.
(1) Additional Credit/PRISM I.
--------------------------
Each month during the service term, MCI will apply an additional credit to
Member's domestic interstate MCI PRISM I service monthly usage charges
(exclusive of taxes, surcharges and pass-through access/egress (or
related) charges.) The credit will be in an amount equal to the total of
the applicable discount percentage in the schedule below times Member's
domestic intrastate MCI PRISM I monthly usage charges (exclusive of taxes,
surcharges and pass-through access/egress (or related) charges) at standard
tariffed rates after application of applicable tariffed discounts for the
corresponding state.
<TABLE>
<CAPTION>
Discount Percentage
-------------------------
State Day Eve Night
----- ----- ----- -----
<S> <C> <C> <C>
Alabama [___] [___] [___]
Arkansas [___] [___] [___]
Arizona [___] [___] [___]
California range 1 [___] [___] [___]
California range 2 [___] [___] [___]
California range 3 [___] [___] [___]
Colorado [___] [___] [___]
Connecticut [___] [___] [___]
Delaware [___] [___] [___]
Florida [___] [___] [___]
Georgia [___] [___] [___]
Iowa [___] [___] [___]
Idaho [___] [___] [___]
Illinois [___] [___] [___]
Indiana [___] [___] [___]
Kansas [___] [___] [___]
Kentucky [___] [___] [___]
Louisiana [___] [___] [___]
Massachusetts [___] [___] [___]
Maryland [___] [___] [___]
Maine [___] [___] [___]
Michigan [___] [___] [___]
Minnesota [___] [___] [___]
</TABLE>
MCI CONFIDENTIAL
-22-
<PAGE>
<TABLE>
<S> <C> <C> <C>
Missouri [___] [___] [___]
Mississippi [___] [___] [___]
Montana [___] [___] [___]
North Carolina [___] [___] [___]
North Dakota [___] [___] [___]
Nebraska [___] [___] [___]
New Hampshire [___] [___] [___]
New Jersey [___] [___] [___]
New Mexico [___] [___] [___]
Nevada [___] [___] [___]
New York [___] [___] [___]
Ohio [___] [___] [___]
Oklahoma [___] [___] [___]
Oregon [___] [___] [___]
Pennsylvania [___] [___] [___]
Rhode Island [___] [___] [___]
South Carolina [___] [___] [___]
South Dakota [___] [___] [___]
Tennessee [___] [___] [___]
Texas [___] [___] [___]
Utah [___] [___] [___]
Virginia [___] [___] [___]
Vermont [___] [___] [___]
Washington [___] [___] [___]
Wisconsin [___] [___] [___]
West Virginia [___] [___] [___]
Wyoming [___] [___] [___]
</TABLE>
The credit in any month shall not exceed Member's domestic interstate MCI
PRISM I Service monthly usage charges (exclusive of taxes, surcharges and
pass-through access/egress (or related) charges) and may not be carried
forward to any subsequent month.
(m) Additional Credit/800 DAL Service.
----------------------------------
Each month during the service term, MCI will apply an additional credit to
Member's domestic interstate MCI 800 DAL Service monthly usage charges
(exclusive of taxes, surcharges, and pass-through access/egress (or
related) charges.) The credit will be in an amount equal to the total of
the applicable discount percentage in the schedule below times Member's
domestic intrastate MCI 800 DAL usage charges (exclusive of taxes,
surcharges and pass-through access/egress (or related) charges) at
standard tariffed rates after application of applicable tariffed discounts
for the corresponding state.
MCI CONFIDENTIAL
-23-
<PAGE>
<TABLE>
<CAPTION>
Discount Percentage
------------------------
State Day Eve Night
----- ----- ----- -----
<S> <C> <C> <C>
California range 1 [____] [____] [____]
California range 2 [____] [____] [____]
California range 3 [____] [____] [____]
Georgia [____] [____] [____]
Indiana [____] [____] [____]
Maryland [____] [____] [____]
Massachusetts [____] [____] [____]
Michigan [____] [____] [____]
Mississippi [____] [____] [____]
New Jersey [____] [____] [____]
Oregon [____] [____] [____]
Virginia [____] [____] [____]
Washington [____] [____] [____]
Wisconsin [____] [____] [____]
Alabama [____] [____] [____]
Florida [____] [____] [____]
Iowa [____] [____] [____]
Louisiana [____] [____] [____]
Nebraska [____] [____] [____]
New York [____] [____] [____]
North Carolina [____] [____] [____]
Pennsylvania [____] [____] [____]
Utah [____] [____] [____]
West Virginia [____] [____] [____]
Arizona [____] [____] [____]
Connecticut [____] [____] [____]
Delaware [____] [____] [____]
Minnesota [____] [____] [____]
New Hampshire [____] [____] [____]
North Dakota [____] [____] [____]
South Carolina [____] [____] [____]
South Dakota [____] [____] [____]
Tennessee [____] [____] [____]
Montana [____] [____] [____]
Oklahoma [____] [____] [____]
Idaho [____] [____] [____]
New Mexico [____] [____] [____]
Vermont [____] [____] [____]
Arkansas [____] [____] [____]
Colorado [____] [____] [____]
Illinois [____] [____] [____]
Kansas [____] [____] [____]
Kentucky [____] [____] [____]
Maine [____] [____] [____]
Missouri [____] [____] [____]
Nevada [____] [____] [____]
Ohio [____] [____] [____]
</TABLE>
MCI CONFIDENTIAL
-24-
<PAGE>
<TABLE>
<S> <C> <C> <C>
Rhode Island [____] [____] [____]
Texas [____] [____] [____]
Wyoming [____] [____] [____]
</TABLE>
The credit in any month shall not exceed Member's domestic interstate MCI
800 DAL service monthly usage charges (exclusive of taxes, surcharges and
pass-through access/egress (or related) charges) and may not be carried
forward to any subsequent month.
(n) networkMCI Conferencing.
------------------------
(1) For the methods of domestic interstate networkMCI Conferencing
("Conferencing") specified below, Customer shall pay (in addition to
all applicable taxes and tax-related surcharges), the following
postalized per minute rates per bridge port used, with rounding to the
next higher full minute. The per minute rates shall include Tariff
set-up fees. Such rates for domestic interstate Conferencing are in
lieu of Tariff rates described in Section C.17211 and C.1741, and also
in lieu of any volume discounts. All other fees and charges for the
service shall be at Tariff rates.
(2) For Local Meet Me Service, Customer shall pay (in addition to all
applicable taxes and tax-related surcharges) the postalized rate of
[___] per minute per bridge port used, with rounding to the next
higher full minute.
(3) For Dial-Out Service and all Meet Me Services, other than Unattended
Meet Me Service, Customer shall pay (in addition to all applicable
taxes and tax-related surcharges), the following postalized per minute
rates per bridge port used, with rounding to the next higher full
minute.
<TABLE>
<CAPTION>
Total Monthly Net Rate Per
Conferencing Usage Minute
------------------ ------
<S> <C>
[________________] [_____]
[________________] [_____]
[________________] [_____]
[________________] [_____]
[________________] [_____]
[___________] [_____]
</TABLE>
(4) For Unattended Meet Me Service, Customer shall pay (in addition to all
applicable taxes and tax-related surcharges), the following postalized
per
MCI CONFIDENTIAL
-25-
<PAGE>
minute rates per bridge port used, with rounding to the next higher
full minute.
<TABLE>
<CAPTION>
Total Monthly Net Rate Per
Conferencing Usage Minute
------------------ ------
<S> <C>
[________________] [_____]
[________________] [_____]
[________________] [_____]
[________________] [_____]
[________________] [_____]
[___________] [_____]
</TABLE>
(5) Member shall be solely responsible for providing and maintaining
customer service for the End Users of the Conferencing service. Member
shall provide an 800 number terminating to the Member's facility for
customer service and an 800 number terminating to MCI's Conference
Center for reservations only. MCI will not provide bill-back services
to the Member's End Users. MCI will provide customized branding for
only Reservations called into the designated 800 number. MCI will
offer only generic branding for incoming conference calls.
(o) MCI VIP, VIP Plus, MCI 800 MOD. and MCI CAS and MCI CAS PLUS Service.
---------------------------------------------------------------------
(1) For MCI International PRISM I Service, excluding MCI International
Service terminating in Canada or Mexico, and for MCI Services other
than those for which a postalized rate is provided herein:
(a) Customer or its Members are entitled to enroll for the discounts
associated with the thirty-six (36) month term commitment under
the MCI PRISM I Service Value Insurance Plan ("VIP") or the MCI
800 Service VIP Plus subject to the terms and conditions set
forth in the Tariff for such plan except as modified by this
Agreement. In the event Customer or its Member terminates service
prior to the end of the Service Term set forth in this Agreement,
Customer or its Member (whichever is applicable) will be billed
any applicable Tariffed early termination charges associated with
the plan in which Customer or its Member (whichever is
applicable) has enrolled. MCI agrees to waive tariffed
termination liability under the VIP or VIP Plus if Customer or
its Member's (whichever is applicable) termination
MCI CONFIDENTIAL
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<PAGE>
occurs after twenty-four (24) months. Customer or its
Member's termination liability hereunder is in addition to
Customer or its Member's termination liability provided for
in Paragraph 17 of this Agreement.
(b) Customer or its Members are entitled to subscribe to and
receive the discounts associated with MCI Corporate Account
Service ("CAS") and CAS Plus plans subject to the terms and
conditions set forth in the Tariff for such service except
as modified by this Agreement. For MCI International PRISM I
Service (excluding MCI International PRISM I Service
Terminating in Canada and Mexico, and any other countries
for which CAS Plus discounts are not provided pursuant to
the Tariff), CAS Plus discounts will be applied to all time
periods.
(c) Customer or its Members are entitled to subscribe to and
receive the discounts associated with MCI 800 Service Multi-
Option Discount ("800 MOD") subject to the terms and
conditions set forth in the Tariff for such service except
as modified by this Agreement.
(2) In the event the amount of the domestic discount provided under
VIP, VIP Plus, CAS, CAS Plus and/or 800 MOD is greater than the
charges for Customer or its Member's usage of domestic interstate
MCI Services after application of any of the discounts earned
under this Agreement, the difference will not be credited to
Customer or its Members or carried forward.
(3) Member is not entitled to enroll in any other tariffed discount
plans other than the MCI Network Pricing Plan ("NPP") and those
contained in this Paragraph 3 (o).
8. Discount.
--------
Customer shall be entitled to the discounts in the following schedule based
on total MCI domestic and international Monthly Usage. The discount
percentage in the schedule shall be applied to Customer's net usage charges
for the services provided in this Agreement, exclusive of MCI PRISM I
service that receive NPA rates, switched 56Kbps, and Directory Assistance
service that receive NPA rates.
MCI CONFIDENTIAL
-27-
<PAGE>
<TABLE>
<CAPTION>
Monthly Usage Discount
------------------------------- --------
<S> <C>
[_____________] [__]
[____________________________] [__]
[____________________________] [__]
[____________________________] [__]
[______________] [__]
</TABLE>
9. Overlapping Discounts.
----------------------
The discounts provided under this Agreement are in lieu of any other
tariffed discounts other than those specified in this Agreement. If during
the service term MCI shall amend the Tariff to provide a discount on
combined usage that is similar in nature although not necessarily similar
in amount to that provided for in this Agreement, Customer may elect either
to receive the benefit of such discount or continue to receive the discount
provided hereunder, but shall not be entitled to receive the benefit of
both discounts.
10. Credits.
--------
(a) Customer shall be entitled to two (2) credits to be calculated and
applied as follows:
For the first credit, Customer's actual monthly usage billing
(exclusive of usage in Paragraph 7(h), switched 56Kbps service) during
September, October and November 1995 shall be added together and
divided by three (3) . The credit amount shall be applied to the
January, 1996 invoice and the credit shall not exceed [_________]
Dollars [__________]. When referenced above, actual monthly usage
billing shall exclude MCI services where no rates are listed in this
Agreement for the MCI service and where Members pay standard tariffed
rates after application of tariffed discounts.
(b) For the second credit, Customer's actual monthly usage billing
(exclusive of usage in Paragraph 7 (h), switched 56Kbps service)
during August, September, October and November 1996 shall be added
together and divided by four (4). The credit amount shall be applied
to the December 1996 invoice and shall not exceed [_________] Dollars
[__________]; provided that however, if the Agreement continues in
effect for at least twenty (20) months the credit amount limit shall
be [___________] Dollars [__________] and the additional credit amount
above [_________] Dollars [__________] shall be applied in the twenty-
first (21st) month. When referenced above, actual monthly usage
billing shall exclude MCI services where no rates are listed in this
Agreement for the MCI service
MCI CONFIDENTIAL
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<PAGE>
and where Members pay standard tariffed rates after application of
tariffed discounts.
(c) If Customer submits in writing to MCI before the conclusion of the
seventeenth (17th) month that Customer will not terminate the
Agreement until after the twenty-first (21st) month, and if Customer's
total actual monthly usage billing exceeds [_____________] Dollars
[___________], the credit limit in Paragraph 10(a) will be increased
to [___________] Dollars [__________] from [_________] Dollars
[__________], and the credit limit in Paragraph 10(b) shall be
increased to [___________] Dollars [__________].
(d) The credits shall be applied to Customer's net domestic interstate
usage charges (exclusive of applicable taxes, surcharges, and pass-
through access/egress charges) for MCI services hereunder.
(e) To determine if Customer has met the [__________________] Dollar
[____________] amount in Paragraph 15(b), Customer's usage
(exclusive of usage in Paragraph 7(h)) shall be calculated after
deduction of the credits provided above.
11. Security.
---------
Customer shall, as a condition precedent to receipt of MCI Services
hereunder, provide within ten (10) days of executing this Agreement an
Irrevocable Letter of Credit in a form acceptable to MCI in an amount equal
to [___________________] Dollars [________]. This Letter of Credit shall
not exceed [___________________] Dollars [________] except if the payment
terms in Section 12 are not met or if the financial conditions of Customer
or any of its Members materially changes. If the Letter of Credit is not
received by MCI within sixty (60) days of the date of execution of this
Agreement by the parties, Customer shall pay to MCI [_____________] percent
[____] of Customer's total net invoice for each month (or a pro rata
portion for a partial month) that the Letter of Credit is delinquent. The
letter of credit shall be attached hereto and incorporated by reference.
Customer shall continuously renew the letter of credit as necessary to keep
it in effect during the service term. Customer shall continuously revise
this letter of credit so that it is equal to one (1) week average billing
for all Members over the previous two (2) months. Nothing contained herein
shall limit or be interpreted to limit MCI's right, as provided for in
Section B-7.04 of MCI Tariff F.C.C. No. 1, to require, in MCI's sole
discretion, alternative or additional security from Customer, and
Customer's failure or refusal to provide such alternative or
MCI CONFIDENTIAL
-29-
<PAGE>
additional security upon MCI's reasonable request therefor may result in
the cancellation of this Agreement and Customer's service for cause
pursuant to Section B-11.01 of the Tariff. Any requirement for additional
surety shall be based upon a review of Customer's payment history under the
terms of this Agreement and upon a reasonable evaluation of Customer's
financial condition. The security arrangements provided for hereunder shall
survive the expiration of the service term, as defined herein, and shall
remain in effect so long as Customer remains a user of MCI service(s).
12. Payment.
--------
(a) MCI shall invoice each Member separately. Each Member of ACCA shall
prepay to MCI an estimated monthly payment by wire transfer by the
first (1st) day of each month beginning in the first (1st) month after
the execution date hereof, in the amount of the previous month's
invoice. For example, January's usage shall be paid on January 1
based on the previous month's invoice. Members who are not current MCI
Customers shall pay as follows:
o For their first month, fifty percent (50%) of their estimated
invoice, such estimated invoice amount to be mutually agreed by
MCI and new Member, shall be prepaid (i.e., January's prepayment
shall be paid on January 1).
o For their second (2nd) month and continuing thereafter, the new
Member shall prepay based on one hundred percent (100%) of the
prior month's invoice less any disputed amounts agreed upon in
writing by MCI. MCI will not unreasonably withhold such
agreement.
Within ten (10) days of the date of MCI's invoice, MCI and Customer
will reconcile the prepayment with the MCI invoice amount for such
month. MCI shall credit any prepayment amount in excess of the MCI
invoice amount for such month on the next available invoice.
Immediately after reconciliation, Customer shall pay MCI any amount
the prepayment was less than the MCI invoice amount for such month.
(b) If Customer has met its Monthly Commitment during a month, and if a
Member pays for the month's services in advance by the first (1st) of
that month, then such Member shall receive an additional [___________
___] percent [____] discount during such month as identified below in
(c). If a Member fails to prepay as required in
MCI CONFIDENTIAL
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<PAGE>
12 (a) above and if payment is not received by the seventh (7th) day
of that month, then the Member shall not be entitled to the [_______
_______] percent [____] discount and shall pay [___________________]
percent [____] interest per month on all amounts in arrears.
In the event that an ACCA Member fails to prepay as required, MCI
shall notify ACCA in writing at an address provided by ACCA and ACCA
shall by the eighth (8th) day of that month either: 1) allow MCI to
draw from the LOC the sums necessary to make one quarter (1/4) of the
prepayment that is in arrears, or 2) pay the prepayment directly to
MCI. If the prepayment is made through the LOC or by ACCA, MCI may, at
its discretion, immediately remove the Member as a party to and
beneficiary of this Agreement and/or terminate all MCI Service to such
Member. Upon such removal as a Member and/or termination of services,
the Member shall be charged Tariff rates for all services received
after such removal or termination and the collection of amounts due
and owing will be per tariff. ACCA shall have no further
responsibility for any payments for any Member in default of its
obligations contained in Paragraphs 12 (a) and 12 (b). If such
removed or terminated Member qualifies under MCI's surety
requirements, MCI may offer such Member MCI's then current "carrier
program" pricing at the term and volume commitment levels agreed upon.
(c) The additional discount in 12(b) above shall be applied only after
application of all other discounts and credits that Customer may be
entitled to under MCI's tariffs and this Agreement. The amount of the
discount shall be calculated by determining [______________] percent
[____] of that Member's monthly recurring and usage charges for MCI
services in this Agreement. The discount amount shall be applied as a
credit to such Member's interstate monthly recurring and usage
charges.
(d) The termination of any Member pursuant to paragraph (b) above shall
not affect Customer's Monthly Commitment.
(e) In the event Customer fails to pay MCI invoiced amounts as required
and MCI notifies Member that Member's endusers service will be
terminated for non-payment, Member agrees to notify, jointly with MCI,
the Member's endusers of the potential disruption of service, by the
mailing of a letter, signed by Member, to each enduser, containing the
following language. The mailing of a letter applies only where: i) the
enduser is still Member's enduser and MCI is the underlying carrier;
ii)
MCI CONFIDENTIAL
-31-
<PAGE>
Member is reselling to enduser the MCI Carrier Network Services in
Paragraph 4 of this Agreement.
Dear Member Enduser:
Member's provision of long distance service to you and our other
customers will terminate within two (2) weeks of the date of this
Letter. This letter is being sent to you as a courtesy so that
you can make the necessary arrangements so that you do not
experience a disruption of your communications services. You have
a choice of long distance carriers. If you have any questions,
please contact Member (representative and telephone number) or
your local telephone company.
Sincerely,
Member
Notwithstanding notice of termination, the Customer further agrees
that it will remain responsible for all charges incurred during the
period following transmission of the above-referenced notification and
prior to the actual termination of the service by MCI.
13. Dispute Resolution.
-------------------
(a) Except as otherwise provided herein, any claims arising out of or
related to this Agreement, shall be made within one hundred and twenty
(120) days of their occurrence. If such claims cannot be resolved by
negotiation, they shall be settled by binding arbitration in
accordance with the rules contained in MCI Tariff FCC No. 1
("Arbitration Rules") . Neither party may seek injunctive relief of
any kind prior to the confirmation of an arbitration award, except
that MCI may seek injunctive relief against Customer for violation of
Paragraphs 3(a)2), 3) and 4), herein. Any claims made after one
hundred and twenty (120) days of the occurrence giving rise to such
claims shall be barred.
(b) Independent of Customer's payment obligation set forth in Paragraph
12, immediately above, Customer shall make a separate claim in
writing, with adequate support, for any service interruption credit to
which Customer believes itself entitled, and MCI and Customer will
promptly address and attempt to resolve the claim. In the event the
parties are unable to resolve any claim within two (2) weeks of the
date it is received by MCI (or a longer
MCI CONFIDENTIAL
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<PAGE>
period if mutually agreed upon in writing by the parties), the
parties will:
(1) Consent to mandatory arbitration of all disputes amounting to
[_______]Dollars [_______] or more. Such arbitration will be
governed by the Commercial Arbitration Rules of the American
Arbitration Association, 1739 Rhode Island Avenue, N.W., Suite
509, Washington, D.C. 20036 ("AAA"), as amended by this
Agreement.
(2) In the event of a dispute that Customer and MCI cannot resolve,
either MCI or Customer may notify AAA at the above address of the
dispute and provide a copy of this Agreement. MCI will provide
AAA a copy of the Tariff in effect at the time of the dispute.
(3) The party who first gives notice of the dispute shall deposit
with AAA the administrative fee required by its rules, and a
further [_______________________] Dollars [______] to secure the
payment of expenses and fees of the arbitrator. The party who
first gives notice shall send a copy of the notice to the other
party, who shall promptly deposit [_________________________]
Dollars [______] to secure its half of the arbitrator's fees and
expenses.
(4) Customer acknowledges that it may not withhold any sums invoiced
unless MCI agrees to the withholding of disputed sums in writing.
Customer must pay invoiced sums and then may seek a refund in
arbitration, in which event MCI will take all reasonable steps to
expedite the arbitration process.
(5) The arbitrator will be selected under AAA rules from among a
panel of seven (7) telecommunications attorneys, retired FCC
employees, and law professors, all of whom shall be neutral
arbitrators under AAA rules. MCI shall provide the list of seven
(7) arbitrators to AAA by July, 1992 and shall update the list
semiannually. AAA shall select the arbitrator to hear the dispute
from among the seven (7) Members of the panel.
(6) Within twenty (20) days of receipt of notice of the dispute, the
other party shall submit a written response to AAA, which shall
forward the notice and the response to the arbitrator. Within ten
(10)
MCI CONFIDENTIAL
- 33 -
<PAGE>
days of receipt of the notice and the response, the arbitrator
will set the time and place for the hearing.
(7) Customer and MCI expressly recognize that the arbitrator's
authority is limited to resolution of disputes under this
Agreement, MCI Tariff FCC No. 1, and any other Documents signed
by both parties. The arbitrator's decision shall follow the plain
meaning of the relevant documents, and shall be final. In no
event shall the arbitrator have the authority to make any award
that provides for punitive or exemplary damages.
14. Termination for Insolvency.
---------------------------
In the event Customer or any member becomes or is declared insolvent or
bankrupt, is the subject of any proceedings related to its liquidation,
insolvency or for the appointment of a receiver or similar officer for it,
makes an assignment for the benefit of all or substantially all of its
creditors, or enters into an agreement for the composition, extension, or
readjustment of all or substantially all of its obligations, MCI may, by
giving written notice thereof to Customer or any member, terminate this
Agreement in whole or in part, with respect to such Member(s), as of a date
specified in such notice of termination.
15. Term.
----
(a) The Service Term shall begin on August 1, 1995 ("Effective
Date") and will continue for a period of twenty four (24) months
therefrom. Nothing contained herein, however, shall modify or be
deemed to modify MCI's right to terminate this Agreement either as
provided herein, or as authorized in Section B-11.01 of the Tariff,
immediately upon notice to Customer if Customer fails or refuses to
provide alternative or additional security requested pursuant to
Section B-7.04 of the Tariff, or to terminate provision of service for
any other cause as provided for in Section B-11.01 of the Tariff or as
otherwise provided for in this Agreement.
(b) Customer may terminate this Agreement before the expiration of
the twenty-four (24) months without liability for the termination
liability if Customer meets the following two (2) conditions:
1. The total of Customer's Monthly Usage exceeds [____________
______] Dollars [___________].
MCI CONFIDENTIAL
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<PAGE>
2. At least seventeen (17) months of the Service Term have expired.
16. Expiration of Term.
-------------------
Upon expiration of the Service Term, Customer shall be fully subject to all
the terms and conditions, including standard tariffed rates, set forth in
the Tariff for MCI service(s) received by Customer after such expiration.
17. Termination Liability.
----------------------
If Customer terminates this Agreement during the initial service term or
MCI terminates this Agreement during such service term for Customer's
material breach, Customer will pay MCI within thirty (30) days of the
effective date of such termination an amount equal to [______]percent [___]
of the difference between Customer's remaining actual Monthly Usage
hereunder and Customer's Monthly Commitment, or a pro rata portion thereof
for any partial month, for each month remaining in the initial service
term after termination. In addition to the above liability for early
termination, Customer shall pay the termination liability for early
termination of all tariffed discount plans in which the Customer has
enrolled. ACCA shall be billed for all termination charges.
18. Nondisclosure.
-------------
Customer nor Members shall disclose to any third party during the service
term, or during the three (3) year period thereafter, any of the terms
and conditions set forth in this Agreement unless such disclosure is
lawfully required by any federal governmental agency or is otherwise
required to be disclosed by law or is necessary in any proceeding
establishing rights and obligations under this Agreement. MCI reserves the
right to terminate this Agreement for the Member(s) involved in the
disclosure immediately upon delivering written notice to Customer and
Member of any unpermitted third party disclosure hereunder.
19. Letter of Agency.
----------------
Member(s) shall appoint MCI as its agent in the Letter of Agency attached
hereto and incorporated herein as Attachment D.
20. Surcharge Exemption.
-------------------
When applicable, Member(s) shall certify that any special access lines
used in connection with services under this
MCI CONFIDENTIAL
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<PAGE>
Agreement terminate in a device not capable of interconnecting MCI's
service with the local exchange network and thus are surcharge exempt from
the special access surcharge.
21. Tax Exemption.
-------------
When applicable, Member(s) shall certify that it is exempt from federal,
state, and/or local taxes.
22. Governing Law.
-------------
This Agreement, including all matters relating to the validity,
construction, performance and enforcement thereof, shall be governed by the
laws of the State of New York without giving reference to its principles of
conflicts of law, except to the extent the Communications Act of 1934, as
amended, and as interpreted and applied by judicial and regulatory
authorities including the Federal Communications Commission, applies.
23. Assignment.
----------
(a) This Agreement shall be binding on Customer, Member(s) and its
respective successors and assigns. Customer nor Members may assign
this Agreement, whether by operation of law or otherwise, except
pursuant to this Paragraph 23.
(b) Notwithstanding anything to the contrary, this Agreement shall not be
assigned to either AT&T or Sprint without the prior written consent of
MCI.
(c) At least forty five (45) days before the consummation of any
assignment of this Agreement Customer, including any individual
member, shall notify MCI in writing of the name of the proposed
assignee. MCI shall conduct a review of the assignee based on MCI's
prior business dealings with such entity and MCI shall review the
financial credit worthiness of the entity. Customer nor Member shall
assign the agreement if MCI opposes the assignment in its reasonable
discretion based on MCI's prior business dealings with the entity or
if the assignee fails to meet MCI's reasonable credit worthiness
standards, or for competitive reasons.
(d) If Customer or a Member assigns this Agreement without MCI's approval
when such approval is required in this Paragraph 23, MCI shall be
entitled to terminate this Agreement for cause.
MCI CONFIDENTIAL
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<PAGE>
24. No Waiver.
---------
No waiver of any of the provisions of this Agreement shall be binding
unless it is in writing and signed by the party making the waiver. No
waiver shall be deemed, or shall constitute, a waiver of any other
provision, whether or not similar, and no waiver shall be deemed, or shall
constitute, a continuing waiver.
25. Installation Waivers.
--------------------
Customer shall receive a credit for one-time installation and other one-
time non-recurring MCI-billed tariffed charges associated with the
implementation of MCI Carrier Network Services pursuant to this Agreement,
such credit however, shall not exceed [_________________________] Dollars
[________]. If Customer's aggregate actual net monthly usage billings
exceeds [__________________] Dollars [___________] pursuant to the
conditions in Paragraph 15(b), the credit shall be increased from [____
_____________________] Dollars [________] to [________________________
_______] Dollars [__________].
26. Length of Offer: Entire Agreement: Amendments.
---------------------------------------------
This offer shall remain open and be capable of being accepted by Customer
until October 16, 1995. Any and all prior or contemporaneous offers,
agreements including the Agreement between the parties dated February 1,
1994, representations and understandings made to Customer, whether written
or oral, shall be superseded by this offer. Exclusive of any tariff
modifications initiated by MCI, once this Agreement has been executed, any
amendments hereto must be made in writing and signed by both parties.
MCI CONFIDENTIAL
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<PAGE>
IN WITNESS WHEREOF, the parties hereto each acting with proper authority have
executed this Agreement.
MCI TELECOMMUNICATIONS CORPORATION
By: /s/ Jardon Bouska
------------------------------
Title: Director
---------------------------
Date:
----------------------------
ASSOCIATED COMMUNICATIONS COMPANIES OF AMERICA (ACCA)
By: /s/ Mike Newkirk
-------------------------
(Signature)
Title: Vice Pres
------------------------
Date: 10/3/95
------------------------
MCI CONFIDENTIAL
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<PAGE>
EXHIBIT A
***INFORMATION IN THIS TABLE HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***
ACCA MEMBER COMMITMENTS
-----------------------
MCI AGREEMENT
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
SUB- Monthly PRISM I 800 DAL Private Line
COMMITMENT Commitment Subcommitment Subcommitment Subcommitment
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ACC [______] [______] [______] [______]
- -------------------------------------------------------------------------------------------
ATX [______] [______] [______] [______]
- -------------------------------------------------------------------------------------------
BTI [______] [______] [______] [______]
- -------------------------------------------------------------------------------------------
CBLD [______] [______] [______] [______]
- -------------------------------------------------------------------------------------------
LDS [______] [______] [______] [______]
- -------------------------------------------------------------------------------------------
TLD [______] [______] [______] [______]
- -------------------------------------------------------------------------------------------
NTF [______] [______] [______] [______]
- -------------------------------------------------------------------------------------------
DELTA [______] [______] [______] [______]
- -------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
EXHIBIT B
MCI CARRIER OPERATOR SERVICES
Customer is interested in buying MCI Carrier Operator Services for resale and
MCI is interested in providing such services to Customer. In order to accomplish
those purposes the parties hereby agree as follows:
1. Operator Services:
-----------------
(a) MCI shall provide Customer with MCI Carrier Operator Services as such
service is delineated in applicable tariffs, including MCI Tariff FCC
No. 1 (the "Tariff") and, except as provided herein, at the rates
contained in the Tariff.
(b) "Operator Service Calls" mean long distance calls dialed with the 0+,
01+ or 00- dialing pattern (and excluding calls dialed with the 950-XXXX
and 800 dialing patterns).
(c) Customer shall not use any service mark or trademark of MCI.
(d) Call Originating Identification Information. MCI must receive electronic
-------------------------------------------
call origination identification ANI information for each call carried
hereunder. If the Originating Site uses Feature Group D local access
service, the required call origination identification information is
automatically supplied by the local exchange company. If the Originating
Site uses a type of local access service other than Feature Group D
local access service, the Originating Site shall cause electronic call
origination identification information (in a form acceptable to MCI) to
be supplied to MCI at the initiation of each call.
(e) Emergency Calls.
---------------
(1) Each Originating Site shall configure its system so that 911
emergency calls, where available, and similar emergency calls, will
be automatically routed to the appropriate party or clearing house
without the intervention of MCI. Emergency calls which do reach a
MCI operator shall be handled in accordance with MCI standard
operating procedures.
(2) If Member or MCI provides an emergency number database, Member
agrees to indemnify and hold MCI harmless from any and all claims,
damages, fines,
MCI CONFIDENTIAL
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<PAGE>
penalties and any other liabilities (including attorney fees)
arising out of the inaccuracy of any information or the
inadequacy of any procedure or personnel.
(f) Private Payphones.
-----------------
(1) Private payphone lines must be classed as "07" COCOT.
(2) All payphones must have Billed Number Screening ("BNS"), if
available. If BNS is not available, the Customer will be
responsible for calls billed to any lines without BNS.
(3) Unless otherwise permitted by law, all 0- calls must be passed
to the Local Exchange Carrier ("LEC")
(4) Unless otherwise permitted by law, payphones must not block 950-
XXXX or 1-800-XXX-XXXX calls.
(5) All payphones must have "011" blocking at the central office, if
available. If international blocking is not available, or if
Member chooses not to block "011" calls, then Member assumes
responsibility for any international fraud.
(6) Member shall be responsible for any fraud resulting from its
purchase and use of MCI Carrier Operator Services.
(g) Compliance. Member will comply with applicable federal, state and
----------
local laws and regulations, including without limitation, laws and
regulations relating to operator service during the term of this
Agreement.
(h) Authority.
---------
Members warrant that they are authorized to select the operator
services carrier for the telephones served by Member pursuant to
this Agreement. Member agrees that if any party makes any claims
against MCI for commissions from such telephones, Member will be
responsible for any such claim. Member shall indemnify MCI and
hold MCI harmless from any loss, cost or expense resulting from
such claim and will pay MCI's reasonable attorney's fees
resulting from any such claim.
2. Rates. The rates in the following schedule shall be charged on Customer's
-----
usage of MCI Carrier Operator Services. The automated rate will be charged
from the time a call reaches a node until the call is terminated or
released from the MCI
MCI CONFIDENTIAL
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<PAGE>
node via release link technology. The live rate will be charged in addition
to automated rates for the portion of each call that is handled by a live
operator.
<TABLE>
<CAPTION>
Automated Live
Monthly Attempts Rate/Sec. Rate/Sec.
---------------- --------- ---------
<S> <C> <C>
0 - 50,000 [______] [______]
50,001 - 100,000 [______] [______]
100,001 - 200,000 [______] [______]
200,001 - 500,000 [______] [______]
500,001 - 1,000,000 [______] [______]
1,000,001 - 1,500,000 [______] [______]
1,500,000+ [______] [______]
</TABLE>
For a call terminated by MCI on Carrier Network Services, Customer shall pay
MCI an additional charge for termination rated at Customer's 1+ outbound
rate as specified in Paragraph 4.(a) [dedicated rate for dedicated access
node, and switched rate for switched access to the node) of the Agreement
based on an 18 second minimum and rounded to six (6) second increments.
3. Rate Quotes. If Member has provided the appropriate rate information, MCI
-----------
will provide real-time rate quotes to callers. However, Member shall
indemnify MCI and hold MCI harmless from any and all claims, damages, fines,
penalties or other liabilities (including attorney fees) arising from the
inaccuracy of any information or the inadequacy of any procedures or
personnel.
4. Customer Service. Member agrees that all customer service calls (i.e.,
----------------
billing disputes, troubles, general inquiries) shall be routed to Member's
customer service via a Customer-provided 800 number.
5. Language Assistance. On a monthly basis MCI shall review the percentage of
-------------------
Customer's calls utilizing MCI Carrier Operator Services language
assistance. On a monthly basis, if the percentage of Customer's calls
utilizing MCI Carrier Operator Services language assistance exceeds thirty
percent (30%), then MCI shall review the calls utilizing MCI Carrier
Operator Services language assistance on an individual Member basis. During
that month, if the calls utilizing MCI Carrier Operator Services language
assistance exceeds thirty percent (30%) for a Member, that Member shall pay
[___________] the tariff rate for all calls exceeding thirty percent (30%).
6. Brand. Each Member agrees that if will resell MCI Carrier Operator Services
-----
in Member's name only.
7. Service Delivery. Customer agrees that it will receive and deliver all MCI
----------------
Carrier Operator Services calls from/to one of
MCI CONFIDENTIAL
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<PAGE>
the three (3) MCI automated nodes via TDS-1.5, TDS-45 or switched access as
part of Carrier Network Services.
8. Billing. Member agrees to be responsible for all end-user billing for
-------
operator services.
9. Forecasting. Member agrees to provide a written quarterly forecast for all
-----------
operator services traffic to MCI or as call volumes warrant.
MCI CONFIDENTIAL
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<PAGE>
EXHIBIT C
MCI FEATURE CARD SERVICE
A. MCI Feature Card Service (Option T).
-----------------------------------
1) During each month of the service term, Member shall receive a credit
as identified below.
The credit amount shall be calculated by multiplying [______________________
____] times Customer's domestic and international usage charges of MCI
Feature Card Service provided pursuant to the tariff at standard tariff
rates (exclusive of monthly recurring charges, taxes, surcharges,
installation charges, MCI Feature Card surcharges, Directory Assistance
charges, and charges for local access/egress services or facilities
associated with MCI Feature Card Service). The credit amount shall be
applied to Customer's domestic interstate monthly usage charges (exclusive
of monthly recurring charges, taxes, surcharges, installation charges, MCI
Feature Card Surcharges, Directory Assistance charges, and charges for local
access/egress services or facilities associated with MCI Feature Card
Service). The credit amount in any month shall not exceed such interstate
monthly usage charges for MCI Feature Card Service and shall not be carried
forward to any subsequent month.
When this paragraph refers to MCI Feature Card Service, it means such
service only accessed by dialing the unique MCI-provided 800 access number
assigned to the MCI Feature Card reseller.
2) The following interstate MCI Feature Card surcharges shall be
charged on all direct dial MCI Feature Card calls.
<TABLE>
<CAPTION>
Direct
From To Dial
---- -- ------
<S> <C> <C>
United States U.S., Puerto Rico
("U.S.") and U.S. Virgin
Islands [___]
Puerto Rico U.S. [___]
U.S. Virgin U.S. [___]
Islands
U.S., Puerto Rico Canada
and U.S. Virgin
Islands [___]
U.S., Puerto Rico International Locations
and U.S. Virgin Other than Canada [___]
Islands
</TABLE>
MCI CONFIDENTIAL
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<PAGE>
Canada U.S., Puerto Rico and
U.S. Virgin Islands [___]
Canada International Locations [___]
3) The above discounts for MCI Feature Card Service are in lieu of any
tariffed discounts including, without limitation, the discounts for MCI Feature
Card Service available under MCI VIP, MCI VIP Plus, MCI MOD and MCI CAS Service.
4) If MCI provides fulfillment, for MCI Feature Card Service (only
accessed by dialing a unique MCI-provided 800 number assigned to the MCI Feature
Card reseller), Customer shall pay MCI for the fulfillment costs associated with
Customer's usage of MCI Feature Card Service plus pay MCI an administrative
charge for handling fulfillment in an amount equal to [___________________] of
the fulfillment costs.
5) For MCI Feature Card Service (only accessed by dialing a unique
MCI-provided number assigned to the MCI Feature Card reseller), MCI shall
provide the fraud detection procedures set forth in Exhibit C.1. attached hereto
and incorporated herein by reference. Member shall be responsible for all fraud
associated with its usage of MCI Feature Card Service, except as set forth in
Exhibit C.1.
MCI CONFIDENTIAL
- 8 -
<PAGE>
EXHIBIT C.1
MCI FEATURE CARD FRAUD DETECTION PROCEDURES
==================================
All calling card calls will be validated by MCI to permit only those calls
authorized or facilitated by Member or legitimate card holders. MCI will, at
the direction of Member, preclude all calls utilizing expired or terminated
calling card numbers compared against an authorized list provided by Member and
will be responsible for all fraudulent use, unauthorized use, misuse, or abuse
of calling cards occurring after MCI receives actual notice of the expiration or
termination of a calling card or receives specifically detailed written
notification concerning any card which has been lost, stolen, compromised or
which Member has reason to believe is or may be used fraudulently. MCI will
deactivate a calling card within four (4) hours of receipt by MCI's Consumer
Markets Fraud Detection of a request by Customer.
In addition, all calling card calls will be monitored by MCI for fraudulent use,
unauthorized use, misuse or abuse on a twenty four (24) hour a day, seven (7)
days a week basis. MCI shall establish fraud prevention, detection and
minimization procedures so that fraudulent use arising from lost or stolen
calling cards and potential disruption to authorized card holders will be
minimized.
MCI will not hold the Member responsible for "service fraud" associated with the
unauthorized use of an MCI calling card. "Service fraud" can best be described
as unauthorized use of an MCI calling card following the involuntary theft or
loss of a card which was not intentionally facilitated or impliedly authorized
by Customer or an authorized user. "Service fraud" often follows the theft of a
wallet, purse or briefcase, or sometimes is the result of "shoulder surfing"
(thieves observing/recording authorization codes) which occurs at payphones
located in airports, bus terminals, train stations and the like. MCI shall not
be responsible for losses caused by fraudulent information submitted by a card
holder in subscribing for calling card services or for usage which was
intentionally facilitated or impliedly authorized by an authorized user.
In the event that MCI is unable to contact Member of suspected abuse of the
calling card, in order to minimize potential abuse, MCI will deactivate any
calling card which has exceeded established fraud detection parameters or which
MCI has reason to believe is or may be used fraudulently.
MCI CONFIDENTIAL
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<PAGE>
ATTACHMENT D
LETTER OF AGENCY
----------------
ATTENTION: Concerned Local Operating Companies, AT&T and other
Common Carriers and All Equipment Vendors
The undersigned appoints MCI Telecommunications Corporation or any of its
affiliated companies ("MCI") as agent for the purpose of ordering, in connection
with MCI's provision of service to the undersigned, changes in and/or
maintenance on specific telecommunications service that you provide to the
undersigned including, without limitation, removing, adding to or rearranging
such telecommunications service.
You are hereby released from any and all liability for making pertinent
information available to MCI and for following MCI's instructions with respect
to any changes to or maintenance on the undersigned's telecommunications
service. You may deal directly with MCI on all matters pertaining to
telecommunications service and should follow instructions with respect thereto.
This authorization will remain in effect until modified or rescinded in writing
by the undersigned.
Signed this __ day of _______, 19__.
BY:
- ------------------------------
Authorized Customer Signature
- ------------------------------
Title
- ------------------------------
Company Name
MCI CONFIDENTIAL
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<PAGE>
EXHIBIT E
***INFORMATION IN THIS TABLE HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.***
Rates and Discounts on MCI International Services
1. (a) For MCI International PRISM I Service, the following rates plus
all applicable tariffed discounts shall apply:
Countries Rates per Minute
--------- ----------------
Standard Period Discount Period Economy Period
1st 30 1st 30 1st 30/Add'l
sec./Add'l 6 sec. sec./Add'l 6 sec. sec./ 6 sec.
----------------- ----------------- -------------
MCI CONFIDENTIAL
- 11 -
<PAGE>
***INFORMATION IN THESE TABLES HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***
<TABLE>
<CAPTION>
Countries Rates per Minute
- --------- ----------------
Standard Period Discount Period Economy Period
1st 30 1st 30 1st 30/Add'l
sec./Add'l 6 sec. sec./Add'l 6 sec. sec./ 6 sec.
----------------- ----------------- -------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
(b) For MCI International PRISM I Service, the following postalized rates
shall apply.
<TABLE>
<CAPTION>
Countries Rates per Minute
- --------- ----------------
<S> <C>
</TABLE>
The United Kingdom shall receive the following rates:
<TABLE>
<CAPTION>
Number of Customer Minutes
Terminating
In the United Kingdom Rate Per Minute
--------------------- ---------------
<S> <C>
0 - 99,999 [______]
100,000+ [______]
</TABLE>
(c) For MCI International 800 DAL Service, Customer shall receive pricing
at the [_____________________] commitment level under the Tariff but without
regard to the term and volume commitments required therein. Customer shall
MCI CONFIDENTIAL
- 12 -
<PAGE>
also receive an additional [____} percent [____] discount on 800 DAL Service
originating from the following countries:
[______________] [_________]
[_______] [____]
[_________] [____________________]
[_________] [___________]
[_____] [_______]
[______]
MCI CONFIDENTIAL
- 13 -
<PAGE>
EXHIBIT F
MCI has developed the following guidelines to aid MCI Carrier Network
Services customers in determining the proper use of MCI's name, logo, trademarks
and service marks and the proper characterization of the MCI/Reseller
relationship. Resellers are not authorized to use MCI's name, its trademarks,
servicemarks or logo in any manner including use in advertising, promotional
materials, stationery, business cards, billing and signage. For example,
Resellers MAY NOT make in words or in substance the following statements:
"Network services provided by MCI"
"Authorized/Endorsed/Sponsored/Approved by MCI"
"Authorized Provider of MCI Services"
"Affiliate, or partner, or co-marketer with MCI"
If resellers wish to make any reference to MCI, they may ONLY make the
following declarative statement:
"Reseller's services utilize the MCI network"
However, the following conditions apply to this statement:
. This statement may not be used in ANY manner that is likely to create
confusion or to give the impression that MCI sponsors, endorses, or is in
any way affiliated with the Reseller
. This statement may only be used as a declarative statement in any
printed or oral communication and may not be used as a headline or in any
advertising slogan or banner. In order to use this statement, the
Reseller's company name must appear or be verbalized prominently in the
written or oral communication
. The statement may only appear once in each written promotional or
advertising piece. The MCI name may not be used in the same type style that
MCI uses and must not otherwise resemble the MCI name and/or logo
. In any event, whenever the statement above is used, the type size for
this verbiage as it appears in any printed material may not exceed 1/8 of
one (1) inch and cannot be larger, bolder, or a different color or type
style than the adjacent text.
In summary, this policy means no Reseller may state explicitly or
implicitly that it:
. Is an authorized agent, reseller, partner or co-marketer with MCI; or
. Provide MCI services; or
MCI CONFIDENTIAL
- 14 -
<PAGE>
. Is affiliated with, authorized, sponsored by, or endorsed by MCI; or
. Was a special relationship with MCI
MCI is aggressive about protecting its trademark, service mark and
corporate name. In the past, we have not hesitated to bring appropriate legal
action to protect our rights and we shall continue to be vigilant to ensure that
these guidelines are followed.
MCI CONFIDENTIAL
- 15 -
<PAGE>
Exhibit 10.60
-------------
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[_____]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
FIRST AMENDMENT TO
MCI CARRIER AGREEMENT
THIS FIRST AMENDMENT IS MADE AS OF THIS 20TH DAY OF MARCH, 1996, BETWEEN MCI
TELECOMMUNICATIONS CORPORATION ("MCI") AND ASSOCIATED COMMUNICATIONS COMPANIES
OF AMERICA ("ACCA").
WHEREAS, ACCA AND MCI ENTERED INTO AN MCI CARRIER AGREEMENT, SIGNED BY MCI ON
NOVEMBER 9,1995 (THE "AGREEMENT");
WHEREAS, ACCA AND MCI DESIRE TO ENTER INTO THIS FIRST AMENDMENT FOR THE PURPOSE
OF AMENDING THE AGREEMENT, IN ORDER TO ENABLE DELTACOM, INCORPORATED
("DELTACOM") TO RESELL MCI SERVICES TO ITC HOLDING COMPANY ("ITC") AT THE SAME
RATES PROVIDED TO ACCA'S MEMBERS UNDER THE AGREEMENT;
WHEREAS, IN CONSIDERATION FOR EXECUTION OF THIS FIRST AMENDMENT, DELTACOM SHALL
AGREE WITH MCI PURSUANT TO AN ADDENDUM TO CARRIER AGREEMENT, AMONG MCI,
DELTACOM, ITC AND ACCA (THE "DELTACOM ADDENDUM"), THAT DELTACOM WILL PURCHASE AN
ADDITIONAL AMOUNT OF MCI SERVICES ("DELTACOM ADDITIONAL USAGE") IN THE AMOUNT OF
AT LEAST [_______________________________________] DURING EACH MONTH OF THE
SERVICE TERM OF THE AGREEMENT;
NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY
OF WHICH ARE HEREBY ACKNOWLEDGED, ACCA AND MCI AGREE AS FOLLOWS;
1. PARAGRAPH 2(a) OF THE AGREEMENT IS HEREBY AMENDED BY ADDING THE
FOLLOWING AT THE END OF SUCH PARAGRAPH:
"Monthly Usage, for purposes of this Agreement, shall not include
Additional DeltaCom Usage (as defined in the Addendum identified below,
"Additional DeltaCom Usage"), purchased by DeltaCom Incorporated
("DeltaCom") for resale to ITC Holding Company ("ITC") pursuant to the
Addendum to MCI Carrier Agreement by and among MCI, DeltaCom and ITC
(the "Addendum"), signed by MCI on March 20, 1996."
2. PARAGRAPH 10(b) OF THE AGREEMENT IS HEREBY AMENDED BY DELETING THE LAST
SENTENCE OF SUCH PARAGRAPH AND REPLACING IT WITH THE FOLLOWING:
"When referenced in this Paragraph 10, actual monthly usage billing shall
exclude Additional DeltaCom Usage and MCI services where no rates are
listed in this Agreement for the MCI service and where Members pay standard
tariffed rates after application of tariffed discounts."
3. PARAGRAPH 12(c) OF THE AGREEMENT IS HEREBY AMENDED BY ADDING THE
FOLLOWING SENTENCE TO THE END OF SUCH PARAGRAPH:
MCI CONFIDENTIAL
<PAGE>
"Additional DeltaCom Usage shall be eligible to receive the additional [___
__________________________] discount provided under Paragraph 12(b) above."
4. ACCA HEREBY REPRESENTS AND WARRANTS TO MCI THAT EXECUTION AND DELIVERY
OF THIS FIRST AMENDMENT IS FULLY WITHIN THE CORPORATE POWERS OF ACCA AND THAT
THE UNDERSIGNED OFFICER OF ACCA IS DULY AUTHORIZED TO EXECUTE THIS AGREEMENT ON
BEHALF OF ACCA AND ITS MEMBERS.
5. ACCA HEREBY AGREES TO DEFEND, INDEMNIFY, AND HOLD HARMLESS MCI AGAINST
ALL CLAIMS, DAMAGES, LOSSES AND EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES
AND EXPENSES) RESULTING FROM CLAIMS, SUITS OR OTHER ACTIONS MADE BY ANY MEMBER
OF ACCA PURSUANT TO OR IN CONNECTION WITH THIS FIRST AMENDMENT OR CHALLENGING
THE VALIDITY HEREOF,
6. THE TERMS OF THIS FIRST AMENDMENT WILL BECOME EFFECTIVE, UPON
EXECUTION AND DELIVERY BY ALL PARTIES' HERETO, AS FEBRUARY 1,1996.
7. EXCEPT AS EXPRESSLY PROVIDED IN THIS FIRST AMENDMENT, ALL OF THE TERMS
AND CONDITIONS CONTAINED IN THE AGREEMENT SHALL REMAIN IN FULL FORCE AND EFFECT.
8. THIS FIRST AMENDMENT, TOGETHER WITH THE AGREEMENT, IS THE COMPLETE
AGREEMENT OF THE PARTIES AND SUPERSEDES ALL OTHER PRIOR AGREEMENTS AND
REPRESENTATIONS CONCERNING ITS SUBJECT MATTER.
9. THIS OFFER WILL REMAIN OPEN AND BE CAPABLE OF BEING ACCEPTED BY ACCA
UNTIL MARCH 10, 1996. ANY AND ALL PRIOR OFFERS MADE TO ACCA, WHETHER WRITTEN OR
ORAL, SHALL BE SUPERSEDED BY THIS OFFER. ANY FURTHER AMENDMENTS MUST BE IN
WRITING AND SIGNED BY BOTH PARTIES.
MCI TELECOMMUNICATIONS ASSOCIATED COMMUNICATIONS
CORPORATION COMPANIES OF AMERICA (ACCA)
/S/ Tom Schilling /S/ Mike Newkirk
- ---------------------- ---------------------------
AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE
Tom Schilling, Director Mike Newkirk Vice President
- ---------------------- ---------------------------
PRINT NAME AND TITLE PRINT NAME AND TITLE
3/20/96 2/28/96
- ---------------------- ---------------------------
DATE DATE
MCI CONFIDENTIAL
-2-
<PAGE>
EXHIBIT 10.61
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[_____]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
THIRD AMENDMENT TO
MCI CARRIER AGREEMENT
This Third Amendment is made as of this 1 day of August, 1996, between MCI
TELECOMMUNICATIONS CORPORATION ("MCI") and ASSOCIATED COMMUNICATIONS COMPANIES
OF AMERICA (ACCA) ("Customer"), an association of carriers which are subject to
the Communications Act of 1934, as amended, with offices located at 111 Congress
Avenue, Suite 3000, Austin, Texas 78701.
WHEREAS, Customer and MCI entered into an MCI Carrier Agreement, signed by MCI
on November 9, 1995, as heretofore amended (as amended, the "Agreement"); and
WHEREAS, Customer and MCI desire to enter into this Third Amendment for the
purpose of further amending the Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Customer and MCI agree as follows:
1. The following is hereby added as a final sentence to Paragraph 1(b) of
the Agreement:
For purposes of this Agreement, all references herein to "MCI 800 DAL
Service" shall be deemed to refer to "MCI Toll Free DAL Services"
2. Paragraphs 7(b)(2) and 7(b)(3) of the Agreement are hereby deleted in
their entirety and replaced with the following:
(2) For domestic interstate inbound services terminating via dedicated
access from an MCI point of presence (except for service originating
from Alaska, Hawaii, Puerto Rico, and the U.S. Virgin Islands for
which Customer shall pay Tariff rates less applicable Tariff discounts
and less an additional [___________________] discount), Customer will
pay the following applicable postalized rate per minute for domestic
interstate MCI 800 DAL Service originating in the following LATA
groups:
MCI CONFIDENTIAL
<PAGE>
<TABLE>
<CAPTION>
LATA Rate
Group Per Minute
----- ----------
<S> <C>
1 [____]
2 [____]
3 [____]
4 [____]
5 [____]
6 [____]
7 [____]
8 [____]
9 [____]
10 [____]
ECC [____]
</TABLE>
(3) For purposes of Paragraph 7(b)(2) above, the LATA Groups for MCI
domestic interstate 800 DAL Service are as follows;
<TABLE>
<CAPTION>
GROUP 1
LATA City State
---- ---- -----
<S> <C> <C>
721 Las Vegas NV
228 Philadelphia PA
732 San Diego CA
736 Monterey CA
734 Bakersfield CA
722 San Francisco CA
222 Trenton NJ
220 Atlantic City NJ
242 Salisbury MD
238 Baltimore MD
236 Washington DC VA
224 Newark NJ
252 Norfolk VA
254 Charleston WV
246 Culpepper VA
248 Richmond VA
956 Bristol VA
250 Lynchburg VA
240 Hagerstown WV
730 Los Angeles CA
738 Stockton CA
256 Clarksburg WV
922 Cincinnati OH
320 Cleveland OH
232 Northeast PA
720 Reno NV
358 Chicago IN
740 San Luis CA
728 Fresno CA
</TABLE>
<TABLE>
<CAPTION>
GROUP 2
LATA City State
---- ---- -----
<S> <C> <C>
340 Detroit MI
927 Harrisonburg VA
928 Charlottesville VA
</TABLE>
MCI CONFIDENTIAL
-2-
<PAGE>
<TABLE>
<S> <C> <C>
929 Edinburg VA
456 Daytona Beach FL
460 Miami FL
556 Waco TX
540 El Paso TX
330 Evansville IN
562 Beaumont TX
428 Wilmington NC
442 Augusta GA
484 Biloxi MS
452 Jacksonville FL
490 New Orleans LA
486 Shreveport LA
973 Palm Springs CA
374 Springfield IL
338 Bloomington IN
444 Albany GA
370 Champlain IL
234 Pittsburgh PA
438 Atlanta GA
356 Milwaukee WI
488 Lafayette LA
568 Brownsville TX
230 Altoona PA
430 Greenville SC
477 Huntsville AL
448 Pensacola FL
</TABLE>
<TABLE>
<CAPTION>
Group 3
LATA City State
---- ---- -----
<S> <C> <C>
324 Columbus OH
346 Lansing MI
520 St Louis MO
424 Greensboro NC
482 Jackson MS
420 Asheville NC
336 Indianapolis IN
476 Birmingham AL
542 Midland TX
550 Abilene TX
564 Corpus Christi TX
522 Springfield MO
666 Phoenix AZ
322 Youngstown OH
526 Fort Smith AR
668 Tuscon AZ
566 San Antonio TX
454 Gainesville FL
328 Dayton OH
244 Roanoke VA
458 Orlando FL
656 Denver CO
658 Colo. Springs CO
530 Pine Bluff AR
558 Austin TX
548 Wichita Falls TX
348 Grand Rapids MI
952 Tampa FL
360 Rockford IL
560 Houston TX
426 Raleigh NC
552 Dallas TX
446 Macon GA
226 Capital PA
</TABLE>
MCI CONFIDENTIAL
-3-
<PAGE>
<TABLE>
<S> <C> <C>
624 Duluth MN
528 Little Rock AR
325 Akron OH
474 Knoxville TN
492 Baton Rouge LA
468 Memphis TN
</TABLE>
<TABLE>
<CAPTION>
GROUP 4
LATA City State
---- ---- -----
<S> <C> <C>
951 Rocky Mount NC
436 Charleston SC
364 Dekalb IL
980 Navajo AZ
434 Colombia SC
524 Kansas City MO
664 New Mexico NM
470 Nashville TN
726 Sacramento CA
462 Louisville KY
464 Owensboro KY
536 Oklahoma City OK
949 Fayetteville NC
652 Boise ID
724 Chico CA
432 Florence SC
654 Cheyenne WY
660 Utah UT
544 Lubbock TX
981 Navajo Terr UT
628 Minneapolis MN
920 Connecticut CT
368 Peoria IL
939 Ft Meyers FL
953 Tallahassee FL
</TABLE>
<TABLE>
<CAPTION>
GROUP 5
LATA City State
---- ---- -----
<S> <C> <C>
472 Chattanooga TN
133 Poughkeepsie NY
644 Omaha NE
534 Topeka KS
538 Tulsa OK
532 Wichita KS
478 Montgomery AL
354 Madison WI
342 Marquette MI/WI
554 Longview TX
674 Seattle WA
670 Eugene OR
326 Toledo OH
344 Saginaw MI
</TABLE>
<TABLE>
<CAPTION>
GROUP 6
LATA City State
---- ---- -----
<S> <C> <C>
672 Portland WA
332 South Bend IN
546 Amarillo TX
376 Quincy IL
924 Erie PA
480 Mobile AL
422 Charlotte NC
</TABLE>
MCI CONFIDENTIAL
-4-
<PAGE>
<TABLE>
<S> <C> <C>
634 Davenport IA
648 Great Falls MT
350 Green Bay WI
138 Binghampton NY
630 Billings MT
</TABLE>
<TABLE>
<CAPTION>
GROUP 7
LATA City State
---- ---- -----
<S> <C> <C>
521 Columbia MO
132 New York NY
136 Syracuse NY
334 Auburn IN
450 Panama City FL
140 Buffalo NY
570 Bryan TX
646 Grand Island NE
632 Des Moines IA
635 Cedar Rapids IA
961 San Angelo TX
676 Spokane WA
937 Richmond IN
466 Winchester KY
938 Terre Haute IN
977 Macomb IL
352 Eau Claire WI
134 Albany NY
</TABLE>
<TABLE>
<CAPTION>
GROUP 8
LATA City State
---- ---- -----
<S> <C> <C>
923 Lima OH
366 Bloomington IL
626 St Cloud MN
362 Cairo IL
640 Sioux Falls SD
130 Rhode Island RI
128 Boston MA
932 Blue Field WV
126 Springfield MA
630 Sioux Falls IA
636 Fargo MN
122 New Hampshire NH
</TABLE>
<TABLE>
<CAPTION>
GROUP 9
LATA City State
---- ---- -----
<S> <C> <C>
440 Savannah GA
620 Rochester MN
124 Vermont VT
978 Olney IL
120 Maim ME
638 Bismark ND
960 Couer D'Arlene ID
</TABLE>
<TABLE>
<CAPTION>
GROUP 10
LATA City State
---- ---- -----
<S> <C> <C>
976 Mattoon IL
974 Rochester NY
958 Lincoln NE
963 Kalispell MT
</TABLE>
MCI CONFIDENTIAL
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<PAGE>
ECC
---
AK
HI
PR
USVI
3. PARAGRAPH 7(B)(5) OF THE AGREEMENT IS HEREBY DELETED AND THE FOLLOWING
IS INSERTED IN ITS PLACE:
(5) For MCI 800 service calls that originate in Canada and terminate in
the domestic United States via dedicated access (excluding service to
Hawaii, Alaska, U.S. Virgin Islands and Puerto Rico, for which
Customer shall pay Tariff Rates less applicable Tariff discounts),
Customer shall pay the following rates, determined based on the number
of minutes of such 800 DAL service purchased in such month:
<TABLE>
<CAPTION>
Minutes of MCI 800 DAL
Service originating in Canada Rate Per Minute
------------------------------ ---------------
<S> <C>
[____________] *
[__________________] [___]
[__________________] [___]
[__________________] [___]
[_________] [___]
</TABLE>
* Customer will receive the maximum discount associated with the VIP
Plus at the three (3) year and [____________________________________]
annual commitment level and on MOD on all MCI 800 DAL Service usage
originating in Canada.
4. THE FOLLOWING IS HEREBY ADDED AS NEW PARAGRAPH 7(Q) OF THE AGREEMENT:
(q) MCI Hyperstream/SM/ Frame Relay Service
-----------------------------------
Members may purchase MCI Hyperstream/SM/ Frame Relay Service
("Hyperstream Service"), pursuant to a Hyperstream/SM/ Frame Relay Network
Pricing Plan at the maximum discount level provided in the Tariff, as
provided in the MCI Hyperstream/SM/ Frame Relay Enrollment Form and
Agreement attached hereto as Attachment H ("Hyperstream Enrollment Form").
Hyperstream Service shall be provided to and purchased by Members pursuant
to the terms and conditions of the Tariff and the Hyperstream Enrollment
Form.
5. PARAGRAPH 10(b) OF THE AGREEMENT IS HEREBY AMENDED BY DELETING THE LAST
SENTENCE OF SUCH PARAGRAPH AND REPLACING IT WITH THE FOLLOWING:
MCI CONFIDENTIAL
-6-
<PAGE>
"When referenced in this Paragraph 10, actual monthly usage billing shall
exclude Additional DeltaCom Usage, domestic interstate MCI 800 DAL Service
usage, and usage of MCI services where no rates are listed in this Agreement for
the MCI service and where Members pay standard tariffed rates after
application of tariffed discounts."
6. EXHIBIT E TO THE AGREEMENT IS, HEREBY AMENDED BY DELETING PARAGRAPHS
1(A) AND (B)FROM SUCH EXHIBIT AND REPLACING THEM WITH THE FOLLOWING:
(a) MCI International PRISM I Service
---------------------------------
(1) For MCI International PRISM I Service terminating in
international countries (excluding MCI International PRISM I Service
terminating in Canada and Mexico), Customer shall pay the rates set
forth below. No Tariff discounts shall apply to such rates and no
discounts otherwise provided in this Agreement, other than as provided
in Paragraph 12(b), shall be provided with respect to such service.
<TABLE>
<CAPTION>
COUNTRY RATE
------- ----
<S> <C>
AFGHANISTAN [_____]
ALBANIA [_____]
ALGERIA [_____]
AMERICAN SAMOA [_____]
ANDORRA [_____]
ANGOLA [_____]
ANGUILLA [_____]
ANTARCTICA [_____]
ANTIGUA [_____]
ARGENTINA [_____]
ARMENIA [_____]
ARUBA [_____]
ASCENSION ISLANDS [_____]
AUSTRALIA [_____]
AUSTRIA [_____]
AZERBAIJAN [_____]
BAHAMAS [_____]
BAHRAIN [_____]
BANGLADESH [_____]
BARBADOS [_____]
BELARUS [_____]
BELGIUM [_____]
BELIZE [_____]
BENIN [_____]
BERMUDA [_____]
BHUTAN [_____]
BOLIVIA [_____]
BOSNIA [_____]
BOTSWANA [_____]
BRAZIL [_____]
</TABLE>
MCI CONFIDENTIAL
-7-
<PAGE>
<TABLE>
<S> <C>
BRITISH V.I. [_____]
BRUNEI [_____]
BULGARIA [_____]
BURKINA FASO [_____]
BURUNDI [_____]
CAMBODIA [_____]
CAMEROON [_____]
CAPE VERDE [_____]
CAYMAN ISLANDS [_____]
CENTRAL AFRICAN [_____]
CHAD [_____]
CHILE [_____]
CHINA [_____]
CHRISTMAS ISLAND [_____]
COCOS ISLAND [_____]
COLOMBIA [_____]
COMORROS [_____]
CONGO [_____]
COOK ISLAND [_____]
COSTA RICA [_____]
CROATIA [_____]
CUBA (HAVANA) [_____]
CYPRUS [_____]
CZECH REPUBLIC [_____]
DENMARK [_____]
DIEGO GARCIA [_____]
DJIBOUTI [_____]
DOMINICA [_____]
DOMINICAN REPUBLIC [_____]
EASTER ISL [_____]
ECUADOR [_____]
EGYPT [_____]
EL SALVADOR [_____]
EQUATORIAL GUINEA [_____]
ERITREA [_____]
ESTONIA [_____]
ETHIOPIA [_____]
FAEROE ISLANDS [_____]
FALKLAND ISLANDS [_____]
FIJI ISLANDS [_____]
FINLAND [_____]
FRANCE [_____]
FRENCH ANTILLES [_____]
FRENCH GUIANA [_____]
FRENCH POLYNESIA [_____]
GABON [_____]
GAMBIA [_____]
GEORGIA [_____]
GERMANY [_____]
GHANA [_____]
</TABLE>
MCI CONFIDENTIAL
-8-
<PAGE>
<TABLE>
<S> <C>
GIBRALTAR [_____]
GREECE [_____]
GREENLAND [_____]
GRENADA [_____]
GUADELOUPE [_____]
GUAM [_____]
GUANTANAMO [_____]
GUATEMALA [_____]
GUINEA [_____]
GUINEA-BISSAU [_____]
GUYANA [_____]
HAITI [_____]
HONDURAS [_____]
HONG KONG [_____]
HUNGARY [_____]
ICELAND [_____]
INDIA [_____]
INDONESIA [_____]
IRAN [_____]
IRAQ [_____]
IRELAND [_____]
ISRAEL [_____]
ITALY [_____]
IVORY COAST [_____]
JAMAICA [_____]
JAPAN [_____]
JORDAN [_____]
KALINGRAD [_____]
KAZAKHSTAN [_____]
KENYA [_____]
KIRIBATI [_____]
KUWAIT [_____]
KYRGYZSTAN [_____]
LAOS [_____]
LATVIA [_____]
LEBANON [_____]
LESOTHO [_____]
LIBERIA [_____]
LIBYA [_____]
LIECHTENSTEIN [_____]
LITHUANIA [_____]
LUXEMBOURG [_____]
MACAO [_____]
MACEDONIA [_____]
MADAGASCAR [_____]
MALAWI [_____]
MALAYSIA [_____]
MALDIVES [_____]
MALI [_____]
MALTA [_____]
</TABLE>
MCI CONFIDENTIAL
-9-
<PAGE>
<TABLE>
<S> <C>
MARSHALL ISLANDS [_____]
MAURITANIA [_____]
MAURITIUS [_____]
MAYOTTE ISLAND [_____]
MICRONESIA [_____]
MIDWAY [_____]
MOLDAVIA [_____]
MONACO [_____]
MONGOLIA [_____]
MONTSERRAT [_____]
MOROCCO [_____]
MOZAMBIQUE [_____]
MYANMAR (BURMA) [_____]
NAKHODA [_____]
NAMIBIA [_____]
NAURU [_____]
NEPAL [_____]
NEThERLANDS [_____]
NETHERLANDS ANTILLES [_____]
NEVIS [_____]
NEW CALEDONIA [_____]
NEW ZEALAND [_____]
NICARAGUA [_____]
NIGER [_____]
NIGERIA [_____]
NIUE ISLAND [_____]
NORFOLK ISLAND [_____]
NORTh KOREA [_____]
NORWAY [_____]
OMAN [_____]
PAKISTAN [_____]
PALAU [_____]
PANAMA [_____]
PAPUA NEW GUINEA [_____]
PARAGUAY [_____]
PERU [_____]
PHILIPPINES [_____]
PITCAIRN ISL [_____]
POLAND [_____]
PORTUGAL [_____]
QATAR [_____]
REUNION ISLAND [_____]
ROMANIA [_____]
RUSSIA [_____]
RWANDA [_____]
SAIPAN [_____]
SAKHALIN [_____]
SAN MARINO [_____]
SAO TOME [_____]
SAUDI ARABIA [_____]
</TABLE>
MCI CONFIDENTIAL
-10-
<PAGE>
<TABLE>
<S> <C>
SENEGAL [_____]
SERBIA [_____]
SEYCHELLES [_____]
SIERRA LEONE [_____]
SINGAPORE [_____]
SLOVAKIA [_____]
SLOVENIA [_____]
SOLOMON ISLANDS [_____]
SOMALIA [_____]
SOUTH AFRICA [_____]
SOUTH KOREA [_____]
SPAIN [_____]
SRI LANKA [_____]
ST. HELENA [_____]
ST. KITTS [_____]
ST. LUCIA [_____]
ST. PIERRE & MIQUEL [_____]
ST. VINCENT/GRENADINES [_____]
SUDAN [_____]
SURINAM [_____]
SWAZILAND [_____]
SWEDEN [_____]
SWITZERLAND [_____]
SYRIA [_____]
TADJIKISTAN [_____]
TAIWAN [_____]
TANZANIA [_____]
TATARSTAN [_____]
THAILAND [_____]
TOGO [_____]
TONGA [_____]
TRINIDAD AND TOBAGO [_____]
TUNISIA [_____]
TURKEY [_____]
TURKMENISTAN [_____]
TURKS & CAICOS ISL [_____]
TUVALU [_____]
UGANDA [_____]
UKRAINE [_____]
UNITED ARAB EMIRATES [_____]
UNITED KINGDOM [_____]
URUGUAY [_____]
UZBEKISTAN [_____]
VANUATU [_____]
VATICAN CITY [_____]
VENEZUELA [_____]
VIETNAM [_____]
VLADIVOSTOK [_____]
WAKE ISL [_____]
WALLIS AND FUTUNA [_____]
</TABLE>
MCI CONFIDENTIAL
-11-
<PAGE>
<TABLE>
<S> <C>
WESTERN SAHARA [_____]
WESTERN SAMOA [_____]
YEMEN ARAB REPUBLIC [_____]
ZAIRE [_____]
ZAMBIA [_____]
ZIMBABWE [_____]
</TABLE>
(2) The rates set forth in Paragraph (a)(1) above are fixed for six
(6) months from the Effective Date. Beginning six (6) months after
July 1, 1996, MCI shall have the option to revise such rates on 30
days notice to ACCA.
(b) All tariff limitations on callback traffic will apply individually to
each Member's use of MCI International PRISM I Service and are hereby
incorporated in this Agreement.
7. Exhibit H ATTACHED HERETO IS HEREBY ADDED TO THE AGREEMENT AS EXHIBIT
H THEREOF.
8. THE TERMS OF THIS THIRD AMENDMENT WILL BECOME EFFECTIVE, UPON
EXECUTION AND DELIVERY BY BOTH PARTIES HERETO, AS OF APRIL 1,1996.
9. EXCEPT AS EXPRESSLY PROVIDED IN THIS THIRD AMENDMENT, ALL OF THE TERMS
AND CONDITIONS CONTAINED IN THE AGREEMENT SHALL REMAIN IN FULL FORCE AND EFFECT.
10. THIS THIRD AMENDMENT, TOGETHER WITH THE AGREEMENT, IS THE COMPLETE
AGREEMENT OF THE PARTIES AND SUPERSEDES ALL OTHER PRIOR AGREEMENTS AND
REPRESENTATIONS CONCERNING ITS SUBJECT MATTER.
11. THIS OFFER WILL REMAIN OPEN AND BE CAPABLE OF BEING ACCEPTED BY
CUSTOMER UNTIL AUGUST 1, 1996. ANY AND ALL PRIOR OFFERS MADE TO CUSTOMER,
WHETHER WRITTEN OR ORAL, SHALL BE SUPERSEDED BY THIS OFFER. ANY FURTHER
AMENDMENTS MUST BE IN WRITING AND SIGNED BY BOTH PARTIES.
ASSOCIATED COMMUNICATION MCI TELECOMMUNICATIONS
COMPANIES OF AMERICA (ACCA) CORPORATION
/s/ Mike Newkirk /s/ Edward W. Smith
- ---------------------- ------------------------------
Authorized Signature Authorized Signature
Mike Newkirk V.P. /s/ Edward W. Smith / Director
- ---------------------- ------------------------------
Print Name and Title Print Name and Title
8/1/96 8/9/96
- ---------------------- ------------------------------
Date Date
MCI CONFIDENTIAL
-12-
<PAGE>
EXHIBIT H
MCI HYPERSTREAM/SM/ FRAME RELAY ENROLLMENT FORM AND AGREEMENT
- --------------------------------------------------------------------------------
COMPLETE AND SIGN THIS FORM TO ENROLL YOUR COMPANY IN AN MCI HYPERSTREAM/SM/
FRAME RELAY AGREEMENT. ENROLLMENT IS SUBJECT TO THE TERMS AND CONDITIONS SET
FORTH BELOW, AND IS NOT VALID UNLESS SIGNED BY CUSTOMER ON OR BEFORE 06/30/96
AND SUBSEQUENTLY ACCEPTED BY AN MCI FINANCE REPRESENTATIVE.
- --------------------------------------------------------------------------------
CUSTOMER INFORMATION
(To be completed by MCI Representative)
Please Print: Check one to indicate current term plan enrollment
_______________________ [_] New HyperStream/SM/ Frame Relay Enrollment
Company Name
_______________________ [_] Conversion from existing HyperStream/SM/
Company Address Line 1 Frame Relay
_______________________ [_] Conversion from existing Customized
Company Address Line 2 Business Program
_______________________
HyperStream/SM/ Frame Relay
City/State/ZIP MEGA ID No. [_] [_] - [_] [_] [_] [_] [_] [_]
[_] - [_] [_]
( ) - COMS ID No. ___________
- ------------------------
Main Telephone Number
<TABLE>
START DATE, TERM AND MONTHLY MINIMUM VOLUME COMMITMENTS
(To be completed by Customer)
<S> <C>
Start Date. This Agreement shall be Check Month-to-Month or Term Commitment:
effective upon execution by both parties.
The Term or month-to-month service [_] Month-to-Month. (Check if enrolling in
(excluding Trial Promotion enrollments) HyperStream Frame Relay Trial Promotion).
shall commence on the first day of the next full
monthly billing period following the latest
signature date on this Agreement.
TERMS & CONDITIONS: Enrollment is subject to [_] Term Commitment. If Term Commitment, indicate
MCI Tariff F.C.C. No. 1, as revised from time to time, Term and Monthly Minimum.
and the Terms and Conditions herein.
Term Commitment:___1 yr ___2 yr ___3 Yr ___4 yr ___5 yr
Monthly Minimum:
RENEWAL POLICY: Agreement automatically renews ____$ 500 ____$ 25,000
for a period of 1 year following expiration of ____$ 2,000 ____$ 50.000
a Term Commitment, unless Customer provides written ____$ 5,000 ____$100,000
notice to MCI at least 30 days prior to expiration ____$10,000
the original Terms.
</TABLE>
MCI CONFIDENTIAL
<PAGE>
ENROLLMENT REQUESTED BY:
(To be completed and signed by Customer and MCI Representative)
<TABLE>
<S> <C>
_______________________________________________
MCI Branch Dept./Loc. No.
________________________________________________________ _______________________________________________
Company Representative Name - Please Print MCI Sales Representative Name - Please Print (vnet no.)
________________________________________________________ _______________________________________________
Title - Please Print MCI CSC Representative Name - Please Print (vnet no.)
________________________________________________________ _______________________________________
Company Representative Signature MCI Sales or CSC Representative Signature
________________________________________________________ _______________________________________
Date Date
</TABLE>
AGREEMENT ACCEPTED BY:
(To be completed and signed by MCI Billing Services)
<TABLE>
<S> <C>
________________________________________________________ _______________________________________________
MCI Finance Representative Name - Please Print HyperStream/SM/ Frame Relay Contract Number
___________________________________ ___________________
Finance representative Signature Date
</TABLE>
MCI CONFIDENTIAL
H-2
<PAGE>
TERMS AND CONDITIONS
1. DEFINITIONS. "You" and "Your" refers to Customer. "MCI" refers to MCI
Telecommunications Corporation. "HyperStream/SM/ Frame Relay" or "HSFR" means
MCI's packet-oriented frame-based data networking service, as described in MCI
Tariff F.C.C. No.1 ("Tariff"), as revised from time to time
2 SERVICE TERMS.
2.1. This HyperStream/SM/ Frame Relay Enrollment Form and Agreement incorporates
by reference the Tariff, as it may be amended or modified from time to time
(collectively, the "Agreement"). In the event of any inconsistency between
the terms of the Tariff and this Enrollment Form and Agreement, the Tariff
shall be deemed controlling. MCI will furnish the service to Customer
pursuant to the terms of this Enrollment Form and Agreement and the Tariff,
and any other applicable interstate, international or state tariffs, of MCI
and its affiliates.
2.2. With the exception of revisions of the Tariff made in accordance with
applicable law, this Agreement may only be amended in writing signed by
authorized representatives of the parties.
3. RATES AND CHARGES. Customer will pay standard rates as set forth in the
Tariff for MCI HyperStream/SM/ Frame Relay service, including but not limited to
access charges, installation charges, reconfiguration charges, monthly recurring
port and permanent virtual circuit ("PVC") charges. MCI charges which contribute
to satisfaction of any Monthly Minimum are set forth in the Tariff ("Qualifying
Volume"). MCI charges eligible for discounts are also set forth in the Tariff
("Eligible Volume").
3.1 Month-to-Month.
If Customer selected a Month-to-Month plan, Customer shall pay standard
month-to-month tariffed rates without a term or volume commitment, except
Customer shall be liable for satisfying any monthly PVC minimum
requirements.
3.2 HyperStream/SM/ Frame Relay Network Pricing Plan ("HPP").
3.2.1 Term and Monthly Minimum Commitments.
If Customer selected an HPP, in lieu of any other tariffed term plan
(except Access Pricing Plans), Customer agrees to use services
pursuant to this Agreement for a period of years, as indicated above
("Term"). Customer further agrees to purchase at least the Monthly
Minimum, before application of any discounts, of HSFR recurring port
and PVC charges for services pursuant to the Tariff, during each
month of the Term. At the completion of each year in a multi-year
Term, Customer may increase its Monthly Minimum. Following
execution by Customer of an amendment increasing its Monthly
Minimum, the terms and conditions of this Agreement will then apply
at the new, higher Monthly Minimum. After expiration of the initial
Term, this Agreement shall automatically renew for a period of one
(1) year, unless MCI receives written notice of termination from
Customer at least thirty (30) days prior to expiration of the
initial Term, or unless Customer has met the requirements set forth
under "Termination without Liability." Upon expiration of the
renewal period, Customer will receive standard tariffed rates for
month-to-month HSFR service, until such time as either party
provides the other with at least thirty (30) days written notice of
termination. The term of an associated Access Pricing plan ("APP")
is independent of the HPP term.
3.2.2 Underutilization Liability.
Commencing with the fourth (4th) full monthly billing period
following commencement of the Term, if Customer fails to satisfy its
Monthly Minimum during any month of the Term, Customer shall pay an
underutilization charge equal to one hundred percent (100%) of the
difference between Customer's Qualifying Volume during such month
and Customer's Monthly Minimum.
3.2.3 Early Termination Liability.
MCI CONFIDENTIAL
H-3
<PAGE>
If Customer terminates this Agreement prior to expiration of the
Term or prior to expiration of any renewal period, other than
pursuant to the terms set forth below for "Termination without
Liability", Customer shall pay early termination charges, equal to a
portion of the total HPP discounts received during the Term prior to
termination, based upon the year in which Customer terminates.
<TABLE>
<CAPTION>
Term Year of Termination Percentage of Discount Repayment
---- ------------------- --------------------------------
<S> <C> <C>
5 years 1 100%
2 75%
3 50%
4 30%
5 15%
---------------------------------------------------------------------------------------
4 years 1 100%
2 75%
3 50%
4 30%
---------------------------------------------------------------------------------------
3 years 1 100%
2 75%
3 50%
---------------------------------------------------------------------------------------
2 years 1 100%
2 500%
---------------------------------------------------------------------------------------
1 year 1 100%
</TABLE>
3.2.4 Termination Without Liability.
Customer may discontinue this Agreement without liability, except
for charges incurred prior to termination, provided Customer
executes a new HyperStream/SM/ Frame Relay agreement with a greater
or equal term and a greater or equal monthly volume commitment.
4. PROMOTIONS. Customer will receive HSFR promotions indicated with an "X"
below, pursuant to the eligibility requirements, availability, and other terms
and conditions as set forth in the Tariff. In the event a promotion is
selected for which Customer is ineligible, or in the event an unacceptable
combination of promotions is selected, such promotion selections will be
invalid and this Agreement shall remain in full force and effect without regard
to any invalid promotion selections.
_________ HyperStream/SM/ Frame Relay Trial Promotion. Customer shall pay
rates and charges pursuant to the terms and conditions of the Tariff
during the first sixty (60) days following implementation of the
first service element ("Trial Period"), provided Customer has not
received MCI HSFR service during the previous 365 days and Customer
satisfies any other eligibility requirements set forth in the Tariff
Upon expiration of the Trial Period, Customer will automatically be
enrolled in an MCI HyperStream/SM/ Frame Relay agreement for HSFR
service on a monthly-month basis pursuant to the terms and
conditions of the Tariff, unless Customer executes an MCI
HyperStream/SM/ Frame Relay agreement with term and monthly volume
commitments prior to expiration of the Trial Period, or unless
Customer provides written notice of termination to MCI prior to
expiration of the Trial Period. The HSFR Trial Promotion may not be
used concurrently with any other HyperStream Promotional Offering
but, upon expiration of the Trial Period, Customer may be eligible
to receive the benefits of one or more HyperStream Promotion
Offerings.
__________ HyperStream/SM/ Frame Relay Sign-Up Promotion (customers receiving
HyperStream/SM/ Frame Relay service at any time during the preceding
365 days, except pursuant to the Trial Promotion, are ineligible for
this promotion)
MCI CONFIDENTIAL
H-4
<PAGE>
__________ HyperStream/SM/ Frame Relay Network Growth Promotion
__________ HyperStream/SM/ Frame Relay Competitive Conversion Promotion
5. GOVERNING LAW. The provision of service under this Agreement is subject to
the terms of the Communications Act of 1934, as administered by the Federal
Communications Commission.
6. COMPLETE AGREEMENT. This Enrollment Form and Agreement, including any MCI
attachments hereto, together with the Tariff, constitutes the complete agreement
of the parties concerning HSFR service and supersedes any prior proposals,
discussions or agreements, written or oral, concerning HSFR.
MCI CONFIDENTIAL
H-5
<PAGE>
EXHIBIT 10.62
[LOGO]
[LETTERHEAD OF MCI]
FOURTH AMENDMENT TO
MCI CARRIER AGREEMENT
This Fourth Amendment is made as of this 1st day of May, 1996, between MCI
TELECOMMUNICATIONS CORPORATION ("MCI") and ASSOCIATED COMMUNICATIONS COMPANIES
OF AMERICA (ACCA) ("Customer"), an association of carriers which are subject to
the Communications Act of 1934, as amended, with offices located at 111 Congress
Avenue, Suite 3000, Austin, Texas 78701.
WHEREAS, Customer and MCI entered into an MCI Carrier Agreement, signed by MCI
on November 9,1995, as heretofore amended (as amended, the "Agreement");
WHEREAS, Customer and MCI desire to enter into this Fourth Amendment for the
purpose of further amending the Agreement, in order to enable U.S. LONG
DISTANCE, INC. ("USLD") to become a member of Customer and to obtain MCI
Services at the rates provided to Customer's Members under the Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Customer and MCI agree as follows:
1. Exhibit A of the Agreement is hereby supplemented by the Acknowledgment
and Acceptance signed by USLD below, and USLD is hereby acknowledged as a
"Member" of Customer within the meaning of the Agreement.
2. Pursuant to Paragraph 19 of the Agreement, USLD shall appoint MCI as
its agent in the Letter of Agency attached hereto, which shall be incorporated
in the Agreement as part of Attachment D thereto.
3. USLD shall not purchase domestic interstate MCI 800 DAL Service,
international PRISM I Service, or international PRISM I Service terminating in
Mexico pursuant to the Agreement during any month, until USLD has first
satisfied the Monthly Commitment pursuant to the MCI Carrier Agreement between
MCI and USLD, signed by MCI on April 6,1995, as supplemented and amended.
4. The terms of this Fourth Amendment will become effective, upon
execution and delivery by both parties hereto and upon acknowledgment and
acceptance hereof by USLD, as of January 1,1996.
5. Except as expressly provided in this Fourth Amendment, all of the terms
and conditions contained in the Agreement shall remain in full force and effect.
MCI CONFIDENTIAL
<PAGE>
6. This Fourth Amendment, together with the Agreement, is the complete
agreement of the parties and supersedes all other prior agreements and
representations concerning its subject matter.
7. This offer will remain open and be capable of being accepted by
Customer and USLD until March 31, 1996. Any and all prior offers made to
Customer, whether written or oral, shall be superseded by this offer. Any
further amendments must be in writing and signed by both parties.
ASSOCIATED COMMUNICATION MCI TELECOMMUNICATIONS
COMPANIES OF AMERICA (ACCA) CORPORATION
/s/ Mike Newkirk /s/ Tom Schilling
- ------------------------------ ----------------------------
Authorized Signature Authorized Signature
Mike Newkirk Vice President Tom Schilling, Director
- ------------------------------ ----------------------------
Print Name and Title Print Name and Title
3/30/96 5/1/96
- ------------------------------ ----------------------------
Date Date
ACKNOWLEDGMENT AND ACCEPTANCE
Monthly PRISM I 800 DAL Private Line
Commitment Subcommitment Subcommitment Subcommitment
---------- ------------- ------------- -------------
U.S. LONG DISTANCE, INC.
/s/ James S. Speirs $ 0 $ 0 $ 0 $ 0
- ------------------------
Authorized Signature
James S. Speirs
SENIOR VICE PRESIDENT
- ------------------------
Print Name and Title
3/29/96
- ------------------------
Date
MCI CONFIDENTIAL
-2-
<PAGE>
EXHIBIT 10.63
-------------
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[_____]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
[LOGO]
[LETTERHEAD OF MCI]
FIFTH AMENDMENT TO
MCI CARRIER AGREEMENT
This Fifth Amendment is made as of this 10 day of April, 1996, between MCI
Telecommunications CORPORATION ("MCI") and ASSOCIATED COMMUNICATIONS COMPANIES
OF AMERICA (ACCA) ("Customer"), an association of carriers which are subject to
the Communications Act of 1934, as amended, with offices located at 111 Congress
Avenue, Suite 3000, Austin, Texas 78701.
WHEREAS, Customer and MCI entered into an MCI Carrier Agreement, signed by MCI
on November 9, 1995, as heretofore amended (as amended, the "Agreement"); and
WHEREAS, Customer and MCI desire to enter into this Fifth Amendment for the
purpose of further amending the Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiently of which are hereby acknowledged, Customer and MCI agree as
follows:
1. THE CHART APPEARING IN PARAGRAPH 8 OF THE AGREEMENT IS HEREBY AMENDED
TO READ AS FOLLOWS:
<TABLE>
<CAPTION>
Monthly Usage Discount
------------- --------
<S> <C>
[______________________] [__]
[______________________] [__]
[______________________] [__]
[______________________] [__]
[______________________] [__]
[_________________] [__]
</TABLE>
2. PARAGRAPH 10(B) OF THE AGREEMENT IS HEREBY DELETED IN ITS ENTIRETY AND
REPLACED WITH THE FOLLOWING:
(b) For the second credit, Customer's actual monthly usage billing
(exclusive of usage in Paragraph 7(h), switched 56Kbps service)
during August, September, October and November 1996 shall be added
together and divided by four (4). The credit amount shall be applied
to the December 1996 invoice and shall not exceed [_______________
___________________]. When referenced in this Paragraph 10, actual
monthly usage billing shall exclude Additional DeltaCom Usage and
MCI services where no rates are listed in this Agreement for the MCI
service and where Members pay standard tariffed rates after
application of tariffed discounts.
MCI CONFIDENTIAL
<PAGE>
4. The terms of this Fifth Amendment will become effective, upon
execution and delivery by both parties hereto.
5. Except as expressly provided in this Fifth Amendment, all of the terms
and conditions contained in the Agreement shall remain in full force and effect.
6. This Fifth Amendment, together with the Agreement, is the complete
agreement of the parties and supersedes all other prior agreements and
representations concerning its subject matter.
7. This offer will remain open and be capable of being accepted by
Customer until April 15, 1996. Any and all prior offers made to Customer,
whether written or oral, shall be superseded by this offer. Any further
amendments must he in writing and signed by both parties.
ASSOCIATED COMMUNICATION MCI TELECOMMUNICATIONS
COMPANIES OF AMERICA (ACCA) CORPORATION
/s/ Mike Newkirk /s/ Tom Schilling
- --------------------------------- -------------------------------
Authorized Signature
Mike Newkirk Vice Pres Tom Schilling, Director
- --------------------------------- -------------------------------
Print Name and Title Print name and Title
4/10/96 4/19/96
- --------------------------------- -------------------------------
Date Date
<PAGE>
EXHIBIT 10.64
-------------
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[_____]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
[LOGO]
[LETTERHEAD OF MCI]
SIXTH AMENDMENT TO MCI CARRIER AGREEMENT
This Sixth Amendment is made as of this 11 day of Sept, 1996, between MCI
TELECOMMUNICATIONS CORPORATION ("MCI") and ASSOCIATED COMMUNICATIONS COMPANIES
OF AMERICA (ACCA) ("Customer"), an association of carriers which are subject to
the Communications Act of 1934, as amended, with offices located at 111 Congress
Avenue, Suite 3000, Austin, Texas 78701.
WHEREAS, Customer and MCI entered into an MCI Carrier Agreement, signed by MCI
on November 9, 1995, as heretofore amended (as amended, the "Agreement"); and
WHEREAS, Customer and MCI desire to enter into this Sixth Amendment for the
purpose of further amending the Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Customer and MCI agree as follows:
1. Exhibit C to the Agreement is hereby deleted and replaced by Exhibit C
attached to this Sixth Amendment.
2. Exhibit C.1 to the Agreement is hereby deleted and replaced by Exhibit
C-1 attached to this Sixth Amendment.
3. The terms of this Sixth Amendment will become effective, upon execution
and delivery by both parties hereto, as of September 1,1996.
4. Except as expressly provided in this Sixth Amendment, all of the terms
and conditions contained in the Agreement shall remain in full force and effect.
5. This Sixth Amendment, together with the Agreement, is the complete
agreement of the parties and supersedes all other prior agreements and
representations concerning its subject matter.
6. This offer will remain open and be capable of being accepted by
Customer until September 1, 1996. Any and all prior offers made to Customer,
whether written or oral, shall be superseded by this offer. Any further
amendments must be in writing and signed by both parties.
MCI CONFIDENTIAL
<PAGE>
ASSOCIATED COMMUNICATION MCI TELECOMMUNICATIONS
COMPANIES OF AMERICA (ACCA) CORPORATION
/s/ Mike Newkirk /s/ Edward W. Smith
- ------------------------------ -----------------------------------
Authorized Signature Authorized Signature
Mike Newkirk V.P. Edward W. Smith, Director
- ------------------------------ -----------------------------------
Print Name and Title Print Name and Title
9-11-96 9/18/96
- ------------------------------ -----------------------------------
Date Date
MCI CONFIDENTIAL
-2-
<PAGE>
EXHIBIT C
MCI FEATURE CARD SERVICE AND
ASSOCIATED FEATURE SERVICES DISCOUNT
A. MCI Feature Card Service (Option T).
When used under this Paragraph A, MCI Feature Card Service shall refer to
such service only as accessed by dialing the unique 800 access number
assigned by MCI to the MCI Feature Card Service.
1) For domestic (i.e., within the U.S., but excluding Alaska,
Hawaii, Puerto Rico and the U.S. Virgin Islands) interstate usage of MCI
Feature Card (exclusive of monthly recurring charges, taxes, surcharges,
installation charges, MCI Feature Card surcharges, Directory Assistance
charges, charges for local access/egress services or facilities, and
enhanced feature charges associated with MCI Feature Card Service),
Customer shall pay a postalized rate of [___] per minute.
2)(a) For domestic intrastate usage of MCI Feature Card (exclusive of
monthly recurring charges, taxes, surcharges, installation charges, MCI
Feature Card surcharges, Directory Assistance charges, charges for local
access/egress services or facilities, and enhanced feature charges
associated with MCI Feature Card Service), Customer shall pay standard
tariff rates for MCI Feature Card Service in each applicable MCI state
tariff.
(b) Customer shall receive a credit for domestic intrastate usage of
MCI Feature Card Service, which when combined with the rates identified in
2)(a) above, shall yield the postalized rate of [___] per minute (exclusive
of monthly recurring charges, installation charges, MCI Feature Card
surcharges, Directory Assistance charges, charges for local access/egress
services or facilities, and enhanced feature charges associated with MCI
Feature Card Service).
(c) The credit amount provided for in 2)(b) above shall be applied to
Customer's domestic interstate monthly usage charges (exclusive of monthly
recurring charges, taxes, surcharges, installation charges, MCI Feature
Card surcharges, Directory Assistance charges, charges for local
access/egress services or facilities and enhanced feature charges
associated with the MCI Feature Card Service). The credit amount in any
month shall not exceed such interstate monthly usage charges and shall not
be carried forward to any subsequent month.
MCI CONFIDENTIAL
C-1
<PAGE>
3) For MCI Feature Card Service usage originating in international
countries (excluding Canada, Puerto Rico and the U.S. Virgin Islands),
Customer will pay standard tariff rates (together with any applicable
monthly recurring charges, taxes, surcharges, installation charges, MCI
Feature Card surcharges, Directory Assistance charges, charges for local
access/egress services or facilities and enhanced feature charges
associated with the MCI Feature Card Service).
4) During each month of the service term, Customer shall receive a
credit calculated by multiplying the discount percentage determined below
times Customer's domestic interstate, intrastate (after application of the
credit described in Paragraph 2)(b) above) and international usage charges
of MCI Feature Card Service (exclusive of monthly recurring charges, taxes,
surcharges, installation charges, MCI Feature Card surcharges, Directory
Assistance charges, charges for local access/egress services or facilities,
and enhanced feature charges associated with MCI Feature Card Service). The
discount percentage shall be as follows:
<TABLE>
<CAPTION>
Total Revenue Discount Percentage
------------- -------------------
<S> <C>
$ [__________] [___]
[_________________] [___]
[_________________] [___]
[_________________] [___]
[_________________] [___]
[_________] [___]
</TABLE>
The credit amount shall be applied to Customer's domestic interstate
monthly usage charges (exclusive of monthly recurring charges, taxes,
surcharges, installation charges, MCI Feature Card surcharges, Directory
Assistance charges, charges for local access/egress services or facilities
and enhanced feature charges associated with the MCI Feature Card Service),
after application of the credit described in 2)(b) above. The credit amount
in any month shall not exceed such interstate monthly usage charges and
shall not be carried forward to any subsequent month.
5) The following MCI Feature Card surcharges shall be charged on all
direct dial MCI Feature Card calls.
<TABLE>
<CAPTION>
From To Dial
---- -- ----
<S> <C> <C>
United States U.S., Puerto Rico
("U.S.") U.S. Virgin Islands,
Alaska and Hawaii [____]
</TABLE>
MCI CONFIDENTIAL
C-2
<PAGE>
<TABLE>
<S> <C> <C>
U.S. U.S., within same state
(domestic intrastate) [____]
Puerto Rico U.S. [____]
U.S. Virgin U.S. [____]
Islands
U.S., Puerto Rico Canada
and U.S. Virgin
Islands [____]
U.S., Puerto Rico International Locations
arid U.S. Virgin Other than Canada [____]
Islands
Canada U.S ., Puerto Rico and
U.S. Virgin Islands [____]
Canada International Locations [____]
</TABLE>
6) The above discounts for MCI Feature Card Service are in lieu of
any Tariff discounts including, without limitation, the discounts for MCI
Feature Card Service available under MCI VIP, MCI VIP Plus, MCI MOD and MCI
CAS Service.
7) For MCI Feature Card Service, Customer shall pay MCI for the
fulfillment costs associated with Customer's usage of MCI Feature Card
Service, plus an administrative charge for handling fulfillment in an
amount equal to [_____] percent [___] of the fulfillment costs.
8) For MCI Feature Card Service, MCI shall provide the fraud
detection procedures set forth in Exhibit C-1, attached hereto and
incorporated herein by reference. Customer shall be responsible for all
fraud associated with its usage of MCI Feature Card Service, except as set
forth in Exhibit C-I.
B. Discounts on Non-Tariffed Feature Services.
1) Customer will be entitled to the following applicable incremental
discounts on Customer's usage of non-tariffed Card Feature Services (MCI
Messenger Service, *3
MCI CONFIDENTIAL
C-3
<PAGE>
Flexible Routing for Voice Mail, Voice News Network and Speed Dialing) as
determined by Customer's Non-Tariffed Feature Services Monthly Usage (as
defined below):
<TABLE>
<CAPTION>
Non-Tariffed
Feature Services
Monthly Usage Discount
------------- --------
<S> <C>
[_________________] [__]
[_________________] [__]
[_________________] [__]
[_________________] [__]
[_________________] [__]
[_________________] [__]
[_________] [__]
</TABLE>
The above discounts shall apply only to Customer's usage of non-tariffed
Feature Services provided pursuant to MCI's standard terms and conditions
for such services, but not to charges for installation, taxes or
surcharges, and charges for local access/egress services or facilities
associated with non-tariffed Feature Services.
2) Non-Tariffed Feature Services Monthly Usage shall mean Customer's
monthly combined recurring and usage charges for non-tariffed Feature
Services at standard pricing but not including taxes (and gross receipts
taxes), surcharges, and any charges for MCI Tariff or state tariff
services.
C. Discounts on Tariffed Feature Services.
1) Customer will be entitled to the following applicable incremental
discounts on customers usage of tariffed Card Feature Services (i.e.,
conference calling) as determined by Customer's Tariffed Feature Services
Monthly Usage (as defined below):
<TABLE>
<CAPTION>
Tariffed
Feature Services
Monthly Usage Discount
------------- --------
<S> <C>
[_________________] [__]
[_________________] [___]
[_________________] [___]
[_________________] [___]
[_________________] [___]
[_________________] [___]
</TABLE>
MCI CONFIDENTIAL
C-4
<PAGE>
[________] [___]
The above discounts shall apply only to Customer's usage of tariffed
Feature Services provided pursuant to MCI's standard terms and conditions
for such services, but not to charges for installation, taxes or
surcharges, and charges for local access/egress services or facilities
associated with tariffed Feature Services.
2) Tariffed Feature Services Monthly Usage shall mean Customer's
monthly combined recurring and usage charges for tariffed Feature Services
at standard pricing but not including taxes (and gross receipts taxes),
surcharges, and any charges for MCI Tariff or state tariff services.
MCI CONFIDENTIAL
C-5
<PAGE>
EXHIBIT C-1
MCI FEATURE CARD FRAUD DETECTION PROCEDURES
===================================
All calling card calls will be validated by MCI to permit only those calls
authorized or facilitated by Associated Communications Companies of America or
legitimate card holders. MCI will, at the direction of Member, preclude all
calls utilizing expired or terminated calling card numbers compared against an
authorized list provided by Member and will be responsible for all fraudulent
use, unauthorized use, misuse, or abuse of calling cards occurring after MCI
receives actual notice of the expiration or termination of a calling card or
receives specifically detailed written notification concerning any card which
has been lost, stolen, compromised or which Member has reason to believe is or
may be used fraudulently. MCI will deactivate a calling card within four (4)
hours of receipt by MCI's Consumer Markets Fraud Detection of a request by
Member.
In addition, all calling card calls will be monitored by MCI for fraudulent use,
unauthorized use, misuse or abuse on a twenty four (24) hour a day, seven (7)
days a week basis. MCI shall establish fraud prevention, detection and
minimization procedures so that fraudulent use arising from lost or stolen
calling cards and potential disruption to authorized card holders will be
minimized.
MCI will not hold the Member responsible for "service fraud" associated with the
unauthorized use of an MCI calling card. "Service fraud" can best be described
as unauthorized use of an MCI calling card following the involuntary theft or
loss of a card which was not intentionally facilitated or impliedly authorized
by Member or an authorized user. "Service fraud" often follows the theft of a
wallet, purse or briefcase, or sometimes is the result of "shoulder surfing"
(thieves observing/recording authorization codes) which occurs at payphones
located in airports, bus terminals, train stations and the like. MCI shall not
be responsible for losses caused by fraudulent information submitted by a card
holder in subscribing for calling card services or for usage which was
intentionally facilitated or impliedly authorized by an authorized user.
In the event that MCI is unable to contact Member of suspected abuse of the
calling card, in order to minimize potential abuse, MCI will deactivate any
calling card which has exceeded established fraud detection parameters or which
MCI has reason to believe is or may be used fraudulently.
MCI CONFIDENTIAL
C-1-1
<PAGE>
EXHIBIT 10.65
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[_____]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
SEVENTH AMENDMENT TO
MCI CARRIER AGREEMENT
THIS SEVENTH AMENDMENT IS MADE AS OF THIS 1 DAY OF AUGUST, 1996, BETWEEN MCI
TELECOMMUNICATIONS CORPORATION ("MCI") AND ASSOCIATED COMMUNICATIONS COMPANIES
OF AMERICA (ACCA) ("CUSTOMER"), AN ASSOCIATION OF CARRIERS WHICH ARE SUBJECT TO
THE COMMUNICATIONS ACT OF 1934, AS AMENDED, WITH OFFICES LOCATED AT 111
CONGRESS AVENUE, SUITE 3000, AUSTIN, TEXAS 78701.
WHEREAS, CUSTOMER AND MCI ENTERED INTO AN MCI CARRIER AGREEMENT, SIGNED BY MCI
ON NOVEMBER 9,1995, AS HERETOFORE AMENDED (AS AMENDED, THE "AGREEMENT"); AND
WHEREAS, CUSTOMER AND MCI DESIRE TO ENTER INTO THIS SEVENTH AMENDMENT FOR THE
PURPOSE OF FURTHER AMENDING THE AGREEMENT;
NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY
OF WHICH ARE HEREBY ACKNOWLEDGED, CUSTOMER AND MCI AGREE AS FOLLOWS:
1. PARAGRAPH 10(B) OF THE AGREEMENT IS HEREBY AMENDED TO READ AS FOLLOWS:
(b) Customer shall receive a monthly credit equal to [________________
_______________] percent [_____] of Customer's actual monthly usage
billing (exclusive of usage in Paragraph 7(h), switched 56kps service)
during such monthly billing period. When referenced in this Paragraph
10, actual monthly usage billing shall be calculated after application
of all other applicable credits under this Agreement with the
exception of the credits set forth in Paragraph 12(b), and shall
exclude Additional DeltaCom Usage, domestic interstate MCI Toll Free
Service usage from April 1, 1996 onward, MCI International Prism I
service from July 1,1996 onward, and usage of MCI services where no
rates are listed in this Agreement for the MCI service and where
Members pay standard tariffed rates after application of tariffed
discounts.
2. THE WORDS ", AND THE CREDIT LIMIT IN PARAGRAPH 10(B) SHALL HE INCREASED
TO [________________________________]" APPEARING AT THE END OF PARAGRAPH 10(C)
ARE HEREBY DELETED.
3. THE TERMS OF THIS SEVENTH AMENDMENT WILL BECOME EFFECTIVE, UPON
EXECUTION AND DELIVERY BY BOTH PARTIES HERETO, AS OF JANUARY 1, 1996.
4. EXCEPT AS EXPRESSLY PROVIDED IN THIS SEVENTH AMENDMENT, ALL OF THE
TERMS AND CONDITIONS CONTAINED IN THE AGREEMENT SHALL REMAIN IN FULL FORCE AND
EFFECT.
MCI CONFIDENTIAL
<PAGE>
5. THIS SEVENTH AMENDMENT, TOGETHER WITH THE AGREEMENT, IS THE COMPLETE
AGREEMENT OF THE PARTIES AND SUPERSEDES ALL OTHER PRIOR AGREEMENTS AND
REPRESENTATIONS CONCERNING ITS SUBJECT MATTER.
6. THIS OFFER WILL REMAIN OPEN AND BE CAPABLE OF BEING ACCEPTED BY
CUSTOMER UNTIL AUGUST 1,1996. ANY AND ALL PRIOR OFFERS MADE TO CUSTOMER,
WHETHER WRITTEN OR ORAL, SHALL BE SUPERSEDED BY THIS OFFER. ANY FURTHER
AMENDMENTS MUST BE IN WRITING AND SIGNED BY BOTH PARTIES.
ASSOCIATED COMMUNICATION MCI TELECOMMUNICATION
COMPANIES OF AMERICA (ACCA) CORPORATION
/s/ Mike Newkirk /s/ Edward W. Smith
- ------------------------- --------------------------------
AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE
Mike Newkirk V.P. Edward W. Smith/ Director
- ------------------------- --------------------------------
PRINT NAME AND TITLE PRINT NAME AND TITLE
8/1/96 8/9/96
- ------------------------- --------------------------------
DATE DATE
MCI CONFIDENTIAL
-2-
<PAGE>
EXHIBIT 10.66
-------------
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[_____]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
[LOGO]
[LETTERHEAD OF MCI]
EIGHTH AMENDMENT
This Eighth Amendment is made between ASSOCIATED COMMUNICATIONS COMPANIES OF
AMERICA (ACCA) ("Customer") and MCI TELECOMMUNICATIONS CORPORATION ("MCI") and
shall become effective on March 1, 1997, provided that Customer signs this
Eighth Amendment by the date specified in Paragraph 4 herein ("Eighth Amendment
Effective Date").
WHEREAS, Customer and MCI entered into a Carrier Agreement signed by MCI on
November 9, 1995, as heretofore amended (as amended, the "Agreement"); and
WHEREAS, Customer and MCI desire to enter into this Eighth Amendment for the
purpose of further amending the Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, Customer and MCI agree as follows:
1. Commencing on the Eighth Amendment Effective Date, LATA AEO shall be added
to group 4 of Paragraph 7(b)(3) of the Agreement retroactively to April 1, 1996.
2. Commencing on the Eighth Amendment Effective Date, the following paragraph
shall be added as new Paragraph 7(r) of the Agreement:
7. Additional Rates.
-----------------
(r) International PRISM 1 Service Terminating in Mexico.
----------------------------------------------------
(1) For International Prism 1 Service traffic originating via dedicated
access and terminating in Mexico, Customer shall pay a postalized rate per
minute, as determined from the table below:
<TABLE>
<CAPTION>
--------------------------------
INTERNATIONAL
PRISM I SERVICE
TERMINATING IN MEXICO
RANGE [_______] [___________]
--------------------------------
<S> <C> <C>
[_] [_____] [_____]
[_] [_____] [_____]
[_] [_____] [_____]
[_] [_____] [_____]
[_] [_____] [_____]
[_] [_____] [_____]
[_] [_____] [_____]
[_] [_____] [_____]
--------------------------------
</TABLE>
The ranges set forth in the above table correspond to Table V, Part
H of the Tariff (or any successor Tariff section) which state the
distance from the Mexican border to the destination in Mexico.
MCI CONFIDENTIAL
1
<PAGE>
(2) The rates set forth in Paragraph 7(r)(l) above shall be fixed for
three (3) months from the Eighth Amendment Effective Date. Beginning four
(4) months after the Eighth Amendment Effective Date, MCI shall have the
option to revise such rates on fifteen (15) days notice to Customer.
3. Except as herein modified or amended, the provisions, conditions, and terms
of the Agreement shall remain unchanged and in full force and effect.
4. This Eighth Amendment shall be valid only if signed by Customer by MARCH 31,
1997 and subsequently accepted by MCI. This Eighth Amendment and the Agreement
are the complete agreement of the parties and shall supersede all other prior
agreements and representations, whether written or oral, concerning the
Agreement's subject matter.
ASSOCIATED COMMUNICATIONS MCI TELECOMMUNICATIONS
COMPANIES OF AMERICA CORPORATION
/s/ Mike Newkirk /s/ Edward W. Smith
- --------------------------- -----------------------------
Signature Signature
for
Mike Newkirk Jon McGuire
- --------------------------- -----------------------------
Printed Name Printed Name
COO/BTI VP. ACCA Vice President, Finance
- --------------------------- -----------------------------
Title Title
3/25/97 3/27/97
- --------------------------- -----------------------------
Date Date
MCI CONFIDENTIAL
2
<PAGE>
EXHIBIT 10.67
-------------
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[_____]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
[LETTERHEAD OF MCI APPEARS HERE]
NINTH AMENDMENT TO THE CARRIER AGREEMENT
This Ninth Amendment ("Amendment") is made as of this 15 day of May, 1997,
between ASSOCIATED COMMUNICATIONS COMPANIES OF AMERICA (ACCA) ("Customer") and
MCI TELECOMMUNICATIONS CORPORATION ("MCI").
WHEREAS, Customer and MCI entered into a Carrier Agreement signed by MCI on
November 3, 1995, as heretofore amended (as amended, the "Agreement").
WHEREAS, Customer and MCI desire to enter into this Amendment for the purpose of
further amending the Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
the of which is hereby acknowledged, Customer and MCI agree as follows:
1. (a) Paragraph 7(a)(1) of the Agreement is hereby amended by changing the
reference to "service terminating to Alaska, Hawaii, Puerto Rico and the U.S.
Virgin Islands" appearing therein to read: "service terminating from Alaska,
Hawaii and the U.S. Virgin Islands."
(b) The following is hereby added to the end of Paragraph 7(a)(1) of the
Agreement:
For domestic interstate switched outbound service originating via dedicated
access terminating to an MCI point of presence in Puerto Rico, Customer
will pay the following non-distance sensitive ("postalized") rates:
Peak Off-Peak
---- --------
[_________] [_____] [_____]
2. (a) Paragraph 7(b)(2) of the Agreement is hereby amended by changing the
reference to "service originating from Alaska, Hawaii, Puerto Rico and U.S.
Virgin Islands" appearing therein to read: "service originating from Alaska,
Hawaii and U.S. Virgin Islands."
(b) The following is hereby added to the end of Paragraph 7(b)(2) of the
Agreement:
For domestic interstate switched outbound service terminating via dedicated
access originating from an MCI point of presence in Puerto Rico, Customer
will pay the following non-distance sensitive ("postalized") rates:
Peak Off-Peak
---- --------
[_________] [_____] [_____]
3. Paragraph 1(a)(1) of Exhibit E to the Agreement is hereby amended by
deleting the rates for the countries listed below found therein and replacing
them with the following rates:
COUNTRY RATE
------- ----
BRAZIL [_____]
EL SALVADOR [_____]
FRANCE [_____]
MCI CONFIDENTIAL
1
<PAGE>
<TABLE>
<CAPTION>
COUNTRY RATE
- ------- ----
<S> <C>
ITALY [_____]
NETHERLANDS [_____]
PANAMA [_____]
PORTUGAL [_____]
SAUDI ARABIA [_____]
SOUTH KOREA [_____]
SPAIN [_____]
TURKEY [_____]
</TABLE>
4. The terms of this Amendment shall become effective as of the first day of
the first full month following execution and delivery by both parties hereto,
with exception of Section 3 of this Amendment which shall be effective on
May 1, 1997.
5. Except is expressly provided in this Amendment, all of the terms and
conditions contained in the Agreement shall remain in full force and effect.
6. This Agreement, together with the Agreement, is the complete agreement of
the parties and supersedes all other prior agreements and representations
concerning its subject matter. Any further amendments to the Agreement must be
in writing and signed by both parties .
7. This Amendment shall be valid only if signed by Customer by May 30, 1997,
and subsequently accepted by MCI.
ASSOCIATED COMMUNICATIONS MCI TELECOMMUNICATIONS
COMPANIES OF AMERICA CORPORATION
/s/ Mike Newkirk /s/ John McGuire
- ---------------------------- ------------------------------
Signature Signature
Mike Newkirk John McGuire
- ---------------------------- ------------------------------
Printed Name Printed Name
Vice President Vice President, Finance
- ---------------------------- ------------------------------
Title Title
5/15/97
- ---------------------------- _____________________________
Date Date
MCI CONFIDENTIAL
2
<PAGE>
Exhibit 10.68
TENTH AMENDMENT TO THE CARRIER AGREEMENT
This Tenth Amendment ("Amendment") is made as of this 11th day of July, 1997,
----- ---- ----
between ASSOCIATED COMMUNICATIONS COMPANIES OF AMERICA ("Customer") and MCI
TELECOMMUNICATIONS CORPORATION ("MCI").
WHEREAS, Customer and MCI entered into a Carrier Agreement signed by Customer on
November 8, 1995, as heretofore amended (as amended, the "Agreement").
WHEREAS, Customer and MCI desire to enter into this Amendment for the purpose of
amending the Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Customer and MCI agree as follows:
1. Paragraph 15(a) of the Agreement is hereby deleted and replaced with the
following:
(a) The Service Term shall begin on August 1, 1995 ("Effective Date"), and
shall continue for a period of twenty-five months therefrom, except that the
Service Term shall continue for a period of twenty-six months from the
Effective Date with respect to the services provided in Paragraph 7(c)
hereof. During the twenty-sixth (26th) month following the Effective Date,
the provisions of Paragraph 2(b) of the Agreement shall not apply.
2. The terms of this Amendment shall become effective as of the first day of
the first month following exercise and delivery by both parties hereto.
3. Except as expressly provided in this Amendment, all of the terms and
conditions contained in the Agreement shall remain in full force and effect.
4. This Amendment, together with the Agreement, is the complete agreement of
the parties and supersedes all other prior agreements and representations
concerning its subject matter. Any further amendments to the Agreement must be
in writing and signed by both parties.
MCI CONFIDENTIAL
1
<PAGE>
5. This Amendment shall be valid only if signed by Customer by July 11, 1997,
and subsequently accepted by MCI.
ASSOCIATED COMMUNICATIONS MCI TELECOMMUNICATIONS
COMPANIES OF AMERICA CORPORATION
/s/ Tom Mullis /s/ Edward W. Smith
- -------------------------------- --------------------------------
Signature Signature
for
Tom Mullis Jon McGuire
- -------------------------------- --------------------------------
Printed Name Printed Name
IT'S AUTHORIZED AGENT Vice President
- -------------------------------- --------------------------------
Title Title
July 11, 1997 7/25/97
- -------------------------------- --------------------------------
Date Date
(ATL/[illegible])
MCI CONFIDENTIAL
2
<PAGE>
EXHIBIT 10.69
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[_____]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
SWITCHED RESELLER SERVICES AGREEMENT
This Agreement is between Allnet Communication Services, Inc. ("ALLNET"), a
Michigan corporation with its principal offices at 30300 Telegraph Road, Suite
350, Bingham Farms, MI 48025, and DeltaCom, Inc. ("CUSTOMER"), an Alabama
corporation with its principal offices at 113 South Main, Arab, AL 35016 and is
made effective as of the date an Allnet officer executes this Agreement.
RECITALS
--------
Allnet is in the business of providing long distance telecommunication services
to commercial and residential customers; and
Customer is in the business of purchasing long distance telecommunication
services and reselling the same to commercial and residential customers; and
The parties desire to enter into a business arrangement whereby Allnet provides
certain of its telecommunication services to Customer for resale in accordance
with the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the covenants and obligations contained
herein the parties hereto agree as follows:
1. DEFINITIONS.
------------
1.1 General Definitions.
-------------------
A. "ALLNET 800 NUMBERS" shall be 800 telephone numbers ordered onto
the Allnet network by Customer and for which Allnet has either (i) been
appointed the RESPORG, or (ii) reserved and issued the 800 telephone number to
Customer. Allnet shall be deemed to be the RespOrg for all 800 telephone numbers
reserved and issued by it under (ii) above.
B. "ANI" shall mean a telephone number.
C. "ANI INFORMATION": see Subsection 5.4 C.
D. "BILLING CYCLE" shall mean the Allnet billing cycle to which
Customer's account hereunder is assigned by Allnet (a full billing cycle equals
approximately 30 days of SERVICES usage). All monthly recurring charges herein
shall apply separately to each Billing Cycle if Customer requests and Allnet
assigns multiple Billing Cycles. If Customer is assigned multiple Billing Cycles
hereunder, then usage for all Billing Cycles commencing in the same calendar
month shall be aggregated for the purpose of calculating whether Customer's
various monthly minimum usage requirements herein have been met.
1
<PAGE>
E. "BUSINESS DAY" shall mean Monday through Friday, 8:30 am to 5:30
pm EST, excluding nationally recognized holidays.
F. "CALL ABUSE" and "STANDARD MONITORING : see Subsection 9.1
G. "CALLING CARD MINIMUM CHARGE" and "CALLING CARD MONTHLY
SURCHARGE": see Exhibit 3.1, paragraph 5.
H. "CARRIER 800 NUMBERS" shall be 800 telephone numbers ordered onto
the Allnet network by Customer for which a party other than Allnet or Customer
has been appointed the RespOrg.
I. "CODE" shall mean a calling card authorization code issued by
Allnet to Customer (and by Customer to an END-USER).
J. "CDR" and "CDR TAPE": see Subsections 4.1 and 4.1 A.,
respectively.
K. "COLLATERAL": see Subsection 11.2.
L. "CUSTOM PROGRAM": see Subsection 6.2.
M. CUSTOMER 800 NUMBERS" shall be 800 telephone numbers ordered onto
the Allnet network by Customer for which Customer has been appointed the
RespOrg.
N. "CUSTOMER INVOICE": see Subsection 11.1.
O. "EFFECTIVE DATE" is the date this Agreement is signed by an
Allnet officer as set forth on the signature page hereof.
P. "END-USERS" are customers of Customer for which Customer has
submitted an order that has been accepted by Allnet during the term of this
Agreement. To the extent that Customer subscribes to the Services for its own
use, Customer shall be deemed to be an End-User.
Q. "END-USER INFORMATION": see Subsection 5:3.
R. "END-USER PURCHASE" and "TRANSFER PRICE": see Subsection 11.3.
S. "800 NUMBERS" shall collectively refer to the Allnet 800 Numbers,
Carrier 800 Numbers, Customer 800 Numbers and PIN 800 NUMBERS.
T. "ELECTRONIC EXCHANGE": see Subsection 4.1 B.
U. "ERROR CORRECTION": see Subsection 5.4 B.
V. "GENERIC PROGRAM": see Subsection 6.1.
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W. "GUIDELINES" shall refer to the telecommunication industry's
general rules with respect to 800 number portability, including but not limited
to, (i) the Federal Communications Commission's ("FCC") 800 number portability
policies and rules, (ii) the SMS 800 requirements set forth in the Bell
Operating Companies' Tariff F.C.C. No. 1, and (iii) the CLC 800 DataBase Ad-Hoc
Committees' Guidelines for 800 DataBase, as all of the foregoing may be replaced
or modified from time to time.
X. "INITIAL TERM": see Subsection 12.1.
Y. "MINIMUM CHARGE", "MONTHLY SURCHARGE" and "DISCOUNT MAKE-UP
CHARGE": see Exhibit 3.1, paragraph 8.
Z. "OPERATOR SERVICES" and "700/900 NETWORK CALLS": see Subsection
2.3.
AA. "PIN 800 NUMBER" shall be an Allnet 800 Number assigned to
Customer for use with the 800 PIN SERVICE.
BB. "PIN NUMBERS": see Subsection 1.2 B.
CC. "PROPRIETARY INFORMATION": see Subsection 13.1 A.
DD. "RESPORG" shall mean the responsible organization as defined in
the Guidelines. A RespOrg is the entity that is responsible for managing and
administering the accounts records in the 800 Service Management System
DataBase.
EE. "SUBSCRIPTION CHECKLIST": see Subsection 5.1.
FF. "TARIFF": see Subsection 2.1.
GG. "TRANSFER": see Subsection 15.2 B.
HH. For purposes of this Agreement and unless otherwise stated
herein, "MONTH" shall equal a Billing Cycle. Unless otherwise stated herein,
"DAYS" shall refer to calendar days.
1.2 Services Definitions. The following described telecommunication
--------------------
services are hereinafter collectively referred to as the "SERVICES".
A. "ANCILLARY SERVICES" consist of calling card operator assisted
calls and calling card traffic generated via the Codes which access the
following Allnet special features: teleconferencing, voice mail, Allnet Call
Delivery(R), Allnet InfoReach(R), SpeedLink(R), Option USA(R) and such other
special features as Allnet may from to time add to its calling card platform and
make available to Customer. The Ancillary Services are only available in
conjunction with the Calling Card Services.
B. "CALLING CARD SERVICES" consist of calling card traffic generated
via the Codes.
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C. "800 PIN SERVICE" consists of inbound SWITCHED SERVICES combined
with a PIN 800 Number which is accessed via four digit personal identificiation
numbers ("PIN NUMBERS") assigned by Customer to End-Users. The use of the PIN
Numbers with a PIN 800 Number permits multiple End-Users to utilize the same 800
telephone number on an individual basis. 800 DIRECTORY ASSISTANCE is not
available with the 800 PIN Service.
D. "DEDICATED SERVICES" consist of (i) switched outbound long
distance traffic delivered to an Allnet Point of Presence ("POP") via dedicated
facilities and terminated over the Allnet network, and (ii) switched inbound 800
traffic generated via 800 Numbers which traffic originates on the Allnet network
and is terminated by Allnet onto Customer's or a End-User's dedicated
facilities.
E. "DIRECTORY ASSISTANCE SERVICES" consist of calls made by End-
Users to directory providers for assistance in locating a non-800 Number. "800
DIRECTORY ASSISTANCE" consists of calls made to directory providers for
assistance in locating an Allnet 800 Number.
F. "INBOUND SERVICES" shall collectively refer to inbound traffic
under the Dedicated Services, Switched Services and 800 PIN Services.
G. "INTERNATIONAL SERVICES" consist of international traffic
generated via the Dedicated Services, Switched Services or Calling Card
Services.
H. "SWITCHED SERVICES" consist of switched inbound and outbound long
distance traffic generated by End-Users that originates and terminates over the
Allnet network.
2. SERVICES AVAILABILITY.
----------------------
2.1 Commencing on such dates after the Effective Date as may be mutually
agreed upon by the parties in writing, Allnet shall provide the Services
selected by Customer in those areas where Allnet in its sole discretion
determines the Services to be available. Allnet shall provide the Services in
accordance with the terms and conditions of service set forth in the applicable
Allnet federal and state tariffs, which are incorporated herein by reference
(the "TARIFF"). An excerpted copy of the Tariff is attached as Exhibit 2.1 and
made a part hereof.
2.2 Customer understands and agrees that the Services do not include
value-added services that Allnet makes available to its customer base, such as
without limitation, Allnet ESP(R) reports, and that Allnet is not obligated to
provide End-Users with such value-added services. Customer further understands
and agrees that the 800 PIN Service is not available to commercial End-Users.
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2.3 "OPERATOR SERVICES" are defined to be calls made via 00, 0- or 0+
calling that require the assistance of an operator to complete, such as but not
limited to, collect calls and bill-to-a-third-number calls. Operator Services
specifically exclude calling card operator assistance calls which are deemed to
be part of the Calling Card Services. "700/900 NETWORK CALLS" are those calls
made to various information providers utilizing telephone numbers with 700 or
900 dialing sequences. Operator Services and 700/900 network calls are not
included in the Services, but may be made available to End-Users via the Allnet
network. If Operator Services or 700/900 network calls are utilized by End-
Users, such calls shall be billed to End-Users at standard Allnet charges either
directly by Allnet or through its billing agents. Allnet shall not bill Customer
for the Operator Services or 700/900 network calls utilized by End-Users and any
revenues collected by Allnet for such Services and calls shall be retained
solely by Allnet. Allnet reserves the right to revise its rates for Operator
Services and 700/900 network calls at any time.
2.4 Customer understands and agrees that End-Users whose telephone lines
are presubscribed to Allnet may be requested to call 1-700-555-4141 to confirm
their long distance carrier and that they will hear a recording identifying
Allnet as their long distance carrier. If requested by Customer, Allnet shall
provide Customer with an available 700 number (1-700-555-XXXX) and a recorded
message that identifies Customer as the carrier. Customer's request and message
selection shall be made in writing on the Subscription Checklist submitted by
Customer when it first orders the Switched Services. Allnet shall make such 700
number available for Customer's use within fifteen Business Days after receipt
of said Subscription Checklist.
3. RATES FOR THE SERVICES.
----------------------
3.1 Customer shall purchase and pay for the Services at the rates set
forth in Exhibit 3.1 attached hereto and made part hereof.
4. CALL DETAIL RECORDS.
-------------------
4.1 Customer shall have the option of receiving call detail records for
usage of the Services ("CDR") on (i) a monthly basis, (ii) a pre-bill run basis
(approximately six times per week), or (iii) no CDR at all. Customer may also
elect both options (i) and (ii), as further detailed below.
A. If Customer elects option (i), then on or about the fifth
Business Day following the end of a Billing Cycle, Allnet shall deposit with an
overnight delivery service for delivery to Customer a magnetic tape containing
CDR for the Services in the modified CARE format set forth in Exhibit 4.1 A.
attached hereto and made a part hereof (the "CDR TAPE"). The CDR Tapes will rate
the Services at the standard Allnet rates in effect at the time the Services
were provided. Customer shall pay a one-time CDR
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Tape set up charge of [_____], plus [_____] per month. Software modifications to
the CDR Tape format requested by Customer are subject to Allnet approval and
will be invoiced to Customer at [_____] per hour, per programmer.
B. If Customer elects option (ii) above, then for each pre-bill
computer run performed by Allnet (generally pre-bill runs are performed by
Allnet six days per week) Allnet shall deliver the CDR by electronic data
exchange ("ELECTRONIC EXCHANGE") to either (i) Customer's designated mainframe
computer via the IBM Information Network ("IIN") via Network Data Mover ("NDM"),
or (ii) dedicated personal computer via Procomm+ software. The CDR transfers via
Electronic Exchange are initiated by Allnet and generally run during the evening
or early morning hours. Customer shall pay a one-time Electronic Exchange set up
charge of [_______], plus a monthly recurring charge of [_____]. Provided that
Customer is not in default hereunder, the [_______] set up charge shall be
credited to Customer after the Minimum Charge becomes effective. Further,
Customer shall be responsible for all transmission charges together with the
cost of hardware and software necessary at its location for use of IIN, NDM or
Procomm+, which hardware and software shall comply with the formats and
technical specifications that Allnet from time to time may promulgate. The
current Procomm+ format is set forth in Exhibit 4.1 A.
C. Customer shall select the applicable option or options at the
time it submits its first Subscription Checklist to Allnet. If Customer elects
both options 4.1 A. (i) and (ii), the individual set up charges and the monthly
recurring charges for both options shall be applicable. Customer may cancel an
option at any time on thirty days written notice. Customer may change an
existing option or select a new option at any time upon written notice and
payment to Allnet of the applicable set up charge. Changes or new selections
shall not be effective any earlier than the second Billing Cycle following the
date of the receipt of payment for the applicable set up charge.
4.2 Customer shall have the affirmative obligation of providing written
notice of any inaccuracies in Customer Invoices within sixty Business Days after
receipt. In the event that Customer does not report an inaccuracy concerning a
Customer Invoice within said sixty Business Day period, Customer shall be deemed
to have waived its right to contest accuracy of the billing and deemed to have
agreed that the Allnet billing system inputs and outputs, including without
limitation, the CDR and answer supervision, are accurate and final. If an
alleged inaccuracy is brought to the attention of Allnet within said twenty
Business Day period and such inaccuracy is verified by Allnet to its reasonable
satisfaction, Allnet shall credit future Customer Invoices to reflect such
verified inaccuracy. Allnet represents that the billing system inputs and
outputs used for the Services will be substantially the same used by Allnet for
its other customers utilizing services similar to those provided to Customer
hereunder.
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4.3 Customer agrees that, other than for one minute call rounding, it
shall not charge End-Users utilizing any of the Services for more minutes of
Services' usage than is contained in the CDR provided by Allnet to Customer.
5. FORECASTS; ORDER PROCESSING.
----------------------------
5.1 Customer shall not be obligated to subscribe to all of the Services
being made available by Allnet hereunder. Requests for subscription to any of
the Services must be made by Customer at least thirty days prior to the desired
date of activation. At such time as Allnet executes this Agreement and returns a
copy to Customer, Allnet shall supply Customer with a subscription checklist and
information sheet that must be completed by Customer each time it requests
subscription to a new Service (the "SUBSCRIPTION CHECKLIST"). In addition to the
Subscription Checklist, Customer shall provide Allnet with a forecast covering a
good faith estimate of the monthly traffic volume and distribution for the
ordered Services/800 Number for the three calendar month period following the
desired activation date. The forecast shall be in the format attached hereto as
Exhibit 5.1 and made a part hereof. Each forecast shall be revised by Customer
at least thirty days prior to the expiration of each three calendar month
period. Within ten Business Days of receiving a forecast or revised forecast,
Allnet shall provide written acceptance or rejection of the forecast, in whole
or in part. Failure by Allnet to accept or reject a forecast within said ten
Business Day period shall not be deemed an acceptance of the forecast, unless
Allnet thereafter accepts orders for the Services/800 Number covered by the
forecast. If Customer exceeds a forecast accepted by Allnet, then Allnet shall
have the right to cease accepting all orders for the under-forecasted
Services/800 Number for such period of time as Allnet deems necessary, in its
sole discretion.
5.2 At the time Customer submits its first Subscription Checklist to
Allnet, Customer shall select one of the options set forth below as the media by
which it will transmit to Allnet orders for the Services. Orders shall be
transmitted in the modified CARE format of Exhibit 4.1 A.
A. Magnetic tape in the format set forth in Exhibit 4.1 A.
B. Electronic Exchange via NDM.
C. Electronic Exchange via Procomm+.
Notwithstanding the foregoing options, if Customer has elected Electronic
Exchange for receiving CDR, then Customer shall be deemed to have selected
either option B. or C. above, whichever is applicable, for the purposes of this
Subsection 5.2.
5.3 At the time Customer submits an order for the Services, Customer shall
furnish Allnet, via the applicable media hereunder,
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with the name, billing and service addresses and ANI of each applicable End-User
(the "END-USER INFORMATION"). The End-User Information is required for local
exchange carrier ("LEC") account set-up, normal call processing and handling NXX
level customer service. The End-User Information shall be deemed to be
Customer's Proprietary Information in accordance with Section 13.
5.4 Allnet shall use its best efforts to activate Codes and End-User ANIs
in accordance with the following time frames:
A. Codes for existing End-User ANIs shall be activated within five
Business Days of receipt by Allnet of complete and accurate End-User
Information. Codes requested with End-User ANI orders will be activated when the
ANI is activated. If the End-User Information submitted by Customer is
incomplete or inaccurate, Allnet shall return the same to Customer for
correction and resubmission.
B. Customer understands and agrees that activation of End-User ANIs
is contingent on the End-User Information associated with such ANIs complying
with LEC established criteria. Assuming receipt of properly formatted End-User
Information that complies with said LEC established criteria, ANIs will
generally be activated within ten Business Days of receipt by Allnet of such
End-User Information. If the End-User Information does not comply with said LEC
criteria, Allnet shall attempt to correct non-complying End-User Information to
the extent Allnet is able to do so ("ERROR CORRECTION"). If Allnet is unable to
perform Error Correction within a reasonable period of time not to exceed ten
Business Days after receipt of non-complying End-User Information, it shall
resubmit the non-complying End-User Information to Customer for Customer's
correction and resubmission.
C. Subject to the provisions of subparagraph D. below, once each
calendar month Allnet shall provide Customer with a written report detailing
moves, adds and terminations for End-User ANIs ("ANI INFORMATION"). If Customer
has elected to receive CDR via Electronic Exchange, then the ANI Information
shall be transmitted via Electronic Exchange, rather than by a written report.
D. If 10% or more of the aggregate End-User Information submitted by
Customer in any calendar month fails to comply with the aforesaid LEC criteria,
Allnet shall have the right in its sole discretion to cease providing Error
Correction and/or ANI Information and require Customer to perform both
functions. If Allnet ceases providing Error Correction and/or ANI Information
pursuant to the preceding sentence and Customer requests Allnet to reinstate
either or both, then Allnet may require Customer to provide an Allnet training
session covering compliance with LEC criteria to appropriate Customer personnel.
Such training shall be at a location designated by Customer and Customer shall
pay Allnet a training fee of $25.00 per hour for the trainer, plus the trainer's
travel, lodging and ancillary expenses.
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5.5 Notwithstanding the order transmission media selected pursuant to
Subsection 5.2, until such time as Allnet determines in its sole discretion that
Electronic Exchange and/or magnetic tape processing is available for the
reservation or ordering of 800 Numbers (and informs Customer of such
availability), orders for activation or reservation of 800 Numbers shall be by
facsimile and subject to the following.
A. Subject to (i) the Guidelines, (ii) delays attributable to other
carriers, RespOrgs or the SMS 800 Database, and (iii) Subsections 5.1, 5.6 and
7.1, Allnet/Carrier/Customer 800 Numbers shall be activated and confirmed by
Allnet within two Business Days of receipt by Allnet of a proper order in
accordance with the order processing requirements set forth below. If the order
submitted is not in compliance with said processing requirements, Allnet shall
return the same to Customer for correction and resubmission.
(i) Orders shall be submitted to Allnet via facsimile using
the form attached hereto as Exhibit 5.5 (i) and made a part hereof, and shall
include: (a) a letter of authorization in the format attached hereto as Exhibit
5.5 (i(a)) and made a part hereof, if Allnet is being appointed as the RespOrg,
and (b) the End-User Information for each 800 Number, including the ANI
translation for each 800 Number.
(ii) If Allnet is requested to reserve an 800 Number from the
SMS 800 Database on behalf of Customer, then Customer shall make such request
via facsimile using the form attached hereto as Exhibit 5.5 (ii) and made a part
hereof. Allnet shall fulfill up to 10 such reservation requests per calendar
month at no charge. Additional requests each calendar month shall be charged to
Customer at a cost of [_____] for every additional 100 requests or fraction
thereof. Allnet shall provide Customer with the status of its request (either
confirm reservation or indicate unavailability) via facsimile within two
Business Days of its receipt of the request. VERBAL REQUESTS FOR RESERVATIONS
WILL NOT BE ACCEPTED OR HONORED BY ALLNET.
(iii) If Allnet has reserved an 800 Number for Customer and
Customer does not order activation of the reserved number in accordance with
item (i) above within ten Business Days from the date of Allnet confirmation of
the reservation, the reserved number shall be assigned to the Allnet pool of 800
numbers and shall be available to Allnet for its or its other customers'
reservation and use. CUSTOMER UNDERSTANDS AND AGREES THAT CUSTOMER SHALL BE
RESPONSIBLE FOR ALL DAMAGES AND CLAIMS IN THE EVENT CUSTOMER AS8IGNS A RESERVED
800 NUMBER TO AN END-USER WITHOUT HAVING TIMELY ORDERED ACTIVATION OF SUCH 800
NUMBER WITH ALLNET AND SUCH 800 NUMBER IS ASSIGNED BY ALLNET TO A THIRD PARTY.
CUSTOMER AGREES TO DEFEND, INDEMNIFY AND HOLD ALLNET HARMLESS FROM ANY CLAIMS
AND COSTS (INCLUDING ATTORNEY FEES) RELATING TO THE ASSIGNMENT OF SUCH 800
NUMBER.
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B. Subject to Subsections 5.1, 5.6 and 7.1, initial PIN 800 Number set up
shall be implemented within fifteen Business Days of receipt by Allnet of
complete and accurate End-User Information (including the applicable PIN
Number(s)). PIN Numbers must be numeric characters; "0000" is not available as a
PIN Number. For adding or deleting a PIN Number to an existing PIN 800 Number
the time frame shall be two Business Days after receipt by Allnet of Customer's
request for the addition or deletion. If the End-User Information submitted by
Customer is incomplete or inaccurate, Allnet shall return the same to Customer
for correction and resubmission.
C. The Allnet facsimile numbers and contact persons to be used for 800
Number reservations shall be 313-746-1433, Attention: Tonya Henderson; and for
800 Number orders shall be 313-647-2439, Attention: Mark Choroba. The Customer
facsimile number and contact person to be used for said purposes shall be
_______________, Attention:__________________. Either party may change its
respective facsimile number or contact person upon prior written notice to the
other party.
5.6 In the event the traffic volume of ANIs, Codes or 800 Numbers ordered
onto the Allnet network by Customer is such that Allnet determines, in its sole
discretion, that a delay in processing orders is required, Allnet shall have the
right to temporarily delay order processing for such period of time as Allnet
deems necessary in its sole discretion. Any such delays shall not, however,
adversely impact Customer for the purpose of determining whether Customer has
met any minimum usage requirements hereunder. Allnet agrees to adjust the time
frames for said requirements to reflect such delays.
6. CALLING CARD REQUIREMENTS.
-------------------------
6.1 Upon Customer's submission of a Subscription Checklist for the Calling
Card Services, Allnet shall commence the implementation of a Customer unique 800
gateway number for use of the Calling Card Services by End-Users (the "GENERIC
PROGRAM"). The Generic Program shall be subject to the Calling Card Surcharge,
but shall not be subject to the minimums set forth in Subsection 6.4. Allnet
shall make the unique gateway number available to Customer within thirty
Business Days after the date of receipt of the applicable Subscription
Checklist.
6.2 Customer shall have the option of selecting a customized program for
the Calling Card Services that would include a Customer unique 800 gateway
number and specially recorded voice and operator scripting (the "CUSTOM
PROGRAM"). Upon submission by Customer of a Subscription Checklist for the
Custom Program selecting either option (i) or (ii) set forth below, Allnet shall
commence the process of developing the Custom Program. The two options, one of
which must be selected on the Subscription Checklist, are as follows: (i) paying
an initial customization fee of [________] to Allnet, or (ii) in lieu of such
payment, agreeing to meet the minimums set forth in Subsection 6.4. If Customer
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selects option (i), but fails to timely pay the Customer Invoice listing the
[________] fee, Customer shall be deemed to have selected option (ii) above.
Subject to the written approval by Allnet of the customization specifications,
Allnet shall make the Custom Program available to Customer within forty-five
Business Days after the date of such written approval by Allnet. The unique 800
gateway number will be available for use with the Calling Card Services, but the
specially recorded voice and operator scripting will only be available for the
Allnet SpeedLink(R) special feature and the calling card operator assistance
function. The other Allnet calling card special features will identify Allnet or
another third party vendor as the provider of such features.
6.3 After the Generic and/or Custom Program has been implemented, upon
receipt of Customer's order and the End-User Information sent via the applicable
media hereunder for the assignment of Codes, Allnet shall assign the Codes to
Customer for issuance to End-Users, subject to the following. Customer shall be
responsible for all costs associated with the design, production and
distribution of all calling cards to be issued to End-Users. Allnet reserves the
right, in its reasonable business judgment, to limit the number of Codes it
assigns to Customer. CUSTOMER ACKNOWLEDGES AND AGREES THAT ONCE ALLNET ASSIGNS
THE CODES TO CUSTOMER, THE CODES WILL BE ACTIVE AND CUSTOMER FURTHER AGREES THAT
IT SHALL BE RESPONSIBLE FOR (I) ALL CHARGES ASSOCIATED WITH THE USAGE OF THE
CODES ASSIGNED TO CUSTOMER HEREUNDER, INCLUDING WITHOUT LIMITATION, CHARGES FOR
CALL ABUSE, AND (II) ALL CLAIMS BY THIRD PARTIES, INCLUDING END-USERS,
ASSOCIATED WITH THE CODES ASSIGNED TO CUSTOMER HEREUNDER, INCLUDING WITHOUT
LIMITATION, CLAIMS REGARDING CALL ABUSE, REGARDLESS OF WHETHER OR NOT CUSTOMER
ISSUES SUCH CODES TO END-USERS.
6.4 Excepting situations in which Customer has paid the [________]
customization fee pursuant to Subsection 6.2, if Customer has subscribed to the
Custom Program, Customer shall generate the following minimums in gross charges
(tariffed charges prior to available discounts) for usage of the Calling Card
Services as supported by the CDR for such Services.
A. [________] per month commencing with the sixth full month
following the month in which the Custom Program is made available to Customer.
B. [________] per month commencing with the twelfth full month
following the month in which the Custom Program is made available to Customer.
C. [________] per month commencing with the eighteenth full month
following the month in which the Custom Program is made available to Customer.
D. If any of the foregoing applicable monthly minimums are not
timely met, Customer shall have the option of paying either (i) a make up to
minimum charge of the difference between the applicable monthly minimum set
forth above and the actual
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gross charges for the Calling Card Services for each month in which the
applicable minimum is not met, or (ii) the [________] customization fee.
Customer shall make its election, and if it elects option (ii), Customer shall
pay the [________] customization fee so that it is received by Allnet within
fifteen Business Days following the date of written notice from Allnet that
Customer did not attain the applicable minimum. If Customer elects option (i),
then option (ii) shall no longer be available to Customer at any time and Allnet
shall add the appropriate make up to minimum charge to Customer Invoices for
each month in which the applicable minimum is not met for the remaining term of
this Agreement. If Customer elects option (ii), and timely makes its payment to
Allnet of the [________], Customer shall have no further obligations with
respect to the above minimums.
E. If Customer has subscribed to the Custom Program and elected to
be subject to the above minimums rather than pay the [________] customization
fee and this Agreement is terminated prior to the time the minimum under A.
above becomes effective (other than termination by Customer for an uncured
breach by Allnet), Customer agrees that it shall be liable for and pay to Allnet
the [________] customization fee.
7. 800 NUMBER REQUIREMENTS.
-----------------------
ALL 800 NUMBERS.
---------------
7.1 A. In order to protect the integrity of its network, Allnet may
without liability temporarily block any 800 Number having usage surges. Allnet
agrees to use reasonable efforts to promptly notify Customer after such blockage
has occurred.
B. If usage of an 800 Number impacts Allnet in such a manner that
the unbillable (non-completed) calls for such 800 Number in any month are
greater than 5% of the billable (completed) calls for such 800 Number in that
month, Allnet may, in its sole discretion, charge Customer a non-discountable
$0.50 charge for each unbillable call in that month.
C. CUSTOMER AGREES THAT IT SHALL BE RESPONSIBLE FOR (I) ALL CHARGES
FOR USAGE OF 800 NUMBERS, AND (II) ALL CLAIMS BY THIRD PARTIES, INCLUDING END-
USERS, RELATED TO 800 NUMBERS, INCLUDING WITHOUT LIMITATION, CLAIMS REGARDING
CALL ABUSE, REGARDLESS OF WHETHER OR NOT CUSTOMER ASSIGNS ANY 800 NUMBERS TO
END-USERS.
7.2 Customer understands and agrees that call duration for 800 Number
calls are measured at (i) time-point ("TP") 7 minus TP6 for the Switched
Services and for inbound Dedicated Services traffic terminated to a End-User's
dedicated facilities, and (ii) TP7 minus TP1 for all call attempts for inbound
Dedicated Services traffic terminated to Customer's dedicated facilities. Time
point definitions are attached hereto as Exhibit 7.2 and made a part hereof.
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ALLNET/CARRIER/CUSTOMER 800 NUMBERS.
------------------------------------
7.3 At Customer's written request and to the extent available to Allnet,
Canadian origination will be available for Allnet 800 Numbers. Due to the fact
that Canadian origination is provided through an arrangement with third parties,
Allnet does not guarantee the availability or continuing availability of
Canadian origination. Customer shall inform End-Users in writing of this fact
prior to or at the time of Customer's sale of Canadian origination. Allnet shall
provide Customer with prompt written notice if Canadian origination becomes
unavailable.
7.4 At Customer's written request and to the extent available to Allnet,
800 Directory Assistance will be available for Allnet 800 Numbers at a charge of
$15.00 per month per Allnet 800 Number requested to be listed with 800 Directory
Assistance. Due to the fact that 800 Directory Assistance is provided through an
arrangement with a third party, the provision of 800 Directory Assistance by
Allnet shall be subject to the policies and procedures promulgated from time to
time by such third party. Customer understands that any Allnet 800 Number listed
with 800 Directory Assistance is not published in any written directory, but is
only available on a call-in basis. Customer shall inform End-Users in writing of
this fact prior to or at the time of Customer's sale of 800 Directory
Assistance.
7.5 The transfer of Allnet/Carrier/Customer 800 Numbers or Inbound
Services traffic to another carrier (other than 800 PIN Service traffic which is
not transferable) shall be subject to the Guidelines and the Allnet policies and
procedures for 800 number/traffic transfers in existence at the time of the
requested transfer.
7.6 If an Allnet/Carrier/Customer 800 Number is temporarily blocked at
Customer's request made in accordance with Section 8.1, then for the period such
800 Number is being blocked Allnet shall, at Customer's written request and
expense, re-translate such 800 Number to Customer's customer service telephone
number.
PIN 800 NUMBERS.
----------------
7.7 Customer understands and agrees that due to the multiple End-User
nature of the 800 PIN Service, PIN 800 Numbers are controlled by Allnet and are
not transferable by Customer or End-Users to another carrier. End-Users to whom
PIN 800 Numbers are assigned forfeit the right to use such Numbers when their
services are cancelled. Customer shall in writing inform End-Users assigned a
PIN 800 Number of the conditions and limitations set forth above prior to or at
the time of Customer's sale of the 800 PIN Service.
7.8 A. When the 800 PIN Service is ordered by Customer, Allnet agrees to
initially provide Customer with three PIN 800 Numbers for use with the 800 PIN
Service. At such time as a PIN 800 Number has at least 1,000 PIN Numbers
assigned to it, and upon
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the written request of Customer, Allnet agrees to provide an additional PIN 800
Number to Customer.
B. End-User calls to a PIN 800 Number for which a PIN Number is not
entered at the initial bong tone will be routed to an Allnet operator for manual
entry of the PIN Number. Up to 3% of total PIN 800 Number calls in any calendar
month may be routed to an Allnet operator for manual entry of the PIN Number
without charge to Customer. For all calls in excess of said 3%, Customer shall
be charged $0.25 per call.
C. If a End-User (i) enters the numerals "0000" as a PIN Number,
(ii) enters an invalid PIN Number (less than four digits or incorrect four
digits) on a second attempt to enter the PIN Number, or (iii) inquires of an
Allnet operator as to what a correct PIN Number is, then such calls will be
terminated to an Allnet 800 number to be delivered to Customer's customer
service center. Customer shall be charged for such calls at the then current
standard Allnet Solution(R) II 800 rates.
8. SERVICE BLOCKAGE AND CANCELLATION.
----------------------------------
8.1 Upon Customer's request sent via the applicable media hereunder,
Allnet shall use reasonable efforts to immediately block or cancel the service
to End-User ANIs or Codes, but in no event later than 24 hours after receipt of
said request. The same standard shall apply to blockage of an
Allnet/Carrier/Customer 800 Number associated with the Switched Services. Allnet
shall have no obligation to temporarily block Allnet/Carrier/Customer 800
Numbers associated with the Dedicated Services, but Allnet will at Customer's
request permanently cancel such 800 Numbers. Except in instances of its willful
misconduct, Allnet shall not be liable to Customer or End-Users for any damages,
costs or charges with respect to the failure of Allnet to block or cancel the
Services in accordance with Customer's request. Thus, Customer shall be solely
responsible for and shall defend, indemnify and hold Allnet harmless from and
against any claims and costs (including attorney fees) by End-Users or other
third parties related to the blocking of, or cancellation of the Services to, an
ANI, Code or 800 Number at the request of Customer.
8.2 In the event an End-User violates any provision of the Tariff, Allnet
reserves the right without liability to immediately cancel the Services to such
End-User in accordance with the Tariff.
9. CALL ABUSE MONITORING.
----------------------
9.1 Allnet monitors its network in an attempt to detect unauthorized usage
("Call Abuse") of an ANI, Code or 800 Number ("Standard Monitoring"). Customer
authorizes Allnet to apply Standard Monitoring to End-User ANIs, Codes and 800
Numbers. If, pursuant to its Standard Monitoring, Allnet determines that Call
Abuse is or may be occurring, Allnet shall have the right, but not the
obligation, to block usage of the Services from any ANI, Code
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<PAGE>
or 800 Number associated with the suspected Call Abuse. If Allnet elects to
block the Services it shall use reasonable efforts to immediately notify
Customer of such blockage via facsimile, but in no event later than 24 hours
after the blockage. Allnet shall remove a blockage or replace a Code within 24
hours of Customer's written request. In lieu of blocking the Services, Allnet
may, in its sole option, contact Customer by facsimile and request Customer to
substantiate authorization for the suspected Call Abuse. Within 24 hours from
its receipt of the Allnet facsimile, Customer shall instruct Allnet by facsimile
as to what action, if any, it wishes Allnet to take regarding such suspected
Call Abuse. Customer agrees that if it fails to timely provide such instruction,
Allnet may take whatever action, including taking no action, it deems reasonable
under the circumstances.
9.2 Except in instances of its willful misconduct, Allnet shall not be
liable to Customer or End-Users for damages, costs or charges, including charges
for Call Abuse, arising from acts or omissions of Allnet in applying or failing
to adhere to its Standard Monitoring practices or otherwise. Thus, Customer
shall be solely responsible for and shall defend, indemnify and hold Allnet
harmless from all expenses, charges and costs for usage attributable to End-User
ANIs, Codes and 800 Numbers, including all charges for Call Abuse.
9.3 The Allnet facsimile number and contact person to be used for the
purposes set forth in this Section 9. shall be 313-433-4119, Attention: Bonnie
Levine. The Customer facsimile number and contact person to be used for said
purposes shall be _______________, Attention:____________________. Either party
may change its respective facsimile number or contact person upon prior written
notice to the other party.
10. ADDITIONAL CUSTOMER REPRESENTATIONS/WARRANTIES & OBLIGATIONS.
-------------------------------------------------------------
10.1 Customer hereby represents and warrants that (i) it is certified to
do business in all jurisdictions in which it conducts business and it is in good
standing in all such jurisdictions, and (ii) it has been assigned a carrier
identification code by BellCore. Customer further represents and warrants that
it is certified by the proper regulatory agencies to provide interstate,
intrastate and international long distance services to End-Users in those
jurisdictions where such services are to be provided by Customer.
10.2 Customer shall be responsible for obtaining signed letters of agency
("LOAs") from prospective End-Users in the format set forth in Exhibit 10.2
attached hereto and made a part hereof. Customer shall retain the signed LOAs
and promptly make the originals available upon the request of Allnet, a LEC or
any regulatory agency. Customer shall be responsible for LEC Primary
Interexchange Carrier change charges ("PIC Charges") that may be imposed on
Allnet as a result of End-Users moving onto or off of the Allnet network or as a
result of Customer's inability or refusal to provide original End-User LOAs when
requested. Any
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<PAGE>
such PIC Charges shall be billed to Customer periodically on a Customer Invoice.
10.3 Customer shall be responsible for and pay all expenses in connection
with its business and its performance of this Agreement. Customer shall use its
best efforts to solicit and market the Services to prospective End-Users in
accordance with the terms of this Agreement and applicable law. Customer shall
at all times conduct its efforts in a commercially reasonable and ethical
manner. To the extent Customer makes any statements or representations to third
parties (including End-Users) with regard to Allnet, the Services, or the terms
of this Agreement, such statements or representations shall be true, accurate
and not misleading and shall conform to and be consistent with the terms herein.
10.4 Customer shall not transfer an End-User to another long distance
carrier, except with an LOA signed by the End-User and dated after the date on
which the End-User was placed on the Allnet network, a copy of which LOA shall
be provided to Allnet. Notwithstanding the foregoing, in the event Allnet is in
default under the terms of this Agreement and fails to cure said default in
accordance with the terms hereof, then Customer may transfer the End-Users to
another long-distance carrier. Customer warrants that End-Users shall be
residential and/or commercial end-users of the Services and shall not be other
long distance carriers, resellers or aggregators.
10.5 Customer may not use the Allnet name, logo, carrier identification
code or service marks without the prior written consent of Allnet. Customer
shall submit to Allnet for written approval copies of all marketing and
advertising materials involving the Allnet name, logo, carrier identification
code or service marks which Customer proposes to use in its marketing activities
prior to use of said materials. Allnet may in its sole discretion grant or
withhold its written consent or approval. Customer shall designate an individual
to serve as contact for all communications between itself and Allnet.
10.6 A. Customer shall be responsible for all customer service functions
for the End-Users and shall supply Allnet with a telephone number to which
Allnet can refer End-Users that call Allnet with customer service issues. A list
of the current Allnet network recordings that either identify Allnet as the
carrier or that reference the Allnet customer service telephone number are set
forth in Exhibit 10.6 A. attached hereto and made a part hereof. Customer
understands and agrees that Allnet may add, change or delete said recordings
from time to time and that Allnet is not obligated to change any recordings to
identify Customer as the carrier or to reference Customer's customer service
telephone number.
B. In performing its customer service functions, Customer shall
comply with the following quality assurance standards:
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<PAGE>
(i) All Customer telephone personnel shall be courteous and
responsive to End-Users at all times.
(ii) All End-User calls for customer service shall be answered
promptly.
(iii) Customer shall answer all End-User correspondence by telephone
or in writing. If an End-User is not available by telephone after two attempts,
Customer shall respond in writing within five Business Days of receipt of End-
User correspondence.
(iv) Customer shall immediately notify Allnet of all End-User
inquiries or problems regarding technical issues associated with the Allnet
network. Customer shall refer such inquiries via procedures established by
Allnet and communicated to Customer. Customer shall provide Allnet with the End-
User's name, ANI, address and a description of the nature of the problem.
(v) Customer shall maintain an experienced and trained staff of
personnel in order to comply with its obligations under this Agreement,
including the foregoing quality assurance standards.
(vi) Customer shall comply with reasonable modifications to the
quality assurance standards that Allnet may from time to time request in
writing.
11. PAYMENT TERMS AND OBLIGATIONS.
------------------------------
11.1 Customer shall pay Allnet for the Services in accordance with the
following.
A. Allnet shall invoice Customer via facsimile on or about the fifth
Business Day after the close of each Billing Cycle for the Services to be
provided during the then current Billing Cycle and for any other sums due Allnet
hereunder (the "Customer Invoice"). Each Customer Invoice shall detail: (i) the
amount due Allnet, or the credit due Customer, [________________________________
________________________________________________________________________________
________________________________________________________________________________
_______________]. In the event the Letter of Credit (defined at 11.2 D.) is less
than [__________________________________________________________________________
________________________________________________________________________________
___________________________________], the Customer Invoice shall provide for a
pre-payment in an amount [______________________________________________________
_____________________________________________________]. Each Customer Invoice
will rate the Services at the then current Allnet tariffed rates, less any
applicable discount credits for which Customer may be eligible pursuant to
Exhibit 3.1.
B. Each Customer Invoice shall be paid by Customer via wire transfer
of immediately available U.S. funds to an account
17
<PAGE>
designated by Allnet so that the payment is received by Allnet within twenty-one
days from the date of the Customer Invoice. Allnet agrees that (i) the Customer
Invoice date shall be the same day that the Customer Invoice is faxed to
Customer, and (ii) the Customer Invoice will be faxed on a Business Day. If
payment for a Customer Invoice is not received by Allnet by the second Business
Day prior to the due date of the Customer Invoice, Allnet agrees to notify
Customer's contact named in C. below via facsimile of such non-receipt.
C. The Customer facsimile number and contact person for purposes of
this Subsection 11.1 shall be ______________, Attention :______________________.
Customer may change said facsimile number and contact person upon written notice
to Allnet.
D. At the time Customer submits its initial Subscription Checklist
hereunder, it shall provide Allnet with an irrevocable, standby letter of credit
to secure Customer's payment obligations hereunder (the "LETTER OF CREDIT"). The
Letter of Credit shall be from a financial institution acceptable to Allnet
18
<PAGE>
in the minimum amount of [________] and shall include the terms and conditions
set forth on Exhibit 11.2 D. attached hereto and made a part hereof. Allnet
shall not be obligated to provide the Services until such time as it receives
such a satisfactory Letter of Credit. Customer shall be responsible for all fees
and expenses in obtaining the Letter of Credit and any amendments, supplements
or replacements. Customer shall at all times during the term of this Agreement
maintain the Letter of Credit in full force and effect in accordance with the
terms herein. Customer shall have the option of furnishing a cash security
deposit in lieu of the Letter of Credit. In such event, the provisions herein
with respect to the Letter of Credit shall apply to such security deposit as
well. Provided that Allnet has been paid for all outstanding monies due it from
Customer hereunder, Allnet agrees that upon the termination or expiration of
this Agreement it shall promptly return to Customer any undrawn Letter of Credit
or any excess funds remaining from a draw on the Letter of Credit.
E. In the event Customer fails to timely pay a Customer Invoice in
full, Allnet shall have the right to draw on the Letter of Credit for the full
face amount. Allnet shall apply the funds from the Letter of Credit to any
outstanding Customer Invoice and credit any excess funds to Customer's account.
If the funds from the Letter of Credit are insufficient to fully pay any
outstanding Customer Invoice, then Allnet shall have the right to immediately
proceed with its remedies under Subsection 11.3.
11.2 [Intentionally left blank.]
11.3 A. In the event Customer fails to timely pay any Customer Invoice
(other than a failure caused by the failure of Allnet to provide the notice set
forth in the last sentence of Subsection 11.1 B., in which event the due date
for the Customer Invoice shall be extended two Business Days) or fails to
maintain the Letter of Credit in full force and effect, Customer shall be in
breach of this Agreement which the parties hereby agree is an uncurable breach,
unless Allnet elects in writing to allow Customer to cure. If said uncurable
breach occurs, or if Customer otherwise breaches this Agreement (and the breach
remains uncured beyond any available cure period herein), Allnet shall have the
right at its sole option to do any or all of the following: (i) cease accepting
or processing orders for the Services; (ii) withhold delivery of any CDR Tapes
and cease Electronic Exchange; (iii) draw on the Letter of Credit and enforce
any guaranty granted herein; (v) terminate this Agreement without liability to
Allnet, including cancellation of the Services to Customer and/or End-Users;
(vi) collect from Customer for future Services that would have been provided but
for Customer's breach, including but not limited to the Monthly Surcharge and
other charges referenced herein; and (vii) pursue such other remedy or relief as
may be appropriate.
[____________________________________________________________________
______________________________________________________________________________
________________________________________________________________________________
___________________]
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[____________________________________________________________________________
________________________________________________________________________________
_______________________________________________________________________________
_________________________________________________________________________
_______________________________________________________________________________
_____________________________________________________________________________
________________________________________________________________________
_______________________________________________________________________________
________________________________________________________________________________
_______]
[_____________________________________________________________________
_____________________________________________________________________________
______________________________________________________________________________
__________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________
____________________________________________________________________________
_______________________________________________________________________________
___________________________________________________________________________
__________________________________________________________________________
_______________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
______________________________________________________________]
11.4 Customer acknowledges and agrees that time is of the essence with
respect to the payment of the Customer Invoices and that it shall have no
opportunity to cure any failure by it to timely pay any Customer Invoice, absent
a written agreement by Allnet. Customer further acknowledges and agrees to the
following with respect to TERMINATION of this Agreement by Allnet for
Customer's non-payment:
A. That Customer shall not seek legal or equitable remedies,
including without limitation, injunctive relief, that would require Allnet to
continue providing the Services to End-Users through the Customer while any
monies due Allnet hereunder remain unpaid.
B. That upon termination of this Agreement, Allnet has the right to
cancel or block the Services, or to continue providing long distance services to
End-Users; that such cancellation or blockage may have an adverse impact on an
End-User's business; and that Customer shall be solely responsible for all
claims asserted by End-Users or other third parties associated with such
blocking or cancellation of the Services by Allnet.
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<PAGE>
C. That cancellation or blockage of the Services to End-Users will
have a negative impact on Customer's business for which Allnet shall have no
liability.
11.5 Customer shall be responsible for payment of, or reimbursement to
Allnet of, Universal Service Fund and Lifeline Assistance Charges (presubscribed
line charges) as set forth in the National Exchange Carrier Association (NECA)
Tariff FCC #5, sections 8.5.1, 8.5.2 and 17.1.4 (A) & (B), as the same may be
amended from time to time, or any successor tariffs or sections. Said charges
shall be included on Customer Invoices and shall be calculated based on the
number of End-User ANIs presubscribed to Allnet. In addition, with respect to
the Services, Customer shall be responsible for payment of, or reimbursement to
Allnet for, (i) telecommunication relay service charges required by the
Americans with Disabilities Act or otherwise (both federal and state), (ii)
interexchange carrier fees payable to the FCC under the Omnibus Budget
Reconciliation Act of 1993 or otherwise, and (iii) universal service fund
charges, intraLATA compensation charges and similar fees and charges imposed on
Allnet by state regulatory agencies. The above charges shall be included on
Customer Invoices from time to time.
11.6 Within ten Business Days after the Effective Date, Customer shall
furnish to Allnet, and keep current during the term of this Agreement, valid and
appropriate tax exemption certificates for all applicable jurisdictions
(federal, state and local) in which it performs the End-User billing. Customer
shall be responsible for properly taxing the End-Users and for the proper and
timely reporting and payment of applicable taxes to the taxing authorities and
shall defend, indemnify and hold Allnet harmless from payment and reporting of
all applicable federal, state and local taxes, including but not limited to,
gross receipts taxes, surcharges, franchise fees, occupational, excise and other
taxes (and penalties and interest thereon), relating to the Services. Such
indemnification shall include costs and expenses (including reasonable
attorney's fees) incurred by Allnet in settling, defending or appealing any
claims or actions brought against it relating to said taxes. In the event
Customer fails to provide and maintain the required certificates, Allnet shall
have the right, but not the obligation, to charge Customer for applicable taxes.
12. TERM AND TERMINATION.
---------------------
12.1 Subject to any early termination provisions provided herein, this
Agreement shall be for the term of two years from and after the Effective Date
(the "INITIAL TERM"). Unless a party provides the other party with at least
ninety days written notice prior to expiration of the Initial Term of its intent
to discontinue this Agreement upon expiration of the Initial Term, then upon
such expiration this Agreement shall automatically continue until the earlier to
occur of (i) termination as provided elsewhere herein, or (ii) termination by a
party at any time upon ninety days written notice.
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<PAGE>
12.2 Upon written notice, this Agreement may be immediately terminated by
Allnet, without liability, (i) where provided for in this Agreement, (ii) in
accordance with its rights to cancel service as set forth in the Tariff, or
(iii) after the occurrence of any of the following events:
A. Upon Customer's insolvency, dissolution or cessation of business
operations.
B. The making by the Customer of any general assignment or
arrangement for the benefit of creditors; the filing by or against the Customer
of a petition to have it adjudged a bankrupt or for a reorganization or
arrangement under any federal or state bankruptcy or insolvency laws, unless any
such petition shall be dismissed or discharged within thirty days of its filing;
the appointment of a trustee or receiver to take possession of all or
substantially all the Customer's assets, where such fiduciary is not dismissed
within thirty days of its appointment; the attachment, execution, or other levy
or seizure of all or substantially all of the Customer's assets, where such
event is not discharged within thirty days of its initiation.
C. Pursuant to any order by the FCC denying Customer certification
or authorization to provide long distance services as contemplated herein.
Allnet shall have the right to cease providing the Services to Customer, but not
terminate this Agreement, in any state pursuant to an order by a Public Utility
or Service Commission denying Customer certification or authorization to provide
long distance services in such state.
D. The transfer of End-Users to another entity or long distance
carrier by Customer, unless transferred in accordance with Subsection 10.4 or
15.2 B.
12.3 This Agreement may be terminated by Customer pursuant to paragraph 9.
of Exhibit 3.1.
12.4 In the event of a breach of any term or condition of this Agreement
(except for payment of funds due Allnet which is covered by Section 11. or other
breaches the remedy for which is covered elsewhere herein) by a party, the other
party may terminate this Agreement upon thirty days written notice to the
breaching party, unless the breaching party cures the breach, or takes prompt
steps to cure a breach that cannot be reasonably cured during said period, prior
to expiration of said thirty day period. Customer's right to cancel service on
thirty days notice under the Tariff is superceded by its termination rights
under this Agreement.
12.5 Subject to Subsection 13.6, upon termination or expiration of this
Agreement, each party shall immediately discontinue the use, if any, of all
trade names, service marks, trademarks, Proprietary Information and other
materials provided to it by the other party.
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<PAGE>
12.6 In addition to its right to convert End-Users to Allnet customers as
provided elsewhere herein, upon termination or expiration of this Agreement,
Allnet shall have the right to continue providing long distance services to End-
Users on the Allnet network at the time of termination in accordance with the
rates and terms Allnet and an End-User may agree upon and to treat such
continuing End-Users as Allnet customers for all purposes.
13. TRADE SECRETS AND CONFIDENTIALITY.
----------------------------------
13.1 A. Each party agrees that all information furnished to it and
identified by the other party as being confidential or proprietary information
or trade secrets (collectively referred to as "PROPRIETARY INFORMATION"), is,
and shall continuously remain, the sole and exclusive property of the party
furnishing the same (the party furnishing the Proprietary Information
hereinafter referred to as the "DISCLOSING PARTY" and the other party
hereinafter referred to as the "RECEIVING PARTY"). Each party shall treat the
Proprietary Information and the contents of this Agreement in a confidential
manner and, except to the extent necessary in connection with the performance of
its obligations under this Agreement, neither party shall directly or indirectly
disclose the same to any third party without the written consent of the
Disclosing Party.
B. The confidentiality obligations hereunder shall not apply to any
portion of the Proprietary Information which (i) is or becomes public knowledge
through no fault of the Receiving Party, (ii) is in the lawful possession of
Receiving Party prior to disclosure to it by the Disclosing Party (as confirmed
by the Receiving Party's records), (iii) is disclosed to the Receiving Party
without restriction on disclosure by a person who has the lawful right to
disclose the information, or (iv) is disclosed pursuant to the lawful
requirement or formal request of a governmental agency. In the event that the
Receiving Party is requested or legally compelled by a governmental agency to
disclose any of the Proprietary Information of the Disclosing Party, the
Receiving Party agrees on behalf of itself and its representatives that it will
provide the Disclosing Party with prompt written notice of such requests so that
the Disclosing Party has the opportunity to pursue its legal and equitable
remedies regarding such potential disclosure.
13.2 The Proprietary Information is to be used by the Receiving Party only
for the purposes contemplated herein and the Receiving Party shall not disclose
the same to any one other than its employees who have a need to know and who
agree to be bound by the terms of this Section 13. The Proprietary Information
shall not be copied or retained by the Receiving Party in written form and all
originals and any copies or summaries thereof shall be returned to the
Disclosing Party upon request.
13.3 Each party acknowledges that its breach or threatened breach of this
Section 13. may cause the Disclosing Party
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<PAGE>
irreparable harm which would not be adequately compensated by monetary damages.
Accordingly, in the event of any such breach or threatened breach, the Receiving
Party agrees that equitable relief, including temporary restraining orders or
preliminary or permanent injunctions, shall be an available remedy in addition
to any other legal remedies to which the Disclosing Party may be entitled.
13.4 Neither party shall use the name, trade name, service marks, trade
marks, or printed materials of the other party, in any promotional or
advertising material, statement, document, press release or broadcast without
the written consent of the other party.
13.5 The parties acknowledge the existence of a highly competitive long
distance marketplace and understand and agree that either party may offer to
provide long distance services to customers of the other party, including End-
Users, in accordance with such rates and terms as a party and the customer may
agree upon, provided however, that a party shall not at any time use Proprietary
Information of the other party in soliciting customers for long distance
services. Provided further, Customer shall not, in any marketing activities to
existing Allnet customers, use the fact that Allnet is the Customer's underlying
carrier as an inducement for such customers to switch their long distance
service to Customer.
13.6 Notwithstanding the restrictions set forth in this Section 13.,
Allnet may use the End-User Information in furtherance of its rights under
Subsections 11.3 and 12.6.
14. LIMITATIONS ON LIABILITY AND ACTIONS; INDEMNIFICATION.
------------------------------------------------------
14.1 PROVISIONS RELATING TO THE LIMITATION OF ALLNET LIABILITIES AND ITS
DISCLAIMER OF WARRANTIES ARE SET FORTH IN THE TARIFF. IN ADDITION TO SAID
PROVISIONS, ALLNET SHALL NOT BE LIABLE FOR INDIRECT, CONSEQUENTIAL, INCIDENTAL,
PUNITIVE OR EXEMPLARY DAMAGES, INCLUDING WITHOUT LIMITATION, LOST PROFITS OR
REVENUES, CREDITS FOR SERVICE OUTAGES OR LOST TRAFFIC AND END-USER CREDITS.
EXCEPT WITH RESPECT TO CLAIMS ARISING OUT OF ITS WILLFUL MISCONDUCT, THE MAXIMUM
LIABILITY, IF ANY, OF ALLNET FOR ALL DAMAGES, INCLUDING WITHOUT LIMITATION,
DAMAGES FOR BREACH OF THIS AGREEMENT, NEGLIGENCE OR OTHER TORT WITH RESPECT TO
THIS AGREEMENT, SHALL BE LIMITED TO AN AMOUNT NOT TO EXCEED $50,000.00.
14.2 It being the express intent of the parties that Customer be solely
responsible for all claims of End-Users relating to the Services, Customer
agrees that it shall be solely responsible for any credits or adjustments that
may be issued or required to be issued to End-Users and that it shall not be
entitled to any credits or adjustments from Allnet on a Customer Invoice or
otherwise for credits or adjustments given to End-Users. Further and in addition
to its indemnification obligations set forth in the Tariff, Customer shall be
responsible for and shall save, defend, indemnify, and hold Allnet and its
directors, officers,
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<PAGE>
employees and agents free and harmless from any and all claims (including any
and all claims of End-Users and regulatory agencies), taxes, penalties,
interest, expenses, damages, lawsuits, or other liabilities (including without
limitation, reasonable attorneys' fees and court costs) relating to or arising
out of (i) the operation of Customer's business; (ii) Customer's activities
hereunder; and (iii) Customer's breach of any of the terms or provisions of this
Agreement.
14.3 The statute of limitations applicable to all claims by Customer
arising under this Agreement shall be one year from the date that the action or
event giving rise to the claim accrues, is discovered or should have been
discovered.
15. MISCELLANEOUS.
--------------
15.1 RELATIONSHIP OF PARTIES. Allnet and Customer acknowledge and agree
-----------------------
that the relationship between them is solely that of independent contractors,
and nothing herein shall be construed to constitute the parties as
employer/employee, partners, joint ventures, franchisor/franchisee, co-owners,
or otherwise as participants in a joint or common undertaking. Neither party,
nor their respective employees, agents or representatives, shall have any right,
power or authority to act or create any obligation, express or implied, on
behalf of the other.
15.2 LIMITATION ON ASSIGNMENT; SALE OF END-USER BASE.
------------------------------------------------
A. Neither party shall assign or transfer its rights or obligations
under this Agreement without the other party's prior written consent, which
consent shall not be unreasonably withheld. Notwithstanding the foregoing,
Allnet may assign this Agreement to its parent, successor in interest or a
subsidiary without Customer's consent, and Customer may assign this Agreement to
its parent, successor in interest or a wholly owned subsidiary upon prior
written notice to Allnet and without Allnet's consent, provided Customer is not
in default hereunder and its assignee agrees in writing to assume Customer's
obligations hereunder. Any assignment or transfer without the required consent
shall be void.
B. Except as otherwise provided under Subsection 10.4, Customer
shall not assign, sell, convey or otherwise transfer all or a portion of its
End-User customer base (collectively "TRANSFER") without the prior, written
consent of Allnet, which consent shall not be unreasonably withheld provided
Customer complies with the conditions referenced below. Customer shall provide
Allnet with at least sixty days prior, written notice of Customer's intent to
initiate a Transfer. Within thirty days from the date of receipt by Allnet of
Customer's said notice of intent, Allnet shall in writing inform Customer of the
reasonable conditions required by Allnet for its consent to the Transfer, which
conditions will at a minimum include compensation to Allnet to cover charges for
future Services that would have been provided but for the Transfer, including
but not limited to, the Minimum Charge, costs for the Custom Program and other
charges referenced
25
<PAGE>
in this Agreement. If Allnet fails to timely provide said conditions, Allnet
shall be deemed to have consented to the Transfer. The parties agree that (i)
Customer's breach of this Subsection 15.2 B. is an uncurable breach, unless
Allnet elects in writing to allow Customer to cure, and (ii) upon the occurrence
of such breach Allnet may immediately proceed with its remedies under Subsection
11.3.
15.3 ENTIRE AGREEMENT. This Agreement, the Tariff and any Exhibits
----------------
attached hereto contain the entire agreement between Allnet and Customer
concerning the subject matter hereof, and any representations or agreements,
oral or otherwise, not embodied herein, are superceded by the terms hereof and
shall be of no force or effect. Except as otherwise set forth herein, Allnet
makes no representations concerning the Services or otherwise. This Agreement is
intended to supplement the Tariff, but in the event of a conflict between the
provisions of this Agreement and the Tariff, the provisions of this Agreement
shall control to the extent of such conflict. Without limiting the foregoing,
Paragraphs 4.F. and 9. of Exhibit 2.1 are expressly superceded by the terms of
this Agreement. Subject to Allnet's limitation of liabilities under Subsection
14.1, Paragraph 4.G. of said Exhibit shall be reciprocal to the extent that
either party institutes legal action under this Agreement and prevails in such
action.
15.4 COUNTERPARTS. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The individuals signing
this Agreement by their signatures below represent and warrant that they are
authorized to bind and do so bind the party on behalf of which they are
executing this Agreement. In order to be binding, any modifications to this
Agreement must be in writing and signed by an authorized representative of each
party.
15.5 COMPLIANCE WITH LAWS. During the term of this Agreement, the
----------------------
parties hereto shall comply with all local, state and federal laws and
regulations applicable to this Agreement or to their respective businesses;
further, the parties shall obtain, file and maintain any tariffs, permits,
certifications, authorizations, licenses or similar documentation as may be
required by the FCC, a state Public Utility or Service Commission, or any other
governmental body or agency having jurisdiction over their respective
businesses. Upon request, each party shall supply the other with copies of such
tariffs, permits, certifications , etc .
15.6 THIRD PARTIES. The provisions of this Agreement and the rights and
-------------
obligations created hereunder are intended for the sole benefit of Allnet and
Customer, and shall not create any right, claim or benefit on the part of any
person not a party to this Agreement, including End-Users.
15.7 SURVIVAL OF PROVISIONS. Any obligations of the parties relating to
----------------------
monies owed, as well as those provisions relating to
26
<PAGE>
confidentiality, security interests, limitations on liability and actions and
indemnification, shall survive termination or expiration of this Agreement.
15.8 GOVERNING LAW. Except as otherwise required by tariff or federal
-------------
law, this Agreement shall be governed by Michigan law with exclusive venue and
jurisdiction of any disputes involving this Agreement in the U. S. District
Court for the Eastern District of Michigan or (in the event subject matter
jurisdiction cannot be established in the U. S. District Court) the Circuit
Court for the County of Oakland, State of Michigan.
15.9 CONSTRUCTION. The language used in this Agreement shall be deemed
------------
the language chosen by the parties to express their mutual intent. No rule of
strict construction shall be applied against either party.
15.10 ALLNET APPROVAL. This Agreement is not effective until executed
---------------
by an Allnet officer as set forth below and a copy is given to
Customer.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the dates
set forth below.
ALLNET COMMUNICATION SERVICES, DELTACOM, INC.
INC.
By: /s/ WILLIAM H. OBERLIN By: /s/ FOSTER MCDONALD
----------------------------------- -------------------------------
Title: EVP Title: PRESIDENT
-------------------------------- ----------------------------
Printed Name: WILLIAM H. OBERLIN Printed Name: FOSTER MCDONALD
------------------------- ---------------------
Date: 1/25/94 ("Effective Date") Date: 1/17/94
------- --------------
1/7/94
EXHIBIT SCHEDULE
Exhibit Number Description
- -------------- -----------
2.1 Excerpt of Tariff
3.1 Rates/Charges for the Services
4.1 A. CDR and Modified CARE Formats
5.1 Forecast Form
5.5 (i) 800 Number Order Form
5.5 (i(a)) 800 Number Letter of Authorization
5.5 (ii) 800 Number Reservation Form
27
<PAGE>
7.2 Time Point Definitions
10.2 Form Letter of Agency
10.6 A. List of Allnet Network Recordings
11.2 D. Letter of Credit Terms & Conditions
28
<PAGE>
EXHIBIT 3.1
RATES AND CHARGES FOR THE SERVICES
***INFORMATION IN THIS EXHIBIT 3.1 (PAGES 29-35) HAS BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***
29
<PAGE>
EXHIBIT 7.2
TIME POINT DEFINITIONS
1. Time Point 1: Request for Service Event
Identifies the time of day that a request for service was received for the
call. The request for service event is declared upon detection of a valid
off-hook from an originating trunk.
2. Time Point 6: Answer Detected Event
Identifies the time of day that called party answer was declared.
3. Time Point 7: Call Disconnect Event
Identifies the time of day that calling or called party disconnect
occurred.
36
<PAGE>
EXHIBIT 10.2
LETTER OF AGENCY
I, the undersigned Customer, authorize Deltacom ("Carrier") to provide my long
distance service through Allnet Communication Services, Inc. ("Allnet") as the
underlying transport provider, and to act as my agent in all matters related to
providing my long distance service for the telephone number(s) listed on this
form. I understand that, (i) I may only subscribe to one long distance carrier
for outbound services for the listed telephone number(s), (ii) Allnet's name
rather than the Carrier's name may appear on my local telephone company bill at
the time my service begins, (iii) there may be a charge from the local telephone
company for subscribing my long distance service to Carrier, (iv) there may be a
charge from my local telephone company should I decide to change my long
distance carrier after my service begins, and (v) I may be serviced and billed
directly by Allnet at such time as Allnet ceases being the transport provider
for the Carrier with respect to my long distance service.
This Letter of Agency shall remain in effect until Customer signs a new Letter
of Agency.
Telephone Numbers ______________________ ______________________
______________________ ______________________
______________________ ______________________
______________________ ______________________
__________________________________ Customer's billing address
(print Customer's name) and telephone #:
______________________________
__________________________________ ______________________________
Customer's signature ______________________________
______________________________
Title:___________________
Date:____________________
37
<PAGE>
EXHIBIT 10.6 A
ALLNET NETWORK RECORDINGS
***INFORMATION IN THIS EXHIBIT 10.6A HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.***
<PAGE>
EXHIBIT 11.2 D.
TERMS AND CONDITIONS FOR IRREVOCABLE STANDBY LETTER OF CREDIT
-------------------------------------------------------------
Issuer: FDIC insured financial institution acceptable to Beneficiary
Beneficiary: ALLNET COMMUNICATION SERVICES, INC.
30300 Telegraph Road, Suite 350
Bingham Farms, Michigan 48025-4510
Account Party: ______________________________________________________________
______________________________________________________________
Amount: US $ _________________________________________________________
Advising and
Negotiating
Bank: Detroit, Michigan financial institution chosen by Issuer
Tenor: sight, partial drawings permitted
Expiration: Initial expiration date: _______________, 199_
The Credit shall be automatically extended (without the
necessity of a formal amendment of the Credit) on each
succeeding anniversary date of the initial expiration date,
unless not less than sixty (60) days nor more than ninety (90)
days prior to the initial expiration date or any subsequent
extended expiration date, Beneficiary receives notice from
Issuer in writing by overnight courier or registered mail
(return receipt requested) that Issuer elects not to extend
the Credit for an additional one year period.
Documents: 1. sight draft
2. One of the following statements purportedly signed by an
officer of the Beneficiary stating:
(A) "Allnet Communication Services, Inc. ("Allnet") has
determined that, as of the date of the accompanying sight
draft, [Account Party] was obligated to pay Allnet the amount
---------------
set forth on the accompanying sight draft and said amount is
now past due.", or
(B) "The accompanying sight draft does not exceed the sum of
(i) the amount Allnet Communication Services, Inc. ("Allnet")
has determined was due and payable by (Account Party) as of
the date of
39
<PAGE>
the accompanying sight draft and (ii) the amount of payments
received by Allnet from [Account Party] within ninety (90) days
prior to the (a) filing of a petition by or against [Account
Party] with the United States Bankruptcy Court or (b) the making
by [Account Party] of an assignment for the benefit of creditors
which in either of the foregoing instances under applicable state
or federal law could result in the return of such payments to
[Account Party], its debtor in possession or other appropriate
parties.", or
(C) "Allnet Communication Services, Inc. ("Allnet") has received
notice from the issuer of Letter of Credit No.________ (the
"Credit"), or its successor or assignee, of its election to not
extend the Credit for an additional one year period. Allnet
agrees that it will return all unused Credit proceeds to [Account
Party] upon satisfaction in full of [Account Party's] obligations
to Allnet."
Governing
Law: Either the Uniform Commercial Code as enacted in the state where
Issuer is located or the Uniform Customs and Practices for
Documentary Credits, 1983 Revision, ICC Pub. No. 400 ("UCP")
shall govern the Credit. If the UCP shall govern, Articles 16c
and 16e thereof shall not apply. If this Credit expires during an
interruption of business as described in Article 19 of the UCP,
Issuer agrees that Beneficiary may draw against the Credit for a
period of thirty (30) days beginning on the date Issuer resumes
business.
Negotiation: At specified office of Advising and Negotiating Bank. If
presentment is made prior to 11 a.m. (Detroit time), wire
transfer of the sight draft proceeds will be made by the end of
business on the next succeeding business day. If presentment is
made after 11:00 a.m. (Detroit time), wire transfer of the sight
draft proceeds will be made by the end of business on the second
succeeding business day. Wire transfer instructions shall be set
forth on the Beneficiary's sight draft.
Bank Charges: All correspondent banking charges for the account of Account
Party
Legal Fees: In the event Issuer wrongfully dishonors a drawing under this
Credit, Issuer shall reimburse Beneficiary for reasonable legal
fees and expenses incurred subsequent to the date notice of
dishonor was given to Beneficiary.
40
<PAGE>
EXHIBIT 10.70
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[_____]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
WILTEL, INC.
CARRIER
DIGITAL SERVICES AGREEMENT
THIS DIGITAL SERVICES AGREEMENT (the "Agreement") is entered into as the
1st day of September, 1995 (the "Effective Date"), by and between WORLDCOM
NETWORK SERVICES, INC. d/b/a WilTel, a Delaware corporation ("WilTel") and (i)
ASSOCIATED COMMUNICATIONS COMPANIES OF AMERICA, a Texas non-profit corporation
("ACCA") and the members of ACCA which are listed with their respective
addresses on Appendix A attached hereto (individually referred to as a
"Member"), for the provision of the dedicated digital telecommunications
interexchange, local access and ancillary services described in Service Orders
accepted by WilTel under this Agreement, subject to the terms and conditions
contained in this Agreement. References to "Customer" shall refer collectively
to ACCA and all of the Members and each Member individually. Each Member may
directly order, provision and maintain its own respective private line
interexchange service requirements under this Agreement; provided, however, ACCA
agrees to appoint an administrator (the "ACCA Administrator") who will be solely
responsible for administering the terms and conditions contained in this
Agreement, but shall have no personal liability under this Agreement. The
addition of any additional Members under this Agreement after the Effective Date
must be approved in writing by WilTel, which approval may not be unreasonably
withheld.
NOW THEREFORE, the parties agree to the following:
1. INCORPORATION OF DOCUMENTS AND CONTROLLING PROVISIONS: This Agreement
consists of all the terms and conditions contained (i) in this Agreement, (ii)
in Service Orders that conform hereto, and, (iii) in documents incorporated
herein specifically by reference. This Agreement constitutes the complete and
exclusive statement of the understanding between the parties and supersedes all
proposals and prior agreements (oral or written) between the parties relating to
Service provided hereunder. In the event any provision of this Agreement
conflicts with any statute, rule or order of any governmental unit or regulatory
body, or tariff filed by WilTel, then, if required by law, such statute, rule,
order or tariff shall control.
Page 1 of 27 CONFIDENTIAL
------------
<PAGE>
2. PRIOR AGREEMENTS/DISPOSITION OF EXISTING SERVICE:
(A) The parties acknowledge that there currently exists between WilTel (or
WilTel's affiliates, including without limitation, WorldCom, Inc.,
successor-in-interest to LDDS Communications, Inc.) and certain Members,
agreements both oral and written for DS-0, DS-l and DS-3 level
Interexchange Service and associated ancillary and local access service
(collectively, the "Existing Service"), including without limitation the
following agreements (collectively, the "Prior Agreements"):
(i) That certain Digital Services Agreement between WilTel,
Inc. (predecessor-in-interest to WorldCom Network Services, Inc.)
and Long Distance Savers, Inc. dated as of the 1st day of April,
1994.
(ii) That certain Digital Services Agreement between WTG-
Central, Inc. (formerly LDX Net, Inc. and predecessor-in-interest
to WorldCom Network Services, Inc.) and ACC Long Distance
Corporation dated October 24, 1986, as amended by Amendment No. 4
dated January 4, 1991.
(iii) That certain Digital Services Agreement between WilTel,
Inc. and BTI (also known as Business Telecom, Inc.) dated
December 1, 1994 and more particularly known as DSA#BTI-941201.
(iv) That certain Digital Services Agreement between Williams
Telecommunications Services, Inc. (predecessor-in-interest to
WorldCom Network Services, Inc.) and Southern Interexchange
Facilities, Inc. (predecessor-in-interest to Delta Comm, Inc.)
dated July 13, 1991 and more particularly described as DSA#SIF-
91071.
(v) That certain Reseller Affiliate Agreement between WilTel,
Inc. and Delta Comm, Inc. dated August 10, 1994.
(vi) That certain ATC Service Agreement between Advanced
Telecommunications Corp. (predecessor-in-interest to WorldCom,
Inc.) and NTC, Inc. (also known as National Telecommunications of
Florida) dated January 22, 1991.
Page 2 of 27 CONFIDENTIAL
------------
<PAGE>
(B) As of the Effective Date of this Agreement, the Prior Agreements are
canceled and of no further force or effect, and the parties shall be
released from all liability thereunder with the exception of certain
obligations arising under the Prior Agreements which are intended to
survive, such as, payment for Services provided thereunder and rights of
confidentiality and indemnity.
(C) As of the Effective Date of this Agreement, the Existing Service
provided to any Member pursuant to a Prior Agreement shall be subject to
the terms and conditions of this Agreement, including without limitation,
the rates (as described in Section 10 below), and the minimum Service
Commitment Periods and minimum circuit charges (both of which are described
in Section 14 below). However, neither ACCA nor any Member who is not a
party to a particular Prior Agreement shall have any obligation, liability
or responsibility for or under such Prior Agreement.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PARTIES: Each of
WilTel, ACCA and each Member individually represents and warrants to the other
parties that:
(A) It has the right, power and authority to enter into and perform its
obligations under this Agreement;
(B) It has taken all requisite action (corporate or otherwise) to approve
execution, delivery and performance of this Agreement, and this Agreement
constitutes a legal, valid and binding obligation of it, enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency or similar laws:
(C) Neither the execution of this Agreement nor the fulfillment of or
compliance with the terms and provisions hereof will conflict with or
result in a breach of the terms, conditions or provisions of, or constitute
a default under, or result in a violation of the charter, by-laws, or other
governing instruments of it, or any instrument, order, judgment or decree
to which it is subject or any contract to which it is a party; and
(D) The fulfillment of its obligations hereunder will not constitute a
material violation by it of any existing applicable law, rule, regulation
Page 3 of 27 CONFIDENTIAL
------------
<PAGE>
or order of any governmental authority, and except as otherwise provided
herein, all material necessary or appropriate public or private consents,
permissions, agreements, licenses, or authorizations to which it may be
subject have been obtained.
4. TERM: WilTel's obligation to provide Service under this Agreement
shall be effective over the period commencing with the Effective Date of this
Agreement and continuing through and including August 31, 1998 (the "Term").
With respect to any Service Order for which the applicable Service Commitment
Period has not been satisfied by the end of the Term, the terms and conditions
of this Agreement will remain in full force and effect until such Service
Commitment Period has been satisfied. Upon the expiration of the Term, all
charges relevant to the Service will remain in effect and Service which has met
its minimum Service Commitment Period as described herein will be subject to
termination by either party upon not less than thirty (30) days prior written
notice to the other party.
5. SERVICE ORDERS: Service requested by Customer hereunder shall be
requested on (i) WilTel Digital Service Description forms in effect from time to
time or Customer's forms accepted in writing by an Authorized Headquarters
Representative of WilTel as hereinafter provided, or (ii) through the WilTel
Electronic Order Processing system whereby Customer receives written
confirmation from WilTel of the Service it has requested (hereinafter
collectively referred to as "Service Orders"). Each Service Order shall
reference this Agreement by Digital Service Agreement number ("DSA#") and shall
become a part of this Agreement only to the extent that it specifies the type of
Interexchange Service, quantity of circuits, originating and terminating cities,
Requested Service Date, Service Commitment Period, charges and other information
necessary for WilTel to provide the Service to Customer. Any other terms and
conditions that are typed, printed or otherwise included in any Service Order
shall be deemed to be solely for the convenience of the parties. No action by
WilTel (including, without limitation, provision of Service to Customer pursuant
to such Service Order) shall be construed as binding or estopping WilTel with
respect to such term or condition, unless the Service Order containing said
specific term or condition has been signed by an Authorized Headquarters
Representative of WilTel.
6. SERVICE COMMITMENT PERIOD, START OF SERVICE AND AUTOMATIC
EXTENSION: The Service Commitment Period for the Interexchange and Ancillary
Services subject to recurring charges and described in a Service Order shall
commence on
Page 4 of 27 CONFIDENTIAL
------------
<PAGE>
the Requested Service Date or the date upon which the Service first becomes
available in conformity with the Technical Standards, whichever is later ("Start
of Service").
7. SERVICE TO BE PROVIDED:
(A) WilTel agrees to offer and provide Customer with DS-0 level
Interexchange Service, DS-l level Interexchange Service, Multiple DS-l
level Interexchange Service and DS-3 level Interexchange Service that is
available and uncommitted (i.e., Service for which WilTel does not have
firm orders) between and among (i) any two (2) cities comprised exclusively
of the WilTel On-Net Cities ("On-Net Service"), and (ii) one or more WilTel
Extended Cities ("Extended Service") both of which are set forth in
Attachment "1" (or such other cities as may be mutually agreed upon from
time to time and documented via a Service Order executed by a duly
authorized representative of each party). On-Net Service and Extended
Service are collectively referred to as "Interexchange Service".
(B) The rates set forth in Section 10 below shall apply to (x) On-Net
Service with respect to DS-1, Multiple DS-1 and DS-3 level Interexchange
Service, and (y) Extended Service only with respect to DS-l level
Interexchange Service; provided, all other Extended Service shall be
subject to rates as determined by WilTel on an individual case basis and
agreed upon, in writing, by the parties hereto.
(C) In addition, it is further acknowledged by Customer that WilTel can
not make an advance guarantee of the delivery interval for Service
originating or terminating in WilTel Extended Cities set forth in
Attachment "1". Further, WilTel shall not be obligated to accept a Service
Order conforming with the provisions of this Section 7 for On-Net Service
pursuant to which Customer requires a Requested Service Date for such
Service described therein which is greater than ninety (90) business days,
and less than WilTel's standard installation intervals which are (i) twelve
(12) business days with respect to DS-l level Interexchange Service, or
(ii) ten (10) business days with respect to DS-3 level Interexchange
Service from the date Customer submits such Service Order to WilTel (the
"Standard Interval"). Provided, WilTel's Standard Intervals only apply
when such On-Net Service is available and uncommitted as provided in
Subsection (A) above.
Page 5 of 27 CONFIDENTIAL
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<PAGE>
(D) WilTel will also provide (i) Customer with Ancillary Services (as
hereinafter defined), and (ii) agency service for Customer in provisioning
Customer's Local Access (as hereinafter defined) all as may be requested by
Customer and accepted by WilTel in accordance with the terms hereof
(Interexchange Service, Ancillary Service and agency for Customer's Local
Access shall be collectively referred to herein as the "Service").
WilTel's Installation and Ancillary Charges as of the Effective Date are
shown on Exhibit "1", a copy of which is attached hereto and incorporated
herein by reference. WilTel's liability for delays in installation, testing
and operation of Interexchange Service, Local Access and Ancillary Services
is limited in Section 21 of this Agreement.
8. LOCAL ACCESS AND ANCILLARY SERVICES:
(A) WilTel may, when reasonable under the circumstances, upon Customer's
or an individual Member's request, act as Agent for Customer or such
individual Member with responsibility for provisioning and the initial
testing of an interconnection (reasonably coordinated with Start of
Service) between selected Interexchange Service and a Customer or
individual Member designated termination point and/or service (e.g.,
Feature Group Service) ("Local Access"). Charges to Customer or the
individual Member for Local Access Service ministered on behalf of Customer
or such individual Member by WilTel shall not exceed charges Customer or
such individual Member would otherwise pay the same local access provider
for the relevant interconnection and/or service.
(B) WilTel will also provide Customer and the individual Members other
services (which are available and provided by WilTel), including but not
limited to: (i) multiplexing/demultiplexing service ("Muxing"), (ii)
digital cross-connect service ("DCS"), or (iii) extraordinary service for
reasons including but not limited to: (a) Customer's request to expedite
Service availability to a date earlier than WilTel's published installation
interval or a previously accepted Requested Service Date; (b) Service
redesign or other activity occasioned by receipt of inaccurate information
from Customer; (c) reinstallation charges following any suspension of the
Service for cause by WilTel; (d) Customer's request for use of routes or
facilities other than those selected by WilTel for provision of the
Service; and (e) other circumstances in which extraordinary costs and
expenses are generated by Customer and reasonably
Page 6 of 27 CONFIDENTIAL
------------
<PAGE>
incurred by WilTel (services under this Subsection (B) are collectively
referred to herein as "Ancillary Services"). Recurring and non-recurring
charges to Customer for Local Access (including WilTel's Local Access
Coordination Fee) and Ancillary Services shall be established as of
WilTel's acceptance of the Service Order relevant thereto. A list of
WilTel's Installation and Ancillary Service charges are shown on Exhibit
"1" which is attached hereto and incorporated herein by reference.
RECURRING CHARGES FOR LOCAL ACCESS BILLING ADMINISTERED BY WILTEL AND
CHARGED TO CUSTOMER SHALL BE SUBJECT TO ADJUSTMENT AT SUCH TIMES AS WILTEL
SHALL DETERMINE, NOT TO EXCEED THE PREVAILING CHARGES OF SUCH LOCAL ACCESS
PROVIDERS AS WOULD OTHERWISE BE PAID DIRECTLY BY CUSTOMER FOR THE RELEVANT
INTERCONNECTION OR SERVICE.
(C) Commencing with the Effective Date of this Agreement, WilTel agrees to
charge Customer [__________________] of WilTel's standard rates for the DS-
l level entrance facilities or local serving arrangements WilTel has with
the relevant local telephone operating compan(ies) (the "LSA Rates"). The
LSA Rates as described herein will remain in full force and effect until
such time as WilTel modifies its rates (either by an increase or a
decrease) relative to entrance facilities or local serving arrangements
generally available to its other carrier customers. In the event Customer
is billed directly by the Local Access provider(s) for entrance facilities
or local serving arrangements, the parties agree to cooperate in preventing
WilTel's duplication of charges to Customer for the same entrance
facilities. In the event Customer has been charged by the Local Access
provider(s) for such charges, upon WilTel's receipt of reasonable
documentation substantiating such charges and Customer's payment therefor,
WilTel agrees to either issue Customer a credit for such charges or
reasonably assist Customer in obtaining a refund from the appropriate Local
Access provider.
9. CUSTOMER'S COMMITMENT/DEFICIENCY CHARGE:
(A) Commencing with the March, 1996 billing period and continuing through
the end of the Term (the "Commitment Period"), Customer agrees to maintain,
on a take-or-pay basis, Monthly Recurring Interexchange Service Charges of
a least [______] ("Customer's Commitment"). It is further understood by the
parties that certain Members have individually committed for a certain
portion of Customer's Commitment as further described in
Page 7 of 27 CONFIDENTIAL
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<PAGE>
Section 17 below. Provided, however, except as provided in Section 17,
nothing contained herein shall be construed as to make ACCA or any Member
directly liable to WilTel for the monthly recurring Interexchange Service
Charges of any other Member.
(B) Subject to Section 17 below if, in any month during the Commitment
Period, a Member's actual Monthly Recurring Interexchange Service Charges
do not equal at least such Member's portion, if any, of Customer's
Commitment as shown in the Commitment Schedule described in Subsection
17(B), then for such month(s), such Member agrees to pay WilTel the
difference between such Member's actual Monthly Recurring Interexchange
Service Charges and such Member's portion, if any, of Customer's Commitment
(the "MONTHLY DEFICIENCY CHARGE"). Monthly Deficiency Charges, if any,
determined in accordance with this Subsection (B) shall be due at the same
time Service charges are due hereunder.
(C) The parties hereby specifically agree that the provisions contained
herein describing a deficiency charge represents a mutual good faith
estimate of, and bears a reasonable relationship to, the actual damages to
WilTel in the event of such deficiency and do not represent a penalty of
any kind, and that such deficiency charge is an obligation of ACCA and the
Members subject to specific performance.
(D) For purposes of this Agreement, "MONTHLY RECURRING INTEREXCHANGE
SERVICE CHARGES" will not include pro-rated charges for Interexchange
Service, Local Access charges, Ancillary Service charges, additional
Charges (as defined below), other recurring or non-recurring charges for
space, facilities or any other charges other than those charges identified
by the relevant WilTel invoice as monthly recurring interexchange service
charges for private line service.
(E) In the event Customer submits a firm Serviced Order for DS-l or DS-3
level On-Net Service (other than orders submitted under Sections 11 or 12
below) and WilTel can not deliver Service within [_________] business days
or some other longer interval agreed to by Customer, and Customer orders
and is provided such Service by another carrier, then solely for purposes
of determining if Customer has met Customer's Commitment described in
Subsection (A) above, WilTel agrees to include an amount equal to WilTel's
Monthly Recurring Interexchange Service Charges for such Service times the
Page 8 of 27 CONFIDENTIAL
------------
<PAGE>
number of months such Service is actually installed by the other carrier.
Upon request by WilTel, Customer agrees to provide adequate documentation
reasonably acceptable to WilTel to substantiate Customer's ordering and
being provided Service under this Subsection from another carrier.
10. MONTHLY RECURRING INTEREXCHANGE SERVICE RATES: Customer will receive
the following rates and discounts for Service ordered hereunder. Customer will
not receive any other discounts unless specifically set forth herein.
(A) The Base Rate per VGE per V&H Mile for On-Net DS-3 level
Interexchange Service will be as follows based on Customer's Spending
Level (as defined in Subsection (F) below):
<TABLE>
<CAPTION>
Monthly
Spending Level Rate
------------------------- ----------
<S> <C>
[________] - [________] [_____]
[________] - [________] [_____]
[________] - [________] [_____]
[________] - [________] [_____]
[________] - [________] [_____]
[_________] [_____]
</TABLE>
(B) The Base Rate per VGE per V&H Mile for On-Net and Extended DS-l level
Interexchange Service will be as follows based on Customer's Spending Level
(as defined in Subsection (F) below):
<TABLE>
<CAPTION>
Monthly
Spending Level Rate
------------------------- ----------
<S> <C>
[________] - [________] [_____]
[________] - [________] [_____]
[________] - [________] [_____]
[________] - [________] [_____]
[_________] [_____]
</TABLE>
(C) Notwithstanding anything to the contrary contained herein, commencing
with the Effective Date and continuing through and including February 28,
1996, Customer's Monthly Spending Level will be deemed to be the greater of
(i) [______], or (ii) Customer's actual Monthly Spending Level. Commencing
March 1, 1996 and continuing through the end of the Term, Customer's rates
for DS-l and DS-3 level Interexchange Service as described above will be
the rate which corresponds with Customer's actual Monthly Spending Level as
determined under Subsection (F) below.
Page 9 of 27 CONFIDENTIAL
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(D) The Base Rate for Multiple DS-l level Interexchange Service ("Multiple
DS-1 Service") will be the DS-l level Interexchange Service rates described
in Subsection (B) above. Multiple DS-l level Interexchange Service between
and among WilTel On-Net Cities and Extended Cities ordered solely by one
Member (i.e., Members may not allocate Service under this Subsection (D))
will be subject to the discounts described below provided all of the
following conditions are met:
(i) Customer orders at least six (6) DS-l circuits between or among
On-Net Cities or Extended Cities at one time (the "Circuit Package");
(ii) the Requested Service Date(s) relevant to the DS-s are subject
to WilTel's standard intervals and, if more than one date is
requested, the dates are within the same thirty (30) period; and
(iii) the Service Commitment Period for each of the DS-ls in question
is twelve (12) months.
In the case of an initial Circuit Package comprised exclusively of existing
DS-s, the Multiple DS-1 level Interexchange Service discount and twelve
(12) month Service Commitment Period will commence as of the second monthly
billing period following the month in which the Service Order therefor is
submitted. If Customer desires to create a larger Circuit Package or create
an initial Circuit Package from existing DS-ls and incremental new DS-ls
(e.g., take a Circuit Package of 6 to a Circuit Package of 10 DS-ls; or,
create an initial Circuit Package of at least 6 DS-ls from an existing 4
DS-ls plus an additional incremental 2 DS-ls), Customer will first identify
all DS-ls to be in the resulting Circuit Package. All circuits within the
resulting Circuit Package will be subject to a twelve (12) month Service
Commitment Period commencing as of the date the last circuit comprising the
package is installed. If through the creation of a larger Circuit Package
existing DS-ls should be subject to a greater level of discount, the
applicable discount shall commence for the existing DS-ls as of the date
the last circuit in the larger Circuit Package is installed, and the
applicable discount for each new incremental DS-l relevant to the larger
Circuit Package shall commence as of Start of Service for each such
incremental DS-l.
Page 10 of 27 CONFIDENTIAL
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<PAGE>
<TABLE>
<CAPTION>
No. of DS-1s One Common End Two Common Ends
------------ -------------- ---------------
<S> <C> <C>
6 - 12 [__] [__]
13 - 18 [__] [__]
19 - 26 [__] [__]
</TABLE>
(E) The Base Rate per V&H Mile for On-Net an Extended DS-0 level
Interexchange Service between will be [___].
(F) For purposes of this Section 10, "Monthly Spending Level" will include
(i) "Monthly Recurring Interexchange Service Charges" (as defined in
Subsection 9(D) above), and (ii) provided Customer's Monthly Recurring
Interexchange Service Charges are at least [______], [_____________] of
Customer's International monthly measured and per call usage charges for
Switched Services purchased by Customer from WilTel (excluding Local Access
charges, Ancillary Service charges, special feature charges such as,
Authorization codes or CDR Tapes, or any other charges other than those
identified by the relevant WilTel invoice as Switched Service charges).
With respect to Service ordered after February 28, 1996 and each month
thereafter through the end of the Term, the Monthly Spending Level will be
determined at the end of each month and will be based on WilTel's latest
private line invoice to Customer. The Monthly Spending Level determined at
the time of such computation shall be effective from the first through the
last day of each calendar month following the month in which the
computation is me.
11. DS-1 LEVEL SERVICE UPGRADES: Provided Customer is not in default
under the terms of this Agreement, Customer shall have the right to replace up
to twenty-eight (28) DS-1 circuits between two (2) WilTel Cities (each of which
DS-1 circuits has been in place for a minimum of ninety (90) days) with DS-3
level Interexchange Service between the same two cities ("Upgraded DS-3
Service") upon at least forty-five (45) days' prior written notice to WilTel.
The DS-l level Interexchange Service in question shall be canceled as of a date
not earlier than the date Service commences for the Upgraded DS-3 Service (i.e.,
44.736 Mbps level). The charge for Upgraded DS-3 Service under this Section 11
shall be at the rates set forth in Section 10 above and the Upgraded DS-3
Service shall be subject to the Minimum Service Commitment Period described in
Section 14 below commencing as of the date Service commences for the Upgraded
DS-3 Service. Upgraded DS-3 Service under this Section 11 is subject to the
additional capacity being available and uncommitted (if additional capacity is
Page 11 of 27 CONFIDENTIAL
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<PAGE>
required) and WilTel is under no obligation to construct additional circuits for
Customer. Further, the replacement of DS-1 circuits with Upgraded DS-3 Service
in accordance with this Section 11 shall not result in Customer being subject to
a cancellation charge for the DS-ls in question pursuant to Section 19 below.
12. SUBSTITUTE ON-NET DS-1 LEVEL SERVICE: Provided Customer is not in
default of this Agreement, Customer may substitute DS-1 level Interexchange
Service between and among WilTel Cities (the "Substitute DS-1 Service") for DS-1
level Interexchange Service between WilTel Cities then being provided to
Customer hereunder ("Replacement DS-1 Service") without incurring a cancellation
charge pursuant to Section 19 below provided the following conditions are met:
(i) As of the effective date of cancellation, the Replaced DS-1 level
Interexchange Service has been maintained for a minimum of ninety (90)
days from the Start of Service therefor.
(ii) Customer provides notice of such cancellation and concurrently
therewith submits a Service Order for the Substitute DS-1 level
Interexchange Service for installation by WilTel within WilTel's standard
installation intervals.
(iii) The Substitute DS-1 level Interexchange has a Requested Service Date
not later than the effective date of cancellation for the Replaced DS-1
Service.
(iv) The Substitute DS-1 Service has a monthly recurring Interexchange
Service charge equal to or greater than the monthly recurring Interexchange
Service charge of the Replaced DS-1 Service.
Further, the Substitute DS-1 Service will be subject to the minimum Service
Commitment Period set forth in Section 14 below commencing with the Start of
Service date for the Substitute DS-1 Service.
13. DIVERSELY ROUTED SERVICE: WilTel will provide DS-1 or DS-3 level
Interexchange Service (i.e., not Multiple DS-1 Service) to the extent diverse
routing is available under facilities owned by WilTel between and among WilTel
On-Net Cities designated by Customer as Service used for diversity ("Diversely
Routed Circuits"). The rates for such Diversely Routed Circuits will be as set
forth in Section 10 above provided the route miles relative to each Diversely
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<PAGE>
Routed Circuit must be less than or equal to [__] of the primary route selected
by WilTel in connection with the same city pair. If the route miles relative to
each Diversely Routed Circuit are greater than [__] of the primary route,
WilTel, at its sole discretion, may provide the Diversely Routed Circuits on an
individual case basis.
14. MINIMUM SERVICE COMMITMENT PERIOD/MINIMUM CHARGE:
(A) Subject to Subsection (B) below, the minimum Service Commitment period
for Interexchange Service provided hereunder will be as follows
(collectively referred to as the "Minimum Service Commitment Period"):
(i) DS-0 level Interexchange Service between WilTel Cities or one or
more WilTel Extended Cities - [______________].
(ii) DS-1 level Interexchange Service between WilTel Cities - [______
_____].
(iii) DS-1 level Interexchange Service between one or more WilTel
Extended Cities - [__________________].
(iv) DS-3 level Interexchange Service between WilTel Cities - [_____
__________].
(iv) DS-3 level Interexchange Service between one or more WilTel
Extended Cities - [__________________].
(v) Multiple DS-1 level Interexchange Service between and among
WilTel Cities and WilTel Extended Cities - [________________].
(B) The Service Commitment Period for Existing Service which is in effect
as of the Effective Date shall continue in full force and effect (the
"Existing Commitment Period"). Upon expiration of any Existing Commitment
Period or the Minimum Service Commitment Period as determined under
Subsection (A) above, the rates for such Service as determined under
Section 10 above will continue in full force and effect through the end of
the Term at which time such Service may be terminated by either party upon
thirty (30) days' prior written notice to the other party. Provided,
however, at any time during the Term, Customer may elect to "renew" Service
(including Existing Service) at the rates then in effect (i.e., based on
Customer's then existing Monthly Spending Level as described in Subsection
10 (F) above) by notifying WilTel at least thirty (30) days in advance of
the effective date of the renewal (the "Renewal Effective Date") for such
Service (hereinafter referred to as "Renewed Service").
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<PAGE>
In such case, Renewed Service will be subject to a new Minimum Service
Commitment Period in accordance with Subsection (A) above which will
commence on the first day following the Renewal Effective Date.
(C) The minimum monthly recurring Interexchange Service charge for (i)
each DS-0 circuit comprising DS-0 level Interexchange Service shall be [_],
(ii) each DS-1 circuit comprising DS-1 level Interexchange Service
(including Multiple DS-1 Interexchange Service) shall be [__], and (iii)
each DS-3 circuit comprising DS-3 level Interexchange Service shall be
[____].
15. CUSTOMER RESPONSIBILITIES: Customer has sole responsibility for
installation, testing and operation of facilities, services and equipment other
than that specifically provided by WilTel as part of the Service described in a
Service Order ("Customer Facilities"). In no event will the untimely
installation or non-operation of Customer Facilities (including Local Access
when Customer is responsible therefor and customer premise equipment) relieve
Customer of its obligation to pay charges for the Service as of Start of
Service.
16. ADDITIONAL CHARGES: Customer acknowledges and understands that all
charges stated in Service Order are computed by WilTel exclusive of any
applicable federal, state or local use, excise, gross receipts, sales and
privilege taxes, duties, fees or similar liabilities (other than general income
or property taxes), whether charged to or against WilTel or Customer for the
Service provided to Customer ("Additional Charges"), and that such additional
Charges shall be paid by Customer in addition to all other charges provided for
herein.
17. PAYMENT OF CHARGES:
(A) Payment for (i) all pro-rated monthly recurring charges (charges for
monthly Service provided for less than a calendar month), installation and
other non-recurring charges shall be due on the first day of the month
following the month in which the Service was provided, and (ii) all monthly
recurring charges for full months during which the Service is to be
provided following Start of Service shall be due in advance on the first
day of that month (collectively, the "Due Date"). WilTel's invoice to
Customer will be computed each calendar month in advance of the Due Date
for charges as provided above and as of a billing cut-off date
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<PAGE>
determined by WilTel, which shall not be earlier than the fifth (5th) day
or later than the fifteenth (15th) day of the month in which such
computation is me ("WilTel Billing Cut-Off Date"). The invoice date shall
not be determinative of the billing cut-off date used by WilTel in the
preparation of any particular invoice.
(B) A schedule showing the individual Member's allocable share of
Customer's Commitment described in Subsection 9(A) above is attached hereto
and incorporated herein by reference (the "Commitment Schedule"). WilTel
agrees to provide (i) a separate monthly invoice to ACCA and each Member
detailing each Member's respective private line interexchange service
charges under this Agreement for which such Member is responsible as
described on the Commitment Schedule, (ii) an invoice to the ACCA
Administrator showing the total amount of all Members' private line
interexchange service charges and the resulting total Monthly Deficiency
Charge, if any, and (iii) any Suspension Notices sent to Delinquent
Customers as described in Section 18 below.
(C) In order to ensure performance of this arrangement as set forth
herein, each Member agrees to provide WilTel with a satisfactory
irrevocable standby letter of credit (in a form reasonably acceptable to
WilTel) in an amount equal to its respective portion of Customer's
Commitment as shown on the Commitment Schedule (individually referred to a
"Member's LOC" and collectively as the "Members' LOCs"). Within ninety (90)
days after the Effective Date, WilTel agrees to review in good faith each
Member's credit, including without limitation, such Member's payment
history, and if reasonable, terminate such Member(s)' LOC requirements
described herein. Provided, subject to adjustment as provided herein, the
total amount of all Members' LOCs delivered to WilTel hereunder shall not
be less than Customer's Commitment described in Subsection 9(A) above.
During the Term of this Agreement, WilTel and the ACCA Administrator agree
to meet to review the amount of Members' LOCs in relation to the estimated
Monthly Recurring Service Charges of all Members (i) every quarter, or (ii)
in the event a Member's estimated Monthly Recurring Interexchange Service
Charges exceed the amount shown on the Commitment Schedule attributable to
such Member by more than twenty-five percent (25%). If WilTel and the ACCA
Administrator determine that a particular Member should increase its
respective LOC, such Member will supply WilTel with an
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<PAGE>
additional LOC or a new LOC which takes into account the increased amount
required by WilTel within five (5) business days.
(D) Each Member agrees to remit payment to WilTel at the remittance
address indicated on WilTel invoices to such Member. In the event a Member
fails to pay WilTel's invoice in full or remit payment to the proper
address on or before thirty (30) days after the Due Date, such Member shall
also pay a late fee in the amount of the lesser of one and one-half percent
(l 1/2 %) of the unpaid balance per month or the maximum lawful rate under
applicable state law. Notwithstanding the foregoing, late fees shall apply
to, but shall not be due and payable for, amounts reasonably disputed by a
Member for a period of ninety (90) days following the Due Date therefor
(the "Alternate Due Date"), provided: (i) such Member notifies WilTel of
the basis for such dispute in writing on or before thirty (30) days after
the Due Date; and (ii) negotiates in good faith with WilTel for the purpose
of resolving such dispute within said ninety (90) day period. In the event,
such dispute is resolved in favor of WilTel, such Member will pay to WilTel
the once disputed amounts together with the applicable late fees within ten
(10) business days of the resolution. In the event such dispute is resolved
in favor of such Member, such Member will receive a credit for the amounts
determined not to be owed together with a credit for the applicable late
fees. In the event the dispute cannot be resolved within such ninety (90)
day period, all disputed amounts together with late fees shall become due
and payable on the Alternate Due Date, and this provision shall not be
construed as preventing such Member from pursuing any available legal
remedies.
(E) WilTel agrees to collect those amounts due WilTel attributable to each
Member from the Member who incurred such charges. In the event a Member
fails to pay WilTel its respective undisputed charges in full by the Due
Date for such charges ("Delinquent Member"), WilTel (without further notice
to or approval by such Delinquent Member) may satisfy any outstanding
amount (the "Past Due Amount") from such Delinquent Member's respective
LOC. In the event such Delinquent Member's LOC does not satisfy WilTel's
invoice in full such Delinquent Member shall remain liable for such Past
Due Amount.
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<PAGE>
18. SUSPENSION OF SERVICE:
(A) In the event payment in full is not received from a Delinquent Member
on or before thirty (30) days following the Due Date with respect to
undisputed amounts or on or before ninety (90) days following the Due Date
with respect to amounts reasonably disputed in accordance with the
prescriptions of Section 17 above, WilTel shall have the right (in addition
to any rights it has under Section 17 above) after giving such Delinquent
Member ten (10) days notice and opportunity to cure (the "Suspension
Notice") to suspend all or any portion of the Service to such Delinquent
Member, or upon subsequent notice, all or any additional portions of the
Service to such Delinquent Member; and, in either event, until such time as
the Delinquent Member has paid in full all charges then due, including any
late fees as specified herein. Following such payment, WilTel shall be
required to reinstitute Service to such Delinquent Member only upon the
----
provision by the Delinquent Member to WilTel of satisfactory assurance
(such as a deposit) of such Delinquent Member's ability to pay for Service
and such Delinquent Member's advance payment of the cost of reinstituting
Service. If the Delinquent Member fails to make such payment by a date
determined by and acceptable to WilTel, such Delinquent Member will be
deemed to have canceled the Service suspended effective as of the date of
such suspension. In such case, the other Members will be required to
allocate the Delinquent Member's portion of Customer's Commitment among the
other Members.
(B) Further, if at any time there is a material adverse change in a
Member'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 Service
described in a previously executed Service Order submitted by such Member
to be withheld; (ii) cease providing Service to such Member pursuant to a
Suspension Notice; (iii) decline to accept a Service Order or other
requests from such Member to provide Service which WilTel may otherwise be
obligated to accept; and/or (iv) condition its provision of Service or
acceptance of a Service Order on such Member's assurance of payment which
shall be a deposit or such other means to establish reasonable assurance of
payment. An adverse material change in a Member's creditworthiness shall
have occurred upon one or more of the following events: (a) such Member's
default of its obligations to WilTel under this
Page 17 of 27 CONFIDENTIAL
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<PAGE>
or any other agreement with WilTel; (b) failure of such Member to make full
payment of 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 such
Member's failure to make such payment on or before the Due Date in any two
(2) consecutive months; (c) acquisition of such Member (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 such Member; or, (d) Customer's being
subject to or having filed for bankruptcy or insolvency proceedings or the
legal insolvency of such Member.
19. CANCELLATION:
(A) After a Service Order is accepted by WilTel, Customer may cancel all
or a portion of the Service described therein if Customer provides written
notification thereof to WilTel thirty (30) days in advance of the effective
date of cancellation. In such case, Customer shall pay to WilTel all
charges for Service provided through the effective date of such
cancellation plus a cancellation charge determined as follows: (i) if the
Service Commitment Period for the canceled Interexchange Service is one (1)
year or less, then the cancellation charge shall be an amount equal to the
balance of the monthly Interexchange Service charges (then in effect at the
time of cancellation) for such canceled Interexchange Service that
otherwise would have become due for the unexpired balance of the Service
Commitment Period (but in no event less than zero); (ii) if the Service
Commitment Period for the canceled Interexchange Service is longer than one
(1) year and such cancellation becomes effective prior to completion of the
first year of the Service Commitment Period, then the cancellation charge
shall be an amount equal to the balance of the monthly Interexchange
Service charges (then in effect at the time of cancellation) for such
canceled Interexchange Service that otherwise would have become due for the
unexpired portion of first year of the Service Commitment Period plus
twenty percent (20%) of the balance of such monthly Interexchange Service
charges for the remainder of the Service Commitment Period beyond the first
year; and, (iii) if the Service Commitment Period for the canceled
Interexchange Service is longer than one (1) year and such cancellation
becomes effective after completion of the first year of the Service
Commitment Period, then the cancellation charge shall be an
Page 18 of 27 CONFIDENTIAL
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<PAGE>
amount equal to twenty percent (20%) of the balance of the monthly
Interexchange Service charges (then in effect at the time of cancellation)
for such canceled Interexchange Service that otherwise would have become
due for the unexpired portion of the Service Commitment Period. It is
agreed that WilTel's damages in the event Service is canceled shall be
difficult or impossible to ascertain. The provisions provided for in this
Section 11 (A) are intended, therefore, to establish liquidated damages in
the event of cancellation and are not intended as a penalty.
(B) In the event of any cancellation described in Section 11 (A), Customer
shall also pay WilTel an amount equal to any termination charges, expenses,
fees or penalties incurred by WilTel due to cancellation of Local Access
plus any other reasonable costs, expenses or additional charges incurred in
accordance with Sections 8 and 10.
(C) The foregoing to the contrary notwithstanding, and upon thirty (30)
days prior written notice, either Customer or WilTel shall have the right,
without cancellation charge or other liability, 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 by order of the
highest court of competent jurisdiction to which the matter is appealed,
the Federal Communications Commission, or other local, state or federal
government authority.
(D) Customer may terminate this Agreement and all Services provided
hereunder upon any material breach or material default by WilTel hereunder
which breach or default is not cured within fifteen (15) business days
after notice to WilTel by the Administrator. In the event Customer
terminates this Agreement pursuant to this Subsection (D), Customer will
not be liable for any cancellation charges, penalties or other amounts
except for payment for Services actually rendered by WilTel prior to the
effective date of such termination.
20. FORCE MAJEURE: If WilTel's or Customer'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 States government or state or local governments, or of any department,
agency,
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commission, court, bureau, corporation or other instrumentality of any one or
more said governments, or of any civil or military authority, or by national
emergencies, insurrections, riots, wars, strikes, lockouts or work stoppages or
other labor difficulties, supplier failures, shortages, breaches or delays, then
the affected party shall be excused from such performance on a day-to-day basis
to the extent of such prevention, restriction or interference. The affected
party shall use reasonable efforts under the circumstances to avoid or remove
such causes of non-performance and shall proceed to perform with reasonable
dispatch whenever such causes are removed or cease. If such failure of
performance shall be for thirty (30) days or less, then the Service affected
thereby shall continue as-is but, upon receipt of a Customer request directed to
Customer's designated Customer Service Representative, a pro rata credit of the
charges for the affected Service shall be me; if for more than thirty (30) days,
then said pro rata credit shall continue, and the affected Service may be
canceled by either Customer or WilTel on thirty (30) days notice without
liability other than Customer's liability for payment for Service provided prior
to cancellation.
21. SERVICE WARRANTY; GENERAL LIMITATION OF LIABILITY; INDEMNITY:
(A) WilTel warrants that the Service will be provided to Customer in
accordance with prevailing telecommunications industry standards
(hereinafter "Technical Standards") . WilTel will use reasonable efforts
under the circumstances to remedy any delays, interruptions, omissions,
mistakes, accidents or errors in the Service (hereinafter "Defect" or
"Defects") and restore the Service in accordance with the Technical
Standards. Following Start of Service, if Customer reports a Defect to
WilTel at WilTel's Maintenance Control Center and WilTel is unable to
restore the Service as warranted within one-half hour of such report,
Customer shall, upon request directed to Customer's designated Customer
Service Representative, receive a credit at the rate of 1/1440 of the
monthly charges applicable to the affected Service for each half hour or
major fraction thereof in excess of the first half hour that the affected
Service fails to conform to the Technical Standards. If a portion of the
Service fails to conform to the Technical Standards at any time and over a
period of thirty (30) days after written notice thereof by Customer to
WilTel, Customer may terminate the affected portion of the Service without
a cancellation charge. Customer's credit and termination rights shall not
apply, however, in the event any Defect is caused or contributed to,
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directly or indirectly, by any act or omission of Customer or its
customers, affiliates, agents, representatives, invitees or licensees.
(B) THE FOREGOING WARRANTY AND REMEDIES ARE EXCLUSIVE AND IN LIEU OF ALL
OTHER WARRANTIES OR REMEDIES WITH RESPECT TO THE SERVICE PROVIDED, WHETHER
EXPRESS, IMPLIED OR STATUTORY, INCLUDING WITHOUT LIMITATION IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. IN
THE EVENT OF ANY DEFECT IN THE SERVICE WHATSOEVER, NEITHER WILTEL OR ANY
THIRD PARTY PROVIDER OR OPERATOR OF FACILITIES EMPLOYED IN THE PROVISION
OF THE SERVICE SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL,
SPECIAL, ACTUAL, PUNITIVE OR ANY OTHER DAMAGES, OR FOR ANY LOST PROFITS OF
ANY KIND OR NATURE WHATSOEVER.
(C) In the event parties other than Customer shall have use of the Service
through Customer, then Customer agrees to forever indemnify and hold
WilTel and any third party provider or operator of facilities employed in
provision of the Service harmless from and against any and all claims,
demands, suits, actions, losses, damages, assessments or payments which
may be asserted by said parties, arising out of or relating to any Defect
in the Service.
22. INTERSTATE INTEREXCHANGE SERVICE: Customer may use any Interexchange
Service provided under this Agreement only if such Interexchange Service is used
for carrying interstate telecommunications (i.e., telecommunications subject to
the jurisdiction of the Federal Communications Commission). WilTel shall only
be obligated to provide the Interexchange Service described in a Service Order
(which has been accepted by WilTel) when Customer's interstate use of the
Interexchange Service is greater than ten percent (10%) of the total traffic on
special access lines comprising Local Access associated with the Interexchange
Service. WilTel shall not be obligated to make available Interexchange Service
on a circuit with end points within a single state or service on a circuit which
originates/terminates at points both of which are situated within a single state
unless Customer represents in writing that such Interexchange Service or
circuits shall be used to carry interstate telecommunications, or the state in
question permits the Interexchange service to be provided. If it is determined
at any time that such Interexchange Service or circuit is subject to state
regulation, WilTel may (i) provide the Interexchange Service or circuit pursuant
to applicable state laws, regulations and tariffs, (ii) assign the Interexchange
Service or circuit to an affiliated company to be provided in accordance with
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such affiliated company's tariff, or (iii) discontinue provision of the affected
Interexchange Service or circuit.
23. NOTICES: Notices under this Agreement shall be in writing and
delivered to the person identified as the "Party to Receive Notices" at the Full
Business dresses of the parties as they appear herein or as otherwise provided
for by proper notice hereunder and the effective date for any notice under this
Agreement shall be the date of delivery of such notice, not the date of mailing.
24. USE OF SERVICE: Upon WilTel's acceptance of a Service Order
hereunder, WilTel will provide the Service specified therein to Customer upon
condition that the Service shall not be used for any unlawful purpose. The
provision of Service 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. (S) 43.51.
25. PROPRIETARY INFORMATION: Customer and WilTel understand and agree
that the terms and conditions of this Agreement and all documents referenced
herein (including without limitation, invoices to Customer for Service provided
hereunder), communications between the parties regarding this Agreement or the
Service to be provided hereunder (including price quotes to Customer for any
Service proposed to be provided or actually provided hereunder), as well as such
information and price quotes relevant to any other agreement between the parties
are confidential as between Customer and WilTel and shall not be disclosed by
Customer or WilTel to any party other than the directors, officers and employees
of Customer or WilTel, whichever is applicable, or agents of Customer or WilTel,
whichever is applicable, who have specifically agreed to nondisclosure of the
terms and conditions hereof. Violation by Customer or WilTel or their agents of
the foregoing provision shall entitle the other party, at its option, to
terminate this Agreement without further obligation or liability. Customer and
WilTel further agree that any press release, advertisement or publication
regarding this Agreement, the Service provided hereunder or in which either
party is to be mentioned, will be submitted to the other party for its written
approval prior to publication.
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26. GENERAL PROVISIONS:
(A) Customer will execute such other documents, provide such information and
affirmatively cooperate with WilTel, all as may be reasonably required by WilTel
and relevant to providing the Service. In particular, Customer accepts the
responsibility for providing WilTel with special access surcharge exemption
forms as may be required by local exchange telephone companies.
(B) The failure of either Customer or WilTel to give notice of default or to
enforce or insist upon compliance with any of the terms or conditions of this
Agreement shall not constitute the permanent waiver of any term or condition of
this Agreement.
(C) The provision of the Service will not create a partnership or joint venture
between the parties or result in a joint communications service offering to
third parties.
(D) In the event suit is brought or an attorney is retained by either party to
enforce the terms of this Agreement or to collect any moneys due hereunder or to
collect money damages for breach hereof, the prevailing party as determined by
the court in which the suit is brought shall be entitled to recover, in addition
to any other remedy, reimbursement for reasonable attorneys' fees, court costs,
costs of investigation and other related expenses incurred in connection
therewith.
(E) No subsequent agreement concerning the Service or modification to this
Agreement shall be binding upon the parties unless it is me in writing by an
authorized representative of Customer and Authorized Headquarters Representative
of WilTel Services.
(F) 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, and further provided that any assignment or transfer
without such consent shall entitle WilTel to terminate the Service provided
hereunder at its option upon ten (10) days prior written notice.
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(G) This Agreement shall be construed under the laws of the State of
Oklahoma without regard to choice of law principles.
(H) If any part of any provision of this Agreement shall be invalid or
unenforceable under applicable law, said part shall be ineffective to the
extent of such invalidity only, without in any way affecting the remaining
parts of said provision or the remaining provisions of this Agreement, and
the Customer and WilTel Services hereby agree to negotiate with respect to
any such invalid or unenforceable part to the extent necessary to render
such part valid and enforceable.
(I) The terms and provisions contained in this Agreement that by their
sense and context are intended to survive the performance thereof by the
parties hereto shall survive the completion of performance and termination
of this Agreement, including, without limitation, the making of any and
all payments due hereunder.
(J) Descriptive headings in this Agreement are for convenience only and
shall not affect the construction of this Agreement.
(K) 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.
(L) No rule of construction requiring interpretation against the draftsman
hereof shall apply in the interpretation of this Agreement.
27. INSTALLATION WAIVERS: [___________________________________
_______________________________________________________________________________
____________________________________________________________________________
________].
28. CREDIT: [_______________________________________________________
___________________________________________________________________
________________________________________________________________________________
_________________]. The IXC Credit will be applied to Customer's final invoice
from WilTel.
Page 24 of 27 CONFIDENTIAL
------------
<PAGE>
COMMITMENT SCHEDULE
<TABLE>
<CAPTION>
Company Commitment
------- ----------
<S> <C>
ACC Long Distance Corporation [______]
ATX Telecommunications and Services [______]
Business Telecom, Inc. [______]
Cincinnati Bell Long Distance, Inc. [______]
Long Distance Savers [______]
Telefonica Larga Distancia
de 'Puerto Rico, Inc. [______]
National Telecommunications of Florida [______]
Delta Comm, Inc. [______]
--------
TOTAL [______]
</TABLE>
<PAGE>
Attachment "1"
<TABLE>
<CAPTION>
WILTEL CITIES
-------------
<S> <C> <C> <C>
Akron, OH Des Moines, IA Mercerville, NJ Santa Clara, CA
Albany, GA Detroit, MI Miami, FL Savannah, GA
Atlanta, GA Evansville, IN Minneapolis, MN Shreveport, LA
Augusta, GA Fort Lauderdale, FL Mobile, AL Smyrna, GA
Baltimore, MD Fort Pierce, FL Montgomery, AL South Bend, IN
Baton Rouge, LA Framingham, MA Nashville, TN Springfield, MA
Beaumont, TX Gainesville, FL New Orleans, LA St. Louis, MO
Boca Raton, FL Hartford, CT New York, NY Stamford, CT
Boise, ID Houston, TX Newark, NJ Stuart, FL
Boston, MA Indianapolis, IN Oklahoma City, OK Tallahassee, FL
Cedar Rapids, IA Iowa City, IA Omaha, NE Tampa, FL
Chattanooga, TN Jacksonville, FL Orlando, FL Toledo, OH
Chicago, IL Joplin, MO Philadelphia, PA Topeka, KS
Cleveland, OH Kansas City, MO Phoenix, AZ Tulsa, OK
Cocoa, FL Lake Charles, LA Pittsburgh, PA Vero Beach, FL
Columbia, MO Lakeland, FL Portland, OR Washington, DC
Columbia, SC Las Vegas, NV Raleigh, NC West Palm Beach, FL
Dallas, TX Longview, TX Richmond, VA White Plains, NY
Daytona Beach, FL Los Angeles, CA Saint Augustine, FL Wichita, KS
Davenport, IA Macon, GA Salt Lake City, UT Winter Garden, FL
Denver, CO Melbourne, FL San Francisco, CA
WILTEL EXTENDED CITIES
----------------------
<S> <C> <C> <C>
Albany, NY Fort Worth, TX Nashua, NH Rocky Mountain, NC
Anaheim, CA Greensboro, NC New Brunswick, NJ Sacramento, CA
Austin, TX Greenville, SC Norfolk, VA Salinas, CA
Birmingham, AL Gulfport, MS Northbrook, IL San Antonio, TX*
Bloomington, IL Hackensack, NJ Oakland, CA San Diego, CA
Buffalo, NY Harlingen, TX Ontario, CA Santa Ana, CA
Charlotte, NC Hinsdale, IL Palm Springs, CA Santa Barbara, CA
Cincinnati, OH Huntsville, AL Pensacola, FL Seattle, WA
Columbus, OH Irving, TX Pleasantville, NJ Sherman Oaks, CA
Compton, CA Knoxville, TN Poughkeepsie, NY Sioux Falls, SD
Corpus Christi, TX Little Rock, AR Redding, CA Springfield, IL
Culpeper, VA Louisville, KY Reno, NV Stockton, CA
Durham, NC Lynchburg, VA Reston, VA Syracuse, NY
El Paso, TX McAllen, TX Rialto, CA Tucson, AZ
Fayetteville, NC Memphis, TN Richardson, TX Westheimer, TX
Feathersound, FL Milwaukee, WI Rochester, NY Wilmington, DE
Florence, SC
</TABLE>
NOTE: [______________________________________________________________________
________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________].
04/15/95
<PAGE>
EXHIBIT "1"
[Note: Any charges not specifically address herein will be determined on
an individual case basis.]
INSTALLATION AND ANCILLARY SERVICE
<TABLE>
<CAPTION>
NON-RECURRING CHARGE SCHEDULE
SERVICE TYPE (Carrier Digital Service) DS-3 DS-1 DDS DS-0
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. INSTALLATION CHARGES:
PER IXC $2,000.00 $400.00 $150.00 $150.00
PER LOCAL ACCESS ASR* $ 100.00 $ 50.00 $ 25.00 $ 25.00
2. ORDER EXPEDITE CHARGES:
PER IXC $ 500.00 $100.00 $ 50.00 $ 50.00
PER CROSS-CONNECT $ 125.00 $ 75.00 N/A N/A
INITIAL LOCAL ACCESS ASR* $ 100.00 $ 50.00 $ 25.00 $ 25.00
3. CHANGE OF REQUESTED SERVICE DATE ONLY CHARGES:
FIRST CHANGE & STANDARD NOTICE:
PER IXC OR CROSS-CONNECT N/C N/C N/C N/C
PER LOCAL ACCESS ASR* $ 100.00 $ 50.00 $ 25.00 $ 25.00
PLUS ANY CHARGES INCURRED BY WILTEL
FROM THIRD PARTY SERVICE PROVIDERS
SUBSEQUENT CHANGES OR SHORT NOTICE:
PER IXC $ 500.00 $ 200.00 $150.00 $150.00
PER CROSS-CONNECT $ 250.00 $ 125.00 N/A N/A
PER LOCAL ACCESS ASR* $ 100.00 $ 50.00 $ 25.00 $ 25.00
PLUS ANY CHARGES INCURRED BY WILTEL
FROM THIRD PARTY SERVICE PROVIDERS
4. CHANGE OF ORDER CHARGES (PRE-INSTALLATION):
ADMINISTRATIVE CHARGES:
PER IXC OR CROSS-CONNECT N/C N/C N/C N/C
PER LOCAL ACCESS ASR* $ 100.00 $ 50.00 $ 25.00 $ 25.00
PRE-ENGINEERING:
PER IXC $ 500.00 $ 200.00 $ 50.00 $ 50.00
PER CROSS-CONNECT $ 250.00 $ 125.00 N/C N/C
PER LOCAL ACCESS ASR* $ 100.00 $ 50.00 $ 25.00 $ 25.00
POST-ENGINEERING:
PER IXC $2,000.00 $ 400.00 $150.00 $150.00
PER CROSS-CONNECT $ 500.00 $ 250.00 N/A N/A
PER LOCAL ACCESS ASR* $ 100.00 $ 50.00 $ 25.00 $ 25.00
5. ORDER CANCELLATION CHARGES:
PRE-ENGINEERING:
PER IXC $ 500.00 $ 200.00 $ 50.00 $ 50.00
PER CROSS-CONNECT $ 250.00 $ 125.00 N/A N/A
PER LOCAL ACCESS ASR* $ 100.00 $ 50.00 $ 25.00 $ 25.00
POST-ENGINEERING:
PER IXC $2,000.00 $ 400.00 $150.00 $150.00
PER CROSS-CONNECT $ 500.00 $ 250.00 N/A N/A
PER LOCAL ACCESS ASR* $ 100.00 $ 50.00 $ 25.00 $ 25.00
6. CHANGE OF SERVICE CHARGES (POST-INSTALLATION):
ADMINISTRATIVE CHANGES:
PER IXC OR CROSS-CONNECT N/C N/C N/C N/C
PER LOCAL ACCESS ASR* $ 100.00 $ 50.00 $ 25.00 $ 25.00
RE-ENGINEERING CHARGES:
PER IXC $2,000.00 $ 400.00 $150.00 $150.00
PER LOCAL ACCESS ASR* $ 100.00 $ 50.00 $ 25.00 $ 25.00
PER CROSS-CONNECT $ 500.00 $ 250.00 N/A N/A
</TABLE>
02/01/95 Page 1 of 8
<PAGE>
<TABLE>
<CAPTION>
NON-RECURRING CHARGE SCHEDULE
-----------------------------
<S> <C>
7. CROSS-CONNECT REARRANGEMENT CHARGES:
PER DS-1 CROSS-CONNECT NOT
ASSOCIATED WITH DCS or M13
$50.00
M13 RE-RE-ARRANGEMENT CHARGES
PER DS-1 CONNECTION $50.00
MAXIMUM PER ORDER $500.00
DCS RE-ARRANGEMENT CHARGE
PER DS-0 CONNECTION $ 25.00
MAXIMUM PER ORDER $250.00
LEC D4 CHANNEL BANK
PER SPECIAL ACCESS ASR* $100.00
8. ROLL-UP CHARGES (PRE-ENGINEERING & CHANGE OF CROSS-CONNECTS):
ROLL-UP DS-0 to DS-1 IXC $500.00
ROLL-UP DS-0 TO DS-1 ASR'S $250.00
ROLL-UP DS-1 to DS-3 IXC $2,500.00
ROLL-UP DS-1 TO DS-3 ASR'S $1,000.00
9. ADDITIONAL INSTALLATION/MAINTENANCE/ENGINEERING CHARGES:
DURING NORMAL HOURS $100.00 PER HOUR PER PERSON
AFTER NORMAL HOURS $125.00 PER HOUR PER PERSON
</TABLE>
<TABLE>
<CAPTION>
Monthly Recurring Non-Recurring
Charge Charge
-------------------- -------------
10. CROSS-CONNECT CHARGES:
<S> <C> <C>
A. WILTEL DS-1 IXC TO DS-1 LOCAL
ACCESS, BYPASS OR CO-LOCATE N/C N/C
B. NON-WILTEL DS-1 FACILITIES TO
NON-WILTEL DS-1 FACILITIES $ 50.00 $250.00
C. WILTEL DS-3 IXC TO DS-3 LOCAL
ACCESS, BYPASS OR CO-LOCATE
INITIAL N/C N/C
SUBSEQUENT N/C $100.00
D. NON-WILTEL DS-3 FACILITIES TO
NON-WILTEL DS-3 FACILITIES $ 250.00 $500.00
11. M13 MULTIPLEXING CHARGES:**
PER M13 $ 600.00 $ 250.00
12. DCS (OR DACS) SERVICE:***
PER DS-1 CONNECTION $ 75.00 N/C
13. SUB-RATE MAINTENANCE CHARGES:
A. DS-3 SUB RATE MAINTENANCE
PER DS-1 CHANNEL $ 50.00 N/C
MAXIMUM PER DS-3 $1,000.00 N/C
B. DS-1 SUB-RATE MAINTENANCE
PER DS-0 CHANNEL MAXIMUM PER $ 25.00 N/C
MAXIMUM PER DS-1 $ 250.00 N/C
</TABLE>
02/01/95 Page 2 of 8
<PAGE>
<TABLE>
<S> <C> <C>
14. ECHO CANCELLATION CHARGES (PER CANCELLER)**:
TYPE SERVICE - DS-0 IXC WITH VF ACCESS:
CIRCUITS MORE THAN OR = 800 ROUTE MILES N/C N/C
CIRCUITS LESS THAN 800 ROUTE MILES $ 30.00 $ 50.00
TYPE SERVICE - DS-1 IXC:
CIRCUITS MORE THAN OR = 800 ROUTE MILES N/C N/C
CIRCUITS LESS THAN 80O ROUTE MILES $ 250.00 $500.00
15. LOCAL ACCESS BILLING ADMINISTRATION:
PER DS-0 LOCAL LOOP $ 25.00 N/C
PER DS-1 LOCAL LOOP $ 50.00 N/C
PER DS-3 LOCAL LOOP $ 150.00 N/C
NOTES:
</TABLE>
* PLUS APPLICABLE LAP CHARGES.
** PRE START OF SERVICE CANCELLATIONS WILL BE SUBJECT TO THE STATED NON-
RECURRING CHARGE, IF ANY, AND TWELVE (12) TIMES THE STATED MONTHLY
RECURRING CHARGE. CANCELLATION FOLLOWING START OF SERVICE AND BEFORE
COMPLETING TWELVE (12) MONTHS OF SERVICE, WILL BE SUBJECT TO A
CANCELLATION CHARGE EQUAL TO THE DIFFERENCE BETWEEN THE TOTAL
RECURRING CHARGES FOR THE SERVICE PERIOD COMPLETED AND TWELVE (12)
TIMES THE STATED MONTHLY RECURRING CHARGE.
*** PRE START OF SERVICE CANCELLATIONS WILL BE SUBJECT TO THE STATED NON-
RECURRING CHARGE, IF ANY, AND THREE (3) TIMES THE STATED MONTHLY
RECURRING CHARGE. CANCELLATION FOLLOWING START OF SERVICE AND BEFORE
COMPLETING THREE (3) MONTHS OF SERVICE, WILL BE SUBJECT TO A
CANCELLATION CHARGE EQUAL TO THE DIFFERENCE BETWEEN THE TOTAL
RECURRING CHARGES FOR THE SERVICE PERIOD COMPLETED AND THREE (3) TIMES
THE STATED MONTHLY RECURRING CHARGE.
N/A= NOT APPLICABLE
N/C= NO CHARGE
ASR= ACCESS SERVICE REQUEST
CFA= CONNECTING FACILITY ASSIGNMENT
ICB= INDIVIDUAL CASE BASIS
IXC= INTEREXCHANGE CIRCUIT
LAP= LOCAL ACCESS PROVIDER/LOCAL EXCHANGE CARRIER
LEC= LOCAL EXCHANGE CARRIER/LOCAL ACCESS PROVIDER
INSTALLATION AND ANCILLARY SERVICE
DEFINITIONS AND APPLICATION OF CHARGES
1. INSTALLATION CHARGES:
Installation charges apply when WilTel provides new or additional
Interexchange Service (IXC) or when WilTel obtains new or additional
Local Access (including feature group service) on Customer's behalf.
WilTel will charge Customer for IXC installation and for issuing an
Access Service Request (ASR) to the Local Access Provider (LAP),
i.e., Local Exchange Carrier (LEC) or by-pass carrier. LAP
installation charges will also be billed to the Customer.
2. EXPEDITE CHARGES:
Expedite charges apply when WilTel provides installation of Service
(IXC, Local Access or Ancillary Service) in less time than otherwise
established by WilTel's published intervals. WilTel will charge for
the expedited handling of the order and will pass along to Customer
any LAP expedite charges associated with Customer's request for
expedited installation. When LAP expedite charges are
02/01/95 Page 3 of 8
<PAGE>
incurred for reasons other than Customer's expedite request, these
charges will not be passed on to Customer.
3. CHANGE OF REQUESTED SERVICE DATE CHARGES:
These charges apply when a change of the Requested Service Date is
the only Customer requested modification to the original Service
Order relevant to the Service in question. The amount of the charge
depends on when in the stage of order processing Customer's request
is made to WilTel and whether the Requested Service Date for the
Service in question has been previously modified. If the first
request to change an IXC Requested Service Date is received more than
ten (10) working days prior to the original Requested Service Date
("Standard Notice"), there will be no charge. If the Requested
Service Date has been changed once already, or if the request is made
within ten (10) working days of the established Requested Service
Date ("Short Notice"), the applicable charge will apply. An ASR
charge will be assessed whenever a change of Requested Service Date
is made with respect to Service Orders pursuant to which WilTel is to
act as agent to obtain Local Access. When Customer requests that a
Requested Service Date be pushed out, the new Requested Service Date
is to be within thirty (30) days of the previous Requested Service
Date. If the new Requested Service Date is more than thirty (30) days
following the previous Requested Service Date, or is unknown, the
Service affected thereby will be deemed to be canceled by Customer
and subject to applicable cancellation charges. In no event will
WilTel be obligated to accept more than three (3) changes to a
Requested Service Date, and as of the fourth (4th) such request the
Service in question will be deemed to be canceled by Customer and
subject to applicable cancellation charges. A change of Requested
Service Date charge also applies when Customer requests an earlier
Requested Service Date that does not require an expedited
installation interval. If an expedited interval is required, the
Order Expedite Charge supersedes the Change of Requested Service Date
Charge. Customer will also be charged for any changes incurred by
WilTel from third party providers of facilities or services relevant
to Service affected by a change of Requested Service Date.
4. CHANGE OF ORDER CHARGES:
Change of Order Charges apply when Customer requests a modification
to the information contained in a fully executed or binding Service
Order prior to completion of installation of the circuit (ICOM) other
than a change of Requested Service Date. Administrative changes
(e.g. billing address, contact, etc.) on IXC only orders will be made
without charge. There will be an ASR charge for Administrative
Changes with respect to Service Orders pursuant to which WilTel is to
act as agent to obtain Local Access. Change of Order is defined as a
change of Local Access Service type (voice grade to data grade or
vice versa), change of transmission speed (speed of DS-0, e.g. 4.8 to
9.6), transmission mode or termination interface, or to reflect a
partial cancellation of the order. Change of Order Charges will not
apply if the origination or termination city changes (i.e., changes
of termination interface are permitted, e.g., WASH.CPT to WASH.ICC,
but not changes in city, e.g., DLLS.SWB to HSTN.SWB). Order
modifications outside this Change of Order definition will be deemed
as Customer's cancellation of affected Service and as an order for a
new Service which must be described in a Service Order.
Charges for Change of Order are lower if the change is received prior
to circuit engineering. While the exact time of circuit engineering
may vary, to afford a verifiable date, "pre-engineering" is defined
as being within five (5) working days of the date the order was
entered into the WilTel F&E system (i.e., WilTel's order processing
system) for standard interval circuits. All expedited orders are
deemed to be in "post-engineering" two (2) working days after the
order is entered into the F&E system. IXC Change of Order Charges
apply if the change necessitates a modification of the IXC portion of
the circuit (e.g. change IXC from ESF to B8ZS or 56K/DSO to 56K DDS).
Local Access ASR Change of Order
02/01/95 Page 4 or 8
<PAGE>
Charges apply if the change requires a change in a LAP ASR or that a
new ASR be sent. For example, a change on a DS-0 order from 2-wire to
4-wire local loops requires a new ASR, but does not require any
change to the WilTel IXC. There would, therefore, be an ASR Change of
Order charge, but not an IXC Change of Order charge. Charges apply
per affected circuit or ASR, not per Service Order in which the
affected Service (which may be comprised of multiple circuits one or
more of which may be affected by the change order) was originally
described.
5. ORDER CANCELLATION CHARGES:
Order Cancellation Charges apply for orders canceled prior to
completion of installation (ICOM). These charges are applied in
addition to any cancellation charges specified in the relevant
Service agreement between WilTel and Customer or cancellation charges
relevant to associated M13, DCS, Echo Cancellation equipment or
incurred by WilTel from third party service providers. Cancellation
charges apply per IXC and per ASR and differ by pre and post
engineering. The definition of both pre-engineering and post-
engineering are the same as under Change of Order Charges. Order
Cancellation Charges are in addition to installation charges which
will also apply with respect to orders canceled prior to ICOM.
6. CHANGE OF SERVICE CHARGES:
Change of Service charges apply to Customer orders for changes made
after a circuit has completed installation (ICOM). Administrative
changes, i.e., changes to Customer's files such as billing address,
billing contact, etc., will only be charged on affected Service for
which WilTel also administers relevant Local Access. The Change of
Service Charge will be applied per Local Access ASR. Changes to
initial cross-connects requested by Customer are covered under Cross-
connect Re-arrangement Charges.
Re-engineering charges apply to orders that are re-engineered due to
Customer requested change in Local Access Service type (e.g., 2-wire
to 4-wire), transmission speed, transmission mode (e.g., AMI to
B8ZS), IXC or Local Access termination location or terminating
equipment (DACS, MUX, cross-connect, etc.). Changes which require
only modification of Local Access, but do not affect relevant IXC
(e.g. 2-wire loop to 4-wire loop) will only result in a charge for
the ASR(s) required to effect the order. Any LAP charges or third
party service provider charges incurred by WilTel because of a
Customer requested change will be passed on to Customer.
7. CROSS-CONNECT RE-ARRANGEMENT CHARGES:
Cross-connect Re-arrangement Charges apply either when Customer
requests additional cross-connects or changes to existing cross-
connects after initial installation. If a new cross-connect is part
of a new WilTel IXC order (adding a DS-0 IXC to a DS-1 Fan-Out or a
DS-1 IXC off an M13) no additional Cross-connect Re-arrangement
Charge will apply since the IXC installation charge includes an
initial cross-connect. When cross-connects are within the same piece
of DCS equipment or M13, the charge is per lower level (transmission
speed) circuit with a maximum per DCS or M13.
8. ROLL-UP CHARGES:
When permitted by terms of the relevant Service agreement between
WilTel and Customer or as otherwise agreed to in a writing subscribed
to by authorized representatives of Customer and WilTel, Customer
requested upgrades of either multiple WilTel provided DS-0's to a new
WilTel provided DS-1 IXC or Local Access circuit, or multiple WilTel
provided DS-1's to a new WilTel provided DS-3 IXC or Local Access
circuit, will be subject to a single lump-sum re-engineering and/or
ASR charge, rather than a charge for the re-engineering of each of
the existing
02/01/95 Page 5 of 8
<PAGE>
circuits individually. There is no charge for rolling an FT-1
(Fractional DS-1) up to a full DS-1 IXC.
9. ADDITIONAL INSTALLATION/MAINTENANCE CHARGES:
Additional Installation and/or Maintenance Charges apply when
Customer requests installation or circuit changes to be effected
during non-business hours for Wiltel or when Customer requests a
WilTel technician at the Customer premise for trouble that results
from problems in non-WilTel provided facilities. These charges also
apply when Customer requests and WilTel agrees to perform other
engineering, design or activities which are not provided by WilTel as
part of its then standard design and installation of Service.
10. CROSS-CONNECT CHARGES:
SERVICE DESCRIPTION/APPLICATION:
A cross-connect is an electrical connection made between two DS-1
circuits on a DSX-1 cross-connect panel or two DS-3 circuits on a
DSX-3 cross-connect panel in a WilTel or WilTel designated third
party Point of Presence (POP).
CHARGES:
Cross-connect Charges are determined by the level and type of
facilities being connected. Initial cross-connects will be provided
at no additional charge when there is an associated WilTel provided
IXC of the same level (i.e. DS-1 cross-connect with associated WilTel
provided DS-1 IXC). If Customer places a firm cross-connect order
simultaneously with a corresponding Service Order, WilTel agrees to
waive the monthly recurring cross-connect charges; provided, however,
rearrangement and changes to existing cross-connects will be subject
to the cross-connect charges set forth herein. Charges for additional
cross-connects after initial installation or reconfiguration of
existing cross-connects are covered under Cross-Connect Re-
Arrangement Charges. For cross-connects within a DACS or MUX, see
respectively the Digital Cross-Connect Service Description and
Charges and M13 Multiplexing Service Description and Charges.
11. M13 MULTIPLEXING (DS-3 TO DS-1) CHARGES:
SERVICE DESCRIPTION/APPLICATIONS:
This Service provides M13 multiplex equipment (MUX) in a WilTel or
WilTel designated third party POP to perform the function of deriving
up to twenty-eight (28) DS-1 level circuits out of a single DS-3
level circuit. M13 Multiplexing Service is only available at WilTel
approved M13 locations.
CHARGES:
M13 Multiplexing Charges are applied on a per M13 basis and
automatically apply when FT-3 (fractional DS-3) Service is provided.
M13's will not be provided without an associated WilTel provided full
DS-3 or FT-3 IXC. Initial cross-connects necessary to establish this
Service are included in the M13 Multiplexing Charges. Charges for
additional cross-connects after initial installation or
reconfiguration of existing cross-connects are covered under Cross-
Connect Re-Arrangement Charges. Charges for DS-3 to DS-1 Drop &
Insert applications are applied based upon the number of M13's
utilized. When Customer requires that WilTel be able to isolate and
test individual DS-1 channels on a DS-3 IXC connected to M13
multiplexing equipment, the DS-3 Sub-Rate Maintenance Charge will
also apply. WilTel will also supply Customer one (1) Ml-3
Multiplexer, at no cost to Customer, for each DS-3 level On-Net
circuit ordered by Customer, provided such Ml-3 Multiplexer is
ordered simultaneously with the
02/01/95 Page 6 of 8
<PAGE>
applicable Service Order for such DS-3 circuit. The preceding
sentence shall not apply, however, in the event Customer reconfigures
the DS-3 level circuits.
12. DIGITAL CROSS-CONNECT SERVICE (DCS or DACS) CHARGES:
SERVICE DESCRIPTION/APPLICATIONS:
Digital Cross-Connect Service (DCS or DACS) can be used within the
WilTel Network for two basic applications: DS-1/DS-0 Drop & Insert
Service or DS-1/DS-0 Fan-Out (See, attached diagrams for these two
---
applications). DCS equipment located in a WilTel designated POP is
used to electronically multiplex-demultiplex DS-0 (VF/DDS) level
channels from a DS-l level circuit and then electronically cross-
connect those DS-0 channels to either a DS-0 circuit or to a
different DS-1 circuit. DCS is WilTel's alternative to the use of DS-
l/DS-0 channel banks and VF/DDS electrical distribution frames within
WilTel designated POP's. DCS Service is only available at WilTel
approved DCS locations.
CHARGES:
The charge for DCS is applied per associated WilTel DS-1 IXC or
corresponding Local Access DCS termination. WilTel is under no
obligation to provide DCS for use in conjunction with transmission
services not provided by WilTel. Initial DS-0 cross-connects within
the DCS necessary to establish this Service are included in the
charge. Charges for additional cross-connects after initial
installation or reconfiguration of existing cross-connects are
covered under Cross-Connect Re-Arrangement Charges. In cases where a
DS-1 IXC is terminated in DCS for connection to VF or DDS (DS-0
level) Local Access facilities, or when DCS is used for DS-1 Drop &
Insert (DS-0 cross-connections between DS-1 IXC's), the DS-1 Sub-Rate
Maintenance Charge will also apply.
13. SUB-RATE MAINTENANCE CHARGES:
SERVICE DESCRIPTION/APPLICATION:
Sub-Rate Maintenance Charges are applied to recover and compensate
WilTel for the additional administration and maintenance costs
incurred by WilTel when higher capacity service (DS-3 and DS-1) is
broken down into lower level channels which require individual
tracking, testing and maintenance. Sub-Rate Maintenance will
automatically be provided by WilTel on WilTel provided DS-3 IXC with
M13 MUX and WilTel provided DS-1 IXC with attached DCS unless
------
Customer signs a waiver form acknowledging that WilTel will not be
responsible for the testing and Maintenance of associated lower level
IXC channels. DS-3 Sub-Rate Maintenance Charges will apply when a DS-
3 IXC has associated M13 MUX equipment and WilTel is responsible for
testing and maintaining individual DS-1 channels within the DS-3 IXC.
DS-1 Sub-Rate Maintenance Charges will apply when DS-1 IXC is
connected to multiple DS-0 level (VF or DDS) Local Access channels
either through WilTel DCS or through LAP provided D4 Channel Banks.
DS-1 Sub-Rate Maintenance Charges will also apply when WilTel DCS
equipment is used to Drop & Insert channels between DS-1 IXC's and
WilTel is responsible for testing and maintaining individual DS-0
channels within a DS-1 IXC.
CHARGES:
Pricing for DS-3 and DS-1 Sub-Rate Maintenance are applied per sub-
rate Local Access channel or IXC end with a maximum charge per DCS or
M13 MUX. Where M13 or DCS connections are to be made between
different Service provided to two different WilTel customers, the
customer ordering the connection(s) will be charged by WilTel for the
applicable Sub-Rate Maintenance.
02/01/95 Page 7 of 8
<PAGE>
14. ECHO CANCELLATION CHARGE:
SERVICE DESCRIPTION/APPLICATION:
With this service option, WilTel will provide echo cancellation
equipment on Customer's WilTel provided DS-0 or DS-1 IXC's necessary
to cancel the echo caused by the total cumulative physical length of
transmission path (route miles) traveled by the circuit from
origination to termination. Echo cancellation applies only to voice
applications of DS-0 and DS-1 Service. WilTel will employ echo
cancellation equipment free of charge on DS-0 and DS-1 IXC's that
are, by WilTel design, greater than 800 route miles. In cases where
Customer requested routing or other Customer (directly or indirectly)
controlled circumstances cause the circuit length to exceed 800 route
miles, Customer will be charged for Echo Cancellation Service. Echo
Cancellation Service provided by WilTel on a temporary basis due to a
re-route around WilTel Network blockage or damage will not be charged
to Customer.
CHARGES:
Echo Cancellation Charges are applied per canceller and per
associated DS-0 or DS-1 IXC provided by WilTel.
15. DIAGRAMS:
The diagrams shown on Attachment "1" hereto are provided to illustrate the
physical design characteristic of a "DS-1 Fan-Out," "DS-1 IXC to DS-0
Access," "FT-l with Shared Access & Tail" and "Drop & Insert."
02/01/95 Page 8 of 8
<PAGE>
ATTACHMENT "1"
[DIAGRAM SHOWING TECHNICAL SPECIFICATIONS FOR DS-1 AND
RELATED SERVICES APPEARS HERE]
ATTACHMENT "1" ARTWORK HERE
<PAGE>
29. COUNTERPARTS: This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Digital Service
Agreement on the date first written above.
WORLDCOM NETWORK SERVICES, INC.
d/b/a WilTel
By: /s/ Charles M. Cole
----------------------------------------------------
(Signature)
Charles M. Cole
-------------------------------------------------------
(Print Name)
VP Carrier Sales
-------------------------------------------------------
(Title)
ASSOCIATED COMMUNICATIONS COMPANIES OF AMERICA
By: /s/ Mike Newkirk
---------------------------------------------------
(Signature)
Mike Newkirk
-------------------------------------------------------
(Print Name)
Vice President
-------------------------------------------------------
(Title)
ACC LONG DISTANCE CORPORATIONS
By: /s/ Michael LaFrance
---------------------------------------------------
(Signature)
Michael LaFrance
-------------------------------------------------------
(Print Name)
President
-------------------------------------------------------
(Title)
Page 25 of 27
<PAGE>
BUSINESS TELECOM, INC.
BY: /s/ Mike Newkirk
----------------------------------------------------
(Signature)
Mike Newkirk
-------------------------------------------------------
(Print Name)
Exec. VP
-------------------------------------------------------
(Title)
CINCINNATI BELL LONG DISTANCE, INC.
By: /s/ Barry L. Nelson
----------------------------------------------------
(Signature)
Barry L. Nelson
-------------------------------------------------------
(Print Name)
President & CEO
-------------------------------------------------------
(Title)
CONFIDENTIAL
------------
Page 26 of 27
<PAGE>
LONG DISTANCE SAVERS, Inc.
By: /s/ Chris Chelette
----------------------------------------------------
(Signature)
Chris Chelette
-------------------------------------------------------
(Print Name)
Vice President
-------------------------------------------------------
(Title)
NATIONAL TELECOMMUNICATIONS OF FLORIDA
By: /s/ John A. Mansour
----------------------------------------------------
(Signature)
John A. Mansour
-------------------------------------------------------
(Print Name)
CEO
-------------------------------------------------------
(Title)
DELTA COMM, INC.
By: /s/ Tom Mullis
----------------------------------------------------
(Signature)
Tom Mullis
-------------------------------------------------------
(Print Name)
EXEC. V.P.
-------------------------------------------------------
(Title)
Page 27 of 27 CONFIDENTIAL
------------
<PAGE>
APPENDIX A
NAMES AND ADDRESSES OF ASSOCIATED COMMUNICATIONS OF AMERICA AND ITS MEMBERS
---------------------------------------------------------------------------
Associated Communications Companies of America
111 Congress Avenue, Suite 3000
Austin, Texas 78701
ACC Long Distance Corporation
400 West Avenue
Rochester, New York 14611
ATX Telecommunications and Services
50 Monument Road
Bala Cynwyd, Pennsylvania 19004
Business Telecom, Inc.
4300 Six Forks Road
Raleigh, North Carolina 27609
Cincinnati Bell Long Distance, Inc.
36 East 7th Street, #2200
Cincinnati, Ohio 45202
Long Distance Savers, Inc.
801 North 31st Street
Monroe, Louisiana 71202
Telefonica Larga Distancia de 'Puerto Rico, Inc.
P.O. Box 70325
San Juan, Puerto Rico 00936
National Telecommunications of Florida
111 Congress Avenue, Suite 3000
Austin, Texas 78701
Delta Comm, Inc.
113 S. Main Street
Arab, Alabama 35016
<PAGE>
EXHIBIT 10.71
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[ ]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
AMENDMENT
This Amendment (the "AMENDMENT") is made and entered into as of the 1st day
of April, 1996 (the "EFFECTIVE DATE") to that certain Carrier Digital Services
Agreement dated as of September 1, 1995 (the "AGREEMENT") made by and between
WorldCom Network Services Inc. d/b/a WilTel ("WILTEL") and (i) Associated
Communications Companies of America ("ACCA"), and (ii) the individual1 members
of ACCA which are listed on Appendix A hereto (individually referred to as a
"MEMBER"). In the event of any conflict between the terms of the Agreement and
the terms of this Amendment, the terms of this Amendment shall control.
References to "CUSTOMER" shall refer collectively to ACCA and to all ACCA
Members and to each Member individually:
R E C I T A L S:
A. ACCA has added two (2) members, Consolidated Communications, Inc.
("CNI") and U.S. Long Distance ("USLD"), as Members ,
B. Pursuant to the Agreement, ACCA desires to allow CNI and USLD to
purchase Interexchange Services under the Agreement.
C. WilTel agrees to add CNI and USLD as Members under the Agreement
pursuant to the terms and conditions contained herein.
NOW THEREFORE, in consideration of good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agrees as
follows:
1. ADDITION OF MEMBERS: Each of CNI and USLD have been previously
provided a copy of the Agreement and have read and understand the terms and
conditions contained therein. By execution of this Amendment , each of CNI and
USLD agree to be liable under such Agreement as if they were each an original
party to the Agreement, including without limitation, the requirement imposed on
all Members to allocate a Delinquent Member's portion of Customer's Commitment
among all other Members as described in Section 18 of the Agreement. Further, by
execution of this Amendment, all other Members consent to the addition of CNI
and USLD as parties to the Agreement.
2. PRIOR AGREEMENT: The parties acknowledge that there currently exists a
Carrier Digital Services Agreement between CNI and WilTel (the "PRIOR CNI
AGREEMENT") which provide for a take-or-pay commitment of [_______]from the
Effective Date of this Amendment through and including March 31, 1997. As of the
Effective Date of this Amendment, the Prior CNI Agreement will be canceled and
of no further force or effect and the parties to the Prior CNI Agreement shall
be released from all liability thereunder with the exception of certain
obligations arising under the Prior CNI Agreement which are intended to survive,
such as, payment for services provided thereunder and rights of confidentiality
and indemnity. Neither ACCA, nor any individual Member of ACCA other
Page 1 of 6 CONFIDENTIAL
------------
<PAGE>
than CNI, shall have any liability or obligation whatsoever with respect to the
Prior CNI Agreement.
3. CUSTOMER'S COMMITMENT: The parties agree to substitute Subsection 9(A)
of the Agreement to read in its entirety as follows:
(A) Commencing as of the Effective Date and continuing through the end of
the Term (the "COMMITMENT PERIOD") Customer agrees to maintain, on a take-
or-pay basis, Monthly Recurring Interexchange Service Charges of at least
$553,450 ("CUSTOMER'S COMMITMENT"). It is further understood by the parties
that certain Members have individually committed for a certain portion of
Customer's Commitment as further described in the Amended and Restated
Commitment Schedule. Provided, however, nothing contained herein shall be
construed as to make ACCA directly liable to WilTel for the Monthly
Recurring Interexchange Service Charges of any individual Member or to make
any Member directly liable to WilTel for the Monthly Recurring
Interexchange Service Charges of any other individual Member.
4. LETTER OF CREDIT: In accordance with Subsection 17(C) of the
Agreement, upon execution of this Amendment, CNI agrees to provide WilTel with a
letter of credit equal to $103,450 unless such requirement is waived by WilTel
or some other security arrangement acceptable to WilTel is agreed to by the
parties.
5. OTHER TERMS AND CONDITIONS: Except to the extent specifically modified
by this Amendment, the remaining terms and conditions contained in the Agreement
shall be in full force and effect through the remainder of the Term.
6. COUNTERPARTS: This Amendment may be executed in multiple counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
WORLDCOM NETWORK SERVICES, INC.
d/b/a WilTel
By: /s/ Charles M. Cole
-----------------------------------------
(Signature)
Charles M. Cole
--------------------------------------------
(Print Name)
Vice President Carrier Sales
--------------------------------------------
(Title)
Page 2 of 6 CONFIDENTIAL
------------
<PAGE>
ASSOCIATED COMMUNICATIONS COMPANIES OF AMERICA
By: /s/ Mike Newkirk
-------------------------------------------------
(Signature)
Mike Newkirk
-----------------------------------------------------
(Print Name)
Vice President
-----------------------------------------------------
(Title)
ACC LONG DISTANCE CORPORATION
By: /s/ Michael La France
-------------------------------------------------
(Signature)
Michael La France
-----------------------------------------------------
(Print Name)
President
-----------------------------------------------------
(Title)
ATX TELECOMMUNICATIONS AND SERVICES
By: /s/ Scott Dulin 4.8.96
-------------------------------------------------
(Signature)
SCOTT DULIN
-----------------------------------------------------
(Print Name)
DIR. BUS. OPERATIONS.
-----------------------------------------------------
(Title)
Page 3 of 6 CONFIDENTIAL
------------
<PAGE>
BUSINESS TELECOM, INC.
By: /s/ Mike Newkirk
-----------------------------------
(Signature)
Mike Newkirk
--------------------------------------
(Print Name)
Exec V.P.
--------------------------------------
(Title)
CINCINNATI BELL LONG DISTANCE, INC.
By: /s/ Barry L. Nelson
-----------------------------------
(Signature)
Barry L. Nelson
--------------------------------------
(Print Name)
President and CEO
--------------------------------------
(Title)
CONSOLIDATED COMMUNICATIONS INC.
By: /s/ Brian L. Carr
-----------------------------------
(Signature)
BRIAN L. CARR
--------------------------------------
(Print Name)
V.P./G.M.
--------------------------------------
(Title)
Page 4 of 6 CONFIDENTIAL
------------
<PAGE>
LONG DISTANCE SAVERS, INC.
By:/s/ Chris Chelette
-----------------------------------
(Signature)
Chris Chelette
--------------------------------------
(Print Name)
Vice President
--------------------------------------
(Title)
NATIONAL TELECOMMUNICATIONS OF FLORIDA
By:/s/ James M. Mansour
-----------------------------------
(Signature)
James M. Mansour
--------------------------------------
(Print Name)
President
--------------------------------------
(Title)
DELTA COMM, INC.
By:/s/ Tom Mullis
-----------------------------------
(Signature)
Tom Mullis
--------------------------------------
(Print Name)
COO
--------------------------------------
(Title)
Page 5 of 6 CONFIDENTIAL
------------
<PAGE>
TELEFONICA LARGA DISTANCIA DE PUERTO RICO, INC.
By: /s/ Hector M. Lugo
-------------------------------------------------
(Signature)
Hector M. Lugo
-----------------------------------------------------
(Print Name)
President
-----------------------------------------------------
(Title)
U.S. LONG DISTANCE, INC.
By: /s/ James S. Speirs
---------------------------------------------
(Signature)
JAMES S. SPEIRS
-----------------------------------------------------
(Print Name)
SENIOR VICE PRESIDENT
-----------------------------------------------------
(Title)
<PAGE>
AMENDED AND RESTATED
COMMITMENT SCHEDULE
<TABLE>
<CAPTION>
Company Commitment
------- ----------
<S> <C>
ACC Long Distance Corporation [_______]
ATX Telecommunications and Services [_______]
Business Telecom, Inc. [_______]
Cincinnati Bell Long Distance, Inc. [_______]
Consolidated Communications, Inc. [_______]
Delta Comm, Inc. [_______]
Long Distance Savers, Inc. [_______]
National Telecommunications of Florida [_______]
Telefonica Larga Distancia de Puerto Rico, Inc. [_______]
U.S. Long Distance [_______]
---------
TOTAL [_______]
</TABLE>
Page 6 of 6 CONFIDENTIAL
------------
<PAGE>
EXHIBIT 10.72
-------------
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[_____]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
AMENDMENT NO. 2
This Amendment No. 2 is made and entered into effective as of the 1st day
of June, 1996 (the "EFFECTIVE DATE") to that Certain Carrier Digital
Services Agreement dated as of September 1, 1995 (the "DSA") and modified by
that Certain Amendment dated as of April 1, 1996 (the "AMENDMENT") made by and
between WorldCom Network Services, Inc. d/b/a WilTel ("WILTEL") and (i)
Associated Communications Companies of America ("ACCA"), and (ii) the individual
members of ACCA which are listed on Appendix A hereto (individually referred to
as a "MEMBER"). In the event of any conflict between the terms of the DSA, the
Amendment and this Amendment No. 2, the following order of precedence shall
apply: this Amendment No. 2, the Amendment and the DSA. References to
"CUSTOMER" shall refer collectively to ACCA and to all ACCA Members and to each
Member individually. Further, capitalized terms not defined herein shall have
the meaning ascribed to them in the DSA or Amendment, whichever is applicable.
1. RATES: The parties agree to substitute Subsection 10(A) of the DSA to
read in its entirety as follows:
(A) With respect to On-Net DS-3 level Interexchange Service ordered
between September 1, 1995 and May 31, 1996, the Base Rate per VGE per
V&H Mile for On-Net DS-3 level Interexchange Service will be as
follows based on Customer's Spending Level (as defined in Subsection
(F) below):
<TABLE>
<CAPTION>
Monthly
Spending Level Rate
-------------------------- --------
<S> <C>
[________] - [________] [_____]
[________] - [________] [_____]
[________] - [________] [_____]
[________] - [________] [_____]
[________] - [________] [_____]
[_________] [_____]
</TABLE>
Further, with respect to On-Net DS-3 level Interexchange Service
ordered on or after June 1, 1996, the Base Rate per VGE per V&H Mile
for On-Net DS-3 level Interexchange Service will be as follows based
on Customer's Spending Level (as defined in Subsection (F) below):
<TABLE>
<CAPTION>
Monthly
Spending Level Rate
-------------------------- --------
<S> <C>
[________] - [________] [_____]
[________] - [________] [_____]
[_______] [_____]
</TABLE>
PAGE 1 OF 6 CONFIDENTIAL
------------
<PAGE>
2. MINIMUM CHARGE: The parties agree to substitute Subsection 14(C) of
the DSA to read in its entirety as follows:
(C) The minimum monthly recurring Interexchange Service charge for
(i) each DS-0 circuit comprising DS-0 level Interexchange Service
shall be [_], (ii) each DS-1 circuit comprising DS-1 level
Interexchange Service (including Multiple DS-1 Interexchange Service)
shall be [__], and (iii) each DS-3 circuit comprising DS-3 level
Interexchange Service shall be [____].
3. ECHO CANCELLATION CHARGE: Commencing as of the Effective Date of this
Amendment No.2 and continuing through the end of the Service Term, the Echo
Cancellation monthly recurring charge for DS-1 level circuits less than 800
miles as described in Section 14 of Exhibit "1" to the DSA shall be changed from
"[_____]" to "[_____]".
4. OTHER TERMS AND CONDITIONS: Except to the extent specifically
modified by this Amendment No. 2, the remaining terms and conditions contained
in the DSA and the Amendment shall be in full force and effect through the
remainder of the Term.
5. COUNTERPARTS: This Amendment No. 2 may be executed in multiple
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment No. 2 as of
the date first written above.
WORLDCOM NETWORK SERVICES, INC.
d/b/a WilTel
By: /s/ Charles M. Cole
--------------------------------------------------
(Signature)
Charles M. Cole III
------------------------------------------------------
(Print Name)
Vice President, Carrier sales
------------------------------------------------------
(Title)
PAGE 2 OF 6 CONFIDENTIAL
------------
<PAGE>
ASSOCIATED COMMUNICATIONS COMPANIES OF AMERICA
By: /s/ Mike Newkirk
--------------------------------------------------
(Signature)
Mike Newkirk
------------------------------------------------------
(Print Name)
Vice President
------------------------------------------------------
(Title)
ACC LONG DISTANCE CORPORATION
By: /s/ Mae Squier-Dow
--------------------------------------------------
(Signature)
Mae Squier-Dow
------------------------------------------------------
(Print Name)
President
------------------------------------------------------
(Title)
ATX TELECOMMUNICATIONS AND SERVICES
By: /s/ S. Dulin
--------------------------------------------------
(Signature)
S. Dulin
------------------------------------------------------
(Print Name)
Dir. Bus. Opr.
------------------------------------------------------
(Title)
PAGE 3 OF 6 CONFIDENTIAL
------------
<PAGE>
BUSINESS TELECOM, INC.
By: /s/ Mike Newkirk
--------------------------------------------------
(Signature)
Mike Newkirk
------------------------------------------------------
(Print Name)
Exec Vice President
------------------------------------------------------
(Title)
CINCINNATI BELL LONG DISTANCE, INC.
By: /s/ Barry Nelson
--------------------------------------------------
(Signature)
Barry Nelson
------------------------------------------------------
(Print Name)
President & CEO
------------------------------------------------------
(Title)
CONSOLIDATED COMMUNICATIONS INC.
By: /s/ Brian L. Carr
--------------------------------------------------
(Signature)
Brian L. Carr
------------------------------------------------------
(Print Name)
V.P. & G.M.
------------------------------------------------------
(Title)
PAGE 4 OF 6 CONFIDENTIAL
------------
<PAGE>
LONG DISTANCE SAVERS, INC.
By: /s/ Chris Chelette
--------------------------------------------------
(Signature)
Chris Chelette
------------------------------------------------------
(Print Name)
VICE PRESIDENT
------------------------------------------------------
(Title)
NATIONAL TELECOMMUNICATIONS OF FLORIDA
By: /s/ John A. Mansour
--------------------------------------------------
(Signature)
John A. Mansour
------------------------------------------------------
(Print Name)
CEO
------------------------------------------------------
(Title)
DELTA COMM, INC.
By: /s/ Tom Mullis
--------------------------------------------------
(Signature)
Tom Mullis
------------------------------------------------------
(Print Name)
Exec. V.P.
------------------------------------------------------
(Title)
PAGE 5 OF 6 CONFIDENTIAL
------------
<PAGE>
TELEFONICA LARGA DISTANCIA DE PUERTO RICO, INC.
By: /s/ Hector M. Lugo
--------------------------------------------------
(Signature)
HECTOR M. LUGO
------------------------------------------------------
(Print Name)
PRESIDENT
------------------------------------------------------
(Title)
U.S. LONG DISTANCE, INC.
By: /s/ G. D. Anglin
--------------------------------------------------
(Signature)
G. D. Anglin
------------------------------------------------------
(Print Name)
Director
------------------------------------------------------
(Title)
PAGE 6 OF 6 CONFIDENTIAL
------------
<PAGE>
EXHIBIT 10.73
-------------
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[_____]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
AMENDMENT NO. 3
This Amendment No. 3 (the "AMENDMENT") is made and entered into as of the
1st day of May, 1997 (the "EFFECTIVE DATE") to that Certain Carrier Digital
Services Agreement dated as of September 1, 1995 (the "DSA") as modified by that
Certain Amendment dated as of April 1, 1996 ("PRIOR AMENDMENT") and that certain
Amendment No. 2 dated as of June 1, 1996 ("AMENDMENT NO. 2") made by and between
WorldCom Network Services, Inc. d/b/a WilTel ("WILTEL") and (i) Associated
Communications Companies of America ("ACCA"), and (ii) the individual members of
ACCA listed on Appendix A hereto (individually referred to as a "MEMBER"). All
capitalized terms used in this Amendment not otherwise defined shall have the
meaning given to them in the DSA, the Prior Amendment or Amendment No. 2,
whichever is applicable. In the event of any conflict between the terms of the
DSA, the Prior Amendment, Amendment No. 2 and the terms of this Amendment, the
order of precedence will be as follows: (1) this Amendment, (2) Amendment No. 2,
(3) the Prior Amendment, and (4) the DSA.
In consideration of good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agrees as follows:
A. Term. The parties agree to substitute Section 4 of the DSA Agreement
----
to read in its entirety as follows:
4. TERM: WilTel's obligation to provide Service under this Agreement shall
be effective over the period commencing as of May 1, 1997 and continuing
through and including August 31, 1999 (the "TERM"). With respect to any
Service Order for which the applicable Service Commitment Period has not
been satisfied by the end of the Term, the terms and conditions of this
Agreement will remain in full force and effect until such Service
Commitment Period has been satisfied. Upon the expiration of the Term, all
charges relevant to the Service will remain in effect and Service which has
met its minimum Service Commitment Period as described herein will be
subject to termination by either party upon not less than thirty (30) days
prior written notice to the other party.
B. Rates: The parties agree to substitute Section 9 of the DSA to read in
-----
its entirety as follows:
9. CUSTOMER'S COMMITMENT/DEFICIENCY CHARGE:
(A) Commencing with the September, 1997 billing period (i.e., October,
1997 invoice) and continuing through the
Page 1 of 10 CONFIDENTIAL
------------
<PAGE>
end of the Term (the "Commitment Period"), Customer agrees to
maintain, on a take-or-pay basis, Monthly Recurring Interexchange
Service Charges of at least [______] ("Customer's Commitment"). It is
further understood by the parties that certain Members have
individually committed for a certain portion of Customer's Commitment
(hereinafter referred to as a "Member's Portion") as further described
in Section 17 below. Provided, however, nothing contained herein shall
be construed as to make ACCA or any Member directly liable to WitTel
for the Monthly Recurring Interexchange Service Charges of any other
Member.
(B) If, in any month during the Commitment Period, the aggregate of
all of the Members' actual Monthly Recurring Interexchange Service
Charges does not equal at least the Customer's Commitment, then WilTel
will determine which Member (or Members) (a "DELINQUENT MEMBER") has
not satisfied its respective Member's Portion as shown in the Amended
and Restated Commitment Schedule described in Subsection 17(B). In
such case and only for such month(s), the Delinquent Members agrees to
pay WilTel the difference between its actual Monthly Recurring
Interexchange Service Charges and its respective Member's Portion, if
any (the "MONTHLY DEFICIENCY CHARGE"). Monthly Deficiency Charges, if
any, determined in accordance with this Subjection (B) shall be due at
the same time service charges are due hereunder.
(C) The parties hereby specifically agree that the provisions
contained herein describing a deficiency charge represents a mutual
good faith estimate of, and bears a reasonable relationship to, the
actual damages to WilTel in the event of such deficiency and do not
represent a penalty of any kind, and that such deficiency charge is an
obligation of ACCA and the Members subject to specific performance.
(D) For purposes of this Agreement, "Monthly Recurring Interexchange
Service Charges" will not include pro-rated charges for Interexchange
Service, Local Access charges, Ancillary Service charges, Additional
Charges (as defined below), other recurring or non-recurring charges
for space, facilities or any other charges other than those charges
identified by the relevant WilTel invoice as monthly recurring
interexchange service charges for private line service.
Page 2 0f 10 CONFIDENTIAL
------------
<PAGE>
(E) In the event Customer submits a firm Service Order for DS-l
or DS-3 level On-Net Service (other than orders submitted under
Sections 11 or 12 below) and WilTel can not deliver Service
within thirty (30) business days or some other longer interval
agreed to by Customer, and Customer orders and is provided such
Service by another carrier, then solely for purposes of
determining if Customer has met Customer's Commitment described
in Subsection (A) above, WilTel agrees to include an amount equal
to WilTel's Monthly Recurring Interexchange Service Charges for
such Service times the number of months such Service is actually
installed by the other carrier. Upon request by WilTel, Customer
agrees to provide adequate documentation reasonably acceptable to
WilTel to substantiate Customer's ordering and being provided
Service under this Subsection from another carrier.
C. Commitment Schedule.
-------------------
A. RATES. The parties agree to substitute Section 10 of the DSA to
read in its entirety as follows:
10. MONTHLY RECURRING INTEREXCHANGE SERVICE RATES: Customer will
receive the following rates and discounts for Service ordered hereunder.
Customer will not receive any other discounts unless specifically set forth
herein.
(A) The Base Rate per VGE per V&H Mile for On-Net DS-3 level
Interexchange Service will be as follows based on Customer's
Spending Level (as defined in Subsection (F) below):
<TABLE>
<CAPTION>
Monthly
Spending Level Rate
----------------------- ---------
<S> <C>
[________] - [________] [______]
[________] - [________] [______]
[________] - [________] [______]
[________] - [________] [______]
[_________] [______]
</TABLE>
(B) The Base Rate per VGE per V&H Mile for On-Net and Extended DS-l
level Interexchange Service will be as follows based on Customer's
Spending Level (as defined in Subsection (F) below):
Page 3 of 10 CONFIDENTIAL
------------
<PAGE>
<TABLE>
<CAPTION>
Monthly
Spending Level Rate
----------------------- -----------
<S> <C>
[________] - [________] [_______]
[________] - [________] [_______]
[________] - [________] [_______]
[________] - [________] [_______]
[_________] [_______]
</TABLE>
(C) The Base Rate for Multiple DS-l level Interexchange Service
("Multiple DS-1 Service") will be the DS-l Interexchange Service rates
described in Subsection (B) above. Multiple DS-l Service between and
among WilTel On-Net Cities and/or WilTel Extended Cities ordered
solely by one Member (i.e., Members may not allocate Service under
this Subsection (D)) will be subject to the discounts described below
provided all of the following conditions are met:
(i) Customer orders at least six (6) DS-l circuits between or
among On-Net Cities and/or WilTel Extended Cities at one time (the
"Circuit Package");
(ii) the Requested Service Dates relevant to all of the DS-1s in
the Circuit Package are subject to WilTel's standard intervals and, if
more than one date is requested, the dates are within the same thirty
(30) day period; and
(iii) the Service Commitment Period for each of the DS-ls in
question is twelve (12) months.
In the case of a new initial Circuit Package comprised exclusively of
existing DS-1s, the Multiple DS-1 Service discount and twelve (12)
month Service Commitment Period will commence as of the second monthly
billing period following the month in which the Service Order therefor
is submitted. If Customer desires to create a larger Circuit Package
or create an initial Circuit Package from existing DS-ls and
incremental new DS-ls (e.g., take a Circuit Package of 6 to a Circuit
Package of 10 DS-ls; or, create an initial Circuit Package of at least
6 DS-ls with at least 4 existing DS-1s plus an additional incremental
2 DS-ls), Customer will first identify all DS-ls to be in the
resulting Circuit Package. All circuits within the resulting Circuit
Package will be subject to a twelve (12) month Service Commitment
Period commencing as of the date the last circuit comprising the
Page 4 of 10 CONFIDENTIAL
------------
<PAGE>
package is installed. If through the creation of a larger Circuit
Package existing DS-ls should be subject to a greater level of
discount, the applicable discount shall commence for the existing
DS-ls as of the date the last circuit in the larger Circuit Package in
installed, and the applicable discount for each new incremental DS-l
relevant to the larger Circuit Package shall commence as of Start of
Service for each such incremental DS-l.
<TABLE>
<CAPTION>
No. of DS-1s One Common End Two Common Ends
------------ -------------- ---------------
<S> <C> <C>
6 - 12 [___] [___]
13 - 18 [___] [___]
19 - 26 [___] [___]
</TABLE>
(D) The Base Rate per V&H Mile for On-Net and Extended DS-0 level
Interexchange Service between will be [___].
(E) For purposes of this Section 10, "Monthly Spending Level" will
include (i) "Monthly Recurring Interexchange Service Charges" (as
defined in Subsection 9(D) above), and (ii) provided Customer's
Monthly Recurring Interexchange Service Charges are at least [______],
[_____________] of Customer's International monthly measured and per
call usage charges for Switched Services purchased by Customer from
WilTel (excluding Local Access charges, Ancillary Service charges,
special feature charges such as Authorization Codes or CDR Tapes, or
any other charges other than those identified by the relevant WilTel
invoice as Switched Service charges). The Monthly Spending Level will
be determined at the end of each month and will be based on WilTel's
latest private line invoice to Customer. The Monthly Spending Level
determined at the time of such computation shall be effective from the
first day through the last day of each calendar month following the
month in which the computation is made.
C. Commitment Schedule. As of the Effective Date of this Amendment, the
-------------------
Commitment Schedule described in Subsection 17 (B) of the DSA will be replaced
by the Amended and Restated Commitment Schedule attached hereto and incorporated
herein by reference.
D. Other Terms and Conditions. Except to the extent specifically modified
--------------------------
by this Amendment, the remaining terms and conditions contained in the DSA, the
Prior Amendment and Amendment No. 2, as applicable, shall remain in full force
and effect through the remainder of the Term described in this Amendment.
Page 5 of 10 CONFIDENTIAL
<PAGE>
E. Counterparts. This Amendment may be executed in multiple
------------
counterparts, each of which shall be deemed an original and all of which when
taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment as of
the date first written above.
WORLDCOM NETWORK SERVICES, INC.
d/b/a WILTEL
By: /s/ Charles M. Cole
---------------------------------------------
(Signature)
Charles M. Cole
------------------------------------------------
(Print Name)
Vice President Carrier Sales
------------------------------------------------
(Title)
ASSOCIATED COMMUNICATIONS COMPANIES
OF AMERICA
By: /s/ Mike Newkirk
---------------------------------------------
(Signature)
Mike Newkirk
------------------------------------------------
(Print Name)
Vice President
------------------------------------------------
(Title)
Page 6 of 10 CONFIDENTIAL
------------
<PAGE>
ACC LONG DISTANCE CORPORATION
By: /s/ Larry Dubon
---------------------------------------------
(Signature)
Larry Dubon
------------------------------------------------
(Print Name)
VP, Network Planning
------------------------------------------------
(Title)
ATX COMMUNICATIONS AND SERVICES
OF AMERICA
By: /s/ Scott Dulin
---------------------------------------------
(Signature)
Scott Dulin
------------------------------------------------
(Print Name)
Dir. Bus. Ops.
------------------------------------------------
(Title)
BUSINESS TELECOM, INC.
By: /s/ Mike Newkirk
---------------------------------------------
(Signature)
Mike Newkirk
------------------------------------------------
(Print Name)
COO
------------------------------------------------
(Title)
Page 7 of 10 CONFIDENTIAL
------------
<PAGE>
CINCINNATI BELL LONG DISTANCE, INC.
By: /s/ Barry L. Nelson
----------------------------------------------
(Signature)
Barry L. Nelson
-------------------------------------------------
(Print Name)
President & CEO
-------------------------------------------------
(Title)
CONSOLIDATED COMMUNICATIONS INC.
By: /s/ Brian L. Carr
----------------------------------------------
(Signature)
Brian L. Carr
-------------------------------------------------
(Print Name)
V.P. & G.M.
-------------------------------------------------
(Title)
LONG DISTANCE SAVERS, INC.
By: /s/ Chris Chelette
----------------------------------------------
(Signature)
Chris Chelette
-------------------------------------------------
(Print Name)
Vice President
-------------------------------------------------
(Title)
Page 8 of 10 CONFIDENTIAL
------------
<PAGE>
NATIONAL TELECOMMUNICATIONS OF FLORIDA
By: /s/ John Mansour
----------------------------------------------
(Signature)
John Mansour
-------------------------------------------------
(Print Name)
President
-------------------------------------------------
(Title)
DELTA COMM, INC.
By: /s/ Tom Mullis
----------------------------------------------
(Signature)
Tom Mullis
----------------------------------------------
(Print Name)
SR VP
-------------------------------------------------
(Title)
TELEFONICA LARGA DISTANCIA
DE PUERTO RICO, INC.
By: /s/
----------------------------------------------
(Signature)
-------------------------------------------------
(Print Name)
-------------------------------------------------
(Title)
Page 9 of 10 CONFIDENTIAL
------------
<PAGE>
U.S. LONG DISTANCE, INC.
By: /s/ James S. Speirs
----------------------------------------------
(Signature )
James S. Speirs
-------------------------------------------------
(Print Name)
Senior Vice President
-------------------------------------------------
(Title)
Page 10 of 10 CONFIDENTIAL
------------
<PAGE>
AMENDED AND RESTATED
COMMITMENT SCHEDULE
<TABLE>
<CAPTION>
Company Commitment
- --------------------------------------------- ----------
<S> <C>
AC Long Distance Corporation [______]
ATX Telecommunications and Services [______]
Business Telecom, Inc. [______]
Cincinnati Bell Long Distance, Inc. [______]
Consolidated Communications Inc. [______]
Long Distance Savers [______]
Telefonica Larga Distancia
de Puerto Rico, Inc. [______]
National Telecommunications
of Florida [______]
Delta Comm, Inc. [______]
U.S. Long Distance, Inc. [______]
--------
TOTAL [______]
</TABLE>
<PAGE>
EXHIBIT 10.74
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[_____]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
MARKETING AND OPERATING AGREEMENT
THIS AGREEMENT made and effective as of October 6, 1994 by and between
DukeNet Communications, Inc. (DCI), a North Carolina corporation and Interstate
FiberNet (IFN), a Georgia general partnership,
WHEREAS, DCI has or will obtain any and all necessary regulatory
authority required to provide Carrier's carrier service in North Carolina and
South Carolina and desires to market such service to Customers in North Carolina
and South Carolina through direct sales;
WHEREAS, IFN desires to market Carrier's carrier service to Customers as
an Agent of DCI and to provide certain operating services;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements and understanding herein contained, the parties agree as follows:
1. Definitions
-----------
Affiliate: Any person that directly or indirectly through one or more
---------
intermediaries controls, or is controlled by, or is under common control
with, such entity. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of any person,
whether through the ownership of securities, by contract, or otherwise.
Customer: The person who obtains Fiber Optic capacity from DCI.
--------
Marks: Trademarks, service marks, trade names, insignia, symbols,
-----
decorative designs, or the like, DCI or its Affiliates own or are
licensed or sublicensed to use in connection with Fiber Optic Facilities,
and which DCI, in its sole discretion, determines IFN is licensed to use.
Party or Parties: DCI or IFN or both, as the context shall require.
----------------
Person: The term "person" means an individual, partnership, joint
------
venture, cooperation, trust, unincorporated organization or government or
any department or agency thereof.
Representative: A person authorized to perform specific acts on behalf
--------------
of another Person.
2. Relationship of the Parties
---------------------------
2.1 Appointments: DCI hereby appoints IFN within North Carolina and
------------
South Carolina as its authorized non-exclusive Marketing Representative
for Carrier's carrier capacity and retains IFN to provide certain
operating services described herein subject to all of the terms and
conditions hereof.
2.2 Independent Contractors: The Parties hereto shall be construed to be
-----------------------
independent contractors. This Agreement shall not be considered to create
a joint venture, partnership or any other legal relationship
<PAGE>
between the Parties where either Party shall share or be responsible
for the debts and liabilities of the other Party beyond the extent
expressly provided in and limited by this Agreement, or as giving the
right of one Party to legally bind the other in any manner or be able
to incur debts and liabilities on behalf of the other.
2.3 Common Carrier: Nothing in this Agreement shall be construed to make
--------------
IFN or DCI a Telephone Utility or Telephone Common Carrier or
obligate IFN or DCI to provide Telephone Utility or Telephone Common
Carrier services.
3. Contract Period
---------------
3.1 Term: The term of this Agreement shall be ten (10) years, commencing
----
on October 6, 1994, unless otherwise terminated pursuant to the
provisions hereinafter provided.
3.2 Default: In the event IFN fails to perform any of its obligations
-------
under this Agreement and such failure continues unremedied for a
period of thirty (30) days after written notice is given by DCI to
IFN, then DCI may thereupon elect to cancel and terminate this
Agreement, which termination shall be effective immediately upon the
expiration of said thirty-day period.
3.3 Termination: Either party may terminate this Agreement upon the
-----------
occurrence of any of the events described below by giving the other
party written notice of its desire to terminate at least thirty (30)
days prior to the intended date of termination:
3.3.1 Regulatory constraints make it impossible or financially
burdensome for DCI to provide service.
3.3.2 DCI or IFN makes an assignment for the benefit of creditors;
3.3.3 A trustee or receiver of any substantial part of DCI or IFN's
assets is appointed by any Court; and
3.3.4 DCI or IFN, (1) has made any material misrepresentation or
omission in its application to establish an agency relationship
with the other Party or is convicted of or pleads no contest to
a felony or other crime or offense that is likely to
adversely affect the reputation of the other Party or its
affiliated companies; (2) attempts to make an unauthorized
assignment of this Agreement; (3) receives a notice of
violation of the terms or conditions of any license or permit
required by either Party or its employees in the conduct of its
business and fails to correct such violation; (4) fails to
comply with any provision of this Agreement, and does not
correct such failure within thirty (30) days after written
notice of such failure to comply is delivered to the other
Party, or (5) fails in any (6) consecutive months to comply
with any material provisions of this Agreement whether or not
such failures to comply are corrected after notice thereof is
delivered to the other Party. No waiver of either Party of any
deficiencies in one or more instances shall constitute a waiver
of either parties right
<PAGE>
to terminate this Agreement in subsequent instances.
4. IFN Responsibilities
--------------------
In consideration for being appointed as Marketing Representative of DCI,
IFN assumes the following responsibilities:
4.1 Marketing: IFN shall maintain a trained and capable sales
---------
organization to market and provide marketing support for Carrier's
carrier service on DCI Fiber Optic Network and to work with DCI to
assure customer satisfaction.
4.2 Customers: IFN shall solicit customer agreements and engage in such
---------
promotional activities in connection therewith as may be reasonable
and lawful, all subject to and in accordance with the terms and
conditions hereof.
4.3 Advertising: IFN at it's cost shall actively promote and market DCI's
-----------
service to a degree and in a manner determined by IFN and DCI to be
reasonable, subject to terms and conditions described in Section 6.
4.4 Sales Activity: IFN shall act as a marketing representative appointed
--------------
by DCI for DCI. IFN shall use its best efforts to promote the sale
and use of DCI's services and to solicit customers using such
reasonable administrative procedures established from time to time by
DCI and IFN.
4.5 Customer Agreement: IFN shall present to potential customers a
------------------
customer agreement in the form attached hereto as Exhibit A (Customer
Agreement) as amended by DCI from time to time, and assist such
customers to complete and sign the customer agreement. IFN shall
insure that its personnel are adequately informed and able to so
assist such customers. The rate, charges, and service to be set forth
in the customer agreement shall be those agreed to in writing by IFN
and DCI. IFN shall not represent or agree that customers will be
charged for service at any rate other than those so established.
4.6 Operating Services: With regard to all carriers's carrier services
------------------
marketed by IFN and services not marketed by IFN but those where DCI
has requested that IFN provide Operating Services (collectively
"Covered Services"), IFN shall provide the following Operating
Services:
4.6.1 Provision Circuits: IFN will design circuitry for and connect
------------------
to DCI's network all customers of Covered Services.
4.6.2 Collection: IFN shall bill and collect from customers of
----------
Covered Services all charges for services provided by DCI and
provide DCI with a monthly statement .
4.6.3 Monitoring: IFN will monitor all portions of DCI's network
----------
providing Covered Services.
-3-
<PAGE>
4.6.4 Dispatching: IFN will dispatch DCI-approved repair technicians
-----------
to make repairs on DCI's network as required to provide Covered
Services.
4.6.5 Customer Service: IFN will receive and respond to all customer
----------------
calls or inquiries regarding Covered Services. IFN shall
provide prompt, courteous, and efficient service to the
customer, shall be governed in all dealing with customer by the
highest standards of honesty, integrity and fair dealings, and
shall do nothing which would tend to discredit, dishonor,
reflect adversely upon or in any manner injure the reputation
of DCI or IFN. IFN shall at all times faithfully, honestly and
diligently perform its obligations hereunder.
4.7 Provisions: IFN shall take no action inconsistent with the provisions
----------
of the agreement and shall reasonably support DCI's efforts in
providing service to customers.
4.6 Confidentiality: Neither Party shall without the other's specific
---------------
prior written consent, disclose to any third party, including but not
limited to customers, any information supplied to it by the other
which has been designated as CONFIDENTIAL or PROPRIETARY or PRIVATE,
and which information is not otherwise generally available to the
public. The Parties hereby designate the terms, conditions, exhibits
and schedules of this agreement to be confidential.
4.7 Proprietary Information: IFN shall treat customer lists and related
-----------------------
information or data as the exclusive property of DCI, and use such
information solely in the performance of its obligations and duties
as described herein and upon request return such information to DCI
upon termination of the Agreement.
4.8 Warranties: IFN shall not make any representations or warranties
----------
whatsoever, and shall effectively disclaim any authority to make such
warranties or representations on DCI's behalf, to any customer
regarding services, except as specifically authorized in DCI's
procedures.
4.9 Trademarks: IFN agrees that upon the expiration or termination of
----------
this Agreement in North Carolina and South Carolina, IFN and its
affiliates shall:
4.9.1 Not thereafter use any actual or similar mark or any actual or
similar trade name, service mark, trademark, logo, insignia,
symbols or decorative designs theretofore used by IFN
specifically in the conduct of service for DCI, in any manner
or for any purpose in North Carolina and South Carolina, except
that IFN and its affiliates may use or continue to use any
trade name, service mark, logo, insignia, symbols or decorative
designs IFN or its affiliates used in any business prior to the
date of this agreement; and will not utilize for any purpose
any actual or similar trade name, trade or service mark or
other
-4-
<PAGE>
commercial symbol that suggests or indicates a connection or
association with DCI or any affiliated company of DCI, or
directly or indirectly, at any time or in any manner, identify
itself or any business as associated with DCI or such
affiliated company in North Carolina and South Carolina; and
4.9.2 Return to DCI any advertising and marketing materials, forms,
customer lists, and other materials containing any Mark or
otherwise identifying or relating to DCI's business in North
Carolina and South Carolina. Provided that, to the extent they
have been paid for by IFN, DCI shall reimburse IFN for its
costs associated with the production or purchase of same.
5. DCI Responsibilities
--------------------
DCI assumes the following responsibilities:
5.1 Regulatory Status: DCI shall obtain any and all necessary regulatory
-----------------
licenses, from the appropriate federal and state authorities, and
operate under applicable federal and state statutes, rules and
regulations issued thereunder.
5.2 Approvals: DCI shall secure any necessary approval of this agreement
---------
by any and all local, state and federal regulatory agencies having
jurisdiction over the provision of Fiber Optic Facilities in North
Carolina and South Carolina.
5.3 Procedures: DCI shall provide IFN with reasonable administrative
----------
procedures for subscription of customers, which DCI may amend from
time to time in its discretion.
5.4 Customer: Upon acceptance by DCI of a particular customer contract,
--------
that customer shall become a customer of DCI, and DCI will be
responsible for meeting any contractual obligation of customer.
5.5 Additional Routes: DCI shall provide capital or pay for leased dark
-----------------
fiber to build routes from Research Triangle Park to Raleigh and from
Skyland substation to Asheville on CP&L's right of way. IFN will
negotiate agreement with CP&L.
6. Advertising and Promotion Standards
-----------------------------------
DCI and IFN shall from time to time establish standards for, and approved
forms for use in all advertising and promotional materials used or
distributed by IFN which relate to the Services. Such standards will be
limited to factual matters pertaining to DCI furnished services and use of
the service marks and trademarks.
7. Arbitration
-----------
If any dispute referred to the Intercompany Review Board, as determined by
DCI and IFN, has not been resolved within ten working days after the date
-5-
<PAGE>
of referral to the Board, the Parties may agree to submit the dispute to
binding arbitration. If the Parties do agree to submit a dispute to binding
arbitration, the dispute shall be decided by a majority of three
arbitrators selected in accordance with the procedures set forth herein.
An agreement to arbitrate shall be enforceable under then prevailing law
and decision rendered by a majority of the arbitration panel shall be final
and a judgement may be entered upon it in accordance with the applicable
law in any court of competent jurisdiction.
An agreement to arbitrate shall be made within six months after demand that
the dispute be referred to the Intercompany Review Board.
Unless otherwise agreed to in writing by the Parties, upon an agreement to
arbitrate, each Party shall designate an arbitrator within five working
days. The two designated arbitrators shall then select a third arbitrator
to complete the full arbitration panel within ten working days, or as
otherwise agreed.
The arbitration panel shall commence hearings within sixty days of
selection unless the Parties agree upon or the arbitration panel orders a
delayed schedule of hearings. Either party may send requests to compel
document production from the other. Disputes concerning the scope of
document production from the other. Disputes concerning the scope of
document production and enforcement of the document requests shall be
subject to agreement by the Parties or may be ordered by the arbitration
panel to the extent economical and reasonable. All discovery requests shall
be subject to the proprietary rights and rights and privilege of the
Parties, and the arbitration panel shall adopt procedures to protect such
rights. Except where contrary to the provisions set forth in this
Agreement, the rules of the American Rules of Arbitration ("AAA") shall be
applied to all matters of procedure, including discovery; PROVIDED,
HOWEVER, that the arbitration need not be conducted under the auspices of
the AAA, in which event the fee schedule of the AAA shall not apply. The
arbitration panel may obtain independent legal counsel to aid in the
resolution of legal questions presented in the course of arbitration to the
extent that such counsel is considered absolutely necessary to the fair
resolution of the dispute, and to the extent that is economical to do so
considering financial consequences of the dispute.
If the arbitrators selected by each Party cannot agree upon the third
arbitrator within the time limits set by this Agreement, either Party may
apply to any court having jurisdiction over this Agreement to select the
neutral arbitrator. If either Party fails to appoint an arbitrator within
the time period set forth, the other Party may apply to any court having
jurisdiction over this Agreement to compel arbitration, and that court
shall be empowered to select the arbitrator.
If either Party fails or refuses to appear at and participate in an
arbitrations hearing after due notice, the arbitration panel may hear and
determine the controversy upon evidence produced by the appearing Party.
Arbitration costs (i.e., neutral arbitrator, transcript and hearing room)
shall be borne equally by each Party. However, each Party shall pay the
expenses of its representative on the arbitration panel and of presenting
its own case
-6-
<PAGE>
(i.e., attorneys, witnesses, and document preparation).
Arbitration provided by this Section shall not be an exclusive remedy for
the enforcement of the rights and obligations of the Parties as contained
in this Agreement, and shall be available only if the Parties agree to
submit a specific dispute (or disputes) to binding arbitration. The
provisions regarding arbitration in this Section shall be activated only
after further agreement to submit to arbitration and shall not preclude
either Party from seeking relief with respect to any dispute against the
other Party in any court having jurisdiction; PROVIDED, HOWEVER, that if
the Parties do agree to arbitration of the dispute in accordance with this
Section, the arbitrator's decision shall be final and binding upon the
Parties, and shall be subject to review only as provided by law.
During the course of dispute resolution pursuant to the provisions of this
Section, and unless otherwise agreed in writing, the Parties shall continue
to provide service, continue to make payments, and honor all other
commitments in accordance with this Agreement.
8. Commissions and Fees
--------------------
In consideration for obtaining Customers and providing operating services,
DCI shall pay IFN commission in accordance with Exhibit B. Commissions
shall be paid only with respect to Customer Agreements accepted by DCI. DCI
shall not unreasonably refuse to accept Customer Agreements presented to
it. Commission and fees shall be paid monthly on the twentieth business day
of each month.
9. General Provisions
------------------
9.1 Indemnification: The indemnification provisions of this Section shall
---------------
apply to all matters arising under this Agreement except that
indemnification or limitation of liability or related provisions
contained in other Sections of this Agreement shall be controlling
and take precedence over this Section.
To the extent not prohibited by law, each party shall indemnify the
other and hold it harmless against any loss, cost, claim, injury, or
liability relating to or arising out of negligence or willful
misconduct, by the Indemnifying Party or its agents or contractors in
connection with the Indemnifying Party's provision of Capacity, or
the other Party's provision of Capacity to the Indemnifying Party,
under this Agreement. The Indemnifying Party under this Section
agrees to defend any suit brought against the other Party for any
such loss, cost, claim, injury or liability. The Indemnified Party
agrees to notify the other Party for any such loss, cost, claim,
injury or liability. The Indemnified Party agrees to notify the other
Party promptly, in writing, of any written claims, lawsuits, or
demands for which the other Party is responsible under this Section
and to cooperate in settlement of claims. The Indemnifying Party
shall not be liable under this Section for settlement by the
Indemnifying Party of any claim, lawsuit, or demand if the
Indemnifying Party has not approved the settlement in
-7-
<PAGE>
advance unless the Indemnifying Party has had the defense of the
claim, lawsuit or demand tendered to it is writing, and has failed to
assume such defense.
IFN and DCI each agrees with respect to the Services provided
hereunder to indemnify and save the Services provided hereunder to
indemnify and save the other harmless for liabilities, claims or
demands (including the costs, expenses, and reasonable attorney's
fees, on account thereof) that may be made by persons furnished
(employee, agent, or otherwise) by either Party or by any of that
Party's subcontractors, under workers' compensation or similar
statutes. Each Party agrees to defend any such suit brought against
the other for any such liability, claim, or demand. Each Party agrees
to defend any claims or demands for which it is claimed that the
other is responsible hereunder and to cooperate in a reasonably way
to facilitate defense or settlement of claims. Each Party shall have
complete control over defense of its case and over the terms of any
proposed settlement of compromise thereof.
No claims for indemnity under this Section may be made more than two
years after the accrual of the cause of action for indemnity.
9.2 Survival of Obligations: Termination of this Agreement for any cause
-----------------------
shall not release either Party from any liability which at the time
of termination has already accrued to the other Party or which
thereafter may accrue in respect of any act or omission prior to
termination or from any obligation which is expressly stated herein
to survive termination.
9.3 Applicable Law: The validity, construction and performance of this
--------------
Agreement shall be governed by and interpreted in accordance with the
laws of the State of North Carolina.
9.4 Effects of Headings: Headings to articles and paragraphs of this
-------------------
Agreement are to facilitate reference only, do not form a part of
this Agreement, and shall not in any way affect the interpretation
hereof.
9.5 Assignment: All rights and obligations hereunder excepting the right
----------
to receive payment, are personal as to the Parties hereto and shall
not be assigned in whole or in part by either of the Parties to any
other persons, firm or corporation without the prior written consent
by the other Party; provided, however, that DCI may assign this
Agreement and Customer Agreement obtained hereunder, without the
prior consent of IFN, to any person, firm or corporation acquiring
all or substantially all of the assets of DCI, or to any Affiliated
entity.
9.6 No Waiver: The waiver, express or implied, by either Party of any
---------
rights hereunder or of any failure to perform, or breach hereof by
the other Party shall not constitute or be deemed a waiver of any
other right hereunder or any other failure to perform or breach
hereof by the other Party hereto, whether of a similar or dissimilar
nature.
9.7 Force Majeure: The Parties performance under this Agreement shall be
-------------
-8-
<PAGE>
excused by labor difficulties, governmental orders, civil commotions,
acts of God, and other circumstances beyond the Parties' reasonable
control.
9.8 Notices: Except as otherwise provided in this Agreement, all
-------
notices required or permitted to be given hereunder shall be in
writing and shall be valid and sufficient if dispatched by registered
mail, postage prepaid, in any post office in the United States,
addressed as follows:
If to: Interstate FiberNet
Steve Moses
910 First Ave.
West Point, Georgia 31833
If to: DukeNet Communications, Inc.
Chip Smith
422 S. Church Street
Charlotte, North Carolina 28242-0001
Either Party hereto may change its address by a notice given to the
other Party in the manner set forth above.
9.9 Severability: Should any part of this Agreement for any reason be
------------
declared invalid, such decision shall not affect the validity of any
remaining portion, which shall remain in force and effect as if this
Agreement had been executed with the invalid portion eliminated, and
it is hereby declared the intention of the parties that they would
have executed the remaining portion of this Agreement without
including any such part or portion which may, for any reason, be
hereafter declared invalid.
9.10 Counterparts; Entire Agreements; Amendments: This Agreement may be
-------------------------------------------
executed by the Parties in counterparts, each of which shall
constitute originals hereof. This Agreement set forth the entire
understanding between the Parties and supersedes all previous
agreements, arrangements and understandings between the Parties,
whether oral or written, and may not be amended expect in writing
signed by authorized representatives of both Parties.
9.11 Binding Effect: This Agreement shall be binding upon and inure to
--------------
the benefit to the Parties, their Affiliates, and their permitted
successors and assigns unless otherwise agreed to in writing between
the parties.
9.12 Execution: This Agreement shall be effective only after its
---------
execution by an officer or other authorized agent of both IFN and
DCI.
9.13 Modifications: This Agreement shall at all times be subject to
-------------
changes or modifications to comply with local, state and federal
regulatory agencies having jurisdiction over the provision of Fiber
Optic Facilities service in North Carolina and South Carolina.
-9-
<PAGE>
IN WITNESS THEREOF, the undersigned have executed this Agreement as of the
date first above written.
ATTEST: DUKENET COMMUNICATIONS, INC.
[SIGNATURE APPEARS HERE] By:[SIGNATURE APPEARS HERE]
- --------------------------- ---------------------------------
Secretary President and Chief Executive
Officer
Date: October 5, 1994
INTERSTATE FIBERNET, a Georgia General
Partnership
ATTEST: By: ITC Transmission Systems, Inc., a
Delaware corporation, Managing Partner
[SIGNATURE APPEARS HERE]
- ---------------------------
Secretary By:/s/ C. Michael Gragg
----------------------------
C. Michael Gragg, President
Date: October 13, 1994
-------------------------------
-10-
<PAGE>
Exhibit A
Customer Agreement
INTERSTATE FIBERNET SERVICE ORDER
Date: PON: Lease#:
---------------------- ------------------- -------------
The following order for service on the specified terms and conditions herein is
made by _______________________________________________________________________
pursuant to the Interstate FiberNet Master Capacity Lease.
I. Capacity Under this agreement, Interstate FiberNet will provide the
following services and capacity between its Points of Presence in the
following cities:
City A City Z Capacity Description Quantity In Service Date
- ------ ------ -------------------- -------- ---------------
II. Rates and Charges
A. Recurring Charges __________________ per month
B. Non-Recurring Charges ________________________
III. Terms of Payment Monthly in advance, commencing on the Service Date then
on the first day of each month thereafter. Any payment not received on or
before the required payment date as specified in the Interstate FiberNet
Master Capacity Lease will be subject to a late payment charge, also
specified therein.
IV. Terms of Service Order ________ years (or _________ months) from date
Capacity is placed in service.
V. Basic Agreement This Service Order is hereby incorporated in the
Interstate FiberNet Master Capacity Lease dated ________________ between
the parties.
Interstate FiberNet, JV
- ---------------------------------- ------------------------------------
Name Name
- ---------------------------------- ------------------------------------
Title Title
-11-
<PAGE>
Exhibit B
Commissions and Fee Schedule
Commissions: [______________________________________________________________
__________________________________________________________
_______________________________]
Fees: [______________________________________________________________
__________________________________________________________
_____________________________________________]
-12-
<PAGE>
EXHIBIT 10.75
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[_____]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.
THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
[LOGO OF T-NET] RESELLER AGREEMENT
This Reseller Agreement ("Agreement") is entered into by and between Total
Network Services, a division of Cable & Wireless, Inc. (hereinafter referred to
as "T-Net") with an office located at 8219 Leesburg Pike, Vienna, Virginia 22182
and its reseller customer signing below ("RESELLER"). This Reseller Agreement,
the General Terms and Conditions for Reseller Agreements (RESAGTC-96C (8/96) and
the terms of any documents attached hereto or referenced herein are part of this
Agreement.
<TABLE>
<CAPTION>
====================================================================================================================================
ORDER INFORMATION
====================================================================================================================================
<S> <C>
1. Services to be Provided by T-Net: (insert "X" in box for each type of service to be provided by T-Net)
--------------------------------
[X] Domestic Outbound [X] Domestic Inbound [X] Calling Card
[X] International Outbound [X] Directory Assistance [_] Conference Calling
[X] International Inbound (Canada Only)
2. Initial Terms: [_] months
------------- -
3. Rates:*
-----
Interstate Outbound (U.S. mainland originated; terminated in US mainland, Alaska, Hawaii, Puerto Rico and US Virgin Islands):
-------------------
See attached rate schedule entitled DeltaCom dated 10/21/96
-------------------------------------------------- ---------------
Intrastate Outbound: See attached rate schedule entitled DeltaCom dated 10/21/96
------------------- ------------------------------------- ---------------
Interstate inbound (US mainland, Alaska, Hawaii, Puerto Rico and US Virgin Islands originated and terminated in US mainland)
------------------
See attached rate schedule entitled DeltaCom dated 10/21/96
---------------------------------------------- ---------------
Intrastate Inbound: See attached rate schedule entitled DeltaCom dated 10/21/96
------------------- ------------------------------------- ---------------
International Inbound (Canada Only): See attached rate schedule entitled DeltaCom dated 10/21/96
----------------------------------- -------------------------- ---------------
International Outbound: See attached rate schedule entitled DeltaCom dated 10/21/96
---------------------- --------------------------------- ---------------
Calling Card: See attached rate schedule entitled DeltaCom dated 10/21/96
------------ --------------------------------------- ---------------
Directory Assistance: T-NET's then standard rates
--------------------
Conference Calling: T-NET's then standard rates
------------------
Other Fees: See attached rate schedule entitled DeltaCom dated 10/21/96
---------- ------------------------------------- ---------------
* If CWI, other than through its T-NET division, is already providing its service, or is in the process of initiating its
service, for a particular CWI customer ANI pursuant to a separate agreement between that CWI customer, and CWI that same
ANI is also provided to T-NET by Reseller from an End User of Reseller ("Duplicate ANI"), T-NET shall bill Reseller the
usage for such Duplicate ANI at the applicable rate(s) for such usage set forth above plus a thirty percent (30%)
surcharge for as long as T-NET is providing Service to that Duplicate ANI hereunder.
4. Payment/Security Deposits: (Insert "Yes" or "No" where applicable)
-------------------------
Payment Period:................................... [__] days after invoice date
-------------- --------
Wire Transfer Required:........................... yes
---------------------- --------
Estimated Payments Required:...................... [___]
--------------------------- --------
Estimated Usage Period....................first [___] days of each monthly billing period
--------
Estimated Payment Due Date:.................... [___] business days after T-NET notifies the Customer of the
--------
Estimated Payment Amount
Financial Reports Required:....................... [___]
-------------------------- --------
Security Deposits Required:....................... [___]
-------------------------- --------
Initial Security Deposit Amount:............... [___]
--------
Continuing Security Deposit Amount:............ [___] times the amount of usage charges incurred over any [___] period
-------- ------
Deposit Release Period:........................ [___] months
--------
5. Minimum Monthly Payment Obligations:
-----------------------------------
Month after Service Initiation* Minimum Amount each Month Month after Service Initiation* Minimum Amount each Month
------------------------------- ------------------------- ------------------------------- -------------------------
[___] $ [___] [___] $ [___]
----------- --------- --------- --------
[___] $ [___] [___] $ [___]
----------- --------- --------- --------
[___] $ [___] [___] $ [___]
----------- --------- --------- --------
* Starting with the first full T-NET monthly billing cycle after T-NET initiates Service to the first End User of Reseller.
DeltaCom Total Network Services,
-------- -----------------------
a Division of Cable & Wireless, Inc. ("CWI")
--------------------------------------------
Signature: /s/ Tom Mullis Signature: /s/ Elaine M. Beiseigel
--------------- ------------------------------
Printed Name: Tom Mullis Printed Name: Elaine M. Beiseigel
---------------- ----------------------------
Title: COO Title: Contract Manager
---------------- -------------------------
Date: 10/24/96 Date: 6/25/97
---------------- -------------------------
</TABLE>
<PAGE>
[LOGO OF T-NET APPEARS HERE]
SPECIAL TERMS AND CONDITIONS ADDENDUM
TO RESELLER AGREEMENT
Total Network Services, a division of Cable & Wireless, Inc. ("T-NET") and its
reseller customer signing this Special Terms and Conditions Addendum
("Reseller") agree that the Reseller Agreement ("Agreement") is modified as set
forth below. Any capitalized terms not defined herein shall have the meaning
defined in the General Terms and Conditions for Reseller Agreements.
================================================================================
1. Directory Assistance
--------------------
Notwithstanding the provision of Section 3 (Rates) of the Order Information
-----
section of the Agreement to the contrary, the rate for directory assistance
shall be $0.50 per call.
2. Rates and Charges
-----------------
T-NET shall provide Reseller with [_________] days' prior written notice
of changes to T-NET's international rates.
3. CDR Billing Options
-------------------
A. [________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
___________________________________________________________________
_________________________________________________________________________
_______:
__________________________________________________________________________
_________________________________________________________________________
______________________________________________________________________
_________________________________________________________________
______________,
_____________________________________________________________________
__________________________________________________________________________
_________________________________________________________________________
________________________________________________________________________
_______________________________________________________________________
__________________________________________________________________
_________________________________________________________________________
____________________________________________________________________
_________________________________________________________________________
_____________________________________________________________________
_____________________________].
B. [____________________________________________________________________
________________________________________________________________________
________________________________________________________________________
______________________________________________________________________
___________________________________________________________________________
__________________________________________________________________
_____________________________________________________________________
_________________________________________________________________________
______________________________________________:
__________________________________________________________________________
__________________________________________________________________________
____________________________________________________],
<PAGE>
[LOGO OF T-NET APPEARS HERE]
[_______________________________________________________________________
___________________________________________________________________________
________________________________________________________________________
_________________________________________________________________________
___________________________________________________________________________
_______________________________________________________________________
__________________________________________________________________________
___________________________________________________________________________
_________________________________________________________________________
__________________________________________________________________
________________________________________________________________________
___________________________________________________________].
[_______________________________________________________________________________
___________________________________________________________________________
_______________________________________________________________________________
___________________________________________________________________________
______________________________________________________________________________
_______________________________________________________________________________
__________________________]
Total Network Services, a division of
DELTACOM,INC. Cable & Wireless, Inc.
---------------------- -------------------------------------
Signature: /s/ TOM MULLIS Signature: /s/ Elaine M. Beisegel
------------------- -----------------------
Printed Name: TOM MULLIS Printed Name: ELAINE M. BEISEGEL
------------------- -----------------------
Title: COO Title: 6/25/97
------------------- -----------------------
Date: 10/24/94 Date: CONTRACT MANAGER
------------------- -----------------------
<PAGE>
***INFORMATION IN THIS TABLE HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.***
[LOGO OF T-NET APPEARS HERE]
- ---------------------------------------------
DELTACOM
- ---------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------
SWITCHED ACCESS
- ---------------------------------------------
STATE RATE
- ---------------------------------------------
<S> <C>
INTERSTATE-Peak
INTERSTATE-Off Peak
AK-HI-PR-USVI
AL
AZ
AR
CA InterLATA
CA InterLATA
CO
CT
DE
FL
GA
IA
ID
IL
IN
KS
KY
LA
MA
MD
ME
MI
MN
MO
MS
MT
NC
ND
NE
NH
NJ
NM
NV
NY
OH
OK
OR
PA
RI
SC
SD
TN
TX
UT
VA
VT
WA
WI
WV
WY
- ---------------------------------------------
</TABLE>
This Proposal is only Effective until 30 days from: 6/17/96
CWI CONFIDENTIAL
<PAGE>
***INFORMATION IN THIS TABLE HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE.***
[LOGO OF T-NET APPEARS HERE]
- ---------------------------------------------------------------
DELTACOM
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
- ---------------------------------------------------------------
SWITCHED
COUNTRY C CODE RATE
- ---------------------------------------------------------------
<S> <C> <C>
ALBANIA 355
ALGERIA 213
AMERICAN SAMOA 684
ANARTICA 672
ANDORRA 376
ANGOLA 244
ANGUILLA 809
ANTIGUA 809
ARGENTINA 54
ARMENIA 374
ARUBA 297
ASCENSION ISLAND 247
AUSTRALIA 61
AUSTRIA 43
BAHAMAS 809
BAHRAIN 973
BANGLADESH 880
BARBADOS 809
BELARUS 375
BELGIUM 32
BELIZE 501
BENIN 229
BERMUDA 809
BHUTAN 975
BOLIVIA 591
BOSNIA-HERZEGOVI 387
BOTSWA 287
BRAZIL 55
BRUNEI 673
BRVIRGIN 809
BULGARIA 369
BURKINA FASO 226
BURMA 95
BURUNDI 257
CAMBODIA 855
CAMEROON 237
CAPE VERDE ISLANDS 238
CAYMAN IS 809
CENTRAL AFRICAN REPUBLIC 236
CHAD 235
CHILE 58
CHINA 86
CHRISTMAS ISLAND 872
COLOMBIA 57
COMOROS 269
CONGO 242
COOK ISLAND 682
COSTA RIC 506
CROATIA 386
CUBA 530
CYPRUS 357
CZECH REP 42
DENMARK 47
DIEGO GARCIA 246
DJIBOUTI 253
DOM REP 809
DOMINICA 809
ECUADOR 593
EGYPT 20
EL SALVADOR 503
EQUATORIAL GUINEA 240
ERITREA 291
ESTONIA 372
ETHIOPIA 251
</TABLE>
DRAFT-CWI CONFIDENTIAL
<PAGE>
***INFORMATION IN THIS TABLE HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***
[LOGO OF T-NET APPEARS HERE]
- -----------------------------------------------
DELTACOM
- -----------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------
- -----------------------------------------------
SWITCHED
COUNTRY CCODE RATE
- -----------------------------------------------
<S> <C> <C>
Faeroe Islands 298
Falkland Islands 500
Fiji Islands 679
Finland 358
France 33
French Gula 594
French Polynesia 689
Gabon Rep 241
Gambia 220
Georgia 995
Germany 49
Ghana 233
Gibraltar 350
Greece 30
Greenland 299
Grenada 809
Guadeloupe 590
Guam 671
Guantanamo Bay 53
Guatemala 502
Guinea 224
Guinea Bissau 245
Guyana 582
Haiti 509
Honduras 504
Hong Kong 852
Hungary 36
Iceland 354
India 91
Indonesia 62
Iran 98
Iraq 964
Ireland 353
Israel 972
Italy 39
Ivory Coast 225
Jamaica 809
Japan 81
Jordon 962
Kenya 254
Kiribati 686
Korea 82
Kuwait 965
Laos 856
Lebanon 961
Lesotho 266
Liberia 231
Libya 218
Lithuania 370
Luxembourg 332
Macao 853
Macedonia 389
Madagascar 261
Malawi 265
Malaysia 60
Meldivas 960
Mali Republic 223
Malta 356
Marisat 871
Marshall Island 692
Mauritania 222
Mauritius 230
Mayotta Island 269
Micronesia 691
- -----------------------------------------------
</TABLE>
DRAFT - CWI CONFIDENTIAL
<PAGE>
***INFORMATION IN THIS TABLE HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***
[LOGO OF T-NET APPEARS HERE]
A DIVISION OF CABLE AND WIRELESS, INC.
- --------------------------------------------------------------------------------
DELTACOM
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Switched
COUNTRY CCODE RATE
- --------------------------------------------------------------------------------
<S> <C> <C>
Moldova 373
Monaco 377
Mongolia 976
Montserrat 809
Morroco 212
Mozambique 258
Myanmar 95
Namibia 264
Nauru 674
Nepal 977
Neth Ant 599
Netherlands 31
Nevis 809
New Caledonia 687
New Zealand 64
Nicaragua 505
Niger Republic 227
Nigeria 234
Nlue Island 683
Norfolk Island 672
Norway 47
Oman 968
Pakistan 92
Pulau 680
Panama 507
Papua New Guinea 675
Paraguay 595
Peru 61
Phillippns 63
Poland 48
Portugal 351
Qatar 974
Reunion Island 262
Romania 40
Russia 7
Rwanda 250
Saipan 675
San Marino 378
Saudi Arabia 966
Senegal Republic 221
Seychelles 248
Sierra Leone 232
Signapore 65
Slovenia 386
So Africa 27
Soe Tome 239
Solomon Islands 677
Spain 34
Sri Lanka 94
St. Helen 290
St.Kitts 809
St.Lucia 809
St.Pierre & Miqurion 508
St. Vincent/Grenadines VC 809
Suriname 597
Swaziland 268
Sweden 46
Switzerland 41
Syria 963
Taiwan 886
Tanzania 226
Thailand 66
Togo 228
Tonga Island 675
</TABLE>
DRAFT - CWI CONFIDENTIAL
<PAGE>
***INFORMATION IN THIS TABLE HAS BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT. THE OMITTED PORTIONS HAVE BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.***
[LOGO OF T-NET APPEARS HERE]
- ---------------------------------------------------------
DELTACOM
- ---------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------
- ---------------------------------------------------------
SWITCHED
COUNTRY CCODE RATE
- ---------------------------------------------------------
<S> <C> <C>
Trinidad & Tobago 809
Tunisia 216
Turkey 90
Turks and Caico Islands 809
Tuvalu 688
U.A.E 971
Uganda 256
UK 44
Ukraine 380
Uruguay 598
Vanuatu Republic 678
Venezuela 58
Vietnam 84
Wake and Futu 681
Western Samoa 685
Yemen 967
Yugoslavia 386
Zaire 243
Zambia 260
Zimbabwe 263
Mexico 1 Discount 52
Mexico 1 Standard 52
Mexico 2 Discount 52
Mexico 2 Standard 52
Mexico 3 Discount 52
Mexico 3 Standard 52
Mexico 4 Discount 52
Mexico 4 Standard 52
Mexico 5 Discount 52
Mexico 5 Standard 52
Mexico 6 Discount 52
Mexico 6 Standard 52
Mexico 7 Discount 52
Mexico 7 Standard 52
Mexico 8 Discount 52
Mexico 8 Standard 52
CANADA (418,806,614,604) 1
CANADA (Other NPAs) 1
- ---------------------------------------------------------
</TABLE>
DRAFT - CWI CONFIDENTIAL
<PAGE>
[LOGO OF T-NET APPEARS HERE]
- --------------------------------------------------------------------------------
DeltaCom
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Feature Set Up Fee Monthly Fee Additional Information
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
800 Features None $10 minimum per 800 number
(Customer charged for actual
usage plus difference between
actual usage and $10).
Multi-Location Routing Features $50.00 per feature $40.00 per feature, per 800 $30.00 Change Charge applies
per 800 number number
Day of Year
Day of Week
Time of Day
Percent of Calls
Area Code
Area Code and Exchange
Selected Coverage Blocking Features $50.00 per feature, $40.00 per feature, per 800 $60.00 Change Charge applies
-----------------------------------
per 800 number number
Area Code
Area Code and Exchange
Extended Coverage
-----------------
Alaska, Hawaii, Puerto Rico, None None If user selects any of the 4
and/or U.S. Virgin Islands U.S. areas (e.g. AK, HI, PR or
USVI), extended coverage is
considered to be selected for
all 4 areas. See rate schedule
for extended coverage rate.
Canada None None Note: 800 Organization from
Canada:
Switched: $.3350/minute
Dedicated: $.2850/minute
Real Time ANI $150.000 per 800 None
-------------
number
Programmable 800 (Switched Only) None $5.00 per number No Change Charges
--------------------------------
800 Directory Assistance Listing None $15.00 per number Note: For directory assistance
--------------------------------
via 1-800-555-1212
Accounting Features
Account Codes - Unvalidated None None
Security Codes - Validated None $2.50 per ANI with features Maximum monthly charge of $250
per reseller
Domestic Directory Assistance None None $.50 per call
CDR Billing Options
Daily CDR information $100 $2,000 *Available electronically only
Weekly CDR information $100 $ 520 Call Detail Media available:
Monthly Media Charge $100 $ 120 Magnetic Tape, Diskette, CD-ROM,
cartridge or electronic file.
CDR Media or Frequency Change $500 Resellers are allowed one CDR
media or frequency change for
free. All subaccount changes
will be $500.
Dedicated Access Fees
T-1 Install $150 None Customer responsible for payment
of local lo?p.
T-1 Port Charge None $ 62
Expedite Requirements $25 Charge to have ANI submitted in
a non-standard turnaround time.
</TABLE>
<PAGE>
[LOGO OF T-NET APPEARS HERE]
GENERAL TERMS AND CONDITIONS FOR RESELLER
AGREEMENTS
1. SERVICES TO BE PROVIDED BY T-NET. T-NET shall provide to Reseller, and
--------------------------------
Reseller shall pay T-NET for, the long distance services ("SERVICE" or
"SERVICES") set forth in the "SERVICES TO BE PROVIDED BY T-NET" portion of
the Order Information Section of this Agreement and as set forth in service
requests signed by Reseller which are acceptable to T-NET ("SERVICE
REQUEST"). Each Service Request shall set forth, at a minimum, the
following: (i) the type of access into the T-NET network (i.e., either via
switched access or dedicated T-1 access); (ii) ANI information relevant to
the Services; (iii) the Requested Start Date as defined below; (iv) the
Reseller billing address; and (v) any other pertinent information relevant
to the Services. It is understood that Reseller is purchasing such Services
from T-NET for the sole purpose of reselling such Services to its customers
(hereinafter, "END USERS" or "END USER SUBSCRIBERS"). Reseller is
responsible for ordering and for paying for any access facilities to
connect Reseller's facilities to T-NET's network.
If T-NET accepts a Service Request, T-NET shall start providing the
Services to an End User of Reseller on the earlier of (i) the service date
requested by Reseller for such End User ("REQUESTED START DATE") set forth
in the Service Request, or (ii) the date the Service is made available to
such End User and is used ("SERVICE START DATE").
2. TERM. The term of this Agreement shall start on the date of full execution
----
of this Agreement ("EFFECTIVE DATE") and it shall continue starting with
the first full T-NET monthly billing cycle after T-NET initiates Service to
the first End User of Reseller through the number of months set forth in
the "INITIAL TERM" portion of the Order Information Section of this
Agreement ("INITIAL TERM"). Either party may terminate this Agreement at
the end of the Initial Term by providing thirty (30) days' prior written
notice. If no such notice is given, this Agreement shall continue after the
Initial Term until terminated by either party providing the other with
thirty (30) days' prior written notice. The term "TERM" as used herein
shall mean the Initial Term plus any subsequent period of time during which
this Agreement continues beyond the end of the Initial Term. If T-NET shall
have undertaken efforts to provide Services prior to the date of full
execution of this Agreement, the provisions of this Agreement shall apply
retroactively with respect to such efforts and such Services.
If T-NET has not received any traffic under this Agreement within sixty
(60) days after the Effective Date, T-NET shall have the right to terminate
this Agreement upon written notice to Reseller.
3. RATES AND TAXES.
---------------
3.1 RATES AND CHARGES. For a particular End User, the Reseller shall pay
-----------------
T-NET any monthly, usage and one-time charges set forth in the "RATES"
portion of the Order Information section of the Agreement starting on
the date which is the earlier of (i) the Requested Start Date, or (ii)
the Service Start Date. Each international call shall be billed in six
(6) second increments with a thirty (30) second minimum. Each domestic
inbound call shall be billed in six (6) second increments with a
thirty (30) second minimum and each domestic outbound call shall be
billed in six (6) second increments with a six (6) second minimum. T-
NET's international rates are subject to change upon notice to
Reseller. If Reseller requests T-NET to expedite the delivery of the
Service, and T-NET agrees to such request, T-NET shall pass through
the actual charges assessed T-NET by any supplying parties (e.g., the
local access providers) for such request.
3.2 TAXES. The rates and charges set forth in this Agreement do not
-----
include any applicable federal, state, or local taxes, fees and
surcharges. Unless Reseller provides to T-NET a valid exemption
certificate, Reseller shall pay such applicable taxes, fees and
surcharges upon receipt of an itemized invoice therefor.
4. PAYMENT FINANCIAL REPORTS AND SECURITY DEPOSITS.
-----------------------------------------------
4.1 PAYMENT. T-NET shall provide monthly invoices to Reseller covering
-------
designated T-NET monthly billing periods which shall be due and
payable within the Payment Period set forth in the Order Information
section of this Agreement. T-NET shall provide Reseller with the call
detail records applicable to each month's invoice in a format
acceptable to T-NET. All payments for the Services shall be made to
Cable & Wireless, Inc., and as determined by T-NET, either by check
and mailed to the address set forth on the first page of the Reseller
Agreement to the Attention of Mr. Scott Sorge, Alternate Channels or
by wire transfer to the account designated below.
If the Order Information section of this Agreement indicates that
estimated payments are required, T-NET shall notify the Reseller on
the last day of the "ESTIMATED USAGE PERIOD," or if such day is not a
business day, on the next business day, as to T-NET's estimate of the
charges incurred by the Reseller during such period. The Reseller
shall pay T-NET such estimated amount ("ESTIMATED PAYMENT") no later
than the "ESTIMATED PAYMENT DUE DATE". At the end of a T-NET monthly
billing period, T-NET shall provide an invoice for the usage charges
actually incurred that month less that month's Estimated Payment,
provided, however, that if a minimum monthly payment obligation
applies for that month and such minimum has not been met, then the
invoice amount shall be that month's minimum payment
================================================================================
Page 1 of 6
<PAGE>
LOGO OF T-NET APPEARS HERE]
GENERAL TERMS AND CONDITIONS FOR RESELLER
AGREEMENTS
obligation less that month's Estimated Payment. The Reseller shall
pay the invoiced amount within the Payment Period.
A late payment charge shall be applied on balances that remain unpaid
after the Payment Period in the amount of the lesser of (a) 1 1/2%
(one and one-half percent) per month of the amount of the late payment
starting from the day following the end of the Payment Period, or (b)
the maximum amount allowed under applicable law. The Reseller must pay
all invoices when due; and any questions which the Reseller may have
concerning an invoice must be brought to T-NET's attention within
forty-five (45) days of the invoice date. Customer shall be liable to
T-NET for any and all costs and/or expenses incurred directly or
indirectly, including reasonable attorney's fees and expenses, in
collection of any amounts due.
If so indicated in the Order Information section of this Agreement,
all payments by the Reseller will be made via wire transfer (in
immediately available funds) to Mellon Bank, 3 Mellon Bank Center,
Room 153-2718, Pittsburgh, PA 15259-0001, ABA #0430-00261/Account
#1705643. Each such wire transfer shall designate: (i) "Cable &
Wireless, Inc." as the beneficiary, and (ii) "T-NET in the "Other
Beneficiary Information" or "OBI" section thereof.
4.2 Financial Reports. If the Order Information section of this Agreement
-----------------
indicates that financial reports are required, within thirty (30) days
after the end of each calendar quarter, the Reseller shall provide T-
NET with a written report updating the Reseller's financial status
("QUARTERLY REPORT"), and within ninety (90) days after the end of
each calendar year, the Reseller shall provide T-NET with an audited
annual report. Each Quarterly Report shall contain, at a minimum, an
updated balance sheet and income statement. The Reseller represents
and warrants that no Quarterly Report shall contain any material
misstatement or omission bearing on the Reseller's financial
condition.
4.3 Security Deposits. If the Order Information section of this Agreement
-----------------
indicates that security deposits are required, the "INITIAL SECURITY
DEPOSIT" amount shall be provided prior to any initiation of Service.
Thereafter, if requested in writing by T-NET, the Reseller shall add
additional amounts to the Initial Security Deposit such that the total
amount of security deposit being held by T-NET at all times is at
least equal to the "CONTINUING SECURITY DEPOSIT AMOUNT". The Reseller
shall provide any such required additional amounts within five (5)
business days after receiving T-NET's written request.
If, at any time during the term of the Agreement, T-NET determines
that there has been a materially adverse change in the Reseller's
financial condition as compared with the equivalent period of time
immediately prior to the Effective Date, T-NET may require Reseller to
provide a security deposit or an additional security deposit in an
amount to be determined by T-NET. The Reseller shall provide any such
required amounts within five (5) business days after receiving T-NET's
written request therefor.
Each required security deposit shall be either in cash (paid by check
or wire transfer) or an irrevocable letter of credit in a form and
from a financial institution acceptable to T-NET.
T-NET shall refund or release, as applicable, any security deposit it
is holding (plus, if the security deposit is in the form of cash,
accrued interest at the applicable rate set by regulation of the state
in which T-NET invoices the Reseller, or if no such rate is set by
regulation. T-NET's then-prevailing interest rate for security deposit
refunds) if the following conditions are met by the Reseller: (i) for
the entire "DEPOSIT RELEASE PERIOD", the Reseller pays T-NET in full
when each payment is due; and (ii) T-NET determines that the
Reseller's Quarterly Reports covering the Deposit Release Period
indicate that the Reseller's financial condition has had no materially
adverse change as compared to the equivalent period of time
immediately prior to the start of the Deposit Release Period. If the
above conditions are not met, the security deposit shall be refunded
or released, as applicable, at the end of the Term less any amounts
that may be due and owing to T-NET at such time.
5. MINIMUM PAYMENT OBLIGATIONS. If the total amount of usage charges incurred
---------------------------
by the Reseller in any month is less than the amount of the then-
applicable minimum monthly payment obligation set forth in the Order
Information section of this Agreement, then in addition to paying for its
actual usage that month, the Reseller shall pay (as an underutilization fee
and not as a penalty) a shortfall charge equal to the difference between
(i) the actual usage charges incurred that month, and (ii) the amount of
the then-applicable minimum monthly payment obligation. If this Agreement
remains in effect after the Initial Term, the minimum monthly payment
obligation for each subsequent T-NET monthly billing period shall be equal
to the amount of the minimum monthly payment obligation for the last T-NET
monthly billing cycle of the Initial Term.
================================================================================
Page 2 of 6
<PAGE>
[LOGO OF T-NET APPEARS HERE]
GENERAL TERMS AND CONDITIONS FOR RESELLER
AGREEMENTS
6. LETTER OF AGENCY. Reseller shall promptly obtain a written Letter of
----------------
Agency ("LOA") (or any other means approved by the Federal Communications
Commission, hereinafter "FCC") acceptable to T-NET for each ANI indicating
the consent of each End User to be served by Reseller and transferred to
Reseller via a change of such End User's designated primary interexchange
carrier (hereinafter "PIC") prior to Reseller submitting the Service
Request to T-NET for such End User's order. Each LOA shall include, among
other things, (i) that an End User Subscriber has consented by an
authorized and dated signature of End User subscriber to the transfer of
its long distance service to Reseller, (ii) that an End User Subscriber
shall be billed a charge for the transfer of its long distance service to
Reseller and that such charge shall appear on its local service provider
bill, (iii) an End User Subscriber's billing address, (iv) the main ANI
and other ANIs of an End User Subscriber that are being transferred to
Reseller, and (v) the written authorization of an End User Subscriber to
transfer its secondary long distance service to Reseller if that End User
Subscriber is located in an area which allows for a secondary long
distance provider. Upon T-NET's request, Reseller shall, within two (2)
business days of receipt of such request, provide copies of the
documentation that Reseller uses to satisfy the above. Reseller shall
comply with all laws and regulations including all FCC rules such as 47 C.
F.R, PART 64, Subpart K, (S)64.1100 through (S)641150 regarding LOAs and
PIC transfer requirements and 47 C.F.R, Part 64, Subpart K, (S)64.11
regarding the verification of orders for long distance service generated by
telemarketing.
7. EXCLUDED ANIs. T-NET reserves the right to reject any ANI for reasons that
-------------
shall include, but not be limited to, the following: (i) T-NET is not
authorized to provide the Services in a particular jurisdiction in which
the ANI is located; (ii) Reseller is not certified to provide the Services
in a particular jurisdiction in which the ANI is located; (iii) a
particular ANI submitted to T-NET is not in proper form; (iv) Reseller
fails to cooperate with T-NET in implementing verification processes
determined by T-NET to be necessary or appropriate in the conduct of
business; (v) any other circumstances determined by T-NET which could
adversely affect Reseller's End Users or other end users including, but not
limited to, T-NET's ability to electronically effect PIC changes with the
local service provider, or (v) Reseller is in breach of any of the
provisions of this Agreement.
T-NET shall be under no obligation to accept ANIs within the two (2) full
calendar month period preceding the scheduled expiration of the Term.
8. TRANSFER CHARGES/DISPUTED PIC TRANSFER. Reseller shall be responsible for
--------------------------------------
(i) all charges incurred by T-NET to change the PIC of End Users to
Reseller, (ii) all charges incurred by T-NET to change End Users back to
their previous PIC arising from disputed transfers plus an administrative
charge equal to twenty percent (20%) of such charges; (iii) an
administrative charge of $50.00 per disputed ANI if Reseller does not
provide to T-NET a valid non-disputed LOA within five (5) business days
from T-NET's request, and (iv) any other damages suffered by or awards
against T-NET resulting from disputed transfers.
9. RECORDS. Reseller shall maintain documents and records supporting
-------
Reseller's resale of the Services, including, but not limited to , valid
LOAs from End Users that meet the requirements of this Agreement and all
laws and FCC rules and regulations 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. Upon reasonable advance notice, T-NET reserves the
right to audit the Reseller's LOA records, or upon request by T-NET,
Reseller shall, within two (2) business days from receipt of such request,
provide a copy to T-NET of any LOA or such other requested information by
T-NET to confirm Reseller's compliance with Reseller's obligations set
forth herein.
10. ADDITIONAL RESELLER RESPONSIBILITIES. Reseller shall be responsible for
------------------------------------
the following:
10.1 Establishing the rates that it shall charge its End Users, billing
its End Users and collecting amounts due from its End Users.
10.2 Providing the End Users with customer service and technical support
which includes, but is not limited to, dedicating sufficient human
and other resources to assure prompt handling of inquires and orders
from prospective and existing End Users.
10.3 Notifying T-NET immediately in the event that an End User has
notified Reseller of a problem with the Services including, but not
limited to, excess noise, echo or loss of Service. Reseller shall
cooperate with T-NET in resolving service-related issues and shall
impose an obligation on its End Users to cooperate with Reseller to
resolve such problems.
10.4 Obtaining the necessary certification from the appropriate
governmental authority, if such certification is required, in all of
jurisdictions in which Reseller provides long distance services.
Further, Reseller shall provide proof of such certification
acceptable to T-NET at the time Reseller submits the Service Request
to T-NET. In the event Reseller is
Page 3 of 6
================================================================================
<PAGE>
[LOGO OF T-NET APPEARS HERE]
GENERAL TERMS AND CONDITIONS FOR RESELLER
AGREEMENTS
prohibited, either on a temporary or permanent basis, from conducting
its telecommunications operations in a given jurisdiction, in
addition to any other remedies available to T-NET, Reseller shall
immediately so notify T-NET by facsimile, and send via regular mail
the original of such written notice to T-NET within twenty-four (24)
hours of such prohibition.
11. SUSPENSION AND TERMINATION OF SERVICE.
-------------------------------------
11.1 Suspension of Services for Non-Payment. In addition to any other
--------------------------------------
remedies available to T-NET, if the Reseller fails to pay any invoice
in full (including any late payment charges, if any) or other demand
for payment hereunder when due, T-NET shall have the right, at its
option, after providing Reseller two (2) days' prior written notice
("SUSPENSION NOTICE") of its decision, to suspend all or any portion
of the Services to Reseller and its End Users including, without
limitation, the right to withhold call detail records until such time
(as designated in the Suspension Notice) as Reseller has paid T-NET
in full all the charges then due to T-NET, including any late payment
charges, if any. If Reseller makes such payment on or before the date
set forth in the Suspension Notice, T-NET shall reinstate such
Services only when Reseller provides T-NET with satisfactory
assurance of Reseller's ability to pay for the Services (i.e.,
deposit, letter of credit or other means acceptable to T-NET) and
Reseller pays in advance any costs associated with the suspending and
reinstating such Services. If Reseller fails to make its required
payment by the date set forth in the Suspension Notice, this
Agreement and the Services shall be deemed, without any further
action by either party, to have terminated effective as of the date
of suspension by T-NET. In the event of such termination, the
obligations set forth in Section 11.3.3(i), (ii) and (iii) below
shall apply to Reseller.
11.2 Termination of Agreement by Reseller. Prior to the end of the Term,
------------------------------------
the Reseller may terminate this Agreement in its entirety by
providing T-NET with sixty (60) days' advance written notice. In such
event, the Reseller shall pay T-NET the amounts set forth in Section
11.3.3(i) and (ii) below.
11.3 Termination of Agreement by T-NET. In addition to any other remedies
---------------------------------
available, T-NET may immediately terminate this Agreement in the
event of a breach by Reseller which includes, but is not limited to,
the following:
11.3.1 Without notice in the event any of the following occurs: (i)
initiation of proceedings by Reseller in voluntary
bankruptcy; (ii) initiation of proceedings against Reseller
in involuntary bankruptcy which are not dismissed within
sixty (60) days of initiation; (iii) the appointment of a
receiver or trustee for Reseller; (iv) a general assignment
for the benefit of Reseller's creditors; (v) Reseller's
inability to pay debts as they fall due; or (vi) breach of
any of the provisions set forth in Section 13.4 and Section
13.7.
11.3.2 If Reseller has not cured a breach of any of the following
within two (2) days of receipt of written notice from T-NET:
(i) non-payment of amounts due to T-NET; (ii) provide any
required security deposit amounts; or (iii) provide any
required financial reports.
11.3.3 Upon termination pursuant to 11.3.1 or 11.3.2 above, the
following shall occur: (i) Reseller shall pay T-NET for all
Services through the date of discontinuance of Service; (ii)
Reseller shall pay T-NET a discontinuance charge (as an
early discontinuance fee and not as a penalty) equal to the
sum of the minimum monthly payment obligations for each of
the remaining months in the Term; and (iii) Reseller agrees
that T-NET has the right to contact the End Users and advise
such End Users that Reseller is in default of its Agreement
with T-NET, the underlying service provider, and that the
Service to Reseller has been interrupted. In addition,
Reseller agrees that T-NET has the right to market its
services directly or indirectly to Reseller's End Users for
the purpose of converting these End Users to T-NET.
12. INDEMNIFICATION, LIABILITIES AND WARRANTY.
-----------------------------------------
12.1 Reseller shall defend, indemnify and hold T-NET harmless from and
against all claims, demands, actions, causes of action, judgments,
costs and reasonable attorneys' fees and expenses of any kind or
nature for any and all damages of any kind arising from or related
to any resale or use of the Services or otherwise arising under this
Agreement including, but not limited to, any disputed PIC selections
involving Services to be provided to Reseller for which Reseller
cannot produce a valid LOA relevant to an ANI and PIC charge in
question, or when T-NET is not reasonably satisfied that the validity
of a disputed LOA has been resolved, or any dispute asserted by any
End User Subscriber of the Services, or any violation of any FCC
rules and regulations or other applicable laws or regulations
pertaining to the resale or delivery of the Service to End User
Subscribers.
================================================================================
Page 4 of 6
<PAGE>
[LOGO OF T-NET APPEARS HERE]
GENERAL TERMS AND CONDITIONS FOR RESELLER
AGREEMENTS
12.2 In the event the Services or any portion thereof are unavailable due
to a total or partial interruption of the Services, T-NET's sole
obligation, and Reseller's sole and exclusive remedy, with respect to
such interruption of the Services shall be for Reseller to request and
for T-NET to provide a pro rata credit for the period and for the
portion of the Services affected during which the Services or any part
thereof were unavailable to Reseller. T-NET's obligations to Reseller
with respect to a particular interruption start upon T-NET's receipt
of Reseller's notification of the interruption and end upon service
restoration.
12.3 In no event shall T-NET be liable for any loss of profits or for any
indirect, incidental, special, exemplary, or consequential damages.
T-NET's maximum liability for any damages arising out of or under this
Agreement shall not exceed the total charges for the Services provided
under this Agreement during the month in which such liability arises.
12.4 T-NET and Reseller expressly agree that this Agreement shall not give
rise to any third party being a third-party beneficiary or being
entitled to any rights whatsoever.
12.5 T-NET has no responsibility or liability for any unauthorized use of
the Services by any third party. Reseller shall defend, indemnify and
hold T-NET harmless from and against all claims, demands, actions,
causes of action, judgments, costs and reasonable attorneys' fees and
expenses of any kind or nature for any and all damages of any kind
arising from or related to any fraudulent calls of any nature which
may comprise a portion of the Service 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 Service through Reseller or
an end user of the Service through Reseller's distribution channels.
In the event T-NET discovers fraudulent calls being made (or
reasonably believes fraudulent calls are being made, including but not
limited to an End User's Usage Limit, as defined below, being
exceeded), T-NET may (but in no circumstances is obligated to) take
immediate action (without notice to Reseller) that is reasonably
necessary to prevent such calls from taking place, including without
limitation, denying Service to a particular ANI or terminating Service
to or from specific locations or with respect to a specific calling
card. If T-NET is providing calling card service, Reseller shall
specify to T-NET with respect to each End User a daily and monthly
usage limit which shall apply to each calling card issued to such End
User ("USAGE LIMIT"). In calculating whether Usage Limit has been
exceeded, T-NET shall use domestic calling card rate provided by
Reseller and international calling card rates estimated by T-NET. If
no domestic rate or Usage Limit are specified by Reseller for a
particular End User, a Usage Limit set by T-NET based on estimated
domestic and international rates shall apply. Reseller shall not be
excused from paying T-NET for the Services provided to Reseller or any
portion thereof on the basis that fraudulent calls, or calls in excess
of a Usage Limit, comprised any portion of the Service.
12.6 T-NET warrants that it shall provide the Services as set forth in this
Agreement. T-NET DISCLAIMS ALL OTHER WARRANTIES EITHER EXPRESS OR
IMPLIED INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
13. ADDITIONAL TERMS.
----------------
13.1 Reseller may not assign or transfer this Agreement or any rights or
obligations without the prior written consent of T-NET. An assignment
shall be deemed to include any change of control of Reseller.
13.2 This Agreement is governed by and subject to the laws and the
jurisdiction of the courts of the Commonwealth of Virginia.
13.3 In the event an action is brought by T-NET against Reseller to enforce
this Agreement, in addition to any other remedy available to T-NET,
Reseller shall reimburse T-NET for reasonable attorneys' fees and
expenses of any kind or nature incurred in connection therewith.
13.4 Reseller shall not disclose the terms of this Agreement to any third
party.
13.5 T-NET shall not be liable for, and is excused from, any failure or
delay in performance that is due to acts of God, acts of civil or
military authority, acts of the public enemy, war or threats of war,
accidents, fires, explosions, earthquakes, floods, unusually severe
weather, epidemics, or due to any other cause beyond its reasonable
control.
13.6 Any notices and similar communications concerning this Agreement
("Notice") shall be in writing, and shall be either (i) delivered in
person, or (ii) sent to the other party by certified mail with return
receipt requested or by facsimile, electronically confirmed and
followed up immediately by regular mail. Notices shall be delivered or
sent to the parties' respective addresses or to such other address as
either party may hereafter establish by notice given in the
================================================================================
Page 5 of 6
<PAGE>
[LOGO OF T-NET APPEARS HERE]
GENERAL TERMS AND CONDITIONS FOR RESELLER
AGREEMENTS
manner prescribed in this paragraph. A Notice shall be considered given
when delivered in the manner prescribed in this paragraph.
13.7 Neither party shall issue a news release, public announcement,
advertisement, or other form of publicity concerning the existence or the
terms of this Agreement without obtaining prior written approval from the
other party. Reseller shall not use T-NET's or CWI's names, logos,
trademarks, service marks or any variations thereof in any of its
promotional, advertising or other materials. Reseller shall not represent
to End Users or prospective End Users that such End Users would be CWI's
or T-NET's customers or that they may obtain CWI or T-NET services from
Reseller. Notwithstanding the above, Reseller may, however, include the
following statement in an item of its promotional or other material
provided that CWI has given its prior written approval to do so:
"[Reseller's company name]'s service may utilize the Cable & Wireless,
Inc. network".
13.8 T-NET and Reseller are independent contracting parties. This Agreement
shall not constitute the parties as principal and agent, partners, joint
ventures, or employer and employee. In no way shall this Agreement or the
provision of the Services by T-NET to Reseller hereunder be considered as
T-NET's endorsement of Reseller or that Reseller is in any way acting as
an authorized agent of or otherwise for T-NET.
13.9 Nothing in this Agreement shall limit T-NET's or CWI's ability to enter
into any arrangements of any kind with any other entities with respect to
the resale of its services or to market any of its services to any entity.
13.10 T-NET shall have no obligation to provide any support to Reseller in the
marketing and reselling of the Services to End Users, including, but not
limited to, making joint sales presentations or sales calls to End Users.
13.11 Reseller shall not use the Services in conjunction with the provision of
communications services to any detention facility, including, but not
limited to, any local, state or federal prisons.
13.12 This is a carrier-to-carrier agreement subject to (S)211 of the
Communications Act of 1934, as amended. The Reseller is responsible for,
and shall comply with, any and all legal and regulatory requirements with
respect to the Reseller's resale of the Services, including those of the
FCC and state public utility commissions. The Services are governed by
this Agreement and all Reseller obligations and CWI rights as set forth in
the "General Rules and Regulations" section of CWI's interstate tariff, as
may be amended by CWI in accordance with applicable laws and regulations.
For the purpose of this provision, the "rights" of CWI shall also include
T-NET.
13.13 T-NET's failure to insist upon strict performance of the terms of this
Agreement or to exercise any rights or remedies hereunder shall not waive
any of T-NET's rights to require strict performance of such terms, to
assert any of the same rights, or to rely on any such terms any time
thereafter.
13.14 In the event that one or more of the provisions herein shall for any
reason be held to be illegal or unenforceable, this Agreement shall be
revised only to the extent necessary to make such provision(s) legal and
enforceable; provided, however, that this Agreement as revised is
consistent with the parties' original intent.
13.15 No Reseller purchase order or similar document shall vary or add to the
terms of this Agreement.
13.16 The Agreement, these General Terms and Conditions Attachment to the
Reseller Agreement, and the terms of any documents attached hereto or
referenced herein constitute the entire understanding of the parties with
respect to the subject matter hereof, and they supersede all prior or
contemporaneous oral or written agreements, understandings and
representations.
13.17 The term "T-NET" as used in the Agreement shall mean the Total Network
Services division of CWI, any other division or part of CWI, and CWI in
its entirety.
================================================================================
Page 6 of 6
<PAGE>
[SEAL APPEARS HERE]
SALES TAX LICENSE
STATE OF ALABAMA 015500
REVENUE DEPARTMENT
MONTGOMERY, ALABAMA 36132
ISSUED TO: --------------------------------------
ACCOUNT NUMBER DATE
--------------------------------------
4500 15456 6/19/96
DELTACOM INC
113 S MAIN ST
PO BOX 1233
ARAD AL
35016-5000
TO ENGAGE IN BUSINESS FOR WHICH TAX IS IMPOSED BY SECTIONS
40-23-1/38 CODE OF ALABAMA 1975, AS AMENDED.
SALES TAX LAW
NON-TRANSFERABLE
THIS ACCOUNT ISSUED TO PERSON OR BUSINESS WHOSE NAME APPEARS
ABOVE IS NOT TRANSFERABLE.
STATE OF ALABAMA
DEPARTMENT OF REVENUE
[SIGNATURE ILLEGIBLE]
EFFECTIVE DATE: 09/01/92 Acting Commissioner
This form attached per para 3.1, Rates and taxes in General Terms & Conditions
for Reseller Agreement
<PAGE>
Exhibit 10.76
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT (this "Sublease"), made as of the 1st day
of January, 1995, by and between ITC Holding Company, Inc., a Delaware
corporation with its principal address at 1239 O.G. Skinner Drive, West Point,
Georgia, or its assignee ("Landlord"), as landlord, and ITC Transmission
Systems, Inc., a Delaware corporation ("Tenant"), as tenant.
WITNESSETH:
----------
1. PREMISES. Landlord is leasing an office building located at 210
--------
West Ninth Street, West Point, Georgia (the "Premises") pursuant to that certain
Lease Agreement dated as of July 1, 1996 by and between J. Smith Lanier & Co.,
as lessor and Landlord as lessee, and terminating on July 1, 2005 (the "Prime
Lease"). Subject to the terms, covenants, provisions and conditions set forth
herein, and subject further to all the terms, covenants, provisions and
conditions contained in the Prime Lease (as such may from time to time be
amended), Landlord hereby subleases to Tenant, and Tenant subleases from
Landlord, the Premises.
2. TERM OF SUBLEASE AND TERMINATION. The term of this Sublease (the
--------------------------------
"Lease Term") shall commence on January 1, 1995 and shall terminate on July 1,
2005 or such earlier or later date as the Prime Lease shall terminate.
Notwithstanding the foregoing, either Landlord or Tenant may terminate this
Sublease for any reason on ninety (90) days' written notice, which notice may be
waived. At the end of the Lease Term, tenant agrees to surrender the Premises in
good repair and good working order, all of which Premises are as of the date
hereof in such condition and good repair. Upon termination of this Sublease by
Landlord pursuant to this Section 2, Landlord may proceed to recover possession
of the Premises under and by virtue of the provisions of the laws of the State
of Georgia, or by such other proceedings, including re-entry and re-possession,
as may be applicable.
3. RENT.
----
(a) Payment. Tenant shall pay to Landlord during the Lease Term
-------
$2,483.75 (Two Thousand Four Hundred Eighty-Three Dollars and Seventy-Five
Cents) (the "Rent") per month in advance on the first day of every calendar
month during the remainder of the term. Landlord shall refund to Tenant a
prorated portion of the last monthly installment paid by Tenant, for the number
of days in the last month of the Lease Term during which Tenant did not actually
occupy the Premises. It is agreed that payment of Rent shall cease if the
Premises are destroyed by fire, or be so damaged by fire or any unavoidable
casualty as to make the Premises uninhabitable, and either party may forthwith
terminate this Sublease by written notice to that effect.
(b) Nonpayment; Reentry of Premises. If any installment of Rent is
-------------------------------
not paid within ten (10) days after the same becomes due and payable as provided
herein, although no demand shall have been made for the same, Landlord may
terminate this Sublease forthwith and Landlord may proceed to recover possession
of the Premises under and by virtue of the provisions of the laws of the State
of Georgia, or by such other proceedings, including re-enty and re-possession,
as may be applicable.
4. TAXES, INSURANCE, UTILITIES.
---------------------------
(a) Taxes. Tenant shall pay all taxes relating to the Premises,
-----
which shall include all real estate taxes and personal property taxes and other
assessments and governmental charges, whether federal, state, county or
municipal, and whether they be by tax districts or authorities presently taxing
the
<PAGE>
Premises or by others subsequently created, and any other taxes and assessments
attributable to the Premises or its operation whether or not directly paid by
Landlord, excluding, however, federal and state taxes on income. It is agreed
that Tenant will be solely responsible for ad valorem taxes on its personal
property and on the value of leasehold improvements to the extent that the same
exceed standard building allowances.
(b) Insurance. Tenant agrees to carry, at Tenant's own cost and
---------
expense and keep in full force and effect throughout the Lease Term (i) fire and
extended coverage insurance insuring the leasehold improvements and Tenants
furniture, fixtures, equipment and supplies and (ii) public liability insurance
in such amounts as shall be acceptable to Landlord with respect to any one
person, any one accident and property damage. All such policies shall be issued
by insurance companies licensed to do business in the State of Georgia, shall
name Landlord and Tenant as parties insured and shall contain a provision that
the same may not be canceled without giving Landlord at least thirty (30) days'
prior written notice.
(c) Utilities. Tenant shall pay all charges for gas, electricity and
---------
water used on the Premises when the bills therefor become due and payable.
5. GENERAL PROVISIONS. It is agreed that all right, remedies and
------------------
liabilities herein given to or imposed upon either of the parties hereto, shall
extend to their respective heirs, executors, administrators, successors, and
permitted assigns. This Sublease contains the entire agreement between the
parties and all prior negotiations and agreements are merged herein. Any party
may act under this Lease by its attorney or agent appointed by an instrument
executed by such party. Wherever a requirement is imposed on any party hereto,
it shall be deemed that such party shall be required to perform such requirement
at its sole cost and expense unless it is specifically otherwise provided
herein. This Sublease may be executed in several counterparts and the
counterparts shall constitute but one and the same instrument.
[Rest of page intentionally left bank.]
2
<PAGE>
IN WITNESS WHEREOF, the respective parties hereto have executed this
Sublease or have caused this Sublease to be executed by their duly authorized
representative the day and year first hereinabove written.
Landlord:
ITC HOLDING COMPANY, INC.
/s/ Doug Shumate
------------------------------------
By: Doug Shumate
Its: Vice President
Tenant:
ITC TRANSMISSION SYSTEMS, INC.
/s/ Doug Shumate
------------------------------------
By: Douglas A. Shumate
Its: Chief Financial Officer
3
<PAGE>
Exhibit 12.1
Statement Re: Computation of Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Six Months Ended
Years Ended December 31, June 30,
------------------------------------------------------- --------------------------
Combined Pro Forma Pro Forma
---------------------------------------- Consolidated Combined Consolidated
1994 1995 1996 1996 1997 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Fixed charges:
Interest expense on debt 273,759 297,228 6,172,421 26,266,789 7,561,591 12,389,998
Interest element of rent expense 21,084 24,845 424,130 777,227 331,344 331,344
Fixed charges of unconsolidated subsidiary - 782,054 1,564,200 - - -
------------ ------------ ------------ ------------- ------------ ------------
294,843 1,104,127 8,160,751 27,044,016 7,892,935 12,721,342
============ ============ ============ ============= ============ ============
Earnings
Consolidated net income 136,997 (504,373) (3,909,749) (12,073,502) (3,278,019) (5,049,568)
Extraordinary loss - - - - 507,515 507,515
Provision for income taxes (113,248) 302,567 1,233,318 6,167,132 (1,005,809) (2,046,160)
Fixed charges 294,843 1,104,127 8,160,751 27,044,016 7,892,935 12,721,342
------------ ------------ ------------ ------------- ------------ ------------
545,088 297,187 3,017,684 8,803,382 4,116,622 6,133,129
============ ============ ============ ============= ============ ============
Ratio of Earnings to Fixed Charges 1.85 0.27 0.37 0.33 52% 48%
============ ============ ============ ============= ============ ============
Coverage Deficiency N/A 806,940 5,143,067 18,240,634 3,776,313 6,588,213
</TABLE>
<PAGE>
Exhibit 21.1
Subsidiaries of ITC/\DeltaCom, Inc.
Interstate FiberNet, Inc., a Delaware corporation 1/
-
DeltaCom, Inc., an Alabama corporation 2/
-
GulfStates Transmission Systems, Inc., a Delaware corporation
- ------------------
1/ Formerly ITC Transmission Systems, Inc. Includes the operations of ITC
- -
Transmission Systems II, Inc. and Eastern Telecom, Inc. (d/b/a/ InterQuest").
2/ Expected to be renamed "ITC/\DeltaCom Communications, Inc."
- -
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion in
Amendment No. 1 of this Registration Statement of our report on the financial
statements of ITC/\DeltaCom, Inc. as of June 30, 1997 dated July 31, 1997; our
report on the combined financial statements of Interstate FiberNet, Inc.
(formerly ITC Transmission Systems, Inc.), ITC Transmission Systems II, Inc.,
Gulf States Transmission Systems, Inc., Eastern Telecom, Inc., d.b.a.
InterQuest, and DeltaCom, Inc. (reorganized as ITC/\DeltaCom, Inc.) as of
December 31, 1995 and 1996 and for each of the three years in the period ended
December 31, 1996 dated March 27, 1997 (except with respect to the Credit
Facility and Debt Offering discussions in Note 16, as to which the date is
July 31, 1997); our report on the statements of operations, stockholders'
equity, and cash flows of DeltaCom, Inc. for the year ended December 31, 1995
dated March 27, 1997; and our report on the financial statements of Gulf
States FiberNet as of December 31, 1995 and 1996 and for the period from
inception (August 17, 1994) through December 31, 1994 and for the two years in
the period ended December 31, 1996, dated March 27, 1997 (except with respect
to the ITC/\DeltaCom Debt Offering discussion in Note 8, as to which the date
is July 25, 1997), and to all references to our Firm included in or made a
part of this Registration Statement.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
July 25, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
As independent public accountants, we hereby consent to the use of our report
dated March 19, 1997 related to DeltaCom, Inc. (and to all references to our
Firm) included in or made a part of Amendment No. 1 to this Registration
Statement.
MARTIN STUEDEMAN & ASSOCIATES, P.C.
Birmingham, Alabama
August 25, 1997
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in Amendment No. 1 to this Registration Statement of
ITC DeltaCom, Inc. on Form S-4 of our report dated May 23, 1997 relating to
the financial statements of Georgia Fiber (a business unit of SCANA
Communications, Inc.), appearing in the Prospectus, which is part of this
Registration Statement.
We also consent to the reference to us under the headings "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
Columbia, South Carolina
August 26, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This financial data schedule contains summary financial information extracted
from the combined balance sheets of Interstate FiberNet, Inc. (formerly ITC
Transmission Systems, Inc.), ITC Transmission Systems II, Inc., Gulf States
Transmission Systems, Inc. Eastern Telecom, Inc. d.b.a. InterQuest, and
DeltaCom, Inc. (Reorganized As ITC/\DeltaCom, Inc.) as of December 31, 1996 (see
registration statement page F-11) and the related combined statements of
operations for the year ended December 31, 1996 (see registration statement page
F-12). This information is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,301,415
<SECURITIES> 0
<RECEIVABLES> 13,122,556
<ALLOWANCES> 856,858
<INVENTORY> 543,447
<CURRENT-ASSETS> 18,365,041
<PP&E> 38,450,464
<DEPRECIATION> 6,569,908
<TOTAL-ASSETS> 113,207,979
<CURRENT-LIABILITIES> 14,949,953
<BONDS> 0
0
0
<COMMON> 826
<OTHER-SE> 19,255,700
<TOTAL-LIABILITY-AND-EQUITY> 113,207,979
<SALES> 66,518,585
<TOTAL-REVENUES> 66,518,585
<CGS> 38,756,287
<TOTAL-COSTS> 38,756,287
<OTHER-EXPENSES> 25,314,646
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (6,172,421)
<INCOME-PRETAX> (5,143,067)
<INCOME-TAX> (1,233,318)
<INCOME-CONTINUING> (3,909,749)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,909,749)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This financial data schedule contains summary financial information extracted
from the combined balance sheets of ITC/\DeltaCom, Inc., Interstate FiberNet,
Inc. (formerly ITC Transmission Systems, Inc.), ITC Transmission Systems II,
Inc., Gulf States Transmission Systems, Inc., Eastern Telecom, Inc. d.b.a.
InterQuest, and DeltaCom, Inc. (Reorganized as ITC/\DeltaCom, Inc.) as of June
30, 1997 (see registration statement page F-11) and the related combined
statements of operations for the six month period ended June 30, 1997 (see
registration statement page F-12). This information is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 200,253,742
<SECURITIES> 0
<RECEIVABLES> 18,621,306
<ALLOWANCES> 1,134,039
<INVENTORY> 630,431
<CURRENT-ASSETS> 220,747,710
<PP&E> 132,893,062
<DEPRECIATION> 17,040,982
<TOTAL-ASSETS> 402,015,721
<CURRENT-LIABILITIES> 152,572,046
<BONDS> 0
0
0
<COMMON> 150,826
<OTHER-SE> 33,299,746
<TOTAL-LIABILITY-AND-EQUITY> 402,015,721
<SALES> 53,365,061
<TOTAL-REVENUES> 53,365,061
<CGS> 25,302,747
<TOTAL-COSTS> 25,302,747
<OTHER-EXPENSES> 25,234,556
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (7,561,591)
<INCOME-PRETAX> (3,850,445)
<INCOME-TAX> 1,005,809
<INCOME-CONTINUING> (2,770,504)
<DISCONTINUED> 0
<EXTRAORDINARY> (507,515)
<CHANGES> 0
<NET-INCOME> (3,278,019)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
